Craft Cultivators Glean Premium Prices as Consumers Demand Top Shelf Cannabis

Cannabis is most commonly associated with its flower form, however, innovative producers within the industry have developed new products to stand out among the competition. Specifically, in Canada, many producers are designing new products such as concentrates, extracts, and edibles for consumers. Notably, these products are much more potent and effective than traditional flower, which is why many consumers are beginning to shift towards less conventional delivery methods. Moreover, the price of flower has increased since Canada legalized adult-use back in October 2018. According to Statistics Canada, Canadians paid 56.8% more for dried cannabis in legal channels than they did from illicit sources since legalization. Following Canada’slegalization, consumers were paying on average of approximately CAD 9.99 (USD 7.47) per gram compared to the illicit source prices of CAD 6.37 per gram. Health Canada noted that prices in Manitoba prices surged as high as 27.7% per gram, while British Columbia’s prices increased by as little as 3.7%. Typically, the price of cannabis is directly correlated with costs of cultivation and federally or provincially mandated taxes and fees. For instance, the Department of Finance Canada states that in most provinces, cannabis excise taxes is CAD 1.00 per gram, of which the federal government collects CAD 0.25 and the province collects the remaining CAD 0.75. However, back in the 1980s, Canada implemented a tax increase on cigarettes which ultimately lead smokers to turn to the black market for cheaper alternatives. Canadaended up cutting the tobacco taxes. Similarly, the country’s cannabis taxes could potentially be reduced in order to keep consumers away from the black market, as Federal Finance Minister Bill Morneau has pledged to keep taxes as low as possible to keep consumers out of the illicit market and eliminate illegal sources. Furthermore, according to data compiled by Ameri Research, the global legal marijuana market was valued at USD 14.3 Billion in 2016. By 2024, legal marijuana global sales are projected to reach USD 63.5 Billion while exhibiting a CAGR of 21.1% from 2017 to 2024.

The Canadian cannabis tax rates can heavily impact a company’s financials, which can ultimately result in unprofitability. Generally, smaller cultivators struggle to keep up with the competition from large corporations that can produce tons and tons of cannabis per harvest. Additionally, with the excise tax rates, it makes it even more difficult for small players to stand out within the market. In efforts to adapt, smaller cultivators have expanded their operations to developing high-quality, premium cannabis. Larger cultivators typically have difficulties producing excellent quality cannabis because of the massive-scale production they’re operating. On the other hand, however, smaller cultivators’ intrinsically simpler operations allow them to focus more on each individual plant to ensure premium quality. The precise art of tending to each plant is known as cultivating “craft cannabis.” Customarily, craft cannabis cultivators focus on organic and attentive methods such as avoiding chemicals or hand-trimming the flowers. Chemicals such as pesticides are usually avoided, however, this requires cultivators to nurture each plant to avoid the possibility of mold or a bug infestation. Furthermore, craft cultivators also have to maintain a stable and adequate temperature and humidity levels, factors which can affect the yield and quality of a harvest. The extensive efforts craft cultivators take to create top-shelf quality cannabis for consumers can be quite expensive compared to mass-produced cannabis. However, many consumers have indicated that they are willing to pay more for a premium and an organic product. According to a 2017 survey conducted by Brightfield Group, it was uncovered that 43% of respondents are willing to pay more for premium strains while 34% are willing to pay more for an organic product. “When it comes to retail, consumers will always pay more for premium-quality products. In the cannabis industry, that means top-shelf genetics cultivated in small batches will fetch higher prices,” said Anne Forkutza, former Vice President of Strategic Partnerships and Brand Officer at Cova Software. 

Pasha Brands Ltd. (OTC: CRFTF) (CSE: CRFT) is also listed on the Canadian Securities Exchange under the ticker (CSE: CRFT). Earlier this week, the Company announced, “the acquisition of the CBD Therapeutics brand – a leading pre-legalization manufacturer and purveyor of cannabidiol (CBD) product based in British Columbia.

Since its inception, CBD Therapeutics has supplied solvent-less full spectrum and isolated CBD formulations to the pre-legalization market throughout Canada, and increased access to both products and education. Since ceasing sales on October 17, 2018, CBD Therapeutics has been preparing to enter the regulated framework. Pasha has acquired all of the brand’s trademarks, names and intellectual property and will re-launch the brand in the Canadian regulated market in the very near future. 

‘Joining Pasha Brands is yet another step forward in our mission of making CBD products more accessible,’ said James Whitehead, CEO of CBD Therapeutics. ‘Working with a collective of smart, like minded individuals and brands will help open opportunities for CBD Therapeutics and aid our growth. It already has.’

CBD Therapeutics is one of the only companies in the CBD space that has built and offered an educational curriculum on CBD that can be accessed for free. They credit their focus on education as one of the reasons they are Canada’slargest direct-to-consumer retailers of CBD.

‘We’re thrilled to have acquired one the leading CBD brands in Canada and feel Pasha will benefit from CBD Therapeutics’ established client base and brand awareness, as they’ve made a strong name for themselves in the CBD market,’ said Patrick Brauckmann, Executive Chairman of Pasha Brands. ‘This addition to the Pasha family is yet another indication of the momentum of growth that Pasha is initiating in the new legal cannabis landscape, while remaining committed to those people and brands that operated in the pre-legalization market and who helped establish the industry in Canada.’

Following the legalization of cannabis in Canada, retailers have experienced supply shortages for all cannabis, but are particularly concerned with keeping highly demanded CBD products on shelves. The popularity of CBD has captured the attention of a variety of consumers, many of whom are first-time users.

Through the acquisition of CBD Therapeutics, Pasha aims to help close the supply gap of CBD and is preparing to take advantage of Health Canada regulations on cannabis edibles, beverages, topicals and extracts, set to become legal later this year.