NetworkNewsWire
Editorial Coverage: The proposed legalization of recreational
cannabis this year is expected to mean huge growth in the Canadian
cannabis sector, and companies are preparing to make the most of
it. Choom™ Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF)
(CHOOF
Profile) is creating a premium lifestyle brand backed
by an integrated supply chain, while Hiku Brands Co. Ltd.
(CSE: HIKU) (OTC: DJACF) (DJACF
Profile) is applying for the final license to sell its
handcrafted cannabis flower. Medical marijuana producer
Canopy Growth Corp. (TSX: WEED) (OTC: TWMJF) has
obtained outside funding to explore the potential of
cannabis-infused soft drinks, and Aphria, Inc. (TSX: APH)
(OTCQB: APHQF) is using a strategy of collaboration and
targeted investment to boost its cannabis production resources. For
consumers concerned about the quality of their smokes,
ABcann Global (TSX-V: ABCN) (OTCQB: ABCCF) (ABCCF
Profile) is using a specially developed technique to
ensure a consistently high-grade, premium organic cannabis.
Recreational Cannabis Coming to Canada
The imminent legalization of recreational cannabis in Canada is
expected to lead to a huge boom in the broader cannabis industry.
Even without recreational legalization, around 5 million
Canadians consumed marijuana in 2017. According to Statistics
Canada, 90 percent of the nearly $6 billion was spent for illegal,
nonmedical purposes—suggesting that when the law changes, even more
Canadians will give it a go. Canadians spend nearly as much on
cannabis as on wine, and when recreational cannabis use gets
the green light, those profits are expected to shift from criminal
gangs and street dealers to businesses and high street vendors. The
potential for profit is huge, with recreational cannabis forecast
to quickly outpace the medical market.
The activities of cultivators taking steps to expand their
production capabilities indicate faith in the massive consumer
demand for retail cannabis. While the medical market established
the roots of Canada’s cannabis industry, first-comer recreational
brands have a chance to take dominant places in this newly emerging
sector.
A Relaxing Brand for a Relaxing Industry
For many consumers, the appeal of cannabis is its relaxing
properties. This is the angle that Choom
Holdings (CSE: CHOO) (OTCQB: CHOOF) its targeting with
its carefully crafted recreational cannabis brand.
Though based in British Columbia, Choom has built its brand
around a very different part of the Americas. By evoking the spirit
of Hawaii, the company aims to tap into the ethos of surf, sand and
chilled times for which the island is known. In fact, the
organization’s name is drawn from the slang of 1970s Hawaii and the
story of a group of friends who loved to smoke weed—or “choom.”
That youthful appeal is part of Choom’s branding with deliberate
imagery designed to attract consumers with a relaxed and laidback
vibe. Recreational cannabis companies, like any company focused on
recreational products, will need to tap into the disposable incomes
of 20-somethings as both tastemakers and a source of profit. This
approach may help the brand lay claim on a solid chunk of an
expected $6 billion market.
Big Ambitions for a Big Market
Choom is going big on investment in the recreational cannabis
market, and it’s easy to see why. As cited by the Financial
Post, Canaccord Genuity forecasts that there will be an
estimated 3.8 million recreational and 500,000 medical cannabis
users in Canada by 2021. That’s more than eight times as many users
as exist in the current already profitable and purely medical
market.
This growth is predicted to create an industry significantly
larger than the $5 billion industry in spirits and almost as large
as the $7 billion wine industry. Choom’s aim is to become a leading
retailer within that industry. The company’s early start, which
includes years of planning and preparing branding, facilities and
business strategy, could put it in a strong position to reach that
goal.
Choom’s tactic is to position itself as a purely recreational
brand with a line of premium products. It will be a fully
integrated company positioned to scale up as needed. As part of
this, it intends to develop and acquire positions, brands and
products focused specifically on this market. This approach
provides contrast with competitors emerging from the medical
market.
Building a Strong Production Base
License and production assets are a critical part of this
strategy, allowing Choom to quickly grow in line with the
market.
The company recently announced a definitive agreement to acquire
Specialty Medijuana Products, Inc., which has submitted its
evidence package as part of the Affirmation of Readiness to Health
Canada. Upon successful review of this final stage, the company may
expect to receive an ACMPR license to cultivate cannabis, which
could be a significant value inflection point for the company.
This makes for a total of three ACMPR applicants to Choom’s
already dynamic strategy.
The company continues to develop its two other facilities for
cultivation, which will also provide the company with the potential
to expand to meet market needs.
The first facility, located in Vernon, B.C., has 6,800 square
feet of space. When working at full capacity, this facility is
anticipated to produce revenue reaching $6.6 million, excluding
income from oils. A second phase of building, slated for completion
by the end of 2018, could increase this potential to $15
million.
A facility at Chemainus on Vancouver Island provides a second
source of cannabis. With 4,500 square feet of space, this location
is expected to provide revenue up to $4.5 million, not counting
oils. Like the Vernon facility, it is undergoing a refit and should
be ready for production for legalization in 2018; a second phase of
building is planned for completion by early next year. This
expansion could increase this facility’s potential revenue to $9
million.
Product and Placement
One of the pillars of Choom’s strategy is ensuring that it has
the right product and position to sell to its specific market. To
this end, the company has been working on its retail program to put
Choom-branded stores onto Canadian streets.
The look of the stores is cool and stylish in keeping with Choom’s
modern, young brand. Its custom-designed retail environment
combines wood paneling with clean, white shelving and sofas where
customers can relax to bring the Choom brand to life. Fitting with
the aesthetic of popular modern brands, the stores will create a
comfortable, familiar space for customers. The stores will also
allow Choom to appeal to both existing cannabis users as well as
those curious to try the product once it becomes legal.
With a complete and carefully branded supply chain that runs
from cultivation to retail, Choom has laid the foundation for its
goal to be a leader in the recreational-use cannabis industry.
Several other companies are also set to make the most of
legalization through consumer brands and expansion strategies.
Hiku
Brands (CSE: HIKU) (OTC: DJACF) is another cannabis
lifestyle brand, with a focus on premium products in the form of
its high-quality handcrafted cannabis flower. Hiku has a wholly
owned subsidiary licensed to produce cannabis, which has requested
a Pre-Sales License Inspection — the last step before licensing to
sell cannabis under the ACMPR. Hiku recently closed on a $10
million strategic equity investment from Aphria (TSX: APH)
(OTCQB: APHQF) to expand its product offering ahead of the
recreational market.
As an established Canadian cultivator with a background in
medical marijuana, Aphria continues to increase its production
capabilities for the American cannabis market. The company recently
received a license amendment under the ACMPR from Health Canada
that will more than triple the company's production capacity of
medical cannabis from 9,000 kg annually to 30,000 kg annually.
Canopy Growth’s (TSX: WEED) (OTC: TWMJF)
experience in developing and cultivating cannabis strains has set
it up to produce for the newly expanding market. The company
recently received a financial boost through a $191 million
investment by Constellation Brands. This money from the company
behind Corona, Modelo and Svedka will provide the money needed to
develop cannabis-infused drinks, bringing the markets of the two
companies together. This investment from a major player in the
drinks industry shows the faith being placed in Canada’s
recreational cannabis sector.
ABcann
Global (TSX-V: ABCN) (OTCQB: ABCCF) is a cultivator of
premium quality organic cannabis. Its ABcann Advantage technique is
a best-in-class standardized approach to growing cannabis that uses
computer monitoring and the omission of pesticides to minimize the
risks of variance in its yields and ensure a consistently
high-quality product. This has led to a 4.7 percent customer
retention rate and 30 percent month-over-month customer growth.
The Canadian recreational cannabis industry is heading to the
starting line with a strong pack of recreational brands and
cultivators geared up to meet rising product demand. And as the
sector grows, these companies could take a substantial share of a
market worth billions.
For more information on Choom Holdings, please
visit Choom
Holdings (CSE: CHOO) (OTCQB: CHOOF)
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