Canada edition / October 26, 2019
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This week on the podcast
P.R. and the Vape Panic

1 HEXO, CANNTRUST SLASH JOBS

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DEUTSCHE FOTOTHEK

Both Hexo and CannTrust announced sweeping layoffs. Hexo cut 200 positions across the company, including those of Chief Manufacturing Officer Arno Groll and Chief Marketing Officer Nick Davies. The cuts represented roughly 20% of Hexo's workforce, which grew to about 1,100 after its May acquisition of Newstrike (producer of Tragically Hip–affiliated REC brand Up Cannabis).
NewsWire, Twitter—David George-Cosh

Hours later, CannTrust announced it was "temporarily" laying off "as many as 140 people, approximately one quarter" of its employees, between now and 2020. NewsWire

Also this week, US-based vaporizer-maker PAX Labs announced it's laying off 25% of its workforce, following US-based cannabis site WeedMaps, which also fired 25% of their staff last week.
MJ Biz Daily

· CannTrust submitted its remediation plan to Health Canada, indicating the intention to carry out all parts of the plan before the end of the first quarter of 2020. Bloomberg

Quick Hits

  1. Cannabis NB cut eight management positions.
    919 The Bend
  2. If you happen to be in charge of regulating legal cannabis but aren't sure how to go do that, Transform Drug Policy Foundation offered a helpful how-to guide.
    Transform Drug Policy
  3. Parents using cannabis during periods of interacting with their children may feel it makes them more compassionate and responsive to their kids, while researchers worry it may create parental detachment. Chances are a positive or negative effects are connected to a wide number of factors.
    The Conversation
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2 HEXO, ZENABIS SEEK UNCONVENTIONAL FINANCING

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Hexo—whose stock has declined 35% over the last few weeks—announced it was pushing back its quarterly earnings report (scheduled for Thursday) until Monday as it was raising a $70M private placement in convertible debentures to provide working capital as well as meeting other corporate needs.
NewsWire, Financial Post

Hexo CEO and co-founder Sebastien St-Louis was joined by three board members and co-founder Adam Miron in buying $8.67M worth of debentures.
MJ Biz Daily

  • Analysts puzzled over the raise, considering the company was not expected to face capital shortages for nearly three years, while Hexo stock is close to 52-week lows.
    Ottawa Citizen

Zenabis took a different approach to financing, attempting to raise $20.8M in a deeply discounted rights offering with shares 73% lower than five-day market price—and shareholders were punished for it, as Zenabis stock lost 42% of its value between Wednesday and Thursday
Globe and Mail, Twitter—Ryan Lee

3 TGOD SLASHES 2020 PRODUCTION 85%

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The Green Organic Dutchman announced revised construction schedules with the aim of reducing its 2020 production capacity by 85% (from an expected 147,500 kilograms to between 20,000 and 22,000 kilograms) in the hopes of achieving profitability within a year.
NewsWire, MJ Biz Daily

Quick Hits

  1. Researchers at the University of Ottawa have invented a far cheaper and faster chip-based test for THC:CBD ratiosCBC Ottawa
  2. One of the first round of Ontario REC lottery winners wrote about the wild process of becoming a REC retailer overnight. Toronto Life

4 SALES SURGED IN AUGUST

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The latest Statistics Canada numbers on legal REC sales hit $127.3M in August, surpassing July's $104.5M and June's $91.5M, the biggest monthly increase to date.
Stats Can, Twitter—David George-Cosh

New Brunswick charted a striking 59% increase in sales, while Yukon sales increased by only 1.8%. Manitoba's REC sales actually declined by 1.7%.

BC is eager to keep the momentum going, especially since the Business Council of BC forecasted feeble economic growth in the province. Solicitor general Mark Farnworth is working to develop a framework to allow widely desired farm-gate sales by LPs at their production sites, which would be a boon to the province's burgeoning craft industry.
Business in Vancouver, Twitter—Mike Hager, Business In Vancouver

Vancouver REC store Village Bloomery asked LP sales reps to kindly stop harshing their vibes by shaking staff down for sales numbers and hovering eerily around customers.
Village Bloomery

Kitchener felt the sales boom as local LP James E Wagner announced it was looking to hire 400 workers over the course of 2020. The company hired the first 15 workers at a job fair last weekend, noting they were "overwhelmed" by interest from prospective hires.
CTV News

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5 TEPID ELECTION RINGS IN YEAR TWO

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Canadians went to the polls and unenthusiastically elected Justin Trudeau's Liberals to a tepid minority government, but as Bruce Linton predicted this summer, the election largely ignored cannabis.
Yahoo Finance, Twitter—David George-Cosh

  • That was, of course, excepting the Marijuana Party of Canadawho fielded 30 losing candidatesGrowthOp
  • Linton said, "As far as I could tell, [no party] was opposed to cannabis, and nobody was in favour of it. […] They should have been on the campaign trail saying 'This sector created the most jobs of any sector in Canada over the last three or four years.'" Bloomberg

Quick Hits

  1. Toronto analysts Trichome Financial offered a "State of the Market" memo including interesting conclusions about the market: management expertise remains varied and the whole industry is learning, production licenses no longer mean what they once did, and financial institutions are hesitant to lend to a heavily regulated industry.
    Google Drive
  2. Per 2019 statistics, 50% of Canadian MED patients are treating pain, 20% are treating mood disorders, and 20% use MED to help them sleep.
    Twitter—Dr. Caroline MacCallum

6 FNS SUSPICIOUS AS ONTARIO TRIPLES NATIVE REC RETAIL

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After first giving licenses to First Nations eight applicants in August, the Alcohol and Gaming Commission of Ontario will issue 26 more licenses on First Nations territories.
Globe and Mail

Quick Hits

  1. Calgary claims to have spent more than $6.9M on cannabis-related programs since legalization. Trina Fraser noted there was little information about whether these costs have been offset by other spending, since other cities have reported little comparable increase.
    Calgary Herald, Twitter—Trina Fraser
  2. Financial intelligence agency the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is beginning to investigate whether the legal REC industry is being used to launder money.
    Regina Leader-Post

7 THIRD-PARTY MANUFACTURERS TO CASH IN ON BEVERAGES

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As REC beverage makers rush to get their products ready for the new market, a number of companies are turning to white-label deals with companies who can make and/or package their products.
Globe and Mail

Quick Hits

  1. Canadian pre-rolls are, on average, far larger than the smaller "dog-walker" formats popular in the US.
    Lift & Co
  2. Following Hexo's launch of its budget-cannabis line Original Stash, the Ontario Cannabis Store debuted Tilray/High Park's new budget line The Batch, comprised of "assorted cannabis strains with a THC potency between 10 and 15.9%." Because the product is, as one commentator called it, "random mids in a jar," potency may vary from bud to bud in the same container.
    NewsWire, Financial Post, Twitter—What's My Pot

8 GROW-OP GETS NATION’S LARGEST SOLAR ROOFTOP

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Freedom Cannabis's production site west of Edmonton will soon switch on the largest rooftop array of solar panels in Canada, helping remove the company from Alberta's coal-fired electrical grid.
MJ Biz Daily

  • Many noted the company could open the roof to the sun and become a greenhouse, while EY Cannabis Strategy and Risk Advisor Ashley Chiu wondered simply, "couldn’t they have built the solar panels somewhere OTHER than the roof? Makes sense for the panels to be supplementary to the SUN."
    Twitter—Ryan Lee, Dan Sutton, Ashley Chiu

Quick Hits

  • Smaller LPs are leading the way on developing sustainable, recyclable, non-plastic packaging. The first year of legalization generated an estimated 10,000 tons of packaging waste.
    MJ Biz Daily
  • Designated growers were a huge part of the MED landscape for many years, growing MED on behalf of those who couldn't grow their own. Today there are 363,000 registered MED users, and only 0.2% employ a designated grower.
    NOW! Magazine

9 NUNAVUT TO OPEN PHYSICAL STORE(S)… EVENTUALLY

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Nunavut's government is considering expressions of interests from REC retailers, but has not yet decided how it will open physical stores in the territory. For the moment, cannabis can be purchased in Nunavut only online through private retailers Tweed and Vertical Cannabis, but Liberal finance minister George Hickes said online sales weren't doing enough to displace the illicit market.

Quick Hits

  1. Somebody needs to tell Saint John chicken restaurant the Coop that adding CBD oil to their chicken wings is illegal unless they have a Health Canada license. (By now, someone probably has.) CBC New Brunswick
  2. Would you be liable if you fed a friend an edible and he later drove impaired? Insurers worry you might be.
    Insurance Business