The Rise of The Global Cannabis Titans


Marguerite Arnold

October 17th, 2017

Policy, Top News


Not too long ago, in fact, just four years ago, there was no real legitimate cannabis business that had any protection from federal prosecution. Then, the idea of having a cannabis business that operated outside of one state was unheard of. However unbelievable just two years ago, the cannabis industry had finally gone national in a place that was not Uruguay. Two years on, it is already global.  Even more intriguingly, a few companies now seem poised on the edge of not only fundamentally shaping the next steps of the industry, but have clearly already established world-wide production, distribution and even promotion networks.

In fact, if there is one thing that is absolutely clear, especially from the ground in Europe, the medical horse has already left the barn. There are a few companies already in position to gain major market share. Everyone else is going to be playing catch-up.

How and Why Is This Even Possible?

Timing is everything. In the last year, if not 18 months alone, multiple countries have moved into the legalization zone, even if first dipping in a “medical only” toe. Even as big and bad as California certainly is, foreign federal legislators are admitting that cannabis has medical efficacy. No matter how reluctant this admission is. This also means they must source medication. Even if “only” at this point low THC, CBD oils and capsules – although it is already more than that. As they establish domestic regulations and in some cases grow regulations and infrastructure, such governments also have to start importing from elsewhere.

With the exception of Dutch Bedrocan, who is limited by sovereign federal law on how much they can export, this means that the Canadian LPs to date have been the only other game in town. With Israel now moving into the export space, and Australia more than likely to, that will change although it is unlikely to alter existing dynamics. Whatever they might lack in technical expertise (in contrast to the Israelis for example although they are increasingly partnering with or outright buying Israeli IP) Canadians can easily overcome this in terms of sheer volume. No matter how sophisticated the tech and biological innovation from the start-up nation, the country is a small desert. And no matter how much Israeli companies are already in the game on the tech export side, they cannot, unless partnered with a federally legal Canadian (or potentially Australian) company, even begin to compete in the supply game. American-Israeli partnerships so far are solely in the realm of tech transfer.

For all these reasons, the global market leaders in the cannabis space are today all Canadian, with the exception of Dutch Bedrocan. And while they will be challenged at some point, particularly on the pharma front, and early, by their competition in Israel and Australia, so far the approach seems to be to form alliances rather than compete.

What that means for most American companies is unclear. There are already financial alliances if not more afoot north and south of the Canadian border. However the continuing lack of reform in terms of FDA scheduling, not to mention other issues (banking and insurance for starters) is moving the cannabis game on a global level outside of the U.S.

Even companies like CW Hemp, producers of Charlotte’s Web, are finding themselves literally outgunned if not “underqualified” per European standards that are already setting a different conversation. While CW Hemp (for one) is not only exporting internationally and clearly interested in foreign expansion, it is precisely firms like this who have been blocked so far, from participating in what is now afoot outside the U.S. – namely participation as a bidder in any domestic cultivation in the various countries this is now proceeding in.

In fact, German authorities, following guidelines set out via the UN, wrote the requirements of the still pending medical cultivation bid in a way that seemed tailor made for Canadian firms. Why? They were the only companies, with a few exceptions who could even meet the requirements of operation within a federally regulated environment.

That in turn also seemed to galvanize the firms who are clearly shaping up to be global market players – across jurisdictions. In fact, during the summer of 2017, the line separating the “men” from the “boys” started to become even more apparent, just in the positioning of top firms within the German if not wider EU marketplace.

So who are these firms? And what are the specific accomplishments that make them, as of this writing, the global market leaders in the cannabis space.

The Industry Leaders

It is already possible to say that if you do not have a foot in the medical markets in Canada, Israel, Australia and Europe, somewhere, as well as Germany specifically, you are out of the game on this front already. And probably, going forward, all global bulk distribution of cannabis and cannabinoid product.

By definition, this limits the list considerably.

Canopy Canada

Without a doubt, Canopy Canada is forging its position, and early, as the leading, global cannabis brand. Par none. And while it might be showing up in Market Cap, there is far more good news in the fundamentals. In fact, at the end of last year, this started to become very obvious no matter industry and blog chatter about the swings of stock price. They acquired, outright, Spektrum Cannabis (originally MedCann GmbH), the market leader in Germany, which had managed to obtain the first import licenses for both raw bud and cannabis oil concentrate. The Spektrum acquisition occurred about a month before the law changed to legalize insurance coverage of the drug here. That absolutely kick-started the “Canadian invasion” into Deutschland.

Since then, Canopy has moved dramatically to consolidate their position, not only in Germany and the EU but far from Europe. In the past several months, they have announced strategic alliances with  Alcaliber in Spain and AusCann in Australia. These alliances are unbelievably important. Not only does this elevate cannabis indisputably into pharmaceutical territory globally, but introduces the drug into networks and companies that are federally and internationally licensed to supply at least 60% of the world’s morphine and other legal opioid medications. Plus have just received Australian licenses to grow medical cannabis. Compete with that!

Aurora Cannabis

The company has been clearly on the heels of Canopy in terms of Market Cap for the past year. However they have also been busy differentiating themselves within a global market – not only against their Canadian competition, but clearly in ways to move themselves into slightly different market positioning in multiple territories. Not only was their recent acquisition of Pedianos, a leading distributor based in Germany significant (as the bid for new cannabis production was underway), but they are also launching into other interesting territory, including in grow tech.

In fact, their recently released Envoy product is clearly targeting a much dissed and overlooked part of the market. While home grow, at present, is a dirty word in Germany, in particular, it is also obvious that no matter what any federal government does, patients everywhere are still forced to either grow in secret or etcetera. And they will.

In fact, this development is also intriguing right now given the continued popularity and growth of the home cultivation market in Germany alone (as seen at places like the Mary Jane Expo in Berlin). No matter how “grey.” In Germany and beyond, as the formal rollout of medical marijuana is slowed down by the formation of regs and procedures to mainstream it as a drug, Aurora might be on the edge of capturing a patient market the others are not touching at this point. Certainly not in Germany.

Maricann

This was another Canadian-Dutch powerhouse to establish itself aggressively in Germany this year but it is clear they have other plans and far afield from both Canada and Germany specifically. In fact, the company began issuing press releases about German expansion literally within a month of the announcement of the first tender bid to grow here. This included large capex expenses like the formalization of grow space (in former industrial real estate in East Germany) and a corporate office in Munich (one of the centers of insurance in the country).

Beyond that, of course, the company footprint just in Canada has grown dramatically. In addition, Maricann is one of the Canadian firms that is looking at how to enter the U.S. market, even if it is via another means. In this case, in fact, the company is looking at how to exploit brands made popular in American state markets in other places. See the recent Julian Marley partnership and branding distribution agreement to take product established first in U.S. state markets, to both Canada and selected parts of Western Europe.

Tilray

This interesting hybrid has clearly been weaving its way through the weeds in a strategic way and is currently in six countries. Tilray was backed by Privateer, the canna-focussed VC firm also behind Leafly and associated with Peter Thiel. They are ostensibly “Canadian” but have been exploring market entry in not only the United States but Europe – and which also includes branding beyond product. Interestingly, while initially it appeared the company was aligning itself for a position to grow in Germany (and thus an applicant for one of the still-pending licenses), that has turned into a very different animal. The company recently announced that they were spending $30 million to build a state-of-the art production facility in Portugal as Leafly also launched a German only site, with offices in Berlin. Tilray also got an early import license into Croatia last year. This means they have market access, directly, to Europe, and from a country where all drugs are already decriminalized.

This gives them a European base for full product and brand establishment, a Canadian operation, and plenty of access to U.S. markets through establishing channels. The transfer of IP and brands is far easier across national boundaries than cannabis. And Tilray is certainly exploring this area aggressively.

Honourable Mentions

There are clearly other companies who might not lead the pack, but are already in the global cannabis club. This includes Dutch Bedrocan, the oldest federally licensed cannabis export company in the world. It also includes Canadian AbCann, and a few Australian and Israeli companies who are coming into the space with capital and expertise, usually gleaned or gained from previous pharma experience. CW Hemp is also trying to establish itself globally. If they succeed, they will also become the first solely American-based cannabis producer to successfully jump the borders of the U.S. Their product is already being shipped (by ground transport only) across the United States and exported internationally to Argentina.

And while it is not making the list (yet) of major global pot players, look for Netflix to make a splash sooner rather than later. The global subscription media content distributor is aggressively launching pot themed content. This includes Disjointed, the Kathy Bates comedy about an aging Boomer and her pot shop in SoCal. Also see Five Foot Two, Lady Gaga’s rockumentary showing the singer both struggling with chronic pain and unabashedly attributing ganja to her ability to manage it. Beyond this, however, Netflix has also just launched their own line of branded cannabis. It is not a conventional play, but it sure is an interesting one. With global reach.

What is very clear, however, is that the cannabis industry is seguing into two very clear divisions: those who operate in multiple countries, and those who don’t.

And for the most part, that also means that the vast majority of American firms, at this point, are being left far, far behind.

About Marguerite Arnold



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