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Two staples in the Canadian cannabis industry, Canopy Growth and Cronos Group, join others eager to branch into the U.S. market, with hemp and CBD being their gateway to what is projected to be a $20 billion industry by 2024.
With CBD projected to hit $1.3 billion by 2022 and hemp to exceed that by more than 10-fold, Canopy Growth is entering an already competitive market, going head to head against vertically integrated industry unicorns likeNext Green Wave.
With the 2018 Farm Bill having passed, hemp in the US has been re-classified as “legal” for the first time since WWII. This bill, eliminating restrictions previously imposed by the Controlled Substances Act of 1970, has set the stage for a booming market poised for exponential growth.
Canopy Growth
In 2014 Canopy Growth became the first publicly traded cannabis company in North America, and now the company is taking steps to expand its reach even further. With the recent acquisition of a 308,000 sq. ft. facility on 48-acres of land in Kirkwood, NY, their footprint on the U.S. cannabis market is projected to be vast. The purpose of this new space is to facilitate hemp-derived cannabinoid extraction, as well as associated processing and manufacturing.
In an effort to fully integrate this new Hemp Industrial Park into its community of operation, Canopy Growth intends to give local vendors and farmers top priority in sourcing needed materials and services. Canopy Growth also wants to see locals take advantage of meaningful career opportunities at the facility. They began hiring senior leadership in 2019, and will round out their entire workforce by 2020.
As if that wasn’t a big enough move into the U.S. market, Canopy Growth also took a major step forward in an arrangement that will ultimately form the largest marijuana company in the world. Canopy Growth shareholders approved a deal to acquire one of the largest American cannabis chains, Acreage Holdings. However, this deal is contingent upon the U.S. federally legalizing the growth, sale, and possession of marijuana.
Acreage Holdings currently operates in 20 U.S. states, engaging in cultivation, processing, and dispensing operations. Canopy and Acreage hope to ink the first part of this deal within the month, which would entail a $300 million payment to Acreage stockholders, immediate access to Canopy’s brands, and the ability to make acquisitions from $1 billion worth of securities that have the potential to convert to Canopy stock, assuming Congress federally legalizes marijuana.
Cronos Group
Meanwhile, another Canadian cannabis giant, Cronos Group, is also ready to make waves in the United States hemp market. Hailing from Toronto, Cronos Group is actively building a brand portfolio that focuses on advancing cannabis research, technology, and product development.
With a recent $1.8 billion investment from Altria Group, a top player in the North American tobacco industry, Cronos will have access to over 200,000 retail stores across the country as well as a network of tobacco farmers that could easily transition to growing hemp. This new surge of cash and resources, combined with their affiliation with cannabis private equity firm, Gotham Green Partners, will give Cronos Group the backing needed to be a force to be reckoned with in the U.S. cannabis market.
With tobacco sales volume falling, this deal gives Altria a new lease on life and the opportunity to expand into a new market with a seamless transition. Altria also gets the opportunity to nominate four out of seven of Cronos Group’s board of directors, giving them an even stronger foothold in the future direction of this cannabis giant.
Altria Group is not stopping there, which means that neither will Cronos Group. Altria currently owns 10% of Anheuser-Busch, which opens up the door for them to enter the cannabis-infused beverage market, giving Cronos the opportunity to provide the cannabinoids needed to produce such beverages. Altria is also looking into buying a minority stake in Juul Labs, a leading electronic cigarette manufacturer. This potential purchase could also give Cronos Group a chance to supply the cannabinoids needed to make cannabis e-cigarette cartridges for Juul.
It is clear that Altria Group’s investment into Cronos Group was a good move for all parties involved, especially considering investors are all having very favorable reactions to the deal. Opportunities for growth for both companies seem to be endless, and it’s only just beginning.
Good Deals for Canadian Cannabis
Both Canopy Growth and Cronos Group are taking a stab at the United States cannabis market, and they are off to a great start. Although their approaches differ from each other, both companies, as well as their partners and investors, have stellar growth potential that will certainly skyrocket with the federal legalization of marijuana. Until then, the wheels keep on turning for both of these Canadian cannabis superpowers, and they show no signs of slowing.
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