Tilray and Canopy: A Tale of Two Cannabis Companies

It was once akin to a forbidden fruit, accessible only if you knew someone who knew someone. But social stigma has given way to scientific fact, and now cannabis use has become more commonplace — and far more legal. As a result, the industry has grown dramatically. Two of the largest cannabis companies in the world are Canada’s Canopy Growth Corporation and Tilray Inc. Each possesses a market capitalization that exceeds $11 billion dollars. Yet, while dominating the industry, the two largest cannabis companies are boldly heading down divergent paths.

Tilray and Canopy: A Tale of Two Cannabis Companies

In Canada, 4.9 million consumers spent an estimated $5.7 billion on both medical and non-medical cannabis in 2017. That’s big business. And not only are more distributors entering the market, but many of these cannabis companies are revolutionizing the way customers can consume the product. For Canopy, that means diving into the beverage sector. For Tilray, their fortunes lie in the pharmaceutical space.

Canopy: Combining Beer with Cannabis

Canopy is no new contender in the industry.

They are among the top marijuana growers in Canada, and export globally. Their Q2 revenue for 2018 tops out at $25.92 million, which is a uptick of 63.27% from the previous year. They are the first cannabis-producing company to be listed on the New York Stock Exchange.

But though they made their presence known selling medical marijuana, they may soon be treading a different path.

Recently, Constellation Brands, owner of several alcoholic drink brands such as Modelo and Corona, acquired over 50% ownership of Canopy through share purchase. Constellation and Canopy have been tight-lipped about what they might have up their sleeves. However, with recreational marijuana use now legal in Canada, and recreational sales projected at hitting nearly $4.3 billion in the first year, it’s a no-brainer what happens next. We’ll soon likely see the beverage company and one of the largest cannabis companies around roll out a cannabis-infused beer.

Brendan Kennedy, CEO of one of the largest cannabis companies in Tilray, sees a push into the beverage sector as the future.
As CEO of Tilray, Brendan Kennedy is bullish on the notion of cannabis-infused beverages.

Tilray: Leaning Towards the Pharma Sector

Recreational cannabis use and the beverage industry might seem like a match made in heaven, but nothing says growth potential like a trip into the pharmaceutical sector. That’s the path Tilray has decided to take.

Even though it does not have the largest production capacities in the industry, Tilray has one of the largest market values among all competing stocks. Instead of growing and maintaining their own product, they purchase it from other companies such as Supreme Cannabis, with whom they recently entered into a supply agreement.

Tilray and Canopy Growth Corporation are two of the largest cannabis companies, but they walk divergent paths.
Supreme Cannabis is on board with Tilray’s entrance into the pharmaceutical cannabis space.

Tilray’s focus has narrowed to global medical cannabis research and development. In fact, they recently signed a collaboration agreement with Sandoz Canada, one of the fastest-growing pharmaceutical companies in Canada. As Canada still struggles to find sources to support the industry’s rapid expansion, Tilray’s investment into the Canadian pharma industry is a strong strategic move.

“I definitely expect additional strategic investors to invest in the industry in the coming months.” – Brendan Kennedy, CEO of Tilray, Inc.

The Last Hurdle in the U.S. Market for Cannabis Companies

Though business is booming in Canada, a legal hurdle remains just south of the border. And it centers around the Food and Drug Administration and Drug Enforcement Agency’s classification of marijuana, and the components therein.

THC is the psychoactive chemical in the cannabis plant and has traditionally been the more sought-after ingredient among consumers. But the cannabis industry has focused on extracting and distributing the other main ingredient of the cannabis plant: CBD.

CBD is the component that delivers the therapeutic affects many customers and patients consume the product for.

Across the U.S., many companies have begun selling the ingredient in the form of pills, ointments, gels and recently, food and beverages. However, because CBD has not been approved by the Food and Drug Administration, CBD has been banned as an additive in several states.

For example, California may have legalized recreational marijuana, but it still prohibits CBD.

However, once CBD is inevitably reclassified, the floodgates will open…

… And Tilray, with their pharmaceutical focus, is extremely well-positioned for that. As one of the largest cannabis companies north of the border, they’re on the precipice of even greater growth once the last legal hurdles are removed.

It Was the Best of Times, It Was the Best of Times

Bruce Linton CEO Canopy Growth Corporation Discusses impact of cannabis companies on Beverage Companies
Bruce Linton CEO Canopy Growth Corporation

While the cannabis plant is nothing new to society, the cannabis industry has just begun carving out its slice of the world market. And as the legalization of recreational and medicinal cannabis spreads, the industry will only get bigger.

With Aurora Cannabis Inc. partnering with Coca-Cola for a possible dive into the beverage market, it’s clear Canopy’s strategy is a viable one.

The same holds true for Tilray, their pharma sector alignment, and the impending legalization of CBD additives in the U.S.

The two largest cannabis companies may be taking different paths, but they’re forging ahead boldy.

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