2020 was a tough year for the CBD industry, with Covid causing disruptions to supply chains as well as lower footfall in bricks & mortar retailers, and these setbacks were reflected in greater hesitancy from CBD marketers in terms of NPD activity – according to our CHC New Products Tracker service – with launch activity in 2020 much lower compared to 2019. However, recent regulatory developments in Australia and Mexico, and the uptick in M&A activity in the CBD industry over recent weeks, suggest 2021 will see a revival in NPD activity and sales.
For example, Curaleaf, a leading US provider of consumer cannabis products, last week signed a definitive agreement to acquire EMMAC, the largest vertically-integrated independent cannabis company in Europe, for around US$286mn. Curaleaf Executive Chairman, Boris Jordan, commented: “[This acquisition] provides an advanced base to reach scale within the nascent European cannabis market and transform Curaleaf into a truly international cannabis consumer packaged goods company. The consumer and political liberalisation trends around cannabis that are sweeping USA are also increasingly taking hold in Europe … The European cannabis market has the potential to exceed the US cannabis market over the long-term and will help fuel our growth for years to come.”
In addition, a wholly-owned subsidiary of British American Tobacco last week subscribed for around 58.3mn common shares – a 19.9% equity interest – of Organigram, a leading licensed cannabis producer, for C$221mn (US$176mn). The companies have also entered into a Product Development Collaboration Agreement, under which a Centre of Excellence will be established to focus on developing the next generation of cannabis products, with an initial focus on CBD. “The cannabis industry is still in the nascent stages of product development. We believe that product innovation backed by core fundamental R&D is necessary to establish a long-term competitive advantage in the cannabis industry,” said Organigram Chief Strategic Officer Paolo De Luca.
Another M&A CBD development from last week was MediPharm, a research-driven global leader in cannabis extraction, entering into a GMP white-label supply and contract manufacturing agreement with Cannim. The company has also commenced registrations for the launch of next-generation OTC products in Australia in 2021. Under the 3-year agreement, with options to extend, MediPharm will supply a full range of specially-formulated CBD and THC cannabis oil products, sold initially under Cannim’s Lumir brand. MediPharm will also provide Cannim with contract manufacturing options.
Finally, a bill that would legalise the recreational use of cannabis was approved in Mexico’s lower house of Congress last week and will move to the Senate for final approval. The legislation would enable users aged 18+ years with a permit to carry up to 28g of cannabis and grow up to eight plants at home for personal use. President Andres Manuel Lopez has argued that the bill could help to curb Mexico’s violent and powerful drug cartels. John Walsh, Director of Drug Policy for the Washington Office on Latin America, a US advocacy group, said: “Mexico, given its size and its worldwide reputation for being damaged by the drug war, to take this step is enormously significant. North America is heading towards legalisation.” Canada and Uruguay are the only countries in the world to have legalised cannabis for recreational use. With its liberal switch environment, Mexico could be an early adopter of OTC cannabis, possibly the second or third market after Australia.
Discover who the main CBD players are, and how big the market could get in our recent report, CBD 2020: The 20 Most Important Questions about CBD in the Future of CHC. To find out more, or to order your copy, please contact melissa.lee@NicholasHall.com.