Marijuana stocks were on a rampage Friday, after a report that Smirnoff and Johnnie Walker maker Diageo PLC is in talks with at least three Canadian pot companies with the intent to purchase a stake or initiate a collaboration in one of them, part of a wave of large traditional companies looking to partner with cannabis companies.
Investors pushed Cronos Group Inc. CRON, +15.76% up 16% in Friday trading, Tilray Inc. TLRY, +11.71% stock gained 15%, and Canopy Growth Corp.CGC, +7.68% stock surged nearly 10% as the S&P 500 index SPX, +0.63% added 0.6%. Canadian pot stocks like Aurora Cannabis Inc. ACB, +5.85% also received a substantial lift in Friday trading.
The potential to strike a deal with an international beverage conglomerate or pharmaceutical company is something of a Holy Grail for Canadian pot makers, the vast majority of which are exploring investment or other partnerships of a similar sort, according to a source familiar with the Canadian cannabis industry. A long sought-after goal, the potential deal with Diageo DEO, +0.52% reported by BNN Bloomberg citing two anonymous sources, comes amid the $4 billion investment booze giant Constellation Brands Inc. made in Canadian pot-maker Canopy.
Canopy’s deal with Constellation, the first of its size in Canada, has made real for many the possibility that multinational companies looking to strike deals with weed companies are willing to invest billions to stay ahead of competitors.
“If you’re the CEO of an alcohol and beverage company, and if you go a shareholders meeting or a staff meeting, I guarantee the first question you get is going to be: ’What is our cannabis strategy?’,” Canopy Chief Executive Bruce Hinton said in a telephone interview. “I think the world has changed dramatically and it’s changed because of Constellation and Canopy.”
Other big beverage companies such as Molson Coors Brewing Co. TAP, +0.00% have also signaled their interest in the cannabis industry as beer sales drop. In August, Molson said it was forming a joint venture with The Hydropothecary Corp. HEXO, +4.60% to develop non-alcoholic cannabis-infused beverages for the Canadian market.
Legal adult recreational use of cannabis is set to go into effect in Canada in October. It remains illegal under U.S. federal law, though a number of states including California, Colorado and Washington have legalized the drug.
Tilray declined to comment. Aurora and Cronos did not immediately return a request for comment.