Big Pharma, Tobacco and Alcohol will dominate Canada's cannabis industry, according to the country's medical marijuana growers. According to a report from the consultancy firm EY, 75 percent of Canada's licensed producers (LPs) say those big players will essentially take over the market in the near future.
"Recognizing that there is substantial opportunity in the cannabis industry, these established industries are expected to enter this space and try to leverage existing competencies and assets," said the report from EY, which surveyed 11 of Canada's LPs.
"They drew a comparison to the alcoholic beverage industry and the fact that there are craft brewers and players," Monica Chadha of EY told BNN. "So a few big players and then, again, the industry will also be comprised of smaller niche players that really won't be major competitor."
And we're already seeing signs of that happening. Last month, Constellation Brands Inc. (distributors of Corona) took a 9.9 stake in the Canadian LP Canopy Growth Corp. and announced plans to partner with Canopy to produce a cannabis-infused beverage. Meanwhile, a former Budweiser executive is advising American beer barons to get into the cannabis industry sooner than later. More recently, Shoppers Drug Mart — Canada's largest pharmacy chain — announced it was hiring a medical marijuana brand manager.
Those moves could explain the recent rise in corporate consolidation taking place among LPs. Last Wednesday, the Saskatchewan-based LP CanniMed Therapeutics announced it was taking time to review an unsolicited takeover offer from Alberta's Aurora Cannabis. But they won't have much time to mull over the deal as Aurora has since launched a hostile takeover bid by trying to buy up the majority of CanniMed's stocks.
Meanwhile, CanniMed is also trying to finalize a deal to acquire the Toronto-based Newstrike Resources — a producer that partnered with Canadian band The Tragically Hip last spring.
And we will probably see many more headlines like these in the coming months. According to EY, 87 percent of the surveyed LPs said corporate consolidation was inevitable, meaning the industry will be held by fewer, larger hands.
“Over the long term, I see an industry with two or three major, relevant players and a bunch of craft producers,” Canopy Growth CEO Bruce Linton told the Financial Post recently.
So the landscape of Canada's cannabis industry could look entirely different a year from now, or even less depending on how quickly these consolidations and takeovers occur.