Distinct advantages are appearing in each region of the emerging cannabis market. Leading the pack are the state of California, and the entire country of Canada, which each have their own favorable regulations to adhere to for a growing class of ambitious cannabis companies that include Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1),Hexo Corp. (OTC: HYYDF) (TSX.V: HEXO), Organigram Holdings Inc. (OTC: OGRMF) (TSX.V: OGI), Supreme Cannabis Co. (TSX: FIRE) (OTC: SPRWF),and iAnthus Capital Holdings Inc. (CSE: IAN) (OTC: ITHUF).
Legalization takes many forms. For instance, while Canadian dispensaries are opening nationwide, marketers of these new products are restricted in how they conduct their branding—ie. only boring generic labels are allowed. Whereas, the similarly large population of California are being exposed to all types of new products, brands, and labels.
The Golden State’s branding advantage has given companies such as Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) the impetus to set up shop in California while importing established brands in from other parts of the Pacific Northwest. The company recently solidified a land purchase of 9.55 acres in California’s prominent Desert Hot Springs Cannabis Cultivation Zone.
Upon the commencement of production from the Desert Hot Springs Cannabis Cultivation Zone, it appears that getting the product into the hands of customers should become even easier than it was before. Californian regulators most recently stated that marijuana deliveries can be made anywhere in the state—even in locales that ban cannabis.
The proposed regulations become permanent next month after state lawyers finish reviewing them. However, the proposals also come with their potential drawbacks, including a ban on permit holders partnering with unlicensed partners, which industry supporters said will stifle growth. They also continue to allow farmers to receive an unlimited number of permits to grow.
With the recently acquired global brand and marketing rights for the Washington-based Sugarleaf brand in hand, Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) is seemingly poised to make a big leap across state lines.
California’s Land of Opportunity
For Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) establishing Sugarleaf in California is a primary objective. The first move for the company is the latest strategic collaboration recently launched with a Humboldt County-based cannabis processing company that holds a “Type 6: Non Volatile Solvent Extraction” license from the State of California. The processor uses Apeks supercritical CO2 extraction to produce cannabis oil, terpene profiles and other products on behalf of cannabis cultivators, other manufacturers, and processors throughout northern California.
Once extraction has taken place, the sky’s the limit on the choice of products, as the cannabis flower can be incorporated into edibles. Edibles spending in Canada and the US surpassed $1 billion in 2017 and is projected to grow to more than $4.1 billion by 2022.
As the market shakes out the poseurs from the players, consumers are at this very early stage beginning to align themselves with their favorite products—a decision that could solidify a relationship that could last years. Quality, availability, and that “it” factor goes into every buying decision.
Whether the customer is seeking something they’ll be buying on a regular basis, or pulling out their wallets and seeking the “champagne of cannabis” which is being sold for upwards of $800 per ounce—It’s up to cannabis companies to give the customer what they want.
Banking on the Pacific Northwest Branding Advantage
Branding and marketing new products require finesse and capital. Now many are looking to the Pacific Northwest to be the central launch pad for new cannabis brands and products.
The region has had disproportionate success in brand building, having spawned such notable giants as Nike, Microsoft, Starbucks, and Amazon. Should brands such as Washington-based Sugarleaf take the next step in terms of name-recognition, its Pacific Northwest origins won’t soon be forgotten.
With the cannabis market emerging as potentially a new competitor (or compliment) to coffee and other versions of life’s pleasures, a unique opportunity is at hand. It’s up to companies to get out ahead of the herd early and seize an early-mover advantage as soon as possible.
Chemistree Technology Inc.’s (CSE:CHM, OTCQB:CHMJF, FRA: CM1)strategic move into California represents this type of advantage—despite the state’s already booming cannabis sales. In 2017, before recreational marijuana even became legal on January 1, 2018, California’s cannabis spending hovered near $3 billion in 2017. By 2022, that figure is expected to soar to $7.7 billion.
Banking on the Pacific Northwest Branding Advantage
As the new era of legalization across all major markets comes closer to reality, cannabis companies are at this point staking valuable ground. Chemistree Technology Inc. (CSE:CHM, OTCQB:CHMJF, FRA: CM1) is gearing up for a big move, now with operations in both Washington State and more importantly, California.
Potential new business initiatives for the company include adding key industry people in sales positions in Washington and California, developing a proprietary CBD-focused line of products and most importantly expanding the Company’s presence outside of Washington and California to other states where opportunities exist in the rapidly growing cannabis industry.
When his company announced its California land acquisition in November, Chemistree president Karl Kottmeier stated, “This is a great purchase for Chemistree. I am pleased to report that our highly-experienced team in California has begun working on this exciting project. We are buying a site that already has much of the Conditional Use Permit application process well underway.”
Now in the process of addingkey people to theChemistreeCalifornia Team, the company is currently focused on product development, biomass sourcing and sales, and marketing planning.
Upon acquiring the global rights for Sugarleaf and officially entering the California market, Kottmeier stated, “I am grateful to our tremendous team of advisors in California who are helping us access a market that is expected to exceed $5.1 billion next year. Sugarleaf is a high quality, flower-based product line in Washington state and now, working closely with our new processor partner in Humboldt, we will be able to develop and produce Sugarleaf manufactured products as well as flower products in the world’s sixth largest economy – the massive California market.”
The company’s plans for the Desert Hot Springs Cultivation Zone property includes the development of a greenhouse cultivation facility at the site that includes two separate cultivation buildings totaling 127,960 square feet and an additional 119,960-square-foot building intended for warehousing and processing facilities. Fully constructed, a facility of this size has the potential to produce approximately 50,000 pounds of cannabis flower per year.
Kottmeier added in the company’s most recent corporate update, “Our submission to the City of Desert Hot Springs is advancing through the regulatory process and our most recent update from our contractor has provided us with the good news that due to a rework of our plans by the City Engineer, we have an unexpected savings of approximately $500,000 to the project budget. We are confident that our submission will be successful and we are looking forward to working with the City of Desert Hot Springs going forward.”
Opportunities in Other Regions
Management at Hexo Corp. (OTC: HYYDF) (TSX.V: HEXO) is beaming, fresh off of hauling in two prizes at the 2018 Canadian Cannabis Awards. The company’s flagship Hydropothecary by HEXO took home Cannabis Product of the Year, while its peppermint medical cannabis oil sublingual spray “Elixir” won them the Innovation of the Year award. In terms of innovation, the market’s eyes are still on the Quebec-based company, in the wake of its deal signed with Molson Coors, which will likely lead to new beverage based products in the coming years.
Prior to its recent price drop, it looked as if Organigram Holdings Inc. (OTC: OGRMF) (TSX.V: OGI) could be the next cannabis company to make the jump onto the NYSE. However, the Moncton-based company is continuing to keep its focus on the Canadian market first and foremost. Most recently, Organigram obtained a $10 million loan from Farm Credit Canada to continue to expand its Moncton campus. The scheduled expansion is projected to increase the company’s target production capacity by 62,00kg per year and 89,000kg per year, with the additional state-of-the-art grow rooms coming online in April and August of 2019, respectively.
While refraining from launching in the United States, Supreme Cannabis Co. (TSX: FIRE) (OTC: SPRWF) recently indicated another move into international markets through a deal with a prominent cannabis tastemaker. Globally-recognized recording artist Wiz Khalifa and his global regulated cannabis brand Khalifa Kush Enterprises (KKE), just inked a deal with Supreme, launching an international partnership (excluding the US) to develop and launch a lineup of premium cannabis products. Supreme Cannabis and KKE will work to develop and commercialize a product lineup that is expected to include pre-rolls, extracts, capsules, and cannabis oils to be sold by Supreme Cannabis under the KKE brand.
Unlike Supreme, iAnthus Capital Holdings Inc (CSE: IAN) (OTC: ITHUF) is entirely focused on the United States. The New York-based company owns and operates licensed cannabis cultivation, processing, and dispensary facilities throughout the USA. At the moment, iAnthus is patiently waiting for the finalizing of the transformative acquisition of MPX Bioceutical (OTC: MPXEF) from October. The combined entity is positioned to build out its multi-state business model in the US cannabis market, with a combined market capitalization of over $600 million.
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