Israel looks like it will be the next country to legalize recreational cannabis and we expect the development to serve as a catalyst for the entire sector.
So far this year, we have seen a significant increase in the amount of medical cannabis that is being exported to Israel and consider this to be a bullish indicator. In 2020, Israel overtook Germany as the largest importer of medical cannabis flower in the world (according to data compiled by the Israeli Cannabis Magazine and Marijuana Business Daily) and we are bullish on the growth potential that is associated with the market.
If the legislation is approved, the development would have a significant impact on the growth trajectory of Israel’s cannabis industry. Some of the regulations that are expected to be in the legislation include decriminalizing the use of cannabis by consumers and expunging the criminal records for people who were previously convicted of a cannabis related crime (only applies to certain types of crime).
Why Should Companies be Focused on the Israeli Market?
Two reason for our bullish view on Israel’s cannabis market are: 1) when compared to Canada, Israel is located much closer to the EU and we are favorable on the export opportunity over the long-term; and 2) the country’s climate is perfect for cultivating cannabis and some producers have been able to grow cannabis for less than $0.40 per gram (all-in costs). We are bullish on the growth prospects that are associated with Israel’s cannabis market and continue to follow the companies that are capitalizing on it.
Last month, Flora Growth Corp. (Nasdaq: FLGC) announced a major milestone and signed an agreement with Artos to sell approximately 3,600 kg of dried high-THC cannabis flower to Israel from its facility in Colombia. Through this agreement, Flora Growth seeks to establish a partnership with the Artos team to expand their offering of cannabis products and we will monitor how the relationship advances from here.
Prior to Flora and Artos announced an agreement, Aurora Cannabis Inc. (TSX: ACB) (Nasdaq: ACB) reported to have exported approx. C$10 million of cannabis to Israel. We believe 2022 is a make or break year for the Canadian Licensed Producer (LP) and expect international markets like Israel to have a major impact on the success of the business.
Israel has the Potential to be a Global Cannabis Leader
Israel is burgeoning international cannabis market and we are bullish on how the market has advanced within the last year. Going forward, we will monitor how the legislation advances as well as the companies that are positioned to benefit from the development.
During the last year, the cannabis sector has been under heavy pressure and we expect the trend to change as countries like Israel pass pro-cannabis legislation. In the near future, we expect to see some type of cannabis reform passed in Germany and the United States (US).
If some form of cannabis legislation is passed in these markets, we expect to see a domino type effect in other countries and consider this to be the most significant potential catalyst for the cannabis sector.
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