With less than a month left in 2021, we have become highly focused on the trends that are expected to become more significant in 2022. 

From Southeast Asia to Latin America, legal cannabis markets are popping up all over the world and we expect this trend to continue in the years to come. (Click here to read full article)

One region that we have been especially excited about is the European Union (EU). Following a change of leadership in Germany, we expect recreational cannabis to be legalized in Europe’s largest economy and believe that other countries in the EU will follow suit. 

We expect 2022 to be a banner year for the global cannabis industry and believe that legalization efforts in several major markets will come to fruition. A few themes that we expect the market to be highly focused  in 2022 include:

1. Canadian companies ramping up the pace of acquisitions of US cannabis and hemp operators
2. An increase in the number of US multi-state operators (MSOs) that are acquiring assets that are levered to certain markets in the EU 
3. An improving regulatory environment in Southeast Asia (not including Australia) for the hemp and cannabidiol (CBD) industry
4. Expect increasing interest in US cannabis brands from Canadian LPs and leading domestic operators 
5. Operators becoming more focused on profitability than revenue growth and a continued focus on rightsizing operation to be in-line with consumer demand

Canada Invades the US: Canadian Companies are Acquiring US Assets

A major theme in 2021 has been Canadian LPs acquiring US hemp and CBD companies for a fraction of what they were valued at in 2018-2019. During the last year, several high-profile and large-scale CBD brands were acquired by mid to small-tier Canadian LPs to have leverage to the US when the regulatory environment improves. 

A few larger-scale Canadian LPs have entered into definitive agreements to acquire leading US brands when cannabis is legal at the federal level. These operators trade on a big board US stock exchange (Nasdaq or NYSE) which prevents them from being able to own assets that sell tetrahydrocannabinol (THC) products. The price tag on some of these type of agreements is several hundred million dollars and we expect to see more transactions like this in 2022. 

Expanding Abroad: Are US Operators Capitalizing on International Markets?

Last year, we notice an increase in the number of US cannabis operators that are focused on expanding into Europe, Latin America, and Africa. Between these three regions, we are the most bullish on the long-term opportunity in Europe and expect to see a spike in the number of US companies which are levered to the EU in 2022. 

According to the European Cannabis Report (6th Edition) by Prohibition Partners, the cannabis market in the EU is forecasted to be a $3.75 billion market by 2025. The region could quickly prove to be an attractive growth avenue for US operators and we are bullish on the long-term potential value that is associated with the region.

Southeast Asia: An Emerging Hemp Market to be Aware of

When it comes to the hemp and CBD opportunity in Southeast Asia, we are highly focused on Thailand. Earlier this year, Thailand’s government passed a bill that legalized the production and use of hemp in products. The types of products that are allowed to contain hemp range from cosmetics to medical supplements. According to the law, products must contain less than 1% of THC. A key reason for our bullish view on Thailand is related to how the government issued a limited number of licenses to capitalize on it. 

Last month, Audacious Brands (CSE: AUSA) (OTC: AUSAF) formed a strategic partnership with Golden Triangle Health (GTH) to capitalize on Thailand and become a leading CBD operator in Asia. We consider GTH to be a strategic partner due to its distribution network and expect the companies to penetrate and capture market share in certain Southeast Asian markets.

Canada’s Cannabis 2.0 Market: US Brands are Capturing Market Share

In December 2019, Health Canada legalized the sale of cannabis 2.0 products and this vertical has been recording strong revenue growth. To better capitalize on this burgeoning aspect of the Canadian medical and recreational markets, several LPs have formed agreements with leading US cannabis brands to sell products in Canada.

This strategy has benefited the Canadian LPs who formed relationships with high-profile brands. In October, Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) announced an agreement to acquire Wana Brands once cannabis is legal at the federal level in the US. Wana is a leading cannabis edible brand and we expect to see more agreements like this in 2022. 

Bankruptcies & Billions of Write Offs: What is Next for Canada’s Cannabis Sector?

During the last two years, several Canadian LPs have closed production facilities and written off billions worth of assets. These operators expanded to big, too fast and have paid the price for this mistake. Canopy Growth and Aurora Cannabis Inc. (TSX: ACB) (Nasdaq: ACB) were negatively impacted by this trend and we are monitoring how these operators can be more aligned with the Canadian supply-demand dynamic. 

Although billions worth of assets have already been written off, we expect to see more companies go bankrupt or close additional facilities in 2022. The COVID pandemic has made it more challenging for Canadian LPs to right size the business and this has put additional pressure on the entire sector. We continue to prefer Canadian LPs that have a strong balance sheet and can weather the current storm. (Click Here To View the Entire Article)