Branding was in focus in the cannabis space this week, with a new report showing that work from major players in the industry is perhaps not having the desired effect.
Meanwhile, the question of when institutional investors may enter the marijuana market was in the spotlight in an online discussion.
Read on for a closer look at some of the biggest cannabis news over the last five days.
Cannabis branding faces lackluster consumer response
A new report from Brightfield Group shows that cannabis companies’ branding efforts have been less successful than they might have hoped. The market intelligence firm surveyed 3,000 Canadian cannabis users in the first quarter of this year, and found that no brand has more than 41 percent recognition; in fact, most have only between 1 and 15 percent recognition.
According to Brightfield, consumers are more likely to buy based on price and not due to brand name, packaging or other factors like word-of-mouth reviews.
Click here to skip to the Investing News Network’s overview of the Brightfield report.
Tweed and Aurora (Drift) are the brands with the highest recognition at 41 and 34 percent, respectively. Tweed is owned by Canopy Growth (TSX:WEED,NYSE:CGC) and Aurora (Drift) is owned by Aurora Cannabis (TSX:ACB,NYSE:ACB). In third place at 23 percent is Tokyo Smoke, another Canopy product.
Part of the problem, according to Brightfield, is that Canada’s adult-use market is relatively new, and Cannabis 2.0 products are even newer. As a result, consumers have been inundated with choices, and even when they see a brand they recognize, they may not have a connection to that brand.
“When product options increase and brand awareness remains low, consumers get confused. They can get decision fatigue when they do not see a product that aligns with their complex purchasing decisions,” the firm explains in the document. “This has led to a significant gap between consumers aware of Canadian brands and those that report purchasing them.”
Interestingly, Brightfield notes that the brand recognition metric doesn’t tell the whole story. When it comes to converting awareness to purchases, the leading brands are Edison, Solei and Good Supply. Edison is owned by Organigram Holdings (TSX:OGI,NASDAQ:OGI), while both Solei and Good Supply are Aphria (TSX:APHA,NASDAQ:APHA) products.
“This is a strong indicator that these brands may be able to make gains and attain market leadership in the mid-term,” the report states. Even so, the overall conclusion from Brightfield is that at the moment “it’s anyone’s game” — the firm believes that the market is ready to be disrupted and emphasizes that at least right now, company size bears no relation to consumer awareness, purchasing or satisfaction.
Are institutional investors ever coming to cannabis?
The cannabis industry had a difficult time in 2019 as the industry came down from its previous highs, and 2020 has been marked with its own challenges, largely related to the coronavirus.
Access to capital has been a major theme in the space during this time, with one key question being when more institutional money will enter the marijuana space. Speaking in a panel as part of the recent online Prohibition Partners LIVE event, analysts from Jefferies, Credit Suisse (NYSE:CS) and BMO Capital Markets suggested that it’s still too early.
Owen Bennett of Jefferies, for example, said that right now institutional involvement is limited and is coming mainly from hedge funds. In his opinion, the industry’s early reputation for easy money has damaged interest from this class of investor.
“Because money was easy there were a lot of companies in existence, and that still are, that shouldn’t even really be around,” Bennett told the web-based audience. “Those sorts of characteristics make it very difficult for a long-only institution to invest.”
The panelists also brought up the fact that cannabis is still federally illegal in the US, noting that this should not be forgotten. “Unless it’s federally legal, a lot of these institutions can’t invest,” Bennett said.
Cannabis company news
Company news in the cannabis space this week was a mixed bag, from quarterly results to job cuts.
- Aurora Cannabis announced the retirement of Terry Booth from its board of directors. Booth co-founded the company with Steve Dobler, and was its CEO from December 2014 to February of this year. Dobler also retired from his positions at the company as of the end of June.
- 1933 Industries (CSE:TGIF,OTCQX:TGIFF) released its latest quarterly results, reporting revenue of C$2.6 million and an adjusted EBITDA loss of C$3 million. The company’s revenue was down 17 percent from the previous quarter, but its adjusted EBITDA loss improved by 45 percent. 1933 Industries cited COVID-19-related shutdowns in Nevada, and particularly the drop in tourism in Las Vegas, as major factors in its revenue decline.
- Cresco Labs (CSE:CL,OTCQX:CRLBF) closed a sale-and-leaseback agreement with Innovative Industrial Properties for its facility in Fall River, Massachusetts. The deal is Cresco’s fifth with Innovative Industrial Properties, and total consideration was about $29 million, including $21 million in funding for tenant improvements.
- In a corporate update, Organigram said it is laying off around 25 percent of its workforce, or about 220 employees. CEO Greg Engel said that the company wants to make sure it is appropriately sized for the current market conditions; Organigram also said that for the foreseeable future it will produce less cannabis than targeted at its facility in Moncton, New Brunswick.
Don’t forget to follow us @INN_Cannabis for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
CanBud Distribution Corporation Closes 2M Second and Final Tranche of its Oversubscribed Private Placement Offering
CanBud Distribution Corporation (CSE: CBDX) (FSE: CD0) (“CanBud” or the “Corporation”) is pleased to announce that it has closed the final tranche of its oversubscribed non-brokered private placement for aggregate gross proceeds of approximately $4,730,000 (the “Offering”).
The Corporation issued a combined total of 39,409,346 units (each a “Unit“) at price of $0.12 per Unit, with each Unit comprised of one common share in the capital of the Corporation (each a “Common Share“) and one common share purchase warrant (each a “Warrant“). Each Warrant entitles the holder to purchase one additional Common Share at an exercise price of $0.22 within 24 months of the closing of the Offering (the “Warrant Term“), provided, however that if the closing price of the Common Shares on the Canadian Securities Exchange (the “CSE“) (or any such other stock exchange in Canada as the Common Shares may trade at the applicable time) is $0.25 or greater per Common Share for a period of five (5) consecutive trading days at any time after the closing date of the Offering, the Corporation may accelerate the Warrant Term such that the Warrants shall expire on the date which is 30 days following the date a press release is issued by the Corporation announcing the reduced warrant terms.
Thoughtful Brands Inc. (CSE:TBI)(FSE:1WZ1)(OTCQB:PEMTF) (the “Company” or “Thoughtful Brands) announces that the letter of intent with Franchise Cannabis Corp. (“FCC”), previously announced in January, has been terminated. The previously announced European joint venture with FCC will continue and allow the Company to launch and tailor its products to European consumer demands
In connection with termination of the merger transaction with FCC, the Company has agreed to pay FCC $100,000 in cash and to issue FCC 5,000,000 common shares of the Company at a deemed value of $0.05 per share. The common shares will be subject to a four-month-and-one-day statutory hold period in accordance with applicable securities laws.
Mergers and acquisitions (M&A) in cannabis space have helped boost the industry to new levels.
Strategic sale of non-core assets by Lobe adds non-dilutive capital and shareholder value
Lobe Sciences Ltd. (CSE: LOBE) (OTC Pink: GTSIF) (“Lobe” or the “Company”) is pleased to announce, further to its press release dated February 23, 2021, that it has completed the sale to Ionic Brands Corp. (“Ionic Brands”) of Lobe’s non-core cannabis assets relating to Washington-based Cowlitz County Cannabis Cultivation Inc. (“Cowlitz”) held by Lobe’s subsidiary vendor, Green Star Biosciences Inc. (the “Transaction”).
Seattle Area Grocery Chain Metropolitan Market to Begin Carrying KOIOS and Fit Soda on March 22, 2021
Adding to its existing presence on the west coast of the United States, all five KOIOS™ flavours and all four Fit Soda™ flavours will be carried in Metropolitan Market stores beginning on Monday, March 22, 2021. Serving the Seattle-Tacoma area (population 3.87 million), Metropolitan Market is one of five chains under its parent firm Good Food Holdings, which has a total of 51 stores in California, Oregon, and Washington State.
Koios Beverage Corp. (CSE: KBEV; OTC: KBEVF) (the “Company” or “Koios”) is pleased to announce that beginning on Monday, March 22, 2021, Koios’ entire line of canned beverage products will be sold at all locations of Metropolitan Market, an urban format supermarket chain in the Seattle-Tacoma area of Washington State. In Q1 2021, the Company announced multiple placements of its beverage products with regional grocers in markets on the west coast of the United States including Market of Choice in Oregon Jensen’s in Southern California and major natural grocery chain Sprouts Farmers Market which has a substantial west coast presence with over one third of its locations (360+ stores across 23 states) in California as well as Washington State 1 . The Company has also recently announced other developments relating to its expansion efforts being undertaken in 2021 such as an in-house beverage canning facility and distribution agreements with regional and national wholesale partners.