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How to Identify the ‘Third Wave’ of Cannabis Investments

Throughout the world of business, mergers and acquisitions have seen a steady decline. This is due to the liquidity crunch and slowing economic machinery. With fewer people willing to take risks, investing in early-stage businesses has taken a major hit. Investments are down, and the cannabis industry is no different. Due to the sheer amount…

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Throughout the world of business, mergers and acquisitions have seen a steady decline. This is due to the liquidity crunch and slowing economic machinery. With fewer people willing to take risks, investing in early-stage businesses has taken a major hit. Investments are down, and the cannabis industry is no different.

Due to the sheer amount of capital needed to support a large agricultural business, investments in the cannabis sector are especially thin.

Related: Domestic Cultivation is the Next Step for European Cannabis

The latest data does, however, show that in spite of the lockdown and quarantine, cannabis sales have enjoyed a healthy uptick. For the liquid investor, bold decisions could spell attractive payouts down the line.

So, where should this kind of investor be looking? What are the investments to look at in the cannabis sector?

 

Investing in cannabis ‘pick and shovel’ businesses

As Strain Insider has mentioned time and again, investing capital upstream with producers and manufacturers is a regulatory maze. And once businesses make it through the licensing, audits and so on, success is far from guaranteed.

The number of marijuana growers in Canada, for instance, is so saturated that the price of cannabis has been steadily decreasing since 2010. This data is great for consumers, but not so much for producers looking for big returns.

With so much competition, the typical business model hinges on slow-moving technical developments. Companies like Aurora, Canopy Growth and Aphria are constantly on the hunt for improving efficiency and quality in every way possible.

These improvements needn’t be major either.

Lowering the cost of electricity, hydro, harvesting equipment or commercial real estate by even a few cents could have huge payoffs for cannabis companies. This is simply due to the size of each company’s marijuana growing operation. Conversely, falling beyond the technical curve could spell huge losses.

This analysis reveals some intriguing pieces of information for those interested in the cannabis business.

The first is that the first tier, that of cannabis cultivation and harvesting, is already dominated by battle-tested incumbents. Not only have they built a moat via a brand name, but they also enjoy a major head start in terms of capital invested. This leads to the second piece.

During Berkshire Hathaway’s annual shareholders’ meeting, Warren Buffett discussed the merits of businesses that don’t require too much capital to get started. The irony, of course, is that the Oracle of Omaha has famously invested in industries that do the exact opposite.

This fact can be seen in his investments in the textile, agriculture and energy sectors. Each of these investments demands constant inflows to maintain.

The other side of this bet would be the tech industry.

As the cost of building powerful, scalable software needs fewer and fewer moving parts to execute, companies building such software need far less capital over the long-term. These kinds of companies are all the more advantageous in current times.

Shifting to being a remote-first company is far easier for the Zooms and Facebooks of the world than firms like General Motors, for instance.

In a recent update on its strategy, Canopy Rivers, the investment arm of Canopy Growth, revealed some of the trends that it has been seeing. It wrote that ‘the impacts of COVID-19 were already starting to show, with PitchBook data showing both the number of deals and overall deal size decreasing amid economic uncertainty.’

Related: How COVID-19 is Making a Bad Year for Cannabis Worse

The investment company also indicated that the average asking price for companies had been cut in half.

Perhaps the most interesting insight, however, is the drastic change in the types of businesses that are approaching Canopy Rivers. Pre-pandemic, which is defined as before March 16, the top three types of cannabis companies included production and cultivation, consumer products and accessories as well as retail and distribution.

These days, the demographic has changed dramatically.

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Source: Canopy Rivers

When looking around the market, the growing interest in technology startups is mounting. The FANG stocks, Facebook, Apple, Netflix and Google, have barely been affected by the pandemic. Though this may soon change, clearly many in the startup community are taking notice.

Another reason that these kinds of cannabis companies are flourishing has to do with the difficulty for cultivators to get a stamp of approval. Though virtual visits are becoming more and more popular, the EU-GMP certification process has been brought almost entirely to a halt.

As Strain Insider reported back in May, companies that have earned this certificate will enjoy an oligopoly until the audits resume.

 

Investing in the third wave of cannabis

The cannabis industry has grown in fits and starts. The most notable epoch came shortly after Canada legalised the recreational use of marijuana. Firms like Aphria and Canopy Growth, both of which had been highly active in the medical space, profited from the shift in regulations immensely.

However, for more than a year, these bullish trends have faded.

Related: The Effects of COVID-19 on the Medical Cannabis Industry

The bear market cannot be blamed on COVID-19 exclusively, either. In fact, during a time when most businesses were in lockdown, many states around the world identified cannabis dispensaries as ‘essential.’

There were also many innovations that will likely stick around long after the pandemic concludes. This may include curbside pickup, delivery services and other advantages.

For entrepreneurs, it is in these types of services that they will profit from. As mentioned above, purchasing hectares of land to grow your own cannabis plants isn’t good business.

But as the sector has evolved and competition upstream has become too fierce for new entrants, derivative services will become essential. As competent as Canadian cannabis companies are, it likely won’t serve their bottom line to try and compete at this level.

Put otherwise, the legacy thinking that huge grow sites will inevitably generate outsized returns is over. In the past, money sloshed around, and investors, usually with very little interest in cannabis, used base metrics to define success.

This strategy worked, but only because of the frothy nature of the market. It now appears that this kind of strategy no longer holds water.

In a May newsletter from Dutch medical growers, Bedrocan wrote the following:

‘In the end, it really did not matter if these investments made strategic sense or not, for the investors of these companies, the opportunistic hedge funds, were purely interested in executing a financial trade, normally with a retail investor at the very end, who had been led to believe that the cannabis hype was all worth it.’

 

Final thoughts on cannabis investments

Concluding, the cannabis market may have successfully shaken out the profiteers and grifters.

Although COVID-19 has accelerated the bearish trend, the entire sector has been dropping for the past 18 months. It’s still a minefield for investors, but identifying the companies who survived the boom and bust, enjoy liquid runways and have earned trust by playing by the rules is key for allocating capital.

Related: What to Consider Before You Invest in Cannabis Stocks

The cannabis industry is clearly here to stay, and, in its current mature form, hopefully, the third wave of investment can avoid the pitfalls of previous hedge funds.

The post How to Identify the ‘Third Wave’ of Cannabis Investments appeared first on Strain Insider.

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South Dakota Judge Nullifies Cannabis Legalization Initiative

Despite the people of South Dakota voting in favor of legalizing cannabis, a circuit court judge has struck down the measure.

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Despite the people of South Dakota voting in favor of legalizing cannabis, a circuit court judge has struck down the measure.

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The Dutch Fumble First National Recreational Cannabis Cultivation Tender

The first attempt to federally regulate the cultivation of recreational cannabis in Holland goes down in flames over lack of coordination and faults at the federal level, along with local NIMBYism.

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The first attempt to federally regulate the cultivation of recreational cannabis in Holland goes down in flames over lack of coordination and faults at the federal level, along with local NIMBYism.

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Best CBD Edibles in Europe in 2021

Cannabidiol (CBD) edibles are some of the most popular products in Canada and the U.S. In the U.S alone, the cannabis edibles market reached an estimated worth of $863.1 million in 2020. Related: Best CBD Drinks in Europe in 2021 But things are different in Europe. Despite the growing popularity of CBD, many European consumers haven’t…

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Cannabidiol (CBD) edibles are some of the most popular products in Canada and the U.S. In the U.S alone, the cannabis edibles market reached an estimated worth of $863.1 million in 2020.

Related: Best CBD Drinks in Europe in 2021

But things are different in Europe. Despite the growing popularity of CBD, many European consumers haven’t tried CBD edibles yet. However, that doesn’t mean that there aren’t any good CBD edibles to be found in Europe.

Let’s take a look at the best CBD edibles in Europe in 2021.

 

Top CBD Edibles in Europe in 2021

CBD Gummies by ZenBears

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We start off this list with a product that was Voted as one of the UK’s best CBD gummies by different media outlets. The CBD gummies by ZenBears are THC-free, all-natural and vegan.

The gummies are made in Britain out of organic hemp grown in Oregon, USA. They come in a mix of natural fruit flavours, and each gummy contains 20 mg of CBD. There are 30 gummies per bottle.

Buy CBD Gummies by ZenBears

 

CBD Pillows Licorice by Cibiday

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If you enjoy the sweet taste of liquorice and you want to experience the benefits of CBD, then this is the perfect product for you. The CBD Pillows Licorice by Cibiday are small, artisanal candies that contain 6 mg of CBD.

The liquorice pillows are full of flavour and can be quite chewy if you bite into them. But then again, you can’t really enjoy a liquorice snack if it’s not chewy.

Buy CBD Pillows Licorice by Cibiday

 

CBD Chewing Gum by Two Wise Chimps

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Keep your teeth clean and freshen your breath with CBD Chewing Gum. Chewing this sugar-free CBD gum is probably one of the easiest ways to include CBD into your daily routine, and it’s also a great way to make sure that the CBD you consume is easily absorbed into your bloodstream.

Each piece of gum contains 5 mg of CBD. When you chew on the gum, the CBD is slowly absorbed in the small veins under your tongue.

There are nine pieces of CBD gum per pack. Each pack is biodegradable and plastic-free.

Buy CBD Chewing Gum by Two Wise Chimps

 

Banana + Cinnamon CBD Bar by Nooro

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Help boost your focus while indulging your sweet tooth with Nooro’s Banana + Cinnamon CBD Bar. Enhanced with Maca powder and L-Theanine, two renowned nootropics, this delicious treat is specially designed to get your mind working. And with 25 mg of CBD, it also helps you relax, making it easy to concentrate.

The CBD bar is chewy and full of flavour. You can eat it at breakfast to jumpstart your day or during your lunch break to boost your concentration for the rest of the day.

Buy Banana + Cinnamon CBD Bar by Nooro

 

CBD Double Chocolate Cookie by Naturecan

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Chocolate cookies are delicious, so there can’t be a way to make them better, right? Wrong. Naturecan’s CBD Double Chocolate Cookie makes regular chocolate cookies look bad.

This amazing dark chocolate and crunchy crispies cookie is packed with 25 mg of full-spectrum CBD and protein powder. Perfect as a post-gym snack, this on-the-go CBD edible can help improve your muscle regeneration after an exhausting workout.

Buy CBD Double Chocolate Cookie by Naturecan

 

CBD Manuka Honey by Natura Vitalis

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Combine the beneficial effects of CBD with the healing effects of honey. Make your breakfast the healthiest meal of the day with CBD Manuka Honey.

Honey is one of the oldest health supplements in existence. People have been using it to treat different ailments and conditions for millennia. But now, Natura Vitalis made honey even better by enhancing it with CBD.

The result? A healthy and delicious edible you can spread on toast, add to tea or coffee and more.

Buy CBD Manuka Honey by Natura Vitalis

 

CBD Infused Raw Chocolate by Lovechock

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This is the perfect product for dark chocolate lovers across Europe. Lovechock’s CBD Infused Raw Chocolate has a concentration of 75 percent cocoa, and it’s sweetened with unrefined Arenga palm sugar.

Enhanced with 15 mg of CBD, this product combines the beneficial flavonoids from dark chocolate with those found in cannabis, resulting in a healthy and tasty snack.

Buy CBD Infused Raw Chocolate by Lovechock

 

CBD Hash Brownie by Cannabis Bakehouse

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Hash brownies are some of the most popular cannabis edibles in the world. And you can now enjoy THC-free hash brownies legally in the EU. The CBD Hash Brownie by Cannabis Bakehouse is full of chocolate, fluffy and delicious.

Each hash brownie is infused with 15 mg of CBD, so you can eat one to relax and unwind after a long day at work.

 

Chewing Gum by Nordic Oil

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If you’re looking for a subtle way to consume CBD, then this is the perfect product for you. Nordic Oil’s CBD Chewing Gum is a vegan, gluten-free and sugar-free CBD edible that contains 5 mg of CBD per piece.

The full-spectrum CBD used in the chewing gum is extracted from 100 percent certified European hemp. The gum is refreshing, tasting like spearmint and eucalyptus. Each pack of gum contains 24 pieces.

Buy Chewing Gum by Nordic Oil

 

CBD Lolly Pops by Cannabis Bakehouse

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Reach out to your inner child with a CBD Lolly Pop from Cannabis Bakehouse. Choose between bubblegum, cherry, pineapple, apple, orange and cola flavours and enjoy a discreet way of getting your CBD intake.

Each lolly pop contains 5 mg of CBD. The lollypops are tasty and fun, and they can help relax your mind.

Buy CBD Lolly Pops by Cannabis Bakehouse

The post Best CBD Edibles in Europe in 2021 appeared first on Strain Insider.

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