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Canopy leveraging Constellation relationship to bring CBD-infused drink to U.S. stores

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Key Points
  • Canopy Growth announced it will begin selling Quatreau sparkling water online in the U.S. It plans to put the drinks on store shelves later this year.
  • The company on Tuesday announced it has begun selling four flavors of the drink in America online.
  • "You'll see us try to really tap into that more and more over time with our Quatreau CBD drinks, and ultimately our THC-branded drinks when we can get them into the U.S.," Klein said of its partnership with Constellation, which has a nearly 40% stake in the company.

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VIDEO1:5601:56
Canopy Growth CEO talks launching CBD-infused drink Quatreau in the US

Canopy Growth on Tuesday began U.S. online sales of Quatreau, the Canadian cannabis producer's CBD-infused sparkling water.

Canopy CEO David Klein in an interview on CNBC said the company would leverage its relationship with Constellation Brands, the beer, wine, and spirits producer with a nearly 40% stake in the company, to manage the distribution to retailers.

"These are guys that are out on the street ... think everywhere that you see Corona or Modelo. They have the ability to bring our BioSteel brand [to market]," said Klein, who appeared on "Mad Money" Tuesday. "You'll see us try to really tap into that more and more over time with our Quatreau CBD drinks, and ultimately our THC-branded drinks when we can get them into the U.S."

Biosteel is a sports nutrition products maker that Canopy took a majority stake in in 2019.

The line of Quatreau beverages comes in four flavors, including cucumber with mint, passion fruit with guava, ginger with lime, and blueberry with acai. Sold in 12 packs, each bottle of sparkling water includes 20 milligrams of hemp-based CBD grown in the U.S.

Canopy Growth Quatreau CBD beverage
Source: Canopy Growth

In Canada, which legalized marijuana for adult use in 2018, Quatreau has become the top-selling CBD beverage since it launched there in 2020, Canopy said in a press release. Canadian demand for cannabis-based products ballooned amid the coronavirus pandemic.

Canopy did not say when it plans to carry the product in U.S. stores.

"It kind of illustrates our playbook where we want to use insights gathered across North America," Klein said. "We then use our innovation … to develop amazing products, we test them out in Canada for a bit of a test-and-learn process, and then we bring them to the U.S. with the help of Constellation's distribution as soon as we can."

The CBD-based drink launch is part of Canopy's strategy to gain an advantage in the emerging U.S. cannabis market in anticipation of nationwide legalization, which the company expects in the near future. Cannabinoid, or CBD, is a non-psychoactive compound derived from hemp, which was legalized under the 2018 Farm Bill.

As of Tuesday, 14 states, Washington, D.C. and three territories have legalized cannabis, according to the National Conference of State Legislatures. Virginia's legislature last week sent a bill that would legalize recreational use to its governor. If signed, Virginia would become the first southern state to end the prohibition on pot.

Canopy hopes to replicate its strong Canadian sales in America with the help of Constellation's beer distribution network. Klein also credited the alcohol giant, whose wide range of brands include Svedka and Cooks Champagne, for helping to bring Quatreau to market.

"That's the power of the Constellation partnership that we have," he said. "They of course know how to make drinks and they've been helping us every step of the way, which really goes well beyond the balance sheet support that Constellation's given us over the years."

As bars closed down and restaurants reopened with strict rules to mitigate the spread of Covid-19, Constellation Brands found a way to continue growing liquor sales amid the crisis. Depressing on-premise sales were made up for in the retail channel, the company said, as consumers ventured to supermarkets and stores to load up on alcoholic beverages.

Shares of Canopy rose 1.5% Tuesday to close at $35.25.

VIDEO8:1208:12
Canopy Growth CEO on new products, Constellation partnership and US growth

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