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.
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.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.