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Barron's: Colombia A Growing Threat To North American Cannabis

Barron's: Colombia A Growing Threat To North American Cannabis

Canadian cannabis companies hope to eventually achieve and sustain production costs below CA$2 ($1.48) per gram. While this may occur in the future, Colombian producers boast of production costs "well below" 50 cents per gram, according to Barron's.

What Happened

Colombia is the "only place that makes sense" for cannabis companies ahead of a shift toward commoditization over the coming decade, Grupo Flor CEO Paul Henderson told Barron's.

The South American country benefits from an equatorial climate and is backed by a low-cost and skilled labor force.

Colombia has a "clear advantage" and poses a threat to North American companies that are forced to invest hundreds of millions of dollars in climate-controlled facilities, according to the story. 

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A company like Tilray Inc (NASDAQ: TLRY) is at a major disadvantage, as rivals with a presence in Colombia can cut prices by 90 percent and "still make money," he said. 

Tilray responded to Barron's and said its own state-of-the-art facility in Portugal is "well-positioned to efficiently and sustainably cultivate indoors."

The statement also said its facilities boast "room for expansion to service the global market."

Why It's Important

Canadian companies could try and make the case that their production costs are competitive with Colombia, since there is no universal accounting standard, according to Barron's. 

For example, OrganiGram Holdings Inc (NASDAQ: OGI) said automation and high yields results in the company growing cannabis at 65 Canadian cents per gram, but this doesn't packaging and shipping.

What's Next

Multiple factors are at play, including potential trade wars and the pace at which cannabis is legalized worldwide, according to Barron's. 

Assuming that cannabis grown in Colombia will be allowed to compete with product from North American markets in the global stage, the big companies "may face some write-downs," the story said. 

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