Why Canopy Growth has delayed its cannabis drinks launch

Canopy Growth Corp has been forced to delay the launch of its first cannabis drinks.

As shares are marked down and product launches are delayed, the future is hazy for Canada’s biggest cannabis growing firm.

Canopy Growth, whose largest shareholder is drinks giant Constellation Brands, has postponed the launch of a line of cannabis drinks as it hasn’t been able to scale its production to commercial levels yet.

The grower had planned to launch its first cannabis drinks across Canada in January, but chief executive David Klein said it had only been able to work on the product for seven weeks after being granted a license to produce drinks infused with THC (the psychoactive component of the plant) in November.

“Canopy has had seven weeks to work with THC in the brand new beverage facility to scale processes and IP it has developed in the R&D environment,” Klein said in a statement.

“In order to deliver products that meet our customer’s high standards we are electing to revise the launch date while we work through the final details.”

The company has not given a revised launch date for the drinks. It said an update will be given alongside Canopy’s third quarter results expected next month.

Earlier this month, Constellation Brands wrote down its 38% stake in Canopy Growth by US$534 million. It had already marked down its investment by $839 million in October last year.

The unfortunate news comes as cannabis has already proven to be a lucrative industry in Canada, even if the drug has only been legal for a little over a year.

Recreational cannabis use has only been fully legal in Canada since October 2018, but since then, volume sales of domestic beer in the country fell by 3.9%, according to findings published by Beer Canada.

A number of drinks giants have taken interest in this emerging category. UK-based Diageo been in talks with three different Canadian cannabis producers with a view to developing its own line of CBD-infused drinks, while Californian brewer Lagunitas, owned by Heineken, launched its own THC-laced, alcoholic “beer” last summer.

But Canopy Growth has struggled. The Ontario-based firm’s share value fell by 21.5% during the 2019 calendar year.

This is partly due to the fact that Health Canada has been slow to issue licenses to growers who hoped to launch cannabis-based drinks. In addition, the license system for setting up shop in Ontario meant there simply weren’t enough retail opportunities for producers. Canopy was not able to deliver enough of its products to meet demand.

However, the company said and the current delay would not have an impact on its fiscal performance for 2020.