Canadian Investors Are Missing the €52.6 Billion European Opportunity
September 6th, 2018
Exclusive, News, Top Story
The Canadian cannabis industry is projected to reach C$22.6 billion over the coming years, according to Deloitte, driven by the legalization of recreational cannabis in October of this year. While many licensed producers are focused on meeting this domestic demand, investors are starting to realize that an even bigger opportunity is brewing in Europe—an emerging €52.6 billion opportunity with few established players.
Maricann Group Inc.’s (CSE: MARI) growing footprint in Germany, Switzerland, Malta, and Italy makes it one of the most promising opportunities in the space. With a modest C$268.5 million market capitalization, the market appears to have discounted its European operations that could both diversify and grow its revenue far beyond the Canadian market.
Growing European Market
The European cannabis industry could reach €52.6 billion over the coming years, according to Prohibition Partners’ European Cannabis Report. With twice as many citizens as the U.S. and Canada combined, the firm believes that the region has the potential to become the largest single market over the next five years if most or all of its constituents legalize medical and/or recreational cannabis with programs similar to those in North America.
Germany is the largest cannabis market in Europe with a medical and recreational market that could total €14.7 billion—or about 26 percent of the continent’s cannabis market. There are also ten other countries that have legalized medical marijuana and several others that could pass recreational laws over the next few years. These trends are quickly accelerating following Canada’s move to legalize recreational cannabis in October of this year.
Canada has become a leading supplier to these new markets given its growing capacity and status as the world’s leading cannabis producer. Aurora Cannabis Inc. (TSE: ACB) acquired CanniMed Therapeutics to target Denmark, Italy, and Germany; Aphria Inc. (TSE: APH) acquired Nuuvera Inc. to enter the Italian market; and, Maricann Group Inc. (CSE: MARI) acquired Haxxon to enter the Swiss cannabidiol (CBD) market.
Maricann Builds a Presence
Maricann’s acquisition of Haxxon offers significant inroads into European markets. In addition to providing access to the lucrative Swiss market, the acquisition provided a 64,500 sq. ft. indoor facility located in Zurich, near the airport. The company plans to invest CHF4.8 million in improvements to the existing cultivation facility to create finished CBD-based products for inhalation as a tobacco substitute across Europe.
In addition to its Swiss holdings, the company is one of five in the world to have GMP certification that enables it access to the lucrative German medical market, as opposed to waiting for the tender process. The company has already applied for a license and expects to receive approval during the third quarter to begin cultivation at a 300,000 sq. ft. GMP and GPP compliant cultivation facility that it’s building near Dresden, Germany.
Germany’s medical market is unique because government health insurance and the European Medicines Agency pay for patient prescriptions, and over 62 percent of the patient base in Germany are covered by this insurance. This means that Maricann can sell cannabis products directly to the German government rather than to consumers or physicians. The company is one of just six licensed producers to have EU-GMP certification, which enables them to send products into Germany’s market, where one gram of dried cannabis flower retails for 24 euros—a significant premium over North American markets.
In late-August, the company also announced that its European nutraceutical subsidiary, MariPlant, commenced the harvest of about 165 hectares of hemp in Germany. The company managed to collect nearly 3,000 kilograms of dried material from just four hectares so far, using innovative new equipment developed in Germany. Management believes that it will be able to dry up to 50,000 kilograms of wet hemp flower per day using these technologies.
And finally, the company also announced a non-binding term sheet to form a strategic joint venture with San Martino, a large scale agricultural giant in Piedmont, Italy. The two companies will develop a centre of excellence for cannabis products in conjunction with the University of Eastern Piedmont. The initial focus will be on high-CBD products for the medical market, but ultimately, THC products for the European market when legal.
Maricann’s revenue from its domestic and international operations totaled $1,157,887 during the second quarter, which was a 75 percent increase from its year ago results. With these revenue coming from only two large bulk supply orders, shareholders and investors could see further upside, especially as the company has made the decision to consciously preserve inventory ahead of recreational legalization later this year.
“We have achieved significant supply agreements with a number of provinces to supply our cannabis products which is expected to transform into shareholder value with compelling revenue in Q4 2018, 2019 and beyond,” said CEO Ben Ward. “As previously disclosed, the Company has reserved product for the recreational market commencing October 17th and its pharmacy joint initiative commencing October 1st. The Company made the conscious decision to preserve inventory to meet demand for these strategic long-term sales channels.”
The company was recently selected by The Ontario Cannabis Store to supply recreational product through its online store launching on October 17, 2018. On the international front, the company’s recent export of dried cannabis flower to Germany and the closing of two international deals could also pave the way toward greater global revenue. These combined catalysts could help accelerate its future financial results.
Maricann Group Inc. (CSE: MARI) is well-positioned within the Canadian and European cannabis industries. With its growing footprint and upcoming recreational legalization, investors may want to take a closer look at the stock given that the market is currently assigning almost no value to its growing European operations.
For more information, visit the company’s website at www.maricann.com.
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