- New Organigram deal part of continuing cannabis trend
- Canadian cannabis industry looks south for suppliers in Phase 2 of legalization
- Organigram announces national distribution strategy for new vape pens/cartridges
- Additional opportunities for penetration by U.S.-based companies
Earlier today, TSI reported on the latest deal for NASDAQ-listed Organigram Holdings Inc (US: OGI CAN: OGI). The company announced that is becoming the exclusive Canadian supplier of Feather Company LTD.’s disposable vaporizer pens and 5/10 cartridges.
From the release:
Organigram has secured cannabis distribution arrangements across Canada, in all ten provinces. The Company plans to approach all ten provinces with Feather’s disposable [vaporizer pen] and cartridge-based units.
The exclusive supply arrangement is via licensing this vaporizer technology, through parent company Edison Cannabis Co.
The Seed Investor has already alerted investors to this new trend in the cannabis industry. Canada is moving to Phase 2 of its national legalization of cannabis (new regulations just announced). This means “next generation” cannabis products like vaporizers and vape pens, concentrates, and edibles and other cannabis-infused products.
For Canadian cannabis companies, this means developing or acquiring new product lines. Enter the U.S. cannabis industry.
Many fully legalized U.S. states are well ahead of Canada in bringing these products to market. U.S. companies possess the technology and expertise in manufacturing these products. They also already have branding and marketing expertise to bring to the table.
Canadian cannabis companies are finding that it’s faster and more cost effective to go the licensing/distribution agreement route versus organic development of these product lines from scratch.
Note how Organigram is setting itself up as a supplier of these products for the Canadian cannabis industry.
While U.S. companies can pursue additional deals like that of Feather, how long before one of the better funded U.S.-based companies sets their sights higher? Had Feather (and Edison Cannabis) sought to establish their own manufacturing facility north of the Border, it could be Feather that is now announcing plans to supply the entire Canadian market.
Investors looking for a parallel in the Canadian cannabis industry should look at cannabis extraction. Also needed for Phase 2 of cannabis legalization in Canada are the extracted cannabis oils that are the foundation for these value-added products.
TSI has been on top of this trend too. Companies like Medipharm Labs (US: MEDIF, CAN: LABS) and Valens GroWorks (US: VGWCF CAN: VGW) have already had impressive runs, on the backs of numerous supply agreements across the Canadian cannabis industry.
Neptune Wellness (NASDAQ: NEPT CAN: NEPT) recently announced its own plans to become a large-scale specialist in cannabis extraction.
Setting up a Canadian subsidiary for vape pens and vaporizer technology would mean a substantial capital investment. It also means securing access to provincial markets.
The payoff is the opportunity to become a national supplier, in a cannabis market that offers both full access to capital and regulatory certainty.
Today, the trend is U.S.-based companies licensing their technology to the Canadian cannabis industry. Tomorrow?
If the SAFE Banking Act of 2019 secures passage and the U.S. cannabis industry gains greater access to capital, we could then quickly see U.S.-based companies moving into Canada more aggressively.
Published at Tue, 18 Jun 2019 19:06:55 +0000