Cronos Group (CRON -1.66%) and KushCo Holdings (KSHB) offer two very different ways to profit from the tremendous growth for the marijuana industry. Cronos is a Canadian marijuana producer -- about as pure-play of a marijuana stock as you can find. KushCo, on the other hand, focuses primarily on the U.S. market, supplying packaging solutions to cannabis growers.

Both Cronos and KushCo have been successful, and the two stocks were both big winners for investors in 2018. But which is the better pick now?

Two marijuana leaves

Image source: Getty Images.

The case for Cronos Group

Like dominos falling in a row, multiple countries have legalized medical marijuana in a short amount of time. As a leading medical cannabis producer in its home country of Canada, Cronos Group is naturally one of the top contenders in international medical marijuana markets as well.

Cronos has joint ventures in Australia, Israel, and Colombia. It secured key distribution agreements in Germany and Poland. Grand View Research projects that the global medical marijuana market will top $55 billion by 2025. Cronos Group appears to be in a good position to claim a nice share of that market.

Meanwhile, opportunities are also opening up for recreational marijuana. Canada's recreational market launched in October 2018. Mexico appears to be on track to soon legalize recreational marijuana. And although Cronos Group can't operate in the U.S. while marijuana remains illegal at the federal level, efforts to revise U.S. laws to allow states to enforce their own marijuana laws now seem to be more likely to succeed than ever before.

Cronos is busy cranking up its production capacity to meet the demand. The company currently can produce more than 40,000 kilograms of cannabis per year. Its Cronos GrowCo joint venture should boost its capacity by 70,000 kilograms. Adding the company's joint ventures in Australia and Israel into the mix puts Cronos on course for an annual production capacity of around 117,000 kilograms.

Another partnership could give Cronos Group another way to win. Cronos teamed up with Ginkgo Bioworks to produce high-purity cannabinoids from genetically engineered strains of yeast. This approach holds the promise of drastically lowering the costs of cannabinoid production compared to extraction from cannabis plants.

However, perhaps the biggest plus for Cronos Group is its relationship with Altria. The tobacco giant recently invested $1.8 billion for a 45% stake in Cronos. Altria also has options to buy a controlling interest in Cronos in the future. With Altria's expertise in developing consumer brands and navigating highly regulated industries as well as its deep pockets, Cronos Group ranks among the top competitors in the fast-growing global marijuana industry.

Check out the latest Cronos Group earnings call transcript.

The case for KushCo Holdings

While Cronos Group has to twiddle its thumbs in hopes that laws will change so it can enter the U.S. market, KushCo Holdings is already a major player in the U.S. Because KushCo isn't listed on one of the major stock exchanges, it doesn't face the restrictions Cronos does for operating in the U.S.

And the U.S. is where the real money is. Arcview Market Research and BDS Analytics estimate that the U.S. marijuana market totaled $11 billion in 2018 -- roughly 85% of the global legal marijuana market. By 2022, U.S. marijuana sales could more than double from that level. 

KushCo achieved its success by focusing on the unique packaging needs of the U.S. cannabis industry. The company supplies pop-top bottles, vaporizer cartridges, tubes, and other containers, all of which are designed specifically for cannabis products.

The U.S. isn't the only market KushCo has its eye on, though. The company sees Canada and Europe as key opportunities for expansion, too.

In addition, KushCo has branched out beyond packaging solutions through acquisitions. It now has a subsidiary focused on marketing hydrocarbons and solvents used in extracting cannabinoids from cannabis plants. KushCo also bought a company that provides branding, marketing, and e-commerce solutions to the cannabis industry. 

Better marijuana stock

It's hard to argue that Cronos Group isn't a pretty good pick. After all, it's the best-performing marijuana stock of all time. And Cronos had that distinction even before it landed the partnership with Altria.

On the other hand, KushCo is the leader in its niche market. The company will continue riding the wave of marijuana momentum in the U.S. It also is making what I view as smart moves to diversify. 

My hunch is that KushCo could generate a higher return this year, especially if progress is made on changing U.S. federal marijuana laws. That gives KushCo a potential short-term advantage. But I think both Cronos Group and KushCo will be winners over the long run.