Canada is now officially the largest legal recreational cannabis market in the world, and Americans are starting to feel the pressure. Numerous recent events have indicated that America’s longstanding cannabis prohibition could be on its last legs. These signals have sparked optimism for American cannabis companies such as Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) (the “Company” or “Chemistree”) that have established a strong presence in cannabis-friendly states such as Washington and California. Notable cannabis companies outside the United States that may benefit from American cannabis legislation include Harvest One Cannabis (OTC: HRVOF) (TSX.V: HVT), WeedMD Inc. (OTC: MDDMF) (TSX.V: WMD), Namaste Technologies Inc. (OTC: NXTTF) (TSX.V: N) and CannTrust Holdings Inc. (OTC: CNTTF) (TSX.V: TRST).
In October, the U.S federal government announced it was seeking public opinion on a possible reclassification of cannabis. A recent poll also found that 62 percent of Americans support the legalization of cannabis. Most recently, the resignation of Attorney General and cannabis opponent Jeff Sessions was seen as a positive development for the cannabis industry.
Taken together, these developments indicate that America’s strict federal policies on cannabis at the federal level could potentially undergo a historic reversal that would legitimize an industry that is already growing at an impressive rate. This newfound optimism has already brought significant attention to American cannabis companies that have a running head-start on this new potential industry such as Chemistree Technologies Inc.
In Canada, a similar situation occurred during early legislation discussions with many companies securing significant tactical advantages. If legalization plays out across the U.S., as it has in Canada, American cannabis company valuations could rise exponentially in the coming years. In the year before legalization in Canada, cannabis stock prices in the U.S increased up to 150 percent. American companies getting a foothold before prohibition lifts may see similar trends.
Building Brands Before Cannabis Prohibition Ends
While many American cannabis companies acquired infrastructure in 2018, some went even further and built and marketed their own brands. For example, Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1), acquired Washington State cannabis brand Sugarleaf – a well-known high-end cannabis brand with two consecutive Cannabis Cup awards under their belt from 2014 and 2015.
Sugarleaf produces a number of award-winning strains, such as White 99 – a high THC strain consumer favorite. Under Chemistree, Sugarleaf now has a market reach of over fifty retail stores in Washington state.
Building on this momentum, Chemistree recently announced a strategic collaboration with a Northern California processing facility in a bid to bring their Sugarleaf brand to the lucrative California market. Earlier, the company purchased nearly 10 acres for cannabis cultivation in California for just over $1.2 million. The company hopes to ultimately continue this approach to expand into new jurisdictions across the country where legal cannabis processing and product development are in their formative stages
This speaks to the speed the American cannabis industry is moving at. Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) is an example of a company that is already securing infrastructure and building brands. If legalization does occur it may prove difficult for new companies to enter what is likely to be a fairly mature market with significant competition.
Companies like Chemistree are actively replicating their approach in early markets, such as Washington and California, in other legalized states. With cannabis currently legal in thirty-three states plus Washington, DC, for medical use, and in ten states plus Washington, DC, for recreational use, it’s quite possible that some of these early movers may have a very significant national presence by the time potential legalization occurs.
Acquisitions, Strategic Partnerships, And Vertical Integration
As an early-stage industry, the American cannabis industry is filled with news stories of acquisitions, strategic partnerships, and companies maneuvering to become vertically integrated players in the industry.
Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) is an example of a company utilizing all three of these strategies. In addition to their acquisition of cannabis brand Sugar Leaf, the company has recently made a large financial investment into Pasha Brands, a well-established and vertically integrated brand in Canada.
This investment expands on Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) efforts to become a vertically integrated competitor in the cannabis industry, and provides the company with strategic connections into the lucrative BC cannabis marketplace for their Washington and California assets.
Pasha Brands owns the largest licensed retail chain in B.C. and their network of craft producers under the BC Craft Supply Co. This provides Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) access to premium strains from the network of craft producers in the BC Craft Supply Co.
This strategic investment is an example of an early cross-border partnership that may become much more common as American cannabis companies look to leverage the assets of well-established Canadian cannabis companies, and Canadian cannabis companies look to secure entry into the potentially larger American cannabis market.
This vertical approach to market expansion is providing companies such as Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) with a stable platform for national growth, and possible future global expansion. As the national conversation on American cannabis heats up, the industry is likely to see more vertical integration, acquisitions, and strategic partnerships occur as companies scramble to become major players in this potential 23.4 billion dollar industry.
Major Players In North American Cannabis
Namaste Technologies Inc. (OTC: NXTTF) (TSX.V: N)
Aiming to become the ‘Amazon of Cannabis’, Namaste Technologies Inc. is a Canadian cannabis company focusing on the retail side of the cannabis sector. The company has applied for a “sales-only” license with the Canadian government, which could establish Namaste as a leading distributor in the international cannabis space. The company currently sells vaporizers and cannabis smoking accessories in 20 different countries across the world, but hopes to expand to offer different strains of cannabis in the future as well.
WeedMD Inc. (OTC: MDDMF) (TSX.V: WMD)
WeedMD Inc. is a Canadian licensed producer operating two cannabis greenhouses in Ontario. Together the company’s two facilities contain 70,000 square feet of licensed grow space, which the company hopes to expand to 500,000 square feet by the end of 2018. WeedMD has secured a distribution partnership with Shoppers Drug Mart, which is expected to provide the cannabis producer with optimal distribution through the pharmacy’s extensive network of stores and online retail infrastructure.
CannTrust Holdings Inc. (OTC: CNTTF) (TSX.V: TRST)
CannTrust Holdings Inc. is a federally-regulated licensed producer focusing on the medical and pharmaceutical segments of the Canadian cannabis industry. The company operates a 50,000 square foot hydroponic facility to support its 430,000 square foot greenhouse operation in Ontario. Recently CannTrust was named the Best Licensed Producer at the 2018 Canadian Cannabis Awards, where the company also took home the prize for Top Sativa Flower (OG Kush) and Top Hybrid Flower (Blueberry Kush).
Harvest One Cannabis (OTC: HRVOF) (TSX.V: HVT)
Harvest One is an international cannabis company with a diverse portfolio of cannabis-based ventures. The company has three wholly-owned assets including licensed producer United Greeneries, medical CBD brand Satipharm, and CBD-based sleep aid Dream Water. Harvest One’s collection of assets has enabled an effective international business strategy, catering to markets based on local rules and regulations concerning cannabis.
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