Read our latest interview with Casa Verde’s Managing Partner, Karan Wadhera, about the opportunities Europe presents for overseas investors.
NORTH American cannabis operators have invested hundreds of millions of dollars into the European cannabis market, with a new wave of capital expected to arrive as companies line up to ‘claim a stake in the emerging European adult-use market’.
According to new data from Prohibition Partners’ European Cannabis Report 7th Edition, Tilray, Aurora, Canopy and Curaleaf, have combined non-current assets in Europe of ~US$620 million as of Q3 2021.
Although Canada remains the largest exporter to the European medical cannabis market, which saw patient numbers rise by an estimated 89,626 to 284,486, this is quickly changing.
The multi-billion-dollar losses endured by Canadian players have forced them to divest huge chunks of their international estates, leaving room for other North American players to invest in Europe as it transitions ‘towards a fully legal, regulated market worth billions of euros’.
The Next Wave
Throughout late 2019 and 2020 Canadian cannabis producers including Canopy Growth and Aurora Cannabis, who had amassed a huge presence across Europe over a number of years, found themselves forced to rapidly divest their international operations.
Slow revenues in the burgeoning market caused investors to lose faith in their expansionist strategies, leading to sell-offs and subsequent cumulative losses topping billions of euros.
This drove a major shift in strategy between 2020 and 2021, involving global closures of major facilities, and management changes.
Canopy Growth was sold its facility in Denmark to Little Green Pharma for around €15 million below market value, and far less than it had invested in the facility. Then earlier this year it also sold C3 Pharma at a loss of around 60% of the price it paid for it in 2019.
While this great divestment was going on, US companies like Curaleaf saw an opportunity to break into the market ‘prompted not least by the promise of a legalised German adult-use market’.
Its 2021 deal to purchase EMMAC Life Sciences for €300m was seen as a ‘huge vote of confidence’ from US multi-state operators (MSOs).
Prohibition Partners estimates that a further €180m in investments flowed into Europe throughout the year from a ‘handful of North American players’.
This new wave of investment is also seeing major players like Aurora, which was forced to close one of its two large facilities under construction in Denmark in 2020, return to its international expansion strategy seeing it purchase Dutch cultivators Leli Holland and Growery BV in late 2021.
Different Strategies
With Canadian giants now being joined by US MSOs, the scramble to establish a European presence has seen a number of differing strategies emerge.
Tilray
Tilray has the largest presence in Europe out of its North American peers, in a large part thanks to its merger with Aphria which closed in May 2021.
This saw it acquire assets including Nuuvera, Italian distributor FL Group and German pharmaceutical distributor CC Pharma among others.
While the latter’s non-cannabis activity reportedly makes up a large majority of Tilray’s European revenue, it boasts the widest reach in terms of countries and has the most stock keeping units (SKUs) on European shelves, with more than 40 products on sale in Germany.
As of Q3 2021, 48% of Tilrays total revenues came from Europe, the Middle East and Africa, largely from its operations in Germany, Israel, Italy and Portugal.
Curaleaf
The US operator, which purchased EMMAC Life Sciences in 2021 and rebranded it as ‘Curaleaf International’, has also built operations in a number of key locations across Europe.
This €300m deal saw it acquire Portuguese cultivator Terra Verde, British manufacturer Rockshaw and Spanish operator Medalchemy.
Alongside these, Curalead also owns a processing facility and pharmacy licence in the UK, facilities in Spain and Portugal, as well as wholesale supply operations in Germany, Israel, Spain and Portugal.
Canopy Growth
Canopy Growth’s strategy has been largely focused on Germany, with around 20% of its total revenues coming from the country in Q3 2021, and around 10 SKUs currently available in the market.
Prior to 2021, it made a number of notable acquisitions including Spanish producer Cafina, Czech distributor Annabais, British CBD firm This Works! And German vape maker Storz & Bickel.
Last year, due to the declining revenues in Europe thought to be down to its shrinking share of the isolated THC market previously held by C3, Canopy Growth divested large swathes of its European operations.
Aurora
Aurora’s strategy in Europe largely focuses on its Danish and Portuguese production facilities, alongside its tenders to produce domestic cannabis in Germany and supply the Italian market.
While it has also been forced to divest heavily from Europe over the past year, it still has around 20 medical cannabis products for sale in the German market, as well as on the shelves of nearly all open markets in Europe.
