Why the UK cannabis industry is a viable investment opportunity – Investment Week

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The idea of adding cannabis to your investment portfolio may seem far-fetched, but this once frowned-upon commodity is fast becoming a viable asset for long-term sustainable wealth creation.

The demand for cannabis as a medical treatment is growing rapidly, and the Centre for Medicinal Cannabis (CMC) predicts that by 2024, the UK medical cannabis market alone will be worth close to £1bn ($1.3bn) and servicing nearly 340,000 active patients. And that is just the tip of the iceberg.

Changes to UK legislation saw cannabis being legalised for medical use in November 2018. This is based on case studies showing that cannabinoids like cannabidiol (CBD) and tetrahydrocannabinol (THC) are extremely effective at treating many physical, emotional and mental conditions, without the side effects of pharmaceuticals.

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Admittedly there are still some challenges to be addressed before cannabis becomes widely available. These include issues of quality, consistency and access, as well as convincing a somewhat resistant medical establishment to endorse, fund and prescribe it as a treatment. Gathering clinical evidence to prove the effectiveness of Cannabis-Based Products for Medicinal Use (CBPMs) is critical here.

There are several projects in development for trialling CBPMs, including one by the NHS in 2021, which will study their effects on up to 20,000 patients. These will go a long way towards providing the evidence needed to convince the medical establishment, in turn creating a much greater demand for cannabis products.

According to The UK Cannabis Report published in December last year, although only a couple of hundred legal prescriptions have been written so far, approximately 1.4 million people in the UK are currently using black-market cannabis to treat chronic health conditions, as access and price issues are resolved, many of these will switch to high-quality medical cannabis.

Another fast growing market includes CBD-based health and wellness products. CBD is a non-psychoactive compound added to many products, currently under fairly strict, although inconsistently applied, laws.

The UK Cannabis Report estimates that about 7.3 million people in the UK use CBD products each year, often imported and bought online or in speciality or high-street retail stores. In 2019, CBD product sales figures were higher than those of Vitamins C and D combined. And CBD retailers say that those numbers have shot up further during lockdown, with so many people looking for relief from anxiety and stress.

Yet another potential area for growth is recreational cannabis. Although this is currently still illegal, it is unlikely to be for much longer. And its illegality certainly has not stopped the estimated 4.7 million people who have used cannabis in some form just in the past year, resulting in a black-market valued at up to £6bn per year.

While there are valid concerns around safety and addictiveness, the mood-altering effects of products high in THC (which does cause a ‘high’, unlike CBD) and its potential as a gateway drug, legalisation that regulates quality and access would help address these concerns.

To explore these and other related issues, an Independent Review on Drugs and Crime is currently underway in the UK. This is also taking into account the experiences of countries like Canada and Portugal, where cannabis is already legal. While the debate still rages, many parties believe that recreational legalisation looks likely in the next five to ten years, if not sooner.

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In the meantime, more and more companies are entering the UK market, including some industry giants from overseas, and many are listing on stock exchanges with cannabis as their core business.

Consultancies, market research companies and industry-focused finance groups have opened up in London, securing an early foothold in a market primed for rapid growth. And while there is still a fair amount of uncertainty in this industry, cannabis-focussed investment companies and tech angel investors are already taking the leap and it’s only a matter of time before others do too.

Businesses with a track record in the industry, an excellent management team, a reliable supply of raw material, high quality processing methods and the resources to store and distribute CBPMs will be well placed to thrive as this market grows.

Halo Labs is a US-based business leading the way in modern cannabis extraction techniques and cannabinoid isolation. They own the largest grow site in Oregon and California and have recently leased 14 hectares of land for the first phase and has additional access to 200 hectares in Lesotho, the largest cultivation site to date across the globe.

They have also recently acquired UK-based Canmart, with its 30,000 square foot storage and distribution facility in England. Canmart is one of only four companies with a Home Office Licence to import CBMPs into the UK. All these factors, combined with distribution rights throughout Europe, make it a prime investment opportunity in this new and booming industry.

This acquisition is just one example of the investment potential of this market. As access and regulatory issues are resolved, and especially if recreational cannabis is legalised, there is massive room for growth. That growth, coupled with ever-growing demand, offers opportunities that deserve serious consideration by the savvy investor.

The idea of adding cannabis to your investment portfolio may seem far-fetched, but this once frowned-upon commodity is fast becoming a viable asset for long-term sustainable wealth creation.

Louisa Mojela​ is chair at Halo Labs

 

This article originally appeared here in https://www.investmentweek.co.uk/opinion/4024667/uk-cannabis-industry-viable-investment-opportunity

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