During the last few weeks, Canopy Growth Corporation (WEED.TO) (CGC) has reported several substantial developments in regard to the US cannabis market. This comes more than one year after the company announced investments strategic US cannabis assets and this is a trend that we are favorable on.
Last week, Canopy Growth issued an update on its arrangement with Acreage Holdings, Inc. (CSE:ACRG.A.U) (CSE: ACRG.B.U) (OTC: ACRHF) (OTC: ACRDF) and this development caught the attention of the market. Shortly after the companies announced the implementation of their amended arrangement, Acreage reported to have developed a plan to market Canopy Growth’s diverse beverage portfolio in the US.
The cannabis beverage market represents an attractive growth vertical and are favorable on the potential opportunity for Canopy Growth and Acreage. Initially, the US cannabis retailer plans to launch the products in Illinois and California (both are legal recreational cannabis markets). The product line is expected to be available in summer 2021 and we will monitor how the companies are able to develop a strategy to scale the brand and capture market share.
In addition to selling products in its own dispensaries, Acreage will access existing distribution channels through strategic corporate relationships. We are favorable on the strategy that the companies have for growth and will monitor how the management team is able to execute on the growth vertical.
Once cannabis is legal at the federal level in the US, Canopy Growth will be well positioned to be a beneficiary of a change of legislation. During the last year, the Canadian cannabis company has reported several significant changes and has installed a new management team. We have been following how the new team is able to drive the story forward and have not been too impressed so far.
We are surprised by the pace at which Canopy Growth has advanced so far this year and believe that it is growing much slower than expected. Although this trend is concerning, we consider it to be a transitory issue and believe that Canopy Growth has a strong enough balance sheet to outlast its peers.
In regard to the new management team at Canopy Growth, the team is comprised of executives that have a proven track record of success in a variety of industries and we are favorable on this aspect of the story. When Canopy Growth modified the agreement with Acreage, it saved a substantial amount of money.
In regard to new agreement, Canopy Growth will need to make an up-front payment of more than $37.5 million to Acreage shareholders. This is substantially lower than the more than $300 million up-front payment that was included in the original agreement and are favorable on this aspect of the story.
Over the next year, we expect to see Canopy Growth take additional steps to position itself to capitalize on the US cannabis market and believe that our readers need to be aware of this trend.
If you are interested in learning more about how Canopy Growth plans to capitalize on the US market, please send an email to support@technical420.com to be added to our distribution list and to stay up to date.
Authored By
Michael Berger
Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.