The legalization of cannabis in Canada created an entirely new domestic industry that needed growers, distributors and sellers. Prior to legalization, there were no industry leaders who had laid down the blueprint for success, primarily because there had been no industry.
A consequence of companies migrating en masse to uncharted territory stimulated a great deal of excitement, which has since soured to disappointment and skepticism. Stocks skyrocketed, then plummeted. Cannabis plants were going rotten before they could be sold. Consumers were undersupplied.
It’s understandable; this was new ground for all parties involved. It was naive to think the whole process would unravel without difficulty, and all these companies would be worth billions overnight.
But the tale of legalization in Canada provides a useful case-study for any business exploring a new frontier. Especially if that frontier is part of the global cannabis market.
The challenges of entering a new cannabis market
Any time a company looks to establish itself in a new market there are certain obstacles it faces. In our case, many of these obstacles are more easily surmountable because of the acquisitions and pre-existing partnerships that are central to our expansion plans.
In this blog post, we outline four barriers to entering a new market, and explain how our approach mitigates the severity of those barriers.
Rules and regulations
There’s more to entering a new market than opening a shop and selling, especially when it comes to cannabis. Spain grants autonomy to its regions when it comes to the regulations around cannabis, and some are relatively open.
However, even in places like Catalonia, where people are permitted to grow their own cannabis, there are challenges to operating on a commercial level.
Frontier’s acquisition of Medcan completely negates these challenges. Medcan operates a clinic, has long-established relationships with cannabis clubs, and is in the process of acquiring a pharmaceutical distribution licence.
Where Medcan does not operate and possess licences, they are partnered with Bliss Wellness for things like online distribution.
Finding new customers
Entering a new market without a customer base is always a major challenge. It means taking time to develop your brand, gain consumer trust, and understand the best ways to engage with potential partners, before you start to grow.
Frontier’s acquisition of Medcan greatly alleviates the difficulty of this challenge. Medcan owns Spain’s only retail medical cannabis clinic, and through this acquisition, Frontier will maintain relationships with its patients.
Medcan is also in partnership with multiple cannabis clubs, providing medical expertise to their patients. Frontier will continue this practice, working with an existing roster of clients that will permit us to grow and scale quickly.
Data is an invaluable asset to any company. It allows informed decisions to be made and realistic targets to be set. It makes it possible to plan for the future and stay ahead of industry trends.
But companies newly entering a market lack proprietary data, and have to rely on third-party sources. While this data is useful, it’s not nearly as valuable as possessing unique data.
The acquisitions and partnerships Frontier has established from the outset of our entry into the Spanish cannabis market procure for us, not just customers and recognition, but data. This puts us in a position to understand the market to a greater extent than any eventual newcomes.
Building infrastructure in a new cannabis market requires a lot of investment capital. Whether it’s marketing, buying property or hiring employees, scaling from the ground up can be a lengthy and expensive process. Unless some of these things are already in place.
In addition to customers, relationships and data, Frontier’s acquisition of Medcan includes a state-of-the-art clinic, which gives us an immediate physical presence in Spain. We also have offices in Spain, as well as Canada, and a team familiar with the domestic goals and challenges that lie ahead.
By having already passed many of the major hurdles faced by companies entering a new market, Frontier is well-positioned to succeed. And it’s not just something that will enable us to succeed in a niche market that others are yet to discover. It will give us a tremendous headstart over anyone who follows us to the next major frontier in cannabis.
Why Frontier is looking outside the Canadian cannabis market
On October 17, 2018, the federal government legalized cannabis in Canada. In the run up to legalization, and over the months that followed, a countless number of companies formed with the intention of growing and distributing cannabis.
At the time, there existed a palpable optimism, and it seemed as though every company in cannabis was going to reach the billions in valuation. But that assumption was never realized. Instead, many smaller companies failed outright, while most of the larger ones saw their stock prices drop as projections trended downward.
This trend shouldn’t be interpreted as all gloom and doom; there are several well-positioned companies doing things the right way that are likely to succeed in the long run. But the trend does reflect the reality that starting a cannabis company in Canada is not a sure thing.
The overabundance of entities grasping for the same market share means there will be some winners and some losers. For investors, this means having to identify the right cannabis companies and avoid the minefield of lesser options that will eventually be squeezed out.
But investors do have alternative options when it comes to Canadian cannabis.
Frontier Wellness Management is entering the burgeoning Spanish cannabis market. In Spain, cannabis is bound by tighter regulations than in Canada, but progress continues to be made, and consumers are enjoying increased access. That access is not being met with sufficient supply at this point, which is the essence of the opportunity presented by entering this new market.
Because the opportunity in Canada is so apparent, a surfeit of companies are clamouring to establish themselves. Those who were on the forefront, developing an infrastructure long before legalization, enjoy a tremendous advantage.
In Spain, cannabis opportunity is less visible, so fewer companies are interested in establishing themselves. That’s why when the opportunity is realized, Frontier will be extremely well-positioned.
Even the current opportunity, irrespective of future policy changes, is more significant than most realize. The federal government of Spain permits regions autonomy over their own cannabis laws, and several regions have made it possible to grow, buy, sell and consume cannabis, either for medical reasons or recreation. Catalonia is an especially well-developed market, with cannabis clubs representing massive opportunities to growers and suppliers.
Certainly, the Spanish market is more restrictive than the federally legalized Canadian market, but it nevertheless presents a significant opportunity. Additionally, legalization in Spain is a domestic topic of interest, meaning full legalization is possible in the near future. Should legalization occur, new companies will be fighting tooth and nail to establish themselves. And Frontier Wellness Management will already be there, established as the market’s premiere entity.