Canada's nationwide marijuana marijuana market opened in October last year; Last week, we received results from Canada's two largest marijuana companies suggesting that the country's marijuana market represents a huge opportunity.
The ability to capture billions of dollars in legal marijuana sales in Canada, only hints at the greater possibility of legalizing marijuana globally. If you think more and more countries are following Canada's leadership, buying shares in Canopy Growth (NYSE: CGC) Aurora Cannabis (NYSE: ACB) and Cronos Group (NASDAQ: CRON) in 201
The largest marijuana company
Canopy Growth is Canada's largest marijuana company. A vertically integrated pottery game, Canopy Growth, grows marijuana in state-of-the-art greenhouses, treats it with the latest in automated machinery, packs it and sells it across Canada.
The company's investments in growth capacity early made it possible to capture over 30% of Canada's medical marijuana market. Based on its latest quarterly results, using its size and brand recognition makes it possible to capture at least as much market share in Canada's growing recreational market.
The last quarter, which sold in all Canadian province's adult use, marked Canopy Growth's catastrophe revenues at Canadian $ 83 million, up 282% from the same quarter last year. The last quarter contained only about six weeks of recreation sales, and demand exceeded delivery early, shrinking revenue. So there is good reason to believe that sales will go much higher.
Canopy Growth also establishes in other countries that break down barriers to marijuana; It has operations in Europe, Australia and Latin America. There have also recently announced plans to enter the US for the first time.
Until recently, Canopy Growth was unable to operate in the United States due to rules that prohibit listed companies from engaging in federal-level businesses. Marijuana remains a Schedule I drug in the United States. The latest Farm Bill removed hemp, a non-psychoactive form of cannabis, from the list of controlled substances in December. After the hemp's reclassification, Canopy Growth plans to spend up to $ 150 million in the New York State to create a hemp industrial park.
The US market for hemp-based products is already worth hundreds of millions of dollars a year, but it could be a multi-thousand dollar market whose new products are made with hemp-derived extracts. It is important that Canopy Growth's hemp facilities be converted to treat marijuana one day. Therefore, if marijuana becomes legally nationwide, Canopy Growth's hemp strategy can make it a valuable start to what is estimated to be a $ 50 billion market opportunity.
A crazy rush of production growth
Investors should also consider buying Canada's second-largest cannabis company, Aurora Cannabis. Aurora Cannabis does not have Canopy Growth's market share, but it is undoubtedly best positioned to give it a run for its money.
The company's acquisition of CannaMed and MedReleaf last year made it one of the largest medical marijuana suppliers in Canada, and a robust expansion plan that includes significant increases in annual marijuana production, yields strong revenue scales.
Last quarter, Aurora Cannabis reported that the acquisitions and first sale of adult use in Canada resulted in sales increasing 363% to $ 54 million. The market for adult use amounted to $ 21.6 million in revenue, giving it (the company's estimate) a market share of around 20%.
The company sold nearly 7,000 kilograms of marijuana or marijuana equivalents, as extracts in the quarter – up 502%. However, the figure can increase significantly because new production comes online from greenhouse extensions, including Aurora Sky. Currently, the management says that the annual marijuana production capacity is around 120,000 kilos, but is expected to increase to 150,000 kilos next month. If so, Aurora Cannabis expects to have 25,000 kilograms of marijuana available for sale by the end of June.
The future plans of Aurora Cannabis include increasing annual output over 500,000 kilograms; If it can achieve this, it can see that the gross margin is significantly improved. Last year, the gross margin was 52%, but the reflected average production cost was $ 1.92 per gram. Aurora Cannabis believes that the new production it brings online at Aurora Sky, and elsewhere will cost below $ 1 per gram.
Given the company's potential sales growth and improved gross margin as new deliveries come online, the future appears bright.
A powerful partner
There are marijuana companies that are larger than the Cronos Group by income and planned marijuana production. But Cronos and Canopy Growth are the only two cannabis companies with significant financial fire and supply chain access, branding and regulatory expertise due to major consumer spending investments. Cronos Group sold 45% of itself to tobacco power plants Altria (NYSE: MO) for $ 1.8 billion in December; This follows after Canopy Growth's decision to sell 38% of himself to alcohol giant Constellation Brands (NYSE: STZ) for about $ 4 billion in August.
Having Altria as a partner is a big victory for Cronos Group. Altria owns US Philip Morris tobacco brands, including Marlboro cigarettes, and has extensive experience in navigating regulatory control. Built on a slate of successful brands, it has extensive relationships with farmers and other suppliers. In addition, Altria owns over 30% of Juul, a leading weapon company that theoretically could give Cronos Group some exciting opportunities for cooperation.
Cronos Group has not yet reported quarterly fourth quarter results, so we do not know how it started after recreation sales in Canada – but sales jumped 186% year-over-year to $ 3.8 million in the third quarter, so the products appear to get traction. The annual production capacity was only 6,650 kilos in the third quarter, but it has stated that capacity will reach 40 150 kilos this year and that it plans to produce 117 000 kilos per year. These predictions were before Altria's investment so you could see the Cronos Group announcing new goals during the next earnings release.
During Altria's fourth quarter earnings call, it marked a forecast of legal marijuana sales of $ 40 billion a year, based on current legal markets. It also said that worldwide legalization could increase that market opportunity to $ 250 billion. Given these numbers and Altria's help, it can be smart to own the Cronos Group for a long time as well.