Luxury Cannabis Demand On The Rise But Only a Select LPs Can Produce The Right Supply

The latest development amid marijuana’s growing acceptance as a mainstream market is taking it into the upper echelons of society. With the recent opening of a luxury cannabis lifestyle and wellness shop in Beverly Hills from Barney’s New York, an increase in demand for premium cannabis will be shining more attention towards growers of higher-end products, such as The Supreme Cannabis Company, Inc. (“Supreme Cannabis” or the “Company”) (TSX:FIRE) (OTCQX:SPRWF) (FRA: 53S1), Tilray, Inc. (NASDAQ: TLRY), Aurora Cannabis (NYSE: ACB) (TSX: ACB), Canopy Growth Corporation (TSX: WEED) (NYSE: CGC), and Green Thumb Industries Inc. (CSE: GTII) (OTC: GTBIF).

Set to open its doors later this month, the new high-end Beverly Hills store will operate under the aptly-named moniker, The High End. However, The High End won’t be the only place that customers will be able to procure highly-sought-after premium cannabis products, such as the 7ACRESbrand from producers Supreme Cannabis Co.

While dispensaries in other markets, such as north of the border in Canada, won’t likely be selling grinders for $1,400, there appears to be a wider demand for premium strains over the more common and mass-produced versions.

At present, data on premium strains is limited, as the market is still quite new. However, in Canada, researchers pointed out in Deloitte’s 2018 Cannabis Report, that customers in Canada are willing to pay a premium for cannabis grown and processed—up to a 10% price increase.

As consumers become more comfortable with the market’s legal cannabis offerings, habits and brand loyalties will form. Given its growing acceptance as a social activity, many buyers will be looking to impress their friends and enjoy finer offerings for themselves along the way.

That benefit is looking to be passed along to the producers who are going the extra mile to provide a better product.

Premium Product, Premium Pricing, Premium Revenues

Riding on the growing popularity of its premium 7 ACRES brand, and zeroing in on the luxury cannabis market, Supreme Cannabis Co. saw its revenues steadily increase, and put forth one of the best first years that the sector has seen. During Q2 2019, the company’s revenue was $7.72 million—a 359% increase from Q2 2018 ($1.68 million) and a 50% increase from Q1 2019 ($5.14 million). 

The ramp-up of the company’s revenues has been quite significant. During its first four quarters of operation, Supreme Cannabis Co. announced its 2018 revenues totalled $8.85 million.

In comparison, Tilray, Inc. (NASDAQ: TLRY) brought in $6.9 million, and Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) brought in $1.9 million in each of their respective first four quarters of sale.

With a revenue run rate of over $30 million, Supreme Cannabis Co. is now among the top 7 publicly-traded Canadian LPs.

The market superiority of the 7ACRES product saw Supreme Cannabis Co. grow it reputation early, and gain the attention of multi-billion-dollar companies such as Tilray, Inc. (NASDAQ: TLRY) and Aurora Cannabis (NYSE: ACB) (TSX: ACB). Both cannabis majors invested early in the Supreme Cannabis lineup of offerings for the right to resell its strains alongside of their own.

The availability of Supreme Cannabis Co. products continues to grow, as the company recently announced its 7ACRES subsidiary had entered into supply agreements with two more provinces, to bring its total to eight provinces in total: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, and PEI.

The company has just signed a letter of intent (“LOI”) with Malta Enterprises, the economic development agency of Malta. The the first step of Supreme Cannabis’ application for a Cannabis Production License (the “License”) in Malta, one of Europe’s principal
commercial entry points. This would allow the company to produce and process cannabis for medical use within Malta, and to export cannabis for medical use to certain additional international markets.

During Q2 2019, the company made its first shipments of 7ACRES-branded product to adult-use markets in six provinces, and the reception has been overwhelmingly positive.

“Cannabis enthusiasts are vocal about their passion for high-quality cannabis. We believe 7ACRES has quickly established itself as Canada’s only premier cannabis producer at scale,” said Dhaliwal. “With construction on the flowering room at 7ACRES scheduled to be completed by the end of March, we’re looking forward to increasing our production capacity to help meet consumer demand and drive further revenue growth throughout the year.”

An Increasing Variety of Premium Cannabis Offerings

Back in Beverly Hills, likely the first flower product that will be marketed at The High End will be the Beboe product line. Earlier in February, the holding company that owns Beboe was bought by Green Thumb Industries Inc. (CSE: GTII) (OTC: GTBIF). Beboe is currently available in more than 125 retail locations in California and Colorado. In 2018, Beboe launched a direct-to-consumer hemp-derived CBD line of products, including a collaboration with wellness brand Dirty Lemon to make a CBD-infused drink.

The rise of premium CBD-infused products has coincided with the cannabis flower market. Tilray, Inc. (NASDAQ:  TLRY) recognized the potential by making a major acquisition of Manitoba Harvest, a pioneer and global leader in branded, hemp-based foods. The company’s product lineup includes hemp hearts, hemp protein powder, and hemp snacks, which are currently carried in approximately 16,000 retail locations across the US and Canada. As mentioned, Tilray also has a deal withThe Supreme Cannabis Company, Inc. (TSX:FIRE) (OTCQX:SPRWF) (FRA: 53S1) to sell 7ACRES products alongside their own.

The same goes for Aurora Cannabis (NYSE: ACB) (TSX: ACB) which secured the rights to resell 7ACRES products as well. The cannabis major also announced in January a letter of intent to acquire the privately held Whistler Medical Marijuana Corporation for approximately $175 million. The iconic cannabis brand has won awards for its certified organic BC cannabis flower products. The transaction points to Aurora looking to gain more premium products for their lineup, with a differentiated organic certified product suite.

Through its flagship Tweed brand, Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) has always been at the forefront of building a premium cannabis brand. The Tweed name will be put on the company’s next dispensary in Ontario, being opened through a partnership with Canadian convenience store giants Alimentation Couche-Tard, and the winners of a provincial license lottery. Canopy’s Tweed brand already has brick and mortar locations across Canada, with stores currently in Saskatchewan, Manitoba, and Newfoundland and Labrador. The brand has been built up as a trusted cannabis source in Canada, through a focus on customer education, and commitment to quality. The new store in Ontario is expected to open in April 2019, and will be located in the city of London, Ontario.

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