So being as we have to accept what the American People may do. Tilray Brands strategy well a big part of it is USA cannabis sales through adjacent business.
The long-term case for holding Tilray
In the long term, the global market for cannabis products will likely look quite similar to the beer or beverage alcohol industry. These businesses cultivate or buy raw materials where it's cheapest to do so, manufacture them according to consumer preferences, distribute the products to retailers, and market them to a crowd of both new and returning loyal customers.
Brands that cater the most effectively to people's tastes will slowly develop a competitive advantage in the form of customer retention, thereby enabling their market share to remain robust in the face of new entrants to the market, while also defending their profit margin from erosion.
Under the right conditions, it might even be possible for a company that sells beer to use a lot of the same distribution infrastructure to sell marijuana products too, juicing more revenue out of the same assets and experiencing higher margins than what would be probable with selling alcohol alone.
And that's exactly what Tilray is hoping to do with both cannabis and beer, though its efforts are still maturing and awkwardly split across a few geographies. Presently, it holds around 13% of the Canadian market for recreational-use marijuana products, but it doesn't yet compete in the U.S. cannabis market whatsoever.
Since its move in early October to acquire a handful of craft beer brands, it holds a 5% share of the U.S. craft beer market too, but it has no alcohol operations or distribution in Canada. In the E.U., it's the market leader in medicinal marijuana, but in countries like France, its footprint is tightly limited as a result of regulations.
In the future, there is a solid chance that Tilray's North American businesses will be able to fully unify across borders, as cannabis will probably eventually be legalized, and its alcohol brands will eventually need to seek new customers to continue to grow. If that happens, it could become one of the biggest booze companies in the world, and almost certainly the world's largest marijuana company.
Under such conditions, it might be able to find economies of scale in cultivation, manufacturing, and distribution, all of which would drive its margins upward. Building valuable brands with high levels of customer loyalty could seal the deal for it to be a stellar investment, at least for people buying its shares today. It might even be making enough free cash flow (FCF) to justify paying a dividend. And over the very long term, it could maybe even do the same in Europe or other global economic centers.