Canadian cannabis firm Cronos looks set to make a major foray south of the border with the aim of tapping into the booming U.S. CBD market.
Mike Gorenstein, Cronos Group CEO and co-founder, told the Cheddar news website that through its partnership with Marlboro owner Altria it has access to over 200,000 retail stores across the U.S., plus a network of farmers that can pivot from farming tobacco to farming hemp.
With the passing of the Farm Bill in late 2018 the U.S. Congress has further fueled the development of the market for hemp-derived products, including CBD.
While the U.S. Food and Drug Administration is warning businesses not to make unsubstantiated CBD health claims the market is set to blossom with analysts Cowen estimating it could be worth $16 billion by 2025.
Public Listings in the U.S. And Canada
The FDA recently held its first public hearing exploring regulatory requirements for CBD with Mr. Gorenstein concluding no major changes are imminent. ‘I think status quo is the message that we got from that,’ he told Cheddar.
Gorenstein made his name as the co-founder of New York based private equity group Gotham Green Partners and it has invested in Cronos. Now Canada’s thread largest cannabis company, Cronos listed on the Toronto stock exchange before returning to the U.S. in February 2018 and also listing on the Nasdaq.
Planning on a Return to the U.S.
He told Cheddar: “We are Americans in Canada that always planned on coming back to the U.S.” And added: “[I’m] comfortable saying we plan on launching CBD products at some point this year.” Valued at over $4 billion, Cronos has cannabis cultivation, processing, and distribution operations, and partnerships in Columbia, Germany, Australia, Canada, and Israel.
The U.S. and Canadian markets are different beasts says Gorenstein, with vape products being its primary objective in Canada, as the government gears up to permit sales of vapes, edibles, and beverages this fall.
Edibles are Appealing
He says Cronos is positioning itself as a consumer packaged goods company, and is looking at the edibles market, telling Cheddar “we want to make sure we get all the flavors right, the brand positioning, the marketing spend – so it’s a typical CPG market”.
The company’s first quarters sales for 2019 doubled with Gorenstein, saying that Marlboro-maker Altria’s investment of $1.8 billion had ignited the business. This year it has also expanded its Israeli research and development program by opening a facility focused on cannabinoid devices.
Cronos Device Labs, the company’s new R&D facility, is intended to support Cronos Group’s efforts to develop next-generation vaporizer products for cannabinoid applications.