New Brunswick Recreational Marijuana Market Taking Shape
On Sept. 15, 2017, the Canadian province of New Brunswick announced during a news conference that Organigram (TSXV: OGI) and Canopy Growth (TSX: WEED), both already licensed producers in Canada’s medical marijuana program, will distribute recreational marijuana to retail stores established by a newly created provincial crown corporation when Canadian legalization commences in July 2018.
Organigram and Canopy issued statements to announce New Brunswick recreational marijuana agreements prior to the news conference.
“As we move forward under this agreement, we have the opportunity not only to help build a strong and successful cannabis market within the province and beyond, but to also reinforce our company’s commitment to safety and education,” said Ray Gracewood, Chief Commercial Officer of Organigram, in a press release
“Today we take the next step towards the future of cannabis in New Brunswick with a truly historic MOU. We are excited to bring high quality brands like Tweed, Leafs By Snoop, DNA Genetics, as well as a number of the best independent craft grow cannabis producers across Canada to the people of New Brunswick through this arrangement,” said Mark Zekulin, President of Canopy Growth, in a press release.
Health Minister Benoît Bourque and Finance Minister Cathy Rogers explained the distribution agreements and the crown corporation during the news conference and then issued a statement afterwards.
“Your government is committed to ensuring a seamless approach to the legalization of recreational cannabis, an approach that will prioritize public health and safety concerns,” Bourque said in a press release. “To that end, we have created a new Crown corporation that will help us to achieve that goal and have signed memorandums of understanding with two licensed New Brunswick producers of cannabis in order to secure a supply for our New Brunswick market.”
“We are pleased to partner with two local companies to secure a supply for our New Brunswick market in time for the July 2018 launch,” Rogers said. “In addition, the creation of this new provincial Crown corporation provides the flexibility and lays the groundwork for the eventual retail model once final decisions around that have been made.”
Organigram has agreed to supply 5,000 kilos of marijuana per year and Canopy has agreed to supply 4,000. Beyond this, both companies are going to make contributions to provincial programs.
“We’re excited to announce that both companies have committed to contributing 2% of the gross value of all cannabis product purchased by the retail operator to help fund important social and education programs,” Rogers explained during the conference. “If we have an economic model, a good business model, paired with social responsibility, we’ll have great success for New Brunswick.”
While New Brunswick recreational marijuana agreements have been initiated with Organigram and Canopy, Rogers explained that the province could enter into agreements with additional licensed producers.
Both company’s stocks were up following the announcement. Organigram increased by 16.74%, closing the day at $2.65, and Canopy increased by 2.09%, closing at $10.27. The Canadian Marijuana Index ended the session up 3.61%, largest single-day gain since July 13.
There were significant correlations between constituents of the Canadian Index, with 14 out of 18 constituents advancing, five of which gained more than 5%: Organigram gained 16.74%, Naturally Splendid 8.82%, Hydropothecary 8.76%, CanniMed 7.33% and Maricann 5.26%.
The U.S. Marijuana Index was largely unaffected by the Canadian market, ending the session down 0.33% for the day and 1% for the week.