Quebec Adds 2 LPs for Recreational Supply

The province of Quebec is moving forward with changes to its recreational cannabis market as it attempts to combat supply challenges.

On Tuesday (February 26), the Société québécoise du cannabis (SQDC) signed supply agreements with licensed producers (LPs) Organigram Holdings (TSXV:OGI,OTCQX:OGRMF) and Zenabis Global (TSXV:ZENA,OTC Pink:ZBISF) to add product to its lineup of recreational marijuana.

Both producers will have to wait for the public process of the SQDC to determine the exact start date and final agreement in terms of quantity sold to the province.

Zenabis informed shareholders it expects to supply product starting the second quarter of 2019.

This agreement for both marijuana firms represents an increase in the presence of their products across Canada.

Thanks to the deal, Zenabis product will be available in nine provinces, while Quebec was the last province missing in Organigram’s portfolio.

“This relationship represents an additional significant relationship with a provincial counterparty,” Andrew Grieve, CEO of Zenabis, said in a press release.

Organigram indicated it plans to supply Quebec with “mainstream, value and premium flower, along with an assortment of pre-rolls and oils.”

Greg Engel, Organigram’s CEO, said his company would build on the relationship with provincial bodies as “we look ahead to the legalization of cannabis edibles.”

Shares of Zenabis closed on Tuesday at a price of C$3.68, while Organigram finished the day priced at C$8.53.

On Wednesday, share prices for both producers declined with Organigram decreasing 2.23 percent for a price of C$8.34 and Zenabis dropping 0.27 percent for a finishing price of C$3.67.

Quebec adjusts restrictions on marijuana shops

Quebec implemented for its government-run stores to be closed three days a week in order to maintain its supply of recreational product.

On Tuesday, CBC reported the province had reduced this restriction to two days.

“We know that we are now capable of opening all the stores another day in the week because we know that our supply logistics can sustain the whole network,” SQDC spokesperson Fabrice Giguère said.

At the end of January, the SQDC reported it had sold 5.7 tonnes of legal cannabis, resulting in C$40 million during its first three months of sales.

“To diversify its pool of suppliers, the SQDC issued a call for tenders for products in December and is studying the bids received,” the provincial agency informed consumers. “That said, no significant increase in supply will occur before late spring 2019.”

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.