ARIZONA ADULT-USE LEGALIZATION: PROSPECTS AND BENEFICIARIES 

Arizona – one of the biggest medical cannabis markets – is looking to legalize adult-use marijuana through the November 3 ballot. With Proposition 207, Arizona aims to legalize recreational cannabis and apply a 16% tax on marijuana sales in the state. If successful at the ballot box, Prop. 207 will legalize the sale, possession, and consumption of one ounce of marijuana (of which 5 grams can be concentrate) for adults at least 21 years old, which is expected to generate $300 million annually in new tax revenue to fund community colleges, public safety, public health programs, and roads and highways. Arizona already has a substantial cannabis industry because of its large medical marijuana market, and legalization of recreational sales will only add to its size. According to the Arizona Department of Health Services (ADHS), Arizona’s medical cannabis program had 269,030 patients on its rolls at the end of August – up 3.5% m/m and 31.7% y/y from 204,271 in August 2019. Marijuana Business Daily estimates that medical marijuana sales in Arizona are likely to climb ~25% y/y to $910 million in 2020 and reach $1.3 billion by 2024, while adult-use sales are expected to grow from $375 million in the first year to ~$750 million by 2024, implying that Arizona’s total cannabis market could be worth ~$2 billion over the next four years, placing it in the top 10 nationally.

The latest survey data is encouraging as its shows that support for Proposition 207 is gathering momentum as election day approaches. Two polls released on October 15 indicate that Arizona citizens are likely to vote “Yes” on November 3 to legalize recreational cannabis. Survey data from Phoenix-based OH Predictive Insights shows that 55% of voters support Prop. 207 and 37% are against it, while 7% are unsure. This is a considerable improvement over a September poll by OH which found that support for marijuana legalization was dissipating with only 46% of likely voters supporting it and 45% opposing it, down from a solid 60% support in July. The findings of the latest OH poll are in line with those of a survey by Monmouth University which found that 56% of respondents would vote “Yes” on Prop. 207 and 36% would vote “No”.  Smart & Safe Arizona, the leading advocate of adult-use legalization in Arizona, expects 50%+ support.

Adult-use legalization could result in a windfall for Harvest Health & Recreation (HRVSF) and Curaleaf (CURLF), incumbent MSOs  that are best positioned to benefit from the proposed licensing mechanism in Arizona. Proposition 207 calls for the licensing of ~160 retail cannabis stores in the state. The majority of the licenses would go to the pre-existing 130 licensed medical dispensaries, and the state would allocate only 26 additional social equity licenses and a handful of new licenses in rural counties that currently have fewer than two medical dispensaries. Such a move would benefit existing cannabis operators the most since license-acquisition costs are expected to be very high, ranging from $5 million to $8 million for a troubled operation to $10 million to $30 million for a strong business, according to the Marijuana Business Daily. Leading the list of beneficiaries are HRVSF and CURLF which, combined, account for ~20% of the operating dispensaries in AZ and are among the biggest funders of the recreational legalization campaign. Arizona is the home state of Harvest which owns an industry-leading 15 of the 120 operating dispensaries in the state (13%) in addition to a cultivation and processing footprint that exceeds 185,000 sq. ft. Curaleaf has vertically integrated operations in Arizona including eight operating dispensaries and a license for one more, and is the second largest player in the retail market and the vape segment. With financially troubled MSOs like MedMen withdrawing from the Arizona market and new licensing structure favoring incumbents, HRSVF and CURLF are likely to be among the leading recipients of additional licenses in Arizona and are best placed to benefit from the growth of this $2 billion cannabis market after legalization.

Chart 1: Latest Polls Show That Support for Arizona’s Proposition 2017 Stands at a Healthy 55%  Source: Intro-Blue, OH Predictive Insights

Chart 1: Latest Polls Show That Support for Arizona’s Proposition 2017 Stands at a Healthy 55%
Source: Intro-Blue, OH Predictive Insights

CANNA NEWS

STATE AND REGULATORY NEWS

U.S. cannabis readies for the election. Cowen Research recently shared a nifty visual on U.S. cannabis election probabilities that offers a fair assessment. From a flow of funds perspective, should we see a blue wave, U.S. hedge funds would be first movers (as buying begin in early October) followed by family offices and off-shore investors, and then large U.S. institutions likely once legislation becomes law, presumably around this time next year. Should the GOP maintain the status quo, it could further bifurcate the industry chasm between the haves and have-nots. The half-dozen or so U.S. cannabis companies generating positive cash flow and positioned to achieve operating efficiencies at scale would gain share while the rest of the industry awaits a tenable federal solution and clarity around the timing of SAFE banking and access to capital markets. Read More (Cowen Research, Investopedia)

Chart 2: STATES Act Could be Passed Within 12 Months Following a Democratic Sweep  Source: Intro-Blue, Investopedia, Cowen Research

Chart 2: STATES Act Could be Passed Within 12 Months Following a Democratic Sweep
Source: Intro-Blue, Investopedia, Cowen Research

With eye on election and beyond, marijuana industry spends millions on lobbying. Lobbying for cannabis reform in the U.S. Congress has evolved from a fringe issue a decade ago to a political priority that, this year alone, has absorbed more than $3 million and scores of registered lobbyists in Washington DC. And depending on how the November 3 general election plays out, the marijuana lobbying landscape could become even pricier – and crowded – in 2021 and beyond, insiders said. Though that assumes major federal reform might be in the offing. According to an analysis of federal lobbying disclosure records by Marijuana Business Daily, more than $3.5 million was spent in the first two quarters of 2020 by cannabis industry interests. For that price tag, stakeholders got at least 89 lobbyists to gin up support in Congress for bills such as the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. Read More (Marijuana Business Daily)

Chart 3: Lobbying for Federal Marijuana Reform  Source: Intro-Blue, Marijuana Business Daily

Chart 3: Lobbying for Federal Marijuana Reform
Source: Intro-Blue, Marijuana Business Daily

Marijuana advocates seriously eye federal legalization after election. Federal marijuana legalization could be only months from becoming reality, spurring Washington DC-based MJ advocates to seriously consider a “post-prohibition” world as they map out political strategies for 2021. Several DC-based nonprofits and trade associations predict a bill to federally legalize marijuana could pass Congress in the near future – but only if Democrat Joe Biden wins the White House and his party controls the Senate and the House of Representatives. If that occurs – and it’s not a sure bet – the move could become a game changer for the national marijuana industry. Read More (Marijuana Business Daily)

Positive erosion: How the legal cannabis industry’s growth undermines illicit markets. Key factors influencing how much and how quickly that a legal market can capture demand include: flexibility of regulatory structures to adapt to changing market dynamics; market implementation timelines; allowances for diverse product types; taxes and retail prices; product access (largely determined by the number of licenses issued by a state for cultivars and dispensaries, as well as allowances for delivery services); and barriers to patient participation (largely determined by qualifying conditions in medical states). When individual states impose strict market limitations that limit access or experience delays, the illicit market can recapture those consumers. In California, for example, just 38% of in-state demand will likely be met by legal regulated sources during 2020; that share is projected to grow to 46% by 2025. Meanwhile, other recently activated regulated adult-use markets like Massachusetts are expected to convert nearly three-quarters of all cannabis sales to the legal market. Read More (New Frontier Data)

U.S. Supreme Court will not hear marijuana legalization case. A three-year-long attempt to legalize marijuana at the federal level through a lawsuit appears to have come to a close, with the U.S. Supreme Court declining to hear the case. According to Law360.com, the case – filed in 2017 by former NFL player Marvin Washington and several other medical marijuana patients – will remain dismissed by the Second District since the Supreme Court has refused to take up the case. The plaintiffs attempted to argue that marijuana’s classification as a Schedule 1 controlled substance is unconstitutional and should be overturned. The case was first dismissed by a district court in 2018 before getting new life from the Second Circuit in 2019. The Second Circuit initially gave the plaintiffs an opportunity to directly ask the U.S. Drug Enforcement Administration to voluntarily move marijuana from Schedule 1 to a less-restricted category, such as Schedule 2. But when the plaintiffs declined that option, the Second District dismissed the case, and the plaintiffs then appealed to the Supreme Court. That attempt has now ended, bringing the case to a close. Read More (Marijuana Business Daily)

Montana voters poised to legalize marijuana, new poll shows. Montana voters seem poised to approve a pair of marijuana legalization initiatives next month, according to a new poll. Asked about legal cannabis measures that will appear on their ballots, 49 percent of likely voters said they will vote for the reform while 39 percent said they would oppose it. What remains to be seen is where the remaining 10 percent of undecided voters will land on the question. The survey asked a simplified version of what voters will see on Election Day. Rather than ask about both measures—one statutory proposal to legalize and a separate constitutional amendment to codify that only those 21 and older can access the market—the question reads: “The state ballot will ask about legalizing recreational marijuana in Montana. Will you vote to support or oppose legalization?” As is typical with cannabis polling, more Democrats (70 percent) are in favor of the policy change compared to Republicans (27 percent). Fifty-nine percent of independents said they favor legalization. Read More (Marijuana Moment)

Chart 4: Marijuana Vote by Party Among Likely and Active Registered Voters (Montana)  Source: Intro-Blue, Marijuana Moment

Chart 4: Marijuana Vote by Party Among Likely and Active Registered Voters (Montana)
Source: Intro-Blue, Marijuana Moment

 

Chart 5: Marijuana Vote by Age Among Likely and Active Registered Voters (Montana)  Source: Intro-Blue, Marijuana Moment

Chart 5: Marijuana Vote by Age Among Likely and Active Registered Voters (Montana)
Source: Intro-Blue, Marijuana Moment

Nebraskans have already filed to legalize weed in 2022. Nebraskans who support cannabis legalization are not sitting around and sulking about how the state Supreme Court pulled their initiative off the ballot in 2020. Instead, they’ve already started taking action to get the job done in 2022. It’s been a tough road for Nebraska in terms of legalization. After gathering enough signatures to get the issue on the 2020 ballot and getting approval from the Secretary of State, a majority of Supreme Court justices pulled it off the ballot for a technicality. The two senators filed the simple petition language to get around any “single-subject requirement” arguments. Instead, they want to use the approach taken by casino gambling supporters. In the case of gambling, supporters used a one-sentence approach for the ballot measure. Once approved, statutory initiatives followed. The senators plan to use the same approach for marijuana. Read More (Green Entrepreneur)

New Jersey and Arizona legalization measures leading in latest polls. Two of the highest-profile legalization measures on the November 3 ballot look to maintain strong leads with less than three weeks until election day. Recent polls show both initiatives leading in their respective states. New Jersey’s adult-use marijuana measure, Question 1, enjoys a 61% approval rating among state voters, according to a Fairleigh Dickinson University poll released on October 9. The biggest supporters of marijuana legalization include Democrats (71%), men (66%), and 18-34 year-olds (77%). In Arizona, meanwhile, the passage of Prop. 207 looks likely but it’s by no means a stone-cold lock. A Suffolk University/USA Today poll taken during the last week of September found 46% of voters approving of the statewide adult-use legalization measure, while 34% disapprove. The big unknown in Arizona: How that big 20% pool of undecided voters will swing. Read More (Leafly)

Chart 6: New Jersey Question 1: Marijuana Legalization  Source: Intro-Blue, Leafly

Chart 6: New Jersey Question 1: Marijuana Legalization
Source: Intro-Blue, Leafly

 

Chart 7: Arizona Prop. 207: Marijuana Legalization  Source: Intro-Blue, Leafly

Chart 7: Arizona Prop. 207: Marijuana Legalization
Source: Intro-Blue, Leafly

Fires in California continue to displace residents while fall harvest ramps up. According to an October 1 update from Cal Fire, 24 major wildfires continue to burn in the Golden State. Wildfires have consumed almost 4 million acres so far this year in California. One of the major fires that has persisted is the record-breaking August Complex, which is threatening the Emerald Triangle region, where a significant amount of California’s outdoor cannabis cultivation takes place. The persistence of the blazes continues to put the status of California’s fall harvest in question. A clear picture of the situation will likely not emerge until at least next month, once crops are cut down, dried, and tested. Given the significant amounts of smoke and ash that have blanketed parts of the state over the past several weeks, it is likely that this year’s supply of flower for smoking will be dented, though to what degree is not yet clear. Read More (Cannabis Benchmarks)

Chart 8: 2020 California Wildfires  Source: Intro-Blue, Cannabis Benchmarks

Chart 8: 2020 California Wildfires
Source: Intro-Blue, Cannabis Benchmarks

California outdoor marijuana cultivators to designate products by growing region. California’s marijuana market is borrowing a page from the state’s world-famous wine industry thanks to a new law intended to help outdoor cannabis growers’ brand and market their products by highlighting where and how they’re produced. When Gov. Gavin Newsom signed Senate Bill 67 on September 30, the law established that any cannabis product claiming an “appellation of origin” from a California region must have been grown in the soil and with the sun from that region – in other words, without artificial light or shelter, such as a greenhouse or hoop house. California is leading the way with this legislation, and other West Coast states, including Oregon and Washington state, might take notice. Read More (Marijuana Business Daily)

Illinois hits new marijuana milestone with $100 million in tax revenue collected since sales began. Illinois has hit a marijuana tax milestone, the state announced, collecting more than $100 million in revenue from cannabis sales since the recreational legalization program launched this year. In spite of the coronavirus pandemic, Illinois has seen record-breaking marijuana sales month-over-month, contributing to the significant tax revenue that’s being used to fund local governments and restorative justice programs. As of August, the last month for which tax data has been calculated for the adult-use market, the state has taken in about $106 million in revenue, the Illinois Department of Revenue (IDOR) said. Read More (Marijuana Moment)

Maine’s recreational cannabis retailers sell nearly $100,000 on opening day. Adult-use marijuana retailers in Maine sold $94,643.38 worth of product on October 9, the first day of legal sales in the state, according to preliminary figures released by the state’s Office of Marijuana Policy (OMP). Total sales for the long weekend – Friday through Monday – were $258,411.58 across 6,430 transactions, the OMP said in an update on October 13 afternoon. Maine had eight active adult-use retail licenses when sales began, the OMP noted. However, the regulator said only six retail stores were actually open on the first day of sales. Read More (Marijuana Business Daily)

Retail marijuana sales take a slight downturn in Colorado. Retail cannabis sales had been on a steady upward trend month-on-month in Colorado despite the coronavirus pandemic, but that momentum backslid in August. According to CPR News, the Colorado Department of Revenue’s numbers show consumers spent $218,601,341 on marijuana in August. That’s down 3.43% from the previous month, when the state set a record with more than $226 million in sales. Until the August downturn, marijuana sales in Colorado had been trending upward each month since April. With sales totals of more than $200 million in August, the state’s marijuana businesses have reason to be confident that revenue will hold steady. COVID-19, in fact, might be a reason the Colorado numbers dipped since fewer tourists are visiting the state during the pandemic. Read More (Marijuana Business Daily)

Impending adult-use marijuana program will test ‘made in Vermont’ ethos. Vermont’s new recreational cannabis program is projected to generate roughly $250 million in annual sales by the middle of the decade, but homegrown companies might find themselves pitted against larger out-of-state businesses. Three medical cannabis businesses – including multistate operators Curaleaf (CURLF) and iAnthus Capital Holdings (ITHUF) – are poised to take advantage of a five-month head start in sales in the spring of 2022 backed by potentially large cultivation and processing facilities. Small producers and retailers will follow. The new market comes after Vermont on October 7 became the 11th state to legalize adult-use sales and the third to do so in New England. It’s unclear to what extent the Vermont adult-use industry will become local in flavor in a sparsely populated state known for its locally made products: Think maple syrup, cheddar cheese and, more recently, smokable hemp flower. Read More (Marijuana Business Daily)

What you need to know about Vermont’s new tax-and-regulate system for cannabis. According to Sen. Dick Sears, lead sponsor of S.54, there are two different taxing systems in Vermont. One is the 6% sales tax and that sales tax will go exclusively to after-school and summer programs aimed at youth. And the priority in that money would go to underserved areas of the state, which is tremendously important. Secondly, there is a 14% excise tax. Thirty percent of the excise tax will go to prevention and to substance misuse programs. Sears believe a need to build a strong fence around that in the coming year to make sure that money actually does go to those programs. He has already heard from some people [with] concerns about that. Read More (Vermont Public Radio)

U.S. cannabis spot index up 1.5% to $1,647 per pound, November forward up $15 to $1,560 per pound. The simple average (non-volume weighted) price increased $63 to $1,863 per pound, with 68% of transactions (one standard deviation) in the $1,083 to $2,644 per pound range. The average reported deal size increased to 2.2 pounds. In grams, the spot price was $3.63 and the simple average price was $4.11. The average reported forward deal size was nominally unchanged at 22 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 35%, 40%, and 25% of forward arrangements, respectively. Read More (Cannabis Benchmarks)

Chart 9: Cannabis Benchmarks U.S. Spot Index  Source: Intro-Blue, Cannabis Benchmarks

Chart 9: Cannabis Benchmarks U.S. Spot Index
Source: Intro-Blue, Cannabis Benchmarks

 

Chart 10: Cannabis Benchmarks U.S. Implied Forward Curve  Source: Intro-Blue, Cannabis Benchmarks

Chart 10: Cannabis Benchmarks U.S. Implied Forward Curve
Source: Intro-Blue, Cannabis Benchmarks

 

Chart 11: Cannabis Benchmarks U.S. Spot Price by Medical or Recreational  Source: Intro-Blue, Cannabis Benchmarks

Chart 11: Cannabis Benchmarks U.S. Spot Price by Medical or Recreational
Source: Intro-Blue, Cannabis Benchmarks

Canadians spending more on cannabis. In the second quarter of 2019, cannabis only represented 0.16% of all retail commodities in Canada, however, a year later, it now accounts for 0.41% of the total. That’s because Canadians are spending more on legal cannabis. According to more recently released data from Statistics Canada, Canadians spent 49.5% more on cannabis this year than in Q2 of 2019. Household consumption expenditure of cannabis totaled $648 million in the second quarter of this year, compared to only $327 million during the same time in 2019. Out of a total of $275.1 billion in household expenditures, 0.23% was spent on licensed, non-medical cannabis. Read More (Cannabis Retailer)

‘Too much cultivation’: Canadian pot legalization anniversary comes amid supply glut concerns. Two years after Canada legalized recreational cannabis, the country is awash with the stuff. Hundreds of thousands of kilograms of cannabis sit idle in producers’ vaults. Warehouses operated by provincial wholesalers are filled to the brim with finished products. Meanwhile, illicit growers remain active and add to a country-wide stockpile that is far outpacing market demand. The mountain of pot is expected to balloon further once producers – both legal and illicit – finish their “Croptober” harvest, the term used within the cannabis industry in reference to the period around October when outdoor cannabis crops are chopped down and processed. Read More (BNN Bloomberg)

Access barriers stall Canadian medical cannabis market, survey shows. Systemic barriers are making Canada’s legal medical cannabis program prohibitive, causing patients to seek treatment in recreational and unregulated channels with no oversight from medical practitioners, a new survey says. That situation could be partly to blame for Canada’s stalled medical cannabis sales, which have seen flat expenditures of around CAD $150 million ($113 million) per quarter since 2017, according to Statistics Canada data. The survey, conducted by Medical Cannabis Canada (MCC), found that only 37% of Canadians using cannabis for medical purposes have a medical document – such as a prescription – from a health-care practitioner. “This is concerning since patients without a medical document report substantially less engagement with health-care professionals and greater use of unregulated markets to access their treatment,” according to the group’s news release. Read More (Marijuana Business Daily)

Chart 12: Quarterly Medical Cannabis Expenditure in Canada (2014-2020)  Source: Intro-Blue, Marijuana Business Daily

Chart 12: Quarterly Medical Cannabis Expenditure in Canada (2014-2020)
Source: Intro-Blue, Marijuana Business Daily

Lessons after two years of marijuana legalization in Canada. On October 17, 2018, Canada became the first G7 nation to legalize recreational cannabis. “The cannabis industry has definitely overcome numerous challenges and evolved in the past two years, and Merrco has grown along with it,” said Fern Glowinsky, President and CEO of Merrco. “Now more than ever, during the COVID-19 pandemic, all businesses are seeking ways to offer safe supply and payment options to help protect consumers and support industry growth. Merrco has curated a unique, highly valuable ecosystem of technology partners to offer omnichannel payment solutions to the cannabis sector. We will continue investing in our payment platform and working closely with our partners as we navigate this next chapter of the industry together.” Read More (Cannabis Retailer)

Cannabis 2.0 products in Ontario grows to 30% in legal cannabis channels since its introduction. With the introduction of cannabis 2.0 products, consumers seeking more variety presumably have greater reason to purchase products from legal channels. While illegal mail-order-marijuana websites do sell the types of products included in the legal market’s cannabis 2.0 phase, traditional dealers usually only carry a small variety of dried flower. The latest data from the OCS shows cannabis 2.0 products are already accounting for a significant portion of legal sales just a few months after their launch. For the three-month period starting April 30, cannabis 1.0 products (dried flower and pre-rolls) accounted for 70% of total sales in legal cannabis channels, while cannabis 2.0 products grew to 30% of the total. Read More (Cannabis Benchmarks)

Chart 13: Total Sales Revenue by Product Type (Left) and Proportion of Total Grams in Product Type (Right)  Source: Intro-Blue, Cannabis Benchmarks

Chart 13: Total Sales Revenue by Product Type (Left) and Proportion of Total Grams in Product Type (Right)
Source: Intro-Blue, Cannabis Benchmarks

 

Chart 14: Average Net Selling Price per Gram by Product  Source: Intro-Blue, Cannabis Benchmarks

Chart 14: Average Net Selling Price per Gram by Product
Source: Intro-Blue, Cannabis Benchmarks

Alberta lifts cap on percentage of cannabis market retailers can own. Alberta is removing its cap on cannabis stores around the province to allow companies to take up more of the market share. At the end of September, the provincial government amended the Gaming, Liquor and Cannabis Regulation to remove a restriction that previously prevented any one person or group from controlling more than 15 percent of cannabis licenses issued in Alberta. The government introduced the 15 percent cap prior to cannabis’ legalization in October 2018. Heather Holmen, spokesperson for Alberta Gaming, Liquor and Cannabis, said the change was made to allow smaller players to enter the market. Currently, the cannabis retailers with the biggest share of the market include Spiritleaf, Fire & Flower and Nova Cannabis. Each make up more than five percent of the 527 cannabis providers found in Alberta, according to the AGLC’s online database. Read More (CBC)

COMPANY NEWS

Aurora Cannabis exits Australia’s Cann Group after $28 million impairment charge. Alberta-based Aurora Cannabis (ACB) sold off its stake in Australian medical marijuana company Cann Group (CNGGF), but the Canadian producer says it still sees promise in the Australian market. “We continue to see growth potential in this important market and will maintain active relationships with key distribution partners to enhance availability of Aurora’s portfolio of leading, high quality medical cannabis,” Aurora spokeswoman Michelle Lefler wrote in an email to Marijuana Business Daily. She said Aurora remains focused on its “core markets” of: Canadian medical and recreational, CBD in the U.S., and developed international medical markets. “Our capital investment mirrors this focus and is reflected in our decision to redeploy our capital and simplify our position in the expanding Australian market,” Lefler said. Read More (Marijuana Business Daily)

Building brands the right way: a look at Cresco Labs’ newly released cannabis advertising and marketing standards. Cresco Labs (CRLBF) is committed to being a responsible player in the rapidly growing industry, and has now set out to help other companies build brands the right way through the release of its Responsible Advertising and Marketing Standards (RAMS). The advertising and marketing code, which was made public October 8, includes a set of guiding principles to ensure that Cresco markets and promotes its brands and products responsibly. The standards include guidance on commercial communications to help prevent underage appeal and ensure companies make appropriate claims about cannabis’s benefits. The code also offers best practices for consumer-facing promotional events and merchandising. Read More (Cannabis Business Times)

Scotts Miracle-Gro is main financial supporter of New Jersey’s cannabis legalization effort. Scotts Miracle-Gro (SMG) has emerged as the primary financial backer of New Jersey’s cannabis legalization effort, donating $800,000 to two campaign committees formed to back the November 3 ballot question that would amend the state constitution to allow cannabis to be bought and sold for recreational use. Contributions from the Marysville, Ohio-based company represent more than 60 percent of the $1.3 million raised across the three campaign committees formed around the ballot question, according to a new report from the New Jersey Election Law Enforcement Commission. The injection of cash from Scotts Miracle-Gro, which owns a lucrative cannabis-oriented subsidiary called Hawthorne that specializes in hydroponic and indoor production — including products for “home hobbyists,” per its website — comes in the absence of meaningful contributions from New Jersey’s burgeoning cannabis industry operators. Read More (Politico)

EARNINGS

Aphria’s record Canadian cannabis sales marred by weak EU revenue. Strong demand in Canada for Aphria’s (APHA) recreational marijuana products failed to offset disappointing international revenue in the Leamington, Ontario-based company’s first fiscal quarter. The Canadian producer’s net revenue declined 4.5% from the March-May period to CAD $145.7 million ($110 million), well below analyst expectations. In the highly competitive European market, Aphria’s net revenue declined substantially compared to one year ago, falling 16% to CAD $80.7 million for the three months ended August 31. In North America, net revenue more than doubled over last year’s first quarter, to CAD $63.5 million. In Canada, Aphria reported record gross revenue from adult-use cannabis of CAD $69.6 million, up 23% from the previous quarter. Read More (Marijuana Business Daily)

cbdMD expects net sales to be more than $40 million in fiscal 2020. cbdMD (YCBD) said that net sales revenue for fiscal 2020 is expected to range between $41.7 and $41.8 compared to $23.7 million in fiscal 2019. cbdMD also stated that its net sales revenue for the fourth quarter of fiscal 2020 are expected to range between $11.5 and $11.7 million compared to $9.54 million in the fourth quarter of fiscal 2019. The company did not report any profit or loss numbers. “cbdMD continues to generate outstanding sales growth while reaffirming its commitment to reaching positive adjusted operating income during calendar 2020. Our direct to consumer (DTC) net sales channel is performing very strong and we expect to report an increase between 71% and 72% of net sales from 62.5% in fiscal 2019. As we look ahead into 2021, we expect the CBD industry to grow appreciably,” said Martin Sumichrast, chairman and co-CEO of cbdMD. Read More (Business Wire)

Flower One announces preliminary Q3 2020 revenue of $11.5 million, exceeding guidance for the quarter. Flower One Holdings (FLOOF) announced preliminary third-quarter revenue of $11.5 million surpassing its Q3 2020 revenue guidance range of $9.8 million and $10.8 million. The company did not state whether it had any profits or net losses. Preliminary year-to-date gross sales, thru the month ending September 30, 2020, was approximately $24.2 million. “These past few months have demonstrated Flower One’s resilience and ability to reemerge through COVID-19 with momentum as evidenced by our strong, preliminary quarterly revenue” said Ken Villazor, president and chief executive officer of Flower One. “The company continues to increase its market penetration by providing our retail partners with a consistent supply of some of the highest-quality products and premium brands available in the Nevada market.” Read More (Newswire)

MedMen sees revenue decline 40% in Q4, looks forward to 2021. MedMen Enterprises (MMNFF) announced a net revenue decline of 40% to $27.4 million in the fourth quarter. The Los Angeles cannabis retailer blamed the revenue drop on the current health crisis stemming from the coronavirus pandemic. In May, MedMen temporarily shut down five of its eight Florida-based stores due to the financial setbacks. In addition, it estimates to achieve an increase of 37% in revenue over the first quarter of 2021. “We made significant progress during the fourth quarter by focusing on retail profitability, optimizing our corporate infrastructure and strengthening our balance sheet ahead of an exciting new chapter for the company,” the company’s Interim CEO Tom Lynch said in a prepared statement. Read More (Benzinga) and More (New Cannabis Ventures)

Valens sees fiscal 3Q revenue rise by 10% driven by an expanding and diverse customer base. Valens (VGWCF) posted fiscal third-quarter results that saw its revenue jump 10% year-over-year driven by new brand partnerships, white-label, custom manufacturing agreements and existing contracts. For the period ended August 31, 2020, the Kelowna, British Columbia-based manufacturer of cannabinoid-based products, reported revenue of $18.1 million, compared to $16.5 million in the third quarter of 2019. The company’s gross profit was $7.3 million, or 39.5% of revenue, for the fiscal third quarter, compared to $12.8 million, or 77.8% of revenue, in the same period in fiscal 2019. Read More (Proactive Investors)

Indus Holdings pre-announces Q3 revenue above $14 million. Indus Holdings (INDXF) announced preliminary unaudited revenue and adjusted EBITDA for the third quarter ended September 30, 2020. The company expects revenue of approximately $14.1 million, a $4.2 million, or 42% increase over Q2 2020 and adjusted EBITDA to be generated between $2.1 and $2.3 million compared to reported negative EBITDA of $3.3 million in Q2 2020. The company attributes the highest revenue quarter since its inception primarily to the increase in harvested flower resulting from the greenhouse renovations. “It’s an important quarter from a great team that proved its ability to rise to a challenge that has eluded many. We are even more excited about milestones yet to come,” said George Allen, chairman of the board. Read More (New Cannabis Ventures)

Harborside projects Q3 revenue to exceed $18.5 million. Harborside (BUDD-CA) released preliminary unaudited third-quarter 2020 results for the period ending September 30 with gross revenue for the quarter is expected to exceed $18.5 million.  Net revenue for the quarter ending in June was $15.2 million with net losses of $1.7 million. In addition, the company expects to continue to report positive adjusted EBITDA in Q3 2020, due largely to the strategic initiatives implemented earlier this year, which resulted in improved operating efficiencies and headcount reductions across the company. The company did not release any information with regards to profits or losses. Read More (New Cannabis Ventures)

CAPITAL MARKETS

A tale of two cannabinoids: THC-related stocks outperform CBD-related stocks. Viridian priced a representative basket of hemp-derived CBD stocks and THC-related stocks from the beginning of 2020. The basket of THC stocks has meaningfully outperformed CBD stocks, showing a YTD gain of approximately 20%, while the basket of CBD stocks is showing a YTD loss of approximately 35%. There are several key factors that drove this disparity: buoyed by increased revenues, greater profitability, and posed to benefit from the upcoming election, larger U.S. THC companies have thrived; larger cap THC stocks have better trading volume and liquidity characteristics than their CBD counterparts, attracting investors, despite its federally legal status, hemp-derived CBD has been plagued by excess production, brand proliferation, and pricing declines; while the hemp-derived CBD market has sizeable growth potential, the market has been negatively impacted by lack of regulatory clarity by the FDA; the capital crunch has had a more severe impact on CBD companies. Read More (Viridian Capital Advisors)

Chart 15: Intangible Asset % to Market-to-Book Ratio Across Different Cannabis Companies  Source: Intro-Blue, Viridian Capital Advisors

Chart 15: Intangible Asset % to Market-to-Book Ratio Across Different Cannabis Companies
Source: Intro-Blue, Viridian Capital Advisors

Navigating the SPAC trend in the cannabis and hemp/CBD market. While SPACs are not new to the public market, they have recently taken on some novelty by targeting businesses in the cannabis and hemp/CBD industries, and ancillary businesses to those industries. In July 2020, Forbes has listed several top cannabis SPACs, with information on their fund size, listed exchange, and formation date (which will trigger their deadline to enter into a business combination or be forced to liquidate). Some of these SPACs include warrant-based SPACs. A few of the major players that have expressed specific targets of cannabis businesses (likely plant-touching) include: Greenrose Acquisition (GNRSU), Ceres Acquisition (CERE-CA), Akerna (KERN), Mercer Park Brand Acquisition Corp (BRND-CA), and Schultze Special Purpose Acquisition Corp (SAMA). Read More (JD Supra)

New $102 million equity fund targets ancillary cannabis businesses. Pennsylvania-based Intrinsic Capital Partners said it raised $102 million in a fund that will invest in science and technology businesses focused on the legal marijuana and hemp industries. Intrinsic said it has committed $65 million of the equity fund, Intrinsic Health Partners, to four companies and plans to invest in two or three additional companies. The companies the fund is investing in are: ACT Laboratories, a rapidly growing Michigan-based cannabis testing company; Treez, a California-based firm that provides point-of-sale software to marijuana retailers; Hound Labs, a California maker of marijuana and alcohol breathalyzer technology; and Elemental Brand, a Pennsylvania-based provider of hemp-derived consumer health-care technologies. Read More (Marijuana Business Daily)

Michigan’s Gage Cannabis launches Reg A offering. Michigan-based privately-owned cannabis company Gage Cannabis has launched a Regulation A, Tier 2, equity financing.  The company’s executive chairman is industry leader Bruce Linton. Gage said it is offering up to 28,571,400 shares of subordinate voting shares for $1.75 per share. The shares are being offered pursuant to Regulation A of Section 3(b) of the securities, as amended, for Tier 2 offerings, by management on a “best-efforts” basis directly to purchasers who satisfy the requirements set forth in Regulation A. “We wanted to provide investors with the opportunity to invest in a growing and dominant cannabis operation before an official IPO process,” said Bruce Linton, executive chairman of Gage Cannabis. Read More (Green Market Report)

Schwazze scraps deal to purchase Colorado marijuana edibles maker. Schwazze (MDCL) (earlier named Medicine Man Technologies) added to its growing list of scuttled deals by terminating its planned acquisition of a fellow Denver-based cannabis company, infused edibles manufacturer Canyon. According to the company’s 8-K filing on October 9, the term sheet that detailed Schwazze’s purchase of all of Canyon’s assets expired September 7. The original agreement, one of 11 acquisitions Schwazze made in 2019, was a $5.1 million cash and stock deal that would have limited the company to paying no more than $2.6 million in cash for the 10-year-old Canyon. Before Schwazze backed away from a previous deal – an acquisition of Denver-based medical marijuana company MedPharm – the company said it had moved forward on numerous term sheets with Colorado cannabis operators but had completed limited due diligence at that time. Read More (Marijuana Business Daily)

Sunniva, CAD $58 million in debt, granted initial creditor protection. Sunniva (SNNVF) has received an initial creditor-protection order from the Supreme Court of British Columbia as the Vancouver-based marijuana firm pursues restructuring. The cross-border firm made the announcement in a news release, joining a number of troubled Canadian cannabis producers seeking creditor protection this year. Sunniva was previously focused on building a cultivation facility in British Columbia and operated medical cannabis clinics in western Canada but later focused on doing business in California, according to a petition to the court. The company has unsecured debts of more than CAD $58 million ($44.2 million) “that are due or past due,” the petition said, and also “(faces) numerous lawsuits.” Read More (Marijuana Business Daily)

New UK cannabis fund closes in on its first $75 million investment. One of the UK’s first cannabis investment funds is being backed by two of the industry’s global leaders as it closes in on its first $75 million investment. News of the launch of the Verdite Capital Fund emerged last month and it officially opened its doors on October 14. Formed by London-based entrepreneurial corporate finance and investment house Chrystal Capital Partners LLP it is looking to raise $100 million by the end of the year. In a press release announcing its launch Chrystal says it has formed a football-size team of 11 sector experts, which includes Bruce Linton, the founder of Canopy Growth (CGC) and Colin Stott, former R&D Director of GW Pharmaceuticals (GWPH). Verdite says it initial aim is to create a diversified portfolio of 10-15 investments in these markets, adding the fund will not invest in the recreational market. Read More (BusinessCann)

MEDICAL CANNABIS 

Judge overrules state over New Mexico medical marijuana reciprocity. A New Mexico judge rescinded new state requirements that made it more difficult for certain out-of-state visitors to access the medical cannabis program through a reciprocity provision. Santa Fe District Judge Matthew Wilson, in a ruling, agreed with Ultra Health, the state’s leading MMJ operator, that the additional requirements went beyond New Mexico statute and are unenforceable. The judge’s ruling could result in an increase in sales for medical marijuana retailers in New Mexico. The emergency amended rule, which went into effect October 8, increased the requirements such as proof of authorization for individuals from other states and tribal lands. Ultra Health noted in a news release that some reciprocity participants had been denied access to medical cannabis and that the state, per the judge’s order, would need to re-enroll those individuals. Read More (Marijuana Business Daily)

Medical cannabis doesn’t cause cognitive decline in seniors, study finds. A new study conducted at Haifa University’s School of Public Health has found no evidence of cognitive decline in senior citizens who regularly smoke medical cannabis to treat chronic pain. Chronic pain affects 19%-37% of the adult population worldwide and medical cannabis has, in recent years, been raised by patients and researchers alike as a “highly effective” possible treatment. According to the researchers however, most studies done to date have mainly examined the effect of cannabis use on cognitive function in young people. “Our study is the first step in a more accurate assessment of the risk versus benefit of cannabis treatment in this population,” the researchers explained. Read More (The Jerusalem Post)

Study reveals cannabis has increased in popularity among older adults. As the stigma that has traditionally followed cannabis continues to dissipate, the plant is being embraced by a wider variety of people than ever before. A new study conducted by University of San Diego School of Medicine researchers and published in the Journal of the American Geriatrics Society found that cannabis use has continued to increase among older adults suffering from various common health conditions. Researchers found that “61 percent of patients who used cannabis began after age 60.” The study involved 568 patients over the age of 60 in a survey regarding their cannabis use, which took place over a period of 10 weeks at the Medicine for Seniors Clinic at UC San Diego Health. The survey revealed that 15 percent of the patients had used cannabis within the past three years, while 50 percent reported that they used the plant regularly for medical purposes. Read More (Green Flower)

Study finds cannabis effective for 82% of migraine patients. Nearly a third of migraine patients have tried medical marijuana or cannabinoids to relieve their pain and other symptoms, according to a large new study that found 82 percent of those who used cannabis found it effective in providing pain relief. The study gathered data from nearly 10,000 migraine sufferers in the U.S. and Canada who use Migraine Buddy, a migraine tracking app made by Healint, a healthcare technology company based in Singapore. Participants ingested cannabis by a variety of different methods, such as smoking, vaping, tinctures, oils and edibles. No form of ingestion was significantly more effective than another. “Cannabis is becoming a prominent treatment option for chronic pain patients, especially for migraineurs,” Healint CEO and co-founder Francois Cadiou said in a press release. Read More (Pain News Network)

CBD/HEMP

Amazon invites select CBD makers to participate in UK pilot program. Amazon has launched a pilot program allowing the sale of select CBD ingestibles on its UK website. The company says “sellers participating in a limited, invite-only pilot” on the UK site are exempt from its sales ban on edible products containing CBD or other cannabinoids. “This pilot only applies to products listed on Amazon.co.uk and is not available on other Amazon websites,” the company wrote. “The pilot is not accepting additional sellers currently.” Brands participating in the pilot program include the UK-based supplement makers Healthspan and Natures Aid. Harry Staight, who handles corporate communications at Amazon’s UK office, told Hemp Industry Daily that the program was launched over the summer. He declined to comment on how many companies were invited to take part in the programme, the criteria used to select them and how the pilot program will be evaluated. Read More (Hemp Industry Daily)

Almost 30% of U.S. and Canadian CBD users wanted to use more CBD during COVID-19 to fight stress and anxiety. CBD: The Consumer Report demonstrates the underlying strength of the market and its potential to expand over the coming years, as highlighted by a 16% growth forecast by 2024, which takes into account the impact of COVID-19. In total the over-the-counter CBD market is expected to be worth $5.8 billion in 2020 and $6.79 billion by 2024. A significant proportion of CBD and cannabis-infused goods users reported an increase in use as a result of COVID-19, mainly related to a number of health issues. Specifically, almost 30% of users in mature markets, such as the U.S. and Canada, stated that they expected to increase their usage of CBD during the global pandemic, primarily to deal with stress, anxiety and as part of a wellness routine. Read More (Prohibition Partners)

Chart 16: COVID-19 Impact on CBD Purchases  Source: Intro-Blue, Prohibition Partners

Chart 16: COVID-19 Impact on CBD Purchases
Source: Intro-Blue, Prohibition Partners

 

Chart 17: Health Conditions Consumers Use CBD For  Source: Intro-Blue, Prohibition Partners

Chart 17: Health Conditions Consumers Use CBD For
Source: Intro-Blue, Prohibition Partners

Hemp-derived CBD market for pets worth $60 million in 2020, with threefold growth projected. Nielsen projects that by 2025, hemp-CBD dog food and treats will increase by threefold among current users of non-CBD products and nearly that much among all dog owners. Dog vitamins and supplements with hemp-derived CBD are on track to more than double among dog owners and current users of traditional consumer packaged goods, non-CBD products. Cat food and treats infused with hemp-CBD are on track to increase more than sixfold among cat owners and consumers buying consumer packaged goods pet products, while cat owners and buyers of traditional cat products stand to triple their purchases of hemp-CBD vitamins and supplements formulated for cats. If the FDA approves this use within the next year, and more mainstream retailers and veterinarians embrace the category, hemp-CBD products could represent one in four animal health supplements by 2025, Nielsen predicts. Read More (Hemp Industry Daily)

Chart 18: Current and Future Usage of CBD Pet Products  Source: Intro-Blue, Hemp Industry Daily

Chart 18: Current and Future Usage of CBD Pet Products
Source: Intro-Blue, Hemp Industry Daily

Connecticut governor signs hemp cultivation plan amid USDA uncertainty. Connecticut Gov. Ned Lamont has signed into law the state’s new hemp cultivation regulations to align with requirements from the U.S. Department of Agriculture. Connecticut has already submitted its hemp plan to USDA, but the agency has yet to approve it. The new law enacts those changes anyway and gives Connecticut hemp producers new rules for 2021. Lamont signed the state’s hemp production plan, WTIC-TV reports. More than 20 states have had their plans approved by the USDA approved, but nearly half of the states chose to cultivate hemp this year under the less-restrictive 2014 regulations. Those were grandfathered when the USDA set a national framework last fall. Read More (Hemp Industry Daily)

NY extends hemp pilot program, giving cannabis industry legal ‘breathing room’. New York’s hemp and cannabis industry, facing a potential shutdown at the end of the month, has been given life for another year. The state’s two-year-old hemp pilot program will be extended through the end of September 2021, giving the industry “some breathing room,” according to Allan Gandelman, president of the New York Cannabis Growers and Processors Association. The program had been scheduled to expire October 31, potentially leaving the 700 hemp growers and 100 processors across the state in legal limbo, without valid operating permits. The extension is welcome, but still leaves the cannabis industry in a “gray area,” said Gandelman, who is also owner of Head + Heal, a hemp grower and processor in Cortland. Read More (Syracuse)

An introduction to industrial hemp developments in Latin America. The Latin American hemp industry has entered into a new era in 2020, especially during the second half of the year. The COVID-19 pandemic has caused a lot of distress and put enormous pressure on economies all over the world; Latin American (LatAm) countries are not an exception. Given the many challenges mankind is facing during this year, governments in LatAm region are now considering hemp and cannabis as big opportunities to generate investment, jobs, development, and overall economic improvement. Hemp is now seen increasingly as an agricultural commodity and is currently being exported by Uruguay, Paraguay, and Colombia to Europe and North America. Read More (Hemp Benchmarks)

RETAIL

There is no McDonald’s of marijuana: Why cannabis companies get this wrong, and what might actually work. Despite the best efforts of American capitalism, there is no Coca-Cola or McDonald’s “of marijuana.” And thanks to federal prohibition, there won’t be, at least for a while. And even if there is, standardization just isn’t what most cannabis users want. At least one of the cannabis companies trying to be a national force has finally figured this out, and is banking that for a product line of cannabis flower available in multiple states, “close enough” might be good enough. “We’re coming to the realization that we’re never going to be able to be a Bud Light right now, or a McDonald’s. That’s just not going to happen,” said Jesse Channon, the “chief growth officer” at Columbia Care (COLXF). Read More (Forbes)

Alberta lifting retail cannabis store cap in November. Alberta’s government is lifting the cap on the number of retail cannabis store licenses that can be held by a single person or group of people. Currently, a person or a group can hold no more than 15% of the total number of retail stores in the province. With 528 marijuana store licenses issued in Alberta as of October 16, the cap means a single owner could not have more than 79 licenses. The 15% limit will be lifted on November 1. The cap was originally “intended to allow smaller players to enter the market,” Heather Holmen, a spokeswoman for provincial cannabis retail regulator Alberta Gaming, Liquor and Cannabis (AGLC), wrote in an emailed statement. Read More (Marijuana Business Daily)

PRODUCTS

Pabst’s entry into cannabis-infused drinks might untap interest in the category. The appearance of Pabst Blue Ribbon’s iconic blue logo on cannabis-infused beverage packaging might be a sign that the beverage category, which often struggles for market share, is poised for speedy growth in North America and perhaps beyond. PBR launched its first infused beverage through a licensing deal with Pabst Labs, a new California cannabis company founded by former Pabst employees and industry experts. Currently, infused beverages account for only a sliver of the overall market for cannabis-infused products. Sales of adult-use infused beverages in California brought in $3.4 million in September, for example. Read More (Marijuana Business Daily)

Chart 19: Timeline of Mainstream Brands and the Infused Beverage Market  Source: Intro-Blue, Marijuana Business Daily

Chart 19: Timeline of Mainstream Brands and the Infused Beverage Market
Source: Intro-Blue, Marijuana Business Daily

Canada’s race for low-cost legal marijuana reaches derivative ‘Cannabis 2.0’ products. Low-priced cannabis has changed the face of Canada’s regulated marijuana industry over the past year, with many producers launching value-flower brands at competitive prices. Now, that low-cost trend is arriving for marijuana-derivative products, including vape cartridges and edibles. (Such products are sometimes called “Cannabis 2.0” in Canada because of the second set of federal regulations that enabled them.) Competition is increasing, average prices have fallen and some producers are extending their value-flower strategies to the derivative segment. That could bode well for attempts to capture market share away from the illicit market, but it might also signal tighter margins for some producers. Like dried flower, many of those derivative products carried relatively high price tags when they launched around the new year. Read More (Marijuana Business Daily)

Chart 20: Price Trends for Cannabis-Derivative Products in Canada  Source: Intro-Blue, Marijuana Business Daily

Chart 20: Price Trends for Cannabis-Derivative Products in Canada
Source: Intro-Blue, Marijuana Business Daily

INTERNATIONAL

Mexican Senate will vote on marijuana legalization bill by end of October, majority leader says. The Mexican Senate will likely vote on a bill to legalize marijuana within the next two weeks, the chamber’s majority leader recently said. Activists have been eagerly awaiting action on the reform legislation since the Supreme Court deemed personal possession and cultivation of cannabis unconstitutional in 2018—though some are pushing for a greater emphasis on social equity before lawmakers pass the pending bill in its current form. If the Senate passes the legal cannabis bill it will still have to go before the other house of the nation’s Congress, the Chamber of Deputies. President Andrés Manuel López Obrador said in August that marijuana reform legislation will advance in the new session. The bill was approved by several committees earlier this year, but the COVID-19 outbreak derailed negotiations. Read More (Marijuana Moment)

Mexico is poised to become the biggest legal marijuana market in the world. Who will most benefit? Mexican lawmakers have until December 15 to pass pot legislation under orders from the Supreme Court, which two years ago struck down a marijuana ban as unconstitutional. The looming deadline has intensified debate over exactly what legalization should look like and whom it should benefit. Alejandro Madrazo, a researcher at Mexico’s Center for Economic Research and Teaching think tank, said lobbyists from Canada and the U.S. have played an outsized role in shaping the legislation, which he says would create an “elite gourmet market” that would benefit big corporations and upper-class users. Read More (Los Angeles Times)

European cannabis regulations: How convergence could fuel a better investment market. Europe is a large market-in-waiting for the cannabis industry – potentially covering the spectrum from recreational use to medical cannabis, CBD products to industrial hemp. The European recreational market alone is huge: Some 25 million Europeans consumed cannabis in the past year, and it is the most commonly used illicit drug in the continent (with one estimate suggesting that about 1% of European adults consume cannabis daily). Decriminalization and Dutch-style harm reduction measures have not had the negative impacts that some feared, and strong growth is expected to in the years following the pandemic, despite the uncertainty engendered in the CBD market by the European Union’s Novel Foods categorization. Meanwhile, medical cannabis is available to limited numbers of patients in most countries in the EU, among which most are readying themselves for further investment in their respective cannabis sectors. Read More (New Frontier Data)

Chart 21: Adult-Use Cannabis Legality in Europe  Source: Intro-Blue, New Frontier Data

Chart 21: Adult-Use Cannabis Legality in Europe
Source: Intro-Blue, New Frontier Data

The UK spars with European Commission over CBD. In July, the European Commission (i.e., the European Union’s governing body, which proposes legislation and budgeting) issued an official preliminary decision on CBD extracts, stating that “the [EC’s] preliminary view is that CBD extracted from the flowering and fruiting tops of the hemp plant should be considered as a narcotic under the United Nations Single Convention”. The UK, however, has rejected the EC’s ruling. The UK’s Home Office (i.e., the lead government department overseeing drug policy in the country), has categorically stated that CBD is not a narcotic; last month, London’s Food Standards Agency (equivalent to the American FDA) stated its disagreement with the EC’s preliminary decision, and said that it will consider CBD extracts as novel foods. As a combined region, the UK and Ireland ranks a close second among the regions analyzed after Germany in annual spending on CBD, and accounted for 24% of total European sales in 2020. Read More (New Frontier Data)

Chart 22: UK/Ireland Projected CBD Spending 2020-2025  Source: Intro-Blue, New Frontier Data

Chart 22: UK/Ireland Projected CBD Spending 2020-2025
Source: Intro-Blue, New Frontier Data

Brexit could prove to be a boon for Britain’s medicinal cannabis industry. One sector that could be set to reap the rewards of the UK’s exit is its burgeoning cannabidiol (CBD) and wider cannabis sector, with some figures in the sector saying Brexit could allow the country to push ahead with further regulatory reform than would have been possible under the EU’s jurisdiction. “With Brexit, the British government will have the option to not comply with EU law in some areas, and one of the first announcements the Food Standards Agency made was to classify CBD as a novel food, something that the EU has yet to officially confirm and is still holding out on this classification”, said Alexej Pikovsky, chief executive of European medicinal cannabis distributor Alphagreen. “You can see that the UK already has the freedom to make CBD a novel food and therefore is more advanced to regulatory approval of CBD than the EU. That’s a big chance for the UK to become a leader in CBD”, Pikovsky said. Read More (Proactive Investors)

‘Cannabis light’ used in Italy in place of sedatives, antidepressants. Sales in Italy of so-called “cannabis light” – low-THC and CBD-rich flowers derived from hemp – have been linked to a drop in purchases of different medications, indicating some patients chose to abandon prescription drugs in favor of self-medication with an unregulated CBD-based therapy. A new study in the Journal of Health Economics found that the availability of “cannabis light” – flowers from high-CBD hemp plants with up to 0.6% THC – in Italy was connected to: an 11.5% decrease in dispensed boxes of anxiolytics (anti-anxiety medications); a 10% reduction of dispensed sedatives; and a 4.8% reduction of dispensed antipsychotics. “The large-scale accessibility to the new product, which was advertised as a relaxant one, induced some patients to abandon traditional medicine to seek relief,” the authors concluded. Read More (Marijuana Business Daily)

Chart 23: Google Search Trends for Cannabis Light in Italy  Source: Intro-Blue, Marijuana Business Daily

Chart 23: Google Search Trends for Cannabis Light in Italy
Source: Intro-Blue, Marijuana Business Daily

Lithuanian farmers develop two hemp harvesting solutions. Family farmers at UAB Hemp Spot, a Lithuanian hemp agribusiness, say they have developed two solutions for large-scale flower harvesting, with options starting at €16,000 (~$18,900). That’s the price tag for a 3.5m (11’5”) header, which can be attached to small and medium-sized tractors outfitted with hydraulic front-mounted lifts for a conventional setup in which a second driver pulls a bunker alongside the harvesting ensemble. The harvester can cover 1.0-1.5 hectares (~2.5-3.7 acres) per hour. Further processing through a separator the company has also developed (about €37,000/~$44,000) results in consistent biomass, a key factor in harvesting hemp flowers for CBD and other extracts, said Tomas Lunskis, Hemp Spot’s CEO. Read More (Hemp Today)

Rwanda in talks with EU, U.S. firms to produce cannabis for export. Rwanda is in talks with four European and American companies about growing and processing cannabis for export to meet rising pharmaceutical demand for the narcotic, although its consumption is still banned in the country. The move could help boost Rwandan state revenues, hit by the effects of COVID-19, officials said. The central African nation joins a host of countries that have legalized, or are considering legalizing, cannabis to some degree, as attitudes towards the drug slowly change and investments in its medical benefits grow. “We have been in talks with four different companies so we will start with those applications,” Rwanda Development Board (RDB) chief executive Clare Akamanzi told Reuters, adding the firms were from Europe and the U.S. She said the government had realized that the country could potentially make $10 million per hectare, which is much higher than earnings from traditional exports like coffee and tea on the same size of land. Read More (U.S. News & World Report)

CANNA SCIENCE

DNA Genetics launches premium cannabis flower in Michigan with Skymint. OG DNA Genetics announced the official launch of SKYMINT X DNA GENETICS premium cannabis flower. The genetics can be found on the shelves of Michigan’s cannabis retailer, Skymint with 10 locations throughout the state. Michigan consumers can choose from a variety of DNA’s strains like Kosher Kush, Clementine, Bakers Delight, Gelato Sorbet, Chocolope, Strawberry Banana, Ztrawberriez, Lemon Skunk, and LA Confidential. “We are very proud to be partnered with SKYMINT. For me and Don, it is important we work with partners who understand and care about good weed. Growing good weed and smoking good weed. They have an amazing facility, their team is on point, and we are excited to bring our genetics to the people in Michigan,” said Aaron Yarkoni, co-founder and co-CEO of DNA Genetics. Read More (Marijuana Retail Report)

Cannabis decontamination: What is it and why is it important? A cannabis product may fail contaminant testing if it has unsafe levels of microbials, heavy metals or pesticides. Among microbials, the most common is powdery mildew mold. Another risk: aspergillus, or bile-tolerant, gram-negative bacteria. Both can have a dangerous effect on the human health. To prevent their product from failing testing, companies turn to different methods of treatment and processing that reduce or eliminate contaminates. In Willow Industries’ case, the company is focused on microbial decontamination. Cannabis contaminated with microbials is usually processed into concentrates, which is not ideal, because it reduces the price compared to flower. Willow’s technology uses ozone gas to reduce microbial levels without destroying the flower. Read More (LA Weekly)

Terpenes as solvents for extraction. Terpenes are a common target of botanical extraction; they are also valuable byproducts re-introduced into concentrates. But can terpenes act as solvents? Terpenes may be a boon on the quest for alternative green solvents. Recently, terpenes have been explored as key components for natural deep eutectic solvents (DESs)—monoterpenoid alcohol menthol, in particular, may be combined with certain acids to extract cannabinoids from hemp. The principle of natural DSEs is to use a terpene as a hydrogen bond accepter (HBA) in combination with a hydrogen bond donor (HBD) to create strong hydrogen bonding. Note that hydrogen bonding relates directly to solubility parameters. Read More (Extraction Magazine)

TECHNOLOGY

TruTrace sales momentum builds on cannabis contracts. Canadian blockchain specialist TruTrace Technologies says its revenues rocketed in the last fiscal year thanks to its efforts to secure the medicinal cannabis supply chain. Revenues topped CAD $400,000 ($304,000) in the 12 months to April 30 – a massive increase on the CAD $10,000 posted in the prior fiscal year – and TruTrace trimmed its losses from almost CAD $15 million to less than CAD $5 million, thanks largely to a big cut in operating expenses from CAD $9 million to CAD $4 million. The acceleration in revenues comes after TruTrace started a pilot study of its StrainSecure blockchain platform with Canada’s largest pharmacy chain – Shoppers Drug Mart – as part of an initiative to supply medicinal cannabis it launched earlier this year in collaboration with Alberta-based Atlas Growers. Read More (Securing Industry)

Pendram announces launch of equity crowdfunding campaign with WeFunder. Pendram has announced the launch of its first official registered equity crowdfunding campaign in partnership with WeFunder. Pendram is raising capital to grow the brand and launch a new line of high tech “smart” storage solutions. Pendram will use the capital to complete development and go to full production with the innovative new category of products. Pendram’s proprietary patent pending smart technology called Intellisphere IAC “Creates the Perfect Atmosphere” and has the goal to set a new standard for precise storage conditions with safety and smart flexible control from anywhere. Pendram’s business model is innovation and a mission to protect, preserve and optimize the long-term quality of perishables. Read More (Cannabis Business Times)

Hemp businesses look to blockchain to provide transparency to customers. As the hemp industry matures, some business are starting to rely on blockchain technology to assure customers that the products they’re buying contain what’s advertised and information on where they originated. Track-and-trace systems are nothing new in states with medical or recreational marijuana that are required by law to demonstrate a products’ journey from seed to sale. Hemp businesses don’t have the same legal requirements, but they see blockchain as a way to help address a lack of trust from consumers. “What makes blockchain special is that, once created, this block cannot be changed. Because the block exists in a network and every node in the network would have to agree to any change made to the block, which is almost a statistical impossibility,” said Connie Pascal, an adjunct professor at the Rutgers School of Communication and Information. Read More (Hemp Industry Daily)

Nuclear Magnetic Resonance for potency, profile, and fingerprinting. Nuclear Magnetic Resonance (NMR) technology is widely used in the oil industry and medical analysis, and is the foundation of organic chemistry. Most recently, researchers have begun applying NMR spectrometry to cannabis. This move has led to improved throughput, better pattern recognition, and a range of testable products. Currently, the legal cannabis sector requires a detailed analysis of potency, chemical profile, and contamination. Unlike standard technologies, which may heat or dissolve samples in a solvent during processing, NMR is nondestructive. The sample that goes in comes out intact. So while NMR spectrometry requires larger sample sizes than more conventional methods, it is no more wasteful or costly in terms of inputs. Read More (Cannabis Tech)

LEGAL & IP

HIA, CBD maker file another legal action against DEA over hemp extracts. The Hemp Industries Association and a South Carolina CBD manufacturer are asking a second federal court to prevent the U.S. Drug Enforcement Administration from criminalizing hemp extracts. At issue is whether the DEA is simply updating its policies to comply with the 2018 Farm Bill, which removed low-THC cannabis from the Controlled Substances Act, or whether the DEA is making an illegal power grab by saying that hemp extracts are Schedule 1 controlled substances during a portion of the extraction process when the plant’s THC levels spike above what’s allowed.  Read More (Hemp Industry Daily)

SUSTAINABILITY

How the legal cannabis industry is tackling sustainability. Like any other agricultural or retail business, cannabis industry also creates waste that end up in landfills and produces harmful gases such as carbon dioxide and methane. “The two main waste streams from both hemp and cannabis are the plant waste and the packaging waste,” says Kaitlin Urso, Environmental Protection Specialist at the Colorado Department of Public Health and Environment. While her position with the state is part of National Small Business Environmental Assistance Program, she is the only one in the country specifically focused on reducing the environmental impacts of cannabis. The MED requirement forces industry “to double the amount of materials they’re sending to landfill or compost because of outdated rules,” said Urso. Read More (Forbes)

EPA funding fuels sustainable hemp pulping method. Hemp and sustainability should go hand in hand, and thanks to a researcher from the University of California, a new sustainable method for hemp pulping is on its way to helping the hemp industry become more compatible with environmental preservation and protection. Hemp may be known for its sustainable characteristics and applications, but the process it takes to harness the plant can be detrimental to the environment. Enter the CELF system. The CELF method uses water and tetrahydrofuran (a natural substance) to break down the plant matter. The CELF method promises to return some value to the farmer by cutting out tiresome and wasteful steps. Furthermore, the CELF method promises to make all parts of the hemp plant commercially applicable. The fiber can be applied in the construction industry, the lignin for bioplastics, the sugars added in the food industry while the extractions (cannabinoids, terpenes, etc.) are self-explanatory. Read More (Cannabis Tech)

Study highlights lack of diversity in Canada’s legal cannabis industry. Leadership positions in Canada’s regulated marijuana sector continue to be held predominantly by white males, according to a statistical analysis. The new analysis from the University of Toronto’s Centre on Drug Policy Evaluation included 700 executives and directors across 166 licensed cannabis producers and 56 parent companies. It concluded that 84% of those leaders were white and 16% were non-white: 6% were South Asian, 3% were East and Southeast Asian, 2% were Indigenous, 2% were Arab, 1% were Black, and 1% were Latino. Most of the Indigenous people included in the analysis are from the Assembly of Nova Scotia Mi’kmaq Chiefs, which holds a majority stake in a licensed producer. If those leaders were excluded, the analysis notes, Indigenous people would comprise only 0.6% of Canada’s cannabis leaders. Eighty-six percent of the cannabis industry leaders analyzed by the University of Toronto were male, and 14% were female. The analysis acknowledges “some limited initiatives to facilitate greater industry diversity” in Canada’s cannabis industry. Read More (Marijuana Business Daily)

Chart 24: Race Disparity in Canada’s Legal Cannabis Industry  Source: Intro-Blue, Marijuana Business Daily

Chart 24: Race Disparity in Canada’s Legal Cannabis Industry
Source: Intro-Blue, Marijuana Business Daily

CANNA FACTS

Chart 25: U.S. Legal Cannabis Industry Growth: Stunting the Illicit Market  Source: Intro-Blue, New Frontier Data

Chart 25: U.S. Legal Cannabis Industry Growth: Stunting the Illicit Market
Source: Intro-Blue, New Frontier Data

CANNA CAPITAL MARKET TRENDS

Chart 26: Weekly Summary (October 5 – October 9, 2020)  Source: Intro-Blue, Viridian Capital Advisors

Chart 26: Weekly Summary (October 5 – October 9, 2020)
Source: Intro-Blue, Viridian Capital Advisors

 

Chart 27: Cannabis Capital Raises by Week (2020)  Source: Intro-Blue, Viridian Capital Advisors

Chart 27: Cannabis Capital Raises by Week (2020)
Source: Intro-Blue, Viridian Capital Advisors

 

Chart 28: Cannabis M&A by Week (2020)  Source: Intro-Blue, Viridian Capital Advisors

Chart 28: Cannabis M&A by Week (2020)
Source: Intro-Blue, Viridian Capital Advisors

CANNA PRICES – WEEKLY TREND

 

Chart 30: U.S. Implied Forward Prices (Week Ending October 16, 2020)  Source: Intro-Blue, Cannabis Benchmarks Price Index

Chart 30: U.S. Implied Forward Prices (Week Ending October 16, 2020)
Source: Intro-Blue, Cannabis Benchmarks Price Index

 

Chart 31: Canada Cannabis Spot Index  Source: Intro-Blue, Cannabis Benchmarks Price Index

Chart 31: Canada Cannabis Spot Index
Source: Intro-Blue, Cannabis Benchmarks Price Index

CANNA BRANDS AND PRODUCTS RANKING – STATE IN FOCUS: ALBERTA

Chart 32: Best-Selling Flower Brands and Products in Alberta  Source: Intro-Blue, Headset

Chart 32: Best-Selling Flower Brands and Products in Alberta
Source: Intro-Blue, Headset

 

Chart 33: Best-Selling Edibles Brands and Products in Alberta  Source: Intro-Blue, Headset

Chart 33: Best-Selling Edibles Brands and Products in Alberta
Source: Intro-Blue, Headset

 

Chart 34: Best-Selling Vapor Pen Brands and Products in Alberta  Source: Intro-Blue, Headset

Chart 34: Best-Selling Vapor Pen Brands and Products in Alberta
Source: Intro-Blue, Headset

 

Chart 35: Best-Selling Beverage Brands and Products in Alberta  Source: Intro-Blue, Headset

Chart 35: Best-Selling Beverage Brands and Products in Alberta
Source: Intro-Blue, Headset

 

Chart 36: Best-Selling Concentrate Brands and Products in Alberta  Source: Intro-Blue, Headset

Chart 36: Best-Selling Concentrate Brands and Products in Alberta
Source: Intro-Blue, Headset

 

Chart 37: Best-Selling Topical Brands and Products in Alberta  Source: Intro-Blue, Headset

Chart 37: Best-Selling Topical Brands and Products in Alberta
Source: Intro-Blue, Headset

CANNA INDEX

Chart 42: U.S Cannabis Index  Source: Intro-Blue, The Marijuana Index

Chart 42: U.S Cannabis Index
Source: Intro-Blue, The Marijuana Index

 

Chart 43: Canada Cannabis Index  Source: Intro-Blue, The Marijuana Index

Chart 43: Canada Cannabis Index
Source: Intro-Blue, The Marijuana Index

 

Important Disclosures

Analyst Certification

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