Quebec Closes Legal Cannabis Supply Deals with 5 LPs

- April 11th, 2018

A closer look at the companies that have completed supply agreements with the province of Quebec. The deals come as the country prepares for legalization.

The province of Quebec officialized supply deals with five Canadian licensed producers (LPs) on Wednesday (April 11) as a way to prepare for the pending legalization of cannabis across the country.

The producers were given the green light on Wednesday to announce deals in place with the government of Quebec to supply the province with legal cannabis products for retail and online sale.

In Quebec, the alcohol board, Société des alcools du Québec (SAQ), will lead the legal retail and online sale of cannabis once it becomes legal in Canada–making this a development anticipated by investors of companies in the sector and viewed by analysts as a key catalyst for the entire industry.

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Here’s a quick look at each company that announced a deal with Quebec on Wednesday. The ranking of this list has been determined based on the amount of cannabis product each company has announced it will be allowed to supply in the province.

1. The Hydropothecary Corporation (TSXV:THCX)

In the past, Hydropothecary has talked up the importance of its residency in Quebec as a key factor when it came time for the province to determine what companies would be allowed to supply cannabis.

The talk appears to have paid off initially as not only did the company obtained the supplier agreement but was able to become a “preferred supplier” and provide the biggest amount of cannabis product.

According to its announcement on Wednesday, the Hydropothecary signed a five year supply deal for the post-legalization market in Quebec, with an extra year option in place. The company has been allowed to supply 20,000 kilograms of products in the first year of the agreement, 35,000 kilograms in the second year and 45,000 kilograms in the third.

The company projected an increase of volume for product supplied could reach 203,950 kilograms over the five-year deal.

On Wednesday Hydropothecary closed the trading day with a 13.24 percent raise to its stock price, representing a C$0.47 increase per share for investors. The company finished, valued at C$4.02 per share.

2. Canopy Growth (TSX:WEED)

Acting as the giant of the industry, Canopy was not left behind in the opportunity to supply cannabis to Quebec. The company will be allowed to provide 12,000 kilograms per year for the duration of its three-year agreement.

Canopy has also promoted its Quebec operations as a way to is another company attempting to compel its roots in the province as a way to obtain the beneficial supply deal.

“Quebec is home for Canopy Growth and we’re proud to be advancing this long-term partnership to develop the Québec market,” Mark Zekulin, president of Canopy said.

Canopy took in a more reserved increase to its stock price, the company closed valued at C$27.66 amounting to a 0.55 percent increase during Wednesday’s trading.


Similarly, Aphria secured a three-year deal with Quebec for also 12,000 kilograms of cannabis products allowed annually.

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According to Aphria’s announcement, the company will be able to supply the province with a variety of its branded products from its adult-use portfolio, including oils, strains denominated high-quality by Aphria and other derivative products.

“Our product and brand portfolio has been specifically developed to meet the needs of very distinct market segments, and we look forward to offer adult-use consumers in Quebec a unique choice,” Vic Neufeld, CEO of the company said.

Shares of Aphria rose 2.02 percent on Wednesday to C$10.09, representing a C$0.20 gain per share.

4. MedReleaf (TSX:LEAF)

Another of the Toronto Stock Exchange (TSX) licensed producers (LP) to obtain a supply agreement with Quebec is MedReleaf. However, the company will only be allowed to supply 8,000 kilograms of cannabis products during its three-year deal with the province.

As part of the announcement, CEO Neil Closner said MedReleaf’s new greenhouse in Exeter, Ontario brings up the company’s annual production capabilities up to 140,000 kilograms of cannabis products.

This year MedReleaf has introduced two recreational brands intended to entice consumers with the company’s adult-use product catalog. The two brands, San Rafael ‘71 and AltaVie, which recently held a launch event, are planned to attract existing and new cannabis consumers respectively.

MedReleaf saw its share price increase thanks to this announcement. By market closure, shares of the company increased 7.55 percent in value, reaching a C$16.80 worth per share.

5. Aurora Cannabis (TSX:ACB,OTCQB:ACBFF)

Aurora is the last company to announce a deal in place with Quebec. The company will be allowed to supply 5,000 kilograms of cannabis products per year for the Quebec adult market.

“Supply quantities will be determined based on demand on a month by month basis, with a minimum of 5,000 for the first year, but no set maximum,” the company indicated. “The initial term of the contract is to August 31, 2021.”

In a statement Terry Booth, CEO of Aurora said this arrangement will allow the company to offer a range of products for the retail consumer in Quebec. Similar to the rest of the companies with deals today, dried flower is not the only product intended for the post-legalization market.

Aurora’s increase for the day accounted for the lowest amongst all the LPs that confirmed their deals with the province of Quebec. Shares of Aurora rose 0.51 percent in value, to reach C$7.93 per share for the company.

Don’t forget to follow us @INN_Cannabis  for real-time news updates! 

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

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