Dedicated Cultivators Compete for Consumers in the Crowded Cannabis Industry
However, many micro-cultivators have engaged in an innovative method of growing potent cannabis, commonly known as "craft cannabis."
NEW YORK, Nov. 4, 2019 /PRNewswire/ -- As the cannabis industry continues to evolve, competition among companies is becoming more and more fierce. In particular, the struggle for growers has become much more prevalent when compared to retailers, according to Deepak Anand, a cannabis industry expert based in Vancouver. In March 2019, Health Canada indicated that the agency only received 150 applications for micro-cultivation or processing licenses. Typically, larger licensed producers dominate the marketplace because they are able to produce tons of cannabis each harvest. As a result, macro cultivators are able to sell their products at wholesale rates. However, Anand noted that micro-cultivators have to wait for at least 18-months before getting approved for a license, which usually deters entrepreneurs from applying. Consequently, many micro-cultivators work within gray markets while awaiting their approvals. Nevertheless, service providers within the industry have already collaborated or secured partnerships with companies who are stuck in limbo, waiting for approval. Moreover, some service providers have inked agreements to supply companies with their own supply of products in order to accelerate their approval time. Overall, the collective effort by service providers and micro-cultivators is diversifying the market as large licensed producers begin to witness their market shares steadily dwindle. According to data compiled by GlobalInfoResearch, the global legal marijuana market was valued at USD 7.97 Billion in 2019. And by 2024, it is expected to reach USD 35 Billion while registering a CAGR of 28% over the next five years. Pasha Brands Ltd. (OTC: CRFTF) (CSE: CRFT), Tilray, Inc. (NASDAQ: TLRY), Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB), Neptune Wellness Solutions Inc. (NASDAQ: NEPT) (TSX: NEPT), Planet 13 Holdings Inc. (OTC: PLNHF) (CSE: PLTH)
One of the main concerns about micro-cultivators is their ability to survive in the marketplace among large licensed producers. In 2017, Health Canada announced its intent to issue more licenses for micro-cultivators in hopes to "enable a diverse, competitive legal industry comprised of both large and small players in regions across the country." However, by January 2019, there were only 145 authorized cultivators in Canada. Meanwhile, there were approximately 840 site applications in process at the end of December 2018, Health Canada told Marijuana Business Daily. Subsequently, many small cultivators tend to struggle within the marketplace because large producers control a significant fraction of the market share. However, many micro-cultivators have engaged in an innovative method of growing potent cannabis, commonly known as "craft cannabis." The art of craft cannabis cultivation is similar to other craft professions where producers strive to create high-quality and premium products. Specifically, craft cultivators boast about their high quality and natural cannabis that large licensed producers simply cannot replicate. Typically, these cultivators avoid using artificial products such as pesticides to avoid damaging the plant. Moreover, cultivators also avoid using machinery to trim the plants in order to preserve the buds on the plant as much as possible. Instead, craft cultivators meticulously hand-trim each individual plant, as machinery can severely damage the cannabinoid content within a cannabis plant; although using the two can exponentially accelerate the growing time and speed up harvest rates. Regardless, craft cultivators would much rather produce premium-grade cannabis than mass produce bulk cannabis every harvest. "Nearly every marijuana cultivator wants to call its cannabis craft. Whether the plant is grown indoors or outside, with a hydroponic irrigation system or a watering can, under the sun or high-tech LED lights, few growers want their flower to be considered corporate cannabis," said Bart Schaneman, Cultivation and Extraction Reporter at Marijuana Business Daily. "As a general philosophy, a cannabis grower looking to brand its flower as craft needs to show the consumer that the flower was grown with mindfulness and close attention paid to each plant."
Pasha Brands Ltd. (OTC: CRFTF) (CSE: CRFT) is also listed on the Canadian Securities Exchange under the ticker (CSE: CRFT). Earlier last week, the Company announced that, "Between 2014 and 2018 global sales of legal cannabis more than tripled from $3.4 billion to $10.9 billion, according to the State of the Legal Cannabis Markets report from Arcview Market Research. BDS Analytics calls for a near-quadrupling from 2018 levels to $40.6 billion by 2024 at an annual growth rate of 21.9%. This has led many people to wonder, why the recent market downturn in the cannabis sector?
'Legal cannabis, particularly in Canada, has been struggling under the weight of burdensome regulations, poor supply-chain management, and quality issues,' said Jamie Shaw, Chief Communications and Culture Officer for Pasha. 'Coupled with that, companies in the sector were slow to deliver the results expected and were generally seen as overvalued. Share prices were determined at a time when there were relatively few licences that seemed to have a stranglehold on the regulated marketplace.'
While these challenges are most pronounced in today's market, for Pasha it has been an affirmation of its business plan. 'We never bought into the big-box mentality that's causing many of these problems," Shaw said. "Pasha has focused on small batch, craft producers, and has been meeting its goals at a quick pace, with the first micro-cultivation harvest expected in December.'
Pasha has been on-boarding brands and people that made legalization possible, including Baked Edibles, Earth Dragon Organics, and Beard Brothers Collective, and has acquired a Health Canada licensed facility on Vancouver Island. Pasha expects to be the first licensed, nation-wide, all-craft company to be operational by end of Q4 2019/early Q1 2020.
Of the first 5 micro-licences issued by Health Canada, Pasha has signed supply agreements with all of them. Pasha also has signed supply agreements with 60 more applicants currently in the CTLS queue with Health Canada, and another 40 navigating the licensing process with Pasha subsidiary, BC Craft Supply Co. Ltd. With 100 micro-cultivators each permitted to produce up to 500kg per year, Pasha could have the ability to bring up to 50,000kg per year of high-quality craft cannabis to Canadian consumers.
'The legal market has yet to see products with the same care and attention to detail that went into the highest quality, illicit products," said Patrick Brauckmann, Executive Chair of Pasha Brands. "Pasha is committed to bringing products to the marketplace that put the consumer first.'
Partnered with powerful distributors like Great North and developing innovative industry solutions like Craft Labs, Pasha looks to disrupt how people think of legal cannabis.
About Pasha Brands: Based in Vancouver, British Columbia, Pasha is a vertically integrated, prohibition-era brand house 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 subsidiary, Medcann Health Products Ltd., is a Health Canada licensed cultivator and processor with a licence to sell medical cannabis products in Canada. Pasha and BC Craft are 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" and on the FSE under the symbol "ZZD". For more information, please visit www.pashabrands.com."
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Tilray, Inc. (NASDAQ: TLRY) is a global pioneer in cannabis cultivation, processing and distribution currently serving tens of thousands of patients in 13 countries spanning five continents. Tilray Inc. recently announced that it had successfully imported Good Manufacturing Practices (GMP)-certified finished medical cannabis oral solutions into Ireland intended for nationwide distribution. On June 26th, 2019, Ireland's Department of Health enacted the Medical Cannabis Access Programme, which provides compassionate access to medical cannabis for patients in need in Ireland. This new program provides an alternative to legislation that only allows access by patients with a ministerial license, marking a significant milestone for Ireland and the global medical cannabis industry. The Medical Cannabis Access Programme is expected to allow patients to access Tilray oral solutions in the second half of this year. Patients suffering from indications not covered by the program will still have the option to obtain a ministerial license for such products. "This development in Ireland represents an exciting turning point for patients," says Catherine Jacobson, Tilray's Vice President of Medical and Regulatory Affairs. "We're proud to have the opportunity to provide patients in Ireland with access to Tilray's standardized GMP-certified medical cannabis products, and we're thrilled to see an increasing number of countries improve access to medical cannabis. We will continue to do our part to increase access for patients in need around the world."
Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB), headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 625,000 kg per annum and sales and operations in 25 countries across five continents, is one of the world's largest and leading cannabis companies. Aurora Cannabis Inc. recently announced the completion of the previously announced plan of arrangement with Hempco Food and Fiber Inc. pursuant to which Aurora had acquired all of the issued and outstanding common shares of Hempco not already owned by Aurora, reflecting a valuation of approximately CAD 63.4 Million on a fully diluted basis. Hempco is now a wholly-owned subsidiary of Aurora. The Hempco Shares will be delisted from the TSX Venture Exchange, and Aurora will apply to the relevant securities commissions for Hempco to cease to be a reporting issuer under Canadian securities laws. "Aurora is defining the future of cannabis and hemp, globally," said Terry Booth, Chief Executive Officer of Aurora. "Through the addition of Hempco, we have assembled a world-class portfolio of high-quality hemp assets that together form the basis of a strong new operating division that will develop CBD-from-hemp around the world. Aurora Hemp brings together the cultivars, strategic partners, brands, and distribution networks to service medical, consumer, and wellness markets and further advances Aurora's entry into the US hemp food and hemp-derived CBD markets."
Neptune Wellness Solutions Inc. (NASDAQ: NEPT) (TSX: NEPT) specializes in the extraction, purification and formulation of health and wellness products. Neptune Wellness Solutions Inc. recently announced that its Solutions Business had begun offering turnkey product development solutions with hemp-derived ingredients to business customers in the United States. A U.S.-based supply chain of licensed hemp extract producers has been established, and initial purchase orders are now being processed. Neptune boasts long-standing experience in the management of custom and white label turnkey product development solutions comprising a diverse array of product forms including softgels, liquids, topicals, emulsions, and water-dispersible powders. Branded ingredients and products that have contributed to Neptune's success, such as MaxSimil® and ECSentialsTM formulations, could potentially be used in unique combinations with hemp ingredients, particularly as the U.S. regulatory framework around hemp extracts and cannabidiol (CBD) evolves. "The U.S. market for hemp is developing rapidly and represents a significant opportunity for the consumer products industry. Neptune is now offering products and services to American brands that want to create a unique hemp-based portfolio, with products made exclusively in the U.S. for the U.S." said Jim Hamilton, President and Chief Executive Officer of Neptune.
Planet 13 Holdings Inc. (OTCQX: PLNHF) (CSE: PLTH) is a vertically integrated cannabis company based in Nevada, with award-winning cultivation, production and dispensary operations in Las Vegas. Planet 13 Holdings Inc. recently announced that it has added HaHa Gummies™ and Dreamland Chocolates™ to its growing in-house brand portfolio. Planet 13 in-house brands currently represent approximately 15% of all products sold at the SuperStore. With the opening of the new production facility, Planet 13 intends to continue to grow the in-house brand penetration with a long-term, sustainable target of approximately 50%. Planet 13 also plans to leverage its current SuperStore supplier relationships to gain rapid access for its in-house brands, to premium shelf space in third-party Nevada dispensaries. "Edibles, especially premium sativa-based edibles, have been very popular with our tourist customer base," said Larry Scheffler, Co-Chief Executive Officer of Planet 13. "HaHa Gummies™ and Dreamland Chocolates™ were designed from the ground up using the customer insights we have generated from the over 400,000 people we have served at the SuperStore in just eight months. We expect that the combination of this deep customer connection and an interactive production experience at the SuperStore will quickly make both brands Nevada favorites."
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