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Oct. 25, 2019, 9:00 a.m. EDT

Cultivators Strive to Match Cannabis Demand as the Industry Maintains its Growth

FinancialBuzz.com News Commentary

NEW YORK, Oct. 25, 2019 /PRNewswire/ -- The widening gap between licensed producers and consumer demand has continued to grow since Canada fully legalized cannabis back in late 2018. Cultivators are struggling to meet demand because of government-imposed regulations that have curtailed retail operating hours as well as the number of licenses provided. As such, the supply shortages have severely impacted brick-and-mortar retailers in Canadian provinces such as Ontario, Quebec, and Newfoundland and ultimately caused some to shut down. Despite the limited supply, Brock University Professor Michael Armstrong argues that supply will eventually catch up with demand if regulatory complications can be resolved. Armstrong cites data from 2017, comparing it to current production rates and highlighting that producers are growing at a faster rate. Moreover, Armstrong says that not only were producers stockpiling their inventory, but each inventory per month was growing exponentially larger. Consequently, Armstrong believes that supply can catch up to the demand by the end of 2019, when Health Canada projects that the demand for total cannabis consumption is expected to reach a million kilograms per year. Furthermore, following the recent passage of the "second legalization," which enabled cannabis-based products such as edibles, extracts, and topicals to be commercialized, consumer demand is expected to grow. And while the demand is outpacing supply, eventually cultivators can meet the demand and in return, drive higher revenue margins and profitability. According to data compiled by ArcView Market Research and BDS Analytics, worldwide consumer spending on legal cannabis reached an estimated USD 12.2 Billion in 2018. And by 2022, it is expected for consumer spending to reach USD 31.3 Billion while registering a CAGR of 26.7% from 2017 to 2022. Pasha Brands Ltd. /zigman2/quotes/212784086/delayed CRFTF -6.39% /zigman2/quotes/212657074/delayed CA:CRFT -10.53% , Canopy Growth Corporation /zigman2/quotes/200603886/composite CGC +1.85% /zigman2/quotes/202205609/delayed CA:WEED +1.69% , Tilray, Inc. /zigman2/quotes/209129655/composite TLRY -0.48% , Aphria Inc. /zigman2/quotes/207425803/composite APHA +2.94% /zigman2/quotes/205566616/delayed CA:APHA +2.59% , Aurora Cannabis Inc. /zigman2/quotes/210559470/composite ACB +2.31% /zigman2/quotes/203734337/delayed CA:ACB +1.45%

While the U.S. is the largest global market in the cannabis industry, federal regulations still deem cannabis a controlled substance. The U.S. is the largest region due to select states that have moved to legalize cannabis entirely. However, many operators are interested in Canada because it is fully legalized. And despite the U.S. being the largest market, the majority of the largest cannabis corporations are headquartered in Canada, primarily because of legality matters. Nonetheless, most of the largest operators have expanded their businesses into the U.S. and other legal markets around the world. However, the development of the industry is also causing consumer preferences to change. According to a study conducted by researchers at Columbia University's Mailman School of Public Health, American adults have been found to increasingly use cannabis on a daily basis since 2007. The statistics show that, while more and more users are entering the marketplace, it is also retaining existing users. And while new users may prefer a more subtle product, long-time users are beginning to demand more potent and natural products. However, large licensed producers are unable to meet the demands of avid consumers. Generally, large-scale producers aim towards growing wholesale cannabis, which usually results in lackluster qualities of strains. As a result, "craft cannabis" producers have come into the spotlight because of their unique and potent strains. Craft cannabis is known as an artisanal profession, similar to craft beer or craft coffee, where producers take immense pride in their work and strive to produce the best quality product. Craft cultivators typically engage in a meticulous and tedious process to ensure their products are up to the highest standards. For instance, large licensed producers typically have automated farms to speed up efficiency. On the other hand, craft cultivators usually operate small-scale grow houses, which allow them to tend each individual plant to ensure high-quality end results. "As the era of marijuana prohibition comes to an end, now is the time to think about what kind of marijuana industry and marijuana agriculture we want. Craft Weed will help us plan for a future that is almost here," according to a synopsis by the MIT Press, an affiliate of the Massachusetts Institute of Technology. 

Pasha Brands Ltd.   /zigman2/quotes/212784086/delayed CRFTF -6.39% /zigman2/quotes/212657074/delayed CA:CRFT -10.53% is also listed on the Canadian Securities Exchange under the ticker /zigman2/quotes/212657074/delayed CA:CRFT -10.53% . Earlier this month, the Company announced breaking news that, "its wholly owned subsidiary, BC Craft Supply Co. Ltd. ("BC Craft"), has signed a supply agreement with Waterloo, Ontario based Greenterra Cannabis ("Greenterra").

The founders of Greenterra, Adam and Drew Anger, 30 and 24, are two brothers and successful businessmen who saw a tremendous opportunity to get into legal cannabis with a minimal investment. They completed their application using Tamra Follett's do-it-yourself standard operating procedure kit, and will be cultivating cannabis in a greenhouse using hand-mixed soil and organic inputs.

Adam has owned several companies in the trucking and transportation industries and will be operating the business side of the greenhouse, while Drew, the owner of a marketing company, will be lead cultivator.

'Adam and Drew bring a youthfulness and excitement to their business that made signing a supply agreement with them so attractive to us,' said Patrick Brauckmann, Executive Chair of Pasha Brands. 'They truly represent what it means to be a family-oriented business in the cannabis industry and we're excited to get their product on the shelves of retailers across the country.'

With Canada's current licensed cannabis producers only able to supply an estimated 15 percent of what Canadians are consuming, Pasha is optimistic that yet another new supply agreement will help correct the cannabis supply imbalance. Each micro cultivator in Canada will be allowed to produce approximately 500 kg of cannabis per year. Canada has tens of thousands of craft producers operating in the illicit cannabis market and BC Craft is focused on helping as many small farmers transition into the regulated market as possible.

'It's hard to believe that we're breaking into this industry and turning our hobby into a business,' said Adam Anger. 'We're really excited to partner with a company like BC Craft because we know that they prioritize not only craft cannabis but a sense of family the same way that we do.'

About Pasha Brands: Based in Vancouver, British Columbia, Pasha is a vertically integrated, prohibition-era brand house firmly rooted in BC's craft cannabis industry, which boasts an international reputation. With proven capabilities in cannabis cultivation, genetic research and development, product processing, and retail, Pasha is uniquely positioned in the new legal cannabis market through its network of hundreds of craft cannabis suppliers under the Pasha umbrella. Pasha subsidiary, Medcann Health Products Ltd., is a Health Canada licensed cultivator and processor with a licence to sell medical cannabis products in Canada. Pasha and BC Craft are also developing a craft cannabis campus, which is dedicated to bringing craft quality into the newly legal cannabis market in Canada. BC Craft is driven to assist craft growers in obtaining security clearance and licensing to grow as micro-cultivators, specializing in education and compliance to bring growers into the regulated cannabis supply market. Pasha's common shares trade on the CSE under the symbol "CRFT" and on the FSE under the symbol "ZZD". For more information, please visit  www.pashabrands.com ."

For our latest "Buzz on the Street" Show featuring Pasha Brands Ltd. recent corporate news, please head over to:  https://www.youtube.com/watch?v=80i_hHzj91Q

Canopy Growth Corporation   /zigman2/quotes/200603886/composite CGC +1.85% /zigman2/quotes/202205609/delayed CA:WEED +1.69% is a world-leading diversified cannabis, hemp and cannabis device company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms, as well as medical devices through Canopy Growth's subsidiary, Storz & Bickel GMbH & Co. KG. Canopy Growth Corporation recently closed the previously announced acquisition of all outstanding shares in the global cannabinoid-based research company Beckley Canopy Therapeutics, including the joint commercial venture Spectrum Biomedical UK. These teams will now be integrated into the broader Spectrum Therapeutics organization to increase the breadth of the clinical research being pursued under the Spectrum banner and to combine continental European and United Kingdom commercial teams. "The acquisition comes at a time when commercial opportunities across Europe are ramping up," said Mark Zekulin, Chief Executive Officer, Canopy Growth. "Spectrum Biomedical has completed all necessary approvals to import cannabis into the UK market and is proud to facilitate patient access to safe cannabinoid-based medicines there. Consolidating our UK-based operations will allow Canopy to simultaneously improve its research and commercial capabilities across the continent."

Tilray, Inc.   /zigman2/quotes/209129655/composite TLRY -0.48% is a global pioneer in the research, cultivation, production and distribution of cannabis and cannabinoids currently serving tens of thousands of patients and consumers in 13 countries spanning five continents. Tilray, Inc. recently announced it has entered into a definitive agreement pursuant to which Tilray, through a wholly-owned subsidiary of High Park Holdings Ltd., will acquire all of the issued and outstanding securities of 420 Investments Ltd., an adult-use cannabis retail operator headquartered in Calgary, Alberta. FOUR20 provides adult-use cannabis consumers with a premium retail experience focused on high-quality product selection, education and community. FOUR20 currently operates six licensed retail locations and has 16 additional high-traffic locations secured in desirable locations in Alberta, including Canmore, Calgary and Edmonton. Tilray and High Park will leverage FOUR20's retail expertise and brand and market knowledge to expand into other Canadian provincial markets where Licensed Producer retail ownership will be permitted in the future. "FOUR20 offers a premium retail experience for the mainstream cannabis consumer and builds on our broader retail strategy, which includes several minority investments in other leading cannabis retailers," says Tilray Chief Corporate Development Officer Andrew Pucher. "With FOUR20, we will elevate the retail experience for consumers by offering the best quality-tested products while preparing for the next wave of legalized product launches taking place by year's end."

Aphria Inc.   /zigman2/quotes/207425803/composite APHA +2.94% /zigman2/quotes/205566616/delayed CA:APHA +2.59% is a leading global cannabis company driven by an unrelenting commitment to our people, product quality and innovation. Aphria Inc., through its subsidiary Aphria Deutschland GmbH, recently launched the Company's first CBD-based nutraceutical, the first product in its CBD-based cosmetics line for the German market. Featuring CBD derived from hemp, the CannRelief brand of products are being produced in the European Union and distributed by the Company's subsidiary, CC Pharma, which has access to more than 13,000 pharmacies throughout Germany. "We are excited to introduce our first brand of CBD products for the German nutraceutical and cosmetics market," said Jakob Ripshtein, President of Aphria. "Supported by our extensive distribution network through CC Pharma, CannRelief provides a natural extension to Aphria's growing business opportunities in the German medical cannabis market. We look forward to providing a full range of CannRelief CBD products this year."

Aurora Cannabis Inc.   /zigman2/quotes/210559470/composite ACB +2.31% /zigman2/quotes/203734337/delayed CA:ACB +1.45% , headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 625,000 kg per annum and sales and operations in 25 countries across five continents, is one of the world's largest and leading cannabis companies. Aurora Cannabis Inc. and CTT Pharmaceutical Holdings, Inc., recently announced the successful commercialization of CTT's cannabinoid-infused sublingual wafers. The new cannabis product line, a first of its kind, has been launched by Aurora in the Canadian medical cannabis market under the brand name "Dissolve Strips™". "Aurora's Dissolve Strips™ provide unique advantages over other ingestible products due to their ease of administration, discrete nature and accurate dosage, that provides more rapid bioavailability of cannabinoids via sublingual use," said Terry Booth, Chief Executive Officer of Aurora. "This adds yet another innovative offering to our growing portfolio of high quality, medical products that we offer our patient base, and is testament to our industry leading ability to work with technology partners and regulators to bring new form factors to market rapidly."

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P/E Ratio
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Market Cap
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