Canadian marijuana executives share advice on how to position your medical cannabis company for overseas markets
By Matt Lamers
Opportunity beckons overseas for medical marijuana producers.
The global MMJ market could be worth more than $140 billion over the next 15 years, reckons the Toronto-based brokerage firm Eight Capital. About two dozen countries have medical marijuana laws on the books, and more than a dozen have pending laws.
Canadian medical cannabis producers, in particular, have gotten a big head start on the overseas market. At least a dozen Canadian companies are jockeying to do business abroad in MMJ markets including Germany, Israel, Colombia and elsewhere. In addition to exporting dried flower and oil products from Canada, they are building cultivation facilities in Latin America, Europe and the Middle East.
But it’s also worth noting that expanding internationally can be:
- A major drain on a company’s resources.
- Extremely time consuming.
Brendan Kennedy knows that firsthand. The CEO of the British Columbia-based licensed producer Tilray logged 300,000 miles in 2017 in search of overseas business opportunities.
“We got dirty, we worked hard, we went to places that people didn’t go to and talked to people that others didn’t talk to,” said Kennedy, who also is CEO of Privateer Holdings, the Seattle private-equity company that owns Tilray. In September, Tilray unveiled plans to spend $24 million (20 million euros) to build a medical marijuana production facility in Portugal to serve the European Union.
Kennedy and other Canadian executives and experts shared the following five tips for how to capitalize on the expanding overseas market for medical cannabis.
1. Create a checklist to help decide where to expand
With so many opportunities abroad, it’s hard to know where to start or where to focus your resources.
Executives suggested drawing up a checklist to help define priorities and stay focused. For some companies, it’s more than 200 items long – covering everything from internal political factors and weather to potential distribution networks.
“It’s important to think about what you’re going there for. Every country has some merit in some area. It may or may not be worth pursuing,” said Mike Gorenstein, president and CEO of Toronto-based Cronos Group. Cronos was one of the first to export medical cannabis from Canada, and in September it disclosed plans to partner with an Israeli collective settlement to grow MMJ in northern Israel.
Like Gorenstein, Kennedy consults a lengthy checklist when scouting overseas opportunities.
“We look at climate, proximity to the equator, the cost of inputs like labor, water and power. We look at the ability to get a federal license,” he said.
“We look at the trade relationships – meaning the ability to move the product to markets around the world – and the proximity to markets around the world.”
2. Get boots on the ground
Executives agreed it’s essential to be physically present in a country where you’re considering doing business. Having boots on the ground makes it easier to form relationships with local business executives and government officials. It also helps you get the lay of the economic and political landscape.
The most important thing is always the relationship, according to executives. You need to meet face-to-face – not just to iron out contracts and strategies, but to communicate and form a bond.
“You have to know your partners. What do they like to do? You find people you become friends with, and those relationships are the most valuable thing. Contracts mean nothing compared to a strong relationship,” Gorenstein said.
“If you build a strong relationship with someone, you’re both incentivized and aligned. I think you’re setting yourself up for success.”
3. Do your homework on certifications, licenses and regulations
Knowing the ins and the outs of a country you intend to enter – as well as any market you’re already working in – is critical when it comes to licensing and complying with the local laws and regulations.
In Canada, for example, an export permit is required before any medical marijuana can leave the country. But before one is granted, Health Canada requires the target country to sign off on the import permit.
In the European Union, all medical cannabis must comply with guidelines spelled out under so-called Good Manufacturing Practices (GMP). So it’s crucial to achieve that standard before expanding an existing production facility or breaking ground on a new one in Canada or overseas. Otherwise, you may be forced to redesign your facility.
“We consciously designed our facilities in Canada from the ground up to be GMP compliant. Regulatory compliance comes first and is the starting point – without compromise,” said Cam Battley, executive vice president of Alberta-based Aurora Cannabis.
4. Get the right work permits for your employees
Getting advice from international immigration attorneys on visa issues also is important, particularly when it comes to the cannabis industry.
For example, even if the U.S. Citizenship and Immigration Services approves a work visa for an overseas citizen, the U.S. Customs and Border Protection (CBP) has the final say on whether that person can be admitted into the United States.
Suzanne Sukkar and Christian S. Allen, attorneys with Toronto-based Dickinson Wright, noted that the customs and border agency may deem overseas MJ labor to be a form of “drug trafficking” and bar prospective executives and employees from entry. That’s because marijuana is on the U.S. Drug Enforcement Administration’s list of controlled substances.
“Inadmissibility applies to anyone who ‘has been a knowing aider, abettor, assister, conspirator or colluder with others in the illicit trafficking.’ So it doesn’t matter if the person is selling it or not,” the lawyers told Marijuana Business Magazine. “Involvement in other ways can lead to inadmissibility. Also, there is a ‘reason to believe’ standard that gives CBP a much broader net to cast for involvement in drug trafficking.”
The bottom line, the duo added, is to get legal advice – before you think you need it.
5. Be willing to say ‘no’
Saying no to the wrong opportunity is just as important as saying yes to the right one.
Successful companies need to spend a lot of time, energy and resources in a new country before pulling the trigger on a final investment decision, executives said. For them, not pulling the trigger is among the best decisions they’ve made.
A company might want to pull the trigger only after doing due diligence, consulting legal counsel and spending time generating relationships. A resulting red flag may well be cause for pause.
“Most times, no is just as important as yes. You need to be willing to say no. A mentor keeps two lists: A list of things to do, and a list of things that are too hard. And so some of the countries we looked at, it was just too hard,” said Tilray’s Kennedy. “You need to be willing to pull the cord and say, ‘We’re not doing this.”’