Since legalizing medical cannabis in 2016, Australia has steadily developed its marijuana industry, attracting attention from international stakeholders and investors.
With a rapidly growing population of over 27 million people and a robust agricultural industry, this country has the potential to grow into a major force in the international cannabis sector.
Here, Investing News Network looks at how Australia's cannabis industry has shaped since legalization. Read below to find out what you need to know about investing in cannabis.
Australian cannabis market overview
As previously mentioned, the Australian Parliament passed legislation in 2016 to amend the Drugs Act 1967 to allow the cultivation of cannabis for medical and research purposes. Since then, cannabis companies have emerged.
Although the cannabis industry is young, Australia's agricultural sector is well-established and, in fact, one of the largest contributors to the country's GDP. According to the Australian Bureau of Agricultural and Resource Economics and Science, the country's agricultural output is valued at A$80 billion in 2023-2024 and is expected to grow by 6% in 2024-2025. Australia's agricultural export capacity means it has the potential to capitalize on trends in moving medical cannabis products internationally.
Recreational use of cannabis is not legal in most parts of Australia. The exception is the Australian Capital Territory, which legalized the cultivation, possession and personal use of small amounts of cannabis in early 2020. However, the Australian Institute of Health and Welfare has identified cannabis as the most widely used illicit drug in the country.
A 2019 research study found that at the time, more than 40 per cent of Australians supported full legalization of marijuana. More recently, a 2023 survey found that 50 per cent of Australians support the legalization of the right to own six personal cannabis plants, with just 31 per cent of those surveyed opposing such legislation. It was shown that there is.
Medical cannabis is overseen by the Drug Control Bureau, which issues three types of licenses: research, manufacturing of medicines or products, and cultivation or production of medical cannabis. As of January 2024, Australian medical cannabis companies held 48 cannabis cultivation or production licenses and 27 manufacturing licenses.
Medical marijuana users face several challenges in obtaining this drug. Patients can receive medical cannabis products only through a professional, and then may have to wait up to a month for government approval. Still, a 2021 survey of medical marijuana users showed that legal medical marijuana use is increasing in the country. 37% of respondents had a legal prescription for cannabis, compared to just 2.5% in 2018.
How can I invest in cannabis stocks on the ASX?
The Australian cannabis space is still in its infancy and has yet to reach its peak. In the future, more cannabis stocks are expected to be listed on the Australian Securities Exchange (ASX), which means more investment opportunities.
Elixinol Wellness (ASX:EXL, OTC Pink:ELLXF) was founded in 2018 when Colorado-based Elixinol partnered with Hemp Food Australia to form an international brand and launched an initial public offering.
Hemp Food Australia manufactures and sells hemp food and skin care products, while Elixinol is a retail provider on the CBD side, including nutritional supplements and topical cannabis products. Elixinol has focused on building a strong global footprint, with operations in the Americas, Europe, and Asia.
In its latest quarterly report, Elixinor reported an improvement in group revenue, increasing by 76% year-on-year to total A$3 million. Australian brand revenue increased 140% to A$2.5 million.
Elixinor completed the acquisition of Ananda Foods in early 2024, further consolidating its strong position in the Australian hemp market and adding complementary products to its offering.
Another big up-and-comer in the Australian cannabis industry is Cann Group (ASX:CAN, OTC Pink:CNGGF). Founded in 2014, Cann Group was the first cannabis company to be issued a cannabis research license by the Australian government and the first cannabis company to be granted a medical cannabis cultivation license.
Since then, the company has been working to develop and supply cannabis, cannabis resin, and medical cannabis products to patients with everything from multiple sclerosis to chronic pain. The company accomplishes this by using its own dried cannabis flower, keeping it ahead of other companies in a market that is still largely driven by imports. Can Group has the capacity to produce 12,500 kilograms of dried cannabis flower per year for the international and domestic medical cannabis markets at its Mildura cultivation facility in Victoria, with support from National Australia Bank. It was completed in 2022.
There is also Althea Group (ASX:AGH), which produces, supplies and exports pharmaceutical grade medicinal marijuana. The company received a medical cannabis cultivation license in 2018. The company currently operates in regulated medical cannabis markets, including Australia and the United Kingdom. It received permission to sell cannabis products in Germany at the end of 2020. This approval makes Althea Germany the first commercial supplier of Australian-made medical cannabis products. According to Statista, Germany's medical cannabis market is expected to be worth approximately AU$594.8 billion by 2029.
Althea reported record cash income of A$26.6 million in the first three quarters of its 2024 financial year, with A$8.4 million in the quarter ended March 31 (recreational and medical of A$4.2 million each). dollar).
Some of the biggest names in Canada's cannabis industry also have operations in the region, including Canopy Growth (NYSE:CGC,TSX:WEED) and Aurora Cannabis (NYSE:ACB,TSX:ACB).
In 2018, Canopy launched a medical cannabis company, Spectrum Cannabis Australia. The company, now called Spectrum Therapeutics, will remain a subsidiary of Canopy and will continue to develop “innovative cannabis-based products to create a variety of effective formulations and delivery mechanisms and study their therapeutic effects.” states that it is developing.
Aurora has partnered with cannabis pharmaceutical company MedReleaf Australia to jointly offer Aurora's products through the MedReleaf concession scheme. The program supports “people with Pensioner Discount Cards, Commonwealth Elderly Health Cards, Healthcare Cards, and Veterans Cards” and offers considerate pricing.
Further products from Aurora Cannabis, which the company announced in late April, will be coming to Australia, including a new premium dried flower product.
What is the outlook for cannabis in Australia?
According to Future Market Insights, Australia's legal cannabis market (a category that includes medical cannabis and hemp products) is projected to grow at a CAGR of 30.1% to reach US$828.2 million in revenue by 2033 .
Alongside the legalization of medical cannabis, overseas exports were also legalized in 2018, and at the time Australia had big plans to increase its international presence. That same year, Australian Health Minister Greg Hunt told a local radio station: “We want to potentially be the world's number one supplier.” This has not yet happened. The 10 largest cannabis companies are all based in Canada or the United States.
The legalization of marijuana for recreational purposes is being debated as support for full legalization of marijuana grows nationwide. In August 2023, senators introduced Australia's first federal cannabis legalization bill. Legalization of Cannabis Act in 2023.
According to the bill's summary, if passed, it would create “Cannabis Australia as a statutory body to register cannabis strains, cultivate and possess cannabis plants, manufacture and sell cannabis products, operate cannabis cafes, and regulate cannabis-related activities.” Agency” will be established. We also import and export cannabis products. A public hearing on the bill will be held on May 31st.
Overall, the growth of this country's medical cannabis industry and the Australian cannabis companies within it is an opportunity for growth. Recreational cannabis remains illegal, but investors should keep an eye on updates on the Cannabis Legalization Act of 2023.
This is an updated version of an article first published by Investing News Network in 2019.
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Securities Disclosure: I, Melissa Pistilli, have no direct investment interest in any companies mentioned in this article.
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