Shares of the Canadian cannabis company Canopy Growth (NYSE :), (TSX 🙂 increased by 1.70% in US trading on Monday. The reverse in the share trajectory came late, when shareholders cast a vote earlier in the day on the 3.4 billion dollar deal to take over the US-based cannabis grower Acreage Holdings (OTC :).
Although the vote is expected to ratify the deal, the takeover of the New York-based cannabis firm will not take effect until marijuana receives federal legalization in the United States. That may not immediately be the case. Nevertheless, it is not necessarily the physical acquisition of Area that is currently critical. Rather, it is the strategic position behind the movement that Canopy Growth wanted to secure.
Strategic advantage, for now
It gives Ontario, Canopy from Canada, the largest cannabis company in the world, access to the largest marijuana market in the world because AreaAil has a license in 20 US states. Securing a multi-state American partner is an important step in Canopy & # 39; s overall plan to maintain its status as a dominant player in the constantly evolving cannabis industry.
Being at the top of the emerging cannabis industry is becoming increasingly important and difficult, especially for Canadian companies, despite their early lead. The difficulty that Canadian companies are facing is the prospect of legalizing marijuana in the United States at the federal level. As the US gets closer to that point, companies are bracing themselves to prepare for – and the weather – the shift that this will cause in the landscape of the sector.
It will undoubtedly put the US in a position to threaten Canada's current leadership in the sector. Although it is the first G7 country to legalize the substance, allowing investment money to flow, Canada threatens to lose its early lead due to the relatively small population.
With fewer people than the population of California, there is a limit to how much marijuana can be sold. On the positive side, however, this has contributed to Canadian companies establishing links and markets in other countries where the restrictions are easing.
This lead on the world market is now, at least protected, because US based operators cannot legally operate through the 50 states because they are unable to cooperate with companies and governments in other countries because marijuana remains illegal at the federal level.
Building Brand Leadership
Yet there is a difference between a producer of a global commodity and the enormous financial benefits that it has to be a brand leader. And this is where Canadian companies run the risk of being disadvantaged in favor of their American rivals despite their lead. Canadian regulations limit brand marketing.
Unable to market their product with recognizable brands, Canadian companies have a huge obstacle to overcoming in an attempt to connect with consumers. And let's be honest, when it comes to profit margins, branding is a big problem.
Everyone from the makers of Kleenex (NYSE 🙂 to Corn Flakes (NYSE :), to companies such as McDonald's (NYSE 🙂 to Microsoft (NASDAQ :), will confirm that. Nobody really thinks about where these products come from; consumers simply know and trust the brands.
But now entering into a partnership with Areaal in the United States, Canopy has a workable strategy to maintain its momentum forward. And news about this momentum is what Canopy keeps ahead. To this end, it published an update on Monday about its international activities and activities in the emerging markets for medicinal cannabis and CBD.
One of the highlights is a multi-year deal that it has concluded in South America with the Procaps based in Colombia, a manufacturer of freely available drugs and supplements. The company exports to more than 50 countries, including the United States, where it is certified by the Food and Drug Administration. Canopy plans to use Procaps expertise and production capacity, in particular in the field of gelcaps, to serve the growing CBD markets throughout Latin America
Canopy also pointed to his medical cannabis division, known as Spectrum Therapeutics, which began selling medicinal cannabis in Australia last month. Spectrum is expected to provide patients with imported medical marijuana while continuing to build a growth facility in southeastern Australia.
Canopy has also announced that it has acquired growing growth certificates in Denmark and for two facilities in South Africa
All of this sets the scene for the next highly anticipated Canopy news bulletin, the release of the fourth-quarter results, after closing on Thursday, June 20. Strong production and revenue growth is expected to continue
Canopy reported sales of C $ 97.7 million (USD $ 72.77 million), an increase over C $ 21.7 million (USD $ 16.16 million) for the same quarter in 2018 , while net sales amounted to C $ 83.05 million (USD $ 61.86 million) compared to C $ 21.7 million (USD $ 16.16) for the corresponding quarter of the previous year. Given the company's production expansions, these figures should rise accordingly
The statistic to look at, however, is how much will remain in the company's cash reserves. If both series of numbers are healthy, the pace of Canopy is likely to continue.
