Cannabis legalization in Canada may have grabbed the headlines on October 17, but it overshadowed other significant industry developments like a change in leadership at Constellation Brands (NYSE:STZ).
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As cannabis stocks continue to fall, Constellation Brands’ stock remains relatively solid, however, opening and closing around $227 per share last Wednesday. After the closing bell, Constellation CEO Rob Sands announced that he would step down in March 2019.
An investment that changed the cannabis industry
Constellation Brands is the parent company of well-known alcoholic beverage brands like Robert Mondavi, Svedka, and Corona Beer. Constellation made a huge $4 billion investment in Canadian company Canopy Growth Corp. (NYSE:CGC) in August, and Sands’ announcement came on the same day both companies were celebrating cannabis legalization in Canada.
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Sands has served as CEO for over a decade and has been very successful at exponentially expanding the company. Under his leadership, the company became one of the biggest beer brewers in the United States. He was behind the nearly $5 billion deal with Anheuser Busch to acquire U.S. rights to both Corona and Modelo beer brands out of Mexico, and of course was the major catalyst behind the Canopy Growth deal.
Amazingly, Sands has achieved a 900 percent return for investors since he took the helm as CEO in 2007, according to a Bloomberg report.
Who will replace Sands?
Constellation will promote from within for Sands’ replacement, as current company president and industry veteran Bill Newlands will take the helm next year upon Sands’ departure. In a company statement, Sands expressed support for Newlands.
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“Bill understands what it takes to succeed in this rapidly evolving market, and he's the right person to lead our company going forward,” Sands said in a statement.
Newlands will be the first CEO that isn’t part of the Sands family. Rob’s dad Marvin Sands founded Constellation Brands in 1945, and older brother Richard ran the company for nearly two decades from 1993 to 2007.
Newlands stated that he is honored to be selected as the next CEO and that he has always had tremendous respect for the Sands family management of the company. Newland has a solid management team, according to industry analysts, and Wall Street expects no change in company strategy. Instead, it’s full steam ahead.
Sands, who is 60, will take over as chairman, replacing his brother Richard. In the chairman role, he will be able to focus on the Canopy investment. Known as an innovator, Sands didn’t surprise Wall Street analysts when Constellation became one of the first alcoholic beverage companies to make a major investment in the cannabis industry.
Sands saw the signals in the burgeoning cannabis industry and its potential for massive growth.
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With the investment, Constellation Brands increased their holdings in Canopy Growth by nearly 40 percent. Canopy is the world’s largest cannabis grower and has used the investment to expand its operations to a significant international presence in the global cannabis market. Canopy Growth’s strategy is to expand into countries that have already legalized medical cannabis at a federal level.