The image of the stoned family pet has long been the butt of many a joke, but with the explosive growth in the pet medication market, no one on the business side of cannabis is laughing anymore. We take a preliminary look at the size and growth of the pet medicine market to help companies, consumers and investors assess its potential.
Canopy Growth announced a plan to acquire cannabis lifestyle company and future cannabis retailer Hiku Brands for $250 million. This purchase by Canopy may serve as the best example yet of the cannabis industry’s all consuming desire to diversify at any cost.
B.C. will accept retail applications this summer but does not plan to sign supply deals with any more licensed producers until after the October 17 legalization date. The province will be the sole wholesale supplier and buyer which means all of the retail stores will be forced to buy their product and growers are forced to sell only to the government. Wholesale pricing has not been publicly released but is rumoured to be $4.50 per gram or less.
According to Bloomberg data, less than 6% of shares in Cannabis stocks are held by institutional investors. Hedge funds are starting to dip their toes in, but there’s a significant pent-up demand from institutions that will start to flow with legalization in Canada. The floodgates will truly open once marijuana is legalized in the US, a possibility in the next 3 years in Grizzle’s view.
The government in The Netherlands is allowing 10 municipalities to grow marijuana legally as part of a four-year pilot test. Currently marijuana retail sales are legal but wholesale cultivation and sales are not.
The Netherlands will likely become another competitor to Canada, but four years gives the Canadian market a strong head start as they build brand recognition in Europe.
XHemplar Italia, a joint venture of Canadian producer CROP Infrastructure Corp, is growing CBD hemp outdoors which will then be used in assorted therapeutic and cosmetic product lines.
If you read about hemp production deals, ignore them as they’re a totally separate product from the high THC cannabis being legalized in Canada. Growing hemp will become a low margin business even faster than high THC recreational cannabis in Grizzle’s opinion due to the prevalence of outdoor growing and lack of differentiation at the beginning of the supply chain. Low THC hemp is largely used as a raw material in higher value products.
Marijuana stocks sold off this week down 3% as a group. Canadian stocks were off 6% but large cap names outperformed smaller companies as has been the case throughout 2018.
Even with all of the positive momentum on legalization, the stocks are down 3% since the recent bottom in April. Retail investors are still waiting for a rebound in stocks leading up to legalization which could happen for a few weeks just before the October 17 legalization date, but it’s looking like this is going to be a long summer of lacklustre performance.
READ THE MARIJUANA EXPORT MIRAGE FOR AN IN-DEPTH REPORT ON THE STATE OF DEMAND FOR MEDICAL MARIJUANA OUTSIDE OF CANADA