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Canadian weed producers will dominate the global marijuana market

In marketing strategy, there’s a term called “first-mover advantage”. It’s when a few key players in a particular industry gain an advantage because they entered into the marketplace first. These companies are able to establish strong brand recognition, shore up the best sources of funding, and build a loyal customer base simply because there aren’t any competitors in the way during their first few years of operation.

When it comes to the market for exporting weed, big Canadian LPs have clearly established a first-mover advantage. There are currently 29 countries that recognize some form of medical cannabis, but only two of those countries — Canada and The Netherlands — export weed for medical use. In fact, the medical marijuana export market is dominated by just four Canadian weed producers: Cronos Group, Canopy Growth Corporation, Aphria, and Tilray.

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To some extent, it’s going to be a decades-long upward battle to really capitalize on the global demand for weed, given that the drug is still illegal in most countries. But Canadian marijuana companies are ahead of the curve in terms of making their mark overseas, as they scramble to collaborate with foreign medical marijuana producers and pharmaceutical companies keen on discovering and potentially patenting marijuana-based cures.

The European Experiment

“There’s huge opportunity for us in Germany,” PI Financial Corp. analyst Jason Zandberg told VICE Money. “They provide national health coverage for medical marijuana. That means, the German market could be more than double that of Canada.”

Medical marijuana officially became legal in Germany in March 2017, opening up a whole new market to Canadian LPs. Very little weed is actually farmed in Germany, although the government’s legalization framework includes a big push to cultivate the crop on its own for medicinal use to ensure its quality. Until then, however, the German cannabis industry will still rely entirely on imports.

In order to export weed to Germany, Canadian weed producers need to get approval from their own government and the German government. Late last year, Canopy Growth Corporation, a Unicorn in the weed industry, acquired the German-based pharmaceutical distributor, MedCann GmbH, which had successfully placed Tweed-branded cannabis strains in German pharmacies.

In fact, a month before that, another big Canadian LP, Cronos Group began the global expansion of their brand by shipping its first batch of “premium” medical marijuana to Germany. They currently own a subsidiary, Peace Natural Projects Inc., which signed an agreement with the German-based Pedanios GmbH, a distributor of medical cannabis.

Germany is just the first domino, believes Zandberg. “More European Union countries will create new medical cannabis laws and expand the export market for Canadian LPs. Currently 12 of the 28 EU members have a medical cannabis program.”

Restricting recreational weed exports

It is estimated that the global cannabis market may be worth $200 billion, with medical marijuana accounting for up to 50 percent of that. But Prime Minister Justin Trudeau’s pot bill continues to make the export of weed for recreational use illegal, a factor that vastly limits the ability of Canadian weed producers to grow their business.

Canopy Growth CEO Bruce Linton however, sees this as a temporary hurdle. “Canada is emerging as a leader in public policy around marijuana and other countries will need its know-how as they shift toward making cannabis and cannabinoids part of standard medical treatment,” he told Bloomberg in an interview last month.

“That gives Canopy the chance to export product while the domestic industry makes that transition, and to set up production on the ground once it has,” Linton said. In other words, get in there first, mark your territory, establish your brand, and your consumers, regardless of nationality, will only want to consume Canadian weed.

Saul Kaye, the chief executive of iCan, a private Israeli firm that focuses on identifying innovators in the medical marijuana space, has dealings with a bunch of Canadian LPs.

“There’s a synergy that’s happening between Israel and Canada when it comes to marijuana. They are focused on the growing, on the agricultural side. We are focused on the R&D side, and we need that supply of different weed strains.”

But former Toronto police chief Bill Blair, a key player in the government’s campaign to legalize weed has made it clear that one of Canada’s biggest priorities is to ensure that there is adequate supply of legal weed in the market, to “weed out” illegal suppliers.

That could potentially mean the crackdown of export permits in order to prioritize the domestic market. Of course, that depends on how weed will be priced in different countries. If obtaining a marijuana pill is more expensive in say, Germany, there will be a greater incentive for big Canadian LPs to focus their sales there.

Big LPs charge ahead

Currently, four Canadian LPs export weed to a combined six countries. According to Jason Zandberg, it is Tilray, a private LP based in Nanaimo, B.C. that has been the “most aggressive LP in the export market,” selling weed to New Zealand, Australia, Chile, Brazil and Croatia.

Australia legalized marijuana for medical consumption back in November, which prompted another Canadian company, Aurora Cannabis, to lock in a 20 percent stake in Cann Group, the first Australian firm to be awarded a license from the Australian government to grow weed for medical purposes. Leamington-based Aphria also took notice of the Australian market by signing an agreement with Medlab, a weed research firm in Australia, to grow and prepare weed for the completion of a clinical trial.

The big prize, of course, is anyone who manages to crack the American market, in the unlikely event that they legalize medical marijuana. Aphria is attempting to do just that — it recently invested $25 million in a dispensing operation in Florida, besides also having a stake in an Arizona-based weed company. Aphria claims that its strategy in the U.S. is to “target key states that have approved medical marijuana.”

“There’s global opportunity out there,” Zandberg said. “The EU countries are a huge export market for us, but I believe that overall we’re positioned really well to tap into an additional leg of growth beyond the Canadian medical and recreational market.”

Follow Vanmala on Twitter   https://news.vice.com/story/canadian-weed-producers-will-dominate-the-global-marijuana-market

Author: Cenedella.de

Philip J. Cenedella IV - The 2-continent Cannabis Consultant First and foremost, I am a Patient Advocate since 1977. I have also served as a Board of Director for the World Trade Center San Diego, as a Lead Consultant for Deutsche Telekom's Executive Board, Founded the Dayton Human Trafficking Accords and have been a C-Level Business Development Executive for over 3 decades. From California, now residing in Germany and providing professional business development services to firms from the USA and Europe. Call +1.888.206.3264 Skype: philip.j.cenedella eMail: phil@cenedella.de

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