Why Focused Brands Will Dominate in the Cannabis Industry


Ryan Allway

August 13th, 2018

Exclusive, News, Top News


It’s no secret that many licensed producers are scaling up production. With adult-use legalization coming in October, domestic demand for cannabis is expected to soar to one million kilograms by the end of this year. There are only about 300,000 kilograms of annual supply at the moment, which implies a significant deficit of 700,000 kilograms that licensed producers hope to fulfill with their ambitious expansion plans.

But, what happens when supply and demand even out?

There’s little doubt that the largest licensed producers will capture the low-end of the market with their economies of scale. These companies may have relatively thin margins, but their large market share could make up for the difference and lead to strong net income. Smaller licensed producers are likely to either be acquired or pushed out of business — unless they create high-value brands that command premium prices and profit margins.

In this article, we will look at some ways that licensed producers have created high value brands and one company that’s taking a unique approach to the market.

Creating High Value Brands

This future no secret to Canada’s 100+ licensed producers, prompting many of them to try and build their own high value brands. Many larger licensed producers have also been purchasing existing high value brands to try and capture higher margin segments. These dynamics could make it even harder for smaller LPs to develop their own brands.

There are many different approaches to building high value brands:

  • Celebrity Endorsements
  • Acquisitions of Existing Brands
  • Partnerships with Existing Brands

There are pros and cons to each of these strategies. In particular, many endorsements and partnerships require some kind of royalty payment that can impact profit margins, while large acquisitions can dilute existing shareholders.

Focusing on a Niche Market

48North Cannabis Corp. (TSX-V: NRTH) has taken a different approach to building a high value brand. The company has built its business around the female health and wellness market, which is underserved by other LPs focused on marketing to males.

The company initially focused on acquiring high-quality genetics and signed an exclusive partnership with Maripharm B.V. in the Netherlands. Medipharm was the first licensed cultivator in the Netherlands and has been researching the effects of medical cannabis for over 25 years in partnership with leading governments and universities, including the University of Oxford, Hebrew University in Jerusalem,  and the University of Amsterdam.

Next, the company built a GMP-compliant, ACMPR-licensed, 40,000 square foot closed-box facility that’s capable of producing 2,500 kilograms of cannabis per year on its Kirkland Lake, ON property. The property also provides 800 acres of expansion potential that could bring production to 40,000 kilograms per year. Management plans to scale up this production in two phases over the coming quarters as the market matures.

After developing its production footprint, the company plans to partner with leading consumer packaged goods companies in the food, beverage, cosmetic, and skincare industry. In exchange for its experience in creating compliant THC and CBD products, the company would gain access to new distribution channels across a range of different market verticals beyond cannabis flower and extracts.

Investors may want to take a closer look at the company given its unique approach of targeting female consumers with high-quality products and partnering with consumer packaged goods companies to diversify across several vertical markets.

For more information about 48North, visit the company’s website at www.48nrth.com.

Disclaimer

The above article is sponsored content. Emerging Growth LLC, which owns CannabisFN.com and CFN Media, has been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation: http://www.cannabisfn.com/legal-disclaimer/

Ryan Allway

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.


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