As I've mentioned before, California's legalisation launch on January 1 this year has been pretty much an underwhelming failure. Lack of supply is highest on the list. Ontario announced its supply agreements this week and it would seem they will have more weed on the 17th October than California did earlier in the northern summer.
The Ontario Cannabis Store, the province's sole legal online retailer for recreational cannabis, has entered into supply agreements with 26 Health Canada approved Licensed Producers to ensure that a safe, diverse and premium-grade supply of marijuana is ready and available upon legalisation, come October 17.
Most of the Canadian LP's showed significant gains this week as a result of the announcement. The rule in the industry is investors buy the rumour and sell the news. This was the exception to the rule, and rightly so, given it's the biggest province – by population – by far.
However, the only way to purchase legal marijuana in October will be through the state-backed online portal, at least for about a year.
Starting on October 17, consumers 19 and older will be able to purchase cannabis via an online retail platform provided by the OCS. Given home-delivery is the method of distribution, they will have stringent age verification systems in place. Bottom line, it will be hard for consumers under the age limit of 19 to get their hands on the variety of products on offer including dried flower, cannabis oil, and cannabis seeds. The OCS is also working to finalise supply agreements with cannabis accessory suppliers to ensure a diverse selection of accessories is also available for customers.
The OCS has entered into initial supply agreements with the following companies:
7ACRES/The Supreme Cannabis Company
Supreme(TSXV:FIRE) (OTC:SPRWF) lists Ontario as the latest of several secured province agreements. More importantly, the company secured a spot for its 7ACRES brand online with the two-year agreement making sure the product line will be available to be sold in retail stores (when allowed). Big win
Aphria Inc. (TSX:APH) will provide nearly 60 products for online sale in the first year alone. This is only the beginning according to Vic Neufield, the Aphria CEO. He says they are ready for recreational go time in October but aim to rapidly expand their product offering over time.
Aurora already has a large presence in Ontario, with it's fully operating 29 medicinal dispensaries, as well as having 4 cultivation and production facilities. So big is their presence in fact, that Aurora-based companies are now one of the largest Ontario-based cannabis employers. They also have agreements with Quebec (second biggest!)
Canopy Growth Corporation
The market-leader was always going to be there. Another feather in the cap in what was simply a monstrous week for them! Canopy (TSX:WEED) (NYSE:CGC) secured the deal through its wholly-owned subsidiary and well-known brand Tweed Inc. to offer at least 100 different SKUs in the government-run outlet. This news n the back of Constellation sent the stock through the $50 mark. 38% up in just 1 week. Incredible
Organigram (TSX:OGI.V) signed an agreement with the new online retailer to provide nearly 30 dried flower products, pre-rolled products, and cannabis oils, including their well-known Edison Reserve brand. Organigram's reach spreads wide and far in agreements with other provinces including New Brunswick, Prince Edward Island, Manitoba, and Alberta.
In addition to the above, the following Licensed Producers also secured supply agreements.
- Peace Naturals Project Inc.
- Radicle Medical Marijuana Inc.
- RedeCan Pharm
- Solace Health Inc.
- Starseed Medicinal Inc.
- THC BioMed Ltd.
- The Flowr Group Okanagan Inc.
- Tilray Canada Ltd.
- Up Cannabis Inc.
- VIVO Cannabis Inc.
- Emblem Cannabis Corporation
- HEXO Operations Inc.
- Hiku Brands Company Ltd.
- Maricann Inc.
- MedReleaf Corp.
- Natural MedCo Ltd.
- Northern Green Canada Inc.
- Beleave Kannabis Corp.
- Broken Cannabis Coast Ltd.
- CannTrust Inc.
- AgMedica Bioscience Inc.
So what's the next move?
Forward-looking, Ontario intends to allow private companies to operate brick-and-mortar stores in various locations, supplementing the online supply. This is a big shift in policy, given the initial policy was that retails would be supplied through government regulated dispensaries, creating a complete monopoly for the supply and distribution. If the Liberals had their way, this could have been the yellow brick road.
Thankfully, it's a positive, forward-looking, green brick road that Ontario will travel.
But not just yet. They're not going to allow privately-operated brick-and-mortar stores to open until at least March 2019. Despite this, the big players have been (and are still) planting flags in the ground in anticipation of the oncoming boom.
There is a multitude of deals with nationally franchised liquor companies, executed in order to tap into their footprint and then converts some to dedicated stores. They will have to, as Ontario law says alcohol and cannabis may not be sold on the same premises together.
Although actual retail store numbers are yet to be agreed, never mind announced, when the stores do open, the green brick road will have led a green-friendly city with a booming recreational marijuana industry.
And they told you money doesn't grow on trees.