Canada's recreational marijuana market and European medical cannabis markets tend to be the main topics of discussion for leaders of the largest marijuana producers. It makes sense, with almost all revenue for the big marijuana companies being generated in Canada and Europe.
But what about the United States, the largest cannabis market in the world? The largest of the large marijuana market value producers – Canopy Growth (NYSE: CGC) Aurora Cannabis (NYSE: ACB) ] Tilray (NASDAQ: TLRY) and Cronos Group (NASDAQ: CRON) ̵
However, in the US hemp market comes another story, in its entirety thanks to the legalization of the hemp in the United States in December 2018. Which of the best Canadian marijuana producers in Canada is best suited to win in the US market? This is how prospects are right now for Canopy, Aurora, Tilray and Cronos.
Two of the best Canadian marijuana producers stand out as leaders in the race to jump into the US market. Canopy Growth and Tilray have already taken significant steps to enter the United States.
Canopy Growth made its first major splash in October 2018 by acquiring Colorado-based hemp research company Ebb. Canopy could keep up with the listing requirements of the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX) with the deal, although hemp was not technically legal in the US at that time. The company was able to do so by only conducting research and development with ebb operations and not producing any products for sale.
In January, Canopy Growth followed up with an even bigger announcement. The company showed that it had secured a license to produce and process hemp in the New York state. Canopy invests between $ 100 million and $ 150 million to build a hemp industrial park in New York.
Canopy Growth founder and CEO Bruce Linton stated in the company's Q3 conference call in February that he expects the company to have hemp CBD products on the US market by the end of this year. Linton also suggested the possibility that Canopy could build hammock production facilities in several US states.
Tilray was not too far behind. In February, the company announced that it bought Manitoba Harvest, the world's largest hemp feeder, for around $ 318 million. Manitoba Harvest's hemp-based foods are sold in over 16,000 stores in North America, of which around 13,000 are in the United States.
The acquisition of Manitoba Harvest plays in another deal Tilray team recently. In January, the company announced that it was together with the US-based Authentic Brands Group (ABG) to develop and market consumer products for cannabis globally. Tilray CEO Brendan Kennedy confirmed in the company's quarterly update a few weeks ago that this partnership "will first focus on CBD products in the United States." The acquisition of Manitoba Harvest gives Tilray a built-in supply chain for the delivery of CBD to ABG.
While Canopy Growth and Tilray Appear To be the earliest leaders in entering the US, Aurora Cannabis and Cronos Group are laggards. None of the companies have announced any firm plans yet for their US expansion strategies.
When asked about the US hemp opportunity in the company's earnings call in February, Aurora Cannabi's CEO Terry Booth replied that there is some confusion about hemp-based CBD distribution in the United States. He added that Aurora would "go in when it is right to enter and when it is legal to enter the US market."
To be fair, Aurora definitely has significant hemp skills. The company owns Agropro, the largest hemp producer in Europe. Aurora owns a majority interest in Canadian ham producer Hempco Food and Fiber . And it bought Uruguay-based ham producer ICC Labs.
Cronos Group was the first Canadian marijuana stock listed on Nasdaq . CEO Michael Gorenstein stated last year that Cronos planned to be "a large part of the US market." So far, however, the company has not taken any visible steps to expand into the United States. Gorenstein said in Cronos Group's fourth conference call that Cronos has "done a good job of building strong relationships with both US stakeholders for the cannabis industry" and will "continue to look very close" to the US hemp opportunity.
Most Likely to Succeed
Although there are different leaders and laggards among the best Canadian marijuana producers over the US market now, the dynamics can change rapidly. It is quite possible that both Aurora and Cronos Group could make announcements in the near future to expand into the United States
Aurora Chief Corporate Officer Cam Battley mentioned in the company's conference call that "we do not want to give away too much of our strategy just yet In the United States "Similarly, the Cronos group's Gorenstein said that his company" will not telegraph our strategy "for the US market that some of its colleagues have.
Which of the four companies are most likely to succeed in the United States? I will give a nuanced answer.
In my opinion, Tilray will be most successful early in the US hemp CBD market. The company will hit the ground with Manitoba Harvest in its fold. It will take months for Canopy Growth to launch its first hemp CBD products. Tilray will immediately have good relations with dealers and customers with its Manitoba Harvest acquisition and the agreement with ABG.
But Canopy Growth will definitely play to win. The company also has a large partner with a successful track record in the United States, Constellation Brands (NYSE: STZ) . Canopy also has a large cash balance to fund its efforts thanks to Constellation's $ 4 billion investment. When the US Food and Drug Administration completes regulations for CBD-infected beverages, Canopy's relationship with Constellation should benefit it from its peers.
I also think that hemp will only start. The odds that the US will allow states to enforce their own marijuana laws increase. Sooner or later, the large Canadian marijuana producers will probably be able to jump into the marijuana market in the United States.
When that time comes, I think the Canopy partnership with and money from Constellation will be a key factor. My view is that Canopy Growth is still most likely to succeed in the overall US cannabis market in the long run.