Increasing international exports are intensifying competition within global supply chains. Oversupply of cannabis product in some parts of the world, including Canada, is spurring global price compression. The battle for market share is being fought on quality, consistency, cost and commercial terms. At the top of the market, there is still high demand for ultra premium dried flower, particularly in Israel & Germany. At the mid- & lower-ends of the market, price & commercial terms make or break deals.
Germany's medical cannabis market continues to grow, albeit more slowly than Australia's. While German market competition is increasing, there is lots of room for new brand/category entrants with proper market research, understanding of developed cannabis markets and the right distribution partner(s).
Proposed changes to remove cannabis from Germany's Narcotics Act, as/when enacted, will spur significant growth in the medical market, which will evolve further towards a "pre-recreational" market (similar to Israel).
Over-attention to recreational legalization in Western Europe has overshadowed positive developments in Eastern and Central Europe. The Polish THC market, for example, relies wholly on imports, is growing at 4-5X annually, and is expected to reach 2,500 total KG by the end of calendar 2023, with exponential growth thereafter.
The Australian cannabis market continues to grow exponentially, but navigation is challenging based on heightened competition, product oversupply & other key factors. Despite the new GMP requirement under TGO 93, Australia is still the most accessible large medical cannabis export market globally.
Vapes, medical hash and other non-flower product forms are increasing overall market potential in Australia, as the number of cannabis products on the market has now pushed past 500.
The Israeli cannabis market continues to be among the most challenging to navigate for import/export, based in part on inconsistent supply and the "hard bargain" driven by many Israeli importers. Yet the Israeli market offers significant growth potential given the legal reforms anticipated in Q1/2024.
According to Israel's Ministry of Health, these reforms should include loosened prescribing rules, new delivery methods, revised testing requirements, streamlined import/export processes, and a lot more.
Positive developments in the UK are precursors to an emerging, meaningful medical cannabis market set to drive significant import/export activity. As in other early medicinal markets, UK distributors are racing to gain access to patient cohorts to fuel demand for imports from global suppliers.
The gradual expansion of the prescriber base unfolding in the UK will facilitate increased patient growth & ramped up product imports/sales into 2024 and beyond. Quality, exclusivity and price will be key determinants of success for imported products, and early-to-market brands that strike the right balance between efficacy and price have a real opportunity to establish a degree of brand following, and even loyalty.
It's the best of times and the worst of times for many cannabis companies in the United States. Medical and recreational markets continue to show overall growth, having a positive effect on the US economy, yet a number of the largest US state cannabis markets are overregulated or oversaturated.
While there are pockets of opportunity and growth for US multi-state operators (“MSOs”), an increasing number of them are eyeing entry into global markets (i.e., brands, IP) through strategic partnerships and investments with cannabis companies in countries that have direct access into EU-GMP medical & consumer cannabinoid supply chains.
The recommendation to move cannabis from Schedule I to Schedule III of the Controlled Substances Act signals a shift in US cannabis policy. This, coupled with political rumblings about upcoming progress on the Safe Banking Act, have been welcomed with a bump in public cannabis company stock prices. The push towards re-scheduling of cannabis is an important step towards legitimization of the US cannabis business sector.
Canada continues to be a difficult environment commercially for cannabis licensed producers ("LP's", which include nurseries, cultivators, processors, manufacturers and distributors). Many early-to-market LPs over-spent, over-built, tried to do too much and/or failed to understand the customer, which led to an array of negative market dynamics (as well as bankruptcies and restructurings). A number of leaner, nimbler, more disciplined & largely private LPs have emerged as industry leaders, with a select few showing positive net earnings.
A key opportunity for a number of Canadian LPs is the export market; whether for direct product supply, or strategic partnerships with global cannabis companies for brand, product, category, or IP access/expansion in key/emerging global markets.
NOTE: The Hyde Advisory & Investments ("HAI") 'Global Cannabis Business and M&A Outlook' is published monthly and is a roll-up of some of the key insights gleaned from the activities undertaken each month by the 8-person HAI team across the global cannabis sector. We hope you find these insights of value and welcome your feedback below in the comments section. Reach out to us at firstname.lastname@example.org if you'd like to discuss Global Cannabis Sector M&A, Strategic Investment or Global Import/Export.