Look who’s covering Pasha Brands (CRFT.C) again.
In the three whole days since I last covered the company, Pasha has updated us on its growing arsenal of craft cannabis producers. Over 100, to be somewhat precise.
So, when Pasha tells us it’s North America’s largest craft cannabis brand house, I’m inclined to believe that’s more than just marketing jargon.
I’ll cut to the point: On Thursday, Pasha announced that it has signed over 100 micro-cultivator supply contracts across Canada through wholly owned subsidiary BC Craft Supply Co. These aren’t new signings, but the cumulative agreements put in place to-date.
At full capacity, each micro-cultivator can produce roughly 500 kilograms of dried flower per year. Full capacity is utilizing 2,150 square feet of grow space, the arbitrary but legal guidelines set forth by Health Canada.
If you run the numbers, Pasha’s micro-cultivators can produce in excess of 500,000 kilos of craft cannabis per year. I think that solves the supply issue presently undermining the Canadian market.
Patrick Brauckmann, Pasha’s executive chairman, says the supply agreements will help micro-processors transition into Canada’s regulated cannabis market.
“Our objective in creating the BC Craft platform was to assist these craft producers in Canada that have been supplying Canadians their cannabis products for decades.
“They know we share their values, and that we can help them succeed in the legal marketplace in a way they can believe in, by allowing them to do what they do best.”
–Patrick Brauckmann
The grey market for craft cannabis
On Sept. 16 I ran a dramatic piece about how Pasha was looking to tackle black-market cannabis through new supply agreements with Canadian micro-producers. As it turns out, most of the cannabis Canadians are consuming still comes from illicit sources. Whether you want to call it the black market or grey market, the legal industry simply hasn’t scaled up fast enough to meet demand.
And the stuff you can buy on the street is cheaper, too (or so I hear).
Cannabis consumption eclipsed 5.4 million between January and March, according to Statistics Canada. Those are Canadians aged 15 or older. The StatsCan figures suggest 38% of cannabis users obtained their goods from the black market, down from 51% a year earlier.
However, that figure only refers to users, not how much was consumed.
If Pasha is correct, these figures don’t account for the burgeoning grey market, which refers to distribution channels that aren’t authorized by the original manufacturer. That’s where the numbers get fuzzy, and where private-sector researchers and StatsCan diverge.
Licensing just 15% of B.C.’s massive grey market craft cannabis growers and increasing producing caps could yield $3 billion in legal sales over two years, according to Grow Tech Labs. Governments should be salivating at all that tax revenue and how much of it they can waste on bullshit programs.
CRFT.C stock update
Shares of Pasha Brands popped last week, reaching their highest levels in over a month. After an equally large correction, CRFT.C has consolidated in the mid-30-cent range. The stock was last seen trading at CAD$0.35.
At current values, CRFT.C has a total market capitalization of just over $68.1 million.
Volumes were much higher than normal on Thursday, with more than 629,000 shares trading hands. On a typical day, CRFT.C averages 421,834 in volume, which largely explains the volatility.
If BC Craft Supply Co can unlock even a small portion of British Columbia’s grey market, CRFT.C could be a steal at current values. Tread carefully in the meantime.
–Sam Bourgi
Full Disclosure: Pasha Brands is an equity.guru marketing client.
