The marijuana industry has been a mess for much of the year, with some of the top pot companies losing a significant amount in market value since March. Despite these recent troubles, the future promises to be bright for the industry. As marijuana sales are set to increase significantly over the next decade, it’s up to us to separate the wheat from the chaff.
Investors who bet on Aphria at the beginning of the year are probably a bit happier than those who bet on Cronos. Aphria’s shares have lost “only” 8% of their value, while Cronos shares are down by 35%.
Why Aphria might be the better option
Aphria became one of the most prominent cannabis companies in Canada for two major reasons. First, the company is one of the few that have supply agreements with every Canadian province. Second, Aphria is projected to be one of the leaders in the Canadian cannabis market in terms of production capacity. When operating at full capacity, the company should produce about 255,000 kilograms of cannabis per year.
The Canadian market has encountered severe issues, including a lack of legally licensed retail stores. Thankfully, Aphria has a significant presence outside of its domestic borders, most notably in Germany. The company’s subsidiary, CC Pharma, distributes pharmaceuticals to thousands of stores across Germany and other European countries. Aphria introduces a cannabidiol-based cosmetic line dubbed CannRelief, which distributes in the German market through CC Pharma.
Another of Aphria’s subsidiaries in Germany, Aphria Deutschland GMbH, completed the German tender process and was awarded five lots for cultivation of the three strains of medical cannabis approved by the revelant authorities. The company is building an 8000-square-meter growing facility to distribute medical cannabis products in the country.
Cronos’ Deal with Altria Leads the Way
Cronos is expected to reach a peak production output between 110,000 and 120,000 kilograms, and the company has supply agreements with two Canadian provinces totaling about 50% of the Canadian population. The best argument for buying shares of Cronos might be its partnership with cigarette maker Altria.
The tobacco giant acquired a 45% stake in Cronos for about $1.8billion in a transaction that closed in March. As a result Cronos pile of cash exceeds that of almost any of its peers, money it can use to fund its growth efforts, and the company can profit from Altria’s marketing expertise and vast distribution network. Cronos recently announced the launch of its hemp-derived CBD brand, Peace in the U.S., The company will “test the market” by putting products in retail stores throughout the country, a feat it was able to achieve thanks to its partnership with Altria.
Cronos does have other weapons. In September, the company closed its accusation of redwood Holding, a distributor of CBD products in the U.S. for $300 million. Redwood distributes hemp-based CBD products through U.S. retailers under the brand name Lord Jones. Cronos began a partnership with Massachusetts-based Curaleaf Holdings to prove it with a minimum of 20,000 kilograms of cannabis per year for five years.