Consumer Entry into the Cannabis Market Spikes Post Legalization
FinancialBuzz.com News Commentary
NEW YORK, July 9, 2019 /PRNewswire/ -- Within the first quarter of legalization, 5.3 million or 18% of Canadian ages 15 years and older reported using cannabis, according to Statistics Canada. Following legalization, a large number of new users were willing to try cannabis solely because it was legalized and readily accessible. However, a year prior to legalization, only around 14% of Canadians reported using the plant. During the quarter, approximately 646,000 of the users reported trying cannabis for the first time, rising dramatically when compared to 327,000 users a year prior. Overall, the rise year-over-year is largely due to the abundance of male users between the ages of 45 to 64. Generally, within that age group, adults tend to use cannabis for medical purposes, largely due to medical conditions associated with aging. For instance, cases such as chronic pain, Alzheimer's, and Parkinson's are typically associated with the older generation. And through extensive studies, researchers have discovered that cannabis can be used to treat these and several other medical conditions. Furthermore, based on gender, a more significant amount of males used cannabis when compared to females and it was estimated that 22.3% of Canadian males used cannabis compared to only 12.7% of females. Now, while the large increase in users is largely attributable to the older generation, cannabis is also much more prevalent among the younger generation. Statistics Canada reported that 29.5% of Canadians ages 15 to 24 years old used cannabis in the first quarter. Similarly, approximately 28.7% of Canadians ages 25 to 34-year-olds also used cannabis during the quarter. While the adoption of cannabis grew among Canadians, it is important to remember that the market is still maturing. And despite its legalization, there are still many legal barriers imposed on the market, restricting the growth of businesses. Nonetheless, the market is projected to continually grow throughout the shortcoming years, developing into a global industry leader. And according to data compiled by Verified Market Research, the global marijuana market was valued at USD 42.20 Billion in 2016. By 2025, the market is expected to reach USD 466.81 Billion while registering a CAGR of 35.3% from 2018 to 2025. Pasha Brands Ltd. (OTC: CRFTF) (CSE: CRFT), Innovative Industrial Properties, Inc. (NYSE: IIPR), KushCo Holdings, Inc. (OTC: KSHB), Valens GroWorks Corp. (OTC: VGWCF) (CSE: VGW), Harvest Health & Recreation, Inc. (OTC: HRVSF) (CSE: HARV)
With the growth of the legal Canadian cannabis industry, the black market has dwindled as more consumers purchased their products from legal vendors. An estimated 47% or 2.5 million Canadians obtained their cannabis supply from legal sources during the quarter compared to 23% or 954,000 the same period a year prior. Legal sources are dispensaries and retailers that are established after obtaining adequate licensing from the federal and provincial governments. Typically, most vendors sell flower, but ever since legalization, flower sales have begun to wane. Health Canada reported that Canada sold 7,115 kilograms of dried flower in January 2019, declining by 3.7% compared to December 2018. Despite the monthly slump, dried cannabis sales are still up by 10.9% since recreational cannabis was legalized in October 2018. While Health Canada did not disclose why dried cannabis sales fell between December and January, many industry experts speculate that the decrease was due to legal limitations that resulted in demand outweighing supply. Most of the dried cannabis flower that consumers obtain are generally grown by large-scale producers, as these cultivators that produce flower in bulk or wholesale can yield harvests weighing up to tons. Now, while the flower's quality may be subpar, the quantity allows large-scale cultivators to sell at a cheaper price. However, according to a survey conducted by Brightfield Group, 43% of the respondents indicated that they were willing to pay more for products made with premium strains of marijuana. And while cheaper prices for cannabis may play a large role in consumer preferences, the quality of the flower also plays a large factor in consumer purchases. As such, large-scale cultivators can fulfill the demands of consumers looking for cheaper options whereas smaller-cultivators can meet the demands of consumers' looking for premium high-quality cannabis. "We are seeing more and more mainstream retail and branding strategies come into the space as the industry continues to evolve and mature. With the shift toward mainstream cannabis, a number of high-end marketing and brand firms are starting to enter the space to cater to the new consumer. Naturally, this has led, and will continue to lead, to the prevalence of more high-end products throughout the market," said Erik Knutson, Chief Executive Officer or CanCore Concepts.
Pasha Brands Ltd. (OTC: CRFTF) (CSE: CRFT) is also listed on the Canadian Securities Exchange under the ticker (CSE: CRFT). Earlier last month, the Company announced the "addition of three well-respected cannabis experts to the growing Pasha family: Scientific researcher Dr. Cris Felipe Alves, second-generation cultivator and consultant Travis Lane, and lifelong cultivator Kemal Morris.
As a solution provider to the craft cannabis industry, Pasha subsidiary BC Craft Supply Co. Ltd. ("BC Craft Supply") aims to provide cannabis farmers with the tools to transition to new regulations governing the micro-cultivation licence category. These experts will assist farmers in making that transition.
'I'm thrilled to have these experts join our team, and, with their support, I look forward to disrupting the market with craft products that will help solve Canada's ongoing supply chain issues,' said Patrick Brauckmann, Executive Chairman of Pasha Brands. 'With these additions to the Pasha family, I'm confident that enthusiasm for craft products will continue to grow.'
Dr. Cris Felipe-Alves has worked in academic and commercial settings in Australia, Asia, and North and South America, and holds a B.Sc in Biological Sciences from the University of Brasília, and a PhD in Molecular Biology and Biochemistry from Nagoya University. While working as a senior scientist at a global diagnostics company, he led a team of researchers from discovery to R&D and sales of molecular tools designed to detect cancers non-invasively. During this time, he became interested in the potential for cannabis as a curative agent against several types of cancer. Since then, he has worked as an extraction specialist and a Quality Assurance Manager. He will act as the Senior Quality Assurance Person at BC Craft Supply.
'Here at Pasha, I feel at home and am proud to be part of a brand house that has a focus on craft products,' said Dr. Felipe-Alves. 'I look forward to helping Pasha generate safe and efficient cannabis-based products that suit the needs of both recreational and medical consumers both in Canada and around the world.'
Renowned cultivator and consultant Travis Lane has been growing cannabis for more than 20 years. An organic, living-soil-based cultivator who has advocated for the facilitation of pesticide-free, sun-grown cannabis production, Lane has been involved in the founding of numerous small cannabis businesses over the last decade, including a successful chain of storefront dispensaries, a thriving online mail order service, and was a founding partner in one of the most successful hydrocarbon extraction brands in the country. Under legalization, Lane has divested from the illicit market to focus on multiple Cannabis Act license applications, as well as his work with Groundwork Consulting, focused on government relations and licensing for cultivation and retail, and Levity Solutions, a multi-purpose cannabis consultancy focused on assisting aspiring legal cultivators. He will act as a consultant for Pasha Brands and its subsidiaries.
'The level of talent and expertise that exists in the prohibition-era marketplace is beyond impressive,' said Lane. 'These long-time innovators will represent a huge market factor once licensed, and I am proud to help Pasha facilitate this next wave.'
Kemal Morris is a lifelong cultivator who has had his hands in the soil 'since before he could walk'. He watched his parents grow their own food - and cannabis - on Saltspring Island, British Columbia. Soon after Canada launched its first medical cannabis program in 2001, he spent 14 years learning the intricacies of breeding and extract production. In addition, Morris has spent the last four years launching a prominent Canadian Licensed Producer. He is passionate about patients and has connected hundreds of struggling patients with medicine. As the Master Grower for Pasha Brands' owned Vancouver Island Licensed Producer, MedCann, Morris will act as facility designer, cannabis expert, educator and facilitator.
'After completing a four-year term in the regulated industry, I am excited to work with Pasha,' said Morris. 'I finally have the opportunity to share all that I have learned with the cannabis enthusiasts I came up with, and I'm proud to be part of a company that is breaking the big business mold - affording a rightful place to the people who risked everything to create this thriving industry.'
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". For more information, please visit www.pashabrands.com.
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Innovative Industrial Properties, Inc. (NYSE: IIPR) is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Innovative Industrial Properties, Inc. recently announced that it closed on the acquisition of a property in Harrison, Michigan, which comprises approximately 45,000 sq. ft. of industrial space. The purchase price for the Michigan property was approximately USD 6.9 Million. Concurrent with the closing of the purchase, IIP entered into a long-term, triple-net lease agreement with an affiliate of Emerald Growth Partners L.L.C. (EGP), which intends to operate the property as a licensed medical-use cannabis cultivation and processing facility upon completion of redevelopment. EGP is expected to complete tenant improvements for the building, for which IIP has agreed to provide reimbursement of up to approximately USD 3.1 Million. Assuming full reimbursement for the tenant improvements, IIP's total investment in the property will be approximately USD 10.0 Million. "We are pleased to add EGP and its strong management team to our premier tenant roster," said Paul Smithers, President and Chief Executive Officer of IIP. "EGP is well-positioned for success, with its depth of industry experience and expected large-scale vertical integration, and we look forward to supporting EGP through the redevelopment of the Harrison facility and the launch of its Pleasantrees retail locations throughout the state."
KushCo Holdings, Inc. (OTCQX: KSHB) is the premier producer of ancillary products and services to the cannabis and hemp industries. KushCo Holdings, Inc. recently announced that it had filed an application to list the Company's common shares on the NASDAQ Global Select Market (NASDAQ). The listing of the Company's common shares on the NASDAQ remains subject to the approval of the NASDAQ and the satisfaction of all applicable listing and regulatory requirements. In the interim, the Company will continue to trade on the OTC Markets under the current symbol KSHB. Nick Kovacevich, Chairman and Chief Executive Officer of KushCo, commented, "Listing on the NASDAQ Global Select Market, the highest and most prestigious NASDAQ tier, will raise the company's profile by diversifying our shareholder base and enhancing share liquidity in support of our company's long-term goals and objectives."
Valens GroWorks Corp. (OTCQB: VGWCF) (CSE: VGW) is a multi-licensed, vertically-integrated cannabis company focussed on being the partner of choice for leading Canadian and international cannabis brands by providing best-in-class, proprietary services including CO2, ethanol, hydrocarbon, solvent-less and terpene extraction, analytical testing, formulation and white label product development. Valens GroWorks Corp. recently announced it had substantially increased its annual extraction capacity to 425,000KG of dried cannabis and hemp biomass. As the largest third-party extraction company in Canada, Valens continues to experience significant demand for its services and are accelerating its growth to ensure the Company continues to meet the growing demand of its partners for both extraction and white label product development. "We are excited to announce this significant advancement in our annual extraction capacity as we make room for more demand from our partners," said Tyler Robson, Chief Executive Officer of Valens GroWorks. "This increase in scale together with our unique and comprehensive offering of CO2, ethanol, hydrocarbon, solvent-less, and terpene extraction methodologies as well as our consumer product development and manufacturing capabilities position us to be the partner of choice for leading cannabis brands both in Canada and internationally."
Harvest Health & Recreation, Inc. (OTCQX: HRVSF) (CSE: HARV), headquartered in Tempe, Arizona, is a multi-state cannabis operator (MSO) and vertically-integrated cannabis company. Harvest Health & Recreation, Inc. recently announced the acquisition of Arizona medicinal cannabis dispensary Leaf Life in a transaction that includes the only cannabis dispensary in Casa Grande. Leaf Life will be transitioned to operate under Harvest's House of Cannabis stores, known for top operational standards, best-in-class experiences and products and expert teams in developing trusted, quality-driven retail stores with a focus on bettering the community. "Arizona is the third largest medicinal cannabis market in the United States, yet too many in our communities still do not have adequate access to dispensaries that offer the high-quality medicinal products and expert staff required to improve patient education and treatment outcomes," said Harvest Executive Chairman Jason Vedadi. "Harvest is committed to ensuring the strongest operational standards for our industry on a national scale, and we are particularly proud of this acquisition in our home state of Arizona because it enables us to further improve patient access to high-quality medicinal cannabis products."
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