Cannabis legalization is generally good news for the industry and companies looking to expand into other parts of the world. That is not necessarily always the case, as it creates opportunities for those countries to start becoming exporters of Cannabis themselves, and they can end up competing head-to-head with large North American producers. Canada-based Aurora Cannabis (NYSE-ACB) prices itself on its global presence. It has a footprint in 25 countries and has 15 global production facilities.
Hemp, which is legal in the U.S. thanks to the farm bill passed last year. While Aurora and other Canadian companies see this as an opportunity to expand into the us market, the problem is they will be competing with other Canadian producers and U.S. hemp producers as well.
Zimbabwe targets hemp as its next big export
In Zimbabwe, there s a project underway That will see industrial hemp being grown on prison grounds Harare. One one of the motivations for the government to permit hemp cultivation is that it could be a substitute for tobacco, which made up more than half of the country’s total export.
With hemp growing popularity for cannabidiol-baswd products, it can present a significant opportunity for the country to diversify its exports and be less dependant on tobacco. That could lead to its products making their way to North America and other parts of the world as well. Last year, Zimbabwe became the second African country after Lesoto to legalize marijuana for both scientific and medical use
Thailand is another country that’s looking to expand its cannabis program
Asia is another part of the world where cannabis legislation just hasn’t made enough progress. Thailand has been receptive to medical marijuana. It’s not only building southeast Asia’s largest medical marijuana facility, but it’s also expected that legalization will be expected to allow individuals to grow as many as six cannabis plants for medical purposes. That is good news for the industry, but the government is looking to be the mail producer of medical marijuana, with the Government Pharmaceutical Organization Projecting that by February, it will have 1million bottles of Cannabis oil, containing 5 milliliters each, available.
Why North American cannabis companies could be in trouble
A year ago, the opportunities presented legalizing cannabis in many parts of the world would have excited investors. Expansion and growth were all the talk in the industry. With a company like Aurora Cannabis coming under fire for its poor financials and the amount of cash its been burning through, it may not be an easy decision to simply expand in a part of the world because cannabis has been legalized there.
Investors need to look no longer than Aphria (NYSE-APHA) as how quickly an international strategy can go sideways. Last year, the company’s stock took a big hit following allegations that it vastly overpaid for assets in Latin America and the Caribbean. Investors are paying closer attention to the actions companies are taking to make themselves more or less profitable.
Key takeaways for Investors
With the market being more sensitive to the company’s financial statements, it’s likely that cannabis producers are going to put the brakes on international expansion. That means international growers will have an opportunity to build up their own positions in the industry and end up competing with North American companies in Europe, Canada, and other markets where hemp or medical marijuana has been legalized.
For companies like Aurora and Aphria That are banking on international growth, it could impact their market share and overall valuations. With more of a focus on profitability, they won’t be able to be aggressive in perusing new market opportunities. While they may become stronger companies by improving their bottom Lines, their positions their positions internationally will likely get weaker. The good news is that the international market are still a long way from being developed as those in North America, and that gives Aphria their financials in preparation for what could prove to be a big battle on the global stage.