Chart: Who Are The 'Big Boys' Schumer Is Worried Will Take Over The Cannabis Industry?

Senate Majority Leader Chuck Schumer recently said that his legalization proposal is designed to keep the “big boys” from dominating the legalized cannabis industry. But who was he referring to?

The graph shows the market caps for the most prominent cannabis MSOs vs. other “big boy” sectors we think Schumer was likely referring to:

• Big Alcohol, Big Tobacco and Big Food.

• The bars of the graph show market caps for each company ($ Billions), and the light green portion indicates the current cash balance of each company. The orange line represents the current $7.1B market cap of Curaleaf CURA, the largest U.S. cannabis company.

• The graph shows how relatively small the largest cannabis companies are. Note the scale difference between the Alcohol, Food, and Tobacco companies and the MSOs. Annheuser-Bush InBev BUD, Mondelez Intl. MDLZ, and Altria MO each have more than ten times the market cap of the largest U.S. MSO Curaleaf CURA. BUD has nearly enough cash to write a check for Curaleaf and could probably finance the $25B purchase of the top five competitors.  

• Schumer’s goal of keeping big companies from dominating the cannabis business represents either naivety or political posturing. The industry is capital intensive and will only become more so as it grows to a national scale. The industry will inevitably be swept up in a wave of consolidation post-legalization: the economics are too powerful to deny.

• The consolidated future of the industry raises an interesting question about cannabis brands. Will Mondelez care about brands when it looks to add cannabis to its Nabisco products? Probably not. It already has a brand and only wants an ingredient. Doubtlessly though, well-established cannabis brands will thrive similar to wine labels. How much of post-legalization cannabis consumption will be branded products and how much will be blended ingredients in existing CPG brands? We would love to hear your opinion.

The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from the Viridian Cannabis Deal Tracker.

The Viridian Cannabis Deal Tracker provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy. The Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis and hemp industry. Each week the Tracker aggregates and analyzes all closed deals and segments each according to key metrics:

• Industry Sector (one of 12 sectors, from Cultivation to Brands)

• Dollar value of the transaction

• Region in which the deal occurred (country or U.S. state)

• Status of the company announcing the transaction (Public vs. Private)

• Deal structure (equity vs. debt)

• Key deal terms (Pricing and Valuation)

Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.