CannabisNewsWire
Editorial Coverage: Despite legislative delays, the
legalization of recreational cannabis will take place in Canada,
likely by the end of summer at the latest. Companies are coming to
grips with the licensing process and are ready to reach this new
market. One of the leaders in the new industry is Choom
Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF) (CHOOF
Profile), which has gained licensing
experience and developed a slick brand designed to appeal to the
recreational market. Grower and seller Cronos Group, Inc.
(TSX: CRON) (NASDAQ: CRON) is eyeing the international
market through a cross-border deal with MedMen. Canopy
Growth Corporation (TSX: WEED) (OTC: TWMJF) has been
focusing on retail licenses and is now an approved supplier for
every province that has gone through an approval process.
Aphria, Inc. (TSX: APH) (OTCQB: APHQF) is moving
from medical into recreational cannabis though an expansion
strategy that has seen growth in profits and revenue. Hiku
Brands Company. Ltd. (CSE: HIKU) (OTC: DJACF) has gained
an early sales license for its subsidiary company and is setting up
state-of-the-art growing facilities ready for the legal change.
A Matter of Time
Ever since Justin Trudeau and the Liberal party were elected on
a pro-legalization platform, Canada has been heading towards an
in-plain-view cannabis market. Bill C-45, legalizing the trade, was
passed in the House of Commons by a two-thirds majority last
November and is making its way through the Senate. The passage of
the bill has taken longer than expected, but even the Conservatives
are not trying to block its passage. A whole new consumer sector is
coming to Canada.
The delays have largely been caused by concerns about
practicalities. The recreational cannabis market will be tightly
regulated, just as the medical market is now. Conservatives and
Liberals alike want to ensure that the police and local authorities
have time to prepare. Though this concern is causing delays, it
also creates an opportunity for companies that are well prepared. A
company that can show it is organized, responsible and compliant
with government regulations will have an edge in getting licensed
and started in the new market. Balancing that with a
consumer-facing image of a fun, relaxing product may be key to
early success.
Responsible Groundwork
One of the companies leading the way in this is Choom
Holdings (CSE: CHOO) (OTCQB: CHOOF). A purpose-built
recreational brand, Choom is led by an experienced management and
leadership team that understands the complexities of the market it
is entering. President and CEO Chris Bogart has more than twenty
years of experience in international capital markets and was a
co-founder of InMed Pharmaceuticals and Magnum Uranium. He has
structured complex equity financing transactions in the United
States, Europe and Canada.
The team has been preparing for the coming change in the
cannabis market for more than four years. Choom has been going
through the process of applying for an ACMPR (Access to Cannabis
for Medical Purposes Regulations) license in Vernon, B.C. In 2017,
it has offers to acquire three additional applicants, including one
already involved in the process in Vancouver Island, B.C. The
company is working diligently to be ready to sell cannabis as soon
as legalization comes.
Going through the cannabis licensing process could provide Choom
with another advantage. Its staff has developed the skills and
experience to quickly navigate the regulatory process and has
proven to authorities its ability be become a responsible cannabis
grower. The company has been working for future retail growth and
distribution. With Alberta alone expecting to license 250 stores in
the first year (http://cnw.fm/Wgt5F), regulators are clearly going to
be busy working through all the applications. Companies such as
Choom that have experience, a good reputation and a well-presented
application may have a critical edge in successful retail
licensing.
Effective Supply Chain
The Canadian cannabis industry is estimated to be huge. Deloitte
notes that it could be worth as much as $22.6 billion per year
(http://cnw.fm/eOkR5). Even the more
conservative estimates predict a market larger than spirits and
nearly as large as wine. That’s a lot of profit available to
companies that can move in quickly and provide a reliable retail
experience.
Choom could provide that through its fully integrated
seed-to-sale supply chain. The company will be growing its own
cannabis in ACMPR-licensed facilities. The company has four ACMPR
licenses in late-stage review: one applicant has been acquired with
three others under offer, as well as its first applicant expecting
to receive a cultivation license from Health Canada in the next few
weeks. There is approximately 68,000 square feet of facilities
being retrofitted to increase growing capacity in time for
legalization, with a further phase of expansion planned for later
in the year, thereby building production capacity to produce a
steady supply of cannabis.
This cannabis will be packaged as Choom brand products and sold
through a series of Choom stores. The company will run corporate
stores, with other stores being operated across Canada by
independent retail investor/owners. This plan is designed to ensure
that Choom products have a prominent place in the Canadian retail
market and can be found easily by consumers.
Great Branding
While an efficient supply chain is important to placing products
in front of customers, it’s the presentation of the product that
will draw consumers in. Again, Choom appears to be well
prepared.
With tight marketing restrictions in place, cannabis companies
won’t be able to rely on mass advertising to raise customer
awareness. Instead, they’ll need appealing brands that quickly
attract consumers and lead to word-of-mouth recommendations.
Choom’s brand is built around a
fun, relaxed style that draws on Hawaii’s mellow atmosphere and
the cannabis culture on the island in the 1970s. The name of the
company itself comes from island slang, including “the Choom gang,”
a well-known group from that era that famously included the hippest
president in American history, Barack Obama. It’s a strong, clearly
identifiable brand style, firmly established to attract the
recreational market.
The strength of the brand is supported by the design of the
company’s retail stores. Designed by the team behind some of the
most recognizable retail spaces around, Choom stores are designed
with a cool and modern layout and are designed to appeal to serving
everyone, from current users to “curious customers.”
The combination of clean white space and open concept creates a
comfortable, familiar atmosphere that is meant to make the stores
accessible to both existing cannabis consumers and new customers.
Plants and sofas signal that this is not just a shop but a place to
hang out, a part of that relaxing Hawaiian vibe.
Cannabis Companies Prepare for Growth
Other Canadian cannabis companies are also preparing for an era
of huge growth.
Toronto-based cannabis grower and seller Cronos Group,
Inc. (TSX: CRON) (NASDAQ: CRON) has become the first pure
play cannabis company to be traded on Wall Street (http://cnw.fm/BQk4n). This shows the growing
acceptance of the cannabis market not just in countries where the
drug has been licensed but in the broader investment community.
Investors see growth ahead for these companies and are taking the
opportunity to invest before prices rise. As a cannabis company
with international ambitions, Cronos is also distinctive. Its
corporate goals include becoming a global force, and it has created
a first-of-its-kind cross-border venture with Los Angeles-based
cannabis retail brand MedMen (http://cnw.fm/wLhX4).
Canopy Growth Corporation (TSX: WEED) (OTC:
TWMJF) is establishing its retail presence. The company
has been chosen by the government of Manitoba (http://cnw.fm/fEb9K) as one of the first companies to
set up licensed cannabis retail stores in the province. Of the four
Canadian provinces that have established retail and supply
frameworks, all have now chosen Canopy Growth as a trusted
supplier, giving the company a strong place in the retail
market.
Aphria, Inc. (TSX: APH) (OTCQB: APHQF) is a
successful company in the medical cannabis market, with both
profits and revenues consistently rising throughout 2016 and 2017.
The company is looking to continue this expansion, with further
growth in the medical sector alongside expansion into the
recreational cannabis market. It has signed a deal to buy Nuuvera
Inc. (http://cnw.fm/O3oHY) and shows no sign of slowing
down.
Like Canopy Growth, Hiku Brands Company, Ltd. (CSE:
HIKU) (OTC: DJACF) has gained one of the early licenses to
set up cannabis retail stores through selection by the Manitoba
government (http://cnw.fm/1EdHP). This license for its subsidiary
Tokyo Smoke will put Hiku in a strong position to sell to a new
customer base once Bill C-45 reaches its expected passage. The
company is near the end of the ACMPR application process and has a
state-of-the-art growing facility, with another set to be completed
by the end of the second quarter of 2018. It should, therefore,
have a vertically integrated business, with a complete supply chain
from growth to sales.
Delays in the passage of Bill C-45 have caused no slowing in the
growth of the Canadian cannabis market. If anything, the extra time
has allowed companies to better prepare. When the recreational
market opens later this summer, several strong businesses appear to
be ready to step up and play their part.
For more information on Choom Holdings, please
visit Choom
Holdings (CSE: CHOO) (OTCQB: CHOOF).
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