Join our daily newsletter At The Bell to receive exclusive market insights
- The Market Herald brings together several cannabis industry insiders to discuss the market
- Industry experts discuss the changing nature of the regulatory framework in various jurisdictions, and the growing science-based sophistication of consumers in the recreational marijuana market
- Germany’s imminent entry into the legalised recreational cannabis market creates a massive — possibly Europe-wide — opportunity for switched-on players
- Panellists spur investors to look for companies with both runs on the board and their hands on the product
- Australian-based international cannabis market success Althea Group (AGH) is ideally placed to play a growing role
If there’s one sector of the market that has grown with extraordinary pace and diversity in the last ten years, it’s cannabis growth and distribution world-wide. And yet, in some respects, it’s an investment arena that has defied expectation.
For a start, the industry is squarely divided into two completely different and some would say mismatched segments — pharmaceutical and recreational. Then there’s the fact that, since recreational cannabis use was legalised in Colorado, USA, in 2012, the rollout of similar legislative moves has been disjointed and not quite as speedy as predicted across most of the rest of the world — although that’s now changing with some rapidity.
So where is cannabis as a product at right now, and where is it headed?
Recently, The Market Herald convened a panel of highly respected cannabis business insiders to discuss the state of both the medical and recreational marijuana markets, the trends and opportunities that are coming down the pipe, and the prospects for switched on investors.
The Market Herald’s Sarah Lenard hosted a recent discussion with leading industry experts in a panel interview you can watch above. The panel covered the global situation in which the stalling of federal legalisation has given rise to a new kind of agreement between operators, where agreements are drawn up contingent on the change of the national regulatory situation. This includes a number of merger and acquisition agreements, in which the acquisition will go ahead once the legal situation is resolved. It’s worth noting that there were a record number of mergers and acquisitions world-wide in the industry in 2021 — over US$10 billion in transactions, a total higher than those in 2019 and 2020 combined.
Consumer sophistication
In discussing the changes in the cannabis market, the panel noted that where demand was once almost exclusively for dried marijuana flowers, the number and variety of derivatives has exploded in recent years. In some respects this appears to be a consequence of the rapidly increasing scientific knowledge and sophistication of consumers, which is helping to drive demand for an ever expanding variety of new products — heralding the arrival of cannabis as an “almost endless” range of consumer packaged goods.
Gregg Battersby of Peak Processing Solutions, a wholly owned subsidiary of Australia’s Althea Group (AGH), noted that from an investment perspective, this has drawn some of the bigger players — alcohol and beverage companies, for instance, which previously sat on the sidelines — into the market. These mature players are seeking “an asset-lite way to get in,” as Mr Battersby puts it — a description that aptly fits the Peak approach.
In Canada, Peak is at the forefront of scientifically developing and validating, sourcing and integrating, then commercialising and delivering the new wave of derivative products. Its current product range varies from beverages and resins to fast-dissolving powders, liquid concentrates and topical skin care and cosmetics.
The panel seemed to agree that in the future revenue will stem much more from the extracted CPG market, and that investors would do well to seek opportunities in companies that are “plant-touching” and engineer and market the derivatives themselves.
The German surprise
When the discussion turned to the shorter-term future, panellists said the surprise announcement that the German government intends to legalise recreational cannabis creates an entirely new market dynamic. Germany, with its population of 82 million (including an estimate of well over 5 million cannabis users), will not only open a new frontier for the industry, its entry into the market will almost certainly prompt other European nations to accelerate their own steps towards legalisation.
This creates a potential new market of some 300 million people across the EU — a market almost the size of the entire United States.
Althea Group is Australia’s international cannabis powerhouse
As Alan Brochstein told the panel, investors seeking to enter the fast-growing cannabis industry need to look at “what’s in the bank” when considering investment vehicles in the industry. He said a lot of companies took on debt with the promise of growth, but are now “over the barrel”.
An Australian company with a global footprint in the cannabis industry — including a pharmaceutical cannabis presence in the soon-to-be-blossoming German market — Althea Group brings the blend of pharmaceutical expertise, scientific innovation, recreational product development and financial solidity that investors are looking for.
Both Althea Group and its subsidiary Peak recorded excellent results in the half-year to December 31, 2021, with record customer receipts for the period and a strong closing cash position of $9.9 million.
The company’s broad experience across numerous regulatory jurisdictions, its expertise in managing the supply chain, and its capacity to innovate — from its range of access, education and management services linking patients to doctors, to its ever expanding array of recreational derivatives — place it in a prime position to become Australia’s international cannabis powerhouse.
In a world where, as panel convenor Sarah Lenard so aptly puts it, “the conversation around cannabis is no longer if, it’s when,” investors who fail to see the benefits of getting involved in the cannabis industry now will likely rue their reluctance when they arrive late to the party. Perhaps more than a few early-adopters will see the value in Althea Group.
