The Cracks are Showing in the U.S.’ Cannabis Facade
October 3rd, 2018
Yes, cannabis is illegal on a federal level in the United States. Still. There have been mixed messages from the current administration regarding how committed the federal government is to enforcing its prohibition of cannabis, and each time President Trump or Attorney General Sessions makes a declaration of some sort the whole industry lurches forward with hope or backward in fear. Like a stock’s trend line, however, with its ups and downs smoothing into a bigger up or down picture, the general outlook for cannabis in the US is a steady march toward legalization. Recent developments only enforce that view.
What types of companies would stand to benefit the most from a relaxation of the federal prohibition? A rising tide would likely lift most all of the boats in the cannabis industry, but some companies may be in a better position to profit than others. Rubicon Organics™, with current operations in both Canada and the US along with plans to go public in the very near term, is one company that could stand to benefit tremendously should the US continue down the path toward cannabis legalization.
In a development that greatly impacted trading in the cannabis market, Tilray announced that it received permission from the US government to import cannabinoid capsules from Canada for a clinical trial run by researchers at the University of California San Diego. This is a historic breakthrough, as the federal government has previously limited cannabis available for research to its own small supply of cannabis, grown in a single facility in Mississippi and offering questionable value for researchers. Were the federal government to open up the supply lines for scientific research, the industry might be able to advance cannabis as medicine much more quickly and efficiently after years of being handicapped by restrictive regulations.
Canopy Growth CEO Bruce Linton, in an interview with CNN, waxed optimistic about the near term potential for the federal government, even under Republican rule, to recognize the rights of individual states to make cannabis legal. Mr. Linton likely has no particular insight into the current administration’s policy decisions, but he is generally reading the tea leaves of a trend that is hard to ignore.
The statistics keep building: 9 states and the District of Columbia have legalized adult-use cannabis; 22 other states plus the territories of Guam and Puerto Rico have legalized medical cannabis; another 15 states allow hemp-derived CBD products; 13 states (outside of the 9 adult-use states) have decriminalized possession of marijuana. Voters in Missouri and Utah will decide on medical legalization this year, and those in Michigan and North Dakota will vote on adult-use legalization.
International Operations Set the Stage
Canada is the pioneer of the cannabis industry, providing companies a regulated environment for the legal development and sale of cannabis and related products. Canadian companies are perfecting their game domestically while making inroads in Europe and South America, where legalization is taking hold but production lags.
Rubicon Organics is taking a slightly different approach. The company is in the very late stages of its ACMPR application and is on the verge of becoming Canada’s third certified organic producer (there are currently 118 licensed producers). Rather than wait for the Canadian license, the company has established operations in both California and Washington to get a head start on branding and sales in the United States. The company intends to marry its US-based brands with its pending Canadian organic production to create an international powerhouse. By leveraging the trend-setting Southern California vibe of its 1964 Supply Co.™ brand with the premium production of certified organic cannabis in Canada, the company is uniquely positioned to be an early mover in the wider, and growing, US market.
If one were to choose a location to start an iconic cannabis brand, the most logical place would likely be Los Angeles. It’s a trend-setting market for the entertainment, media, and consumer goods markets. Companies have been capitalizing on the SoCal lifestyle for decades, and the approach makes even more sense in relation to cannabis. California was the first state to legalize medical cannabis back in 1996, and cannabis culture is identified with the state in many consumers’ minds.
So Rubicon is saturating the LA market with its products, intending to create a deep and sustainable brand that it can parlay into other markets as they open up. It’s a solid brand strategy for addressing the huge potential US market and may set the company up for success in other legal markets as well. When it comes to naturally identifiable cannabis ‘brands’ in the minds of consumers worldwide, it could be argued that Jamaica, British Columbia, and California lead the way. With Rubicon set to capitalize on two of those three, while adding in the organic component, the company appears to be smartly preparing for the potential lifting of the US prohibition of cannabis. Keep an eye out as the policy situation continues to play out, and Rubicon hits the public markets in the near term.
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