August 10, 2021 -- InvestorsHub NewsWire -- via NetworkNewsWire
Editorial Coverage: In 2020, Canada became the largest
exporter of dried cannabis flower in the world. Today,
Canada is looking over its shoulder at a formidable competitor in
Colombia, which recently instigated some legislative changes that
position the country to become the global cannabis leader. Colombia
was already recognized for its robust infrastructure, distribution
and exports of certain cannabis products such as medicinal oils and
extracts, but the country had a gaping hole in exports by keeping
dried cannabis flower strictly verboten. That hole was filled on
July 23, 2021, when Colombian President Ivan Duque signed a
legislative decree ending the prohibition on the export of dried
cannabis flower — a significant global market and a potential
windfall for Flora Growth
Corp. (NASDAQ:
FLGC) (Profile) and its expansive global
operations. The broader industry should also benefit from this
latest development since most majors,
including Canopy
Growth Corporation (NASDAQ:
CGC), Tilray
Inc. (NASDAQ:
TLRY), Cronos
Group Inc. (NASDAQ:
CRON) and Sundial Growers Inc. (NASDAQ:
SNDL), support the mainstream worldwide evolution of
legal cannabis.
- Colombia made history by modifying its cannabis laws, including
allowing export of dried cannabis flower.
- Flora’s Cosechemos cultivation facility, located in
Bucaramanga, Colombia, offers an ideal cannabis-growing climate and
features an expansive 247-acre land package.
- Free sunlight and water from natural onsite springs, along with
optimized cultivation techniques, results in strong yields per
cannabis plant; costs only $0.06/gram compared to $1.89 in North
America.
- Flora leverages cost-effective cannabis cultivation in Colombia
to supply cannabis and its derivatives for portfolio of premium
brands and products across several verticals.
- Flora has more than 280 products, cosmetic and pharmaceutical
manufacturing licenses, and 2,500-plus points of distribution
across Latin America and the United States.
Click here to view the custom infographic of
the Flora Growth editorial.
Colombia: A New Cannabis Star
Near-perfect growing conditions, skilled labor and friendly
regulations have underscored Colombia’s emergence in the legal
cannabis space since the country first allowed the production of
medical cannabis just over five years ago. However, until now,
dried cannabis flower, or buds, could only be processed for export
as a medicinal oil or extract for fear that flowers would find
their way to the black market. The new law puts Colombia “at the
forefront in terms of regulatory competitiveness,” according
to President
Duque, adding that his country will now participate in new
markets, including food, beverages, cosmetics, and textiles, in
addition to pharmaceuticals.
Upon signing the decree, Duque quoted experts in saying legal
cannabis will represent a $64 billion global market by 2024 while
noting that cannabis will serve as a tool for “economic
reactivation” in Colombia post the COVID-19 pandemic. “According to
a 2019 study, in Colombia, the cannabis sector generated 17.3
agricultural jobs per hectare,” said Colombia’s Minister of
Justice Wilson Ruiz. The Colombian hierarchy seems determined
to catapult the country into global leadership as a legal cannabis
exporter in order to boost the economy and create a lot of jobs at
home.
These circumstances may play right into the hands
of Flora Growth
Corp. (NASDAQ:
FLGC), which is focused on cannabis cultivation and processing
operations in Colombia to supply international markets. The new
decree could prove to be a bonanza for established licensed
producers, especially when considering the extremely low production
costs and that dried cannabis flower represents the majority of
sales in countries with mature markets, such as the United
States, Germany, United Kingdom, and Australia.
Headquartered in Miami and already having established a globally
recognized house of brands, Flora is positioned to be one of the
world’s lowest-cost cannabis producers and has strategically
positioned itself as a global cannabis consumer packaged goods
(CPG) company with a vast international distribution platform.
Flora has more than 280 products, cosmetic and pharmaceutical
manufacturing licenses, and 2,500-plus points of distribution
across Latin America and the United States.
Further, Flora has two separate LOIs executed for significant
acquisitions and is forging partnerships to expand the breadth of
its distribution domain by leveraging networks of others. Flora
fundamentally believes against vertical integration and has
positioned itself to be nimble and asset light, allowing it to work
with the best of the best in their respective channels to bring
product to market and capture incremental revenue while derisking
the prospect of entering new jurisdictions and channel segments.
Against this backdrop, the regulatory update in Colombia is likely
to be a growth accelerator and supercharge revenues. Soaring
revenues with high margin product is the holy grail of Wall
Street.
A 25-Fold Advantage
It’s no industry secret that outdoor growing is far less
expensive than greenhouse cultivation, but Flora has taken it to
another level in Colombia. Free sunlight and water in three pilot
plantings on 4.94 acres at Flora’s Cosechemos farm allowed for
testing of 30 varieties of non-psychoactive (high-cannabidiol or
CBD) cannabis and optimization of its growing techniques, which
resulted in a cost base of just $0.06 per gram. That compares to
$1.89 per gram in North America, calculated through an average of
four major North American licensed producers.
Flora’s cost is even 60% lower than its nearest Colombian peer.
In response to the updated laws in Colombia, Flora
promptly signed a
letter of intent with an international distributor to
supply dried flower and derivatives immediately following the first
commercial harvest and obtaining all requisite import licenses.
With that harvest, Flora also expects to start supplying the
Australian markets with medical cannabis, as well as
over-the-counter CBD products via a partnership with Evergreen
Pharmacare.
Production of high-CBD strains of cannabis are already well
underway at Cosechemos, with prep work now being done to propagate
strains high in THC, the psychoactive component in cannabis.
Moreover, an extraction lab at the facility constructed to EU-GMP
standards is expected to be completed this quarter, for which Flora
will seek EU-GMP certification. As soon as Flora receives the
requisite paperwork in order for it to export its cannabis
products, the company will be positioned to immediately capitalize
on the massive global dried cannabis flower market segment that was
previously unavailable.
Ideal Climate, Plenty of Acreage
Colombia’s climate is ideal for the cultivation of cannabis
year-round, and Flora owns some of the country’s finest farming
acreage. Flora’s Cosechemos farm in Bucaramanga, Colombia, covers
247 acres (10.8 million square feet). Flora also holds the rights
to another 5,268 acres (230 million square feet) licensed in Puerto
Boyacá, Santander, about 170 miles southwest of Bucaramanga.
Situated on the equator, Flora’s licensed land in Colombia’s
climate is perfect for year-round cannabis cultivation. The
property sees 12.8 hours of sunshine 365 days per year, has
extremely fertile soil, and receives optimal wind conditions (3 mph
average), which helps reduce risks of contamination from other
plants. The land also hosts six natural spring water deposits,
meaning Flora has zero water costs.
Colombia is the cut-flower capital of the world, and a top
producer of coffee, bananas and more, resulting in a highly skilled
agricultural labor force that work for roughly one-tenth of
comparable peers in the United States. The combination of
these factors facilitates a minimum of three harvests per year,
which is up to three times that of its North American peers.
Marketing Opportunity for New Products
Unlike Canada and the U.S., where companies must essentially
rely on word of mouth for awareness and branding, Colombia is
removing marketing restrictions on its domestic cannabis products.
For Flora, this means advertising across its portfolio of products
to drive sales at its more than 1,500 points of distribution
throughout Colombia. It could also be beneficial as it relates to
an LOI with
Avaria for Flora to introduce Avaria’s KaLaya, an
award-winning pain cream distributed across Canada to Colombia and
the Americas.
The new Colombian regulations allowing cannabinoid-infused food
and beverage opens the door for developing new products and
introducing products already in the Flora’s Kasa Wholefoods food
and beverage unit. A perfect storm brewing, the new laws dovetail
with Kasa recently signing a distribution agreement with
Importaciones y Asesorias Tropi S.A.S., Colombia’s largest CPG
distributor, which is expected to generate $10
million in annual revenue for Flora by delivering premium
and sustainable canned products to Colombians, with the opportunity
to expand the product line in the future.
Follow the Money: Cannabis Investment
Duque referencing a $64 billion market in 2024 seems in line
with other pundit’s forecasts. Fortune Business Insights in June
said it foresees the global cannabis market reaching $97.35 billion
by 2026 with 32.9% compound annual growth. Safe to say, the legal
cannabis market is still growing in leaps and bounds, which breeds
bullishness in major players throughout the world.
Canopy Growth Corporation (NASDAQ:
CGC) is a story for the ages for long-term
traders that watched it grow from a tiny company named Tweed
Marijuana into the industry’s 700-pound gorilla that keeps rolling
up companies, including recently
acquiring Supreme Cannabis. Canopy paid $435 million for
Supreme, with the main prizes being the 7ACRES brand and a
production facility in Kincardine, Ontario, with a history of
producing premium flower.
Tilray Inc. (NASDAQ:
TLRY), a leading global cannabis-lifestyle and
consumer packaged goods company, has completed a
“business combination” with Aphria Inc. bringing together
two highly complementary businesses to create the leading
cannabis-focused CPG company with the largest global geographic
footprint in the industry. The combined company will operate
as Tilray with the strategic footprint and operational scale
necessary to compete more effectively in today’s consolidating
cannabis market with a strong, flexible balance sheet, strong cash
balance, and access to capital.
Cronos Group Inc. (NASDAQ:
CRON) is another major looking to get bigger
through investment in others. In June, a Cronos subsidiary agreed
to an option to
acquire a 10.5% stake in PharmaCann, one of the largest
vertically integrated cannabis companies in the United States.
PharmaCann operates six production facilities and 23 dispensaries
under the Verilife™ brand in six states. This is in addition to its
organic growth initiatives, including the recent launch of a new
line of dual flavor cannabis gummies called SOURZ by Spinach™.
Sundial Growers Inc. (NASDAQ:
SNDL) is also participating in the merger and
acquisition (M&A) game as a direct part of its two-prong
strategy. M&A on one hand, Sundial’s other business is as a
licensed producer of small-batch cannabis using state-of-the-art
indoor facilities. Sundial completed its latest acquisition in
June, finalizing
its buyout of cannabis retailer Inner Spirit Holdings Ltd.
for about $131 million. The acquisition gave Sundial the
well-established Spiritleaf franchised and corporate-owned stores,
representing Canada’s largest single-brand recreational cannabis
retailer with 100-plus stores across six provinces.
The global cannabis market is turning from one of pure
speculation to one underpinned by solid fundamentals and real
investment opportunities. Soaring revenues and high margins are
strong indicators of potential future success in any almost sector.
Combine these attributes with the burgeoning cannabis market, and
it might just deliver some eye-popping rewards.
For more information about Flora Growth Corp.
(NASDAQ: FLGC), please visit Flora Growth
Corp. (NASDAQ:
FLGC).
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