By / December 24, 2019

Is Brazil’s cannabis market a good investment?

According to the Bank of Montreal, Brazil’s cannabis market raised $18 billion in 2018.

Additionally, according to New Frontier Data, after regulating the commercialization, a number of 3.4 million patients and approximately $985 million (R$4 billion) in revenue should be reached in three years.

The mobile application is specializing in cannabis stocks and dedicated to hemp and marijuana news. The app is covering a full spectrum of companies involved in the cannabis industry.

The potential of Brazil’s cannabis market

Although Brazilian regulations are still somewhat restrictive about the use of the cannabis plant, investors have been carefully watching the potential of Brazil’s cannabis market.

Theo Van der Loo, the former CEO of Bayer, is one of the investors who have checked the growing revenues in Brazil’s cannabis market. In July, Theo opened NatuScience, a startup that will conduct clinical research on cannabidiol-based drugs.

Van der Loo also wants to work with planting even if he has to ask for permission in court. He is currently seeking investors to expand NatuScience’s activities.

Cannabidiol-based drinks to launch in the new year

According to Credit Suisse, Ambev (ABEV3) is expected to launch cannabidiol-based beverages by the end of the year.

The company has been in business for a year, as Labat Brewing, its Canadian subsidiary, has created a $100 million joint venture with Tilray, a cannabis-based pharmaceutical producer.

This partnership generated Fluent Beverage, a company responsible for the production of cannabidiol-based soft drinks.

In 2017, Constellation Brands, the company that produces Corona beer, acquired 9.9% of Canopy Growth, the cannabis producer with the highest value in the industry.

Constellation made a successful move to acquire another 28.1% of Canopy Growth in August 2018. As a result of this transaction, the cannabis shares doubled in value.

Euromonitor consultancy estimated that the growth rate of the cannabidiol-based beverage industry in the United States between 2018 and 2025 will be 53% per year.

Two drink bottles representing cannabis 2.0 in Brazil's cannabis market
“Cannabis 2.0” has investors excited and could bring good business to the Brazilian market. (Source)

Issues in Brazil’s cannabis market

Vinnicius Vieira, a partner of Hiria, explained that the possibilities for cannabis use go even further than in cosmetics, medicines, and beverages, also benefiting fintech.

“Some institutions cannot invest in these initiatives in Brazil’s cannabis market because of issues such as compliance. These startups have sought to understand how they can support initiatives involving CBD,” said Viera.

Cigarette companies have also taken a stand on the possibilities of cannabis use. Altria, the owner of Marlboro, bought 45% of the shares of Cronos, a Canadian cannabis company.

Cigarette manufacturers benefit from this movement because they are up to date with market news, which is essential as cigarette consumption has been decreasing.

Funding for the Brazilian cannabis market

Those who wanted to invest in Brazil’s cannabis market did not have many means to do so other than through foreign brokers. With that in mind, in the last quarter of this year, the manager of Vitreo created two cannabis funds.

The first of these is Cannabidiol FIA IE, aimed at qualified investors. This fund presents high risk and its assets are equally divided between ETFs that invest in shares of the cannabis industry and shares of companies that may benefit from the legalization of medicinal and recreational use of the cannabis plant.

Rio de Janeiro representing Brazil's cannabis market
Cannabidiol FIA IE and Cannabidiol Light FIC FIM are two funds that allow Brazilian cannabis industry investments. (Source)

Its management fee is 1.5% p.a. and the performance fee is 20% over 100% of S&P500 Total Return.

The second is the Cannabidiol Light FIC FIM, aimed at retail investors. The risk is moderate and the portfolio is divided between Cannabidiol FIA IE (20%) and a post-fixed Fixed Income Fund that invests in LFTs (80%).

The administration fee is 0.056% and there is no performance fee. The minimum investment amount for both funds is $1,000 (R$ 5,000) and they are recommended for the medium-long term.


(Featured image by LhcCoutinho via Pixabay)

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