The Next Canadian Organic Cannabis Producer Going Public Tomorrow, 10/10
October 9th, 2018
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Of the 120 currently licensed producers under the ACMPR program in Canada, only two are certified organic. Whistler Medical Marijuana Corporation has been growing certified organic cannabis indoors since 2014, and The Green Organic Dutchman is currently building out its facilities and planning to launch a 200 patient Beta program in January 2019 for its initial line of organic cannabis products. Hill + Knowlton Strategies conducted a poll in late 2017 that showed 57% of potential medical cannabis users, and 47% of potential adult-use consumers, thought it was important that the products they buy are grown organically. There is clearly room in the market for organic cannabis but it is very difficult to grow the plant organically, especially at scale.
Rubicon Organics™, is going public tomorrow, 10/10, on the Canadian Securities Exchange under the ticker symbol “ROMJ.” Rubicon is headed by CEO Jesse McConnell, one of the original founders of Whistler Medical Marijuana Corp. The company is in the final stage of the ACMPR application process prior to the award of a cultivation license, for a 125,000 square foot retrofitted greenhouse facility in Delta, BC. With operations, facilities, and brands currently in place in California and Washington State, Rubicon Organics represents an entirely unique international cannabis opportunity.
Low Cost, Greenhouse Grown, Organic Cannabis
Jesse McConnell has 20 years’ experience in the cannabis industry and spent the last several perfecting the organic cultivation of cannabis in greenhouses alongside Rubicon’s Chief Science Officer, who wrote the Certified Organic Cannabis Standard in Canada. Together they developed a proprietary system that allows the company to grow certified organic cannabis at a cost of less than $0.50/gram. Keeping production costs low is a must for producers as the retail price of cannabis is expected to eventually commoditize once supply meets and exceeds demand.
Rubicon’s cash cost/gram would likely keep the company competitive as general market prices go down, but the fact that consumers pay premium prices for organic cannabis indicates the company should be able to generate higher margins than other non-organic producers. According to a recent report by CannStandard, a leading Canadian cannabis research firm, organic dried cannabis flower prices average about 24% higher than non-organic flower. Pricing fluctuates with various market influences like location and supply/demand variables, and the cannabis industry is in its infancy, but other industries have clearly shown a significant pricing premium for organic products over a much longer period. For organic foods, a 20% premium is generally the standard while premiums for some products like milk and eggs can reach up to 80%.
Rubicon is currently permeating the influential California market with its 1964 Supply Co.™ brand. The brand exudes the hip and relaxed Southern California vibe, and Rubicon intends to introduce it in Canada next year as it ramps up operations. Combining BC-grown organic cannabis with an established California brand and Euro GMP-certified production facilities, the company is positioning to create an international company with reach far beyond North America.
Rubicon has a LOI in place with a German company to provide organic cannabis products to that country’s medical market. Estimated at $12 billion annually, the emerging German market has the advantage of being supported by federal insurance programs. Meanwhile, prices are significantly higher there than in Canada due to a very limited supply. Arrangements like these are definitely part of Rubicon’s strategy to grow the brand throughout the world’s legal markets.
The Green Organic Dutchman, already holding its cultivation license but still in the process of building out and expanding facilities, went public earlier this year and is currently valued at about $1.6 billion. The two companies are roughly comparable in that they are both certified organic and anticipate similar initial levels of production. Rubicon also anticipates receipt of its ACMPR cultivation license in the near term allowing for production to begin immediately. Receipt of such a license has acted as a valuation catalyst for many publicly-traded producers in the past.
In short, it’s an exciting time for Rubicon Organics. Going public tomorrow, anticipated licenses, expanding facilities, existing and growing revenues in the United States, Germany… it all adds up to a story that deserves following over the coming quarters.
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