Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Analysis: Aussie cannabis firms go capital light as they roll into Europe

Stock MarketsFeb 23, 2021 06:15PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: Cannabidiol (CBD) oil bottles of Swedish DeHolk AB company are pictured during the Cannabis Business Europe 2018 congress in Frankfurt

By Shruti Sonal

(Reuters) - A handful of small, young Australian firms are taking a chance on Europe in spite of the region's diverse markets, hopeful that a capital-light investment strategy will diminish their risks.

Europe could be a hard market to crack as regulations vary by country, but favourable rulings for medical marijuana and potential demand are promising factors. The companies reckon that establishing an early base there and working with European partners will help them better negotiate different markets and steal a march on larger North American rivals.

Cann Group and MGC Pharmaceuticals are among many firms that have pushed into Europe, recently signing partnerships to distribute medical marijuana products and also exploring a dual-listing in the region.

Europe is much smaller than North America, already battling oversupply, but the market is a draw for Australian companies that contend with an even smaller home base.

"With prospects still limited largely to just the prescription market (in Australia), exports remain key to marijuana firms," said Jo Paterson, founder and CEO of BOD Australia.

New South Wales-based BOD, valued at just $37 million, entered into distribution partnerships in the United Kingdom, Italy and Netherlands last year. Its stock surged two thirds in the period.

There are indications that regulations around cannabis will continue loosening in Europe.

A ruling in November by the European Union's highest court that cannabidiol - the main ingredient in medical marijuana products - is not a narcotic, is crucial for their success in Europe, the companies said.

The United Nations drug agency voting weeks later to remove cannabis from the most tightly-controlled category of narcotics will also help, they said.

Medical marijuana sales in Europe are expected to surge 52% by 2025, hitting $3.1 billion, according to a report by market researcher Brightfield Group and consultant Hanway Associates.

Graphic: European medical marijuana sales set to rise -

A recent short-lived Reddit-fuelled rally in cannabis stocks notwithstanding, many investors see them as long-term bets. The cannabis index has risen 30% in the past 12 months, outstripping 16% growth in the S&P 500.

Graphic: Cannabis stocks rally as more catalysts emerge -


Analysts have warned, however, that Europe's regulatory landscape is complex and could be hard to navigate.

Even bigger firms such as Canopy Growth (NASDAQ:CGC) and Aurora Cannabis (NYSE:ACB) have found it difficult to make profits in the continent and are now scaling back investments, though they say that Europe remains a big opportunity.

"Policymakers and businesses are tackling issues including cross-border supply chains, standardising manufacturing and laboratory practice, and prescription requirements," said Ibrahim Said Abdeldayem, a risk consultant at Arriello.

Some countries, including Germany and the Netherlands have well-established medical cannabis legislation. In others such as Sweden and Belgium, cannabis is strictly prohibited.

Graphic: Framework of cannabis legalization in Europe -

Australian companies are tackling the diverse markets with a capital-light approach: sticking to partnerships with firms that are better-equipped to handle distribution and rules locally, rather than trying to build processing plants.

Cann Group, the first in Australia to receive a licence to cultivate medicinal cannabis in 2017, said it will focus on Germany and Britain because those markets are expected to grow quickly.

Cann, worth roughly $150 million, is partnering with a London-based company to ensure it is well positioned when the market takes off, its chief operating officer Shane Duncan said.

"Hopefully (Australian investments) will be more thoughtful and more strategic, with a better understanding of the limits of the market, and that it will take time," said Jamie Schau, analyst at Brightfield.

"The important part is to get it right in each market and not treat it as a bloc."

Analysis: Aussie cannabis firms go capital light as they roll into Europe

Related Articles

Airbus to create own airline to rent out whale plane
Airbus to create own airline to rent out whale plane By Reuters - Jan 25, 2022

By Tim Hepher PARIS (Reuters) - Airbus plans to charter out its whale-shaped Beluga transport planes - whose main job until now has been to ferry aircraft parts between its plants...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email