Marijuana Business Magazine - May-June 2018

F ree from U.S. competition and overflowing with capital, Canadian cannabis companies are expanding their global empire one country at a time – drawn by a worldwide market that’s expected to total tens of billions of dollars within a decade. Canadian marijuana companies are the veterans in the global market.Many of the nation’s biggest cannabis companies are establishing subsidiaries, making acquisitions and laying the groundwork for exports in various international markets. Below are snapshots of how CannTrust, Canopy Growth, Aurora Cannabis, Cronos Group and Organigram are doing it. Executives from each of the companies offered tips for how to tackle five key areas when deciding to do business overseas. 1. Assess the Business Opportunities More than two dozen countries have medical cannabis laws on the books. And with another dozen in the works, it can be easy to get lost in this sea of opportunity. That’s why the biggest medical marijuana company in the world holds weekly meetings to assess international opportunities. “You have to be able to answer the question, ‘Should I start a business here?’”Canopy Growth CEO Bruce Linton said. The Ontario company’s meetings bring together executives in Canada and teams overseas to address that key question. Canopy puts together a business case for each opportunity that looks at several variables, including who needs to be hired and how long it would take to make the first sale. Among the company’s 750 employees is a country profiler who assesses international investment opportunities, as well as specialists in regulation, public policy and politics. Canopy’s checklist starts with medical cannabis being feder- ally legal. Other criteria and questions are: • Does the country have a domestic market to support the capital investment? Canopy only looks for countries where it can get a return on the investment from the domestic market. • What’s driving the market? Was it a court decision? A political decision? • What’s the black-market price versus the delivered price to a patient? • How will each dollar spent materially impact asset creation and operating expenses, including input costs, labor and infrastructure? Understanding costs is a key part of assessing an opportunity. For example, the company purchased a greenhouse in Den- mark that had undergone bankruptcy. Canopy plans to convert it into a grow. “Your purchase cost of the greenhouse is maybe 10%-14% of the total capital you’ll need,”Linton said, “because now you have a glass shell. But you don’t have a process building, security and everything else that goes into it.” 2. Get to Know the Regulators Regulation of medical marijuana around the world varies greatly, and executives say that understanding the nuances from country to country is key to avoiding costly missteps. One way to avoid mistakes is to get to know regulators personally, which can be done through local counsel or a direct conversation between a company executive and a regulator. Sage Advice Canadian marijuana executives share tips on five factors to address when mulling an overseas expansion By Matt Lamers Mike Gorenstein, CEO, Cronos Group Bruce Linton, CEO, Canopy Group GOING GL BAL 76 • Marijuana Business Magazine • May-June 2018