MNP Report Provides Insights for Businesses Targeting International Growth
CALGARY, April 17, 2019 /CNW/ - As more countries trend toward partial or total cannabis legalization, Canadian businesses have every advantage to shape and capitalize on a burgeoning international industry, according to a recent global study by accounting, tax and consulting firm MNP. However, those rewards will not come easily, nor are they guaranteed.
MNP's Global Cannabis Markets report reveals the biggest gains will go to companies who can recognize opportunities early, secure investment and inspire consumer confidence across a broad range of cultures, demographics and perspectives – with many people still on the fence about the contentious commodity.
Drawing from their comprehensive industry knowledge, experience and professional relationships, MNP's Cannabis and Public Companies leaders offer exclusive insights into what's next for the Canadian cannabis sector as it looks abroad. Weighing factors such as current trends and market favourability, the report also includes: a comparative analysis of the most likely growth regions and expansion opportunities; and commentary from some of Canada's largest licensed producers.
By virtue of Canada being the first G7 country to legalize recreational cannabis, Canadian businesses already find themselves in an advantageous position to steer the industry. The federal government has received praise for its care and rigor in establishing a domestic market – and especially for its emphasis on product quality and safety. There is also a large pool of growth capital and financial services available across the country, as well as research and development capacity and human capital.
However, it's important to recognize first mover status does not automatically translate into sustained market dominance – at home or around the world. The cannabis industry is growing and changing quickly, and businesses cannot rest on their laurels and still expect to succeed.
"Canadian cannabis firms have the financial capital, intellectual capital, human capital and a supportive policy framework to germinate the seeds of international success," says Glenn Fraser, MNP's National Cannabis Co-Leader. "Whether opportunities blossom depends on how effectively they leverage those advantages to get in on the ground floor of new markets. The time is now for Canadian Cannabis companies to take a leadership role and replicate the Canadian model in new environments."
Identifying Markets and Opportunities
Through an in-depth analysis of the most up-to-date information, MNP identified 16 potential international markets with dynamic cannabis sectors and where policies are currently evolving. Alongside background and recent developments, the report includes a snapshot of current production initiatives and the extent to which Canadian firms are currently participating in each space.
The firm uses a comparative analysis to judge which global markets are most favourable for international growth – considering current medical and recreational legality, available financing opportunities, tax and fee structures and policy maturity. Also, which have the right conditions to encourage low-barrier, high-profit international expansion opportunities for Canadian cannabis businesses.
Finding the ideal mix of conditions can be difficult. However, several countries show great promise as innovators in the space. At the same time, it underscores how Canadian businesses cannot overlook the role auxiliary cannabis industries like CBD-based hemp production will contribute to overseas expansion in Asian markets that may otherwise be averse to other methods of legalization.
The report uncovers other factors to consider as well, which are more difficult to quantify. These include access to low-cost year-round outdoor growing opportunities in equatorial countries; the speed at which public perceptions are changing and the likelihood of that influencing future policy decisions; and opportunities to respond to undersupply in regions where medical cannabis is excessively cost-prohibitive. These are all areas where Canadian expertise either has the potential to increase competitive advantages or help solve persistent challenges in new markets.
Seeing Beyond the Horizon
For Canadian businesses looking to explore international markets, MNP recommends a focused approach at home, which includes doubling down on competitive advantages and building brand eminence in the domestic marketplace.
"It's important for local cannabis companies to consider their areas of expertise and invest heavily in owning that position in the market," says Fraser. "The most valuable international opportunities will go to those companies who have developed a sustainable (and transferable) competitive advantage in conjunction with a recognizable brand in their home market."
With the excitement and media coverage surrounding the recreational market in recent months, medicinal cannabis has largely fallen behind in the public discourse. However, it will continue to play a leading role – especially where international growth is concerned. Canada and several U.S. states have clearly demonstrated medical cannabis is the most likely through line in the product's journey from prohibition to legalization.
"In Europe, major economies with major populations are starting to implement medical cannabis," says David Danziger, MNP's Senior Vice President, Assurance. "These are big, sophisticated economies, and these are good, positive signs. When we look at these markets, we see a lot of parallels to Canada's recent history."
"If Canadian businesses want to build eminence in new countries, they need to involve themselves in cannabis' continued integration into healthcare," adds Danziger. "Companies who are already active in regions with a burgeoning medical market will have a clear advantage – both in terms of brand awareness, infrastructure and international relationships – if and when those areas transition to recreational legalization."
Considering how young the cannabis industry is – in both foreign and domestic markets – the sector is maturing rapidly. Young entrepreneurial upstarts continue to enter the competitive landscape, but the shift is already trending toward more established managed companies with global perspectives. The success of these businesses depends heavily on human capital to sustain growth and innovation.
"Companies targeting international growth need to look for expertise in a broad range of disciplines," says Maruf Raza, MNP's National Director of Public Companies. "Cannabis-specific knowledge is important, but so are language skills, cultural insights and business experience in foreign markets. Cannabis businesses aren't just competing for talent with other cannabis businesses, but with every other player on the world stage."
Unrivaled Global Cannabis Expertise
As one of the first Canadian professional services firms to enter the burgeoning cannabis industry, MNP began working with licensed producers, entrepreneurs and investors several years prior to recreational legalization. Having helped cannabis businesses navigate several significant shifts over that period, the firm has established itself a global leader in delivering audit, tax, and advisory services that meet the specific, unique and dynamic need of this rapidly evolving sector.
Leveraging its membership within the Praxity global alliance of independent firms, MNP also has worldwide reach. No matter where a Canadian cannabis business chooses to set roots next, they can be confident in receiving both local focus and knowledge, along with MNP's unrivaled cannabis business expertise.
MNP is one of the largest national accounting and consulting firms in Canada, providing client-focused accounting, taxation and consulting advice. National in scope and local in focus, MNP has proudly served individuals and public and private companies for more than 60 years. Through partner-led engagements, we provide a collaborative, cost-effective approach to doing business and personalized strategies to help organizations succeed across the country, and through our Praxity alliance, around the world. For more information, visit www.mnp.ca.
To download the report, please visit: https://www.mnp.ca/en/media-centre/global-cannabis-markets
SOURCE MNP LLP