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MedMen Leaps Into Canadian Cannabis Market For Joint Venture With Cronos Group

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Cronos Group

MedMen, the Los Angeles-based "unicorn" of cannabis retailers, has positioned themselves for an opportunity to place a stake in the slowly growing global cannabis market. On Monday, the billion dollar company announced a first-of-its-kind cross-border joint venture with Cronos Group, the Canadian licensed medical cannabis producer, manufacturer, and distributor. MedMen Canada will develop branded products and open stores across Canada--likely by the end of 2018-- blending MedMen's class-defining retail experience with Cronos' Canadian reach and expertise.

"Canada has been on our radar for a while," says Daniel Yi, senior vice president of MedMen's corporate communications. "Late last year, Cronos approached us about this. We decided to move forward with this project because Cronos is a leader in the Canadian market and they share the same hyper-focus we do when it comes to business, quality, and changing and advancing the perception of cannabis."

The collaboration is a symbiotic union of industry giants who share a vision of making cannabis a global business. Currently, Cronos ships flower to a distributor in Germany, which is then distributed and sold in thousands of German pharmacies--where patients get real doctor's prescriptions for cannabis and are reimbursed by insurance, according to Cronos' CEO, Mike Gorenstein. They have a grow operation in Israel, too--where cannabis research is performed by doctors and scientists. Cronos' Israeli-grown flower is then distributed to countries all over Europe. Additionally, they also have a footprint in Australia, where they just received a cultivation and research license. And finally, Cronos was listed on the NASDAQ three weeks ago.

In return, MedMen will give Cronos Group multiple sophisticated retail locations. But unlike California, the cannabis supply chain in Canada currently doesn't permit dispensaries. Rather, when a product gets to the distribution part of the chain, it's delivered straight to patients' doors. Thus, MedMen is likely to revolutionize Canada's retail market because normalizing cannabis is built into the shopping experience, and their stores have a clean, Apple store-like aesthetic. Additionally, MedMen has cultivation factories and stores in California, Nevada and New York. They also recently announced that the company will go public on the Canadian Securities Exchange in the second quarter of this year.

"Everyone leaves MedMen feeling differently about cannabis," says Gorenstein, who took my call from Israel. "It's one thing when people tour our facility now and are shocked by how big it is and see the scientists we work with or talk to our horticulturalist who has a Ph.D. from the University of Toronto. But to have a retail store where you can see all the products and have an experience around cannabis-- we take that very seriously. MedMen has separated themselves without question from the competition, which is why we want to work with them. It's going to be a great addition to the Canadian market, especially because there are no retail stores here."

But the MedMen/Cronos collaboration also sheds light on another trend: America's fascination with Canadian cannabis. As soon as the Medicinal and Adult-Use Cannabis Regulatory and Safety Act (MAUCRSA) was implemented on Jan. 1 in California, the focus of investors, CEO's and entrepreneurs shifted to Canada-- where adult-use and commercial cannabis will be federally legal come fall. Yi explains that the Canadian market is about the size of the California market: huge, in other words. But the source of this fascination comes from the fact Canada is its own massive market, whereas the American market still ceases to exist because state regulatory frameworks vary from state-to-state, and it's still federally illegal. 

"There is great infrastructure in Canada," says Yi, emphasizing how important regulation is. "In Canada, medical cannabis became federally legal in 2013, so a regulatory framework has been in place for a while. So when adult-use comes on board it's going to piggyback on the framework that already exists. Thus, from a business perspective, you're going into an arena where the rules are much clearer and there's significantly less uncertainty. It's the infrastructure in Canada that makes it attractive from an investment and business perspective."

Gorenstein, who's originally from the U.S and moved to Canada specifically for cannabis, says he believes the fascination with the Canadian market is because it gives a glimpse into what the U.S. market could be if (and hopefully, when) America legalizes cannabis on the federal level. "Based on all the polling data I've seen, it seems that most Americans would like a federal legal system," he says. "What's fascinating, though, is now people in the U.S. can actually watch, observe and learn from the neighbors to the north and see how amazing the industry is, and how many private sector businesses are thriving. People will realize, they already do, that what's happening in Canada can happen in the U.S."

MedMen's leap into the Canadian market is also an indicator of how fruitful Canada's industry is likely to be, according to Yi, considering they don't make business moves unless they are executable. The union of the two cannabis groups is, none the less, a peek at how the industry will likely operate post federal legalization. "I think this is a huge milestone for the industry as a whole," Yi says. "This isn't just conceptualizing what the future is going to look like. MedMen and Cronos are two top-tier companies in cannabis moving forward with real projects, and I think that says something about the evolution of our industry as a legitimate industry, and I think it portends bigger things for the future."