The cannabis industry is a highly fragmented space right now, with companies like GW Pharmaceuticals plc (GWPH 70.50 2.53%) studying CBD’s clinical potential, companies like Tauriga Sciences, Inc. (TAUG 0.03 -3.23%) exploring currently-legal topical medicinal products, companies like GreenGro Technologies Inc. (GRNH 0.244 -4.87%) focused on ancillary markets, and companies like Tweed Inc. (TWD 180.71 0.00%) selling medical marijuana under Canada’s new Marihuana for Medical Purposes Regulations (“MMPR”).
Given the regulatory uncertainty and early-stage nature of the industry, many investors are looking for diversified investments that might be less risk. Canadian MMPR growers face the risk of greater competition that could lower prices, while any companies in the U.S. industry run the risk of regulatory crackdowns, given that cannabis remains a Schedule 1 Controlled Substance under federal law.
In this article, we’ll take a look at a diversified company called Affinor Growers Inc. (RSSFF 0.66 1.69%) that could mitigate some cannabis-related risk with its commercial crop production focused on eco-friendly agriculture. The company’s cutting-edge vertical farming technology is ideally suited for mass-producing foods with the highest quality – including both cannabis and more traditional crops.
Exposure to Cannabis
Health Canada estimates that the number of consumers with medical cannabis licenses will increase almost ten-fold over the next decade to about 309,000 as greater evidence supporting its efficacy drives doctors to write prescriptions. These dynamics could drive the legal cannabis supply industry to $1.3 billion per year by 2024, according to the government organization’s estimates.
Affinor Growers set out to “consolidate fragmented [cannabis] growers and work with dispensaries” to obtain MMPR licenses in April of 2014. These efforts resulted in the May 9th acquisition of a private company that’s in the “final stages” of becoming a Licensed Producer under Canada’s MMPR. Notably, the equity deal is largely contingent on the company successfully acquiring an MMPR license.
With its proprietary technology and connected management team, the company is uniquely positioned to capitalize on the burgeoning cannabis market. Management believes that the Canadian market will eventually trend towards recreational legalization and legalized exporting, which could open the door to significantly greater market opportunities over the coming years.
Not Just Cannabis
Affinor Growers sets itself apart from other aspiring Canadian MMPR-focused firms, like Creative Edge Nutrition Inc. (FITX 0.072 -4.89%) and Medican Enterprises Inc. (MDCN 1.30 -3.70%), with its plans to grow other crops like strawberries and lettuce. Leveraging its experience and vertical farming technology, the company’s management believes it will be able to produce the crops at a competitive price and quality.
The company’s proprietary vertical farming technologies control precise combinations of light, temperature, water, and nutrients to create specific growing conditions that result in optimum crop production, product quality, and shelf life. Management believes that no current growing methods compare to its software-driven automation technology, including its mechanically pollinated strawberries.
The market for strawberries, lettuce, and other crops is even larger and growing, with a lack of domestic suppliers. According to the co-authors of the 100-Mile Diet, the average meal travels 1,500 miles from producer to plate. Canada may be home to some of the best organic berry-growing conditions in the world, but its short growing season has created a strong demand for vertical farming technology.
Affinor Growers has an experienced management team consisting of medical and business professionals led by CEO Sebastien Plouffe, as well as a strong executive team, Board of Directors, and Advisory Board. The team has been very successful in the past with the ability to execute on vertical farming and agricultural business, while its advisory board has significant scientific experience in the area.
Tegan Adams joined the team as COO with over ten years of experience teaching topics like operational and producer sustainability and helping Canadian municipalities integrate different control mechanisms. Greg Dennison joined the team as CFO during the same month after leading the financial side of many business ventures in the vertical farming industry.
Nick Brusatore started on the company’s Advisory Board as a top designer and leader in vertical farming technology with over 14 years of experience in AGRI Designs, plant physiology, and organic chemistry to the company. He has recently been appointed the Executive Chairman of the Board of Directors.
Mitigating the Risk
Affinor Growers intends to leverage its unique expertise and industry connections to capitalize on both of these market opportunities. As a result, investors benefit from exposure to the burgeoning cannabis industry without as much direct risk given that revenue could be derived from its other divisions. The diversification could deliver preferable risk-adjusted returns if management executes on its plans.
Article by: Ryan Allway
Posted at: http://www.cannabisfn.com