Cannabis will be ‘in everything’ in Latin American Business

As the global cannabis market matures rapidly, the turnaround of one Uruguayan company shows how the Latin American cannabis market is quickly moving away from simply growing the plant and toward higher-value consumer goods such as creams and cereal bars.

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Success Stories for Some Latin American Cannabis Entrepreneurs

Cannabis Company Builder, a Latin American cannabis-related startup incubator that helps entrepreneurs launch their brands, is investing to develop medical, cosmetic, pet care and nutritional products in Latin America. It aims to invest in 50 companies next year, up from 22 currently, and CEO Andres Israel wants an increasing percentage of them to create branded products.

“Too much money is being invested in the area of cultivation, which to me is not the future of the industry,” Israel, 34, said in an interview at his Montevideo office.

His current group of companies includes cosmetics maker Be Fresh Blends, cereal bar producer Upstairs Food and a company developing a cannabis supplement for dogs. CCB, as his company is known, is also negotiating a minority stake in a project to make cattle feed from hemp, he said. His company avoids the recreational marijuana market and products that get users high to concentrate on consumer products.

The Real Latin American Opportunity is in the Products

Whether buying existing brands or starting from scratch, Latin American cannabis companies such as CCB and Colombia’s Flora Growth Corp. are turning to the derived product market in the expectation that it will be more profitable than commodities such as dried cannabis flower. Flower accounted for 97% of Uruguay’s $7.5 million cannabis exports last year. So for Latin American companies that can overcome regulatory and production hurdles to turn cannabis into products, the opportunity is huge.

“Anything that involves creating end products is where I see an opportunity,” said Israel, who previously co-founded logistics firm Gurucargo and cosmetics brand Canabizzz.

Lack of Legal Certainty Hobbles some Latin American Cannabis Hopefulls

Israel thinks cannabis investors favor Latin American countries where stability and rule of law are strong, such as Uruguay, which was the first country to legalize most marijuana use in 2013, and Chile. Colombia, which has favorable regulations and excellent growing conditions, could become a major exporter if it can address investor concerns about political risk, he said.

Nearly three-quarters of CCB’s companies are Uruguayan, although many of its founders come from Brazil, South Africa and other countries. Chile has yet to pass legislation authorizing cannabis exports, but that has not stopped Israel from entering into negotiations with three companies there.

“Chile can provide the legal and political stability to develop a solid industry like Uruguay did,” Israel said. “The main bottleneck is not being able to export.”

A Blooming Business and Investment Environment

Founded by Israel and two other partners in February, CCB offers cannabis companies services including licensing, branding and legal assistance in exchange for a 5% to 10% stake.

CCB raised US$500,000 in seed capital from investors including Argentina’s largest pharmaceutical companies and Ruben Sosenke, co-founder of delivery app PedidosYa. The deal valued the company at about US$4.5 billion when it closed in June, Israel said. He expects CCB to be profitable in March or April, when its businesses will start generating revenue and earnings.

Shareholders are planning a series A financing round in the first half of next year that will allow CCB to increase ownership of its portfolio companies ahead of a possible initial public offering in mid-2023, he said.

(Featured image by Matteo Paganelli via Unsplash)

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