Canada has been the most dominant player in cannabis production and exportation market since recreational use was legalized in the country back in 2017, resulting in a huge injection of revenues into the companies operating in the country. Since then, the biggest names in Canadian pot like Canopy Growth Corp., Aurora Cannabis, Cronos Group, and others have expanded their reach across the globe – particularly in the Western continents. Large investments, M&A activity, and now, large scale deregulation and removal of cannabis prohibition promises to create goldmines out of a number of different nations.
Earlier this year, MRP highlighted a blockbuster 2018 that saw the European pot industry grow more than it had in the previous six years after a huge expansion and acquisition spree. The UK, Portugal and Malta have legalized medical cannabis products, and the Netherlands, Denmark and Germany have either issued cultivation licenses or plan to introduce a tender for global cannabis producers.
Just this week, the European Union approved a cannabis-based treatment as a prescription drug for the first time, paving the way for its introduction across the continent. Doctors can now prescribe GW Pharmaceuticals Plc’s Epidiolex to help alleviate the seizures caused by two rare and extreme forms of epilepsy that start in childhood. The approval stems from four Phase 3 studies of 714 patients, GW said in a news release. When added to other anti-epileptic therapies, Epidiolex significantly reduced the frequency of seizures in patients with Lennox Gastaut or Dravet syndromes. GW is looking to expand its success with Epidiolex in the U.S., which approved approved the drug earlier this year. In the second quarter, Epidiolex sales were $72 million, well above expectations for $47 million. Last month, the biotech company noted more than 12,000 patients had received the drug since its 2018 launch.
The cannabinoid active in Epidiolex is cannabidiol, commonly referred to as CBD, and is becoming more commonly used in consumer products as well. Medicinal cannabis investment company World High Life recently announced a 9 million pound ($11.23 million) deal to buy British cannabis oil brand Love Hemp as it seeks to build a European business. Love Hemp could prove to be a critical expansion as it already has distribution agreements with more than 1,200 British stores, including Sainsbury’s, which sells its CBD-infused water, and Holland and Barrett, which sells CBD oil.
Earlier this summer, Reuters reported that Canadian pot producer Aurora Cannabis even managed to secure a two-year contract to supply a minimum of 400 kg of medical cannabis to the Italian government. This is significant considering the country has historically been one of the most strictly regulated medical cannabis markets in the world. The company also holds a leading market share in Germany, the largest cannabis market outside of North America.
South America, despite its hospitable climate for the mass production of cannabis, is often neglected when it comes to discussing growth potential of the industry. Not only was Uruguay actually the first in the world to formally legalize the use of recreational marijuana, but Argentina, Brazil, Peru, Paraguay, Chile, and Colombia allow at least some degree of medical marijuana usage or cultivation. While legal frameworks for business remain stiff or underdeveloped, some now believe developments in Colombia’s legislature could soon position the country to be the next big super-powered supplier of the crop.
It is no secret that the country has a long and dark history with powerful drug cartels, but many elected officials have come out in support of a new bill in the Colombian senate that would end the ban on possession of cannabis in hopes of damaging the ability of criminal enterprises to market the product in black markets. In the words of Colombian Senator Alberto Castilla Salazar “Colombia must overcome prohibitionism and break the ties of illegal groups with the control of cannabis”; Senator Julián Gallo Cubillos parroted that sentiment, stating that the legislation presents “a new way to fight the scourge of drug trafficking.” Although the bill will face pushback and passage is not yet certain, potential for the industry’s growth is enormous.
For optimal cannabis production, countries in the Northern Hemisphere have to make huge capital expenditures in greenhouses and other electrical infrastructure. Meanwhile, warm equatorial nations like Colombia offer the perfect climate for natural, low cost cannabis cultivation. In Canada, it costs $1-$2 to produce a gram of dry bud indoors, GMP Securities analyst Robert Fagan estimates. Much of that is from expenses to control lighting and temperature as the seasons change outside. But in Colombia, that cost shrinks to 5-10 cents when growing in the open air. When asked by Investor’s Business Daily how much product Colombia could export over the next five years, BDS Analytics managing director Tom Adams replied: “More than the world could consume.” IBD reports Canopy Growth Corp., Tilray, Aurora Cannabis, and others have scattered their investments across Colombia and the rest of the region.
BDS forecasts that legal domestic revenues on medical pot within Latin American Nations including Argentina, Brazil, Peru, Chile, Colombia, and Mexico will reach $547 million by 2024. However, Mexico’s $441 million will make up the vast majority of that sum. In March, New Frontier Data, provided by Market Realist, stated that the Mexican cannabis market’s current annual value is $2 billion.
With less than a month remaining to abide by a Supreme Court-ordered deadline to legalize recreational cannabis, the country’s congress continues to mull 10 proposed laws that would make them just the third country in the world—behind Uruguay and Canada—to legalize adult use. Mexico must act on one of the bills by Oct. 24. In the past, cannabis wasn’t legal in Mexico. However, the country legalized medical marijuana in 2017 for THC content of less than 1%. The country decriminalized the possession of small amounts of cannabis in 2009. The Mexican government’s rationale for pursuing the legalization of recreational use is similar to that of Colombia’s – effectively destroying illicit lines of business for powerful drug cartels.
Aurora Cannabis might expand into the Mexican market after marijuana legalization. The company has already hit the medical cannabis market in Mexico. Last year, Aurora announced the acquisition of Farmacias Magistrales S.A. Notably, Farmacias is Mexico’s only federally licensed importer of raw materials containing THC.
While we have seen some progress by US lawmakers on the legalization of cannabis at the federal level, it seems momentum on bills like the STATES Act and the SAFE Banking Act have stalled as the US gets closer to the 2020 Presidential election, largely due to the fact that the members of congress who introduced/sponsored them, including Sen. Elizabeth Warren (D-MA) and Sen. Cory Booker (D-NJ), are now deep into their own campaigns for President or other offices. The SAFE Banking Act, which would create a federal safe harbor for financial institutions to serve state-lawful cannabis businesses and ancillary companies, is indeed set for a vote on the floor of the House of Representatives this week, but even passage would not mean much without a 2/3 majority in the GOP-controlled Senate. MRP has previously noted Republicans’ increasingly positive feelings toward cannabis lately, but it will still take a decent amount of logrolling and convincing before the bill is ready for a Senate vote or a Presidential signature.
In their State of the Legal Cannabis Markets report, Arcview and BDS suggest that medical legalization is expected in all U.S. states by 2024, and 20 states will have given the green light to recreational cannabis sales, barring federal legalization, up from 11 today. Total legal sales of cannabis in current legal states are projected to grow at a compound annual growth rate (CAGR) of 14% over the next six years, to reach nearly $30 billion by 2025.