MJBizMag September 2020 - 58

AFFAIRS
FOREIGN
Global Retreat
Some Canadian cannabis firms are starting to pull back from their international
aspirations, a reminder of the risks of expanding too quickly into new, immature markets
By Solomon Israel
B
ack in the early days of Canada's
regulated adult-use cannabis
industry, some of the country's
biggest publicly traded marijuana
producers discovered that investors
rewarded international ambitions.
The domestic recreational marijuana
market that launched in October
2018 was exciting, of course, but that
opportunity would always be limited by
Canada's relatively small population of
around 38 million people.
Before a single Canadian producer
had turned a profit selling recreational
marijuana at home, some cannabis
businesses started looking beyond the
country's borders for future growth
potential: to Africa, Australia, the
Caribbean, Europe and South America.
Armed with capital from the
marijuana stock bubble, all Canadian
cannabis executives had to do was
find a likely international market and
start spending. By doing so, they could
plausibly claim to be positioned to
dominate the global market of the future.
Fast-forward to today. Meaningful
international marijuana revenues remain
somewhere in the indeterminate future.
And some of Canada's biggest cannabis
producers-including Canopy Growth
in Ontario and Aurora Cannabis in
Alberta-have started pulling back from
their international aspirations in the face
of trouble at home.
The situation offers a valuable
lesson to cannabis players with an
eye on global growth: New markets
are certainly out there, but aggressive
expansion without a clear path to
profitability can come back to haunt a
company's balance sheet.
Owen Bennett
worth tens of millions more to acquire
operations in Latin America.
A Spanish cannabis producer was
" They started running before they
could walk, " said equity analyst Owen
Bennett, senior vice president of global
tobacco and cannabis research with
Jefferies, an international investment
bank in New York City. " They need
to prove they can run a sustainable
business in Canada before they even start
thinking about wider global ambitions. "
ERA OF INTERNATIONAL
GROWTH
Some Canadian cannabis companies
started legally exporting relatively small
amounts of product in 2016, most of
it destined for Germany. But beyond
simply exporting, a few Canadian license
holders started spending hundreds of
millions of dollars to acquire and build
assets abroad.
Take Canopy Growth. It acquired a
German pharmaceutical distributor in
late 2016, launched a Danish cannabis
joint venture in 2017 and picked up
a Czech Republic medical cannabis
company in 2018.
Canopy's 2018 acquisition of a
cannabis grower in the landlocked
African country of Lesotho was worth
nearly $22.4 million (CA$29 million) at
the time, and the company issued shares
58 Marijuana Business Magazine | September 2020
added to Canopy's international
portfolio in 2019, and the company
spent $254.6 million (CA$343 million)
to acquire a German producer and
distributor of synthetic cannabis
medication dronabinol. Along the way,
Canopy made forays into Australia, the
United Kingdom, Poland and elsewhere.
Aurora Cannabis took a similar
approach to global expansion, buying
a stake in an Australian producer in
2017 and acquiring German medical
cannabis importer, exporter and
distributor Pedanios.
In 2018, Aurora launched a
joint venture in Danish marijuana
production and acquired South
American producer ICC Labs in a deal
worth $220 million (CA$290 million).
Later acquisitions included a Mexican
importer and an ownership stake in a
Portuguese license applicant.
By late 2019, Aurora claimed to be
active in 25 global cannabis markets,
with plans to " win on a global scale. "
British Columbia-based producer
Tilray also has tested the waters abroad,
starting with exports to markets
including Australia, South America and
the European Union.
In 2017, Tilray announced it was
spending $24 million (CA$29.5 million)
to build a European hub in Portugal,
which has since exported cannabis to
Germany and Israel. The next year,
Tilray spent $3.9 million (CA$5 million)
to acquire its South American partner,
turning the company into a Latin
American subsidiary.

MJBizMag September 2020

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