On June 7, 2018, The Cannabis Bill passed the 3rd reading in the Canadian Senate and will now be kicked back to the House of Commons.

According to the CBC, house members will debate the Senate’s amendments which include a public registry of cannabis industry investors (to dissuade organized crime) and a ban on promotional items, or ‘swag’ that advertise cannabis.

If the Senate insists on amendments that the House has rejected, the upper chamber can then send the bill back to MPs.

It’s a bit like a 15-year-old asking her father if she can go to the school dance, and the Father saying, “I’ve discussed it with your mother – the answer is yes – but she and I need to talk more about the rules.”

Who benefits most from federally legalised cannabis in Canada?

According to Equity Guru’s Chris Parry, “It doesn’t matter how much you can grow if the market gets sucked up by a sweet ass brand from a smaller player who can sell at high prices because everyone wants his version of ‘Heisenberg Blue’ over Canopy’s Lemon Skunk.”

In other words: branders – companies like Choom (CHOO.C) with experience getting premium products onto retail shelves.

“Choom is focused on delivering an elevated customer experience through our curated retail environments, high-grade handcrafted Cannabis supply, and a diversity of brands for the Canadian recreational consumer.”

Choom has acquired 4 ACMPR licenses, all in the late stages of the approval process, and plans to vertically integrate production with a distribution network of branded retail stores.

Chris Bogart, President & CEO of Choom stated in a June 8, 2018 press release

“Legalization is now officially on the horizon, and while some might think they have seen the crest of the cannabis wave that has been building for years, we’ve just started [our emphasis] paddling into a wave that will build momentum now that legalization is in place.”

Bogart isn’t blowing smoke.  We have fresh indicator-data from the U.S.  After full legalization, Colorado, Washington and California saw adult-use grow year over year by double digits.

It turns out there are a lot of people who want to smoke pot recreationally but are not willing to risk a criminal record to do it.

“Canada has made history as the first G-20 country to legalize rec use, and this presents a tremendous opportunity for Choom,” stated Bogart, “given that our roots are firmly planted in the Canadian recreational cannabis space.”

On May 15, 2018 Choom announced that it has “secured the rights to an additional 8 retail locations in Alberta, increasing the total to 17 applications in the approval process with the Alberta government.

This news follows Choom’s announced build-out of its cannabis retail store network.

A strong retail footprint will be instrumental in determining the brands that thrive in this new economy”, stated the release, “Choom will be poised to capitalize on the coming wave of cannabis distribution with our retail strategy.”

“We will continue to seek expansion opportunities to allow as many Canadians as possible to participate in the Choom experience of ‘good times with good friends’,” stated Bogart.

Choom recently bulked up its Board of Directors with veterans in “Consumer Branding, Retail Supply Chain, Government Relations and Financial Services.”

Derek Chan, the former CFO for Vega, North America’s leading all-natural health and performance nutrition brand, helped grow 15X culminating in the successful sale of Vega to White Wave Foods for US$550 million.

John Heaney, the former Chief of Staff for the Government of Alberta, where he was a key official in developing the Alberta government’s energy royalty review and climate-change legislation.

Bobby Black, former senior editor of the iconic High Times Magazine, current host of Blazin’ With Bobby Black on Cannabis Radio.

“Bobby Black will be instrumental in educating our audience of cannabis users and the ‘cannacurious’ on the past, present, and future state of marijuana, as we navigate the new frontier of legal adult use in Canada.”

The “cannacurious” (1st time users) could turn out to be an important market segment.  There is no hard cannacurious-user-data from recently legalised jurisdictions, although the LA Times is sniffing around for anecdotes.

It’s a truism in retail that the buying experience must be easy and pleasant. Illegal recreational purchases create mental and logistical friction. Where did the product come from? Do I trust the seller?  Am I going to get arrested?

“Like most Californians, I have been waiting for the day I could walk into a dispensary and buy marijuana without the required medical recommendation,” wrote Monique Judge in The Root, “Mine expired nearly four years ago, and I have been relying on other means to get my stash as of late.”

Opinions in the comment section echoed Ms. Judge’s enthusiasm.

Of course, there are many people in Canada and the U.S. who disapprove of legalized recreational cannabis.  There is data that suggests it is not good for teenage brains.

But compared to booze, it may as well be coconut water.

You don’t hear of people smoking a blunt and then crashing their cars, beating their spouses or molesting their children.

According to the National Institute of Alcohol Abuse, 80,000 people die from alcohol-related causes annually.  In the last 15 years, 500,000 North Americans died of drug overdoses, the majority of it coming from opioids.

Death toll from cannabis: zero.

“Canada is creating a normal industry. What we have in the United States is a very abnormal industry,” said Roy Bingham, the CEO BDS Analytics in a recent USA Today article.

Choom has a bullish looking chart.

If Choom succeeds in capturing a healthy chunk of this new rec market, this will indeed be just the first growth wave.

“We set out a framework in C-45 that ensures safe access across the country to a legal source of cannabis and that includes home cultivation,” stated Canadian Justice Minister Jody Wilson-Raybould.

“Our goal is to secure significant market share where private cannabis retail stores are permitted,” stated Bogart.

We’ve had our eye on Choom for a while.  We like the people, the space, the branding and the vertical integration into this new frontier.

Stay tuned.

Full Disclosure: Choom is an Equity Guru marketing client, and we own stock.

Written By:

Lukas Kane

Lukas Kane was previously the CEO of a North American investment news syndicate. He was also the Communication Director for a consortium of publicly traded companies. A Senior Writer at Equity.Guru, Mr. Kane writes about mining, cannabis, energy, technology and biotech.

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