National Post (National Edition)
IF YOU LOOK ATTHEWAY WE’VE SPREAD ACROSS THE COUNTRY THERE IS A HINT AS TO THE INTERNATIONAL SIDE.
coup in October when it signed a five-year exclusive supply contract with German pharmaceutical giant G. Pohl-Boskamp GmbH & Co. KG, giving Cronos potential access to a network of 12,000 German pharmacies.
“When you step back and look at sheer numbers and population ... it is unrealistic to believe that (Canada) would be more than 25 per cent (of Cronos’ business), once we go over three years,” said Mike Gorenstein, Cronos’ chief executive.
For these companies, and a handful of others, global expansion is being fuelled by a fortuitous set of circumstances.
For one, expectations about the size of Canada’s domestic recreational market have allowed them to raise significant amounts of capital — more than $1 billion in January alone.
At the same time, competition from well-established U.S. players was effectively eliminated in early January by the U.S. federal government’s decision to repeal the Barack Obama-era Cole Memorandum, which had reduced the federal government’s enforcement of anticannabis laws.
“It’s not dissimilar to what you saw in gambling,” said Nuuvera’s chief executive, Lorne Abony. “By virtue of the fact that gambling online was federally illegal in the United States, there were not many American players. I think that’s one of the reasons that capital is forming in Canada.”
The cash influx has allowed Canadian companies to leverage their existing lead in technology, intellectual property and experience navigating highly regulated markets into a position of international dominance, said Greg McLeish, an analyst at Mackie Research Capital Corp.
“They’ve gone through the regulations in Canada, they’ve learned how to grow in Canada, they’ve worked on these strains on the medical side that work in Canada, they’ve got good expertise in oils, they’re compliant with GMP (pharmaceutical manufacturing standards), so this will position them exceptionally well in markets that are just developing,” McLeish said.
Those, however, aren’t the only reasons that Canadian companies are looking internationally, even as the domestic recreational market looks set to consume more cannabis than they can produce. There’s also the lucrative question of price.
“If we look at dried bud or dried flower, the landed price in Germany is probably anywhere from $10 to $12. Longer term in Canada, you’ll be selling it wholesale for ... probably around $5 or less than $5 a gram,” McLeish said. “Germany is eventually going to want 100 per cent cultivation within their country, but as the demand starts to increase and there’s a lack of supply, it gives these companies in the early years the ability to have a market where the pricing for the product will be better than it is in Canada.”