Israel's Cannabis Market: What Investors & Entrepreneurs Need To Know

Israel is a leader in cannabis, be it research and or in the emerging marketplace.

Numerous research breakthroughs have occurred in Israel. One of the most notable cannabis researchers is Dr. Rafael Mechoulam, who along with his team first identified THC and other active compounds in cannabis decades ago.

Today, Israel continues furthering its research legacy while building its legal marketplace.

The country currently permits medical and research purposes. Those rules should expand to allow adult-use this year. That is if the nation lives up to its November 2020 plan to legalize cannabis within the next nine months. If the country holds to the goal, it will legalize this month.

The market continues to grow as prospects of adult-use loom. In September 2020, the country saw its patient count double to over 70,000, according to the Israeli Medical Cannabis Agency (IMCA).

Major players have been in the market for some time and are further staking their claim in some cases. International operator IM Cannabis IMCC IMCC announced several Israeli market acquisitions in late July, totaling $3.7 million in further investments into the country.

In early July, Curaleaf Holdings Inc CURLF exported over a ton of cannabis to Israel as part of its deal with BOL Pharma. Major U.S. cannabis brand Cookies also got involved through an April 2021 production deal with Israeli brand InterCure.

Some market concerns remain, but operators in Israel appear primarily optimistic about the market and its opportunities moving forward.

Israel A Global Cannabis Hub With Room To Grow

Operators listed various positives in the market, from the nation's research history to its budding potential as adult-use prospects grow.

Craig Frank, CEO of international brand Kaya Holdings, Inc., noted that the country is a leader in research and development and that a substantial portion of the country consuming cannabis. An oft-cited data point from 2017 lists Israel with the world's highest ratio of cannabis consumers, with 27% of the nation's 18 to 65 year-olds consuming.

"We made the decision to invest in Israel because it is a center of technology for the industry, and we wanted to be close to the action," said Frank. He believes the next opportunity will arrive as Israeli brands expand onto the global cannabis stage.

Oren Shuster, CEO of IM Cannabis, stated, "Israel is known as a global hub for cannabinoid R&D and is punching above its weight." He feels that local players benefit from their proximity and potential to collaborate with leading research teams and facilities.

Shuster noted an array of additional market positives, ranging from ideal cultivation climates, condensed geography that benefits large-scale supply chains, a robust healthcare system and effective regulations.

"Israel is one of, if not the largest, importer of medical cannabis in the world, and the potential for the recreational market...is immense," Shuster added.

Nadav Eyal, CEO and co-founder of U.S. and Israeli-based tech brand Eybna, said regulations "Have helped transform Israel into a haven for the field's innovation and evolution."

Eyal added, "As more countries push toward full legalization, Israel's scientific approach combined with a friendly legal framework and ongoing research efforts have helped position the local industry to blossom."
Small Market, Strict Regulations Could Hinder Israel Cannabis Marketplace
The maturing market faces its shortcomings despite ample opportunities.

Jacob Adib, a research analyst for Euromonitor International, noted that the market is largely untapped, with roughly 13 companies exchanged on the Israeli stock market and 43 brand variations in the space today.

Adib reports that many struggle to stay afloat, citing a lack of exports and minimal engagement between retailers and buyers during the pandemic.

"Overall, this has attracted outside investors and entrepreneurs," Adib added. However, non-Israeli investors are limited to 5% or less involvement in any cannabis venture.

IM Cannabis' Shuster noted that Israel's population of 9 million could stunt market growth, as could political fragmentation that could stifle legislation. Additional operators say legislators can be slow to take up cannabis reform.

Adib added that strict regulations and products limited to just cannabis flower and oil hinder market potential. He said buyers would instead turn to nearby Iraq or Jordan and their illicit market for more diverse product options.

Image: Pexels/Kostiantyn Stupak