by Andrew Kaye, Sweet Leaf Madison Capital
Picking up an eighth of Blue Dream right next to where you buy a bottle of merlot used to mean meeting your dealer in the parking lot behind the liquor store, but now it’s as simple as going to the shop next door. The widespread legalization of recreational cannabis over the last 10 years in the United States and abroad has led to a rollercoaster ride of gains and losses for the industry, but the future is still looking as green as ever. Nevertheless, there’s still a lot to learn, specifically from other industries like wine, who continue to rake in billions of dollars each year.
Given that wine has a few thousand years on cannabis as a commodity, cannabis has an opportunity to make up for lost time over the next decade. Due in part to more countries either loosening laws and restrictions or legalizing cannabis all together, the global market will start to see significant growth as international demand increases. In the years to come, cannabis companies will not only have opportunities to expand notoriety and increase demand, but regional terroirs could hold the same esteem as wine-lovers’ favor bottles from Burgundy or Tuscany.
New Players, Same Game
Nearly 30 countries have either decriminalized possession or made cannabis medically legal, with others like Canada, Uruguay, and Malta legalizing recreational cannabis. Germany and Luxembourg are also following suit
Each change leads to a new open market, with new economic opportunities. If we take a look at how the wine industry evolved from 1990 to present day, countries like Bulgaria, Germany, Portugal and Moldova were amongst the top 10 exporters in the world, behind the big three, Italy, France, and Spain. But where there is growth, there is contraction, and in those 30 years, contenders such as Australia, New Zealand and Chile have seen massive growth and recognition for their wines and are now able to go head-to-head with the big three, while Bulgaria and Moldova do not crack the top ten today.
The same is true for cannabis. As Germany moves toward legalization, which is predicted for 2024, it must figure out how to create supply for the country’s increasing demand. For years the Germans have been importing Canadian cannabis for medical use, accounting for 38% of its cannabis imports since 2017 – bringing in nearly 12 tons of flower and extracts in the first six months of 2022 alone. So what is good news to a potentially burgeoning European market, is good news for Canada – at least for the time being. The most recent proposal out of Berlin seems to exclude imports in the future and instead lays out plans to cultivate and distribute all within its own borders. Therefore, companies like Aurora Cannabis have just under two years to get the most out of their relationship before it is time to split up and move on.
On the other hand, we see companies seizing opportunities to expand into the global market. For example, Cookies, a California-based cannabis retailer and product brand, has recently opened a recreational dispensary in Bangkok, Thailand. This is just months after the country moved to legalize cannabis and establishes Cookies’ fourth international store – they also have three medicinal locations in Israel.
This is only the beginning. Global legal cannabis is still in its early days, and diversification of the market is going to be the future. We are going to start seeing countries promote both domestic consumption alongside international export to take advantage of opportunities abroad, while, much like wine, region-specific strains could become popular as cloning, hybridization and other advancements are finding their way into growing operations. Ultimately, specialized strains will become a cherished commodity amongst global cannabis aficionados. Boosting cannabis tourism, much like what we see in Amsterdam or Humboldt County, across the world.
As the industry grows, it will be important for businesses and brands to pull inspiration from those who paved the way, and wine seems to be the best place to start. Learning how to boost recognition to increase global demand will be essential, and big corporations will find this easier than small businesses, but that does not mean growth opportunities will dry up for those small players. Specialization and quality products will shine in a global market as well.
So, drink up, light up, and renew your passport. Cannabis, like wine, is circling the globe!
Andrew Kaye has been involved in all aspects of the financial services industry, as a fund portfolio investment manager, investment banker, family office investor and attorney. He has worked with start-ups on their first raise through global enterprises undertaking billion-dollar stock offerings, and has significant investment experience in the cannabis industry. Currently, Andrew works as Sweet Leaf Madison Capital’s Chief Commercial Officer. Lending his expertise toward the creation of middle market financing solutions for real estate and equipment financing needs in the cannabis space.”
“Sweet Leaf Madison Capital provides non-dilutive, asset-based lending solutions to the underserved middle market of the cannabis industry by originating real estate loans, equipment financing, securitized term loans, and more for entrepreneurs and businesses. The company is based in Denver, Colorado and has offices in New York City and West Palm Beach, Florida. To learn more or complete a loan application, visit Sweet Leaf Madison Capital online, or continue the conversation on LinkedIn, Twitter and Facebook.”
Andrew J. Kaye is Chief Commercial Officer of Sweet Leaf Madison Capital. He can be reached at email@example.com.