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On October 17th, Canada’s recreational marijuana market will open and companies are laser focused on this opportunity. We have been monitoring developments pertaining to this burgeoning market and have provided an updates on three of the companies focused on this.
Aphria Continues to Execute and Advance Retail Efforts
In 2018, Aphria Inc. (APH.TO) (APHQF) has been nothing short of an execution story and has made several significant acquisitions. Although the cannabis producer has been laser focused on the global opportunity, it has not taken its eye off of Canada’s recreational market. During the last month, Aphria has been under considerable pressure and this is a stock to watch.
Yesterday, Aphria signed a manufacturer's representative agreement with We Grow BC Ltd., a Vancouver-based licensed producer of premium cannabis, to become the exclusive sales representative across Canada. The agreement adds a second brand of premium B.C.-bud to be sold alongside Aphria's expanding portfolio of adult-use brands, which includes celebrated B.C.-bud from Broken Coast Cannabis through the company's coast-to-coast sales distribution network.
Aphria's sales team is supported by Great North Distributors, a subsidiary of Southern Glazer's Wine & Spirits as Aphria's exclusive cannabis representative in Canada, providing 100% coverage of all cannabis retailers, whether provincially or privately operated, from the first day of legal adult-use sales.
We are monitoring how the team executes on this opportunity and expect to see Aphria capture a significant portion of the market. The company has strong distribution and is focused on increasing production capacity.
Aurora Announces Major Step in the Retail Market
Yesterday, Aurora Cannabis Inc. (ACB.TO) (ACBFF) and Alcanna Inc. (CLIQ.TO) (LQSIF) reached a license agreement whereby Alcanna has been given exclusive rights to open retail cannabis stores under the brand name Aurora across Canada. Alcanna's position as the biggest private sector liquor retailer in Canada, aligns with Aurora's position as one of the world's leading cannabis companies.
Alcanna is currently converting several of its existing liquor stores into cannabis retail outlets and will build, own and operate the new cannabis stores. In Alberta, Alcanna anticipates opening 37 stores, the maximum number permitted to a single operator under provincial regulations in year one of legalized adult consumer use.
In February, Aurora announced its strategic investment in Alcanna (formerly Liquor Stores NA), the Edmonton, Alberta-based retailer of alcoholic beverages with 229 retail outlets in Western Canada and Alaska, with a view to establishing a leading brand of cannabis retail outlets. This forward-thinking partnership combines Aurora's brand leadership, high-quality products, customer care and scientific innovations with Alcanna's well-established retailing infrastructure and expertise.
In late June, Aurora announced a strategic investment in Choom Holdings (CHOO.CN) (CHOOF), which owns four late stage ACMPR licensed producers (two are pending) and has the right to open retail outlets in several provinces in Canada. This was a strategic investment by Aurora and we are monitoring how the companies execute on this.
Aurora has a significant position in the global medical marijuana market and we are monitoring how these assets continue to add value. During the last two months, Aurora has been under considerable pressure and we are monitoring the decline. The cannabis producer has several catalysts for growth and is a stock to watch.
Canopy Growth Aims to Capture Significant Market Share
Last month, Canopy Growth (WEED.TO) (CGC) said it would acquire Hiku Brands (HIKU.CN) (DJACF) for approx. $275 million (CAD). This acquisitions complements Canopy’s business, strengthens the diversity and range of brands in the company’s portfolio, and improves access to multiple demographic segments.
The adult use marijuana market is going to be significant and Canopy Growth intends to capture the lion’s share of this market. While the feat will not be easy to accomplish, acquisitions like this one will significantly increase the company’s chances to do so. Over the last two years, Canopy Growth has become a leading global medical marijuana company and has captured the largest share of Canada’s medical marijuana market.
We are going to monitor how Canopy is able to fend of cannabis producers like Aphria and Aurora. The company is led by a world-class management team and has been executing flawlessly. We are favorable on the geographic diversity, the strategic partnerships and relationships, and the growth trajectory.