The billion dollar Canadian cannabis market is the right environment to create shareholder value in a wholesale B2B cannabis market.
The now legal recreational segment of the Canadian cannabis market is expected to add a 35% increase to the Canadian cannabis market in 2019according to research firm Deloitte, for an expected total annual revenue of C$7 billion.
While much of the attention of investors in Canada’s emerging cannabis industry has focused on business-to-consumer sales, a combination of new federal licensing regimes and differences in provincial regulations regarding distribution, along with a nationwide supply shortage and changing consumer preferences create an ideal environment. landscape for a lucrative business-to-business (B2B) cannabis wholesale marketplace.
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Cannabis Act Licensing Enables B2B Cannabis Sales
Under the new Cannabis Act and Health Canada’s Cannabis Regulations, holders of standard cultivator and processor licenses can wholesale their products to a provincial distributor or other licensed cannabis companies. This includes seeds, plants, dried flowers, and oil, and will expand to edibles and concentrates once the federal government greenlights those products in late 2019. These updates of the previous licensing regime effectively give cannabis companies the ability to establish B2B wholesale cannabis. models – from cannabis products to ancillary products – and build strategic partnerships with other qualified permit holders.
Varied Provincial Landscape and National Supply Shortage Support B2B Cannabis Sales
The wholesale cannabis distribution landscape in Canada is a patchwork of different provincial rules and regulations with some governments such as British Columbia and Ontario controlling the wholesale sale of recreational cannabis in jurisdictions like Saskatchewan and alberta allowing distribution by a private company. Government control of wholesale and distribution can create a very difficult environment for emerging cannabis companies looking to enter the market. But the wholesale B2B cannabis market opened up by new licensing regulations offers an excellent entry point – made all the more profitable given the problematic shortage of supply.
The legal supply of cannabis in Canada may only meet 30% of demand after the first year of legalization for recreational use, according to a recent study by researchers from the University of Waterloo and the CD Institute. Howe. The legal supply of cannabis is expected to be around 210,000 kilograms in the first year, while the demand will be around 610,000 tons. The imbalance between supply and demand is putting upward pressure on spot B2B cannabis prices, bringing them on par with the prices offered by provincial wholesalers – meaning licensed businesses with sales models of cannabis B2B have multiple channels to accelerate market penetration and revenue generation. In this environment, precursor cannabis companies also have significant opportunities to establish their Mark coast to coast and create strategic relationships between vertical markets.
B2B Cannabis Wholesale Market Companies
In anticipation of the new legal framework for cannabis in Canada, in February 2018, Aurora Cannabis (NYSE:ACB,TSX:ACB) launched a B2B platform for licensed cannabis businesses to facilitate “win-win” wholesale transactions and overcome distribution barriers in major provincial markets.
A Cannabis Sourcing Partner of Aurora, The Supreme Cannabis Company (TSXV:FIRE,OTCQX:SPRWF,FWB:53S1) was the first Canadian cannabis company to adopt a B2B wholesale model, producing cannabis in its 7ACRES hybrid greenhouse. Supreme has entered into recreational cannabis supply agreements with the provincial governments of Manitoba, Alberta, British Columbia, Ontario, Nova Scotia and Prince Edward Island for provincial and private stores. The company also has B2B supply agreements with Namaste (TSXV:NOT), BlissCo (CST:BLIS), Pure Global Cannabis (TSXV:PURE) and Tilray (NASDAQ:TLRY).
The B2B cannabis wholesale market also includes cannabis-related accessories such as packaging materials, agricultural supplies, vapers, water pipes, and grinders. High Tide’s Alberta subsidiary, RGR Canada, is production of a custom line of smoking accessories for Aurora Cannabis, representing the subsidiary’s largest bulk purchase order ever. High Tide is also making strides in the cannabis wholesale market with an application to become a licensed wholesaler in Saskatchewan. The company has already secured wholesale partners through a series of memorandums of understanding with FSD Pharma (CSE:HUGE), Maple Leaf Green World (NEO:MGW), Sundial Growers and Supreme Cannabis Company Inc.
Canopy growth (TSX:GRASS) has its own wholesale cannabis distribution platform, CraftGrow Network, which launched in 2017 and includes the Tweed Main Street online marketplace. CraftGrow serves as a trusted sales channel and secure revenue stream for Canopy Growth’s select group of preferred partners. In addition to providing immediate sales volume with reduced logistical expenses, the platform also offers cannabis growers a great opportunity to build brand recognition and achieve their expansion goals. For Canopy, this is an opportunity to expand the variety of its product offerings to consumers.
One of Canopy Growth’s preferred partners is Valens GroWorks (CSE:VGW) which has entered into a cannabis wholesale agreement with Canopy to distribute, market and sell Valens-branded premium whole flower or oil products through the extensive CraftGrow network. Valens GroWorks was one of the first cannabis companies licensed by Health Canada to be granted an amendment allowing the manufacture and packaging of cannabis oil products for sale to other licensed cannabis producers as well as clinical researchers.
Valens recently announced that Health Canada has updated its standard cultivation and standard processing license to allow B2B sales. The company’s wholly-owned subsidiary, Valens Agritech Ltd, is now licensed to sell cannabis and cannabis-based products to its strategic partners and other licensees, enabling Valens to execute the extraction agreements that it had entered into before the new cannabis regulations.
“This is an extremely important milestone for the company as we continue to strategically execute our business plan to be the industry’s leading provider of mining services,” said Tyler Robson, CEO of Valens GroWorks. “Having this new license in hand, combined with our proprietary mining capabilities, will enable us to create further value for our shareholders and strategic business partners.” The license also allows Valens to deepen its vertical integration and diversification into the Canadian medical and adult markets as well as the emerging global medical cannabis market. Through its subsidiary Valens Farms and its partnership with Kosha Projects, the company is building a 400,000 square foot EU Good Manufacturing Practice greenhouse in British Columbia’s Okanagan Valley.
B2B cannabis extract sales and services
In addition to the wholesale of cannabis products and cannabis accessories, the B2B cannabis market also encompasses cannabis-related services, including the extraction, processing and manufacturing of value-added cannabis-based products. of cannabis. Cannabis oils and cannabis-infused products have begun to overtake the dried flower market in many legal cannabis jurisdictions in the United States, and the same market shift is expected in Canada once value-added products like edibles and concentrates will become legal in 2019. The ability to transact value-added services under Health Canada regulations gives this category of licensees added value for their shareholders, as they are in able to take advantage of a lucrative sector of the cannabis market.
“In mature cannabis markets, derivative products such as vape pens, edibles and infused beverages account for more than half of all products sold at the consumer level. Over the next several years, we expect the Canadian market to evolve to reflect a similar product mix,” said GTEC Holdings (TSXV:GTEC,OTCMKTS:GGTTF) CEO Singhavon.
Valens GroWorks, which specializes in proprietary extraction methodologies and services, recently signed on for multi-year cannabis extraction and value addition service The agreements with GTEC and Harvest a (TSXV:HVT). Under the agreements, corporate clients will ship bulk quantities of dried cannabis to Valens for processing, for a service fee, into value-added cannabis products, such as cannabis oil derivatives that are used in the development of many health and wellness products. , nutraceuticals, beverages and vapers.
“This partnership provides GTEC with the ability to use Valens’ intellectual property, technology and expertise to immediately develop value-added products while growing Specter Labs,” Singhavon said. GTEC could soon merge with Invictus MD Strategies (TSXV:UNCOMFORTABLE,OTCMKTS:IVITF,FWB:8IS1) to form Western Canada’s largest vertically integrated cannabis company.
In a market environment characterized by supply shortages and varying provincial distribution regulations, new B2B cannabis sales provisions under the Cannabis Act open up more opportunities for licensed Canadian cannabis businesses to gain market share, a faster path to revenue, and the strategic partnerships needed to succeed in a fledgling industry.
The post office License Advantage: The B2B Cannabis Wholesale Market in Canada appeared first on Investment News Network.
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