Pot firm Hexo eyes private-label strategy amid U.S. expansion
CEO says he’s considering approaching multi-state U.S. operators to partner on brands
Hexo Corp. is mulling a private label strategy as part of its U.S. expansion.
The chief executive of the Ottawabased cannabis company said Thursday that he’s considering approaching multi-state operators in the U.S. to partner on Hexo-powered private label brands.
According to Sébastien St-Louis, that arrangement would leverage Hexo’s technology to help multi-state operators boost their product quality and margins while lowering costs.
“That requires more regulatory evolution, so that’s not a today strategy, but it’s a very rapid evolution,” he said while speaking at a farm-to-market investment conference BMO Capital Markets hosted.
The insight into Hexo’s strategy comes as Canadian cannabis companies are beginning to plot U.S. expansions in hopes that the cannabis will be legalized federally, which Senate Majority Leader Chuck Schumer has been pushing for.
Hexo’s rivals, including Canopy Growth Corp., Aurora Cannabis Inc. and Tilray Inc., have all indicated that they’re increasingly eyeing the U.S. and many have been on an acquisition spree to prepare themselves for eventual entries into the market.
Hexo recently signed purchase and sale agreements for a 4,645 square-metre cannabis production facility in northern Colorado.
The company will use the facility to give U.S. consumer packaged goods brands access to Hexo’s technology, which it’s been using to drive down the costs of cannabis in Canada and create more products priced at the same levels of pot sold through the illicit market.
Hexo boasts that its Bake Sale brand, for example, has one of the lowest prices per gram in the country and in some cases, is 20 per cent lower than competitor’s products.
Hexo created Bake Sale because it found illicit market customers, which once made up 80 per cent of cannabis sales in the country, were paying between $80 and $145 per ounce of pot, said St-Louis.
By his calculations, legal cannabis producers were selling cannabis at $400 per ounce, which was “not really providing value to consumers.”
Hexo will keep facing off with the illicit market in hopes that it will help the company reach its goal of holding a toptwo position in Canada for adult-use cannabis sales.
The company sits in the third position, Hexo told The Canadian Press this week, when it announced it was acquiring 48 North Cannabis Corp.