NetworkNewsWire Editorial Coverage: For the very first time, a developed country stands at the precipice of legalizing recreational cannabis. Despite a slight delay from the original July 2018 legalization goal, industry analysts agree that Canada is on course to fully legalize recreational marijuana in August or September of this year, clearing the way for adults aged 18 and over to legally purchase the drug from licensed dispensaries across the nation. For companies like Choom Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF) (CHOOF Profile), Aurora Cannabis, Inc. (TSX: ACB) (OTCQX: ACBFF), Namaste Technologies Inc. (CSE: N), Emerald Health Therapeutics, Inc. (TSXV: EMH) (OTCQX: EMHTF) and The Supreme Cannabis Company, Inc. (TSXV: FIRE) (OTC: SPRWF), this unprecedented regulatory shift is likely to unleash huge opportunities across multiple industry sectors, most notably cultivation and retail operations.
Barriers to Entry
Demand for recreational cannabis in Canada is still, to some degree, a mystery. As a forerunner in the legalization of recreational marijuana, Canada will likely serve as a measuring stick for other countries that are interested in following suit. However, based on various federal and provincial reports, legislators have estimated that nationwide demand could come in at around 800,000 kilograms annually, with the market expected to experience sustained growth in the coming years. The push to address this forecast demand has resulted in a number of cannabis industry heavyweights, with their positions in the market being bolstered by the significant barriers to entry that exist for would-be Canadian cannabis producers.
Currently, cannabis production operations fall under the jurisdiction of the Access to Cannabis for Medical Purposes Regulations (ACMPR). Introduced in 2016 as a replacement for the Marihuana for Medical Purposes Regulations, the ACMPR is administered by Health Canada with the goal of licensing and overseeing the commercial cannabis industry. Companies interested in cultivating cannabis for the Canadian market are required to undergo a complex, seven-stage permitting process under the ACMPR that commonly takes more than a year to complete (http://nnw.fm/g71zA). As a result of this complexity, the firms that successfully navigate the regulatory hurdles associated with the ACMPR to become licensed cannabis producers often achieve significant PPS increases in the wake of approval (http://nnw.fm/jbu2A).
Navigating the Changing Tides
Choom Holdings, Inc. (OTCQB: CHOOF) (CSE: CHOO) is one company that’s strategically positioned to capitalize on this post-approval trend in the near future. Choom currently has acquired two ACMPR applicants and has agreements in place to acquire two additional ACMPR applicants, fortified by its recent addition of Saskatchewan-based High Way 10 and parent company Flower Power Cannabis Pharms (http://nnw.fm/Xf26v). As the company noted in a news release announcing the acquisition, High Way 10 is currently in the active review stage of Health Canada’s rigorous application process. Following the completion of select tenant improvements to its existing 16,000-square-foot facility, Flower Power intends to submit its affirmation of readiness (“AOR”) evidence package to Health Canada, which could result in the receipt of a cannabis cultivation license shortly thereafter. If approved, Choom estimates that High Way 10’s current facility is capable of producing approximately 1,500 kg of dried cannabis per year, with plenty of room for future expansion.
Notably, Choom’s efforts to scale up its production capacity ahead of the anticipated summer 2018 legalization of recreational cannabis have spanned multiple provinces. On April 19, the company announced its entry into a definitive agreement to acquire Island Green Cure Ltd., an advanced-stage cannabis production license applicant located in Vancouver Island, British Columbia (http://nnw.fm/5ZmQQ). Choom notes that Island Green Cure is currently at the Confirmation of Readiness (“COR”) stage of the ACMPR application process.
While Choom has remained committed to expanding its production capacity in recent months, the company has also turned its attention to the retail side of the nascent industry. Unlike cultivation, which is regulated at the federal level, recreational cannabis retail programs will be developed and enforced by individual provinces. For this reason, Choom’s recent efforts to diversify its geographic footprint into new jurisdictions, including its entry into Saskatchewan through the High Way 10 acquisition, could prove to be fruitful.
The Future of Retail
Although the exact launch date of recreational cannabis in Canada isn’t yet known, the future of the industry, at least from a retail perspective, is currently being developed. Multiple provinces across the country have already outlined details for their retail programs. The Saskatchewan Liquor and Gaming Authority (SGLA), for example, last month announced plans to commence issuing retail permits. Timing could prove to be key for prospective retailers in Saskatchewan. The SGLA has limited the number of permits to 51 for the first three years in an effort to ensure a controlled rollout (http://nnw.fm/BB5zT), and other provinces have detailed similar restrictions. Choom has already made moves to secure its portion of this retail landscape. In an April 17 news release, the company noted that it has already secured nine retail locations in Alberta and seven in British Columbia, as well as submitting 32 applications for retail permits in Saskatchewan (http://nnw.fm/oC8TP). The SGLA is expected to award permits via lottery by June 2018.
Choom’s retail plans go beyond permits and regulatory filings. In January, the company released a concept retail store design (http://nnw.fm/n2N2a), and it intends to develop a chain of branded dispensaries in jurisdictions across Canada. Supporting these plans, Choom recently entered into a binding agreement with ABcann Global Corporation (http://nnw.fm/X3eUt), one of Canada’s premier growers, through which ABcann will supply Choom with premium cannabis products, subject to regulatory approval. The company marked this deal as a strong endorsement of its strategy and a pivotal step in developing Choom as the premium retail brand in Canada’s burgeoning recreational cannabis market.
Promising Market Trends
Diversification into both cultivation and retail operations could prove to be a lucrative opportunity for Choom. Aurora Cannabis, Inc. has established itself as an industry heavyweight in recent years by leveraging a vigorous growth strategy to rapidly expand its cultivation capacity. Following its acquisition of 71 acres of land in Alberta, Aurora is on track to yield in excess of 430,000 kg of cannabis per year at some point in the future. Add on Aurora’s acquisition of Saskatchewan-based CanniMed Therapeutics, which was noted as the ‘most expensive pot buyout in history’, and it’s clear that an aggressive approach to M&A is a key growth driver throughout the cannabis industry.
Much like Choom, Aurora has also placed focus on addressing the flourishing retail sector of Canada’s recreational cannabis market. In February, the company announced its completion of a strategic investment in Liquor Stores N.A. Ltd. aimed at establishing and launching a leading brand of cannabis retail outlets. Through this blended approach to cultivation and retail, Aurora has achieved considerable PPS growth. The company’s Canada-listed shares rose from C$3.08 in November 2017 to a high of C$14.79 by mid-January.
Namaste Technologies Inc. is taking a similar approach to growth through acquisitions, aiming to execute on a vision of becoming an all-inclusive online cannabis marketplace. Through wholly owned subsidiary Cannmart Inc., Namaste received an ACMPR production license on March 19 (http://nnw.fm/g04sV), just under two months after the company announced its reception of a Health Canada Confirmation of Readiness (“COR”). Following news of Cannmart’s ACMPR approval, Namaste’s Canadian shares rose to C$2.31, up from C$1.60 in late February.
Prior to receiving ACMPR approval, Cannmart entered a definitive supply agreement through which it committed to purchase, in 2018, 1,000 kg of medical cannabis from Supreme Cannabis Company, Inc. subsidiary 7ACRES. John Fowler, CEO of Supreme, noted the importance of supply agreements such as these in a news release (http://nnw.fm/QPth6). “As a cultivation focused Licensed Producer we rely on strong retail partners to provide us access to consumers and favorable brand positioning,” Fowler stated. Diverging from the integrated strategy of Choom Holdings, Namaste, through Cannmart, is positioning itself as a “sales-only” entity.
While many in the Canadian cannabis market look toward new construction and acquisition for growth capacity, some industry players are taking other approaches. Emerald Health Therapeutics, Inc., for example, is partnering with British Columbia-based Village Farms to increase production capacity while simultaneously bolstering the margins of traditional greenhouse farms (http://nnw.fm/sX9BP). This approach, utilizing established agricultural producers to expand capacity, is typically cheaper and faster than the construction of new facilities, as well as providing the opportunity, in many cases, to work with experienced growers and farm staff.
On the Clock
With the legalization of recreational cannabis in Canada expected to occur in a matter of months, the future of what Deloitte has forecast could be a $22.6 billion industry is already taking shape (http://nnw.fm/1iYFF). Companies with the foresight to position themselves in both the cultivation and retail markets figure to benefit most from the rising tide of cannabis spending throughout Canada. With that in mind, it should come as no surprise that industry upstarts like Choom Holdings, with its four late-stage licensed producer applicants and detailed retail strategy, are urging the investment community to ‘Say Hello’ to the next big thing (http://nnw.fm/H6AnE).
For more information on Choom Holdings, Inc., please visit Choom Holdings, Inc. (OTCQB: CHOOF) (CSE: CHOO).
About NetworkNewsWire
NetworkNewsWire (NNW) is a financial news and content distribution company that provides (1) access to a network of wire services via NetworkWire to reach all target markets, industries and demographics in the most effective manner possible, (2) article and editorial syndication to 5,000+ news outlets (3), enhanced press release services to ensure maximum impact, (4) social media distribution via the Investor Brand Network (IBN) to nearly 2 million followers, (5) a full array of corporate communications solutions, and (6) a total news coverage solution with NNW Prime. As a multifaceted organization with an extensive team of contributing journalists and writers, NNW is uniquely positioned to best serve private and public companies that desire to reach a wide audience of investors, consumers, journalists and the general public. By cutting through the overload of information in today’s market, NNW brings its clients unparalleled visibility, recognition and brand awareness. NNW is where news, content and information converge.
For more information, please visit https://www.networknewswire.com
NetworkNewsWire (NNW)
New York, New York
www.networknewswire.com
212.418.1217 Office
[email protected]
Please see full terms of use and disclaimers on the NetworkNewsWire website applicable to all content provided by NNW, wherever published or re-published: http://NNW.fm/Disclaimer
DISCLAIMER: NetworkNewsWire (NNW) is the source of the Article and content set forth above. References to any issuer other than the profiled issuer are intended solely to identify industry participants and do not constitute an endorsement of any issuer and do not constitute a comparison to the profiled issuer. The commentary, views and opinions expressed in this release by NNW are solely those of NNW. Readers of this Article and content agree that they cannot and will not seek to hold liable NNW for any investment decisions by their readers or subscribers. NNW is a news dissemination and financial marketing solutions provider and are NOT registered broker-dealers/analysts/investment advisers, hold no investment licenses and may NOT sell, offer to sell or offer to buy any security.
The Article and content related to the profiled company represent the personal and subjective views of the Author, and are subject to change at any time without notice. The information provided in the Article and the content has been obtained from sources which the Author believes to be reliable. However, the Author has not independently verified or otherwise investigated all such information. None of the Author, NNW, or any of their respective affiliates, guarantee the accuracy or completeness of any such information. This Article and content are not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action; readers are strongly urged to speak with their own investment advisor and review all of the profiled issuer’s filings made with the Securities and Exchange Commission before making any investment decisions and should understand the risks associated with an investment in the profiled issuer’s securities, including, but not limited to, the complete loss of your investment.
NNW HOLDS NO SHARES OF ANY COMPANY NAMED IN THIS RELEASE.
This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. “Forward-looking statements” describe future expectations, plans, results, or strategies and are generally preceded by words such as “may”, “future”, “plan” or “planned”, “will” or “should”, “expected,” “anticipates”, “draft”, “eventually” or “projected”. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in a company’s annual report on Form 10-K or 10-KSB and other filings made by such company with the Securities and Exchange Commission. You should consider these factors in evaluating the forward-looking statements included herein, and not place undue reliance on such statements. The forward-looking statements in this release are made as of the date hereof and NNW undertakes no obligation to update such statements.
