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Canopy Growth beverages to launch in U.S. summer of '21

Canopy Growth CEO David Klein joins Yahoo Finance's Zack Guzman to discuss the company's new THC-infused drinks which are expected to launch in the U.S. next summer.

Video Transcript

ZACK GUZMAN: Right now, interesting news in the cannabis space. Of course, we've been watching how the election is going to play out, how it could shift things here in terms of legalization. But for those states already making cannabis legal here, interesting new plans from the cannabis giant, Canopy Growth, announcing distribution plans to bring their cannabis beverages to the US beginning with Illinois and California in the summer of 2021 through their partner, Acreage.

And here to discuss those plans with us and how big of a market opportunity might be ahead, the CEO of Canopy Growth, David Klein, joining us once again. And David, good to be chatting with you. We talked about this just a couple of weeks ago in terms of these plans. Now it seems it's official starting with Illinois and California. Talk to me about what goals you have in mind for getting these out there and how excited you are for what these beverages represent to the company.

DAVID KLEIN: Well, I think there are huge unlock in a couple of ways. For existing cannabis users, it's a great unlock, because there are a lot of occasions that it's not acceptable to smoke or vape. For people that don't currently use cannabis, it's a great unlock, because they don't have to come into the category through smoking or vaping. And so we get a chance to have people test out the space.

In terms of how big it can be, I think this is like seltzer. This is a different experience that consumers can undertake that gives you the THC feeling. The brands that we, or the products that we're bringing to the market are designed so they're like alcohol equivalent. So one can of our Canadian version of Tweed and Ginger has about the same effect as a beer would have. So they're sessionable, and they're accessible to the average consumer. We think that's a [INAUDIBLE].

ZACK GUZMAN: Yeah, talk to me about obviously, if you're going to compare yourself to seltzer, you better bring the goods here. So talk to me deeper about where you're trying to price these bad boys at and where you're looking to distribute these. Because it's not going to be the case where you can just go to your local grocery store and buy these things off the shelf. So talk to me about that, and how that might be a challenge in getting these out to just average consumers.

DAVID KLEIN: Yeah, so the best example I can give is in Canada. So we launched our drinks in Canada at the end of March. And were priced depending upon the brands, somewhere $3.99, $4.99 when we're using that beer-like analog. But we know over time, the price will have to compress. We'll have to get more competitive with beer.

But as it stands right now, we have about a 70 share in Canada. We have the top five SKUs at retail, and we're just now able to keep the product on shelf. But we know over time, in order for it to be that beer analog, we're going to have to be able to price it somewhat in line on almost a session by session basis with an alcohol session.

ZACK GUZMAN: And beyond just the price point, too, I mean, when we talk about accessibility and distribution here, obviously, you guys partnered with Acreage. You have that rolling out. It's how you're accessing the US market here. But in terms of where it's going to be sold, how important is that as obviously, you're not the first to offer cannabis beverages here in the US? We're talking to the co-creator of Blue Moon and how he was doing this as well a while ago. So talk to me about how you plan to compete against maybe some of those brands that already have a foothold in a lot of these cannabis stores here in the US.

DAVID KLEIN: Yeah, so for right now, like everyone else, we have to distribute through dispensaries. We're hopeful that any sort of federal legislation to decriminalize or legalize cannabis allows for interstate commerce and allows for a wider distribution. Once we get there, we lean very heavily into Constellation Brands distribution network, where we're already striking deals with some of our non-cannabis brands to distribute through those channels.

We want the opportunity then to bring our THC drinks into those channels through those distributors as well. So it's partly how we build [AUDIO OUT] cannabis ecosystem we're building that includes Canopy's business, Acreage's business and Constellation's business.

ZACK GUZMAN: Yeah, you mention Constellation business. We got the update there in terms of that company reporting their earnings. Of course, they have a really large stake in Canopy Growth with the billions that they've poured into guys. That's where you come from. You have that in your DNA. When you think about growing this out though, if you do see success early in 2021 with these beverages here, at what point or maybe it's already happened, the Constellation expertise comes into this equation, how do you see them maybe playing a larger role in this operation moving forward?

DAVID KLEIN: Yeah we've used, and the use in Canada again, is the example. We've used Constellation's expertise to build out our drinks facility, used Constellation's some of Constellation's analytics and insights where we get input on a literally daily basis from Constellation's marketing team. We're comparing our costs to the cost of beer. There's a very symbiotic relationship. And we think that we're going to be able to unlock a lot of value over time as a result of that.

ZACK GUZMAN: Last question to you before we let you go, and it's one that I've asked you I think maybe five times now is what we're at. But you come on, and I'm going to keep asking until it happens. When it comes to federal legalization, we've seen obviously, that get a lot more talk these days. But even beyond that, we still have five states that are putting it on their state ballots for legalizing.

And some pretty big opportunities here, whether you look at New Jersey or Arizona or some of these other states. When it comes to legalization though, what's the timeline for you? And has that changed at all as more states maybe look like they could pass these and the pressure mounts?

DAVID KLEIN: Yeah, look, I've said before, I think the date's sometime in 2022. There's a lot of focus on what happens with the White House. I think the more important thing is the Senate and how many senators will be representing states that have legalized it. I think it's hard for a senator to vote against permissibility on a federal level, when their state's already said that that's the direction that they want to go.

So we'll be watching the election closely. We think it's a home run for the federal government to legalize cannabis. We think it creates 1.6 million jobs, generates $80 billion a year in federal revenue, and we think that's a bit of a no-brainer and we hope to see it move soon.