“Size does matter,” says Irwin Simon, chairman and CEO of Tilray—which, after its merger with fellow Canada-based cannabis giant Aphria was finalized in May, claims to be the largest marijuana company in the world.
Certainly no other cannabis company claims a bigger global footprint. Tilray has licenses to grow, sell, and import-export cannabis and CBD in more than twenty countries, including Australia, Europe, and China as well as Canada and the United States.
Tilray’s resume is world-beating. The company is a leading exporter of medical cannabis products, the biggest medical marijuana company in Europe, and the first foreign firm to export CBD products into China.
Tilray is the biggest seller of adult-use cannabis in Canada—still the only country in the world with a legal nationwide recreational cannabis industry—and runs massive CBD businesses in the United States.
But one thing Tilray does not do is sell cannabis—medical or adult-use—in the United States. And Tilray has no interest to do that until President Joe Biden and Congress do what Canada did and legalize adult-use cannabis nationwide, Simon said in a recent interview. Because until they do, there’s no guarantee that the U.S.’s existing billion-dollar, publicly traded cannabis companies will be able to survive.
“Having all these businesses prepares us to enter the United States,” said Simon, who founded and ran natural-foods giant Hain Celestial Group for 25 years. “We have the ability to enter it. We know how to grow and market brands, we know how to package products from a regulatory standpoint. That gives us the ability to enter the US market once legalization happens.”
When that happens, Tilray could either buy a smaller competitor or execute yet another merger. (Simon’s recent letter to Tilray’s shareholders, asking them to approve another stock offering, will raise capital that could be use for exactly that.) But until then, Tilray is content to stay away from the U.S. market, Simon said.
This doesn’t sound rational. The United States is a checkerboard of individual state markets, cordoned off from one another by federal law, but the United States still has the world’s healthiest appetite for marijuana. Until Tilray’s merger with Aphira, the biggest weed firm in the world was Wakefield, Massachusetts-headquartered Curaleaf—which recorded $625.6 million in revenue last year, has 101 licensed business locations in 23 states, and earlier this year reported a capital raise of $300 million.
But if Congress does pass federal marijuana reform, will the states allow interstate commerce? Will certain states pass stiff protective tariffs to protect domestic marijuana industries into which outfits like Curaleaf and other major multi-state operators (or MSOs for short) have invested millions? What will the tax structure look like?
Questions like these will determine how much a U.S.-based cannabis business is actually “worth.” The current state-by-state market is why individual cannabis grows, like an old factory in Massachusetts, can be sold for $26.7 million. Will that factory be worth that much money if it competes with marijuana grown outdoors in California—or Colombia, or Canada? Will companies be allowed to be vertically integrated—growing, processing, and selling cannabis—on the federal level?
Questions like that have yet to be answered. Until they are, Tilray is content to steer clear of the U.S.’s multi-billion dollar opportunity, Simon said.
“A lot of the US MSOs are sort of saying, ‘Let’s spend all this money now on growth,’ but if later regulations say they can’t be a grower or they can’t be a retailer, their model doesn’t work anymore,” he said. “We don’t know what’s the model that legalization will follow, once it happens.”
Irwin’s caution is inspired by his future competitors. Tilray is a big company compared to other cannabis firms, but not so big when compared to enormous alcohol, tobacco, or other consumer-packaged goods companies—several of which, including tobacco giant Altria and alcohol behemoth Constellation Brands, have invested billions of dollars into cannabis with an eye towards the U.S. market.
Those aren’t the kind of firms that Tilray will be able to overpower with brute strength.
Simon is a firm believer that legalization will happen in the U.S. “within the next few years.” Until then, in Simon’s analysis, buying an American cannabis license is like buying a lottery ticket. And rather than gamble, Tilray is content to stand pat and watch and wait until the game evolves.
“It’s waiting to buy at the right time,” he said. “At the end of the day, if we have to pay more, I’d rather be sure and pay more for something that I know is right, rather than buy a lottery ticket and hope that ticket comes in at the right time.”