Home / Business / Canopy Growth Corp. (NYSE: CGC) – Cannabis companies start to prepare for hemp betting

Canopy Growth Corp. (NYSE: CGC) – Cannabis companies start to prepare for hemp betting

Last week, the markets for hemp and cannabis were highly publicized: the cannabis giant Tilray Inc. (NASDAQ: TLRY) acquired Manitoba Harvest for C $ 419 million (US $ 319 million). Manitoba is the world's largest manufacturer of hemp foods, with products in more than 16,000 retail stores in North America.

For Tilray in particular, the move represents a milestone in its attempt to acquire a claim on the US hemp market. Broadly speaking, this acquisition reflects the growing trend of cannabis operators to acquire hemp companies in order to claim the ever-expanding market for hemp and CBD, and paves the way for an increasingly competitive and dynamic year. for the hemp industry. .

The Hemp Business Journal estimates that hemp and CBD market sales will rise from $ 390 million in 2018 to about $ 1.3 billion in 2022. US cannabis companies continue to struggle under the federal prohibition and Canadian operators continue to seek ways to develop their brands, the hemp-CBD market offers exciting opportunities.

Due to the 2018 Farm Bill, hemp and its derivatives are now treated as agricultural products rather than controlled substances. For agricultural products, there are far fewer financial and regulatory hurdles for companies looking to conquer the hemp market, while cannabis companies looking to generate additional revenue in segments such as foodstuffs. Hemp base offer many opportunities.

Hemp-CBD may be considered a flagship product in the current market, but regulators in the US and Europe have been slow to adopt its use. In the United States, states are cracking down on companies selling edible products containing CBD, and the Food and Drug Administration (FDA) continues to send warning letters to companies marketing CBD supplements as health products .

Similarly in Europe, the market for hemp and CBD has its own obstacles. Recently, the European Food Safety Authority has classified CBD as a "new food" additive, which means that companies producing CBD-based products or extracts will have to submit their products for safety assessment before gaining their place in the European market.

Hemp food products that do not contain CBD have not been subject to the same restrictions. The acquisition of Tilray is all the more significant as US and European regulators take the time to determine how to regulate the CBD, but Tilray will generate revenue from existing Manitoba products. Once the problem of CBD has been resolved, Tilray will be better positioned to transition to hemp-based CBD.

Other cannabis companies have adopted models similar to those of Tilray. A successful company straddling hemp and cannabis is: Elixinol Global (OTC: ELLXF).

Elixinol Global is the parent company of three companies: Hemp Foods Australia, Elixinol (which sells CBD products) and Nunyara (a medical cannabis company seeking a license in Australia). Over the past year, Elixinol Global saw sales increase by 121% to approximately $ 26 million. The vast majority of this growth was driven by sales of CBD products.

Two of the other largest cannabis companies (besides Tilray) that seek to capitalize on the growth of the hemp-CBD market are Aurora Cannabis (NYSE: ACB) and Canopy Growth Corp. (NYSE: CGC).

At the end of last year, Aurora announced its intention to acquire Agropro UAB, the largest organic hemp company in Europe, and its sister company, Borela UAB (which processes and distributes hemp) for an amount of 9.5 million Canadian dollars. Although there has been little talk of Aurora's hemp projects, there are rumors of serious discussions between the company and Coca-Cola to develop a range of CBD-based beverages. If these rumors were true, Aurora could instantly become a powerful force in the hemp industry.

Instead of acquiring an existing hemp business such as Aurora and Tilray, Canopy Growth seems to lay the groundwork for setting up its hemp infrastructure. At the end of last month, Canopy announced that it has received a license for hemp cultivation and processing in the state of New York. Until now, Canopy is committed to investing $ 500 million in its hemp production capacity and hopes to expand its hemp footprint to two more states.

While regulators continue to struggle over the question of how to regulate CBD, the cannabis industry relies heavily on CBD for hemp. Although no clear leader in this sector has emerged yet, one thing is certain: the segments of hemp and cannabis are becoming more intertwined.

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