NEW YORK, June 7, 2019 /PRNewswire/ — The gap between licensed producers and consumer demand has widened since Canada fully legalized cannabis back in late 2018. Now cultivators and producers are struggling to meet consumer demands largely due to government-imposed regulations. For example, the Canadian government has limited the number of licenses given to companies and also curtailed retail hours. As such, supply shortages have significantly impacted many retailers and dispensaries in Canada. Provinces such as Ontario, Quebec, and Newfoundland have a limited number of operating brick-and-mortar stores and in combination with low supplies, some ultimately ended up closing just months into the legalization era. Brock University Professor Michael Armstrong argues that supply will eventually catch up with demand if regulatory complications can be resolved. Armstrong also mentioned that legal production ramped up about half a year prior to Canada’s legalization. Furthermore, he cites data from 2017 and compared it to current production rates, highlighting that producers are growing at a faster rate. Armstrong says that not only were producers stockpiling their inventory, but each inventory per month was exponentially growing larger. And if licensed producers can continue increasing their inventory size, Armstrong predicts that supply will catch up to the demand by the end of 2019. Health Canada forecasts that demand for total cannabis consumption is expected to reach almost a million kilograms per year. Nonetheless, the cannabis industry is still heavily regulated because it was once classified as an illicit drug in Canada and the government is continuing to take precautions regarding the plant even after legalizing it. While the market still remains within its infancy stage, it will continue to mature over the next several years, thus lessening imposed regulations. According to data compiled by ArcView Market Research and BDS Analytics, the worldwide consumer spending on legal cannabis reached an estimated USD 12.2 Billion in 2018. By 2022, it is expected for consumer spending to reach USD 31.3 Billion while registering a CAGR of 26.7% from 2017 to 2022. Pasha Brands Ltd. (CSE: CRFT), Canopy Growth Corporation (NYSE: CGC) (TSX: WEED), Anheuser-Busch InBev SA/NV (NYSE: BUD), Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB), HEXO Corp. (NYSE-A: HEXO) (TSX: HEXO)
ArcView Market Research and BDS Analytics highlight that the entry of big tobacco and large beverage producers into the sector is attributable to the potential growth in consumer spending. Moreover, the firms also note that the passage of the U.S. Farm Bill is a key factor in the global market’s growth. Predominantly, the majority of the global cannabis revenue derives from the U.S. because of its early adoption. However, most of the large cannabis corporations are headquartered within Canada. At the end of 2018, the top five licensed producers in Canada reached a combined market capitalization of nearly USD 20 Billion. Notably, the five producers have all established international operations, supplying the various regions across the world with medicinal cannabis. Furthermore, as investments continue to pour in from other public or private sectors, licensed producers are expected to benefit greatly. Producers can use investment funds towards obtaining more licenses or expanding their facilities. In return, producers can obtain higher yields during each harvest. However, sometimes higher yields can interfere with the quality of the bud. As a result, more producers are using funds in order to tend to each individual plant to grow more potent and high quality strains as consumer demand continues to increase. In conclusion, Canadian consumers can expect cannabis supply to stabilize if licensed producers can overcome legal barriers. „If you look at the data from 2017, and you compare it to pace of production right now, you can see how licensed producers were stockpiling cannabis at a hectic rate,” Armstrong said. „Something’s definitely going on with getting supply to consumers, that’s one of the possibilities, but I’m pretty sure this will all eventually get resolved.”
Pasha Brands Ltd. (CSE: CRFT) yesterday announced breaking news that, „it has acquired Medcann Health Products Ltd. („Medcann”), a fully licensed, Health Canada approved facility to process, cultivate and sell medical cannabis under the Cannabis Act regulations. Prior to its acquisition by Broome Capital Inc., the privately held Pasha Brands Ltd. had previously entered into a letter of intent to acquire Medcann, dated effective April 30, 2019.
This acquisition will allow subsidiary company, BC Craft Supply Co. Ltd. („BC Craft”) to accelerate its pace of growth in Canada’s new craft cannabis sector. BC Craft acts as a service provider to small farmers under the newly created Health Canada licence category known as Micro Cultivator. In exchange for a cannabis supply agreement with a micro cultivator, BC Craft assists the applicant in receiving its licence with Health Canada and provides a whole host of services ranging from quality assurance to the marketing of its cannabis products in Canada’s provincial and territorial markets.
With approximately 10,000 square feet of space, on an acre of land on Vancouver Island, Medcann was granted its processing, cultivation and sales licence by Health Canada in March 2019. Medcann provides Pasha with an immediate pathway to bring craft cannabis products to market under Health Canada’s new micro-cultivation licence category. The Medcann facility will test, process and package high quality craft flower, and package this flower for distribution throughout Canada. In addition to flower sales, it is expected that Medcann will process cannabis for Canada’s emerging oil market through an extraction lab to be developed at the facility. Pasha currently owns nine prohibition-era cannabis brands which Canadians were purchasing in the pre-legalization era. As regulations permit, Pasha will distribute product under these leading brands throughout Canada.
There is a growing supply gap for cannabis in Canada as licensed producers are unable to meet consumer demand. Through BC Craft, Pasha will focus on bringing micro-cultivators into the market. The micro-cultivation licensing program allows for the processing of approximately 500 kilograms of dried flower per year, per micro cultivator. More than just a viable solution for closing the supply gap, this provides consumers with high-quality craft cannabis products that are differentiated from others in the space. Under the micro-cultivation program, the BC Craft network will look to add and assist hundreds of producers. For every 100 micro-cultivators BC Craft secures, up to 50,000 kilograms of world-class craft cannabis could be available to the market via Canada’s regulated supply chain.
In consideration for the acquisition of all of the outstanding share capital of Medcann, Pasha has completed a cash payment of $3,000,000, and has issued 14,444,445 common shares (the „Consideration Shares”) at a deemed price of $0.90 per share, to the existing shareholders of Medcann.
The Consideration Shares are subject to a pooling arrangement which restricts the ability of the holders to transfer or trade the shares. The Consideration Shares will be released from the pooling arrangement over a period of eighteen months, with 25% of the shares released immediately upon completion of the acquisition, and the balance released in six equal tranches every three months thereafter. In the event the volume weighted average closing price of the Pasha common shares is less than $0.72 in the twenty trading days prior to the expiry of the pooling arrangement, the shareholders of Medcann will be entitled to receive additional Consideration Shares to guarantee the value of the consideration they receive.
Following completion of the acquisition, Medcann will also hold the right to acquire the property on which its facility is located in consideration for a further cash payment of $1,200,000. The property is currently subject to a lease arrangement which permits the operation of the facility.
In connection with completion of the acquisition, Pasha intends to issue 1,066,667 common shares as a finders' fee to certain arms'-length parties who assisted Pasha in facilitating the transaction. All shares issued as a finders' fee will be subject to a four-month-and-one-day statutory hold period in accordance with applicable securities laws.
About Pasha Brands: Based in Vancouver, British Columbia, Pasha is a vertically integrated prohibition-era brand house that is firmly rooted in BC’s craft cannabis industry, which boasts an international reputation. With proven capabilities in cannabis cultivation, genetic research and development, product processing, and retail, Pasha is uniquely positioned in the new legal cannabis market through its network of hundreds of craft cannabis suppliers under the Pasha umbrella. Pasha’s subsidiary, BC Craft, is also developing a craft cannabis campus, which is dedicated to bringing craft quality into the newly legal cannabis market in Canada. BC Craft is driven to assist craft growers in obtaining security clearance and licensing to grow as micro-cultivators, specializing in education and compliance to bring growers into the regulated cannabis supply market. Pasha’s common shares trade on the CSE under the symbol „CRFT”. For more information, please visit www.pashabrands.com„
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Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) is a world-leading diversified cannabis, hemp and cannabis device company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms, as well as medical devices through the Company’s subsidiary, Storz & Bickel GMbH & Co. KG. Canopy Growth Corporation recently introduced Spectrum Therapeutics, a new global brand that will encompass all of the Company’s ongoing commercial medical and clinical research operations including Spectrum Cannabis, Canopy Health Innovations (CHI), and the most recent addition to Canopy Growth’s medical portfolio, Bionorica SE-founded C3 Cannabinoid Compound Company („C3”), a European leader in cannabinoid-based medical therapies. Incorporating these entities into one unified ecosystem will integrate the Company’s medical efforts as one global healthcare enterprise. Spectrum Therapeutics now encompasses the production and distribution of full-spectrum and single cannabinoid medical cannabis products; industry-leading education, resources and support for patients and healthcare practitioners; as well as pre-clinical and clinical research and the development of cannabinoid-based medicines. „We’ve always been a company that provides more than medical cannabis to our patients,” commented Dr. Mark Ware, Chief Medical Officer, Canopy Growth. „We also offer education for patients and healthcare professionals and are engaged in research to define the safety and efficacy of cannabinoid medicines and the development of new cannabinoid-based treatments. Integrating our commercial medical businesses and clinical research arm under a single entity better reflects our position as a healthcare company that’s driving further acceptance of cannabinoids as mainstream medicine and addressing the medical and wellness needs of our patients worldwide.”
Anheuser-Busch InBev SA/NV (NYSE: BUD) is a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with secondary listings on the Mexican (MEXBOL: ANB) and South African (JSE: ANH) stock exchanges and with American Depositary Receipts on the New York Stock Exchange. Recently, AB InBev, the world’s leading brewer, and Tilray, a global pioneer in cannabis production and distribution, announced a partnership to research non-alcohol beverages containing tetrahydrocannabinol (THC) and cannabidiol (CBD). The partnership is limited to Canada and decisions regarding the commercialization of the beverages will be made in the future. The research partnership combines AB InBev’s deep experience in beverages with Tilray’s expertise in cannabis products. AB InBev’s participation will be through its subsidiary Labatt Breweries of Canada, one of the country’s founding businesses and its leading brewery, and Tilray’s participation will be through its Canadian adult-use cannabis subsidiary High Park Company, which develops, sells, and distributes a portfolio of socially responsible cannabis brands and products in Canada. Each company intends to invest up to USD 50 Million USD, for a total of up to USD 100 Million USD. „Labatt is committed to staying ahead of emerging consumer trends. As consumers in Canada explore THC and CBD-infused products, our innovative drive is matched only by our commitment to the highest standards of product quality and responsible marketing. We intend to develop a deeper understanding of non-alcohol beverages containing THC and CBD that will guide future decisions about potential commercial opportunities,” said Kyle Norrington, President, Labatt Breweries of Canada. „We look forward to learning more about these beverages and this category in the months ahead.”
Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB), headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 500,000 kg per annum and sales and operations in 24 countries across five continents, is one of the world’s largest and leading cannabis companies. Aurora Cannabis Inc. recently announced that the Company had been selected by the German Bundesinstitut für Arzneimittel und Medizinprodukte BfArM (Federal Institute for Drugs and Medical Devices) as one of three winners in the public tender to cultivate and distribute medical cannabis in Germany. The Company was awarded the maximum number of 5 of the 13 lots in the tender over a period of four years with a minimum supply of 4000kg total. The cannabis produced will be sold to the German government and supplied to wholesalers for distribution to pharmacies. „We are very proud to have been selected as one of only three companies by the German government, which is a great achievement by our team,” said Neil Belot, Chief Global Business Development Officer. „Having the highest rated concept is a strong validation of the Aurora Standard cultivation philosophy, as well as of our track record in the delivery of safe and high-quality medical cannabis products to the German system. We commenced delivering dried cannabis flower from Canada to the German market in 2017, and recently added cannabis extracts to our offerings for German patients. Winning the tender reflects a natural evolution for Aurora, establishing a more prominent local footprint in this important international market with over 82 million people.”
HEXO Corp. (NYSE-A: HEXO) (TSX: HEXO) is an award-winning consumer packaged goods cannabis company that creates and distributes prize-winning products to serve the global cannabis market. HEXO Corp. recently completed the first harvest in its 1 million sq. ft. expansion, marking an important execution milestone in the Company’s continuous growth. Since early January, plants have been moving into the greenhouse and the first plants have now been harvested. The Company continues to ramp up to full harvest capacity using the continuous harvest methodology, the latest step towards reaching the full annual production capacity of 108,000 kg of dried flower per year. HEXO Corp’s headcount now exceeds 600 employees. The Company expects to hire another 500 employees in the coming months; 300 additional positions at its campus in Gatineau, Quebec, and 200 in its Belleville, Toronto and Montreal locations. „Completing the first harvest in our 1,000,000 sq. ft. greenhouse expansion showcases the dedication and hard work of the entire HEXO team,” said Sébastien St-Louis, HEXO’s Chief Executive Officer and Co-Founder. „We are very proud of our continued ability to execute on our plans, creating value for our shareholders and demonstrating our commitment to our customers. This cultivation milestone means that an expanded HEXO product offering will be available to more Canadians shortly.”
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