During the last year, we have noticed a transformational change with the legal cannabis sector and noticed that Canadian Licensed Producers (LPs) were becoming highly focused on the cannabis opportunity in the European Union (EU) and the United States (US).
Last week, we highlighted a few leading Canadian LPs that have leverage to the US market and received a few questions about the companies that are leading the legal cannabis movement in the EU. Today, we highlighted some of the Canadian LPs that are considered to be leaders in EU and provided an update on how we think this aspect of the industry could advance.
Aphria and Tilray are Positioned to be Leaders in the EU
For several years, Aphria Inc. (APHA.TO) (APHA) has been highly focused on the EU cannabis opportunity and has an impressive distribution business with a large footprint in Germany. After the Canadian LP reported to have entered into a definitive agreement to merger with Tilray Inc. (TLRY), we conducted in-depth analysis on the EU assets that would be owned by the combined company.
From cultivation to distribution, the combined company is expected to be the largest cannabis business in the EU. Tilray provides strategic assets to the combined company and owns an EU good manufacturing practice (EU-GMP) facility in Portugal. Since the facility was constructed to meet EU GMP standards, the company will be able to export cannabis to strategic markets across the globe (where legislation permits it).
Cronos has Been Slow to Execute on the International Market
Cronos Group (CRON.TO) (CRON) has been quietly capitalizing on the EU cannabis market and is a Canadian LP that has been flying under the radar. We believe the company has attractive leverage to burgeoning international markets and will be monitoring how the story advances in 2021 and beyond.
Cronos is executing on a multi-faceted growth strategy and operates a global network, with partnerships, production and distribution across five continents. Through a joint venture with Kibbutz Gan Shmuel, a commercial kibbutz and food company, Cronos could export cannabis that was cultivated in Israel to the EU.
We expect Cronos to make the cannabis opportunity in the EU a major focus of the business in the near future and will monitor this aspect of the story. The company has a strong balance sheet and we attribute this to Altria’s $1+ billion investment in it. Going forward, Cronos has the resources that are needed to capitalize on the EU and will continue to closely monitor the story.
Canopy Growth Divests of Non-EU International Cannabis Assets
Last year, Canopy Growth Corporation (WEED.TO) (CGC) went through a major transition that was centered around closing facilities and lowering expenses. After receiving more than $4 billion from Constellation Brands (STZ), the leading Canadian LP started announcing a series of large investments and acquisitions.
A few years later, Canopy Growth lowered its exposure to certain international markets and divested of several assets. The move resulted in the Canadian cannabis company ceasing certain operations in Africa, Canada, Colombia and the US in an effort to improve efficiencies in its global operations.
When Canopy Growth announced that it was scaling down its international cannabis footprint, it announced that the downsizing would not affect Europe. We find this be of significance and consider it to be a testament to the strength of the EU cannabis opportunity.
If you are interested in learning about additional companies that are levered to the emerging international markets, please send an email to support@technical420 to be added to our distribution list.