September 28, 2021 -- InvestorsHub NewsWire -- NetworkNewsWire
Editorial Coverage: When Democrats took control of Capitol Hill
during the elections in November 2020, there was growing optimism
that federal legalization of cannabis was in the cards for
Americans. Nine months into the new administration, progress has
been slow in the United States. Latin American (“LATAM”) countries,
on the other hand, have moved forward with new laws ending cannabis
prohibition and supporting the industry, moves to generate
government revenue, cut into illicit sales and bring novel
therapeutic options to people in need. Colombia, Mexico and Panama
are emerging as global pioneers promoting responsible cannabis
commerce, which bodes well for Flora Growth Corp.
(NASDAQ: FLGC) (Profile), a company
with robust operations in Colombia. These countries are following
the example set forth by Canada, which has given rise to some of
the legal cannabis’ juggernauts, such as Canopy Growth Corporation (NASDAQ:
CGC), Tilray Inc. (NASDAQ:
TLRY) and Sundial Growers Inc. (NASDAQ: SNDL),
as other companies such as Innovative Industrial Properties Inc. (NYSE:
IIPR) lend additional support to the growing
market.
- Mexico, Panama and Colombia made significant moves supporting
legal cannabis industries, including Colombia now allowing exports
of dried flower
- Flora Growth is an emerging leader in Colombia with a portfolio
of brands, dozens of licenses and burgeoning distribution networks
globally
- Flora’s operations include 247 square acres of licensed land
proven to grow premium organic cannabis at $0.06 per gram, nearly
98% cheaper than some Canadian peers
- A spate of new laws in Colombia gives Flora a competitive edge
for expedited growth through its family of companies and massive
land position
Click here to view the custom infographic of
the Flora Growth Corp. editorial.
Colombia: A Beacon in LATAM Cannabis
LATAM commands investor attention as a region where meaningful
progress is happening, not stagnating as in the United States. Late
in June, Mexico’s
Supreme Court opened the door to adult-use marijuana
legalization by declaring prohibition of recreation cannabis as
unconstitutional. Last month, Panama
legalized medical marijuana, aligning the country with at
least seven other LATAM countries that allow some form of cannabis
at the federal level.
Perhaps the biggest news of the summer out of LATAM arrived in
July when Colombia
authorized exports of dried cannabis flower for medical
use, bookending about five years’ worth of legislative changes
favoring legal cannabis. Colombia had already established cannabis
infrastructure by allowing production, distribution, and exports of
many cannabis goods, including seeds and derivatives such as
ointments, but the country had held exporting dried flower – far
and away the most popular version of the plant – as verboten.
Decree 811, issued July 23, 2021, changed that, making the
country’s intentions clear to be a market leader.
Flora Growth Corp. (NASDAQ:
FLGC) has the distinction of being the first
traditional cannabis company to IPO on the Nasdaq exchange,
successfully completing its initial public offering in May. It also
has the distinction of operating one of the largest outdoor,
organic cannabis cultivation facilities in Colombia, where it
benefits from production costs that are markedly lower than
industry averages.
Flora is entrenched in cannabis in Colombia, where it has
diversified businesses spanning the market spectrum including
production, research and development, wholesale, and consumer
packaged goods with a brand portfolio covering pharmaceuticals,
textiles, cosmetics, and food and beverage goods. All told, Flora
has more than 340 products, 70-plus medical and cosmetic licenses
and more than 2,500 points of distribution across LATAM and the
U.S. with sales across 13 other countries. The company’s partners
in Colombia include Importaciones y Asesorias Tropi S.A.S., better
known as Tropi, the largest food distributor in Colombia, which has
more than 130,000 distribution points across the country.
Flora’s sales channels are expanding internationally, which
dovetails perfectly with the new Colombian export laws as Flora’s
distribution extends throughout LATAM, Europe and the United
Kingdom. Future revenue was bolstered in June when
Flora agreed to
acquire Switzerland-based Koch & Gsell, the parent of
the hemp cigarette brand Heimat. The company also deepened its E.U.
inroads with an LOI for a 2-million-euro investment in the European
cannabis company, Hoshi International Inc.
Low Production Costs, Big Competitive Edge
As noted by Prohibition Partners in its second edition of the
Latin America and Caribbean Cannabis Report, low-cost labor and
construction costs in the LATAM region mean that the overall cost
of cannabis production can be up to 80% lower than North American
counterparts. Flora takes it to the next level, with production
costs in pilot programs on the company’s 10.8 million square feet
(247 square acres) of licensed land at only $0.06 per
gram of cannabis, about 97% less than the reported costs
of Aphria and Sundial (~$1.85/gram).
These ultra-low production expenses are made possible through
the combination of low labor costs, free water from the property’s
six natural springs and high yields from near-ideal climate
conditions that are conducive to at least three harvests per year.
Inexpensive labor doesn’t imply unskilled. Agriculture is at the
heart of the Colombian economy, including growing cut flowers that
supply over 70% of all those imported by the U.S.
Partnerships Starting to Bloom
Flora’s key partnerships include a new joint
venture with Canada’s Avaria, the owner of the popular
KaLaya brand pain cream sold across Canada at leading retailers
including Loblaws, Walmart and London Drugs. Flora is a perfect
partner for Avaria because it does not hold a license in Canada to
produce cannabis-derived versions of its products at a commercial
scale. Per the pact, Avaria will supply the product and Flora will
distribute it throughout its expansive LATAM network with plans to
penetrate U.S. markets too, while Flora Lab in Colombia works to
produce KaLaya’s CBD-infused products using cannabis from Flora’s
Colombian cultivation facility, Cosechemos.
This summer, Flora’s Kasa Wholefoods Co. inked a sales agreement
with Tropi for which the distribution giant will begin placing Kasa
products throughout the country. The first shipment was delivered
in July with a value of $1.1 million as part of an initial one-year
contract. Management expects to see that current contract increase
to $2 million monthly for its CBD and hemp-based foods and
drinks.
Mambe, Kasa’s leading brand, already has more than 980
distribution points within Colombia, with expectations to exceed
1,200 by year’s end, including sales in Tostao’ Café & Pan, one
of Colombia’s largest coffee chains. Mambe calls Laura Londoño its
brand ambassador, with the award-winning Latin-American actress
talking up the brand to her 1.3-plus million Instagram followers.
Flora has a knack for attracting superstars, including adding
former Miss Universe (2014) and Miss Colombia (2013) Paulina Vega
as a founding partner in Flora Beauty products.
More New Laws
While the flower export laws are significant on their own, they
are not the only legislative changes that Colombia has implemented
recently to signal the country’s commitment to the industry. Other
new laws allow for the manufacturing, sale and export of
cannabinoid ingestible products; substantially reduce marketing
restrictions on domestic cannabis products (meaning, brands can
actually do some advertising now); allow for the sale of
cannabinoid medical products through drugstores as “custom
formulas” (meaning pharmacists can prescribe and prepare products
designed to complement medical prescriptions specific to a
patient); and allow full industrial use of cannabis in textiles,
plastics, paper and construction materials.
These are particularly important changes for Flora because of
the scalability of operations. The company has run pilot tests on
only about five acres of its 247 acres with plans to start ramping
up — and that’s just scratching the surface. Flora also has rights
to license another 5,268 acres (230.3 million square feet) licensed
in Puerto Boyacá, Santander, in north-central Colombia.
Just Wait, Legal Cannabis Won’t Be Denied
While progress in the U.S. may seem slow, it is easily arguable
that it is only a matter of time before the entire world is
onboard. When, not if, is the question. As it happens, the wheat is
being separated from the chaff for producers with certain companies
establishing leadership positions, while others push for
legalization for different reasons that can most definitely benefit
both the top and bottom lines.
Canopy Growth Corporation (NASDAQ:
CGC) is best known as the world’s largest
cannabis company by market capitalization, but it is broadly a
diversified cannabis, hemp and vaporization company. During the
first quarter of fiscal 2022, ended June 30, 2021, Canopy reported net revenue of C$136 million, up
23% from the year prior quarter. Total net cannabis revenue was up
17% to $93 million during the quarter, as the company held the top
market share in tracked Canadian recreational cannabis market. The
company also recently completed the acquisitions of Ace Valley and
Supreme Cannabis during the quarter.
Tilray Inc. (NASDAQ:
TLRY) is a leading global cannabis-lifestyle and
consumer packaged goods company with operations in Canada, the
United States, Europe, Australia and Latin America. The
company’s production platform supports more than 20 brands
in over 20 countries, with comprehensive cannabis offerings,
hemp-based foods and alcoholic beverages. In a blockbuster merger
earlier this year, Tilray acquired Aphria in a $4.8 billion deal,
making what has been touted as the biggest global cannabis company
by revenue.
Sundial
Growers Inc. (NASDAQ: SNDL), a Canadian licensed
producer that crafts premium cannabis, has launched
Caviar Cones. This is SNDL’s newest product innovation under
its award-winning Top Leaf brand. The Forbidden Lemon Caviar Cones
will be the first caviar cone product to hit the Canadian market.
This launch reinforces Sundial’s focused innovation pipeline around
premium inhalables in the Canadian cannabis market. The launch
of Caviar Cones is not only a milestone for Sundial but also
represents the first product of its kind to launch in the Canadian
cannabis market at large.
Innovative Industrial Properties Inc. (NYSE:
IIPR) is a self-advised Maryland corporation
focused on the acquisition, ownership and management of specialized
industrial properties leased to experienced, state-licensed
operators for their regulated cannabis facilities. Taxed as a real
estate investment trust (“REIT”), IIPR is the first and only real estate company on
the NYSE focused on the regulated U.S. cannabis industry. This
month, the REIT added to its portfolio, acquiring a property in
Missouri and entering into a long-term lease with a subsidiary of
Calyx Peak for the purpose of constructing an approximately
83,000-square-foot property that will be operated as a licensed
cannabis cultivation and processing facility.
The fact is that while there are still some teetotaling-type
opponents, the value of legal cannabis is becoming undeniable.
Research is proving the medical value. Canada has squarely
demonstrated the benefits on the government revenue, dampening
criminal activity and job creation, among other things. There seems
to be a bit of a pause going on in the cyclic nature of the market,
but it is only a matter of time before cannabis regulation is front
and center again.
For more information about Flora Growth Corp.
(NASDAQ: FLGC), please visit Flora Growth Corp. (NASDAQ:
FLGC).
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