From the beginning of hot discussion on the legalization of recreational marijuana in Canada to the issuance of final laws and regulations, there are also the relaxation of restrictions on industrial marijuana in the U.S. agricultural act, as well as the rise of a shares of industrial marijuana in China, which has not lasted more than two years.
In these two years, the fluctuation of cannabis industry is no less than that of Internet industry before and after NASDAQ crash. Capital from speculation to doubt, from North America's entertainment marijuana to China's industrial marijuana plate, not only made enough eyes, but also completed a wave of capital harvest.
In 2019, the whole marijuana sector, apart from the extraction industry, is almost howling. Valuations for marijuana growers and large vertically integrated producers have been falling due to the oversupply of products in the market. However, Canadian hemp extraction technology companies outperformed the big market. The main reason is that the extraction link is less affected by the decline of cannabis commodity price; moreover, cannabis derivatives have become legal in Canada, and large pharmaceutical, alcohol and tobacco companies have entered this fast-growing and high profit market, which is good for extraction companies.
On the whole, the development of the industry is not as fast as expected. Even if the policy is at the forefront of Canada, the speed of production and sales license issuance is not so fast, the illegal market still erodes the share of the legitimate market.
Sales did not keep up, and Wall Street abandoned marijuana companies, making the whole industry facing a severe cash shortage. Both Canadian and American Marijuana companies are facing the risk of capital cut-off.
However, as an emerging industry whose downstream market demand is still rising, it has entered the bottom area after experiencing the turbulent 2019 washing up. As long as the whole industry is not completely prohibited by the policy (it is almost impossible to happen according to the trend of global legalization), there is no room for it to go down, and the only way is to go up.
Moreover, recently, novel coronavirus has been in panic in the world, and the stock market that has been in the market for more than 10 years has finally collapsed. The weakness of large enterprises may be good for small stocks. Under the systematic risk, the allocation of some emerging small enterprises can reduce the systematic risk, and there is also the opportunity to expand the scope of small enterprises.
In 2020, when the world is miserable, look at the marijuana industry chain, and there is a chance of recovery.
In the investment boom of 2018, the upstream is the first to be favored by capital. The essence of upstream is agriculture, which is the basis of industrial development. In the case of good-looking legalization benefits, a large number of funds have entered the planting field, including outdoor planting and indoor planting. As a result, the production capacity of products exceeds the sales capacity, and the development of the industry is of top priority.
However, the concept of marijuana 2.0 is obviously passivated by capital. Marijuana 2.0 refers to the legalization of edible, drinkable and electronic tobacco marijuana products. In fact, in the first wave of industrial boom, the factor of 2.0 has been taken into account, so after the legalization of food and beverage containing hemp, there is no wave.
After the market baptism of the industry as a whole, the current valuation is generally not high, but which link will be the first to recover? The author thinks it will be a technological innovation company in the middle of the industry.
The upstream is the basis of industrial development, mainly to expand the capacity, and because it is an agricultural industry, it has a lag and sustainability. After the earliest development, the upstream capacity has enough supply. The next step is to provide better and more diversified products for the market. In the face of the arrival of cannabis 2.0 era, the requirements for the deep processing field will be improved.
With the development of the industry and the commercialization of cannabis, some multinational groups will continue to enter the industry, and these enterprises will choose to dominate the global cannabis market by injecting products of THC and CBD.
Analysts generally believe that enterprises with patent intellectual property rights are expected to stand out in this process. Because marijuana is still listed in schedule I of the controlled substances act in the United States, these multinational groups will continue to invest in Canadian enterprises where marijuana is already legal. Because in the jurisdiction of Canada, technology patent is legally compulsory and can become a competitive advantage in the industry.
From the perspective of the development of cannabis industry chain, the extraction of hemp oil is more critical in the era of cannabis 1.0 to 2.0. The core of producing standardized and high-quality hemp extract lies in the purification and refining steps. The traditional process is not enough to meet the needs of the modern market.
In the current market stage, technology providers are more flexible in expanding their business models and can earn income by providing technology to growers and processors.
Like recreational marijuana, industrial marijuana must be extracted, extracted and purified before it can be used in food, medicine and other products. As the largest grower, China's investment in extraction technology is definitely limited by relevant policies, and it is also expected to become a major customer of North American technology providers.
Contact Person: Mr. Charlie Tao