​Why companies are teaming up within the marijuana industry

With Canada’s legalization of cannabis, companies are beginning to explore this new landscape. It’s not uncommon to see them form partnerships to break into this growing sector

27Dec

The cannabis sector is set to be one of the most explosive industries in the world today and has the potential to grow to $146bn by 2025. It should come as no surprise that companies are partnering up to fight for a piece of this emerging industry. Whether it's via a joint venture or buying of stocks, teaming up is a good way of capitalizing on all that potential.

A number of enterprises have been watching the cannabis sector with keen interest. Especially after Canada finally implemented full legalization of recreational cannabis. In particular, three industries normally considered sluggish are taking this opportunity to revitalize their offerings.

Companies getting into the cannabis industry

The first of these three industries is the alcohol sector. As the cannabis sector the alcohol sector has seen sales drop by as much as 15% even in states that have only legalized medical marijuana.

As a result, a number of alcohol companies are already making moves to incorporate the marijuana industry into their future plans. As a matter of fact, major alcohol company Heineken already made this decision back in April, deciding to create cannabis-infused drinks months before Canada's recent legalization. Molson Coors Canada and HEXO announced an agreement to create a joint venture focused on non-alcoholic, cannabis-infused beverages for the Canadian market.

The marijuana beverage sector is set to hit $600m by 2025 in the US alone and could represent a real opportunity for companies like Heineken to rejuvenate their brand and perhaps reverse the worrying sales trends for the alcohol industry as a whole.

Second on this list is the pharmaceutical industry. Just this year the first cannabis-derived drug for epilepsy was approved by the US FDA and this has demonstrated that the cannabis market will soon play a significant role in the medical arena.

Earlier this year Sandoz struck a deal with Canada-based Tilray to distribute medical cannabis products, a first for the company and a significant step for the medical marijuana sector. In any case, the deal between Tilray and Sandoz can only mean good things for both industries involved, especially as attitudes towards marijuana relax globally.

The final beneficiary from an exploding cannabis sector is Big Tobacco. These former giants have seen global sales plummet as consumers around the world kick the habit. The awareness of tobacco's health risks have put a huge dent in the industries sales but the marijuana industry represents a rope.

Unsurprisingly tobacco companies have seen this coming for some time and have been quick to adjust. Brands like Imperial Brands are attempting to use the popularity of cannabis to their advantage. The company did this by making an investment in Oxford Cannabinoid Technologies, a company aimed at seeking out cannabinoid-based medicines. More recently Marlboro cigarette manufacturer Altria invested $1 .8bn in cannabis company Crono Group.


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An alternative approach

Apart from partnerships, companies investing in cannabis groups with a lot of potential is another way to take advantage of the burgeoning industry.

One perfect example of this move is when Aurora Cannabis, one of Canada's biggest marijuana companies, decided to invest in up-and-coming marijuana company Choom Holdings Inc., securing a $7m investment in the company, followed by another announcement in November that the company was investing another $20m, bringing the total investment up to $27m. Through this, Aurora effectively becomes Choom's biggest investor.

Headquartered in Vancouver, Canada, Choom is a consumer-focused brand that aims to help cannabis companies sell high-end products via extensive retail opportunities. It currently has around 68 retail opportunities spread throughout three provinces, including Alberta, British Columbia, and Manitoba.

Aggressively working to secure more permits in order to open more retail locations, Choom is currently using a multi-faceted approach to help further secure its place in the industry. Canada's cannabis retail industry is complicated – brands like Aurora Cannabis are not allowed to own retail stores in a majority of provinces, so partnering with companies like Choom which is focused on constructing not just retails stores but lifestyle centers, would be the perfect partner to dominate in the industry. With Choom's vision, Aurora is assured that their products will be found in the best locations.

As a young, innovative, company Choom has been moving fast, and this new investment partnership with Aurora will only help in the company's aim to take root in the industry and capitalize on the new legal market.

The estimated $6bn cannabis retail industry is indeed just beginning and with a big company such as Aurora recognizing the likes of Choom it's safe to say that Canada's cannabis market is primed to explode. 

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