Recently, Mexico announced the legalization of recreational use cannabis causing shock waves across the industry. Mexico has a population of over 130 million people, making it one of the largest cannabis markets to date. Experts project that cannabis sales alone could generate over $2 billion annually in revenues. While this most recent development is certainly newsworthy, evidence for cannabis growth has been present for a while. As a result, many major players are jockeying for position in what’s certain to be a global competition.
The cannabis industry has showcased multiple mergers and acquisitions since its inception. Therefore, it’s not surprising that such business dealings continue to occur. But the nature of these partnerships and buyouts still reveals a great deal about where the cannabis market is headed. And it also offers some important insights about changing consumer opinions about cannabis growth and use worldwide. In fact, this reveals some interesting shifts in opinion involving the use of other previously illicit drugs as well.
“[Cannabis growth] quickly went from focusing on domestic opportunities to how to participate in this global supply chain. You can do high-quality manufacturing in Mexico for a low cost.” – Emily Paxhia, Managing Partner of Poseidon Asset Management
Major Changes in the Cannabis Market Abroad
With Mexico now embracing recreational use of cannabis, the U.S. now finds itself in an interesting position. Canada already legalized cannabis use last year, which means the U.S. is sandwiched between two make cannabis market players. But these countries aren’t alone. Changes in Europe have also been suggesting rapid cannabis growth and acceptance. Multiple countries in Europe have legalized cannabis use in one form or another. Likewise, Australia and New Zealand have invited medical-grade marijuana use as well. (Read more about the new frontier of cannabinoids in this Bold Business story.) And with Brexit, the London Stock Exchange now permits trading of cannabis company stocks. In this regard, Europe is well ahead of the U.S. in terms of the cannabis industry.
That’s not to say numerous states in the U.S. having passed recreational marijuana use laws as well. At least fifteen states have done so with others seeking approval as well. But federal resistance to cannabis growth and legalization remains in place. These pose some degree of barriers in specific instances for cannabis-related companies as well as consumers. However, increasingly state-side cannabis market players are looking to expand beyond national borders. As international opportunities in the industry expand, they don’t want to be left behind. This alone has triggered a great deal of activity and stock pricing shifts as of late.
“The U.S. market will be very healthy, but I believe Europe will grow faster than the U.S. in the 2023-2025 timeframe…Countries like Poland, Ukraine, South Africa — there are even rumors of Egypt — are also moving toward legalization.” – Boris Jordan, Executive Chairman, Curaleaf
Recent Global Cannabis Market Developments
Given international changes in legislation and regulation of the cannabis market, several recent developments have transpired. The following offers some important highlights in this regard that showcases cannabis growth on a global scale.
- Aurora Cannabis Inc. – Aurora is well known in the cannabis market, but its recent acquisition of Farmacias is noteworthy. Farmacias was the first licensed raw-grade THC importer into Mexico long before recreational use was allowed. In all likelihood, Aurora sees Farmacias as a means to quickly access a Mexican market poised for major cannabis growth.
- Curaleaf Holdings Inc. – As far as the U.S. is concerned, Curaleaf is the largest U.S.-based cannabis company. While it has great opportunity at home, company leaders perceive Europe as having a more robust cannabis market in the short-term. In order to prepare for cannabis growth abroad, Curaleaf recently acquired Emmac Life Sciences. Emmac is already a legal cannabis producer in 8 different countries. Thus, as a result, Curaleaf expects ease of entry into the European cannabis market through its purchase.
- Tilray – This Canadian cannabis company is also well-established and has pursued more of a pharmaceutical approach to the cannabis market. Though slowed down by the COVID pandemic, Tilray recently merged with another well-known cannabis leader, Aphria. Together, they have successfully gained approval from New Zealand and Australia to sell branded medical marijuana products. Given the rigorous standards both countries require, this is a major achievement. And it allows Tilray to readily participate in the global cannabis growth trends as well.
- British American Tobacco (BAT) Plc. – One international cannabis market development involves the number of partnerships between cannabis companies and tobacco, alcohol and pharmaceutical ones. The partnership between Canopy Growth and Constellation Brands is well known (check out this Bold Business story on Canopy Growth for more information). But recently, BAT spent $175 million for a stake in Organigram Holding Inc. This move opens up possibilities related to distribution and retail networks that might otherwise not have been available as quickly.
Shifting Cannabis Market Perspectives in the U.S.
Compared to Mexico, the U.S. has been extremely slow to accept cannabis growth and legalization. Mexico went from decriminalization, to medical use, to recreation use in 6 years. In contrast, the U.S. still hasn’t done so in over 3 decades. But even now, U.S. cannabis companies are pushing ahead within the country. Greenrose Acquisition Group recently purchased 4 private forms in 7 states for $210 million. It hopes to developed a more advanced national distribution and retail network. Red, White and Bloom also recently acquired Acreage Holdings in Florida. This will expand its cannabis growth into 6 major state markets. While U.S. adoption of the cannabis industry has been slow, it does appear to be moving ahead.
These trends in the cannabis market are in part due to increasing pressure on policymakers by the public. And it’s not just about cannabis use either. Psychedelic drugs are also gaining public acceptance in the U.S. as well as Europe. MDMA, LSD, mescaline and other psychedelics are being considered for use in specific instances. For example, NYU opened a Center for Psychedelic Medicine after receiving a $10 million donation from MindMed. Missouri also recently passed a “right-to-try” law for these compounds by physicians. All of these developments suggest the cannabis market is about to explode on a global scale. Between changing social opinions and scientific evidence, it appears cannabis growth is likely to continue. And companies astute enough to realize this are doing their best to take advantage of the situation.
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