As Canadians decline in Europe, Curaleaf finds the right moment to invest on the continent

As Canadian cannabis companies pull back from establishing a stranglehold on the European market, Curaleaf Holdings Inc. founder and CEO Boris Jordan is excited to pick up where they left off.

The head of the largest cannabis company in the United States announced the company’s first international foray with the acquisition of European cannabis distributor EMMAC Life Sciences for $ 285 million. This is a clear shot for the company’s Canadian competitors who have built a bridgehead presence on the continent for years.

While the European market is still in its infancy, it holds significant potential for large cannabis companies looking to new growth areas. Prohibition Partners expects the market to grow from just under $ 300 million in the previous year to around $ 2.5 billion in 2024. So far, only 10 percent has been made up of leisure sales.

However, Jordan believes the European market could be as big as the US in a few short years, which is why it waited for the right time before investing in one of the leading medical cannabis players.

“This is not a criticism of Canadian companies. I know they were hindered by their inability to get into the US, so they were looking for somewhere outside of Canada to grow,” Jordan said in a phone interview.

“So they went to Europe because Europe was making noise about cannabis legalization. But timing is incredibly important and I think it was too early.”

When capital flooded the Canadian cannabis space, companies like Canopy Growth Corp. and Aurora Cannabis Inc. raised millions to set up offices and manufacturing facilities across Europe. Lawmakers weren’t moving fast, however, and optimism that the market would take off faded, allowing Canadian operators to close or downsize their European businesses, including Canopy’s announcement earlier this week that it would close its Danish facility.

Most of the companies, including Tilray Inc., Flowr Corp. and now Curaleaf, have come to Portugal, where temperatures are optimal for growing cannabis outdoors, and a government that has set up a friendly medical cannabis program.

“It’s the best agricultural climate for cannabis and it’s cheap to grow,” said Jordan. “I don’t understand why Aurora and Canopy and all these companies built these immensely expensive greenhouses and indoor facilities in Northern Europe. It confuses me a little, but it is what it is.”

Jordan said his team looked at the EMMAC asset for about a year before closing the deal to acquire the asset. He anticipates the company will not generate significant revenue by 2023 and is happy to wait five years for the European market to become more established.

“We said, ‘Where is the growth coming from when the US is penetrating more and more?’ Growth rates are going to drop from triple digits to double digits, which is still very good, but I still wanted to see where the next growth frontier was, “said Jordan.

“I’ve doubled the size of my potential market for less than two percent of my market capitalization. I don’t know what kind of industry in the world you can do that.”

THE TOP STORIES OF THIS WEEK

Health Canada is investigating allegations of mislabeled cannabis products following a complaint against Canopy Growth
Health Canada said it is investigating allegations of inaccurate cannabis potency values. The complaint filed by Pure Sunfarms of Village Farms International found that Canopy’s TWD brand has a flat 20 percent tetrahydrocannabinol (THC) potency for 18 separate batches of its cannabis products. Pure Sunfarms said in its complaint that the statistical probability that these cannabis products will reach the exact potency level is “extremely low”. For its part, Canopy Growth has stated that it meets Health Canada’s labeling requirements and that its efficacy label is the “focus of a narrow range of historical test results.”

Canopy Growth slated to lay off 75, plans to shut down Danish plant as strategic review comes to an end
Canopy Growth continued to downsize as the company’s year-long strategic review draws to a close. Canopy told BNN Bloomberg that approximately 75 employees had been laid off, most of whom were at the headquarters in Smiths Falls, Ont. The company has also made a proposal to the Danish authorities to close its manufacturing facility in the country. If the facility closes, the move will affect an additional 60 people. A prominent member of Canopy’s European team has already moved on. Jens Markussen, who led Canopy’s Danish operations, joined DanCann Pharma as the country’s production manager.

Curaleaf is well on its way to selling $ 1.2 billion worth of cannabis this year
Curaleaf Holdings made a splash earlier this week after its managed revenue rose 186 percent to $ 233 million in the fourth quarter. The company also expects sales of at least $ 1.2 billion in the next fiscal year. Curaleaf announced its first entry into the European market on Tuesday with the purchase of distributor EMMAC Life Sciences. In an interview with BNN Bloomberg, Boris Jordan said he expected US publicly traded cannabis companies to be able to list their stocks on major stock exchanges once the US passes law to reform marijuana banks sometime this year.

Organizational strikes deal with Big Tobacco as BAT has a stake in the pot producer
As investors increasingly look south of the border for opportunities in the cannabis space, don’t count Canada out just yet. Organigram Holdings found a new partner in British American Tobacco, who acquired a 19.9 percent stake in the company for $ 221 million. As part of the deal, the two companies will also develop a new research and development center in Moncton, NB, to develop new products with a focus on cannabis, with a first look at CBD. BAT is the third tobacco company to invest in a Canadian cannabis producer, with Altria taking a substantial stake in Cronos Group for $ 1.8 billion and Imperial Brands partnering with Auxly Cannabis. Greg Engle, CEO of Organigram, told BNN Bloomberg that he believes the deal will play a critical role for the cannabis producer.

The pot business in Ontario is looking for a new boss as interim CEO
The head of the cannabis business in Ontario plans to step down later this month. This is the third such exit in as many years. Crown Corporation announced it would conduct a national search to find a new head to oversee the organization. Ontario Cannabis Retail Corporation (OCRC), which oversees the Ontario Cannabis Store website and provincial marijuana wholesale business, announced that Interim CEO Thomas Haig plans to step down from his interim CEO role effective March 23. The cannabis operations in Ontario are expected to generate sales of approximately $ 70 million in the current fiscal year.

Analyst Call of the Week – Supreme Cannabis
According to analyst Tamy Chen, BMO Capital Markets has created a new framework to control cannabis reporting. The new methodology takes into account improving a company’s profitability and important strategic attributes. As a result, BMO is upgrading its Supreme Cannabis rating to “Outperformance” and giving it a 12-month price target of $ 0.55 per share. At the same time, BMO downgraded Organigram to “Underperform” and left its $ 2 target unchanged because the company was unable to increase its leisure revenue in the past few quarters. Sundial Growers was also downgraded to Underperform, but BMO raised its target price by one cent to $ 0.40 per share. .

You can find more information about Supreme Cannabis here.


CANNABIS SPOT PRICE: $ 5.84 per gram – This week’s price is down 1.4 percent from the previous week, according to the Canada Cannabis Spot Index of the cannabis benchmark. This is equivalent to $ 2,102 per pound at current exchange rates.

BUZZ WEEKLY