The cannabis markets in the US are experiencing impressive growth, and Veritas Farms Inc (OTC: VFRM), a producer and distributor of CBD products, demonstrates huge potential of the cannabis sector.
Despite rapid growth in the U.S., Canada is finding itself left behind. One year after the legalization of cannabis in Canada, the recreational cannabis market is slow to develop in Quebec and Ontario, forcing cannabis products manufacturer TGOD to play it safe by reducing its production rate.
The effects are already being felt at the company’s facilities in Salaberry-de-Valleyfield, even if its development plan remains the same, says spokesperson Sébastien Bouchard. Despite this, several subcontractors hired to perform various types of work on the site have been called upon to reduce their activities.
“The entire cannabis industry is in a transition period, the situation is not specific to TGOD,” says Mr. Bouchard. On the ground, the cannabis market is developing more slowly than expected. In Ontario, the Ontario Cannabis Society (OCS) has only opened 24 stores, while in Quebec, SQDC is expected to have about 40 stores by next spring. This is not much compared to Alberta, which already has 300 stores for a population of 4 million.”
As a result, the conversion of cannabis products from the black market to the legal market is also going slower than anticipated. That is why, as part of a strategic plan unveiled on October 18, TGOD chose to reduce its production forecasts in order to avoid inventory surpluses and weaken the value of its product, while waiting for the cannabis market to reach its cruising speed.
At its Salaberry-de-Valleyfield site, TGOD is completing Phase 1, with two main buildings, one of which houses six greenhouses. These are expected to produce 10,000 kilograms of cannabis in 2020. The first harvest is planned for the first quarter of 2020 and could require a workforce of about 60 employees.
Despite a reduction in its expenses, TGOD says it will still need between $70 million and $80 million by the end of June to implement its plan. The organic cannabis producer is looking for new investors but has difficulty finding options on terms that are sufficiently advantageous to meet its needs.
The company is also preparing to market a range of new cannabis by-products such as tea and infusion bags. It also plans to launch cannabis drinks in 2020, after obtaining the required authorizations.
“With the Canadian cannabis markets remaining smaller than initially anticipated, mainly due to the slow deployment of retail outlets in key provinces, we believe that our revised plan will allow TGOD to adjust its production to focus on the organic segment, while maintaining the option to accelerate and expand as outlets begin to open,” said TGOD CEO Brian Athaide.
The situation is very different in the neighboring US, where Veritas Farms Inc (OTC: VFRM) experienced impressive growth. In Q2 2019 Veritas generated more than $2.9 million in total revenue and that is a 500% increase since Q2 2018. Their gross profits reached $1,523,413 and thanks to great results, they managed to reduce the liabilities by over $1.3 million.
Veritas focuses on producing high-quality CBD products and, to help achieve this goal, the company released a QR code packaging with which customers can check the products’ quality on their smartphones. The nine product categories come from Veritas own 140-acre industrial hemp farm, from Pueblo, Colorado, and includes tinctures, lotions and vegan capsules.
The North American cannabis market is the most dynamic in the global cannabis sector. Canada’s slower-than-expected uptake is largely compensated by the fast-growing cannabis industry in the US.