Not too long ago, cannabis was just the feel-good supplement of choice for a young generation, looking to blow off steam. But intense research on the plant has led to new discoveries. Today, cannabis is used not only to blow off some steam, but to treat diseases which effect the immune system, pain and inflammation, seizures and even mental disorders. Mentioned in today’s commentary includes: Supreme Cannabis (OTCQX:SPRWF) (TSX:FIRE.TO), Auxly Cannabis (OTCQX:CBWTF) (TSXV:XLY.VN), Constellation Brands (NYSE:STZ), Emerald Health Therapuetics (OTCQX:EMHTF) (TSXV:EMH.VN), MedMen Enterprises (OTCQX:MMNFF) (CNSX:MMEN.CN).
Cannabis is finally becoming globally recognized as a viable alternative to costly, ineffective and sometimes dangerous medicines. And thanks to this, not only are a lot of people getting the help they truly need, an entire industry is growing right in front of our eyes.
This destigmatization has led to marijuana use across the United States and Canada growing substantially over the past 10 years. Across all age groups and demographics. And while it is already legal, and blossoming, in Canada, the push to bring cannabis into mainstream markets in the United States is catching fire. In a big way.
Even in the most conservative states in America, the veritable wunderdrug is being legalized. Take Oklahoma, for example. Medical marijuana was legalized in the state just last year, and within months, state regulators were swamped with permit requests and demand for medical cards. But that’s only half the story.
Recreational cannabis is also gaining traction across the nation. Many states in the East Coast are already in the process of lifting regulations to accommodate the overwhelming demand of their constituents. And as the most densely populated region in the country, that means already-established cannabis companies are just waiting for go-ahead before the next ‘green rush’ begins.
But legalization – both medical and recreational – is the most obvious trend in this emerging market. Cannabis is a fast-moving market. New tech, new products, new regulations and new consumers are sprouting up every day. And because of this, it’s a very lucrative space for early investors who can identify these emerging trends.
Here are the three most important emerging trends in the cannabis market today (and the companies leading the charge):
The CBD Health and Wellness Explosion
Most people know what THC is, or at least how it impacts people. It’s the compound in cannabis that leaves users feeling giddy, goofy, and, well, stoned. Think Snoop Dogg or Cheech and Chong. But that’s not the end of the story for cannabis.
In recent years, researchers have perfected the art of extracting another compound – CBD (cannabidiol). Why? Because it offers all of the amazing medical benefits associated with cannabis, without the glassy eyes and uncontrollable bursts of laughter. And consumers can’t get enough of it.
From migraines to depression, as the legal floodgates open, consumers are buying up every new product hits the market. And smart cannabis companies are happy to help.
One of the companies leading this charge is Supreme Cannabis (OTCQX:SPRWF) (TSX:FIRE.TO). Supreme is looking at the world stage as this new market develops. With a global vision and the drive to pursue this opportunity, Supreme is already carving out its market share in key regions as new regulation is passed.
Recently, the company launched its UK-based investment arm Supreme Heights, a platform created for the sole purpose of identifying and capitalizing on opportunities in the UK and Europe’s CBD health and wellness market.
Navdeep Dhaliwal, CEO of Supreme Cannabis explained, “The rapidly evolving CBD markets in the UK and Europe present compelling investment opportunities given the promising environments for new health and wellness companies to establish differentiated brands and capture meaningful market share.”
But other companies, like Auxly Cannabis (OTCQX:CBWTF) (TSXV:XLY.VN), are taking a slightly different – more local – approach. As a veteran in the Canadian market, Auxly has positioned itself ahead of the competition in the coming U.S. market boom thanks to its ambitious wheeling and dealing across Canada. With ample supply, a strong distribution platform, extraction tech and regulatory knowledge, Auxly is ready to pounce.
And Auxly’s expansion isn’t slowing anytime soon. Recently, the company even secured cultivation and processing licenses at a new 27,700 square-foot facility. The new venture is said to focus on premium strains, offering nothing but the best products.
Hugo Alves, President of Auxly explained, “This is a big milestone for one of our key subsidiaries and member of the Auxly family. We know that Andrew and his team are going to produce some of the best cannabis flower available in Canada and we can’t wait to share it with Canadian consumers.”
Big Data and Supply Chain Management
What’s the genius of Amazon? Simple: control of information. Jeff Bezos turned a little online book store into one of the world’s most valuable corporate behemoths by applying technological solutions to complex problems–creating a model mirrored around the world.
Now, a little-known company is trying to duplicate that feat. TruTrace Technologies (TTT.CN – TTTSF) is helping other companies “Amazonify” their businesses– creating a niche in the tech world that has yet to be filled. In other words, it has no competitors yet.
As any retail firm knows, distribution is essential–it can be the biggest source of additional costs and the perfect place to improve efficiency. Inefficiency can be a killer–a study from 2012 showed that distribution centers lose 3000 hours a year to unproductive workflow. Lack of control over information costs even more–large businesses lost $47 million per year to inefficiencies in data transfer.
That’s where TruTrace Technologies comes in. The company has developed a unique platform to help companies cut costs, streamline marketing and distribution procedures, and eliminate inefficiency in the supply chain.
It’s all about finding the best tech to fit the problem–and TruTrace Technologies has built a sturdy platform that covers an entire industry’s supply chain, from top to bottom. Plus, the company’s working in an exciting, rapidly growing new industry–cannabis.
TruTrace Technologies is breaking into cannabis, but it’s got the potential to take on much bigger markets–including retail groceries, which is currently dominated by big supermarket chains like Kroger Company ($105 billion) and H.E.B. ($21 billion).
And where other cannabis plays have focused on production–which firms have the most product, the lowest prices, the biggest chunk of market–TruTrace (TTT – TTTSF) hopes to make a splash by tackling the issues surrounding the emergence of a new market–one that could be worth billions of dollars.
For TruTrace, the possibilities for growth are extremely attractive. They already have the attention of the large medical community in the Canadian market-place and some in the US market-place.
Joint Ventures and M&As
Currently, corporate tie-ups are all the rage in the marijuana sector. Mostly it’s been big pot and big tobacco buying marijuana companies in multi-billion-dollar deals in the hope of getting a piece of the action.
— Constellation Brands (NYSE:STZ) invested $4 billion investment into Canopy Growth Corporation
— Altria Group Inc. has agreed to take a $1.8B minority stake in Cronos Group Inc.
— Aurora Cannabis Inc has agreed to buy smaller rival CanniMed Therapeutics Inc. for C$1.1 billion ($852 million.
And while giant brands get all of the attention, other smaller companies, like Emerald Health Therapuetics (OTCQX:EMHTF) (TSXV:EMH.VN) are flying under the radar. As a veteran in the cannabis sector, Emerald has placed a lot of emphasis on its strategic partnerships and acquisitions. With a highly experienced team in life sciences and product development, the company is truly carving out a name for itself.
Emerald’s reach expands through virtually every sub-sector of the cannabis industry, including cultivation, product development, research, and pharmaceutical solutions. But one of its most unique qualities is that it does not limit itself to pure-cannabis deals.
Emerald recently launched a new product line aiming to support the endocannabinoid system to help maintain equilibrium in the body. Dr. Gaetano Morello, Naturopathic Doctor, CEO of Emerald Health Naturals explained, “The Endo product line was developed by leading naturopathic doctors who previously launched new products into the natural health market, and we are pleased to now introduce Canadian consumers and retailers to this new nutritional supplement as an alternative to existing drugs, supplements, and cannabis.”
Hexo, previously Hydropothecary, is also making some major moves in the M&A wave. The company, which is engaged in the production, distribution and marketing of cannabis and cannabis products, made headlines after it secured a huge deal with international beverage giant Molson Coors. The joint venture marked a new era in recreational marijuana, bringing two heavyweight industries together under one roof.
HEXO’s CEO and co-founder Sebastien St-Louis, explained, “As two leading companies who share a track record of excellent practices, as well as respect for law and regulations, HEXO and Molson Coors Canada have established a relationship built on trust, and together we will develop responsible, high-quality cannabis-infused beverages for the consumable cannabis market in Canada.”
While most of the major pot-stock news comes from Canada, one of the industry’s top wheelers and dealers actually comes from California. MedMen Enterprises (OTCQX:MMNFF) (CNSX:MMEN.CN) is quietly gaining traction in the U.S. market, largely thanks to its strategic acquisitions and focus on expanding its domestic footprint.
In just a year, MedMen has closed on two major deals, including its buyout of California-bases retailer One Love and its acquisition of medical-marijuana provider PharmaCann. The PharmaCann deal, in particular, solidified MedMen’s position as an ‘up-and-comer- to watch. The $682 million acquisition made headlines as the largest marijuana deal at the time, with many analysts praising it as a major steal for MedMen.
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