Is more consolidation on the way for the cannabis industry?
Canada – and Canadian companies are "at the front of the line" in the burgeoning cannabis sector – but will face pressure to maintain their leadership role in the new space, say a top investor in the sector.
Global investors are starting to watch the "Canadian experiment" moving from a medical focus into a recreational one, Steve Ottaway, managing director of investment banking at GMP Securities told BNN in an interview Wednesday.
"The amount of transactions that are going because of the burgeoning, increase in demand that people can see has been like very few other sectors."
Ottaway, who is an early investor in the marijuana sector, said he’s been looking at companies around the globe including those in the U.S., Israel and South America.
"The things we are seeing are very exciting. The Canadians have a foothold in the front of the line here and if they can maintain that, they continue to push - one day I think this is a clash of the titans probably between big Canadian companies and big U.S. companies for world dominance," he said.
In the U.S., there’s some "extraordinary" companies that are working their way up quietly to become much bigger in scale than people think, he added.
Meanwhile, the industry is going to see more mergers and acquisitions ahead of the legalization of recretional marijuana in Canada by this summer, according to Ottaway. But, he added the volatility in the market also means there’s clear winners and losers.
"Fundamentally, you have to think about brands, distribution channels. Those are things that are ultimately going to be the winners, so you look at companies from that sort of perspective," he said.
"If you got something that is differentiating and something that is meaningful as a small niche player, absolutely those are things that people like. Product companies, things that are going to bring something different to the table than just ‘I’m an licensed producer and I can produce X amount’....[but] you don’t want to have empty shelves, you need to fill those shelves today."