Seattle, Washington--(Newsfile Corp. - October 19, 2017) - Cfn Media Group ("CannabisFN"), the leading creative agency and media network dedicated to legal Cannabis, announces publication of an article discussing the Hydropothecary Corporation (TSXV: THCX) and its unique position in the burgeoning cannabis industry. Canada's cannabis industry is expected to balloon to C$22.6 billion over the coming years, according to Deloitte, following the legalization of adult-use cannabis. With about 60 licensed producers approved by Health Canada (and about 30 of those approved to sell as well as produce marijuana), the best opportunities might be companies that have competitive advantages in terms of location, product, or economics.
Quebec's Only Licensed Producer
Canada's federal government is letting provinces decide how to distribute adult-use cannabis on a regional level. With three provinces submitting their plans, investors are starting to get an early glimpse at what adult-use legalization will look like across the country. The two most surprising developments are the possibility of government-owned retail locations - rather than private locations - and preferential treatment for cultivators located within a given province.
New Brunswick, for example, plans on mandating that a certain percentage of cannabis sold at retail locations is grown within the province. With only two licensed producers in the province, this was big news for OrganiGram Holdings Inc. It could also be big news for other licensed producers located outside of British Columbia - where 14 licensed producers are domiciled - and Ontario - where 35 licensed producers are domiciled.
Hydropothecary is the only licensed producer in Quebec, which is the second most populous province after Ontario. While there is no guarantee that there will be such a mandate in Quebec, the Quebecois culture is well-known for preferring local culture, products, and services. The most obvious example of this preference is the use of the French language as the sole provincial official language, which sets it apart from other provinces across Canada.
Always Innovating New Products
Canada may be among the first countries to legalize cannabis on a federal level, but it has been relatively slow in adopting cannabis oils and edibles. Many licensed producers have focused their efforts on expanding square footage for growing cannabis flower, but relatively few have focused on developing innovative products to set themselves apart. The companies that are doing so could see significantly more opportunities as the market matures.
Hydropothecary has been focused on developing easy-to-use and easy-to-understand products for medical cannabis users within the government's constraints. For example, cannabis oils face many limitations when it comes to THC content, but the company's dried capsules contain an activated powder form of THC that doesn't face the same limitations. The company has also developed the first peppermint-based cannabis oils that are delivered in an oral spray format.
From a branding standpoint, the company began by developing a luxury premium brand that was priced at upwards of $15.00 per gram. This helped build its brand reputation as one of high quality and reliability compared to many low-cost producers. Hydropothecary's newest product lines are focused on the mid-market, with 11 products now offered at $10 and under. By leveraging its premium brand, the company hopes to set itself apart from competitors while remaining competitive on price.
The best opportunities in Canada's licensed producer marketplace are companies with low costs, high scalability, and differentiated products. With some provinces likely to run government-owned retail operations, it's unlikely that producers doing business in these provinces will have much pricing power when it comes to supplying recreational customers. Low costs can help preserve margins in these cases, while differentiated products like oils can command higher prices.
Hydropothecary operates with some of the lowest hydro costs in the market - especially compared to Ontario. This helps the company keep its costs extremely low relative to other licensed producers. At the same time, the company has initiated a dramatic production area expansion to 300,000 square feet, which could enable 25,000 kilograms per year of product. The goal is to leverage increased economies of scale to lower its marginal costs even more.
Please follow the link to read the full article: http://www.cannabisfn.com/invest-quebecs-licensed-producer/
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