Mistakes by Canada’s largest cannabis companies offer insight into global expansion

(This story is part of the cover package for the September issue of Marijuana Business Magazine.)

If there is a lesson to be learned from the overseas misadventures of Canada’s large cannabis producers in recent years, it is this: Being first to a market is a waste of time and money if that market is still years (or decades) away from producing material revenue—more so if you’re unable or unwilling to bankroll losses in the meantime.

When it comes to global expansion, slow and steady is winning the race. Most of the big spenders from 2017-20 are not much farther ahead today than they were when Canada legalized adult-use cannabis in October 2018.

In recent years, much ink was spilled on Canada’s so-called international advantage. While American marijuana companies were largely hamstrung by federal prohibition and prevented from competing internationally, Canadian producers were free to splash their capital around the world, gaining leverage and establishing toeholds in promising markets.

That practice turned out to be imprudent.

After years of investments and billions of dollars spent, most Canadian producers have little to show for their large expenditures: Barely any have made meaningful money outside North America, and now the retreat is in full force for many of Canada’s largest players, as the need to conserve capital becomes part of their new survival strategy.

Opportunities abound overseas

That does not mean global medical cannabis markets aren’t growing. Far from it.

Revenue-generating opportunities exist today in numerous countries.

However, experts urge businesses not to count their chickens before they hatch. To provide some perspective, Europe’s medical cannabis retail sales in 2019 were $260 million (240 million euros). That’s about one-third the size of Arizona’s MMJ market.

Unsurprisingly, a handful of large Canadian producers made the same mistakes at home as they did overseas, including an executive-level fixation on investors at the expense of customers, resulting in a significant misallocation of resources.

Those mistakes by the industry’s largest producers opened the door to opportunities for competitors. Legalization in Canada has been a major success story, despite the challenges experienced by some companies.

At home and abroad

This issue of Marijuana Business Magazine takes a close look at the cannabis market in Canada, which remains the only G-20 country to have legalized and regulated an adult-use industry at a national level—and a functional one at that.

When it comes to low-THC cannabis, several international markets are reigniting industries made dormant by hemp prohibition in the past century. Even China, which produced hemp for thousands of years before prohibiting the plant from 1985 to 2010, is clawing its way back to the top of the market.

When you’re doing business overseas in the cannabis industry, being realistic rather than optimistic is everything. Don’t be distracted by “a $160 billion market” in Country A, which will develop only if a series of extremely unlikely policy, political—and potentially astronomical—events coincide.

Other topics of interest in this package:

Matt Lamers is Marijuana Business Daily’s international editor, based near Toronto. He can be reached at [email protected].

3 comments on “Mistakes by Canada’s largest cannabis companies offer insight into global expansion
  1. Duane Michaels on

    Just want to say that as a chronic and intractable pain patient in Atlanta, Georgia where marijuana is not legal has been very difficult. As a medical marijuana patient when I lived in Colorado for seven years, I was able to maintain my health without using strong opioid medications. Here in Georgia my only legal alternative to control my pain is opioids.

    I know there are certain strains of cannabis that have provided excellent pain relief without many of the terrible side effects, or the bureaucracy issues that I deal with here in Georgia with opioids. I do not think the government should interfere with allowing the people from performing the scientific research to find those strains and legalize marijuana nationally for medical use and research. I’ve had the strain that allowed me to live without opioids, yet there’s no one to truly research that strain and create a clinical trial to determine exactly what strain it was. Therefore the science is flawed !

    It’s my experience that the majority of sales in the cannabis industry have been geared towards recreational users. I find that the majority of people who are using marijuana are being marketed with extremely high levels of thc that are stronger than ever before in my lifetime.

    Possibly the government and states need to regulate potency as the alcohol industry does for beer, wine and liquor. Rather than continue to increase potency which has been proven to cause hospitalizations and other side effects that were never heard of forty years ago.

    I’m an advocate of recreational and medical marijuana. I think medical marijuana should be legalized immediately on a national level and clinical trials to help the sick and injured should be a priority. I also think the recreational market should follow with total legalization and the potency of those products need be regulated back to levels that are more similar to the strains prior to the beginning of legalization.

    Ultimately, I would like to have the opportunity to partake in a clinical trial and be able to attest to which strain actually works. I think that the government needs to understand that this substance has the potential to help reduce opioid addiction and prevent unnecessary health and life threatening complications due to an antiquated perspective by those in charge of regulating the substance.

    Reply
    • Kevin Suter on

      Good day sir.
      I am a licensed grower in Canada waiting on my commercial papers. Part of my team is a chemist with the University of Toronto which brings Connections to the very research doctors you are seeking. I understand your issue very well as I deal with chronic pain as well and am able to stay physically active with the use of medical marijuana. I too have a strain that works very well for pain and doesn’t get your head stoned. Feel free to reply to me as I would like to hear about your strain.

      Reply
  2. Yohai Nir on

    The reason Canadian LPs have failed is due to a short-term strategy whose whole purpose is to inflate the value of the stock in the short term. For this purpose the Canadian companies concentrated on buying expensive assets in the wrong places. Canadian companies have turned to places where operating costs are high which has led to very high ongoing expenses. Canadian companies have adopted the wrong strategy of investing heavily in expensive structures and have tried to sell their strategy on the wrong grounds such as repeating the concepts of ‘pharma’ and ‘GMP’; but for pharma and GMP in the Medical Cannabis there is no need for expensive assets or expensive operations, but very clear and regulated planning and control processes must be maintained. Going out of Canada and applying the knowledge gained is the right thing to do but the way is to set up a a farm in one third of the cost in Africa and produce top quality Medical Cannabis in one-fifth the price of a product that is more quality in terms of cultivation. Investing less money in top knowledge and advanced agro-systems at the right places where climate conditions are ideal will be a positive change of direction for all those investors who are stuck with the old models and will give them a high return on investment.

    Reply
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