August 12, 2021 -- InvestorsHub NewsWire -- NetworkNewsWire
Editorial Coverage: In a move that many expect to make a
significant impact on the cannabis sector, the Colombian government
has approved
exports of dried cannabis for medical and other
industries; the pivotal move marks another step forward for the
country as it develops its marijuana industry. Colombia already has
other essential components in place, such as a robust
infrastructure, access to skilled agricultural labor and a strong
distribution network for its exports of certain cannabis products
such as medicinal oils and extracts. The laws forbidding the
exports of dried cannabis flower was a barrier to further growth,
but that barrier was effectively removed when Colombian President
Ivan Duque signed the legislative decree ending its prohibition.
The move has ramifications for cannabis companies operating in the
country and around the world, including Flora Growth
Corp. (NASDAQ: FLGC) (Profile) and its expansive global
operations. The broader industry should also benefit from this
latest development since most majors, including Aurora Cannabis Inc. (NASDAQ:
ACB), Organigram Holdings Inc. (NASDAQ:
OGI), Clever Leaves Holdings Inc. (NASDAQ:
CLVR) and HEXO
Corp. (NYSE: HEXO), support the mainstream
worldwide evolution of legal cannabis.
- Colombia makes history by revising cannabis laws allowing the
industry to flourish, this includes permitting the export of dried
cannabis flower and domestic marketing.
- Located in Bucaramanga, Colombia, Flora’s Cosechemos
cultivation facility is situated on a unique land package with
fertile soil and an ideal climate for cannabis growth.
- Free sunlight and water from natural onsite springs, along with
optimized cultivation techniques, results in strong yields per
cannabis plant.
- Flora leverages its cost-effective cannabis cultivation and
processing operations in Colombia to offer flower and its
derivatives to clients and partners around the world.
- Company offers some 280 products, owns cosmetic and
pharmaceutical manufacturing licenses, and enjoys 2,500-plus points
of distribution across Latin America and the U.S.
Click here to view the custom infographic of
the Flora Growth editorial.
Colombia at the Forefront
Colombia offers near-perfect growing conditions for cannabis.
The country’s skilled labor and now incredibly friendly regulations
have supported Colombia’s rise in the legal cannabis space since it
initially allowed the production of medical cannabis in 2016.
However, while the government decriminalized cannabis, dried
cannabis flower, or “buds,” could only be permitted for export for
very limited purposes (medical research) or had to be processed
into a derivative such as an oil; the restrictions were designed to
prevent the flowers from finding their way to the black
market. Colombia’s new law puts the country “at the forefront in
terms of regulatory competitiveness,” according to President
Duque, who also noted that his country could now participate in
new markets, including food, beverages, cosmetics, and textiles, in
addition to pharmaceuticals.
When he signed the decree, Duque pointed out projections from
experts in the space who have projected a $64 billion global legal
cannabis market by 2024; he also noted that cannabis could serve as
a tool for “economic reactivation” in Colombia post the COVID-19
pandemic. “According to a 2019 study, in Colombia, the cannabis
sector generated 17.3 agricultural jobs per hectare,” said
Colombia’s Minister of
Justice Wilson Ruiz. The Colombian hierarchy seems determined
to catapult the country into global leadership as a legal cannabis
exporter in order to boost the economy and create a lot of jobs at
home.
This new turn of events looks to provide a significant advantage
for Flora Growth
Corp. (NASDAQ: FLGC), which operates in the country and is
focused on cannabis cultivation and processing in order to supply
international markets with its premium brands and products largely
focused in traditional consumer packaged goods (“CPG”) verticals
such as pharmaceuticals, natural wellness, cosmetics, food and
beverage, and hemp textiles. The new legislation looks to be
especially promising for established Colombian licensed producers,
particularly when considering the low production costs and that
dried cannabis flower revenue potential representing
the majority of
sales in countries with mature markets, such as the United
States, Germany, United Kingdom, and Australia.
Headquartered in Miami, Flora Growth already has established a
globally recognized house of brands. Positioning itself to be one
of the world’s lowest-cost cannabis producers, Flora has
strategically positioned itself as a global cannabis CPG company
with a vast international distribution platform. Flora offers more
than 280 products, owns cosmetic and pharmaceutical manufacturing
licenses, and enjoys 2,500-plus points of distribution across Latin
America and the United States.
In addition, Flora has two separate LOIs executed for
significant acquisitions and is building partnerships designed to
expand the breadth of its distribution reach by leveraging networks
of others. Flora is against vertical integration and has
established itself as a nimble, asset-light operation. This
position allows the company to work with the best of the best in
their respective channels to bring product to market and capture
incremental revenue while at the same time derisking the prospect
of entering new jurisdictions and channel segments. With all this
in mind, the legislative changes in Colombia could be a significant
growth accelerator with the potential to significantly increase
revenues. Soaring revenues with high margin product is an attention
grabber in Wall Street.
Flora in Position to Capitalize
Industry experts agree that outdoor growing is far less
expensive than greenhouse cultivation, and Flora who has taken
outdoor growing to the next level in Colombia. To ensure — and
prove — product quality, Flora has sent samples to a registered lab
for cannabinoid, microbial and pesticide testing; the company has
already received back excellent lab results. Free sunlight and
water in three pilot plantings on 4.94 acres at Flora’s Cosechemos
farm created the ideal setting for testing 30 varieties of
non-psychoactive (high-cannabidiol or CBD) cannabis and
optimization of its growing techniques, which resulted in a cost
base of just $0.06 per gram. That compares to $1.89 per gram in
North America, calculated through an average of four major North
American licensed producers. With the new legislative changes, the
Flora cultivation team has now gone into their seed vault of
premium, world-class genetics and are excited to start producing
high-THC cultivars.
Flora’s cost is 60% lower than the next closest Colombian peer.
Immediately following the announcement of Colombia’s updated laws,
Flora signed a
letter of intent with an international distributor to
supply dried flower and derivatives from its first commercial
harvest and after the company receives all requisite import
licenses. In addition, Flora also expects to start supplying
Australian markets with medical cannabis, as well as
over-the-counter CBD products via its already existing partnership
with Evergreen Pharmacare.
Production of high-CBD strains of cannabis are well underway at
Flora Growth’s Cosechemos facility. The company is undergoing prep
work to propagate strains high in THC, the psychoactive component
in cannabis. Additionally, the company is constructing an
extraction lab at the facility; the lab will meet all requisite
standards and is expected to be completed this quarter. After
completion, the company will immediately seek EU-GMP certification.
As soon as Flora receives approval to export its cannabis products,
the company will be positioned to immediately capitalize on the
massive global dried cannabis flower market segment that was
previously unavailable.
Ideal Cultivation Combination
Colombia’s climate is ideal for the cultivation of cannabis all
year long, and Flora owns and grows on some of the country’s best
farming acreage. Flora’s Cosechemos farm in Bucaramanga, Colombia,
covers 247 acres (10.8 million square feet). Flora also holds the
rights to another 5,268 acres (230 million square feet) licensed in
Puerto Boyacá, Santander, about 170 miles southwest of
Bucaramanga.
Situated on the equator, Flora’s licensed land coupled with
Colombia’s climate is ideal for year-round cannabis cultivation.
The property receives 12.8 hours of sunshine 365 days per year. Its
extremely fertile soil and optimal wind conditions (3 mph average)
help reduce risks of contamination from other plants. The land also
hosts six natural spring water deposits, resulting in no water
costs for Flora.
Colombia is the cut-flower capital of the world, and a top
producer of coffee, bananas and more, resulting in a highly skilled
agricultural labor force that work for roughly one-tenth of
comparable peers in the United States. The combination of
these factors facilitates a minimum of three harvests per year,
which is up to three times that of its North American peers
cultivating outdoors.
Door Opens for New Opportunities
Another positive move is Colombia’s removal of marketing
restrictions on its domestic cannabis products. This allows Flora
to advertise across its portfolio of products to drive sales at its
more than 1,500 points of distribution throughout Colombia.
Marketing could also be beneficial as it relates to
an LOI with
Avaria for Flora to introduce Avaria’s KaLaya, an
award-winning pain cream distributed across Canada to Colombia and
the Americas.
Finally, the new Colombian regulations allow cannabinoid-infused
food and beverage, which opens the door for developing new products
as well as introducing products already available in Flora’s Kasa
Wholefoods food and beverage unit. Incidentally, the new Colombian
laws coincide with the recent signing of a distribution agreement
between Kasa and Importaciones y Asesorias Tropi S.A.S., Colombia’s
largest CPG distributor; that agreement is expected
to generate $10
million in annual revenue for Flora by delivering premium
and sustainable canned products to Colombians, with the opportunity
to expand the product line in the future.
Destined for Growth
The $64 billion market by 2024 that Duque referenced seems in
line with other forecasts. Earlier this year, Fortune Business
Insights noted that it foresees the global cannabis market reaching
$97.35 billion by 2026 with 32.9% compound annual growth.
Certainly, the legal cannabis market appears destined for
impressive growth, which breeds bullishness in major players
throughout the world.
Aurora Cannabis Inc. (NASDAQ:
ACB) recently shipped its first European-produced shipment of
medical cannabis to the German market. According to the company,
the first batch of dried flower medical cannabis comes from Aurora
Nordic, a subsidiary. The high-quality product is being shipped to
German pharmacies and is a significant milestone for the company
and its expanded supply solution for the European market, which is
experiencing significant growth. The subsidiary has more than 9,200
m production space and can produce an estimated 10,000 kg of
medical cannabis a year, making it ideally suited to serve the
European and other international markets.
Earlier this year, Organigram Holdings Inc. (NASDAQ:
OGI) unveiled its newest dried
flower offering: Big Bag o’ Buds. This lineup of products
features a roster of well-known genetics and an exciting rotation
of one-time offerings in a 28g format. “Customers across the
country continue to express the importance of large formats and new
genetic offerings at an appealing price point,” says Organigram
senior vice president of sales and commercial operations Tim
Emberg.“Without a doubt, Big Bag o’ Buds delivers on all of those
points but also offers Canadian consumers a continuous pipeline of
new cultivars reflecting our team’s ongoing search for and
development of new terpene profiles and phenotypic
expressions.”
Clever
Leaves Holdings Inc. (NASDAQ: CLVR) is also
well positioned to take advantage of the changes in Colombian law
and the opportunity to commercially produce and export dried
cannabis flower. The company is planning to
leverage its Colombian-based 1.8 million-square-foot CUMCS
GACP-certified cultivation facility, along with its EUGMP Part II
certification covering the production of dry flower. Following
Duque’s announcement, the company noted that Colombian flower
complements its already-strong Portuguese flower production,
providing opportunities for Clever Leaves to present a
comprehensive portfolio, covering different strains and growing
conditions, that will suit ever-evolving patient needs.
HEXO
Corp. (NYSE: HEXO) is an
award-winning licensed producer of innovative products for the
global cannabis market and, with its most recent
acquisition, is strengthening its foothold in the United
States. The company recently closed on the purchase of its first US
production facility through a wholly owned US subsidiary. The
50,000- square-foot facility in Fort Collins, Colorado, will
provide US CPG companies and consumers access to HEXO’s proprietary
technology and products. “The Colorado facility will allow us to
successfully execute on our US strategy, which includes supplying
high-quality Powered by HEXO(R) technology and leveraging our
intellectual property portfolio across the United States,” said
HEXO Corp CEO and co-founder Sebastien St-Louis.
The cannabis market around the world seems headed for notable
growth as the industry changes from one of pure speculation to one
strengthened by solid fundamentals and real investment
opportunities. Mounting revenues and high margins are strong
indicators of eye-catching success moving forward.
For more information about Flora Growth Corp.
(NASDAQ: FLGC), please visit Flora Growth
Corp. (NASDAQ: FLGC).
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