Analyst – Derek Thomas
When a few companies in a particular industry gain an advantage because they entered into a marketplace first, they are said to have ‘first-mover advantage.’ These companies have an opportunity to build strong brand-name recognition, access the best sources of funding, build a loyal customer base, and position themselves to take advantage of any efficiencies yet untouched simply because there aren’t any competitors in the way during their first few years of operation.
As the global tide of marijuana change sweeps across nations, often they find themselves ill-prepared to offer domestically grown marijuana to their populations. Over the last few years, for example, dozens of countries have legalized some form of marijuana. Australia, Italy, Germany, Uruguay, Brasil, New Zealand, Croatia, Chile, Israel, Colombia, Czech Republic, Mexico, South Africa, and Spain all have some form of legal marijuana or are very close to implementing marijuana reform.
That’s a lot of new markets.
But like any burgeoning industry (especially one rising into legality from the black market) there are often growing pains that restrict supply. Self-imposed regulatory hurdles and a lack of domestic production capability are forcing many of these new markets to look to foreign suppliers, and some countries are ready to pounce on the opportunity.
While the U.S. continues to squabble over state-by-state legalization, the federal government is no-where near allowing any type of international trade. We aren’t even close to inter-state trade!
But our friendly neighbors to the north are already taking advantage of the global marijuana supply glut.
Before we can understand why Canada is poised to dominate the international trade industry, it’s important to understand what the international market currently looks like.
The legal international cannabis market is limited to medical use, clinical research, and compassionate access. This is due to a complex system of national and international laws. The importing nation typically issues a permit that follows the regulatory structure of its medical laws. The exporting company gets approval from its domestic national health department and export body. Both nations report to the International Narcotics Control Board, which is the United Nations’s independent control body for international drug conventions.
As bloated as the system may be right now, companies getting involved see it as a long-term investment. As trade grows, it’s fair to assume that cannabis will be swept up into trade deals just like any other industry.
Additionally, there are only two other countries currently exporting marijuana besides Canada. The Netherlands is the most established, and currently exports to Germany, Croatia and Italy. However, the Netherlands is basically at full production capacity and doesn’t have any commercial or regulatory interest in expanding their capacity. They have a large domestic demand via tourism that must be met and exporting outside of the European Union would require regulatory approval from the EU.
Israel is also exporting cannabis, and as a major pharmaceutical exporter it will definitely be a major player in cannabis exports. But Israel is small and does not have the same energy and water resources of Canada. Water, energy, and space are all requirements of any large agricultural industry, and Israel is not blessed with any of those.
Canada, on the other hand, is the world’s second largest country and is blessed with abundant energy and water resources. Ports on both the Atlantic and Pacific oceans allow for easy access to the world’s busiest shipping lanes. And they have legislative and regulatory frameworks that are already allowing for the export of medical marijuana. They even already have a reputation for having the best quality – according to Uruguay’s first lady Lucia Topolanksy, who’s country is considering importing medical marijuana from Canada
Cronos Group, which owns Peace Naturals – one of Canada’s 38 licensed medical facilities – began exporting cannabis to German pharmacies almost a year ago, in October of 2016. Marketing and Communications Director Eric Klein said “Cronos has already announced a partnership with German cannabis import and distribution company Pedanios, which will enable us to extend into the EU and Switzerland.” He furthered his comment by saying “We are focused on developing an international distribution network, and continue to canvas the horticultural and regulatory landscape while aggressively pursuing strategic interests in multiple markets.”
Tilray, another licensed Canadian grower, recently announced that it received approval to, and would begin, exporting medical cannabis to Chile. Shortly thereafter, Tilray announced they would also be shipping medical marijuana to Australia to critically epileptic children in Victoria.
Canopy Growth Corp, a true cannabis unicorn and Technical420 favorite, has announced partnership agreements with German and Danish firms and has successfully placed its Tweed branded cannabis strain in German pharmacies.
In total, it is estimated that the global cannabis market may be worth $200 billion, with medical marijuana accounting for up to 50 percent of that. That’s a large slice of pie for companies to work for, and Canada is clearly taking advantage of their first mover position.
But it isn’t all sunshine and rainbows for Canadian cannabis exporters; Prime Minister Justin Trudeau’s pot bill continues to make the export of weed for recreational use illegal, vastly limiting the ability of Canadian weed producers to grow their international business.
Canopy Growth CEO Bruce Linton 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 said in an interview with Bloomberg earlier this year.
Source: Technical 420