Cronos Group Continues Hot Year with Plans to Enter U.S. CBD Market

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Cronos Group plans on expanding its North American operations beyond Canada’s southern border. The CBD producer operates in countries around the world but is closely associated with its Canadian operations. It looks like chief executive officer Mike Gorenstein is starting to get a bit homesick.

“We are Americans in Canada that always planned on coming back to the U.S.,” Mike Gorenstein told Cheddar.

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Cronos’ stock jumped this week after plans to enter the U.S. CBD market became public. The stock may also have benefited from Bank of America Merrill Lynch upgrading its outlook on the company based on its prospects for success in the U.S. market.

This week represents just the latest good news for Cronos. Its stock has risen by approximately 49 percent in 2019 and 95 percent over the past 12 months. Much of the spike may be attributed to a major investment worth $1.8 billion by Altria, maker of Marlboro. The investment has increased Cronos’ ability to expand and distribute across the globe.

The Altria partnership does more than just add cash and equity for Cronos and could be particularly lucrative in the United States. Cronos will now have access to Altria’s retail network which includes over 200,000 stores across the country. Altria also has a relationship with many tobacco farmers who can transition into cultivating industrial hemp.

“I’m comfortable saying we plan on launching CBD products at some point this year,” Gorenstein said.

With passage of the 2018 Farm Bill, the U.S. CBD market seems poised for rapid expansion. However, there is some confusion as to exactly what is permitted under the new laws. A public meeting was held last week by the FDA, which industry members hoped would eliminate confusion about current regulations.

“I think a lot of people were scrambling to draw big conclusions from that meeting, but I don’t know that there’s anything there to draw a conclusion from,” Gorenstein said. “I think status quo is the message that we got from that.”

Despite Cronos’ success in Canada, Gorenstein still looks at the U.S. as the future for the company.

“The flower market in Canada, it’s not where we see the future for our company. Spending ahead to be able to have next generation vaporizers, great edible products that are fast-acting, we want to make sure we get all the flavors right, the brand positioning, the marketing spend ー so it’s a typical [consumer packaged goods] market,” Gorenstein said.

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