CannabisNewsWire
Editorial Coverage: The Canadian cannabis industry is pliable,
changing shape amid mounting public support, favorable legislative
action, an influx in capital, and the integration of alcohol and
tobacco. For years, this massive industry was entirely illegal; its
potential unavailable to legitimate investors. As Canada heads
toward legalizing recreational cannabis later this year, however,
the continuous sculpting of the industry provides investors a
wealth of consumer-driven investment opportunities. Choom
Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF) (CHOOF
Profile) is targeting the recreational user via its
own brand of high-grade handcrafted cannabis. Cannabis lifestyle
brand Hiku Brands Co. Ltd. (CSE: HIKU) (OTC: DJACF)
(DJACF
Profile) recently received a $10 million equity
investment from Aphria, Inc. (TSX: APH) (OTC:
APHQF), denoting high expectations for recreational
cannabis. Canopy Growth Corp.’s (TSX: WEED) (OTC:
TWMJF) recent investment from a big alcohol brand reveals
a glimpse of how separate sectors of recreational consumables are
interwoven. This strategic blending means big business for
cultivators such as ABcann Global (TSX.V: ABCN) (OTCQB:
ABCCF) (ABCCF
Profile), a recognizable licensed producer and seller
of pharmaceutical-grade cannabis products.
Canada Heads for New Highs
An estimated 5
million Canadians already smoke cannabis once a month, with
another 900,000 expected to join them after legalization. In 2015,
the country was already spending nearly as much money
on cannabis as on wine, indicating the huge business potential
of this sector. The question is, how will companies tap into that
wealth?
One of the big changes expected over the next few years is the
integration of recreational cannabis with the alcohol and tobacco
industries. With their experience of producing, distributing, and
marketing recreational consumables, these businesses have the most
relevant experience to shape the marketplace. Their investment and
expertise will help cannabis companies find creative ways to cater
to consumer demand, not just medical users.
Brand Identity
Among the companies preparing to make the most of this
opportunity is Choom (CSE:
CHOO) (OTCQB: CHOOF). Based in the Okanagan region of British
Columbia, the company is well-placed to make the most of the
production, sales and marketing opportunities offered by the
impending retail market, which has a forecast value of $4.9 billion
– nearly $9 billion (http://cnw.fm/xch0D).
With its relaxed, youthful
brand, Choom is positioning itself to reach the ideal growth
market of cannabis users. Consumers in their 20s tend to be more
socially liberal than their elders. They have substantial
disposable incomes and are used to spending a large part of them on
consumables such as food, drink and tobacco, and are therefore
likely to make up a large part of the recreational cannabis
market.
To connect with these consumers, Choom has created a hip and
modern brand inspired by Hawaii’s culture and relaxed atmosphere.
The brand’s story taps into the history of the 1970s “Choom Gang,”
a group of buddies in Honolulu (including former President Barack
Obama) who knew how to relax with “choom,” the local’s term for
marijuana. Choom’s trademark slogans pivot off another
unconventional phrase, “Say Hello to…”, bringing a heady dose of
good times and good friends together as the company invites
investors to “Say Hello to Choom™” as it lights up the adult
recreational cannabis market in Canada.
Reaching Out to Customers
This aesthetic extends to the design for Choom’s “Aloha”-style
dispensaries. It’s a clean, modern, stylish look, crafted by the
designers behind some of the world’s most recognizable retail
environments. Couches, pale wood and carefully chosen banner fonts
create a relaxed atmosphere. Clean white shelving and neat
presentation make a space reminiscent of Apple stores — another
well-recognized brand with a strong hold on the disposable income
of millennials.
One of the most important factors in marketing recreational
cannabis is going to be establishing such an aesthetic. Brand
specialists will want to leave the cold formality of medical use
and the seedy criminal associations behind, while retaining hip
association with cannabis. Choom’s branding is ideally designed to
make this shift, while establishing prestige brands for the
discerning consumer.
The stores are designed to appeal to the widest possible market.
Choom is aware that its core business will rely on existing users
looking to obtain their cannabis legally, and their stores will
make a comfortable shopping environment for these consumers. But
there are also the “curious customers” — those without a medical
need for cannabis and who did not want to consume it illegally.
They’re expected to fuel a 19 percent increase in the number of
cannabis users in Canada. By creating a familiar shopping space,
Choom will make it easier for them to enter the market.
Experience and Integration
Choom’s business proposition extends beyond the retail face of
the cannabis industry. It is also looking to place itself within
the ancillary markets that will support the consumer business.
Testing labs, security, infused products, consumption paraphernalia
and crop cultivation will all be part of an expanding industry.
Choom is looking to establish a vertically integrated enterprise,
from cultivation through to sales, all under a single hip consumer
brand.
Choom’s application with ACMPR (Access to Cannabis for Medical
Purposes Regulations) has received security clearance and is now in
the detailed review stage. The company has also submitted a second
late-stage ACMPR application, which is in its confirmation of
readiness stage. Aggressively preparing to reap the benefits of
this license, Choom has retained Cannabis Compliance Inc. to help
expedite Choom’s initial license applications and ready the company
for legalization of recreational marijuana.
One of Choom’s greatest strengths is its experience. The
managers and directors have decades of experience covering
investment, entrepreneurship, business development and
pharmaceuticals. Their knowledge of the existing Canadian medical
cannabis market ensures that strategic decisions are backed up by
real expertise and analytical insight. The company has over five
years of experience in the cannabis sector. It knows how to produce
naturally grown premium cannabis. Existing license and production
assets mean that Choom is well positioned to scale-up rapidly once
legalization takes effect, to meet the anticipated Canadian market.
This will put it ahead of companies set up in response to the legal
change and provide an accelerated path for rapid market growth.
This is exemplified by the company’s existing cultivation
facilities at Vernon and Chemainus. Both are receiving a
state-of-the-art retrofit, with expectations that Vernon will be
completed by July, the same month Canada legalizes recreational
cannabis use.
The Vernon property will boast 6,800 square feet of growing
space, capable of producing 660 kg/year of cannabis for an
estimated revenue of $6.6 million, excluding oils. A potential
phase 2 of this facility would double the size and enable
additional growing capacity of 1,500 kg/year, also doubling the
facility’s revenue.
While the second facility, on Vancouver Island, is smaller –
4,500 square feet – its retrofit is also slated to be completed by
July 2018. Plans include doubling this space, which would add about
$9 million in annual revenue, excluding cannabis oils.
It’s this sort of established enterprise that will allow Choom
to build brand loyalty and position cannabis as another popular
consumable, enjoyed in the same way as alcohol and tobacco.
A Growth Sector
A similar approach is being taken by Hiku
(CSE: HIKU) (OTC: DJACF), premium cannabis lifestyle
brand growing high-quality handcrafted cannabis flower. Hiku’s
wholly owned subsidiary is a licensed producer of cannabis under
the ACMPR that has requested its Pre-Sales License Inspection, the
last step prior to receiving a license to sell cannabis under the
ACMPR. Hiku’s Dominion Facility is a state-of-the-art ACMPR
licensed production facility capable of producing approximately 660
kg year of dried cannabis flower. Phase one of its “FUTURE LAB”
production complex is slated for completion in the second quarter
of 2018, in time for legalization. Utilizing an industry-leading
multi-tier system powered by LED lighting provided by Fluence
BioEngineering, Hiku’s annual production capacity is expected to be
in excess of 5,000 kgs, letting it cater to a large part of the
cannabis consumer market. The company’s merger with Tokyo Smoke is
expected to create the first brand and retail-focused craft
cannabis producer.
This development is backed up by a $10 million investment from
Aphria (TSX: APH) (OTC: APHQF), a leading Canadian
medical cannabis company. With an expansion strategy based on
targeted
investment and collaboration with other companies, Aphria has
been working to advance growth in the U.S. medical cannabis market.
This provides the company with the production and distribution
facilities needed to enter the market for recreational
cannabis.
While the involvement of medical marijuana companies will be
important in the growth of Canada’s cannabis sector, the real test
for commercial cannabis will be the involvement of consumer
brand-based businesses. Their entry into the market will signal
faith in the future of recreational cannabis, as well as bringing
consumer branding expertise to the sector. One of the first
examples of this is the investment in Canopy Growth (TSX:
WEED) (OTC: TWMJF) by Constellation Brands. The $42
billion company behind Corona, Modelo and Svedka Constellation
Brands has taken a
stake in Canopy Growth worth about $191 million, with the
option of purchasing additional stakes. It will use this investment
to create cannabis-infused drinks, using Canada as a market in
which to innovate in anticipation of markets emerging
elsewhere.
The growing Canadian cannabis market bodes well for ABcann
(TSX.V: ABCN) (OTCQB: ABCCF), a globally licensed,
cost-efficient producer of premium quality organic standardized
medicinal cannabis. One of the earliest licensed Canadian medical
marijuana producers under Canada’s federally controlled ACMPR,
ABcann has five years of operating experience in the burgeoning
medical marijuana space. The company currently owns and operates a
fully functioning 14,500-square-foot facility in Ontario, as well
as 65 acres of real estate with proper zoning and existing
infrastructure in place to support the construction of another
production facility of up to 1 million square feet. Along with this
growth capacity, ABcann has a healthy cash balance, steady sales
growth, an established operations team and global expansion plans,
making it well positioned to compete in the rapidly expanding
Canadian cannabis industry.
Though it’s still several months away from fulfillment, Canada’s
recreational cannabis market is already providing a diverse range
of businesses and investment opportunities. Building on the
techniques of medical marijuana companies, the market appears set
to diversify into drinks, retail outlets and premium products. This
will establish cannabis as part of the existing market for
recreational consumables.
For more information on Choom, please visit
Choom (CSE:
CHOO) (OTCQB: CHOOF)
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