2021: investing in cannabis to have a legal business
This story is just too ridiculous to ignore.
The year is 2021. Alcohol has been smashed into oblivion by the government, crushing the restaurant industry along with an obvious impact on the entire alcohol value chain.
Distell, a leading alcohol and beverages company, is essentially banned from operating by our government. South African Breweries has called off R5bn in investment since the pandemic began. Consol Glass is spending R8m a day just to keep its furnaces running, even though they cannot produce any bottles because there’s no legal alcohol to fill them with. Heineken South Africa is cutting 70 jobs out of its 1,000 employees.
The wine industry, a key employer and export industry, is also getting hammered. Sad pun intended.
It’s irrelevant whether you believe the stories about how this saves our hospitals, or simply question the sanity of those in charge. Jobs are on the line and investment is being pulled. I saw a man eat a pizza out of a dustbin the other day. Poverty is a fate arguably worse than Covid, with absolute respect and condolences to those who have lost loved ones to this awful virus.
Yet, South African business leaders continue to do what they’ve always done: adapt and survive. Incredibly, it is currently legal to sell certain cannabis-based products, but not alcohol.
*insert high pun here*
The news broke today that Distell has taken a 20% stake in cannabis business Rethink. This gives the company access to Rethink’s CBD (cannabidiol) products.
In case you haven’t noticed, CBD products have sprung up everywhere. Ranging from pop-up shops and vendor trolleys in malls through to high class boutique stores that feel as though Apple designed them, the CBD market has exploded.
Interestingly, Invenfin has invested alongside Distell, taking a 20% stake in Rethink as well. Invenfin is part of Remgro, which is Distell’s biggest shareholder.
Distell’s share price tanked 45% from January to March 2020. Sounds like ages ago, but that’s when the joys of lockdown first hit. It then traded mostly in a range of R70 – R85 per share for several months, before jumping to a range of R90 – R100 per share in November, which is where it has stayed despite the recent ban.
This deal with Rethink makes sense for Distell and one can easily imagine the product opportunities going forward. Unfortunately, it’s a small deal – so small in fact that the value wasn’t disclosed. Distell is worth more than R20bn, so this probably won’t move the dial.
But for the sheer comic relief of a company moving into a legal industry by investing in cannabis, it’s a treat.
Leave Your Comment Here
You must be logged in to post a comment.