Global demand for cannabis, both recreational and medicinal, continues to grow at healthy pace. According to a recent research report put out by Arcview Market Research and BDS Analytics, the next ten years are set to explode with spending on legal cannabis worldwide hitting $57 billion by 2027.
While much of that growth is expected to come from the United States, there are several other countries opening up to cannabis, whether it be through consumption or production and export.
The cannabis sector is beginning to pay closer attention to the latter scenario, with several companies expanding their production capacity through operations abroad, including Aphria Inc. (TSX: APH) (OTC: APHQF), Canopy Growth Inc. (TSX: WEED) (NYSE: CGC), Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) and The Green Organic Dutchman Holdings Ltd. (TSX: TGOD) (OTC: TGODF).
By expanding production operations into other countries, cannabis producers can spread out risk, lower average costs, and gain access to other export markets. Growing cannabis plants is no longer just a domestic activity. Through seeking out more favorable climates, lower energy costs, or a cheaper labour force, the cannabis industry is truly going global.
INTERNATIONAL EXPECTATIONS GROWING
Consumption is expected to rise, along with spending, over the next decade. The bulk of the growth is being credited to an ever-expanding map of markets legalizing recreational use—not just medical cannabis. According to the Arcview-BDS report, approximately two thirds of spending will come from the adult-use (recreational) market, while medical marijuana makes up the remaining third.
But the opportunity isn’t just in export markets. Canada’s biggest players are looking for new places to grow their products, complete with new soils, different sunny hours, and favorable growing conditions. New regions, such as Africa, the Caribbean, and Latin America are making strong cases for being a great place to grow the business.
GLOBAL CANNABIS EXPANSION
Aphria Inc. (TSX: APH) (OTC: APHQF)
Aphria recently expanded into Africa by acquiring an interest in a licensed medical cannabis extracts producer in Lesotho. The global expansionary strategy gains Aphria a supply of high-grade low-cost cannabis isolates in Africa, to compliment the supplies the Ontario-based mega producer is growing domestically. Much of Aphria’s attention recently has been towards extraction, including a recent announcement of a $55-million extraction centre that will enable the company to better serve the market for marijuana edibles, beverages and other alternative products. Local reports out of Colombia are also hinting that Aphria is set to make a significant land purchase in the Latin American country, that could equate to over 1.6 million sq ft of potential grow space.
Canopy Growth Inc. (TSX: WEED) (NYSE: CGC)
Not to be left out of the Lesotho party, cannabis giant Canopy Growth also expanded into southern Africa, through the acquisition of Daddy Cann Lesotho at the end of May. The price tag on the acquisition was roughly $29 million, which was a reasonable cost given that it gives Canopy access to a market of 55 million more people. Given Lesotho’s landlocked location, Canopy sees the country as an ideal greenhouse climate, as it is also positioned for exports across the whole African continent.
Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON)
Through its subsidiary Cronos Australia Pty, the Cronos Group was recently granted a medicinal cannabis manufacture license by the Australian Office of Drug Control. With the license, Cronos can move forward on manufacturing cannabinoid-based products in Australia, through all forms of extraction, refining, concentration and transformation of the cannabis plant. Cronos Australia is a joint-venture between Cronos Group and Australia’s NewSouthern Capital, that serves as the company’s hub for Australia, New Zealand, and Southeast Asia.
The Green Organic Dutchman Holdings Ltd. (TSX: TGOD) (OTC: TGODF)
Global aspirations led The Green Organic Dutchman to launch its new global division, focused exclusively on the beverage industry. However, the organic cannabis specialists took their production operations global, by entering Jamaica through a strategic partnership with Epican Medicinals Ltd. The deal increased TGOD’s production capacity by more than 10%, adding 14,000 kg and bringing the company’s total organic funded capacity to 170,000 kgs.
JAMAICAN EXPANSIONS ORGANICALLY
Through the addition of Jamaican operations, The Green Organic Dutchman Holdings Ltd. (TSX: TGOD) (OTC: TGODF) officially became an international organization. And from the indications from the Epican announcement, it appears that TGOD isn’t done its expansions.
“This represents the first of many strategic partnerships TGOD intends to execute in the coming months,” said TGOD’s CEO, Robert Anderson. “Our value-added approach taken in this investment will set an international M&A framework for capital investment, transfer of knowledge, and sector expertise. We will continue to evaluate international opportunities that will assist us in executing our business plan to become the world’s largest organic cannabis brand.”
Epican was officially awarded the country’s historic first cultivation license, and currently produces high-quality cannabis at its flagship cultivation site called Blue Mountain. One of TGOD’s roles with their new partners will be to work with Eco-Cert to achieve organic certification in Jamaica. And while being 100% organic is TGOD’s specialty, the key to the deal is the company’s expertise in getting a second 125,000 sq ft GMP-compliant (Good Manufacturing Practices) facility constructed, to give the partnership a pair of high premium organic cultivation sites.
Along with the production expansion, TGOD gains access to distribution inside Jamaica through Epican’s first mover advantage, as the new partner is openings its flagship dispensary in July 2018, in the country’s capital of Kingston. This will be the first of many Epican dispensaries, designed to serve the medical needs of Jamaica’s 3 million residents and approximate 3.5 million visitors each year.
Epican also brings with it an extraction laboratory that has been designed, licensed and built to GMP standards, establishing the company as a Jamaican leader in sustainability. This addition matches well with TGOD’s own high standards of extraction.
TGOD’s extraction process is precise, and free of toxic solvents. Their method is capable of producing the highest-quality cannabis oils in the world. In order to produce premium cannabinoid-infused products, containing the two main ingredients tetrahydrocannabinol (THC) and cannabidiol (CBD), TGOD’s careful extraction is key.
According to the company’s press release, international expansion is an integral part of their business plan. The Epican partnership provides a low-cost platform that supplies TGOD with premium Jamaican grown medical cannabis for export to select international jurisdictions, as regulations permit.
Domestically, TGOD continues to expand as well. Recently the company announced that it had received a Health Canada Cultivation License for its breeding facility in Salaberry-de-Valleyfield, Quebec—known simply as Valleyfield. The Valleyfield site will eventually become home to TGOD’s flagship 820,000 sq. ft. state-of-the-art hybrid grow facility. It will house the cultivation of cannabis and the production of seeds and new strains.
Additionally, TGOD announced that it is adding a 287,245 sq ft. purpose-built facility on its Valleyfield property capable of producing 40,000 kgs of premium organic cannabis. This facility will be dedicated to TGOD’s Beverage Division and increases the Company’s fully-funded capacity to 170,000 kgs.
This newly dedicated cultivation building is being constructed to support TGOD’s previously announced Beverage Division Global-Strategic-Launch-Into-the-Beverage-Industry.
Recently coming off an announcement of a $25 million special warrant bought-deal financing co-led by Canaccord Genuity and Mackie Research Capital, TGOD will have additional cash on hand to continue the company’s current expansionary run. The closing of the offering is expected to occur on June 26, 2018.
TGOD’s international expansion will continue for the foreseeable future. There’s much to look forward to with its new ventures such as the Epican deal, coupled with its international marketing aspirations for beverages and other products, including those made with the exclusive ingredient technology brought in through a deal signed in May with Stillwater brands to license RIPPLE SC (Soluble Cannabinoids).
Disclaimer
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Disclaimer
Nothing in this article should be considered as personalized financial advice. We are not licensed under securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this article is not provided to any individual with a view toward their individual circumstances. Baystreet.ca has been paid a fee of twenty thousand dollars for TGOD advertising. Baystreet.ca holds shares in TGOD. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this article as the basis for any investment decision. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in this article is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.
