Big pharmaceutical players boost credibility in the Canadian cannabis industry

Canada's largest retail pharmacy chain, Shoppers Drug Mart continues to lend possibly the most important voice of credibility to the emerging legal cannabis market-so far, having signed supplier deals with three of Canada's largest cannabis growers, and leaving the door open for more to come.

With over 1,250 stores across Canada, the chain owned by Loblaw Companies Limited is a national retail heavyweight. So when Shoppers Drug Mart signed its latest supply deal with cannabis giant Aurora Cannabis, it marked the fourth supplier deal the retailer has inked, and the third with a Canadian major.

Two of the other companies that have already inked agreements with the retailer were Aphria Inc., and MedReleaf Corp., late last year. The retail vote of confidence for the emerging cannabis sector started early-Parent company Loblaw Companies Ltd. applied in October 2016 for a license to dispense medical marijuana.

See also:

• Aurora Cannabis closes $1.1bn CanniMed deal

• Shoppers Drug Mart, Aurora Cannabis sign medical marijuana supplier agreement

• Anandia labs named top Canadian cannabis testing lab 2017

Other pharmacies such as Lovell Drugs and PharmaChoice have already signed deals with other cannabis suppliers; However, it's the intensity of the spotlight that Shoppers Drug Mart casts that lends to speculation of which company will be the next to garner the retailer's favorable access to mainstream consumers. One potential new cannabis supplier for Shoppers Drug Mart could be up-and-comer MYM Nutraceuticals, which is in line to have Canada's largest cannabis greenhouse facility in Weedon, Quebec, and is partnered on Australia's largest in New South Wales.

How many suppliers that Shoppers Drug Mart will carry is still yet to be determined. Should an MYM Nutraceuticals or another outfit join the ranks of Aphria Inc. and now Aurora Cannabis, it would be yet another significant stamp of approval given by a leading retailer in the leadup to legalization.

Shoppers like big growers

The addition of Aurora Cannabis to the Shoppers Drug Mart portfolio was another signal that bigger is better to the retailer. Primary to the deal is the expectation that Aurora's products will be sold online, according to the press release. 

“The Shoppers and Aurora brands are trusted to deliver high-quality products and excellent customer service,” said Terry Booth, CEO of Aurora Cannabis. “Partnering with Shoppers Drug Mart, Canada's largest pharmacy retailer, is yet another validation of the scale and maturity of our company, and of the demand for Aurora's medical cannabis. With its massive facility located adjacent to the Edmonton International Airport, Aurora is one of the largest producers in the country operating today.”

Not to be outdone, fellow Shoppers Drug Mart supplier, MedReleaf recently announced the purchase of 164-acre property in Exeter, Ontario, which includes 1 million square feet of existing greenhouse. The property adds 105,000 kilograms of cannabis production capacity annually to MedReleaf's balance sheet.

However, it's the upcoming 1.5 million square feet of growing space planned by MYM Nutraceuticals in Weedon, Quebec that stands to be the largest project in the country once completed. Once coupled with the company's primary facility in Laval, Quebec, and with its international ventures in Australia, and Colombia, MYM should have a line of suitors that could very well include Shoppers Drug Mart in the coming months.

MYM’s massive footprints

In the lead-up to construction on its massive 1.5 million square-foot facility at Weedon, MYM Nutraceuticals received a boost of confidence and cash from a recent $10,000,000 financing that will move the company closer to its goals in 2018.

"All of us at MYM are very excited about the future of our company," said Rob Gietl, CEO of MYM in the accompanying press release. "This excitement extends to our family and friends who have participated in this non-brokered financing. We have many major milestones to achieve this year that will shape MYM for years to come. Continued global expansion and leveraging the relationships we have built, will ensure that MYM and its shareholders have a bright future."

The net proceeds are intended to be used towards general working capital and corporate purposes as the company pursues development on its two Quebec production projects, and its partnered 1.2 million square foot production facility dubbed the Northern Rivers Project in New South Wales, Australia.

At the Weedon, Quebec project, MYM currently owns 75% (which goes up to 90% upon completion), and is set to help the municipality become the official cannabis capital of Canada. While there are other mega-greenhouse projects in other provinces in Canada, MYM's decision to house their operations in Quebec was very strategic- From an economic perspective, it can't be ignored how cheap Quebec's costs are.

Quebec labor costs on average 34% less than in the US, and 16% less than in G7 countries. Electricity is 36% cheaper than in the US, and 49% lower, on average, than in the G7 countries. Quebec's taxes on investment are the lowest in Canada, and more importantly lower than the average of the US, G7 countries, and the OECD countries. The province offers an investment tax credit that covers up to 24% of the cost of newly purchased manufacturing and processing equipment and reimburses sales tax on capital goods.

Once MYM's Weedon location is opened, there's a possibility that it can provide MYM with a quantity-, and location-based cost advantage that could benefit them to the point of making a deal with a retail giant such as Shoppers Drug Mart. With cash in hand, and a steady momentum, it could be a good year for MYM Nutraceuticals.