Medical marijuana firm makes a premium play
With news that Hydropothecary of Gatineau has acquired a licence to produce medical marijuana, the National Capital Region now appears to have plenty of future supply.
Earlier this month, the licence of Tweed Marijuana of Smiths Falls to grow and sell medical weed was extended another year. The licence allows Tweed to sell up to 3,500 kilograms — the firm’s current annual capacity.
Hydropothecary hasn’t yet received Health Canada’s permission to actually sell weed — that will have to wait for tests to make sure the quality is up to inspectors’ standards.
On this front, the founders of this 17-month-old firm appear to have no doubts. “There is still very large demand for product,” says Hydropothecary co-founder Adam Miron, “especially quality product.”
Indeed, the first thing you notice about the company’s website is the pricing attached to four main strains of marijuana. Assuming Hydropothecary secures its licence to sell, perhaps as early as next month, it will charge customers anywhere between $26 and $32 per gram.
That’s more than double the typical rates offered by the other 13 firms that have so far won approval from Health Canada to sell the product under a new legal regime that came into effect April 1, 2014. Licensed home growers, the former bedrock of the industry, made way for commercial growers with secure, regulated facilities.
No one really knows how quickly the market for medicinal weed will develop — and estimates haven’t been helped by the bottlenecks that have emerged as demand from users has overwhelmed what’s available. Nevertheless, this does suggest the number of potential patients using medical weed is well in excess of the roughly 40,000 who used it when the industry changed the rules last year.
Miron says his firm will justify its richer prices on the basis of “significantly better customer service.” This starts with a promise to deliver. “So many people to date have been told, ‘We’re out of stock’," he notes. “This is medicine. We will guarantee supply.”
How will Hydropothecary accom- plish this? When a patient registers for marijuana, Miron says, the firm will set aside the amount required.
Miron adds that the company will also offer round-the-clock service.
The co-founders — who happen to be brothers-in-law — offer contrasting backgrounds.
Sébastien St. Louis, the CEO, is the financial brains of the operation — with an MBA from the Université du Québec à Montréal, and stints with the Business Development Bank of Canada and the Export Development Corp. He was most recently president of Shield Real Estate Investments, which manages residential properties in the Ottawa area.
Miron’s business history tracks more to media and politics. He was a Liberal campaign manager during the 2008 federal election and is the chief information officer of iPolitics. ca — an online newspaper in Ottawa. He is also president of 7 a.m. Media Group.
Unlike Tweed, whose shares trade on the TSX Venture Exchange, Hydropothecary is a private firm.
“The long-term plan is to go public,” says Miron, though it’s obviously early to say just how it intends to get there. The source of the firm’s current capital is unclear for the moment, though Miron confirmed that figures from Toronto’s financial community on Bay Street have invested. More will surely be required.
The early stages of this developing industry have consumed a lot of capital.
Tweed, for instance, raised $15 million last May through the sale of 4.7 million shares. It has used some of the proceeds to expand capacity and to acquire a separate operation, now known as Tweed Farms. The company recently reported a net quarterly loss of $2.4 million for its quarter ended Sept. 30, at which point it had $8.4 million cash on hand.
“Tweed has done a lot of things right,” Miron says. “They’ve done an incredible job getting their name out there.” You get the idea that Miron and his brother-in-law have plans to do even better — at the premium end of the market.