SEATTLE, WA, Sept. 12, 2018 (GLOBE NEWSWIRE) -- via NEWMEDIAWIRE – CFN Media Group (“CFN Media”), the leading agency and
financial media network dedicated to the North American cannabis industry, announces publication of an article
discussing The Supreme Cannabis Company (TSX-V: FIRE) (OTCQX: SPRWF) (FRA: 53S1).
The Canadian adult-use cannabis market is set to launch in just over a month, on October 17, 2018. Deloitte projects the
domestic cannabis market has the potential to reach C$22.6 billion over the coming years. As such, it is not surprising that an
increasing number of prospective companies are looking to enter the space – already there are more than 100 licensed producers
approved by Health Canada, and there are more in the pipeline.
This obviously raises questions about the supply situation in the market. As a result, investors have recently turned their
focus to distribution agreements or “off-take” in assessing the prospects for cannabis companies. Industry leader Canopy Growth has
been leading the discussion in this area with its “Distribution Drives Revenue, Capacity Alone
Does Not” narrative.
Key Indicators of Success
Canadian cannabis companies offer a unique valuation challenge. Their current financial picture represents their participation
in the country’s legal medical cannabis market – a sizable but still relatively small market compared to the domestic illicit
recreational market. Yet, with the flip of a “legislative switch” on October 17, these cannabis companies have access to an
existing and massive potential end market – with distribution being facilitated by the government. So how do you try to value these
cannabis companies given this catalyst?
For some time, one of the key indicators investors have used in the cannabis space is the concept of funded capacity—effectively
how much cannabis they can grow. The logic being the more you grow, the more you will make. Funded capacity has been a fair measure
in absence of more tangible revenue and earnings estimates.
Provincial Supply Agreements to Drive Revenue
However, at this point, almost all of the provinces have announced supply agreements with various licensed producers – setting
out who will have product on “shelves” on October 17 and providing insight to who will be generating revenue come legalization.
The licensed producers that don’t have their products on the shelf when the doors open in October will face a steep challenge
moving forward — the shelf will be largely “filled” across the country and for a new product to be listed, it will have to ‘bump’
out an existing product – no easy task as the liquor industry, where product turnover tends to be low, would suggest.
At the same time, the first-movers that are on store shelves could have a significant advantage. They will have an opportunity
to establish their brands, fine-tune existing product offerings, and leverage recreational market revenue to pursue other
opportunities, whether fortifying and expanding their domestic market positioning or pursuing global opportunities. Only a select
handful of companies have signed supply agreements with more than half the provinces, including industry leaders: Canopy Growth
Corp., Aurora Cannabis Inc, Aphria Inc., and Tilray.
Many of these companies are large and well-known names in the space, but there are a few other companies in the
mix. The Supreme Cannabis Company and Organigram Holdings Inc. have both secured six supply
agreements with Canadian provinces, while CannTrust Holdings has secured five supply agreements. These companies have a similar
national presence as the more recognizable competitors, but have much lower market capitalizations.
Investment Opportunities
Companies like The Supreme Cannabis Company Organigram Holdings Inc. have broad distribution across Canadian provinces and more
attractive market capitalizations than their more recognizable competitors.
With a market cap of just over C$500 million and C$800 million, respectively, The Supreme Cannabis Company and Organigram
Holdings trade at a fraction of the market capitalization of the industry majors, despite their strong distribution footprint,
solid sales in medical channels, and strong management teams.
The Supreme Cannabis Company, in particular, has generated significant activity in recent weeks as they establish themselves as
the only major licensed producer focused exclusively on premium brands and products and with coast-to-coast distribution. It is
worth noting that on September 10, they announced they had entered into a supply agreement with Tilray – another positive indicator they have been successful in
establishing themselves as the one of the premium brands in the market.
The Supreme Cannabis Company has not reported its fourth quarter and fiscal year-end financial results for the period ended June
30, 2018 yet, investors may want to watch closely for those results.
For more information, visit the company’s website at www.supreme.ca.
Please follow the link to read the full article: http://www.cannabisfn.com/distribution-determine-winners-recreational-cannabis-market/
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/
About CFN Media
CFN Media (CannabisFN) is the leading agency and financial media network dedicated to the global cannabis industry, helps
companies operating in the space attract investors, capital, and publicity. Since 2013, private and public cannabis companies in
the US and Canada have relied on CFN Media to grow and succeed.
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with financial and corporate news.
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/
Frank Lane 206-369-7050 Flane@Cannabisfn.com
