Going Global: International Partnerships in the Cannabis Market

Medical cannabis regulatory landscapes are beginning to open up in countries all over the world, providing opportunities for international partnerships in the cannabis market.

Even with the Canadian legal cannabis market still in its infancy, Canadian cannabis companies are already looking well beyond the True North to emerging medical cannabis markets and the recreational markets of tomorrow. Even before Canada became one of the first legal markets, Canadian companies were realizing the opportunity to become some of the first international cannabis players. While Canada offers the most established and developed legal cannabis landscape to date, markets in places like Latin America offer inexpensive production and highly promising markets in their own right.

For these companies looking to establish themselves in new and developing markets, partnerships with the players already entrenched in the country are key. Canadian companies with global aspirations have wasted no time forming international partnerships that will shape the worldwide cannabis industry and position them in promising markets.

International partnerships in the cannabis market

Entering into a new national market is no easy task in any industry. For cannabis companies, navigating the regulatory landscapes makes the task even more complicated. Only in the last few years have governments the world over begun to take legal cannabis frameworks seriously, and regulatory schemes are still in development. The regulatory systems as they do exist can look very different from the ones Canadian companies are used to. This can make acquiring licenses and approvals difficult. In addition to regulatory challenges, any domestic market will have its own needs, tastes and cultural influences that do not necessarily line up with those of North American cannabis consumers. Long-term success in one of these markets will largely depend on a company’s ability to understand that market.

By partnering with a company already operating in the market of choice, Canadian cannabis companies effectively bypass many of these challenges. A pre-established domestic player will already have most if not all of the necessary licenses, as well as facilities that are up and running complete with a trained and experienced workforce. That company’s leadership will have experience with and contacts within the regulatory regime. Just as importantly, the company brass will be entrenched in the local culture and values with a finger on the pulse of the domestic market.

Cannabis in Colombia

Of the markets emerging today, Colombia is promising to become the king of the South American cannabis market. The country features a government that has been largely cooperative and willing to support legal cannabis. Colombia’s medical cannabis regulatory system is the most well-developed in Latin America. Under the leadership of President Manuel Santos, Colombia legalized medical cannabis in 2015 and by April 2017 the country had established its legal framework for commercial cultivation, production, extraction and distribution. The country has a population of 48.8 million and a domestic medical cannabis market of about 6 million potential patients.

For the North American companies partnering with Colombian entities, the production benefits of this market are clear. Colombia’s climate is ideally suited for outdoor growing of high-quality cannabis, saving producers the construction costs associated with on indoor facilities, necessary in colder climates like Canada, as well as the considerable electricity costs associated with indoor grow lights, ventilation systems, hydroponics and more. Resources needed for production are widely available at low cost. Colombia also features a large pool of knowledgeable and experienced low-cost labor. According to Canadian cannabis company Orion Nutraceuticals (CSE:ORI), high-quality cannabis can be produced for five cents per gram in Colombia, pennies on the dollar when compared to equivalent cannabis grown in North America.

The Colombian domestic market is only part of the story. The primary interest in Colombia by North American companies is in the country’s potential to become a cannabis supplier to the world. Colombia is conveniently situated close to North American markets, allowing for easy and cost-effective exportation. Colombian laws already allow for the export of low- and high-THC extracts. North American producers have realized the value in growing and extracting in Colombia and shipping that product back up north for huge margins.

A few noteworthy global partnerships

Orion Nutraceuticals is one of the Canadian companies who have entered the Colombian market via international partnership. Orion has set up a partnership with Colombian medical cannabis extract company FCM Global with an intent to obtain a 40 percent interest in the Colombian company. Among FCM’s assets is a 235,800-square-foot medical cannabis facility in the town of La Ceja, which is expected to have an annual production capacity of 50 tons of cannabis extract by 2020. FCM also owns a 450-hectare property in Natagaima, which includes 300 hectares of outdoor cannabis cultivation space with the remaining 150 hectares set aside for production and exportation infrastructure.

“Our partnership with FCM Global is our most important one. The fact that we have this partnership with a company in Colombia that has licenses, boots on the ground and a facility, is growing cannabis and will continue to do so is immensely important for us going forward,” Orion Nutraceuticals CEO Jonathan Fiteni told INN.

In October 2018, Canopy Growth (TSX:WEED) launched a strategic partnership with Jamaican producer Grow House JA Ltd, adding Jamaica to a growing list of countries in which the cannabis giant has a presence including Germany, Australia, Chile, Spain and Denmark. Similarly, Canadian cannabis company Weekend Unlimited (CSE:YOLO) has entered into a binding letter of intent to acquire R&D Pharma, a Jamaican company with a Tier-3 cultivator’s license which allows for the cultivation of more than 5-acres of cannabis in Jamaica. MYM Nutraceuticals (CSE:MYM) has acquired a 49 percent stake in licensed Colombian cannabis producer ORGANICA.

Takeaway

The legal cannabis business is increasingly global. Opportunity abounds the world over in emerging markets that offer massive consumer bases, lower production costs, export opportunities and more. Canadian cannabis companies that have established themselves over the past several years now have a rare and valuable opportunity to enter these markets and the best way to do that will likely be through international partnerships with the local players.

This article was written according to INN editorial standards to educate investors.