CannabisNewsWire
Editorial Coverage: The first wave of companies to enter the
Canadian cannabis industry were grounded in medical marijuana,
which was legalized in 2001. As
the country prepares for legalized adult recreational-use this
summer, new recreational brands are joining the scene, and many
companies rooted in medicinal cannabis are taking action to
participate in this second wave of the Canadian market. With its
strong branding and modern store design, Choom Holdings,
Inc. (CSE: CHOO) (OTCQB: CHOOF) (CHOOF
Profile) is branded to appeal to the
Canadian adult consumer ready to experience the cannabis lifestyle.
Aurora Cannabis, Inc. (TSX: APH) (OTCQB: APHQF) is
making strategic investments to establish footing in the
recreational sector, while OrganiGram Holdings,
Inc. (TSXV: OGI) (OTCQB:
OGRMF) is taking measures to increase its production
capacity ahead of a surge in product demand. Supreme
Cannabis Company, Inc. (TSXV: FIRE) (OTC:
SPRWF) has entered into multimillion-dollar agreements to
supply cannabis to retail-oriented companies, and in Quebec,
Hydropothecary Corp. (TSXV: THCX) is expanding its
greenhouse capacity to potentially increase its cannabis production
to 30x its
current volume.
Highs Coming for Canadian Cannabis
As established companies get serious about brand expansion,
supply agreements, and potential retail revenues, investments
within Canada’s cannabis sector are soaring. The industry saw
$1.2 billion
investments in January alone - a 600 percent increase over the
previous year – setting an incredible pace for continued growth.
Currently, the State of California is the largest legal cannabis
market in the world. With a population nearly as large as
California’s and an influx of cannabis capital, Canada is on track
to potentially become one of the world’s largest recreational-use
markets. The country’s combined medicinal and recreational market
size is expected to reach $6 billion by
the year 2021, surpassing the value of its whiskey and spirits
industry.
While the Canadian cannabis industry has found impressive
success with medicinal marijuana in recent
years, a different approach will be needed to target
recreational consumers. Cannabis producers that recognize this
tremendous potential are pursuing investments in recreational
brands that appeal to the retail market. One of Canada’s most
recognizable cannabis producers, Aphria, Inc. (TSXV: APH) (OTC:
APHQF), recently shelled out $230 million
to acquire recreational brand Broken Coast – one of many M&A
deals within the burgeoning industry.
A Relaxed Brand for a Relaxing Product
One of the new companies looking to stake a claim in the
recreational market is Choom
Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF). Choom is
based in British Columbia, though its hip, modern brand has been designed around the
tropical, relaxed ambiance of Hawaii. The company’s name, “Choom”,
and style invoke Hawaiian culture, in particular easy days on the
beach and in the countryside enjoying a casual atmosphere that
connects with relaxation, which fittingly is one of the main
appeals of cannabis. The company’s name, Choom, which means “to
smoke marijuana” - comes from a slang word used by a fun-loving
group of friends (including former U.S. President Barack Obama) who
grew up together in Hawaii during the 1970s.
This relaxed, friendly and informal approach to selling cannabis
is designed to tap into a younger market with socially liberal
values and disposal income to spare, and differs radically from the
marketing focus of medical marijuana companies. The look and feel
more closely resembles a food or alcoholic beverage brand, evoking
warm feelings instead of healing/medicinal properties, which are
the focus of established brands. In short, it’s exactly the sort of
approach the recreational cannabis industry will need.
Moving forward, the advantage in the legal cannabis sector seems
likely to go to companies such as Choom, which are able to innovate
with their branding, creating appealing lifestyle choices. Strict
limitations on advertising cannabis will prevent the big
medical marijuana players from using their financial clout to
dominate the market through saturation advertising, which will
create a space for young brands such Choom to grow via agile,
modern techniques where traditional approaches aren’t an
option.
From Seed to Sale
Choom appears to have another market advantage with its vertical
integration. The business has a seed-to-sale model that covers the
whole cannabis pipeline, from growing and processing the plants to
selling the final product in its own stores. This control over the
entire business process allows the company to maximize efficiencies
and ensure integration along the supply chain.
This advantage starts in the growing facilities, where Choom
will fully oversee the growth of carefully crafted strains of
cannabis. Existing facilities are planned for Vernon and Chemainus,
Canada, to ensure that the company is prepared for the market as
soon as possible. Choom is refitting both facilities, a process
scheduled to be complete by July, with more than 13,000 square feet
of growing space in planning.
Choom has announced a clear plan for its move into this market.
With the Canadian cannabis market expected to see dramatic growth
in early stages, the company has capacity to expand as needed. A
second phase of expansion is in place for both facilities, which
will significantly increase the growing space and allow for
doubling crop yields by early 2019.
At the sale end of this supply chain are Choom’s dispensaries,
which are designed with a clean, stylish, and modern feel, much
like a more relaxed version of an Apple store, a favorite of
millennials and those with disposable income. These stores have
been envisioned to appeal to two different but important market
sectors. One is existing cannabis users, who will be looking for
more convenient ways to buy their product once the law changes. The
other is the group of “curious customers,” who weren’t willing to
use cannabis while it was illegal but are interested in trying it
now. Choom’s relaxing retail space is designed to draw in customers
from both sides, quickly building up a strong high street
brand.
Preparing for Change
To power further growth, the company also recently completed a
financing initiative, exceeding expectations and raising CAD $2.7
million (http://cnw.fm/AkT9x). The funds are being invested in
advancing the company’s development strategy, as well as for growth
and acquisitions.
Having recently released the retail design for its dispensaries
(http://cnw.fm/DIl3r), Choom is readying those
facilities ready for legalization as well. And with the official
launch of its retail program, the company has created the
opportunity to develop a chain of branded cannabis dispensaries
across Canada (http://cnw.fm/jqn8I).
“Choom is using design and retail strategies that have worked
successfully at some of the most profitable storefronts in the
country. We are telling our Choom story with our stores and will
elevate the concept of a high-quality product though our new retail
environments, and we’re inviting others to join us,” Choom
president and CEO Chris Bogart stated in the press release.
As the legal cannabis market prepares to open in Canada, Choom
appears to have all the pieces in place to create a national
premium recreation brand.
A Sector in Waiting
As the creation of Canada’s legal recreational cannabis sector
approaches, other companies are also preparing for the change.
One of Canada’s biggest cannabis producers, Aurora
Cannabis (TSX: APH) (OTCQB: APHQF), is investing in a
range of related companies to set itself up for expansion into the
recreational sector. The Vancouver-based organization has invested
in The Green
Organic Dutchman, a company that produces farm grown, organic,
pesticide-free medical cannabis in small batches using all natural,
organic craft growing principles. It has also teamed up
with Liquor Stores NA Ltd. (TSX: LIQ) to convert existing retail
outlets into cannabis retail stores.
Another licensed producer of medical marijuana,
OrganiGram Holdings (TSXV: OGI)
(OTCQB: OGRMF), recently received an expanded
cultivation license from Health Canada, enabling the company to
move forward with its expansion
strategy that would increase current capacity from
approximately 5,200 kg/year to an estimated 16,000 kg/year. Its
longer-term plan is to increase production to 65,000 kg/year over
the next two years.
Supreme Cannabis Company (TSXV: FIRE)
(OTC: SPRWF) has made its mission to grow sustainable
cannabis companies to cater to the growing recreational market. To
this end, it has invested in
late-stage ACMPR applicant company BlissCo, and has agreed to
provide cannabis to that company through its 7ACRES subsidiary.
7ACRES will also supply cannabis to Namaste (CSE: N) (FRA: M5BQ)
(OTC: NXTTF) subsidiary, Cannmart.
Quebec-based Hydropothecary (TSXV: THCX) has
signed a letter of
intent with Société des alcools du Québec (SAQ) to supply
20,000 kg of cannabis to Quebec’s recreational cannabis market in
its first year of operation. This recent announcement follows news
in December that the company added 78 acres of land adjacent to its
existing 65-acre facility, and that it is working on a 1
million-square-foot greenhouse designed to increase its production
to 108,000 kg
per year, 30 times the current capacity.
Based on all forecasts, Canada’s cannabis market is set for
significant expansion in 2018. New actors and existing medical
companies alike are preparing to seize this opportunity through
production, distribution, and retail growth. With a clearly defined
growth strategy, Choom Holdings is demonstrating its intention to
rapidly become a recognizable national brand.
For more information on Choom Holdings, please
visit Choom
Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF)
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