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Mexico's Cannabis Legalization And The Potential Boom Of Wellness Travel: What It Means For Investors

April 5, 2021 10:51 am
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Mexico's Cannabis Legalization And The Potential Boom Of Wellness Travel: What It Means For Investors

By Emily Paxhia, co-founder and managing partner of Poseidon.

Mexico has long been a beloved tourist destination; pre-Covid, it was the 7th most visited country with 49 million travelers stopping by annually. Now with the impending legalization of cannabis, Mexico is poised to pique the interest of even more travelers.

Mexico is the third country to nationally legalize recreational cannabis, and of those three, it’s the one with by far the most tourists coming across its borders. For some visitors, Mexico has been reduced to a place for cheap tequila shots and sombreros, but for many, it is a cultural hub with art, fashion, beautiful architecture, and incredible dining. Further, Mexico has historically been popular with those who want to experience ancestral plant-based therapies to restore their bodies and minds.  

In the 1950s, Mexico began to see an influx of tourists coming to sample magic mushrooms in rituals intended to bring participants closer to nature, God or their own psyches. Much of that tourism centered on a small town in Oaxaca, where a healer and former farmer named Maria Sabina administered doses to the likes of Timothy Leary, John Lennon and Bob Dylan.

But the surge of interest over the past several years in adaptogenic mushrooms, like shiitake, chaga, and reishi, purported to help the body adapt to environmental and psychological stressors, strengthen the immune system, support sleep, and reduce inflammation. Now seen in everything from skincare to smoothie powder, these mushrooms pair well with cannabis and offer a chance to reap the benefits of these natural remedies without the psychedelic side effects. 

Mexico’s also seen its share of wellness travelers focused on physical, rather than spiritual fitness.

Before Tulum was known for celebrity DJ sets and four-star hotels, it was a mellow haven for yoga fanatics who began flocking to the quiet town in the 1990s to downward-dog along the shore. As word of its charms spread, Tulum underwent a transformation along with a population boom; the town had 2,000 residents in 1990 and has approximately 40,000 today. It’s not a stretch to say that well-executed cannabis-centric spas and yoga resorts could have the same effect on countless other spots around the country. 

The legalization of Mexico presents an intriguing proposition for foreign investors along with plenty of challenges. The country relies heavily on its partnership with the United States and is therefore vulnerable to any changes to the free trade agreement. Additionally, some business sectors in Mexico are reserved for the country’s citizens, and the economy is especially vulnerable to fluctuations in oil prices. Infrastructure, particularly when it comes to transport, can be considerably lacking.

Still, the potential for a profitable cannabis business is high. In an ideal situation, foreign investors would partner with local savvy teams who understand how to navigate government regulations and capitalize on their established networks. For example, a business like Landsteiner Scientific, a nearly 25-year-old pharmaceutical lab, has the ability to manufacture and distribute health products and a strong existing cannabis research arm. Less ideal is the concept of foreign investors setting up on-the-ground operations with little knowledge of the existing market and insisting the country play by their rules. For new cannabis ventures to truly thrive in Mexico, domestic and foreign investors would do well to partner up and play up each other’s strengths.

Since Mexico is much more than its admittedly stunning beaches, we’ll also see legalization alter the landscape of its biggest urban areas, some of which embody a European feel.  With 21 million residents, Mexico City has a complex cultural history and more museums (art, architectural, anthropological, and historical) than any other city in the world, as well as thriving culinary and fashion scenes. The streets are reminiscent of Milan with its 19th-century buildings inspired by the French, Spanish, and Italian architecture and impeccably dressed women and men in suits. 

The possibilities are endless. Will there be cannabis-focused tours of Mexico City’s gorgeous Xochimilco Canals? High-end boutiques in the city’s Colonia Roma neighborhood selling handcrafted pipes? Hotel spas offering CBD lotions and THC tinctures in the minibars?

Legalization offers the possibility of creating rustic cannabis experiences that dovetail with Mexico’s deep historical traditions, like Temazcal Rituals or cacao ceremonies. It’s a wise move from a tourism perspective, especially since increasingly discerning wellness travelers crave hyperlocal and authentic experiences they won’t find anywhere else. 

There are enormous financial gains on the horizon for Mexico- Headset projects that the country’s legal sales market could be worth $840 million in its first year. In fact, the TAM (Total Addressable Market) is now four times the size of Canada’s and three times that of the U.S. It all means we’re likely to see tremendous changes in Mexico’s approach to tourism overall and attract the wellness-focused travelers who set trends and create organic buzz. 

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Emily Paxhia is a co-founder and Managing Partner of Poseidon.

Emily has reviewed thousands of companies in the cannabis industry and has worked with countless founders in many capacities. She had helped to shape founders' pitch preparations, their go-to-market strategies/ product launches, and advised on day-to-day business operations. Emily has held board seats for multiple portfolio companies and participates as an adviser to multiple teams.

Extremely active in the investment decision-making and ongoing investment oversight processes, she works closely with her partners to create meaningful deal structures, ensuring that proper governance is carried out at the company level. Further, Emily has dedicated time and energy to supporting policy groups and has served on the Board of Directors of the Marijuana Policy Project. She also currently serves on the Board of Athletes for CARE and The Initiative.

Emily has over 10 years of experience working as a consultant and researcher, and as such, has become an expert at extracting actionable insights from research and applying them to make corporations function more efficiently and successfully. She also leverages this experience to engage in detailed market analysis for determination around product-market fit and potential scalability.

Emily graduated from New York University with an M.A. in Psychology in 2008. She graduated from Skidmore College with a B.A. in Psychology in 2002.

Photo by Roberto Carlos Roman on Unsplash

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