Canadian companies dominate global marijuana trade, says report

Canada’s rapidly growing cannabis industry now dominates the global trade in legal marijuana, says a report from a Washington, D. C., data analytics firm.

The companies that are frantically building growing facilities to supply Canadians with marijuana are also in a unique position to sell their products and expertise around the world, says the report from New Frontier Data. The independent research firm’s report provides a snapshot of Canada’s cannabis industry.

Canadian cannabis companies are exporting their products to countries on multiple continents, the report notes.

“Canadian (companies) are allowed to export abroad, making them some of the first companies in the world to sign international cannabis trade deals,” says the report.

Canadian companies have a head start in the global cannabis marketplace, and few rivals. “Canada stands alone in terms of scope and importance on the world stage.”

A major factor giving Canadian companies a boost is the restrictions in place in the U.S. While some states have legalized marijuana for medical or recreational use, or both, the drug is still illegal at the federal level.

It’s difficult for U.S. cannabis companies to find investors or even banks that will take their business, the report notes.

In contrast, Canada is seen as a “safe haven” for investors and a proving ground for large, national-scale cannabis operations, says the report. Canadian companies are building cannabis operations that dwarf those in the U.S. in terms of size and production capacity, it says.

Many Canadians don’t realize that our cannabis companies have become “the monsters in this sector,” says Cam Battley, the chief corporate officer for Aurora, one of the largest companies. “We are inventing the global cannabis industry.”

Globally, there is a massive excess of demand over supply for legal, regulated medical cannabis, says Battley. Canadian companies have little competition in supplying it, he said.

Canadian companies are growing on a massive scale, have attracted significant investments and are developing sophisticated technology, says Battley.

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Licensed producers by province or territory

And it has happened almost overnight.

The Canadian industry only started developing in 2014, when Health Canada decided to issue licences to private companies to grow medical marijuana.

The industry exploded after the federal government promised to legalize recreational pot.

Battley gives a personal example: When he began working at Aurora in 2016, the company had 35 employees. Today, there are 850 employees around the world. Aurora has investments, production facilities or supply agreements in Germany, Italy, Denmark, Australia, the Cayman Islands and South Africa, according to a company report released Tuesday.

There are 59 cannabis companies listed on the Canadian stock exchange, according to the New Frontier report. The only other country that has publicly listed cannabis companies is Australia, and its industry is at least three or four years behind the Canadian giants, says Battley.

The New Frontier report documents the money pouring into Canadian cannabis companies. At least $1.23 billion was invested in the industry in the first five weeks of 2018 alone, says the report.  The largest single investment during that time was the $121.1 million raised by Gatineau’s Hydropothecary.

In comparison, the investments tracked in Canadian cannabis companies in all of 2016 totalled $1.29 billion, the report noted.

The investments have allowed Canadian companies to build operations that dwarf those in the U.S. in terms of size and production capacity, says the report.

Big American alcohol and tobacco companies have invested in Canada, too.

Constellation Brands, the beverage company that makes Corona Beer, became the first Fortune 500 company to invest in cannabis when it bought a 9.9 per cent stake in Canopy Growth Corp., based in Smiths Falls, for $245 million. Alliance One, a tobacco company in North Carolina, bought stakes in Canadian cannabis companies Island Garden and GoldLeaf Pharm Inc., the report noted.

The fact that American companies are investing in them will give Canadian companies a strategic advantage in infrastructure and operational capacity that will make it more difficult for American companies to compete if the U.S. ever lifts its federal prohibition on cannabis, the report says.

Demand for cannabis in Canada

A few large companies, such as Aurora and Canopy Growth Corp., dominate the Canadian industry. The trend is toward consolidation, with larger companies gobbling up rivals as well as promising startups that are near the end of the arduous process for receiving a licence from Health Canada.

The report also provides an estimate of how much cannabis Canadians will consume, and how quickly the black market that now supplies the vast majority of marijuana will be squeezed out.

The total demand for cannabis  is estimated at $8.6 billion this year, the report said. The vast majority of that is bought on the black market. By 2025, the report estimates that demand will rise to $9.21 billion, with the majority of that total bought in the legal recreational market.

As a comparison, Canadians spend $9.2 billion a year on beer, $7 billion on wine and $5.1 billion on spirits, according to Statistics Canada data from 2015-16.

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