Legal cannabis jurisdictions across North America are exhibiting similar supply-chain problems, stemming from new licenses not keeping up with demand. Among the cannabis sector, those capable of securing licenses ahead of their competition are gaining an advantage, including Harvest Health & Recreation Inc. (CSE:HARV) (OTC:HTHHF), Canopy Growth Corporation (NYSE:CGC)(TSX:WEED), Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB), Tilray, Inc. (NASDAQ: TLRY) and Aphria Inc. (NYSE: APHA) (TSX: APHA).
Leading the way in the United States, is Harvest Health & Recreation Inc. (CSE: HARV) (OTC:HTHHF), with an industry-leading footprint consisting of 60 licenses in 12 states, with planned expansion into additional states by 2020.
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In Canada, it’s more widely accepted that the majors have a presence across the country, given its federal legal status. However, the major Canadian companies remain at an arm’s length from operating south of the border. While some in the industry are claiming that “2019 is the year the US legalizes cannabis”, the current model is to gain licenses on a state by state basis.
Which is how groups well-versed in the art of winning licenses are getting ahead with an early-mover advantage. Both in cultivation and in retail dispensaries, new licenses are becoming a currency of their own.
In this current environment, savvy companies such as Arizona-based Harvest Health & Recreation Inc. (CSE: HARV) (OTC:HTHHF) are quietly accruing these licenses in multiple markets, ahead of their competitors. Now as even more new potential markets are being put to votes on legalization, the field is widening for new license seekers.
The Race for the Limited Licenses
While there was much fanfare over the legalization of marijuana across Canada last October, the issue that has arisen since has clearly been licensing. In the nation’s most populated province, Ontario, businesses and investors are making offers of more than CAD $5 million to partner with just one of the 25 winners of the Ontario cannabis retail license lottery.
In neighboring Quebec, the licensing situation is worse, as the government handles all retail, and there aren’t enough licensed cultivators to keep up with demand. The result has been a supply shortage causing stores to close multiple days per week.
Across the border in the United States, each state presents its own challenges and benefits.
Founded in 2011, Harvest Health & Recreation Inc. (CSE:HARV) (OTC:HTHHF) is based in the legal medical marijuana market of Arizona – the third largest medical marijuana state in the nation, which has only issued 130 licenses statewide. The company has grown its footprint each year to its current portfolio with 60 licenses across 12 states—boasting 100% license ownership and control in Arizona, Arkansas, Florida, Ohio, Pennsylvania, and Massachusetts.
The Harvest Health & Recreation Inc. (CSE: HARV) (OTC:HTHHF) model is that of a profitable, vertically-integrated business, unlike the majority of competitors in the cannabis space. The company has multiple cultivation licenses, as well as several prominent dispensary locations, selling an array of products—60% of which are the company’s own full suite of brands that cater to every customer need.
Getting to this point, Harvest Health & Recreation Inc. (CSE: HARV) (OTC:HTHHF) has grown steadily, and organically, having only had to invest $18 million into its infrastructure and businesses. However, through a series of recent financings, the company has accumulated a fully-stocked war chest of USD $200 million, which can be used for an aggressive expansion in 2019.
To date, the company has applied for (and won) licenses in 12 states, and has a track record of 13 for 14 in obtaining rights in each category, including vertical, retail cultivation, and processing licenses. Currently, there are a total of 22 retail, 4 cultivation, and 6 processing licenses in the Harvest Health & Recreation Inc. (CSE: HARV) (OTC:HTHHF) pipeline. Their plan for expansion is to have 100 retail stores across 14 states by 2020. Given their history of winning license applications, the company has a chance to keep accumulating licenses across the USA.
For More Information on Harvest Health & Recreation, Click Here
Further Cannabis License Developments
Despite a cautious aversion to holding operations and assets in the United States, the 2018 Farm Bill’s legalization opened the door for Canopy Growth Corporation (NYSE:CGC) (TSX:WEED) into the US. By mid-January 2019, the cannabis major was granted a license by New York State to process and produce hemp. The plan is for Canopy Growth to establish within the state’s Hemp Industrial Park large-scale production capabilities focused on hemp extraction and product manufacturing within the United States. Depending on Board approval of a specific site, Canopy Growth intends to invest between USD$100-$150 million into its New York operations, capable of producing tons of hemp extract on an annual basis.
For More Information on Canopy Growth Corporation, Click Here
Licensing capacity can also be accumulated through acquisitions. Alberta-based Aurora Cannabis (NYSE:ACB) (TSX:ACB) has a stake in 9 cannabis retails stores in Canada—all of which are located in its home province of Alberta. So far the licensed producer’s retail reach is comprised of 5 stores under the brand name Nova Cannabis, which is the cannabis arm of Alcanna Inc. (Canadian liquor retailer with brands such as Liquor Depot and Wine and Beyond), as well as another 4 stores under the brand name Canna Cabana. Through Alcanna, Aurora has access to a wide selection of convertible retail locations, which increases the probability of the company increasing its retail footprint, should it obtain the required permits.
For More Information on Aurora Cannabis, Click Here
Tilray, Inc. (NASDAQ:TLRY) recently signed a deal to buy Natura Naturals Holdings Inc. for up to CAD$70 million, in a move that roughly doubled the company’s domestic cultivation capacity. Under the terms of the deal, Tilray acquires Natura’s 61,500-square-metre greenhouse cultivation facility, of which 14,400 m2 is licensed. Prior to the acquisition, Tilray’s wholly-owned subsidiary High Park received a processing license under the Cannabis Act for its facility in London, Ontario. The processing license will allow High Park to produce finished branded cannabis products.
For More Information on Tilray, Click Here
After staving off a hostile takeover attempt at the beginning of the year, Aphria Inc. (NYSE:APHA) (TSX:APHA) is making gains both domestically and internationally. The Canadian pot producer has gone south with a series of operations, including in Jamaica, and in South America. In September, Aphria acquired LATAM Holdings Inc. in a deal valued at CAD $193 million, and SOL Global Investments Corp. in a deal reportedly worth CAD $298 million when it closed. The assets included in the deals gave Aphria licenses to grow in Jamaica, for a pharmaceutical distribution warehouse in Argentina, and licensed farmland in Colombia. The company also expanded its footprint in Europe, in January, with the acquisition of CC Pharma GmbH, a distributor of drug products including medical cannabis to more than 13,000 pharmacies in Germany and throughout Europe.
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