Meet The The Supreme Company (TSX:FIRE) (OTC:SPRWF), The Disruptive Company Major Pot Giants Are Watching Like A Hawk
With Canadian pot legalization finally at hand, we’re now presented with an incredible opportunity for an early-bird advantage in this the first non-prohibition year. Already, the pot sector has spawned several multi-billion-dollar giants, including Aurora, Aphria, Canopy Growth and Tilray.
Wall Street’s No. 1 pot analyst is already projecting the overall pot market to one day be worth $500 billion. With the revolution underway, the unique opportunity is in finding companies with an established first-mover advantage, who established distribution coverage across Canada ahead of legalization—where others now may be playing catch up.
When using this criteria, a leading candidate is The Supreme Company (TSX:FIRE) (OTC:SPRWF), also known as ‘Supreme’, has steadily built out its distribution across Canada with provincial stores and major licensed producers, all while building a very strong reputation for high-quality, premiere pot product.
Now the majors are taking notice. Supreme’s status has skyrocketed, culminating in major deals with giants such as Aurora and Tilray, who’ve invested millions for the right to resell Supreme alongside their own.
Supreme (TSX:FIRE) (OTC:SPRWF) is off to a very hot start. After announcing its 2018 financial results, which totaled $8.85 million, Supreme’s debut ranked among the best first-four quarters of revenue for LPs of all time. This feat included surpassing the market’s top-two leaders Tilray Inc. ($6.9 million) and Canopy Growth ($1.9 million), in their first four quarters of sale.
The company has continued to grow exponentially since its start in mid-2017, setting new records along the way. The company’s Q2 2019 revenues were $7.72 million, up 359% from Q2 2018, and up 50% from the previous quarter’s $5.14 million. Using their Q2 numbers, Supreme’s annualized revenue run rate of $30.88 million would already surpass other notable industry names such as Cronos Group (mkt cap: USD$3.811 billion) and MariMed Inc (mkt cap: USD$813.15 million).
Producing High-Quality Strains for a Higher Demand
Supreme (TSX:FIRE) (OTC:SPRWF) has built its platform on producing higher-quality strains, rather than mass producing average ones. The strategy is meant to work as a hedge against any potential oversupply gluts such—as has been witnessed in Oregon. The concept uses a quality advantage that carries over into all types of markets (both high supply or low supply), as high-quality pot is always in demand.
According to Deloitte’s 2018 Pot Report, Canadian consumers are willing to pay a premium for pot grown and processed after legalization in all parts of Canada—up to a 10% price increase.
Among pot buyers, those with a refined taste tend to skew towards high-quality products, all while making up the largest segment of the consumer base. All the more, this market looks towards influencers to make their informed decisions regarding new products.
According to Ontario Finance Minister Vic Fedell, “20% of users consume 80% of pot.”
A report put out by Bridgeable titled “Legal Aged Recreational Pot Enthusiast Buying Behavior 2018” reinforces the discerning tastes of these power-consumers. Among these informed consumers, 85% of pot enthusiasts won’t purchase products with subpar scent and/or flavor, and 63% will reject projects not passing their visual inspection— trends that play into Supreme’s business plan.
The numbers don’t lie, as already Supreme’s (TSX:FIRE) (OTC:SPRWF) high-end offerings are yielding high-end results—including a series of guaranteed supply agreements with majors Tilray, Aurora, Emerald Health Botanicals, and Namaste Technologies.
Most recently, Supreme’s (TSX:FIRE) (OTC:SPRWF) wholly-owned subsidiary, 7ACRES was recognized as the Brand of the Year at the 2018 Canadian Pot Awards.
7ACRES was selected by a panel of industry professionals across a variety of sectors in the pot space. The award recognizes the enormous effort behind creating a brand, strategy, culture, image, and impact that resonates in the public consciousness.
The company doesn’t stop there with its flagship brand. Supreme (TSX:FIRE) (OTC:SPRWF) is now also working to develop new high-end pot oil products for the adult-use market, through an agreement with MediPharm Labs. The company’s premium strains are a perfect fit for extracted pot oil products, which gives Supreme yet another advantage in the high-end market.
Since its inception, it’s been more than apparent that The Supreme Company (TSX:FIRE) (OTC:SPRWF) is a premium tier company.
Supreme Has FIVE Strategic Advantages Propelling Its Explosive Growth in the Pot Sector
If Supreme’s (TSX:FIRE) (OTC:SPRWF) future performance continues to outpace companies like Canopy Growth and Tilray, as it did over its first four quarters, then there could be a lot to be excited about this “premium producer” of the pot world. Through its Q2 2019 financials release, it appears that the upward trend for the company continues.
Majors such as Tilray, Aurora, Emerald Health Botanicals, and Namaste Technologies are already buying up Supreme’s products through guaranteed supply deals. Industry professionals across a variety of sectors in the pot space have recognized the company’s 7ACRES brand as Brand of the Year—which could very well lead to even more supply deals in the future.
In this newly legalized marketplace, it’s no longer going to be a race for who can produce, but who can sell through their product the fastest—and Supreme (TSX:FIRE) (OTC:SPRWF) is proving that there’s a high demand for their high-quality strains.
Supreme’s (TSX:FIRE) (OTC:SPRWF) success has been driven by five strategic advantages. These five advantages have helped Supreme outperform the competition as they grow (and sell) to become the predominant high-quality, premium producer in the Canadian pot industry.
STRATEGIC ADVANTAGE #1: High-Quality Reputation Leading to Record-Setting Sales
Through its 7ACRES subsidiary, Supreme (TSX:FIRE) (OTC:SPRWF) is the only licensed producer focused on cultivating high-THC, high-quality pot at commercial scale.
After recently adding 30,000 sq ft of additional licensed flowering room capacity, the company’s current production potential is 17,500 kg. Perhaps more astounding, is how the company added more than 80,000 sq ft of licensed flowering room capacity in less than 12 months.
The 7ACRES subsidiary is already a respectable craft pot producer; however by 2019 the estimated ‘full capacity’ rate could hit a whopping 50,000 kg. In contrast, fellow craft pot producers Broken Coast (who signed a supply deal with Aphria) announced in April that it was set to expand its capacity to only 4,500 kg annually.
Supreme’s (TSX:FIRE) (OTC:SPRWF) high-quality 7ACRES strains are designed for connoisseurs and medical consumers willing to pay more for quality products. Their success has shown Supreme to be leaders in mass cultivation, leading 7ACRES to emerge as Canada’s premier B2B producer.
This unique ability to mass produce high-quality pot has drawn the attention of major producers. Purchase agreements with Tilray, Aurora, and Namaste prove this concept is working—Tilray has even agreed to white label Supreme’s (TSX:FIRE) (OTC:SPRWF) products under its own name, reflecting a high level of confidence in the 7ACRES brand potential.
While larger LPs can produce pot at lower costs, the pot giants have been unable to replicate Supreme’s (TSX:FIRE) (OTC:SPRWF) ability to scale up premium pot production capacity.
The result has been a series of record-setting sales markers; most recently witnessed by yet another significant revenue increase in Q2 2019. With its most recent $7.72 million quarter, Supreme (TSX:FIRE) (OTC:SPRWF) is currently outpacing such industry giants as Cronos Group Inc. and Marimed.
STRATEGIC ADVANTAGE #2: Connection to International Oils Market Through Massive Lesotho Deal
The global medical pot market has been projected from a conservative $145 billion, to a bold projection of $500 billion—extending far beyond the Canadian recreational marketplace.
Seeing the global opportunity for growth, Supreme (TSX:FIRE) (OTC:SPRWF) partnered with international medical pot supplier, Medigrow. The deal establishes a foothold in the medical pot oils market, providing Supreme (TSX:FIRE) (OTC:SPRWF) access to a potential 40,000 litres of pot oil per year.
Having already capitalized on its first-mover advantage in Canada, Supreme (TSX:FIRE) (OTC:SPRWF) is seeking to replicate this huge opportunity by aiming for market share in more countries set to legalize pot in the future. Supreme (TSX:FIRE) (OTC:SPRWF) is the first LP to move into the Lesotho market.
Securing international opportunities such as Medigrow’s 40,000 litres of pot oil potential per year brings significant global medical marijuana market potential.
STRATEGIC ADVANTAGE #3: Discerning Canadian Pot Consumers Seek High-Quality Products
“Twenty percent of the users consume 80 percent of the pot.” – Ontario Finance Minister, Vic Fedell
The term “cannasseur” may be a play on the words connoisseur and pot, but the potential market that targets these cannasseurs could be very substantial.
With its high-THC strains, the cannasseurs are Supreme’s (TSX:FIRE) (OTC:SPRWF) target demographic. The aim is for a premium product that discerning customers will go out of their way to purchase. Supreme (TSX:FIRE) (OTC:SPRWF) believes it has its finger on the pulse of this market, and its purchase agreements with medical supplies such as Tilray prove their product is of the highest (medical grade) quality.
Having already won the recent Canadian Pot Awards’ Brand of the Year, Supreme’s (TSX:FIRE) (OTC:SPRWF) reputation of the company is very highly regarded.
Supreme’s (TSX:FIRE) (OTC:SPRWF) first-mover advantage in the cannasseur demographic is critical: By being on 6 out of 12 provincial shelves as of day one, and with a superior product, Supreme’s (TSX:FIRE) (OTC:SPRWF) has already established its brand as a national pot leader from the start.
The company already has supply agreements in all of Canada’s highest consumption rate provinces.
When looking at the liquor store model, only 10% of products are removed from shelves once the selection is established. This hints that the same could be in place for pot—meaning first mover advantage is very real, and Supreme’s (TSX:FIRE) (OTC:SPRWF) early entry with high-quality products is a distinct advantage.
Supreme’s (TSX:FIRE) (OTC:SPRWF) products aren’t all just high-THC, as the company also produces other strains that are high-quality and less potent strains, which are becoming popular and in-demand.
STRATEGIC ADVANTAGE #4: Well Positioned for the Massive, High-Margin Concentrate Market
The pot concentrates market is soaring, as consumer spending on them in the U.S. alone is projected to reach almost $3 billion in 2018.
By focusing on quality high-THC strains Supreme (TSX:FIRE) (OTC:SPRWF) is positioned to be a key player in this massive, high-margin concentrate market, which is scheduled to become legal in October 2019.
In November 2018, Supreme (TSX:FIRE) (OTC:SPRWF) announced it was in development with MediPharm Labs to launch a new line of pot oil products. The company will supply its partners with approximately 1,000 kg of high-quality pot trim as input per year for the extraction and production of at least 200,000 40 ml units of premium, high-terpene pot oil products for the adult-use consumer market.
To produce concentrates, high-quality (High-THC) flowers are needed as inputs—mid-level strains just won’t work.
The extraction process uses dried pot flower to create a glass-like product called “shatter” or a smoother (whipped) product called ‘budder’.
Legal Age Pot Enthusiasts (or “cannasseurs”) and heavy medical pot users tend to favor concentrates—as they offer the highest THC% (strongest effects), all while not consuming organic plant matter that harms the smokers’ lungs.
STRATEGIC ADVANTAGE #5: Opening New Revenue Streams Through Medical Partnerships with Majors
Supreme (TSX:FIRE) (OTC:SPRWF) has been very successful in medical marijuana marketplace, through partnerships with established giant licensed producers.
Each of these deals (including the $12 million supply deal with Tilray) not only represent an industry-wide stamp of approval, but also serve as a proof of concept for Supreme (TSX:FIRE) (OTC:SPRWF)—LPs with much more grow space still see Supreme’s products as worthy of buying and adding to their menus.
Despite the amount of pot being grown in Canada, high-quality pot is clearly still in high demand. Even the majors are struggling to replicate Supreme’s (TSX:FIRE) (OTC:SPRWF) product quality.
STRATEGIC ADVANTAGE #6: A Significantly Lower Market Cap
The pot sector has been on fire in 2018, but major pot LPs specifically gave outsized returns to investors. Here are a few success stories the market witnessed during the lead-up to legalization:
Aurora Inc. (NYSE:ACB) (TSX:ACB)
Market Cap: $5.044 billion
Canopy Growth Corporation (NYSE:CGC) (TSX:WEED)
Market Cap: $9.45 billion
Curaleaf Holdings, Inc. (CSE:CURA) (OTC:CURLF)
Market Cap: $2.129 billion
Tilray, Inc. (NASDAQ:TLRY)
Market Cap: $7.17 billion
THE SUPREME TEAM
Built to lead the company through the legalization window, Supreme’s (TSX:FIRE) (OTC:SPRWF) management team is a perfect mix of marketing and regulatory experience, in particular within the alcohol and tobacco sectors.
Supreme (TSX:FIRE) (OTC:SPRWF) is led by CEO & Director Navdeep Dhaliwal, and President, Founder, & Director John Fowler, who have assembled a team that’s equipped to take the company into the top pot tier:
CEO Navdeep Dhaliwal’s experience highlights a focus on international expansion, having had success as principal of NLX Capital Corp.—a corporate development company focused on technology and renewable energy development into Southeast Asia.
Vice President of Marketing & Regulatory Affairs Omer Azeez brings invaluable experience, especially from his time at Philip Morris International. At Philip Morris, Azeez held various positions including Manager, Senior Marketing where he defined the marketing message for Philip Morris’ alcohol and tobacco products, two industries recognized as parallels to legal pot.
President John Fowler founded The Supreme Company (TSX:FIRE) (OTC:SPRWF) in 2014, and previously served also as the CEO, and Director of Operations. Mr. Fowler’s career also includes law, and management in the customer service industry.
Chief Financial Officer Dimitre Naoumov came to Supreme from his previous tenure at KPMG LLP, where he held various positions including his most recent as Senior Manager in the Assurance practice.
The Supreme Company (TSX:FIRE) (OTC:SPRWF) team and board include team members from a variety of backgrounds including McCain Foods, Primaris REIT, Apotex Pharmachem, BlackBerry, Deloitte Consulting, and former President of Starbucks Coffee Canada, Colin Moore, who also held marketing positions at PepsiCo, KFC, and Yum! Brands.
“We’re sitting in a group with Canopy, we’re sitting in a group with CannTrust, we’re sitting in a group with Tilray, we’re sitting in a group with Aphria, you know, we’re sitting with the biggest pot companies in the country, and distribution is going to drive revenue – not funded capacity.” – President, Founder, John Fowler
Investors Should Have The Supreme Company (TSX:FIRE) (OTC:SPRWF) on Their Radar:
High-Quality Reputation Already Selling Well:
Supreme (TSX:FIRE) (OTC:SPRWF) is currently capable of producing 13,333 kg annually through its award-winning 7ACRES brand. This capacity is set to expand to 50,000 kg annually by mid-2019. For high-quality strains, this is a remarkably large scalable capacity, which has caught the eye of majors who are buying up the industry-recognized 7ACRES pot for resale.
Connection to International Oils Market Through Massive Lesotho Deal:
Supreme’s goal of international expansion is being realized, starting with its partnership with Medigrow in Lesotho, an established international pot oil company. The deal comes with the potential for 40,000 litres of pot oil per year.
Discerning Canadian Pot Consumers Seek High-Quality Products:
By offering premium pot, Supreme (TSX:FIRE) (OTC:SPRWF) has already aligned itself for coast-to-coast distribution. Supreme (TSX:FIRE) (OTC:SPRWF) has supply agreements in all of Canada’s highest-consuming provinces, meaning loyal and discerning customers can find quality 7ACRES products coast-to-coast.
Well Positioned for the Massive, High-Margin Concentrate Market:
By focusing on quality high-THC strains Supreme (TSX:FIRE) (OTC:SPRWF) is strategically positioning itself for the high margins that can be reached in the quality pot and concentrates markets, which is scheduled to become legal in October 2019. Through a partnership deal, Supreme will develop new high-end pot oil products for the adult-use market. Consumer spending on pot concentrates projected to reach nearly $3 billion in the U.S. in 2018.
Opening New Revenue Streams Through Medical Partnerships with Majors:
Supreme (TSX:FIRE) (OTC:SPRWF) has already successfully established medical marijuana supply partnerships with THREE major LPS : Tilray, Namaste, and Aurora. Internationally, Supreme has already begun expansion into the medical oils market through its partnership with Medigrow in Lesotho.
Low Market Cap Compared To Competitors In The Industry:
While the pot sector has been on fire in 2018, major pot LPs specifically gave outsized returns to investors. Supreme (TSX:FIRE) (OTC:SPRWF) with a market cap of 655.28M, is primed to carve its premium niche in 2018-19.