Curaleaf Deal And Future Of Cannabis Market In Europe

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Today, U.S. cannabis operator Curaleaf announced a $286M deal to expand to Europe.

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Investors have been biased to the U.S. and Canada and haven’t appreciated Europe's potential. As North American cannabis operators look to tap into the European markets, what will be the key to success and what regions should investors be paying attention to?

Kyle’s Advice On The Move By Curaleaf

Kyle Detwiler is CEO of multinational operator Clever Leaves that has operations in Colombia, Portugal, United States, Canada and Germany. He opines:

Focus on a moat - low costs are helpful, but quality must be equal to, if not superior, in frontier markets.

Focus on investments which suit the region - does it make sense to go invest in a high-cost producer in the UK or Germany?  Or does it make more sense to invest in a company which can leverage low-cost production elsewhere and create a moat in that geography with a brand or unique distribution strategy.

  • This move by Curaleaf highlights the eventual recreational opportunity in Europe as well as the higher cost to getting established there.

Regions To Pay Attention To:

  • Germany:
    • Having access to Germany’s limited distribution channels is key - Germany is considered the Pharmaceutical capital of Europe and holds the strictest regulation for healthcare quality and safety – once you pass those standards, tapping into the rest of the EU is easier.
    • Operators with EU GMP certification, like Clever Leaves, are well-positioned to take advantage of the opportunity in this market.
  • Portugal 
    • Has a highly attractive micro-climate for large-scale, efficient production and on track to become one of the largest exporters of medical cannabis in Europe.
    • Most of EMMAC’s value was its Portuguese operation and Clever Leaves also one of the only remaining independent players in Portugal with a licensed and operational facility.
  • Israel:
    • In 2020, Israel was the largest importer of cannabis in the world.
    • Israel recently implemented regulatory changes on imports where companies need to comply with more rigid standards for product quality. Clever Leaves believes it is well-positioned as one of the few companies that can meet these requirements for both flower and extracts.
    • Israeli market is a THC flower dominant market, but we expect to see more oils and other form factors enter the market in 2021 and beyond, including potentially more CBD dominant products, which means that more of Clever Leaves' products will be desirable for the Israeli market.