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HIGHLIGHTS
  1. Canadian CBD companies may be at disadvantage to U.S. companies aiming to export to Latin America
  2. Latin America is not seen offering strong opportunity for cannabis-derived products, except for CBD
  3. CBD market in Latin America to reach US$448 million by 2023 -Brightfield

Despite a flurry of cannabis investments in Latin America, opportunities for retail sales there are limited due to government regulations, a stigma towards marijuana, and lower buying power by residents. Sales of the non-intoxicating cannabis extract cannabidiol (CBD), however, look like the most promising avenue for growth within the sector there, Brightfield Group said in a report on Tuesday.

Canadian companies aiming to export CBD products to Latin America, however, may be at a disadvantage, the U.S.-based market researcher said.

CBD derived from hemp is no longer illegal in the United States following the passage last December of the 2018 Farm Bill, and "many individuals have found that U.S. CBD brands are easier to import than Canadian CBD products, which are still considered scheduled products in Canada, thus adding another layer of difficulty to getting imports approved and the shipping process to Latin America completed in a timely manner,” Brightfield said.

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“As such, for the near-term, U.S.-based CBD players will enjoy an advantage when it comes to imports to Latin America.”

Health Canada has drawn criticism from industry groups for not reclassifying CBD as a natural health product and for only permitting licensed cannabis companies to make and sell the product.

Several Canadian cannabis producers, however, see so much potential in Latin America that they have made acquisitions in South America, positioning themselves for the potential expansion of markets or to benefit from low cultivation costs by exporting cannabis products from there. In 2018, Canopy Growth Corp., Aurora Cannabis Inc., Tilray Inc. and The Cronos Group all made acquisitions in the region.

“Currently, Latin America does not present a strong opportunity for cannabis-derived products relative to North American and European markets,” Brightfield said.

“This is driven by low average household incomes, paired with patients’ freedom to grow their own cannabis in many countries, and strictly regulated medical markets.”

While Brightfield forecast recreational cannabis sales in Latin America will reach US$6-million with medical pot rising to US$109-million by 2023, the CBD market there will soar to US$448-million. In the large region, Mexico will account for the bulk of CBD sales at US$258-million in 2023 versus US$18-million this year.

“CBD Life will be one of the first companies to legally import CBD products to Mexico, having gained import approval in August 2019. This approval will allow for the importation of Foria’s CBD arousal spray, Awaken-M, and expand Foria’s footprint into Latin America,” Brightfield said.

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“As the market continues to open in Mexico it is likely that other U.S.-based CBD companies will come to distribution agreements with companies in Mexico, bringing a wider range of brands and product types to the Mexican consumer.”

Sales in South American countries will be sharply lower, however, with the CBD market in Colombia expected to be valued at US$57-million by 2023, up from US$4-million in 2019, followed by Peru at US$49-million in 2023 and Brazil at US$40-million, then Chile at US$22-million and Argentina at US$21-million.

“Medical marijuana programs in Latin America have thus far failed to scale in any meaningful way, and there is little indication that the continent will follow the model that Canada, Europe or the United States are establishing,” Brightfield said.

“On the other hand, CBD products provide a welcome alternative for countries with a high level of stigma towards marijuana and the importation of non-intoxicating oils avoid a competition with or diversion to the black market.”

While beauty, skincare, and other personal care products are likely to gain traction in Latin America, particularly in Colombia and Mexico where a there is a legal commercialization framework, adoption will still be limited to the relatively small higher income populations in the region, Brightfield said.

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