Aleafia Has Buyers Lined Up as Greenhouse Goes into Production
January 10th, 2019
Exclusive, News, Top News
Canada’s cannabis industry is projected to reach C$22.6 billion over the coming years, according to Deloitte, driven by the legalization of adult-use cannabis nationwide. With more than a hundred licensed producers in the market, investors have shifted their focus from raw production capacity to durable competitive advantages. These could come in the form of distribution agreements, innovative products—or, in some cases, both.
In this article, we will look at Aleafia Health Inc. (TSX-V: ALEF) (OTCQX: ALEAF) (FRA: ARAH) and its new greenhouse that’s moving into production later this year, along with its existing distribution channels that set it up for success—including a base of over 50,000 medical cannabis patients.
Moving into Production
Aleafia recently announced the completion of Phase I construction and retrofitting of its Niagara greenhouse facility located in Grimsby, Ontario. With the greenhouse ready, the company entered the final stage of the Cultivation License application process. Management expects that the first crop will begin within the next 60 days, pending Health Canada’s approval, significantly increasing its total production capacity.
“This milestone, and projected growth in Aleafia’s production capacity, represents a game-changer for Aleafia,” says Aleafia CEO Geoffrey Benic. “With an emerging national retail network via Serruya Private Equity, our 15,000 kg supply agreement with CannTrust and the pending acquisition of Emblem, the demand for Aleafia’s high-quality cannabis has never been stronger.”
Lucas Escott, co-founded of Mettrum Health (sold to Canopy Growth for $430 million), will lead the cultivation efforts as Head Horticulturist. Escott and the rest of the cultivation team have collectively built out and operated seven purpose-built cannabis cultivation facilities representing nearly one million sq. ft. of growing space. The team’s goal is to leverage the latest technology to create the high-quality, low-cost, year-round product.
Existing Customer Demand
Aleafia has significant pent-up demand for its Niagara cannabis which will come online over the course of next year. After moving to acquire Emblem Corp. (TSX-V: EMC) (OTCQX: EMMBF), the company will have access to highly differentiated and high-margin production capabilities, including the ability to create capsules, oils, and oral sprays.
Earlier this week, Emblem announced that it’s-branded cannabis oils are available in Shoppers Drug Mart, which is Canada’s largest pharmacy chain. The demand from this distribution channel could grow significantly over the coming months as it rolls out its highly-differentiated products, and the in-house source of cannabis from Niagara will ensure both high-quality product and greater profit margins through lower costs.
Aleafia also has an agreement with CannTrust Holdings Inc. (TSX: TRST), providing it with the right to purchase up to 15,000 kilograms of cannabis in 2019, and Serruya Private Equity to build a national retail dispensary. The latter agreement calls for the creation of a joint venture that aims to create retail locations across the country by working with provincial distributors and other parties involved in the process.
Aleafia Health Inc. (TSX-V: ALEF) (OTCQX: ALEAF) (FRA: ARAH) represents a compelling investment opportunity in Canada’s nascent cannabis industry. With both innovative products from Emblem and distribution across its 50,000 patients and other venues, the company has a unique advantage that few other licensed producers can match. The near-term production potential also creates a significant catalyst for shareholders in 2019.
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