The Emerging Frontier: A Pivot Toward Colombian Cannabis
May 18, 2020
The Emerging Frontier: A Pivot Toward Colombian CannabisDownloadsDownload Article
The cannabis industry is now prioritizing fundamentals, self-sufficiency, and cost-reduction to ensure long-term growth and profitability. Some companies have leveraged international supply chains by gaining a foothold in Latin America. While the broader region will benefit from recent drug policy reforms, no country is better positioned than Colombia to become the “grower” of choice for international cannabis trade.
Growing Pains in a Maturing Industry
At the outset of legalization, the cannabis market entered a period of explosive growth1. But by late 2019, cannabis was in bear territory, with some major stocks posting up to 90 percent losses for the year2. The final months of last year brought major layoffs at some of the most high-profile firms. And that was before the COVID-19 pandemic.
The industry writ large is now, more than ever, feeling the pinch of skittish investors, delayed deliveries, new layoffs, and looming civil litigation3. With less than 10 months of cash on hand, many of the most high-profile cannabis companies could face liquidity challenges and potential insolvency by early next year4. More than a dozen special-purpose acquisition companies formed last year (with $3 billion pooled from shareholders) to purchase distressed cannabis assets5.
This turbulence is a sign that the global cannabis industry is beginning to mature. Companies are now prioritizing fundamentals, self-sufficiency, and cost-reduction to ensure long-term growth and profitability. That analysis includes the evaluation of secure and efficient supply chains. To that end, many global cannabis leaders will direct their strategic investments to the new frontier of cannabis production: Colombia.
May 18, 2020
Senior Managing Director