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1

Hexo's Reckoning

Jesse Staniforth

Hexo announced annual losses of $82M and a $57M Q4 loss (adjusted to $43.7M), tripling analysts' average prediction of a $13.2M loss.
MJ Biz Daily, Bloomberg

  • The company's revenue was $15.4M (up 19% quarter over quarter).
    Financial Post
  • Taking an inventory writedown, the company cut the value of its inventory by $17M, which BMO analyst Tamy Chen said was "an unsettling development" considering how much unfinished inventory LPs have.
  • Hexo announced it would suspend cultivation in the Niagara facility it acquired as part of its $263M Newstrike acquisition this spring. 100 employees were laid off at that Beamsville, Ontario facility.
    Toronto.com

Hexo has a five-year supply agreement with Quebec, under which it was to provide the SQDC with 20,000 kg of product in the first year. However CEO Sebastien St-Louis said Hexo had only delivered half that amount. Given the slow retail rollout in the province, St-Louis said "We don't think it would be responsible to demand (that Quebec buy) 20 tonnes."

  • Analysts John Zamparo and Krishna Ruthnum wrote in a client note, "Whether or not this is the right move is debatable, but without the [Quebec supply agreement], Hexo is relatively undifferentiated versus peers."
    MarketWatch
  • The company retains 33% market share in Quebec, down from 60% at legalization.
  • CBC Hamilton interviewed me about Hexo's cuts, as well as other challenges to cannabis retail in Ontario.
    CBC Hamilton

Hexo partner Molson Coors announced it was laying off 500 workers worldwide.
CTV News

Quick Hits

  1. The Green Organic Dutchman co-founder turned recently departed 48North co-CEO Jeanette VanderMarel emerged as CEO of Ontario LP Beleave, and she has plans to consolidate the number of stocks the LP has issued by a ratio of 10:1.
    MJ Biz Daily
  2. A licensed Ontario hemp grower accused TD bank of racially profiling him when they froze his accounts and accused him of breaking the law after he asked them to transfer $35,000 to a vendor.
    CBC Toronto

2

Quebec Ignores Critics, Raises Age to 21

Public Domain

Quebec's populist CAQ government passed Bill 2, raising the legal age of consumption from 18 (Canada's lowest) to 21 (the highest) as of January 1, 2020.
CBC Montreal, CTV News

Québec Solidaire party leader Gabriel Nadeau-Dubois accused the CAQ of "acting like a doddering old uncle ['un vieux mononcle'] who believes he knows better than young people do what's best for them."
Journal de Montreal—In French, My Translation

When the CAQ government tabled the bill this winter, I noted in a Leafly article that then-MP François Legault said during the 2018 election, "Young people from 18 to 21 will go on the black market to buy cannabis, but I don’t want, as premier of Quebec, to send the signal that it’s normal to consume cannabis below the age of 21."
Leafly

Quick Hits

  1. Toronto got its first Cannabis Wedding Expo.
    CBC Toronto

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3

LPs Prepare for Legalization 2.0

https://commons.wikimedia.org/wiki/User:Rklawton

Betting on edibles and beverages as a high-margin revenue earner, Canopy debuted 16 REC drinks and chocolates, from a line they said would ultimately comprise 50 products.
Bloomberg, Yahoo Finance

  • The beverages include Tweed-branded distilled "syrup" for combining with mixers, ready-to-drink low-calorie tonic, soda water, ginger ale and Houseplant- and Quatreau-branded flavoured sparkling waters.
  • Six of the 16 products contain THC, and three contain the maximum-allowable 10mg of THC. Others contain CBD alone, or a blend of CBD and THC.

Canopy said it believes a standard THC serving is between 2mg and 2.5mg. The company aims to reach new users with low-dose products.
Ottawa Citizen

Auxly CEO and Canopy co-founder Chuck Rifici expects Health Canada will soon scrap the 10mg per-package limit on cannabis ingestibles. He also expressed surprise at the slow growth in micro licensing.
MJ Biz Daily

  • Health Canada's regulations capping THC for edibles at 10mg has frustrated MED patients who say edibles are the most effective method of delivery, but require far higher doses than 10mg. They're left to make edibles of their own.
    CBC Windsor

Aurora launched Ready for Edibles, a bilingual national public education campaign, which seems mainly to stress edibles are not for children.
NewsWire

Aphria referred to THC distillate as "liquid gold" as it prepared to bring its line of vape pens onto the market. It predicted vape pens would follow pre-rolls and dried flower as "the next big thing."

  • VP marketing Megan McCrae said Aphria "picked vapes as one of the things to hang our hat on" because the popularity of edibles and beverages remains unknown, while vape pens have strong market share in the US.
  • A BC Centre for Disease Control public health MD speculated Canada may have avoided the VAPI crisis because it legalized REC.
    Vice

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4

Sales Steadily Increasing

Jesse Staniforth

Statistics Canada numbers showed cannabis responsible for $7.9B worth of the Canadian GDP in August, up from the low of $6.74B during February's supply shortage.

A Canaccord Genuity analyst predicted in a research note that 2020 revenue from the Canadian legal cannabis sector will be $3.16B, thanks to continued retail rollout and 2.0 products.
Bloomberg

Quick Hits

  1. Public REC consumption in "coffee shops" and cannabis lounges has proven effective in the Netherlands, and cannabis advisor Ivan Casselman argued Canada and the US would only benefit from allowing lounges and other public spaces for cannabis consumption.
    LinkedIn
  2. Inside the Jar, a new and defiantly independent cannabis publication, announced its arrival with "letters" from co-founders Travis Lane, Amanda Siebert, and Piper Courtenay. They're worth reading.
    Inside the Jar

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5

Industry: Ontario Needs More REC Stores, Fast

https://www.flickr.com/photos/134017397@N03

The Cannabis Council of Canada (C3), representing the country's largest LPs, pressed Ontario premier Doug Ford to take drastic action to increase the number of REC stores in the province.
MJ Biz Daily

  • In an open letter to the premier, CEOs from 10 major LPs said Ontario is "lagging far behind" on REC retail—outpaced even by government-monopoly retail in Nova Scotia, New Brunswick, PEI, and Quebec.
  • "There is simply no longer a shortage," the CEOs wrote. "There is no downside for allowing more private retail cannabis stores to be opened."

Windsor's first REC store pushed its opening day back a month due to delays resulting from the eventually rejected class-action lawsuit by 11 disqualified REC lottery winners.
Windsor Star

Quick Hits

  1. For those worried about losing Canada's first-mover status, cannabiz accelerator Leaf Forward CEO Alex Blumenstein said Canadians in the sector should be focused on "deploying our intellectual property to global markets."
    Globe and Mail
  1. For those worried about losing Canada's first-mover status, cannabiz accelerator Leaf Forward CEO said Canadians in the sector should be focused on "deploying our intellectual property to global markets."
    Globe and Mail
  2. Cannabis geneticist "Breeder Steve" (who developed cultivars like Shishkaberry) argued successful legal producers will require "distinct proprietary genetics, skilful biological cultivation, post-harvest handling, [and] novel derivatives."
    Twitter—Breeder Steve

6

Down with Saskatchewan REC Retail Limits

https://www.flickr.com/photos/92787319@N00

Scrapping tight limits on REC retail licensing, the Saskatchewan Liquor and Gaming Authority announced plans to "move forward with an open market" for REC retail in two phases over an 11-month period.
Regina Leader-Post

  • At present, the REC licenses are capped at 51 for the province of 1.2M, and are only allowed in municipalities larger than 2,500 people.
  • The SLGA distributed the 51 REC retail licenses (all private) via lottery. REC stores exist in 32 communities.
    CBC Saskatchewan

Saskatchewan has seen REC sales stagnate compared with continually increasing sales in other provinces, and most believe that's due to the limit on stores.
MJ Biz Daily

  • In April 2020, the SLGA will begin accepting license applications for communities of fewer than 2,500.
  • In September 2020, the SLGA will scrap the 51-store limit in favour of "as many locations as the market will bear."

The decision angered private liquor store owners, whose stores face limits of no more than 40 per city of 275,000, and no more than one for small communities with more than 500 people.
Saskatoon Star-Phoenix

Quick Hits

  1. Organigram VP Public Affairs Cameron Bishop called on Justin Trudeau's government to get serious about supporting and celebrating the economic gains from legalization, while former Hexo Chief Medical Officer–turned–losing Liberal candidate Terry Lake called for Trudeau to "take a 'whole of government' approach to this industry." Twitter—Cameron Bishop, Terry Lake
  2. Facing the threat of frost, 48North was forced to bring in a helicopter to hover over its outdoor crop and suck up cold air. Instagram—Devin Piche (48North Master Grower)

7

Another Loss for New Brunswick Crown Retailer

Troubled New Brunswick crown REC retailer Cannabis NB reported another loss (of $1.5M) for Q2, despite a 17.6% quarter-over-quarter increase in sales (for a total of $10.7M).
CBC New Brunswick

  • NB Liquor, parent to Cannabis NB, has recorded surging sales during summers, so it's unclear how much of the Q2 increase reflected continuing or temporary increase in demand.
  • At first Cannabis NB blamed losses on the supply shortage, though now they blame competition from illicit sellers.

Quick Hits

  1. New Brunswick island Campobello is hard to access and gets mail delivered through the US, which means US Customs and Border Protection is making life miserable for everyone by increasing searches and seizures of mail in search of mail-order cannabis.
    Globe and Mail
  2. Following a violent raid on a dispensary on the Six Nations reserve in Ontario, that community debuted the Six Nations People's Cannabis Coalition "to regulate the production and sale" of cannabis inside the territory. A resident is also running for the community Band Council on a platform of ending cannabis raids and supporting the new SNPCC.
    Dispensing Freedom

8

Alberta REC Retail to Continue Growing

http://www.flickr.com/photos/35034352186@N01

Alberta Gaming, Liquor and Cannabis has now approved license applications for 306 REC stores provincewide, and predicted it would have 500 REC retailers province-wide within three years.
Calgary Herald

Quick Hits

  1. The BC Independent Cannabis Association produced a white paper with six calls for changes to BC cannabis policy. Among them: legalizing both farm-gate sales and public consumption areas; moving from a central provincial warehouse to direct delivery for LPs; and BC municipalities harmonizing their cannabis zoning rules with provincial regulations. BCICA
  2. There may be as many as 20,000 unlicensed craft producers in BC. So far, only one has received a micro license from Health Canada.
    Twitter—Patrick Brauckmann

9

Research Roundup

https://commons.wikimedia.org/wiki/User:Yamavu

After 10 months of delays, BC Cancer continues to wait for Health Canada approval on a $1M randomized, double-blind, placebo-controlled study on the effects of cannabis on cancer-related symptoms.
Vancouver Sun

  • Clinical lead Dr. Pippa Hawley originally expected to be able to begin recruiting patients in June, to deliver results within a year.
  • Delays were partly due to Whistler Medical Marijuana, the LP from which researchers had arranged to procure cannabis oil, being acquired by Aurora. Vancouver Sun

A group of more than 10 medical officers and medical directors largely from Canadian LPs wrote to the British Medical Journal to protest an editorial recommending against "prescription of unlicensed cannabis based products to patients on the NHS."
BMJ

University of British Columbia researchers published a study charting the structures and chemical outputs of cannabis trichomes.
Lab Manager

Quick Hits

  1. Rising MED prices are forcing some patients to buy unregulated product on the illicit market.
    CBC Ottawa

10

Seniors Increase REC/MED Consumption

http://www.flickr.com/photos/40328982@N02

More than any other age group, Canadians over the age of 65 have increased their consumption of cannabis since legalization.
Global News

  • Those 65 and older are the least likely group to consume cannabis. However, the number of people older than 65 consuming cannabis in 2019 (more than 400,000) has increased nearly tenfold since 2012 (roughly 40,000). Le Devoir—In French
  • Per Statistics Canada's latest numbers, more than 25% of 65+ cannabis consumers are new to cannabis—more than twice the 10% of new users aged 25 to 44.

The Canadian Association of Retired Persons will give its 300,000 members a 20% discount on MED.
Cannabis IRL

Quick Hits

  1. One of the 92 Canadians who have received expedited pardons for cannabis possession convictions described the process to The Leaf. Turns out she would have preferred expungement.
    The Leaf
  2. Supreme Cannabis announced the departure of co-founder and Chief Advocacy Officer John Fowler, shocking many across the sector, where Fowler is well liked.
    Twitter—Jameson Berkow

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