Canadian marijuana sector could reap the rewards after U.S. states ease laws
Canada’s marijuana industry could benefit after seven states representing twice the population of Canada voted in favour of legalizing the drug, either recreationally or medically.
Voters in California, Massachusetts, Nevada and Maine approved on Tuesday the use of recreational cannabis, joining four other states and Washington, D.C., that have similar laws in place.
Florida, North Dakota and Arkansas approved medical marijuana, bringing the total number of states with a such a system to more than two dozen. And residents of Montana voted to expand the state’s current medical marijuana regime.
Shipping marijuana into the U.S., whether for medical or recreational purposes, is illegal. But the CEO of Privateer Holdings, a U.S.-based private equity firm that focuses on investing in the marijuana sector, says he expects Canadian producers will enter into partnerships and joint ventures with their neighbours to the south following the referendums.
“I think you’ll see Canadian companies jump at the opportunity to expand their operations and brands into the United States,” says Brendan Kennedy, whose firm owns Nanaimo, B.C.-based licensed producer Tilray.
That could mean everything from participating in the production process to providing consulting services or licensing intellectual property to U.S. producers, Kennedy says.
“There are huge opportunities for Canadian companies, because Canada has the most robust and tightly regulated medical cannabis framework in the world,” he says.
“Both governments and companies around the world are looking to Canada to provide leadership and expertise in this industry.”
In total, the eight marijuana initiatives passed could inject $7.4 billion annually into the marijuana market by 2020, Arcview Market Research says. That would open the door to a recreational and medical marijuana market in the U.S. worth $21.2 billion by that same time, according to the research firm.
Alan Gertner, CEO of luxury marijuana brand Tokyo Smoke, says the legalization push means more opportunities for brand licensing deals. His company is already working with partners in Florida and Massachusetts, he said.
“Generally, more legal consumers means more opportunity to build and scale Canadian cannabis brands,” Gertner said in an email.
Canadian companies that build equipment and technology that help grow medical marijuana will also gain access to a larger market, he added.
Cam Battley, executive vice-president of Alberta-based licensed producer Aurora Cannabis Inc., says Canada is home to some of the largest commercial marijuana producers in the world.
Having a federally regulated medical marijuana regime — rather than a piecemeal, state-by-state system like the U.S. — has allowed Canadian marijuana companies to master large-scale, commercial production techniques, says Battley.
“We do have a lot of expertise, and we’ve learned, collectively as a sector, a lot of really important lessons about cultivation and consistent production,” says Battley.
“I think that does give us some advantages and would bode well for partnerships when the time is right.”
Khurram Malik, the cannabis lead at Jacob Capital Management, says the news could also help Canadian marijuana companies secure funding by making investors more comfortable with the sector.
“Most of the money raised up here is from the U.S.,” says Malik. “This legitimizes the concept of cannabis around the world, which is only a positive for the market up here.”