Flowr Corp. (TSXV:FLWR) (OTC:FLWPF), which went public via a reverse merger transaction with Needle Capital, has been differentiating itself in the exploding Canadian cannabis market through innovations in high-yield cultivation and premium brands.
After a successful capital raise over the summer, the company broke ground on a flagship “Cultivation Campus” in Kelowna, British Columbia. The company is one of the first Canadian firms to be able to scale up indoor production methods to a commercial level and has a strong reputation as a high-quality producer.
Now, with some recent developments, Flowr is also building its reputation as a large-scale international producer.
Flowr’s Deal with Scotts Miracle-Gro
Earlier this year, Flowr started construction on a cultivation research and development facility in partnership with Hawthorne Canada, a subsidiary of The Scotts Miracle-Gro Company (NYSE:SMG). As a company already known for their high-yield cultivation, this is another step to help set the company apart from its peers among Canadian cannabis producers.
SMG decided to partner with Flowr to develop this facility because of the expertise of its cultivation team run by co-Founder Tom Flow. Flow has a strong reputation in the industry for his innovation. His previous company, MedReleaf, was acquired by Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB) last summer for 3.2 billion CAD. Aurora made that acquisition primarily because of its high-yield cultivation expertise. Flowr appointed Flow to be co-CEO in November.
Deals with Fortune 500s
The partnership with SMG is a strategic advantage for Flowr, as the only other Canadian cannabis companies who have partnerships with US Fortune 500 firms are Canopy Growth Corp. (NYSE:CGC) (TSX:WEED) and HEXO Corp. (TSX:HEXO) (OTC:HYYDF). Both companies have partnership deals with alcoholic drink producers who probably see potential business overlap as legalization policies start to become more popular in the US.
Canopy’s huge deal with Constellation Brands set the precedent in 2018. The adult beverage company invested 4 billion USD into Canopy over the summer (on top of the almost 200 million USD it invested the year) and Canopy has already stated that they plan to use this to fund acquisitions of smaller companies in the industry.
Canopy CEO Bruce Linton called the investment “rocket fuel” for the company’s growth plans. He went on to say that they have an acquisition target list totaling over 1 billion CAD. They later acquired Hiku to gain access to new retail infrastructure and complementary brands.
Meanwhile, HEXO and Molson Coors are working together to create a line of non-alcoholic, cannabis-infused beverages for the Canadian market.
With Canada just the second country in the world to legalize recreational cannabis use, many are watching its production industry and trying to position for potential expansion of legal recreational use. The total market for legal cannabis in Canada is estimated to reach 2.8 billion CAD by 2020 and the equivalent market in the US could be over 20 billion USD by the same year.
Flowr has been scaling up its production quickly since becoming a licensed seller last year. It’s new production facility in Kelowna should be completed in 2019 and increase their capacity by 12,000 kg of cannabis flower annually.
In addition to the increase in Canadian cultivation capacity, Flowr also recently acquired a 19.8% stake in large-scale Portuguese producer Holigen to increase it’s international capacity. All of this combined with the fact they are sitting on a war chest of almost 40 million CAD and with significant potential, Flowr appears to be a strong candidate for acquisition by some of the larger firms trying to move quickly to snap up market share and high-value brands.
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