On October 17, 2018, in Canada, 95 years of cannabis prohibition have come to a long anticipated end. Prime Minister Justin Trudeau was elected to a majority mandate in 2015 in part due to his promise to legalize and regulate the sale of recreational cannabis to adults. That promise has finally become a reality after a lengthy and occasionally messy process by federal and provincial governments establishing the laws and regulations that will govern the cannabis consumer as well as the wide world that is Canada’s legal cannabis industry.
Canadian cannabis companies of all types have been working tirelessly to prepare for this day for the past three years. Even with the challenge of working within an actively developing legal framework, these companies have been busy establishing business models, partnerships, retail opportunities, supply chains and more knowing that legalizations day would be the starting gun for a race to establish themselves as key players in what promises to be a huge and intensely competitive marketplace.
To mark the occasion, here is a glimpse into just a few INN’s client companies which are building their businesses in Canada’s legal cannabis landscape.
Canada’s newest cannabis players
The cannabis industry is continuing to develop at a remarkably fast pace, so it’s no surprise that the newest cannabis players have listed themselves on Canadian markets within just the past few weeks. Some of the most recent listings include pharmaceutical cannabis oil producer MediPharm Labs Inc. (TSXV:LABS), licensed medical producer The Flowr Corporation (TSXV:FLWR), lifestyle recreational cannabis company Weekend Unlimited Inc. (CSE:YOLO), Atlantic Canada-based producer Biome Grow (CSE:BIO) and Orion Nutraceuticals (CSE:ORI).
Companies entering provincial supply relationships
From the earliest days of the legalisation process, the federal government made clear that retail frameworks would be the domain of provincial governments, not unlike how liquor retail is regulated. In some provinces like Quebec, New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland, this means that provincial crown corporations are the exclusive cannabis retailers. In others, private stores are allowed, but these businesses must source their product through provincial distribution networks. In either case, supply agreements with provincial governments are incredibly valuable to cannabis producers.
Licensed producer Emblem (TSXV:EMC,OTCQX:EMMBF) is one of the fortunate companies to hold provincial agreements in Alberta, British Columbia, and Saskatchewan. Harvest One (TSXV:HVT) holds agreements in Manitoba, Saskatchewan and Ontario. Invictus (TSXV:GENE,OTCMKTS:IVITF), meanwhile, has secured agreements with British Columbia, Saskatchewan and Alberta, making its first bulk shipment earlier this month. Wayland Group Corp. (CSE:WAYL,FWB:75M,OTCQB:MRRCF) has partnered with the provinces of Ontario, British Columbia, Alberta and Manitoba. Meanwhile, The Supreme Cannabis Company Inc (TSXV:FIRE) has a presence in a whopping six provinces, with supply agreements in Nova Scotia, Ontario, Prince Edward Island, Alberta, British Columbia and Manitoba.
Partnerships with big players in the industry
A few cannabis companies have opted to use the strategy of partnering with the biggest players in the industry. To that end, Ascent Industries has entered into a supply agreement to provide Canadian industry titan Aurora Cannabis (TSX:ACB) with up to 20,000 kilograms of cannabis bud and up to 6,000 kilograms of cannabis trim per year.
Lotus Ventures Inc (CSE:J), meanwhile, has entered into an agreement with cannabis investment giant Auxly Cannabis Group Inc. (TSXV:XLY,OTCQX:CBWTF). Under the agreement, Auxly will contribute $4 million towards the construction of Lotus’ 22,500-square-foot facility in Armstrong, British Columbia in addition to having acquired $1 million in Lotus shares.
Large production facility footprints
Auxly and Lotus are far from the only companies investing millions into large scale growing facilities. The past three years have seen an arms race of sorts as cannabis companies rush to build massive grow spaces. Beleave Inc. (CSE:BE) has is funded for the development of a total of 1.7 million square feet in grow space across three production facilities, two in Ontario and one in British Columbia.
FSD Pharma (CSE:HUGE) is in the process of converting a former Kraft Foods (NASDAQ:KHC) facility in Cobourg, Ontario into one of the largest hydroponic indoor growing operations in the world, which will measure 3.8 million square feet once completed. MYM Nutraceuticals Inc. (CSE:MYM) is in the process of developing 2.7 million square feet of production space including 1.5 million square feet at their massive facility in Weedon, Quebec.
A growing space for cannabis extracts and oils
With the legalisation of cannabis most recently in Canada but preceded by US states like California, Colorado and Oregon, the market is beginning to develop and change. Part of this can be seen in the slow but sure shift legal jurisdictions are experiencing away from the traditional dried bud and towards processed cannabis products like extracts.
This development would be great news for licenced cannabis extractors like James E. Wagner Cultivation (TSXV:JWCA) who received their licence for cannabis oil production in September. Similarly, Health Canada granted Valens GroWorks Corp (CSE:VGW) their licence for cannabis oil production on October 15th.
Late-stage applicants for ACMPR licenses
Even past legalisation day, the cannabis industry is still growing and developing. As such, companies are still applying for and receiving their cultivation, dealer’s or sales licences. Maple Leaf Green World (OTCQX:MGWFF) is in the process of entering the Canadian market and the company expects to receive its licences in time for the completion of its facility in Telkwa, British Columbia by the end of 2018. Similarly, Alliance Growers (CSE:ACG) plans to clear the licensing process in time for the opening of its facility in Quebec in January 2019.
Pure Global Cannabis Inc. (TSXV:PURE;OTC:PRCNF,FWB:1QS) expects to have its sales licence by quarter four of 2018. Meanwhile, Heritage Cannabis Holdings Corporation (CSE:CANN) just recently received its cannabis cultivation license on October 15th, as did Matica Enterprise (CSE:MMJ), a cannabis company with properties in Quebec.
Companies building a retail presence in Canada
Legalisation day marks the debut of the retail store brands that hope to become the face of the legal cannabis industry in the minds of Canadian consumers. GreenTec Holdings (TSXV:GTEC) is developing a retail presence that will span the nation with their Cannabis Cowboys retail chain opening 25 locations in Alberta in addition to retail opportunities in Saskatchewan, Manitoba and British Columbia. INDIVA (TSXV:NDVA) announced plans to develop a retail presence in Ontario, in accordance with provincial regulations. Inner Spirit Holdings Ltd. (CSE:ISH) has designs on introducing the franchise model to the Canadian cannabis space, opening up 100 locations in Alberta, British Columbia, Saskatchewan and—recently announced—Ontario.
Hemp-based products for Canadian market
While not always directly tied to the recreational cannabis industry, the hemp industry will see a significant boost from legalisation. Hemp is cultivated and used for a variety of purposes including but not limited to health food and the extraction of non-psychoactive cannabidiol (CBD). This past summer, Canntab Therapeutics (CSE:PILL) launched a line of hemp oil capsules for nutrition and vitamin delivery. Naturally Splendid (TSXV:NSP) has developed a wide range of health food products derived from protein rich hemp seed oil. The company is also in the process of acquiring its dealers license that it will use to produce cannabis extracts.
Ancillary services for the cannabis industry
A complex new industry like cannabis requires a whole range of ancillary services for cannabis businesses, consumers, regulators and more. BLOCKStrain Technology Corp. (TSXV:DNAX), for instance, has entered into agreements with provincial governments to use their blockchain-based platform to monitor cannabis products along supply chains to help keep cannabis companies accountable and criminal activity out of legal cannabis markets.
Cannvas MedTech (CSE:MTEC) will be offering consumer education on the potential benefits of medical and adult-use cannabis through the company’s planned cannabis education and fulfillment centers which will be located across the country.
As a very different solution for the industry, FluroTech (TSXV:TEST) is developing a technology for product testing services that can be used on-site to ensure quality control, accurate dosing, potency, safety and more.
Moving forward, the cannabis market will bring plenty of opportunity for cannabis companies, particularly with the legalization of edibles and cannabis-infused beverages scheduled for 2019. As the market emerges from infancy, there will be an opportunity to segment product offerings, with premium product lines having their space alongside low-cost options, ongoing product innovation, and additional industry partnerships. As provincial governments solidify their regulations, companies will also have the benefit of an established infrastructure in which to work with. These are all things for investors to keep an eye out for.
For more information on how to invest in cannabis, read INN’s recent article on the matter.
Editorial Disclosure: Ascent Industries, Beleave, Biome Grow, Blockstrain Technology, Canntab Therapeutics, Cannvas MedTech, Clinical Blockchain Data Sciences, Emblem Corp., FluroTech Ltd. FSD Pharma, GreenTec Holdings, Harvest One, Heritage Cannabis Holdings, INDIVA Corp, Inner Spirit Holdings, Invictus, James E. Wagner Cultivation, Lotus Ventures Inc, Maple Leaf Green World, Matic Enterprise, MediPharm Labs, MYM Nutraceuticals, Naturally Splendid, Orion Nutraceuticals, Pure Global Cannabis, The Flowr Corporation, The Supreme Cannabis Company, Valens Groworks, Wayland Group, Weekend Unlimited are clients of the Investing News Network.
The companies selected for this article are clients of the Investing News Network and were selected as each of them have been developing their businesses in the Canadian cannabis market in the lead up to the legalization of the recreational market on October 17, 2018.
This article was written according to INN editorial standards to educate investors.