The Green Organic Dutchman (TSE: TGOD) has created a 50/50 joint venture with LLACA Grupo Empresarial to tap into Mexico’s lucrative medicinal cannabis market.
LLACA is one of the major players in the Mexican market and it has already tied up supply deals with 3,100 supermarkets and 4,500 pharmacies across the country. That made it a perfect partner for TGOD, which is keen to accelerate its international expansion drive.
Canada has quickly established itself as a world leader in the burgeoning cannabis industry and its leading lights are turning Latin America into a game of chess as they battle for regional domination. Aurora, Canopy and Aphria have already made significant inroads into the region and TGOD has no intention of being left behind. It is one of Canada’s largest producers and it already has operations in Jamaica and Poland, while it is soon to go into Denmark.
“This partnership, combined with the recently proposed regulations for the Mexican medicinal cannabis market, provides TGOD with a significant first-mover advantage, at scale,” said chief executive, Brian Athaide. “The distribution network includes over 7,600 potential retailers, significantly expanding our international footprint.”
TGOD president Csaba Reider noted that Mexico has a population of 125 million, making it three and a half times the size of Canada, so it is a crucial market for the firm. Rather than jumping headfirst into Latin American markets and setting up their own hubs, Canadian firms are tying up strategic alliances with local operators.
Alejandro Perea, medical cannabis commercialization director at LLACA, believes his firm can benefit from TGOD’s strong management and business strategy, adding that Mexico is ready for the “organic story”. Cannabis is all about health and wellness in Mexico, so organic accreditation is a big deal for producers trying to capture market share there.
All medicinal cannabis in Mexico must have THC levels of less than 1% in order to be considered legal. Small amounts of personal possession are also decriminalized, and it represents an important market on the global stage given its proximity to the US and status as a gateway to Central America.
TGOD said it is committed to becoming the largest organic cannabis brand in the world. Last week it completed a deal to snap up Polish firm HemPoland, giving it a significant base for its European operations. Athaide added that Europe is home to 750 million potential consumers and that the $7.75 million it paid for the firm should prove to be a strong investment, with EBITDA forecast to rise to $32 million for the 2021 financial year.
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