Marijuana Business Magazine - May-June 2018

O pportunities abound in the North American cannabis market, but companies that want to lead the way should consider opportunities overseas. For this inter- national business package, Marijuana Business Maga- zine explored the legal and regulatory issues – among other factors – that executives and investors in cannabis companies should consider when looking to expand internationally. 1. Reasons to Expand, Besides Growth • Reduce the risk of federal prohibition if your current focus is the United States: Even if your company oper- ates in Canada, there’s a large risk connected to focus- ing on a single, heavily regulated jurisdiction subject to rule changes or increased competition at any time. • Exploit the advantages of growing in lower cost mar- kets : In Colombia, for example, you can grow cannabis for a few cents per gram. • Reduce the impact of destabilizing fluctuations in your home market: Expansion is one way to hedge your bets against drops in price or changes in the rules. • Bring the know-how: Investors with years of experi- ence operating in North America have an opportunity in countries with emerging industries. Producers in new markets have little to no experience with extraction techniques, for example. • Step up your game: Expansion means learning how to deal with foreign partners and compete with foreign companies. 2. Questions You Need to Ask Before Making Decisions Are you willing to take new risks you can’t accurately quantify? If you want a first-mover advantage, you’ll probably need to go to the new market before the rules are clear. For instance, Pharmacielo announced it was granted a license to manufacture cannabis in June 2016 in Colombia. But because the legal framework wasn’t yet final, the company couldn’t start growing until December 2017. Are you will- ing to spend resources setting up a firm and applying for licenses in a foreign country before you know how your firm will be able to operate? If not, someone else will be first and have time-to-market advantage, plus the possibility of influ- encing how regulators shape the framework. Are you prepared to wait? A country legalizing cannabis is great news, but it might not be an immediate opportunity. It usually takes a consid- erable amount of time before companies are allowed to do anything. Argentina passed a medical cannabis law about one year ago, but it still hasn’t implemented much. Uruguay legalized cannabis in December 2013, but the first medical cannabis product, a CBD oil, didn’t reach pharmacies until December 2017. Will your product sell in the targeted country? The cultural aspect of entering a new market is critical. Maybe your trendy CBD beauty product in Colorado won’t gain traction in Peru, where the focus will be on medicinal CBD products for children once the regulations are approved. Is your target market familiar with your products? Don’t assume new markets will have the sophistication of California. Most cannabis consumers outside North America don’t know what shatter, crumble, budder and moon rocks are. How comfortable do you feel in the country where you want to do business? You’ll probably have to spend a considerable amount of time there, and you’ll also have to deal with the local culture. If you have no experience doing business outside North America, you will undoubtedly find surprises. Grow- ing conditions in Colombia are more favorable than in North America, but infrastructure and security (in certain areas) are not. Are you willing to accept that? What will you do if business cannot be conducted in English? It’s a huge risk to take your business partners’ knowledge of English for granted. If you want to invest, you’ll need local Legal and regulatory issues are among the factors that MJ businesses and investors must weigh when eyeing overseas markets By Alfredo Pascual GOING GL BAL OVERSEAS PRIMER 82 • Marijuana Business Magazine • May-June 2018