Cannabis cocktails? Constellation is mulling it

The company behind Corona beer, Robert Mondavi wine and Casa Noble Tequila is considering moving into the market for legal marijuana by selling alcoholic beverages infused with cannabis.

“Why wouldn’t big business, so to speak, be acutely interested in a category of that magnitude?” Constellation Brands (STZ) CEO Rob Sands told Bloomberg News, as he described the company’s thinking about entering a burgeoning legal market that’s forecast to reach $50 billion in sales by 2026.

In a statement to CBS MoneyWatch, Constellation noted that a cannabis cocktail isn’t coming to market anytime soon given the uncertainty around the legality of marijuana.

“The beverage alcohol industry continues to be very robust, performing above the consumer package goods category in general, notwithstanding the legalization of cannabis in several states,” the company said. “Our priority remains growing the beverage alcohol business we have today.” 

Indeed, bringing a product that combines alcohol and marijuana to market would be difficult. 

For one thing, Constellation would need to get approval from the U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) for its product. That would be unlikely since cannabis remains illegal under federal law, according to Richard Blau, a partner with the law firm Gray Robinson in Tampa, Florida. Even if marijuana were legalized on the federal level, regulators would want proof that combining a euphoric element like weed and a depressant like alcohol wouldn’t harm people, he said.

“I suspect that given the current state of the law, even if you somehow had the ability to overcome the federal prohibition on cannabis ... you would still run into great resistance from agencies like the TTB and the FDA over the notion of selling a product that combined the two,” Blau said. “Perhaps there will come a time when there’s sufficient data that understands how cannabis and alcohol interact with one another.”

Constellation may similarly run afoul of regulators like the makers of beverages with high amounts of caffeine and alcohol did a few years ago.

Phusion Products pulled its popular Four Lokos beverage in 2014 to settle a lawsuit filed by 19 attorneys general that alleged, among other things, that the company failed to warn consumers about the product’s potential dangers. Facing opposition from other agencies including the Food & Drug Administration, Phusion’s rivals pulled similar products from the market. 

“My sense is that you will not see true cannabis alcohol products anytime soon,” Blau said.

Shares of Constellation, which is based in Victor, New York, have risen about 9.5 percent this year, fueled by better-than-expected earnings as double-digit increases reversed recent declines. 

Constellation’s interest in marijuana underscores how the product has become increasingly mainstream even though it’s still technically illegal under federal law. Voters in California, Maine, Massachusetts and Nevada this week agreed to allow recreational use of marijuana, doubling the states where that use is allowed. Arkansas, Florida, Montana and North Dakota joined the more than two dozen that allow medical cannabis use.

“This is an interesting though not surprising development,” said Chris Walsh,  editorial director of Marijuana Business Daily. “We have been preparing for the day when big alcohol, big tobacco, and big pharma, big you-name-it tries to get involved in this industry.”

Though President Obama has argued that the current federal prohibition of weed is no longer tenable, the views of President-elect Donald Trump on marijuana legalization are unclear, and several of his key allies are reportedly skeptical of the idea. His running mate, Indiana Gov. Mike Pence, blocked efforts to soften his state’s marijuana laws, which the Marijuana Policy Project describes as among the most draconian in the country. 

New Jersey Gov. Chris Christie and former New York Mayor Rudy Giuliani, among Trump’s most ardent supporters, “have consistently opposed marijuana law reform,” according to the pro-weed Drug Policy Alliance.

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.