Cannabis firm plans to use Quebec as launching pad

five years,” founder and chief executive officer Sebastien St. Louis, 34, said in a phone interview last week. “Our strategy is to go to Quebec first, then expand to Ontario, then to Western Canada, and then internationally.”

Canada’s pot producers are jockeying to grab a slice of a medical and recreational marijuana market that’s forecast to reach $8 billion in sales by 2021. Companies in Gatineau, has dropped 22 per cent to $3.89 from its Jan. 23 peak. That’s not stopping St. Louis from “very seriously” considering a Nasdaq listing after a planned move from the junior to the main Toronto stock exchange in the next few months, he said. The company, which shares board member Nathalie Bourque with Couche-Tard, says it has $260 million in cash, half of which is available agreement with Quebec, which could grow over time, gives Hydropothecary greater visibility and may be worth as much as $120 million, analysts at GMP Securities wrote in a note last month.

“This provides a major endorsement of Hydropothecary’s execution capabilities to deliver quality products at large scale,” they wrote.

The company is expanding its production capacity to 25,000 kilos of dry cannabis by July, and 108,000 kilos by the end of the year. It’s also planning to invest in machines that will directly extract the molecule from plants to make products such as sublingual sprays, massage oils or drinks.

Such higher-margin products will eventually account for 70 per cent of the business and help the company weather a looming oversupply that’s going to spur competition, St. Louis predicts. In Quebec, the grower also benefits from cheap power helping keep production costs lower.

“It’s going to be critical to be hyper-competitive on growing costs but also to develop a manufacturing expertise,” he said. “Cannabis is talked about for its flower but it’s only a very small part of the story. That’s why we’re putting our efforts on transformation and new products.”