NetworkNewsWire Editorial Coverage: Recreational cannabis will soon be legal in Canada for adults, but selling and buying the pungent herb won’t be as simple as some presume it will be. Regulations governing the cultivation, production, packaging and sale of cannabis are still being refined as Canadian lawmakers at different levels of government tackle unique differences between provinces and local jurisdictions. One thing is certain, however: a cannabis retail explosion is coming, and cannabis companies ready for the surge will reap the benefits when Canada’s recreational marketplace officially opens for business. Cannabis retail brand Choom™ Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF) (CHOOF Profile) is preparing to meet the demands of this market with a strategic blend of product and consumer experience, while Hiku Brands Company. Ltd. (CSE: HIKU) (OTC: DJACF) (DJACF Profile) steadies itself as a lifestyle cannabis brand. Canada’s top cultivators, Canopy Growth Corporation (TSX: WEED) (OTC: TWMJF); Aurora Cannabis, Inc. (TSX: ACB) (OTCQX: ACBFF); and ABcann Global (TSX-V: ABCN) (OTCQB: ABCCF) (ABCCF Profile) are also exploring getting in the game.
Economic Boost
Close to 5 million Canadians aged 15 to 64 spent an estimated $5.7 billion on cannabis in 2017, according to a Cannabis Economic Account issued by Statistics Canada (http://nnw.fm/m1AnR). That’s nearly $1,200 per cannabis consumer, although the report does caution that the data is an estimate. Canada’s foray into legalized recreation cannabis will bring more concrete numbers, especially once the nation’s projected $450 million in annual cannabis tax revenue begins to roll in, and the nation’s provinces get a 75 percent share of the loot (http://nnw.fm/EhMe6).
Retail Me Now
Estimates vary as to how much revenue is out there when it comes to legalized cannabis. A 2016 report (http://nnw.fm/R5Csq) from the Canadian Parliamentary Budget Officer estimated a $5.5 billion to $5.8 billion annual retail market while a far more enthusiastic Deloitte study predicted an industry generating more than $22 billion a year (http://nnw.fm/dR0OF). Either way, that translates into an undeniable demand for cannabis. For Choom Holdings (CSE: CHOO) (OTCQB: CHOOF) and its experienced team of cannabis curators, Canada’s upcoming “green rush” presents an incredible opportunity to build premium brand loyalty through the company’s unique retail strategy.
Cannabis Connoisseur
A heady amount of the laid-back spirit of Hawaii is channeled into Choom™ and its unofficial history. Choom was inspired by the Choom Gang, a group of buddies living in Honolulu during the 1970s who loved to relax with “choom,” the local’s term for marijuana. That Choom “vibe” flows throughout the corporate structure today with the company’s commitment to the principle of keeping and maintaining “good times and good friends.”
One of the best ways to do that may be by cultivating naturally grown, premium cannabis that provides an elevated experience for the consumer, then sharing that business model with entrepreneurs in a unique Choom Partner Program (http://nnw.fm/gYs2q). This chain of branded retail cannabis dispensaries will find homes in Canadian jurisdictions where recreational cannabis is legalized for retail sale.
License to Sell
The government in British Columbia, where Choom is headquartered, has issued several guidelines for individuals and businesses seeking a recreational cannabis retail license. Importantly, while the government said the B.C. Liquor Distribution Branch would be the wholesale distributor of nonmedical cannabis, it would not impose a quota on the number of licenses issued for private retail outlets (http://nnw.fm/4PKfP). That’s good news for individuals and companies seeking an entry into the booming cannabis sector.
Fittingly, Choom recently announced it has signed the first agreement in its retail investor program with a consortium known as the Thompson Okanagan Choom Group. Comprised of local investors and business partners, the consortium has secured the exclusive territory rights to open multiple Choom-branded retail dispensaries in the gorgeous Thompson-Okanagan region of British Columbia (http://nnw.fm/4kJMd).
Each Choom retail store is designed with a clean and modern mindset geared to help customers feel at home and enjoy the “aloha” experience. The company’s partner program includes support and access to the expertise and partnerships of the Choom brand and its nimble, adaptive business model. As experienced curators of cannabis, Choom will use its products and services to grow and adapt to the changing cannabis landscape, which is likely a necessary component in Canada’s current regulatory climate.
But Wait, There’s More
While it appears the distribution of wholesale cannabis and online sales will be largely government controlled, provinces and territories have opted for one of three retail models for over-the-counter sales: private, public or a hybrid of the two (http://nnw.fm/Nij0p). The Saskatchewan government, for instance, announced in January that the Saskatchewan Liquor and Gaming Authority would be tasked with issuing about 60 retail permits to private stores located in roughly 40 municipalities and First Nations across the province (http://nnw.fm/w4fCh). Ontario, on the other hand, will only allow cannabis to be sold by the Ontario Cannabis Retail Corporation, a subsidiary of the Liquor Control Board of Ontario (http://nnw.fm/qyg7E).
Cultivating an Experience
Choom has acquired International Tungsten, Inc. (ITI), a late-stage applicant for an ACMPR (Access to Cannabis for Medical Purposes Regulations) cultivation license through its subsidiary, Specialty Medijuana Products Inc. (SMP) (http://nnw.fm/p2Tax). SMP, whose cultivation facility is located in British Columbia, expects to receive its Health Canada cultivation license within the next few weeks, followed by a sales license by the third quarter of 2018. Benefits of this acquisition are significant, moving Choom closer to scaling up cultivation capacity and reaping its first cannabis harvest under this new resource (http://nnw.fm/5A3qi).
Choom already has security clearance with one ACMPR through its subsidiary Medi-CanHealth Solutions Ltd., which is currently in the detailed review stage. Growth plans include a Phase 1 cannabis production facility capable of producing approximately 660 kg of dried cannabis per year, along with expansion plans to increase production to 1,500 kg/year. A second ACMPR application, also in the readiness stage, is located on Vancouver Island with the potential to eventually produce 900 kg/year.
Earlier this week (http://nnw.fm/35Iml), Choom expanded its portfolio with a Letter of Intent to acquire advanced-stage cannabis production license applicant Flower Power and its wholly owned subsidiary, High Way 10 Cannabis Pharms Inc. Located in Southern Saskatchewan, High Way 10 has a 16,000-square-foot facility that will be capable of producing roughly 1,500 kg of dried cannabis annually. In addition to room for additional expansion, Flower Power is advancing its retail store strategy across the country to create a consumer experience that elevates and evolves the traditional dispensary vibe. It intends to have a hybrid of corporately owned and franchised dispensaries, subject to the formal legalization of recreational cannabis by Health Canada and provincial and municipal guidelines.
Complementary to Choom’s corporate vision, this acquisition marks Choom’s fourth advanced-stage applicant and demonstrates the company’s commitment to scale up its operations to meet the demands of the Canadian recreational market.
Other Players
Hiku Brands (CSE: HIKU) (OTC: DJACF) just received one of four master retail licenses in Manitoba’s highly competitive Request for Proposal process, giving Hiku the right to operate retail cannabis stores in the province (http://nnw.fm/jnd7T). The license, awarded to Hiku’s wholly owned subsidiary, Tokyo Smoke, represents what company CEO Alan Gertner called “a validation of our business model and vision of creating an unsurpassed retail experience for cannabis consumers.”
Through its subsidiaries, Canopy Growth (TSX: WEED) (OTC: TWMJF) is a Canadian licensed producer of medical marijuana operating Tweed Main Street Shops in communities throughout southern Ontario (http://nnw.fm/Er6RT). Tweed Main Street has deep roots in the cannabis community, offering Canada’s most “relied upon brands” under one roof. The company’s medical cannabis orders are sent directly to the client after being processed the same day 99 percent of the time, with an average wait call time of less than two minutes.
Aurora Cannabis (TSX: ACB) (OTCQX: ACBFF) is taking a different retail approach by proposing to create medical cannabis retail outlets by converting existing liquor store retail locations in the province of Alberta (http://nnw.fm/XLeK6). Aurora Cannabis, which cultivates, produces and sells medical cannabis, plans to establish “a new customer experience for adult consumers.” The company recently entered into an agreement to become an online medical cannabis supplier for Shoppers Drug Mart, subject to Health Canada’s approval of an application by Shoppers to be a licensed producer (http://nnw.fm/1o8lW).
ABcann Global (TSX-V: ABCN) (OTCQB: ABCCF) has signed an agreement with Choom to market ABcann’s cannabis products through Choom’s branded retail platform. As part of the deal, ABcann Global is making a strategic $4 million investment into Choom, signaling a strong commitment and belief in the company’s unique, customized approach to the recreational cannabis market (http://nnw.fm/PZto7). As one of the earliest licensed medical marijuana producers in Canada, ABcann has five years of operating experience in the medical marijuana space. The company currently owns and operates a fully functioning 14,500-square-foot facility in Napanee, Ontario, as well as 65 acres of real estate with proper zoning and existing infrastructure in place to support the construction of another production facility of up to one million square feet.
Preparation Counts
Scrambling or playing catch-up is never the best business advice, as any successful entrepreneur will tell you. But being able to use that kind of nimble, quick-thinking, planning-ahead ability should bode well for Canada’s cannabis producers and retailers as summer 2018 looms large on the horizon. Companies are lining up financing, expanding production facilities, designing retail spaces and shoring up supplies to meet the expected demand as Canada begins legalizing recreational cannabis for adults 19 years old and over. As Alexander Graham Bell so famously said, “Before anything else, preparation is the key to success.”
For more information on Choom Holdings, please visit Choom Holdings (CSE: CHOO) (OTCQB: CHOOF).
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