Small producers launch letter writing campaign to help lower tax payments
A group of smaller cannabis producers have launched a letter-writing campaign to Ottawa policymakers to implore them to change excise tax requirements for so-called "craft producers.” The "Stand For Craft" campaign claims that smaller, craft-focused cannabis producers are paying the Canadian government too much in excise taxes for sales of their product, leaving them with little revenue left to cover their own costs. They are asking the government to tax businesses as scale, similar to how it is done in the beer industry. However, it is unknown how much in taxes craft producer pay to the government and how many people are employed in that specific part of the cannabis sector. Rob McPherson, a former Bacardi Canada president, said in a LinkedIn post that a similar initiative was done on behalf of the spirits industry to lower excise taxes but failed. He added that the issue is not viewed as a priority for the average Canadian voter and will be hard to ask the government to reduce incoming revenue without suggesting any offset solution. |
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Researcher finds inaccurate potency levels, bacteria and mould in illicitly-sold cannabis
A New Brunswick-based research lab has found that illicitly-sold cannabis is rife with inaccurate potency levels, mould, microbials, and other contaminants such as metals and pesticides. Diane Botelho, the chief science officer at the Research and Productivity Counsel of New Brunswick (RPC), released a report this week that analyzed seven illicit flower types and six illicit edible types for potency and a suite of microbial and chemical contaminants, while also looking at several legal products as well. The findings show that illicit THC potency levels of both flower and edible products are far below - often less than half - the advertised value, while legal options were generally in-line (between six to 12 per cent off). Meanwhile, the illicitly-grown flower products contained higher-than-acceptable levels of bacteria, yeast, mould and pesticides.
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Canopy to shut retail stores in Nfld. as licences shift to Atlantic Cultivation
Canopy Growth said it is closing two of its Tweed retail outlets in Newfoundland and Labrador after the provincial cannabis regulator optioned their licences to a rival operator. The CBC reports that those licences will now be awarded to Atlantic Cultivation, which already operates five Spiritleaf franchises across Newfoundland and is putting the finishing touches on an 110,000 sq. ft. cultivation facility in the province. The CBC says that Canopy Growth lost its licences after ceasing operations at its own production facility in December 2020, which was a key part of the deal to operate retail stores in Newfoundland and Labrador.
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U.S. House committee passes legalization bill but full passage uncertain
A U.S. House of Representatives committee has voted to approve a piece of legislation that would legalize cannabis on the federal level as well as promote social equity, Marijuana Moment reports. The industry news site reported that the House Judiciary Committee voted in favour of the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act on Thursday, which will now see the bill head for a broader vote in the House. In addition to descheduling cannabis as a controlled substance, the bill would create a federal tax on cannabis which would be earmarked for community reinvestment programs while allowing people with cannabis convictions to have their records expunged, the website notes. Even if the bill does make its way through a general vote in the House, it remains to be seen if the U.S. Senate will move forward with this bill given that Senate Majority Leader Chuck Schumer has his own cannabis reform legislation that may take priority. |
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Redecan sales hit $73.6M in 2020 ahead of deal with Hexo
Hexo disclosed financial statements for Redecan Pharm this week, the cannabis producer it acquired in August for $400 million in cash and 69.7 million newly issued shares in the company. The data shows that Redecan generated $73.6 million in cannabis sales in its fiscal 2020, close to the $110 million that Hexo made in that same period. However, the figures also show that Redecan booked a profit of $11.6 million and positive EBITDA of $16.1 million, making it one of the only profitable Canadian cannabis producers in the sector. In its first quarter of 2021, Redecan generated a whopping $24.6 million in sales, nearly triple what it made a year earlier, while booking a $7 million profit.
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| Analyst Call of the Week - Analysts weigh in on Village Farms' European Moves |
Earlier this week, Village Farms announced it struck an option deal to acquire an 80 per cent stake in Leli Holland, one of the 10 companies selected to participate in the Dutch government's pilot adult-use sales program. The deal will see Village Farms and Leli collaborate on building two indoor cultivation facilities to supply 6,500 kilograms of recreational cannabis to 10 Dutch cities or roughly 80 "coffee shops.” Village Farms also has a 16 per cent stake in DutchCanGrow, another Holland-based pot producer that was vying for one of the 10 licence spots for the pilot project.
Alliance Global Partners Analyst Aaron Grey notes that while the revenue opportunity is small, the larger opportunity upon national expansion could be greater. The entire country could support about 485,000 kilograms of legal cannabis annually and this move could act as an initial entry to the broader EU market, Grey said. Meanwhile, Beacon Securities estimates that Village Farms could see as much as 45 million euros in revenue if it goes ahead and purchases another Dutch producer. Beacon also expects Village Farms to receive EU-GMP licensing by the end of the year, which would allow it to sell medical products to the German cannabis market.
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