Canada edition / January 18, 2020
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1 “IT’S EDIBLES MADNESS” IN ONTARIO

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HTTPS://WWW.FLICKR.COM/PHOTOS/157320189@N02

Following enthusiastic sell-outs in both Nova Scotia and Manitoba, edibles hit the shelves of Ontario's REC retail stores (now 28 in total) last week and sold out immediately. This Thursday, edibles went on sale province-wide via the Ontario Cannabis Store online mail-order system, and the entire province sold out of edibles by early afternoon. The Star proclaimed "It's edibles madness."
Leafly, CBC Manitoba, Toronto Sun, Winnipeg Free Press OCS Blog, The Star

Vape pens and batteries remained in "reasonable stock." Of the 59 Cannabis 2.0 products LPs offered Ontarians as of January 3, only 17 were edibles.
MJ Biz Daily, Twitter—Jameson Berkow

On Monday, Alberta rolled out its edibles, with product headed in particular to cities like Calgary (which has three times as many REC stores as the entire province of Ontario), Edmontonand Lethbridge.
Global, CTV News, Edmonton Journal

REC store owners want LPs to hurry up and supply them with more edibles, which they also note are most popular with first-time users.
Toronto Star

Ever wonder what's in legal vape-pens? This article explains it.
Cannabis Retailer

2 BD MRKTNG DCSN

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JESSE STANIFORTH

Kelowna BC LP GTEC Holdings sparked outrage last week at Lift & Co's Vancouver 2020 trade show with a booth for its "high-THC" REC brand BLK MRKT boasting the slogan, "Once You Go BLK…" A large number of people took this to be a reference to a racist expression framing Black men in offensively sexual termsA heated debate ensued.
Business In Vancouver, Wiktionary, Urban Dictionary, GrowthOp

GTEC Holdings responded to the furor with a corporate statement and said it would not use the slogan any more.

  • University of Toronto sociology professor Akwasi Owusu-Bempah had little patience for the response, calling its arguments "incorrect and highly offensive."
    Mugglehead

Just prior to Lift, Hill+Knowlton National Cannabis Sector Lead Omar Yar Khan published a piece suggesting the overwhelming whiteness of Canadian cannabis boardrooms was hamstringing companies. After the BLK MRKT controversy reached Twitter, Khan said, "The fact that someone thought this branding was a good idea might prove my point."

This week on the podcast
Weed & the Body at War, with Alice Moon
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3 QUEBEC CHANGES COURSE ON SQDC EXPANSION

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JESSE STANIFORTH

The Société Québécoise du Cannabis has scaled back its plan to open 150 REC stores across the province of 8.5M, and will now only open 100 stores.

  • At the moment, the SQDC has 33 stores, and aims to have 40 open by March.
  • As part of a December Call For Tenders, the SQDC said it expected to have 56 stores operating by 2023. An SQDC representative said, "As of today, our objective is to reach roughly a hundred points of sale within the next three years."
    TVA Nouvelles—In French

Meanwhile, my neighbourhood in Montreal is struggling to bring back foot traffic with stores that appeal to local interests. And there are 403 SAQ liquor stores across the province.
Le Devoir—In French

Quick Hits

  1. Iqaluit's city council sent the territory's health minister a letter recommending Nunavut open a REC store in the capital city.
    Nunatsiaq News
  2. A joint study conducted by Queen's and Western universities found daily cannabis use during pregnancy may cause stunted brain and liver growth in newborns and decrease birth weights.
    Global News

4 HERE’S TO OPTIMISM

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In a bleak start to the week, an MKM Partners analyst examined earnings transcripts dating back to 2017 for six LPs and discovered 29% of the six LPs' 947 predictions, promises, and outlooks were correct, 28% were incorrect, and 43% were unresolved. Thus, those companies' guidance has only been correct 51% of the time.
Twitter—Max Cherney, Bloomberg

  • Negative productions were 93% likely to be correct, while positive ones were only correct 48% of the time.

Cannalyst Craig "GoBlueCDN" Wiggins told an audience at Lift & Co last week that LPs are holding 721 days' worth of inventory, which could become 816 days' worth of excess stock (at the end of its lifespan and unsellable) within a year. At the same time, Wiggins said LPs are harvesting roughly 4.42 kg for every kilogram sold.

  • "More retails stores and ‘2.0’ does not fix this," Wiggins said. "Something has to give. We need companies to go out of business. […] We need people to write off inventory."
  • Wiggins later added, "The next six months in the cannabis industry will be like the opening scene to Saving Private Ryan. A successful few will make it off the beach."
    Twitter—GoBlueCDN
  • Geneticist Ryan Lee wondered whether there will be another Lift & Co Vancouver, saying "Attendance seems way down, rumors of a bad financial situation, [and] tweets suggesting a change of direction of the business after going public."
    Twitter—Ryan Lee

It's cheaper to run a vertically integrated cannabis company in the US than in Canada, and they're more profitable.
MJ Biz Daily Investor Intelligence

At least the stocks aren't circling the drain anymore, with the Canadian Marijuana Index up nearly 20% and others on the rise. Whether this is a turnaround is uncertain.
Financial Post

5 ORGANIGRAM SURGES, APHRIA SLUMPS, AND OTHER LP NEWS

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Organigram stocks spiked 38% after the company reported Q1 net revenue of $25.2M, up from $12.4M last year (including only one month of legal REC), and exceeding consensus estimates of $21M.
Marketwatch

  • Wholesale sales to other LPs accounted for $9.2M (37%) of the company's $25.2M sales, up more than 1,500% from the previous quarter's $535,000. CEO Greg Engel said he was not certain whether the company will continue to act as a wholesaler.
    Yahoo Finance
  • The company also inked a supply agreement with Shoppers Drug Mart's MED portal.
    Press Release
  • CEO Greg Engel said, "We’re not going to hit any sense of normalcy or predictability until the fourth quarter of this year."
  • Critics found holes in the success: pricing fell 20% in a quarter, only six months' of cash left, and REC market sales down 40% in the past six months.
    Grizzle

Aphria posted a Q2 net loss of $8.2M, down from a profit of $54.8M year over year.
MarketWatch

  • The company downgraded its predicted net revenue for the 2020 financial year from $650–$700M to $575M–$625M, and adjusted its anticipated EBITDA from $88–$95 to $35M–$42M.
    CTV News

Following its $1.25M investment in Toronto head shop and aspiring REC retailer Friendly Stranger last summer, 48North announced it had entered into a "preferred partnership initiative that guarantees 48North a presence in all existing and future Friendly Stranger retail locations, a commitment to stock 48North products without listing fees."
GrowthOp, NewsWire

Tilray named mainstream executives to C-suite positions. Michael Kruteck, formerly of Molson Coors, became CFO, while Jon Levin of Revlon became Chief Operating Officer.
Marijuana Business Daily

Toronto LP Avicanna, which does some cultivation in Colombia, signed an agreement to supply MED to Shoppers Drug Mart. All products will be manufactured in Canada, until regulations allow importation.
MJ Biz Daily

After months of losses, Hexo's stock was up 50% this week, part of a wave of rising stocks following a US bill to make CBD products legal for sale as dietary suppelements.
Pot Stock News

National Access Cannabis, doing business as Meta Growth, abandoned its plan to sell its MED clinic division to Evergreen Pacific Insurance Corporation. Potstocks pugilist Betting Bruiser noted "The clinics [have] essentially just became an unwanted cash burn as less than 1% of its revenue derives from its education clinics."
The Deep Dive, Twitter--Betting Bruiser

6 IP, FREELY:

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Intellectual property is becoming an increasing source of concern in the sector—particularly among the growers I met with last week during Lift Vancouver. (After all, per growers last week, if you sell a seed for a cultivar you developed to anyone before trademarking it, you'll likely lose your right to do so.) Here's a quick rundown of how a producer might expect to protect cannabis IP.
The Angle

Quick Hits

  1. The Globe and Mail will discontinue its publication Cannabis Insider on February 1 and give prorated refunds to subscribers. The Globe has had a team of great people covering cannabis and my hat's off to them for their fine work. The subscriptions were expensive, but the reporting's top notch.
    GrowthOp
  2. The average Canadian is still woefully underinformed about cannabis and the laws and rules that govern its use.
    Policy Options

7 EIGHT CORPORATIONS VIE TO CONTROL NEW BRUNSWICK REC

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OLIVIER PIQUER

Eight companies have made applications to the province of New Brunswick to take over operations of Crown REC monopoly Cannabis NB. Among the eight are Loblaw, the country's largest food retailer, Canopy, the largest LP, and REC retail chain and Fire & Flower, as of this week operating 45 stores across Canada.
MJ Biz Daily

Brock University professor Michael J. Armstrong, a frequent commentator on REC retail, argued New Brunswick should follow Nova Scotia's lead in selling REC in liquor stores, since "They don't have a lot of fixed costs to cover that way, which means they don't have to sell very much cannabis."
CBC New Brunswick

Quick Hits

  1. In a small Twitter poll of MED users by Wildfire Collective founder Mark Spear, 55.9% of respondents answered "not at all" to the question "Do you feel that your LP is providing the products, price points and customer care you need as a medical patient?"
    Twitter—Mark Spear

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8 WEED SEIZURES AT US BORDER UP 70%

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JESSE STANIFORTH

In the year to October 31, 2019, US Customs and Border Protection seized 2,214 kg of cannabis from people entering the US from Canada. That represents an increase of roughly 75% by volume over last year's 1,259 kg.
CBC Politics

  • The amount of cannabis seized per seizure has increased, as the number of total seizures only increased by 25% over the same period (from 3,130 in 2018 to 3,917 in 2019).

Perhaps you have some licensed cannabis you'd like to legally export? A factsheet from law firm Dentons lays out what you need to know.