In recent months, a number of high-profile alcoholic beverage producers have announced partnerships with Canadian cannabis suppliers to begin discussions around producing cannabis-infused beverages for consumption where legal.
The hype surrounding most cannabis stocks at this point in time is bordering on insanity, and these announcements have stoked a fire which continues to burn red hot for investors seeking quick and easy returns.
Among the big deals which have already been done are a very significant investment from Constellation Brands Inc. (NYSE:STZ) in Canopy Growth Corp. (TSX:WEED)(NYSE:CGC).
These investments stand as confirmation for many hard-core investors that the cannabis industry is one which is set to explode, and that only upside remains for the largest firms.
As this industry consolidates, expectations are that deals with beverage manufacturers will take place only with the firms which are believed to be the biggest of the bunch, adding a layer of comfort to those investors in companies such as Canopy.
Recent reports that Diageo Plc (NYSE:DEO), the maker of crown royal and Guinness beer, is looking to make a deal with a Canadian cannabis producer has many on the lookout for who the prospective firm will end up being.
At this point in time, it appears that fear of missing out from beverage makers is greater than that of the cannabis producers, however I would expect a deal to be forthcoming shortly.
Bottom line: don’t chase the attractive deals in this industry, as what is likely to result is a deal in which producers will sell product at lower than average margins, making this current sector mania a head-shaker, in my opinion.
Invest wisely, my friends.
