Even without approval from Congress, Tilray (TLRY) CEO Irwin Simon claims the cannabis market in the United States is enormous.
“93% of Americans support legalising cannabis for medical use, and another 63-65% favour legalising it for recreational use. Around 33 states and the District of Columbia now permit it. It’s out there now that… most people favour legalising cannabis.”
Tilray, already one of the world’s largest cannabis producers, is aiming to increase its share of the market by catering to consumers interested in using the drug for both recreational and therapeutic purposes.
Simon emphasised that the possibilities are not limited to the drug alone. It’s also worth noting that the market for goods that are “close cousins” to cannabis, such as edibles, cosmetics, and beverages, is growing rapidly.
“What will happen once the U.S. legalises is that the big companies like Diageo, Brown-Forman, ABI, even I think the Nestles and the Unilevers will want to be into the cannabis business because they know Gen-Z and millennials, that’s very much what they want,” Simon said.
Matt Darin, CEO of Curaleaf (CURLF), agreed with Simon, saying: “The key to success, we think, is constant innovation. A lot of the expansion in the market can be attributed to the emergence of new product types.”
Darin singled out the beverages segment as a key growth area. He noted that while it is “still a small component of the market,” it is “one category that we see as going to continue to increase over time” as new innovations emerge and the products are made available to more people across the country.
Recent financial results point to expansion in the cannabis space, even as the industry is still being weighed down by the ongoing debate over marijuana’s legality.
Tilray’s stock price rose after the Canadian firm reported an increase in sales of 8% for the fiscal fourth quarter, despite the fact that it was still losing money.
Additionally, Curaleaf achieved record profitability on $338 million in revenue during the second quarter.
“We’re seeing some great momentum coming out of that earlier in the year, where it was a little bit more challenging,” Darin from Curaleaf said. In light of this, “we really pleased with the results and trends for the industry.”
More political parties have never been on the same page.
However, the question of legalisation continues to be a contentious one in the business world. According to Simon, it’s not a question of if but when the federal government will enact reforms like legalisation and decriminalisation.
Darin agreed, saying, “We’re very encouraged by what’s coming out of Washington, D.C. currently. No time in history has there been such widespread agreement on the need for practical changes from both political parties.
According to the National Conference of State Legislatures, as of 2018, 37 states and the District of Columbia permit medical marijuana use, while 19 states and the District of Columbia permit adult-use recreational marijuana.
POLITICO reported that in late July, Democrats introduced a bill that would decriminalise the substance on a federal level, but that the bill lacked the necessary support to pass.
Legalization would “absolutely” make sense, Simon said, citing Canada as a country that benefited from legislation.
If you take a step back and look at the world as a whole, Canada is the only country where cannabis use by adults is legal, Simon said. Over the last 3.5 years and a half, it has generated about $20 billion in tax revenue, created over 150,000 new jobs, and invested about $6 billion in new infrastructure.
If cannabis were made legal, “look at the tax dollars that we’re losing here and the tax dollars that can be in,” he said. “The current cannabis has many potential medical applications, including relief from pain, anxiety, insomnia, cancer, and the need for other medications. Therefore, there are a great many reasons why cannabis should be legalised.”
However, cannabis businesses are forging ahead via new product lines and international expansion whether or not Congress acts.
Simon predicted that the company’s spirits, beer, and Manitoba Harvest brands would experience “tremendous growth” regardless of whether or not cannabis was legalised in the United States in the near future. “Twenty countries across Europe have legalised medical marijuana. After that, there’s Canada. Let me tell you something: Canada is about the same size as the state of California. We intend to continue down the path of acquisition. We’ll be exploring potential mergers and purchases for integration with existing Tilray products.”
Darin pointed out that while the movement toward legalisation is slow, existing businesses are trying to gain an advantage over their rivals.
For Darin, “early movers” are crucial. That has always been Curaleaf’s game plan.