Canadian cannabis companies target lucrative US market
The line that divides Canada from the US is looking more and more illusory for the cannabis industry.
The 49th parallel used to be a big deal for cannabis growers. Canada’s legalisation in 2018 spurred a generation of startups north of the border and investors flooded in with the hope they would follow the path of Canadian alcohol firms, which got a head start on US rivals before prohibition was repealed.
Now, as more US states have legalised cannabis, US companies have overshadowed their Canadian peers. And some Canadian companies, unable to export into the US with its larger population, have stagnated. But a series of creative deals may upend those dynamics.
Tilray’s purchase of MedMen Enterprises’s debt last week is the latest example. It is similar to the first such creative crossborder deal, Canopy Growth’s option to buy US company Acreage. Both could let Canadian companies buy a US target if enabling legalisation is passed.
It is the third deal that gives Tilray a leg up on US legalisation. Its Aphria merger gave it SweetWater Brewing in Atlanta, which it can leverage to make tetrahydrocannabinol (THC) drinks or distribute cannabis in the southeast, while Manitoba Harvest could convert to THC edibles.
Canadian retailer Fire & Flower also made a creative cross-border deal earlier this month by opening a dispensary in Palm Springs, California.
While Canadian companies cannot export cannabis to the US, the store was created through a licensing partner, American Acres, which changed its name to Fire & Flower US Holdings. The licensing agreement will also let it open stores in markets such as Arizona, Nevada and other areas in California over the coming months, Fire & Flower said.
Then there is Scotts MiracleGro, which has got a boost from selling cultivation equipment into the cannabis market. The company is barred from getting into “plant-touching” businesses because it is traded on the New York Stock Exchange.
But the maker of fertilizer and gardening supplies this month invested $150m in Torontobased cannabis investment firm, RIV Capital. CEO Jim Hagedorn said the deal will let Scotts “participate directly in a larger marketplace as the legal environment changes over time”. The structure was made “with full appreciation of current banking and legal requirements”, he said.
Flora Growth, a Colombiabased marijuana grower, got a foothold in the US market through the purchase of a vape pen maker, showing not only Canadian firms are jockeying for position ahead of expected federal legalisation.