New York, NY -- September 30, 2021 -- InvestorsHub NewsWire --
NetworkNewsWire
Editorial Coverage: While North America is the leading cannabis
market, the federal government appears reluctant to legalize the
substance and remove major legislative roadblocks to the market’s
continued growth and success. Countries in South America, however,
seem much more eager to embrace the future of cannabis, with
several countries passing new laws designed to end cannabis
prohibition and support the growing industry. This government
support will likely generate government revenue, cut into illicit
sales and provide innovative treatment options to people in need.
Colombia, Mexico and Panama have established themselves as leaders
in the global move toward cannabis progress, which is good news
for Flora Growth Corp. (NASDAQ:
FLGC) (Profile), which has a cultivation facility in
Colombia. Other major players in the cannabis sector,
including Aurora Cannabis Inc. (NASDAQ:
ACB), Cronos Group Inc. (NASDAQ:
CRON), HEXO
Corp. (NASDAQ: HEXO) and GrowGeneration Corp. (NASDAQ:
GRWG), are paying close attention to what’s taking
place on the worldwide cannabis stage as each major move is likely
to have global ramifications.
- LATAM countries are making moves designed to provide stronger
support for legal cannabis industries.
- An emerging leader in Colombia, Flora Growth has built an
impressive portfolio of brands along with dozens of licenses and
burgeoning distribution networks globally.
- Flora’s Colombian 247-acre cultivation operations produce
premium organic cannabis at $0.06 per gram, almost 98% cheaper than
some Canadian peers.
- A family of companies and massive land position may give Flora
Growth a competitive edge in the wake of newly passed Colombian
legislation.
Click here to view the custom infographic of
the Flora Growth Corp. editorial.
Catching Investment Attention
As South American countries, known as LATAM, show support for
the future of cannabis, the region has caught the attention of the
investment world. That support is exemplified in a variety of ways,
including Mexico’s
Supreme Court opening the door to adult-use marijuana
legalization by declaring prohibition of recreation cannabis as
unconstitutional. In addition, Panama
legalized medical marijuana, bringing the country in line
with at least seven other LATAM countries that allow some form of
cannabis at the federal level.
And in what might be the biggest LATAM cannabis news of the
summer, Colombia
authorized exports of dried cannabis flower for medical
use, that last in a series of legislative changes supporting legal
cannabis. Previously the country had established cannabis
infrastructure by allowing production, distribution and exports of
cannabis goods such as seeds and derivatives. However, had stopped
short of legalizing the export of dried flower — the most popular
version of the plant. That all changed when the government issued
Decree 811, making the country’s intentions clear to be a market
leader.
As the operator of one of the largest outdoor, organic cannabis
cultivation facilities in Colombia, Flora Growth Corp. (NASDAQ:
FLGC) benefits from production costs that are
significantly below industry averages. In addition to lower
production costs, Flora Growth also has the distinction of being
the first traditional cannabis company to IPO on the Nasdaq
exchange and successfully completed its initial public offering in
May.
Flora’s cannabis involvement in Colombia reaches beyond
cultivation. The company has diversified businesses the include
production, research and development, wholesale, and consumer
packaged goods that features a brand portfolio including
pharmaceuticals, textiles, cosmetics, and food and beverage goods.
In fact, Flora offerings include more than 340 products, 70-plus
medical and cosmetic licenses and more than 2,500 points of
distribution across LATAM and the United States with sales across
13 other countries. The company lists an impressive roster of
Colombian partners as well, including Importaciones y Asesorias
Tropi S.A.S., better known as Tropi, the largest food distributor
in Colombia.
Just as the new Colombian export laws go into effect, Flora’s
sales channels are expanding internationally, with distribution
reaching throughout LATAM and beyond into Europe and the United
Kingdom. In June, Flora announced plans to
acquire Switzerland-based Koch & Gsell, the parent of the
hemp cigarette brand Heimat, a move that portends future revenue
increase as well. The company also signed a letter of intent for
a 2-million-euro investment in the European
cannabis company Hoshi International Inc.
Ultra-Low Labor & Production Costs
The second edition of the Latin America and Caribbean Cannabis
Report, released by Prohibition Partners, reports that low-cost
labor and construction costs in the LATAM region could result in
regional cannabis production costs up to 80% lower than North
American counterparts. Leveraging this advantage, Flora has
reported 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).
Flora achieves these ultra-low production expenses by combining
low labor costs, zero-cost water from the property’s six natural
springs and high yields from near-ideal climate conditions that
lead to at least three harvests annually. It’s worth nothing that
low-cost labor doesn’t mean unskilled labor. The Colombian
economy revolves around agriculture, including growing cut flowers
that supply more than 70% of all those imported by the United
States.
The Power of Partnerships
In another key advantage, Flora has developed powerful
partnerships, its most recent being 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. The partnership is
ideal because Avaria does not hold a Canadian license to produce
cannabis-derived versions of its products at a commercial scale.
Therefore, according to the agreement, Avaria will supply the
product and Flora will distribute it throughout its extensive LATAM
network; plans are also underway to expand into U.S. markets. In
addition, FLGC’s Colombian Flora Lab intends to produce KaLaya’s
CBD-infused products using cannabinoids from Flora’s Colombian
cultivation facility, Cosechemos.
Another partnership was forged this summer when Flora’s Kasa
Wholefoods Co. signed a sales agreement with Tropi to begin placing
Kasa products throughout the country. The first shipment, valued at
$1.1 million, was delivered in July, the initial order on the
one-year contract. Flora management anticipates that contract will
increase to $2 million monthly over time for its food and beverage
portfolio.
Mambe, Kasa’s leading brand, has almost 1,000 distribution
points throughout Colombia, including Tostao’ Café & Pan, one
of Colombia’s largest coffee chains. The company plans to expand to
more than 1,200 locations by year’s end. Mambe also counts the
award-winning Latin-American actress Laura Londoño as its brand
ambassador. And Londoño isn’t the only widely recognized Flora
advocate. Former Miss Universe (2014) and Miss Colombia (2013)
Paulina Vega is a founding partner in Flora Beauty products.
Ramping Up Allowed
Flower export laws aren’t the only legislative signs of
Colombia’s commitment to support cannabis. Other new laws provide
for the manufacturing, sale and export of cannabinoid ingestible
products; substantially reduce marketing restrictions on domestic
cannabis products, which means brands can advertise their products;
allow for the sale of cannabinoid medical products as “custom
formulas” available at drugstores, 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 important changes impact Flora because of their
scalability of operations. The company has run pilot tests on about
five acres, leaving more than 240 acres available as the company
starts ramping up operations. In addition, Flora has rights to
license another 5,268 acres (230.3 million square feet) in in
north-central Colombia.
An Enviable Position
While progress in the cannabis space may seem slow at times,
global adaptation and acceptance appear certain. The real question
is when not if, and as support spreads, companies already operating
in the space will be in an enviable position as they benefit from
the true potential of the market.
Aurora Cannabis Inc. (NASDAQ:
ACB) launched
three new proprietary cultivars under the company’s
premium adult-use cannabis brand San Rafael ’71; the three new
offerings are Stonefruit Sunset, Lemon Rocket and Driftwood Diesel.
Guided by consumer insights to identify highly desirable traits,
the new cultivars were developed at Aurora Coast, ACB’s
state-of-the-art research facility dedicated to cannabis breeding,
which is also home to one of the largest and most comprehensive
genetic libraries in the world. The new hybrid and indica cultivars
are also the first adult-use flower products Aurora has
commercialized from Aurora Coast.
Cronos Group Inc. (NASDAQ:
CRON) has partnered with Ginkgo Bioworks to
produce cultured cannabinoids. The two companies
recently announced
the achievement of the first target productivity milestone
in that collaboration. Using Ginkgo’s platform for organism design
and development, Cronos Group has successfully achieved the
productivity target for cannabigerolic acid (“CBGA”), which will
support the Cronos Group’s planned CBG product launch this fall.
“As leading companies in our respective industries, Cronos Group
and Ginkgo are uniquely positioned to elevate the cannabis industry
through cannabinoid and product innovation to unlock the next
generation of its potential,” said Cronos group president and CEO
Kurt Schmidt.
HEXO Corp.
(NASDAQ: HEXO) announced
the completion of its previously announced acquisition of
Redecan, Canada’s largest privately owned licensed cannabis
producer. The transaction included HEXO obtaining all of the
outstanding shares of the entities that carry on the Redecan
business. “This is an exciting day for HEXO and Redecan employees,
investors, consumers and stakeholders,” said HEXO CEO and
co-founder Sebastien St-Louis. “The completion of this transaction
is aligned with our corporate growth strategy and will further
strengthen our position as a leader in the Canadian cannabis
industry, bolstering the combined company as we look towards
becoming a top-three global cannabis products company and continue
on the path towards positive EPS.”
GrowGeneration Corp. (NASDAQ:
GRWG) has opened two
new hydroponic garden centers to serve the largest
hydroponic market in the country: Los Angeles County,
California. The two new super garden centers, which are the
11th and 12th locations for the company, give GrowGen an additional
122,000 square feet of retail and distribution space. The two
stores, the largest hydroponic garden centers in Southern
California, position GrowGen to sell to the highest concentration
of commercial indoor cannabis growers in California. GrowGen is
defining the next generation of garden centers, with the largest
selection, best service and grow professionals, to deliver
solutions for all types of growers.
Growing government support around the world bodes well for the
cannabis industry, and companies operating in countries making
significant moves in that direction should see significant
advantages.
For more information about Flora Growth Corp.
(NASDAQ:
FLGC), please visit Flora Growth Corp. (NASDAQ:
FLGC).
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