Europe May Become the World’s Largest Medical Marijuana Market
It has been compared to both the Tech Bubble and the South Sea Bubble but marijuana stocks have a habit of rebounding and with good reason. When shortsellers were causing a blip earlier this summer, the Constellation Brands deal with Canopy Growth restored the market.
With a global sales value of US$57 billion predicted by 2027 the international marijuana market is going to gain in value as savvy operators move to take the nascent industry into the international mainstream.
A report by Arcview Market Research and BDS Analytics in February 2018 predicts an explosive growth in medical marijuana consumption across the globe and recreational marijuana in the United States and in Canada. The report, Roadmap to a US$57 Billion Worldwide Market, forecasts that by 2027 global legal marijuana consumption will reach US$57 billion.
According to the roadmap, recreational use will dominate the sales figures at US$38 billion followed by medical marijuana at US$19.1 billion. North American consumption is pegged to lead global markets rising from US$9.2 billion in 2017 to US$47.3billion in 2027.
Globally, Arcview and BDS see the market going from US$52 million in 2017 to US$2.5 billion in 2027 providing ROW markets with a CAGR of 47%. The report points out that Europe, with a population of 739 million and US$1.5 trillion in healthcare spending stands to become the largest medical cannabis market in the world.
Canadian companies have already leveraged their first starter status to move into the international space. Industry leader Canopy Growth (TSX: WEED) has just had its target price upgraded to $74.00 from $56.00 by Cowen and Company analyst Vivien Azer. One of her reasons for raising the target price was that Canopy had the “Ability to establish an early lead in the adult use cannabis market as well as the domestic and international medical marijuana market.”
Through a variety of strategic alliances, investments and ownership, Canopy Growth has operations in Columbia, Brazil, Chile, Germany, Jamaica, Denmark, Germany and Australia. Canopy has never shied away from saying that its corporate agenda is to become the number player in the international medical and recreational marijuana company.
Aurora Cannabis (TSX: ACB) has operations in 14 countries spread across five continents. It recently the creation of a spinoff, Australis, a company designed to make investments in US cannabis and real estate. Aurora raised $17 million in a private placement to finance the investments.
Aprhria, (TSX: APH,) announced in March 2018 that it had purchased Nuuvera a grower and distributer with strong Maritime connections. Aphria paid $525 million to acquire Nuuvera but it was looking far beyond the Maritimes. Some European countries are or will be demanding that medical marijuana be grown in their own countries. Nuuvera has five different country licenses and applications to the table. The company now called Aphria International is a front runner for a German cultivation license.
While many of the Canadian marijuana companies listed on the TSXV and CSE have upgraded and joined the TSX as they prospered, opportunities are still to be had in the small cap sector.
Crop Infrastructure, (CSE: CROP) recently received a positive rating in Forbes in The Three Most Overlooked Marijuana Markets. It earned those kudos on the strength of its Jamaican operation. CROP just announced that Greg Douglas, the former CEO of the Jamaican Cannabis Licensing Authority had joined CROP as a member of the executive advisory board with a special focus on Jamaica.
CROP Infrastructure Corp. loans capital to purchase real estate and build greenhouse infrastructure which is leased to the licensed producers. It also offers management and branding expertise. The company receives a 60% preferential payback via lease and management fees on greenhouse infrastructure related equipment, until its deployed capital is returned in full. Once its investment is repaid in full, CROP’s 30% interest in the real estate and infrastructure will receive dividends indefinitely. The company also has several minority positions in its tenants. CROP is structured like a REIT. It has operations in Nevada, Washington State, California, Jamaica and Italy. Its long-term strategic goal is to operate in every jurisdiction where marijuana or medical marijuana is legal.
CROP operations have started harvesting in Italy and Washington State and this should provide the share price with momentum. Arcview Market Research has pegged Italy as being Europe’s second largest medical marijuana market after Germany. As well CROP has a joint venture in two California dispensary locations, San Bernardino and West Hollywood.
American regulations have also led to American producers listing on Canadian exchanges. The Next Green Wave is to be listed shortly on the CSE after the company successfully raised $21 million in Canadian financing. The company operates in California where recreational marijuana was legalized at the beginning of the year. The California market is expected to be one of the largest in the world.
It has four California licenses that just about cover everything from seeds to cultivation to producing oil and cannabinoids for medical marijuana to distribution. It falls under today’s rubric of European market opportunities because the company is in discussions with European growers about seeds.
Along with its licences NGW has an ace up its sleeve because CEO Mike Jennings has won the High Times Cannabis Cup six times and been inducted into the High Times Seedbank Hall of Fame. High Times is the marijuana growers’ and consumers’ bible. Next Green Wave has a sponsorship agreement with High Times.
Canada legalized medical marijuana in 2001, which eventually led to the legalization of recreational marijuana in 2018. As well, 29 American states have legalized medical and recreational marijuana. Just as the legalization of medical marijuana led to the legalization of recreational marijuana in North America, the industry believes that recreational marijuana will eventually become legalized around the world as more and more jurisdictions legalize medical marijuana.
How soon that will happen is anyone’s guess. Arcview Market Research’s editor in chief Tom Adams believes that will only happen after the American government ends its marijuana prohibition. Only then, he believes, will the United Nations remove marijuana from the United Nations Single Convention on Narcotic Drugs.
The above should not be construed as investment advice. It has been written for education purposes only. Every investor should and must perform their own due diligence.