NetworkNewsWire
Editorial Coverage: North American cannabis markets have
achieved tremendous growth in recent years, and that trend shows no
sign of slowing down. Cannabis research firm ArcView has called for
an annualized growth rate of 26 percent through 2021, as the
burgeoning industry benefits from growing popular support and
regulatory changes. Perhaps the most notable of these pending
amendments is Canada’s planned nationwide legalization of
recreational cannabis. Canadian Health Minister Ginette Peitipas
Taylor has stoked optimism regarding an August or September 2018
official launch date for recreational cannabis across Canada.
Choom Holdings, Inc. (OTCQB: CHOOF) (CSE: CHOO)
(CHOOF
Profile), with its growing portfolio
of four late-stage licensed producer applicants, is primed to
pounce on this new market opportunity. Through an aggressive
acquisition strategy and strong commitment to developing national
retail distribution, Choom has quickly positioned itself as a major
player among other North American cannabis industry mainstays like
Cronos Group, Inc. (TSX: CRON) (NASDAQ: CRON),
Canopy Growth Corporation (TSX: WEED) (OTC:
TWMJF), Aphria, Inc. (TSX: APH) (OTCQB:
APHQF) and Hiku Brands Company, Ltd. (CSE: HIKU)
(OTC: DJACF) (DJACF
Profile).
An Evolving Regulatory Landscape
Canada’s quest to become the first G7 nation to legalize
recreational marijuana comes with a number of logistical and
regulatory challenges (http://nnw.fm/zfk3U). Two of the most prominent in the
nascent industry have related to licensing, both for growers and
retailers. Canadian cultivators are currently subject to the Access
to Cannabis for Medical Purposes Regulations (ACMPR). Implemented
in 2016, the ACMPR places the administration of Canada’s cannabis
cultivation industry in the hands of Health Canada, the federal
department tasked with responsibility for national public health.
Currently, only producers who are licensed under the ACMPR may sell
or provide dried marijuana, fresh marijuana, cannabis oil or
starting materials. With the number of licensed producers limited
on a provincial basis, ACMPR approval marks a significant milestone
in the development of all Canadian cannabis producers.
Licensing for the sale of recreational cannabis, on the other
hand, has been tasked to individual provinces. With full-scale
legalization rapidly approaching, multiple provinces have already
begun awarding licenses for the sale of recreational cannabis,
including Manitoba and Saskatchewan (http://nnw.fm/axi7A). Much like ACMPR approval has
proven to be a ‘make or break’ retail license achievement for
cannabis firms. Companies that successfully position themselves to
secure these early retail permits figure to have a key strategic
advantage in the supply and sale of products directly to consumers
through retail outlets.
Riding the Wave
The Choom Holdings,
Inc. (OTCQB: CHOOF) (CSE: CHOO) team is well accustomed to
navigating the tides of change on its way to fields of green. The
company prides itself on its ability to channel the laid-back
spirit of Hawaii without missing out on the opportunities presented
by the changing marijuana markets of North America. In total, the
company Choom™ has acquired two ACMPR applicants and has agreements
in place to acquire two additional ACMPR applicants, including its
most recent addition (http://nnw.fm/1KMa3), Saskatchewan-based High Way 10
and parent company Flower Power Cannabis Pharms.
The High Way 10 acquisition could mark a tremendous leap forward
for Choom and its shareholders. In a news release announcing the
acquisition, Choom noted that High Way 10’s initial 17,000 square
foot facility is located on a 120-acre parcel of land, providing
ample room for future expansion. As it stands, the facility is
estimated to produce approximately 1,500 kg of dried cannabis per
annum. According to Chris Bogart, president and CEO of Choom, “Upon
completion of the retrofitting and compliance within the initial
17,000 sq. ft. building, Flower Power intends to submit its
affirmation of readiness ("AOR") evidence package to Health Canada,
which they hope will follow with the receipt of a cultivation
license shortly thereafter.”
While the company’s portfolio also includes three late-stage
licensed producer applicants based in British Columbia — bolstered
by its entry into a definitive agreement to acquire Island Green
Cure that was announced on April 19 (http://nnw.fm/rl1V7) — High Way 10’s presence in
Saskatchewan immediately diversifies Choom’s national presence at
an important time. As previously noted, the Saskatchewan Liquor and
Gaming Authority (SGLA) last month announced that the province
would commence issuing retail permits. Because the SGLA has limited
(http://nnw.fm/3CdnK) the number of retail
permits to 51 for the first three years to ensure a controlled
rollout, time of filing could play a major role in establishing the
landscape of the local industry in coming years. In an April 17,
2018, news release, Choom provided (http://nnw.fm/F91gh) a retail overview, noting that it
has secured nine retail locations in Alberta and seven in British
Columbia, in addition to submitting 32 applications for retail
permits in Saskatchewan.
“We have now established a footprint to position Choom™ as a
leading private cannabis retailer in Western Canada,” Bogart noted
in a recent news release. “We will continue to pursue retail
licensing opportunities across the country and remain committed to
serving all Canadians in the coming consumer cannabis market.
Choom’s vision of delivering an elevated customer experience
through our curated retail environments, with the creation of
modern, stylish storefronts is well underway.”
The Financial Impact of Regulation
As Choom enters the final phases of Health Canada’s ACMPR
permitting procedure, a complex seven-stage process (http://nnw.fm/Tc5J0) that commonly takes more than a
year to complete, it could be in line for considerable financial
growth. Cronos Group, Inc., operating as PharmaCan
Capital Corp., acquired ACMPR licensed producer Peace Naturals
Project Inc. in 2016, establishing itself as the first Canadian
company to own and operate licensed producers in both Ontario and
British Columbia. In January 2018, Cronos announced that Peace
Naturals had obtained a dealer’s license pursuant to the Controlled
Drugs and Substances Act under Health Canada, enabling the company
to export medical cannabis extracts, including concentrated oil and
resin products, internationally. In the weeks that followed, Cronos
became the first cannabis stock to list on the Nasdaq Global
Market. Its U.S.-listed shares spiked from $3.31 in early December
2017 to a 52-week high of $9.40 in early March.
Share price increases related to key industry licensing and
certification go well beyond Cronos to include many of the Canadian
cannabis industry’s most recognizable names. Canopy Growth
Corporation, a leading diversified cannabis company
boasting collaborations with cannabis icon Snoop Dogg, breeding
legends DNA Genetics and Green House seeds and Fortune 500 alcohol
leader Constellation Brands, announced (http://nnw.fm/nMk5X) in early February that it had
been conditionally selected by the Government of Manitoba to
operate cannabis retail stores in the province. Since that
announcement, Canopy’s Canadian stock has rallied from C$26.50 in
mid-February to a high of C$33.41 in mid-March. Canopy’s Manitoba
selection marks the second provincial retail agreement for the
company, echoing the geographically diversified strategy currently
being implemented by Choom Holdings.
Aphria, Inc. is another Canadian cannabis
industry mainstay with an eye on geographical diversification as
nationwide recreational legalization looms. In late January, Aphria
announced (http://nnw.fm/5J0wR) its entry into an $826 million
deal to acquire NuuverA, Inc., further demonstrating the fiscal
value of Canada’s vaunted licensed producer status. In August 2017,
Nuuvera and Aphria entered a global strategic partnership initially
focused on the Canadian market. In January of this year, the two
firms announced a new offtake agreement for an additional 60,000 kg
of cannabis production. In the days following that announcement,
Aphria’s Canada-listed shares built on recent achievements to reach
a high of $C22.08, up from C$6.50 in October 2017.
Following this industry-wide trend, recreational and medical
cannabis company Hiku Brands Company, Ltd. saw its
Canadian shares climb to C$3.02 in mid-February following news that
it was conditionally awarded (http://nnw.fm/Br06p) one of four master retail
licenses in Manitoba’s highly competitive request for proposal
process for the right to operate retail cannabis stores. This PPS
was the highest achieved by Hiku since shortly after the close of
the late-January merger between DOJA Cannabis Company Limited and
TS Brandco Holdings Inc. that resulted in the newly-combined
company, again reiterating the positive market reaction that has
traditionally been associated with regulatory milestones in the
competitive Canadian marijuana market.
A Burgeoning Market Opportunity
With a clear track record of PPS growth related to approvals
from both Health Canada’s ACMPR licensed producer program and
provincial retail opportunities, the nation’s impending
legalization of recreational cannabis could present tremendous
upside for investors with the foresight to capitalize on market
trends. All told, cannabis industry tides are high, and, as Choom’s
website proudly outlines, it’s a great time to ‘Say Hello to
Opportunity’ (http://nnw.fm/5KfMw).
For more information on Choom Holdings, Inc., please visit
Choom Holdings,
Inc. (OTCQB: CHOOF) (CSE: CHOO).
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