Investing in UK cannabis industry?

EasyToAssemble01

Despite having nothing to do with it recreationally, I've started to become curious about investments in the UK cannabis industry. Especially after noticing the growth in the US - and particularly the Canadian market -  after changes in legalisation went through. Presently, the UK is at the phase of allowing medicinal use, but with no immediate plan to legislate for recreational use. But after observing the US / Canada situation - and the shifting attitude in it's use over here - it could be a case of "when" rather than "if" that legislation changes. When it does, growing controls are likely to be relaxed, meaning a possible boom in that agricultural sub-sector.

Does anyone else have any feelings on this being a good bet, or is it just hype drifting over the Atlantic?. I can't see restrictions becoming tighter anytime soon, so it can really only go one way from here. Although, whether the latecoming UK industry might be dwarfed by established US / European firms remains to be seen.

El_Torro

I wouldn't call this a safe bet. It may be legalized for recreational use soon, or then again it might not. Looking at the situation in The Netherlands the trend in recent years has been for tighter controls, not the other way. I don't think that just because it's booming in the US it will do so here too.

The use of cannabis is already very popular in the UK, all those who want to smoke it already do, regardless of whether it's legal or not. Personally I wouldn't put a big chunk of my investments here. As with all investments a small percentage as part of a diversified portfolio should be OK though.

masonic

The UK is already a large producer of cannabis and produced 320 tonnes in 2019, the vast majority of which was exported. How much further growth would there be in a small market like the UK deregulating?

MaxiRobriguez

El_Torro said:

The use of cannabis is already very popular in the UK, all those who want to smoke it already do, regardless of whether it's legal or not. 

That suggests a potentially very lucrative market to invest in /if/ legalised in the future. 

Bigger question for me is whether UK market would be able to produce a big hitter which could generate large cash flow, especially in the face of competition from established players elsewhere.

It may well be that it becomes legal here, but there's limited investment opportunities, in the same sense that everyone in the country uses social media but any UK social media ETF that was started a decade ago would have fell flat on its face by now.

richtips86

Bigger question for me is whether UK market would be able to produce a big hitter which could generate large cash flow, especially in the face of competition from established players elsewhere.

What are we classing as cannabis here? Aside from Cannabis, there is also CBD.  In my mind there is a monster UK listed firm in the making.  Very undervalued at present because people see the UK side which is high end CBD tinctures, face creams etc. which is probably an already over saturated sector, however they're pending a UK distribution deal following approval by FSA for novel foods.

Where it's really at is in their CBD tobacco cessation products (smokes, chew pouches - think snus) which are being rolled out at phenomenal speeds across the USA (and launched in the UK 2wks ago).  This roll out was announced end of 2020 with the aim of being in 3,500 stores in July and 10,000 by the end of this year.  Smoker Friendly (circa 1k stores) has also taken up the product and were the firm that "made" Zyn now valued at $14.5bn!!!  Gross margins of approximately 50% and hit fcf positive in May!

The ticker is ZOE, the listed name (and UK arm) is Zoetic and the smokes arm is Chill CBD.

jimjames

It depends how you are proposing to invest in the cannabis industry. If it's through a scheme like this you might want to think again

https://damn-lies-and-statistics.blogspot.com/2020/04/symtomax-bonds-scam.html
https://bondreview.co.uk/2019/10/30/we-review-symtomaxs-bonds-paying-30-over-two-years-for-investing-in-cannabis/