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Australian cannabis companies lighten capital when expanding into Europe

Despite the diverse markets of the region, a handful of young Australian companies are seizing opportunities in Europe and hope that low-capital investment strategies will mitigate their risks.

Europe may be a difficult market to crack, as regulations vary from country to country, but favorable decisions and potential demand for medical marijuana are promising factors. The two companies believe that by establishing an early base there and working with European partners, they can improve negotiations in various markets and steal the march of their larger rivals in North America.

Cann Group and MGC Pharmaceuticals are one of many companies in Europe and have recently signed a partnership to distribute medical marijuana products and are seeking a double listing in the region.

Europe is much smaller than North America and is already fighting oversupply, but the market is attractive to Australian companies fighting smaller homes.

“The outlook remains largely confined to the prescription market (Australia), and exports are still important to marijuana companies,” said Jo Paterson, founder and CEO of BOD Australia.

Based in New South Wales, BOD is worth only $ 37 million and signed distribution partnerships in the United Kingdom, Italy and the Netherlands last year. Its inventory surged two-thirds during the period.

There are signs that cannabis regulations will continue to be relaxed in Europe.

The European Union’s Supreme Court ruling in November that cannabidiol, the main component of medical marijuana products, is not a drug is essential to its success in Europe, the two companies said.

A few weeks later, they said, the United Nations drug agency, which votes to remove cannabis from the most tightly controlled drug categories, would also help.

Sales of medical marijuana in Europe are expected to surge 52% to $ 3.1 billion by 2025, according to a report by market researcher Brightfield Group and consultant Hanway Associates.

(Graphics-European Medical Marijuana Sales Expected to Increase: https: //graphics.reuters.com/CANNABIS-EUROPE/jbyprdrjgpe/chart.png)

Despite the recent short-term Reddit fuel rebound in cannabis stocks, many investors see them as long-term bets. The cannabis index has risen 30% in the last 12 months, outpacing the 16% growth of the S & P 500.

(Graphics – Cannabis strains rise as more catalysts emerge: https: //graphics.reuters.com/AUSTRALIA-CANNABIS/oakperndavr/chart.png)

Capital light

However, analysts warn that the regulatory situation in Europe is complex and can be difficult to navigate.

Even big companies like Canopy Growth and Aurora Cannabis find it difficult to make a profit on the continent, saying Europe is still a big opportunity, but are now curtailing investment.

“Policymakers and businesses are addressing issues such as cross-border supply chains, standardization of manufacturing and laboratory practices, and prescribing requirements,” said Ibrahim Said Abdeldayem, Arriello’s risk consultant.

Laws on medical cannabis have been established in several countries, including Germany and the Netherlands. Cannabis is strictly banned in other regions such as Sweden and Belgium.

(Graphics-European Cannabis Legalization Framework: https: //graphics.reuters.com/CANNABIS-EUROPE/xklvyomwbvg/chart.png)

Australian companies are approaching diverse markets with a low-capital approach. In short, rather than building a processing plant, we are sticking to partnerships with companies that are well-equipped to handle distribution and rules locally.

Cann Group, Australia’s first license to grow medical cannabis in 2017, said it will focus on the German and UK markets as they are expected to grow rapidly.

According to Chief Operating Officer Shane Duncan, about $ 150 million worth of Kang has partnered with a London-based company to ensure that the market is in the right place when it gets on track. doing.

“We hope (Australia’s investment) will be more thoughtful, more strategic, better understand market limits and take longer,” said Jamie Schau, an analyst at Brightfield. ..

“The important part is to understand it correctly in each market, not to treat it as a block.”

Disclaimer: This post is auto-published from the agency feed without modification of the text and has not been reviewed by the editor.

Australian cannabis companies lighten capital when expanding into Europe

Source link Australian cannabis companies lighten capital when expanding into Europe

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