Israel represents an exciting cannabis market and we are not surprised by the recent increase in the number of companies focused on this opportunity. When analyzing how the government has set up the Israeli cannabis market, we believe that there are a lot of similarities with the Canadian market and find this to be significant.
If you look at how the Canadian cannabis industry evolved, it started off as a limited license market as Health Canada analyzed additional applications and slowly granted further approvals. If you look at the way this strategy worked in Canada, you will see that a large majority of the companies that were granted licenses in 2014 and 2015 have been acquired for several billion dollars or have multi-billion-dollar valuations.
Although it seems challenging to compare the Israeli cannabis industry to the Canadian cannabis industry due to the sheer size of the Canadian market, there are a number of reasons why we have such regard for this emerging industry and have highlighted these below:
- The economics associated with cultivating cannabis in Israel are much more attractive than in Canada and this will play a huge role in the long-term especially as it relates to profitability
- The export opportunity into the European Union (EU) is easier and cheaper when compared to Canada. The difference in the amount of time it takes to transport will play an important role in profitability as it reduces the amount of time to get product to market
- Israel was a first mover on the medical cannabis industry and started to learning about its medical benefits more than 50 years ago. The country has immense knowledge especially as it relates to specific cannabinoids and this will play an important role when big pharma gets involved with the sector
- In Israel, the costs associated with constructing a cannabis cultivation facility are much lower, making it easier for business to expand. In Canada, companies are spending more than $100 million to construct cannabis cultivation facilities, making it more difficult for these businesses to scale production capacity.
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Published at Mon, 11 Nov 2019 12:56:34 +0000