By J. Daryl Thompson
It’s no secret that North America has DOMINATED the marijuana boom, both from a production and PROFIT perspective and from a client base…but right now Europe has a potential client base of 743,000,000 (that’s MILLION) people who are desperate for legalization and SUPPLY.
But the question is… can the North American suppliers actually meet Europe’s demand?
Europe now offers similar investment opportunities that we’ve recently witnessed in North America, but the difference is that the European market is twice the size of the United States and Canada combined.
Opportunities are so huge that MarketWatch predicts the European market will soon double, growing into a $123 billion industry.
These opportunities could be as lucrative as investing in the ‘Big 5’ Marijuana Companies in 2016 and early 2017. Over that 18 month span, Canopy Growth was trading around $1.82/share, Aurora was just over $1/share, and Cronos and Aphria were both trading around $0.25/share. This was when exponential growth was occurring all over the cannabis industry, and when investors made life-changing returns.
But as great as those companies are…they’re in North America. The European market is a whole different animal and many predict the ‘Big 5’ won’t be that big in Europe. In fact, a well known cannabis company with close ties to the entrepreneurial researchers from Hebrew University, who discovered both THC and CBD is said to have the best opportunity to win-over this exploding market.
That company is Isracann BioSciences (ISCNF). Isracann is well known to cannabis researchers throughout the world, a primary supplier of Hebrew University. Hebrew University continues to make ground breaking discoveries, pioneering research in not only THC and CBD, but also cannabis acids. Cannabis acids are “compounds produced in the plant when it is alive and may be more potent than their better-known derivatives, such as CBD and THC”.
And, just like Hebrew University, Isracann BioSciences (ISCNF) is based in Israel, where there is an ideal growing climate for cannabis production. Reuters recently reported that “Israeli companies – benefiting from a favorable climate and expertise in medical and agricultural technologies – are among the world’s biggest producers of medical cannabis.”
That’s why I believe Isracann BioSciences is in position to become the next cannabis stock to see exponential growth. Benefiting from a multitude of advantages over their international rivals.
YOUR NEXT OPPORTUNITY?
Europe is on pace to become the world’s largest legal cannabis market in as little as 3-5 years. What’s more, they have the chance to supply a massive market while holding higher margins than ANY other cultivator.
‘WHY’ is that true, is the first question a savvy investor should ask, and then, ‘HOW’ are European producers going to pull off being the next round of cannabis companies to meet massive demand across an entire continent? A continent twice the population of the United States.
Big picture, while Canopy, Tilray, Aurora, Aphria and Cronos have been dominating the landscape, they will not be able to meet European demand due to several inherent limiting factors.
What had to go just right for producers and downstream manufacturers in North America, isn’t going to carry over Europe. All of these companies have greatly benefited from favorable deregulation laws and the outright full-scale legalization of cannabis in Canada. A trend that is rapidly spreading across the United States.
However, delivering a product into a foreign market is different than delivering at home.
Obtaining approval from EU regulatories is going to be heavily favored towards countries in and surrounding the EU. And, some investors may not realize this until it’s too late. Missing out on the biggest cannabis investing opportunities to come.
Labiotech, an EU resource for the biotech industry in Europe recently reported that “a number of countries, who could be recognized as approved exporters [to Europe], are already on standby. Examples are Malta, Greece, Denmark, Spain, Portugal, Israel, and Australia – All of these countries are prepared and ready to export, provided they have sufficient quality and the right EU GMP (Good Manufacturing Practice) certification.”
Quality assurance will be different from what the ‘Big 5’ are familiar, and this has everything to do with how swift the timing is from harvest to delivery. As cannabis flower matures, its chemical composition changes over time. This potency and chemical structure, measured in various forms of THC and CBD is what most regulators measure and require to be labeled accurately for safe consumption. The most recent World Health Organization meetings discussed reclassifying maijuana with positive results for the industry. This will naturally lead to a more structured system of laws and regulations in the UN following legalization, similar to what is playing out in the United States.
On the West Coast of North America, producers have a 30-day lag time to get their shipments to Europe, which may not satisfy European regulators. Discussions have already taken place at the UN and many of its participating countries agree that producers MUST be closer to home.
Although some investors assume the North American scientific community has a leading edge in cannabis research, Israel has actually been the world leader since 1964. It was then, over 50 years ago, when Raphael Mechoulam from Hebrew University isolated THC in his laboratory, discovering various cannabinoids.
Israel has been the world LEADER on cannabis research for decades as recognized by governments and businesses worldwide. They’ve virtually created the cannabis medical industry that investors benefit from today. They are leading the way in developing proprietary strains and genetics, which have just recently entered U.S. markets. Israel depends on Isracann BioSciences to deliver medical grade cannabis. A partnership that is only going to grow as Europe’s cannabis market grows.
Israel is focused on being a worldwide cannabis producer.
Israel is leading the industry in policy, research and innovation. Having approved exports to Europe, Israel is proving that they just may be the new leader in European markets for cannabis.
But it’s not just quality that sets overseas producers apart from winning the next pot boom in Europe, because the SPEED of transportation producers can deliver has a huge impact on quality.
Establishing the ability to ship FRESH product transatlantic is a costly and major undertaking. Just look at the time it takes to get a product from the coasts of the US to the UK:
New York, East Coast: 10 – 14 Days on the water. Door-to-door will take approximately 4 weeks.
Los Angeles, West Coast: 30 Days on the water. Door-to-door will take approximately 6 weeks.
Typical transit times to continental Europe are even slower: it takes 12-26 days to ship from the US east coast, and 34-49 days from the US west coast.
With marijuana quality at stake for regulatory approval, 30 days may just destroy a company’s ability to make a profit. This puts transatlantic producers at an extreme disadvantage with the added risk of heavy losses. This might require additional testing (and time) at ports, which will lead to more delays, risking (1) longer periods of time for North American companies to be without cash flow; AND (2) the possibility of delivering an inferior product to the marketplace, if it even gets there at all.
It’s a simple math problem: Sales – Expenses = Profits.
It appears from the chart below that the cost to grow marijuana and the cost to ship tons of marijuana overseas far outweighs profits for most North American cannabis producers.
Canopy, albeit the world’s largest producer, incurs current production costs north of $7 per gram. That is well above industry average throughout North America of $2-$4 per gram and more than 17X Isracann’s cost of production. Additionally, Isracann (ISCNF) has MUCH cheaper export costs, and an ideal climate that allows for multiple growing rotations a year, giving them a huge advantage compared to overseas competitors.
A recent Barron’s report disclosed that while costs of production have come down slightly for some major producers, they are still well above the industry average. Comparing Isracann to Aurora Cannabis, the second largest North American producer still isn’t close at $3 per gram, still 7X higher than Isracann.
While also benefiting from a favorable climate producing multiple crop cycles per year, Israel may become the next major producer and exporter in the world.
This means the next big cannabis stock play that investors should be looking for is definitely not one of the Big 5. The valuations are simply too high for these stocks and reality is setting in for investors, especially those seeking international export beyond the western hemisphere. But this doesn’t mean we shouldn’t try to learn from their early success. Because doing so will help identify companies like Isracann BioSciences (ISCNF) that are set to profit from the burgeoning European market.
Here’s The PROBLEM…
Business models of the Big 5 have shortcomings when attempting to compete in European markets.
Their dependency on other companies to cause the most recent stock fluctuations has many wondering if the time for the biggest gains to be made by investors has already passed. And, many in the industry are starting to look elsewhere, towards companies like Isracann (ISCNF), who are scaling operations over 580,000 sq ft., larger than some of the biggest in the world.
With the biggest opportunity now in Europe, companies that can mimic the Big 5 by compounding the same advantages will take control of a European market that is soon to be worth $123 billion. That’s twice the size of the U.S. and Canada combined. Companies that can scale this opportunity — and the investors that discover them — will not just gain substantial profit, but possibly create fortunes that sustain years of financial growth for their portfolios.
When investigating cannabis companies that provided massive value to investors in North America, focusing on logistical elements is not enough. Understanding the timing of the Big 5’s most strategic and stock-moving decisions, is vital to selecting cannabis stock winners in other regions of the world. The biggest example of this is when Canada saw the opportunity to profit from the U.S. market, based off federal deregulation and proximity for export.
These are the same advantages Isracann BioSciences (ISCNF) has on its hands with European markets, as it shares the shores of the Mediterranean for export. Advantageous in its proximity, is that Isracann is subject to some the most industry-supportive cannabis laws in the world, including international export to Europe.
It will be interesting to see who is able to solve the European marijuana problem and take advantage of the same timeline of events that built cannabis empires worth billions and now partnering with the largest conglomerates in the world. These were all companies set up in strategic locations to deliver an agricultural product with quality in-tact, at an affordable price. That being said, the next cannabis crop of market leaders is set to be made on the other side of the pond, and it appears Isracann might have a head start on the competition.
I believe that Isracann BioSciences (ISCNF) has a MASSIVE head start on the European market…
I got to this conclusion through a LOT of research! Read about my ‘easily digestible’ research in my latest report:
If you want to see the FULL scope of the marijuana boom, then you’ll want this report to help you see what’s coming NEXT, and how you can profit.
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