Multi-state operators, or MSO’s, have long represented the biggest and most influential cannabis players in North America. Yet, as that market matures and expansion opportunities dwindle a new trend is emerging – the rise of ‘multi-country operators’ (MCOs).
As global cannabis reform continues to gain traction, businesses are now looking beyond state borders towards emerging markets across Europe.
Dominant international operators like Curaleaf, Tilray, and Aurora have been leveraging their weight to break into the UK and European markets for some time, but new players are beginning to emerge aiming to challenge these behemoths head-on.
One company that has been built from the ground up with this global outlook at its foundations is Somai Pharmaceuticals, which now operates across 12 countries, and plans to expand to 20 by the end of the year.
Facing the giants
Somai is one of Europe’s largest and most developed MCOs, with vertically integrated operations spanning manufacturing, cultivation and distribution. It also boasts the largest EU GMP-certified cannabinoid-containing pharmaceutical extract portfolio in the industry and indoor cultivation partners around the world.
Many cannabis operators, particularly those which received outsized investments throughout the initial ‘green rush’ of the late 2010s and early 2020s, have historically prioritised growth over profitability, buying up businesses and facilities which they were later forced to offload at a sharp discount.
Conversely, having learned the lessons from this period early on, Somai has adopted a more measured approach, prioritising branding, profitability and sustainable margin expansion.
As one of just five fully vertical multi-country brands, Somai is unique in its ability to generate consistent profitability, realising profits after just one year of sales.
Its focus on vertical integration and strategic brand partnerships, rather than simply expanding for visibility, have enabled Somai to outperform its larger, publicly traded counterparts. Its vast product portfolio also enables the company to break into international markets regardless of how strict or unique their market is.
“It’s a real 100+ SKUs portfolio of extracts, gel caps, oral gums, and inhalation products. We don’t just have one—we have eight versions of gummies, 16 versions of vaporizers, and many oils and now we’re launching gel caps. So we have a really robust portfolio of EU-GMP stabilised products,” Sassano explained.
It also differentiates itself from its competitors by focusing specifically on many craft indoor non-irradiated cannabis flowers, as opposed to large-scale greenhouse-grown cannabis.
“On the other side, we have flower, now branded under multiple names. We’re bringing brands, but also all of our flower is indoor, non-irradiated—no greenhouses. With other producers, it’ll be fire, great,and it’ll be good—but it will be indoor. Good indoor is fire greenhouse.
“So we’re offering consistent indoor flower, bringing similar value to big players who are pumping out volume greenhouse flower. There’s just too much greenhouse flower in the market and not enough indoor.”
This has attracted some of the world’s largest cannabis brands to Somai, which now counts huge brands like Cookies, Airpro, Ghost Drops, Sherbinskis, Jack Herer as partners, with more craft brands expected to be announced shortly.
Alongside its hefty extract portfolio and its 3,800 sqm state-of-the-art EU-GMP pharmaceutical facility in Portugal, Somai has invested in an indoor craft facility and subsequently partnered with 20 indoor craft growers from around the world to bring top quality product through its sales and distribution network at a competitive price.
Expanding profitably
This solid, self-sustaining foundation has enabled Somai to expand its reach across the globe. However, international expansion is not only a costly endeavour but requires deep market knowledge and solid relationships with local operators.
Calculating this risk and potential return on investment is something crucial for survival in the cannabis industry.
Somai’s CEO and founder, Michael Sassano, told Business of Cannabis that when targeting the largest markets, such as Australia and Germany, along with secondary markets like the UK, Poland and Italy, it’s prudent to establish your footprint and then boost sales staff in the region.
Smaller markets, however, require a more nuanced approach. Somai tackles these by guiding its in-house sales teams to partner with big-pharma distributors. Somai is also one of only a few groups that can make large market authorisation dossiers for the hardest medical markets.
“If you’re not investing in distribution and staffing, brokers dealing with flower, oil and API deals are really hurting the business. To have secure, tradable supply lines at volume, you need a real system, large QA and inventory management teams plus robust computerised management systems. And most importantly Somai boasts 4.5 million euro credit line to trade product and offer sellers and buyers better cash flow management.
“We own our own lab, we issue our own COAs based on EU Pharmacopeia standards. This is a real value for all our trading partners who can be faster in the market with a reliable trading partner with full-service quality systems that are required in big pharma.”
For regions like France and Spain, where the medical cannabis market remains nascent but is showing meaningful progress, it is important to have great local partners and to plan for local staffing and build the brand(s) from scratch, Sassano explained.
Then there are countries which are harder to break into, requiring a full market authorisation dossier and some countries that require FDA herbal registrations.
Somai oversees distribution, with nearly two-dozen salespeople in the field, alongside over a dozen QAs and QPs, as well as an inventory management team. 6 person marketing team with local in-house marketing in the largest countries like Australia and Germany.
“Our distribution network spans almost every major market to maximise margins—that’s where most of our investment is going now.”
Sassano continued that Somai is one of ‘maybe three’ companies in the space that can achieve the highest standards required to enter these markets, including FDA registrations in countries like Thailand.
Despite its measured approach to international expansion, Sassano remains bullish on the opportunities these markets represent.
“We want to be in the hard-to-get countries—the ones where you need market authorization. At the same time, we want to service the easier, high-volume countries like Germany, Australia, the UK, Italy, and Poland. These are volume countries, and we want to be taking care of them.
“Australia and Germany together are €500 million markets, with Germany expected to grow to €1 billion. The UK, Poland, and Italy are all in the range of €120-140 million and growing.”
