Anyone who is not aware by now that big Canadian players intend to dominate the American cannabis market hasn’t been paying attention.
Although, since American beverage alcohol giant Constellation Brands owns a majority stake in Canopy Growth, Marlboro maker Altria owns nearly half of Cronos Group, and Southern Glazer’s, Molson Coors, and Pabst also have skin in the Canadian game, perhaps it’s more accurate to say mammoth American companies in adjacent industries intend to dominate the American cannabis market by sneaking in through Canada. The ploy allows them to profit from an extremely lucrative industry without risking increased regulatory scrutiny of their existing U.S. interests and gives them a monumental strategic advantage when federal legalization finally happens.
This is not mere conjecture. The pace of Canadian-American deals has picked up, with two big ones occurring over the past few months. Others undoubtedly are in the works.
In October, Canopy announced an agreement to acquire Colorado-based Wana Brands — which currently operates in twelve U.S. and nine Canadian markets — the moment the feds greenlight weed. The conditional acquisition follows a similar arrangement with Acreage Holdings, which Canopy engineered in 2019. Vertically integrated Acreage operates in at least twenty states, and Constellation’s distribution network covers every square inch of the U.S., so Canopy is the proverbial 800-pound gorilla in waiting.
In August, Tilray Inc. — which claims to be the largest Canadian cannabis company by revenue — acquired warrants for 21 percent of multistate retailer MedMen Enterprises…again, with execution contingent upon federal legalization. MedMen and Tilray both have troubled histories, though Tilray’s financials (if not its per-share price) have improved markedly over the past year. MedMen’s twenty-five retail locations, on the other hand, continue to burn through cash at the rate of about $300 million annually. Still, if speculation Tilray may try to acquire all of MedMen proves true, the move would give the Canadian powerhouse significant leverage in the U.S.
Tilray already owns American craft brewer SweetWater Brewing Company, whose products are distributed in thirty-six states and the District of Columbia. SweetWater and its annual 420 Fest music festival (which is unrelated to cannabis) represent a potentially powerful Trojan horse, especially in light of Tilray Chief Executive Officer Irwin D. Simon’s comment following the company’s merger with fellow Canadian Aphria Inc. in May. “Our focus now turns to execution on our highest-return priorities, including business integration and accelerating our global growth strategy,” he stated in the merger announcement.
Simon sees U.S. federal legalization occurring within eighteen to twenty-four months, and he’s determined to be ready to jump. In July he told Yahoo Finance, “As we look at what companies are out there, do we look at having options on them to buy once the legalization happens? Do we have some type of relationship with them? The answer is yes, and that will give us the opportunity to be a player in the U.S. once legalization does happen.”
Following the company’s most recent earnings report, he told BNN Bloomberg, “If you look at us, Hexo, Canopy Growth, and Aurora, together we have a 50-percent share [of the Canadian market]. Underneath that, you have 450 licensed producers that are all ankle-biters…”
Ankle-biters. Ankle-biters! One can’t help imagining that’s how he views every company in the American landscape.
Suddenly, Canadians don’t seem quite so polite anymore, do they?
Kathee Brewer is the editorial director for mg Magazine’s parent company, Inc Media LLC. This editorial originally appeared in the magazine’s November 2021 issue.
