During the last year, we saw increased interest in the cannabidiol (CBD) vertical of the cannabis industry and this comes after the US legalized the high-value cannabinoid in late 2018.
Demand for CBD products continues to increase as researchers learn more about the benefits associated with the cannabinoid. We believe that researchers still have a lot to learn when it comes to CBD and expect to see increasing demand for products that contain the high-value cannabinoid.
Although we are excited about the growth prospects associated with the burgeoning CBD opportunity, several of the most exciting markets are saturated and very competitive. For this reason, we have been focused on identifying markets that are still in their infancy when it comes to the CBD opportunity.
Asia is a market that we have been excited about and believe that the opportunity is much less saturated when compared to North America and Europe. Very few countries in Asia have legalized any form of cannabis (CBD or medical cannabis) and we expect to see new markets open in the near future.
According to Prohibition Partners, Asia’s cannabis market is estimated to be worth more than US$5.8 billion by 2024. Also, China in particular has a potential US$4.4bn market size for CBD products and already places no limitation on CBD content for its cosmetics. From a population standpoint, Asia represents the largest market in the world and we are favorable on this aspect of the story. In 2020, we expect to see the Asian CBD market to record substantial growth and this is a trend that we expect to continue on a going forward basis. We have been increasingly interested in companies that are levered to the Asian CBD market and want to highlight an opportunity that we recently started to cover.
The company, Canrim Growth Group represents an attractive play on the Asian CBD market and we believe that the business is well positioned to capitalize on this emerging opportunity. The company has an attractive operating structure and is led by a management team that has been nothing short of a success story in the Asian market.
Plans to Capture Market Share in the World’s Largest Market
When it comes to Canrim, one of the first characteristics to stand out is related to the operating structure. The company is comprised of two portfolio companies, CBD Group Asia (CGA) and Natural Source Group (NSG), that provide direct exposure to strategic Asian markets (China, Hong Kong, Singapore, and Thailand). We are favorable on the structure of the operation as well as on the amount of value that these two divisions can create for the business.
CGA is a distribution and investment company that has been focused on China’s CBD market. Earlier this year, the companies entered into an investment agreement for Canrim to fund and earn up to a 75% ownership in CGA. Through its incubation program in Shanghai, CGA is investing and partnering with CBD related start-ups and established businesses in the region to create new brands and introduce high tech solutions within the CBD sector. This strategy provides CGA with the opportunity to work with early stage as well as advanced businesses that are levered to the CBD industry and we are favorable on the amount of value that can be created through this.
One of the most important aspects of the CGA opportunity is related to its expanding distribution network and we are favorable on the leverage that Canrim will have to it. CGA has already secured strategic partnerships with successful North American brands for introduction of their product line into the Asian marketplace through their China focused distribution partners. Distribution is one of the most important aspects of the CBD industry and we are favorable on how this asset enhances the Canrim story.
With regard to NSG, Canrim has an exclusive, commercial arrangement to distribute co-branded CBD products across NSG’s platform. NSG has an Asia-wide distribution reach which has been conducting sales since 2013. NSG’s underlying investment thesis is that a fundamental imbalance exists between sources of supply and aggregate demand in areas of the emerging frontiers of Asia. We will monitor how the two teams are able to work together and create value for the entire business. We are favorable on the skills that NSG and Canrim bring to the relationship and will keep an eye on this aspect of the story.
An Emerging Opportunity that is on our Radar
We believe that Canrim represents a differentiated opportunity and are favorable on the way the management team is approaching the CBD market. Over the next year, we expect to see the company enter new markets and improve its influence to a market that is not saturated and which that has substantial growth prospects.
Canrim is acting as a pioneer for Asia-centric CBD business development and is well positioned to be a key player in the investment, distribution and marketing of CBD-rich health products. The company is led by a management team that is comprised of international business and capital markets experts who are committed to executing on an aggressive, cost-effective growth strategy.
When looking at the people who make up Canrim’s management team, there is a lot to be excited about. Canrim Growth Group CEO Ranjeet Sundher played a key role in bringing Jushi Holdings, a leading US cannabis company, to market and we are favorable on the expertise that he brings to the operation.
CBD Group Asia’s principals boast over ten years’ experience specializing in the importation and customization of premium Canadian consumer packaged goods (“CPGs”) for the Chinese marketplace. CBD Group Asia’s management team previously distributed premium Canadian CPGs into China’s largest retail chains and C-stores, including RT-Mart International Ltd and Carrefour SA. We are favorable on the people who make up the Canrim team and find this to be an important aspect of the story.
In the near future, Canrim plans to complete a go-public transaction and list on the Canadian Stock Exchange. We believe that this is an opportunity that the market needs to be aware of and we will keep an eye on how the management team continues to drive the story forward. To learn more about this opportunity, please send an email to firstname.lastname@example.org to be added to our distribution list.
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