In just three months and a day, the legal cannabis landscape will change forever. On Oct. 17, 2018, recreational marijuana will become legal for adults in Canada, making it the first industrialized country in the world to have approved adult use (and the second country overall, behind Uruguay).
As you might have rightly guessed, investors are champing at the bit to get a taste of the massive growth surge that awaits -- and so are the cannabis growers responsible for supplying the Canadian recreational market. We've witnessed no shortage of capacity expansion announcements, partnerships, and acquisitions since the beginning of the year as marijuana growers angle to gobble up as much market share as possible once the proverbial green flag waves.
However, this rapid capacity expansion has led to a lot of fluidity in terms of production forecasts. Every attempt to quantify how much cannabis will be produced by Canadian domestic growers each year often proves obsolete within a matter of days. But one thing is certain: There will be no shortage of major players.
Introducing the biggest players in Canada's pot market
Four weeks ago, I took what's now an obsolete look at the Canadian cannabis industry and unearthed eight pot growers that are currently on track to produce in excess of 100,000 kilograms of cannabis-equivalent production each year. "Cannabis equivalent" refers to the fact that growers are producing cannabis alternatives, such as cannabis oils and concentrates, and not just dried cannabis. Below you'll see a now-updated list (as of July 12) of what each company expects to produce at full capacity -- or what I expect they'll produce, in the instance that they haven't offered peak production guidance.
- Canopy Growth Corporation (NYSE:CGC): approximately 500,000 kg (author estimate)
- Aurora Cannabis (NYSE:ACB): 430,000 kg
- Aphria: 255,000 kg
- The Green Organic Dutchman: 195,000 kg
- MedReleaf: 140,000 kg
- OrganiGram Holdings: 113,000 kg
- Hydropothecary Corporation: 108,000 kg
- Emerald Health Therapeutics (OTC:EMHTF): 100,000-plus kg (partial author estimate)
Even though these totals are up to date, they're still subject to near-term change. For instance, Aurora Cannabis is in the process of acquiring Ontario-based MedReleaf for $2.5 billion in an all-share deal. If completed, it would likely vault Aurora Cannabis to the top spot in terms of annual production at full capacity.
Then there's Canopy Growth and Emerald Health Therapeutics, which haven't been entirely transparent about their peak annual production. Canopy Growth is working with 5.6 million square feet of capacity (2.4 million of which is currently licensed by Health Canada) that I anticipate could yield around 500,000 kg a year.
Meanwhile, Emerald Health Therapeutics' patnership with Village Farms International, known as Pure Sunfarms, is expected to yield 75,000 kg annually by 2020. Emerald Health's Metro Vancouver facility will span 500,000 square feet. And while there are no specific peak production estimates offered by the company, more than 25,000 kg from such a vast expanse of growing space seems almost assured, which would push the company to (or above) 100,000 kg.
Say hello to the newest 100,000 kg member
Well, folks, there's yet another marijuana grower that's joined the ranks of Canada's major pot players: CannTrust Holdings (NYSE:CTST).
Near the end of June, CannTrust announced the official opening of its Niagara Perpetual Harvest Facility, which is a 450,000-square-foot hydroponic grow site. Hydroponics involves using a nutrient-rich solvent solution to grow cannabis plants, as opposed to growing plants in soil. The press release marking the occasion notes that the current output of the facility is estimated at 50,000 kg annually.
What's particularly interesting about this grow site is that it's the first to combine moving containerized benches with a perpetual harvesting system. This should allow for steady crop production and harvesting, as opposed to the potentially lumpy planting and harvesting cycle that many of its peers will contend with.
But as you may rightly have guessed, CannTrust isn't done expanding. It's begun construction on the final phase of its Niagara expansion, which is fully funded, and will add 600,000 square feet when completed. This expansion is expected to "double CannTrust's annual capacity to in excess of 100,000 kilograms," per the release.
CannTrust President Brad Rogers said: "The size and scope of this facility is a testament of CannTrust's industry-leading achievements, and is setting new industry benchmarks for high-quality yields and reduced costs. Operating a facility of this scale, CannTrust is well positioned to meet the increased Canadian and global demand for cannabis."
It's also worth pointing out that, as of its most recent quarter, CannTrust leaned on alternative cannabis products more so than any other marijuana stock. Over half the company's total sales (albeit, we're talking about a relatively small amount of sales) were derived from oils. Assuming CannTrust emphasizes product diversity and can keep its production costs low, it has a genuine chance to best its peers in terms of operating margin.
Though the aggregate production outlook remains fluid in Canada, one thing is for sure: The number of major players is growing, not shrinking.