Agraflora Organics International (AGRA.C) is opening farm-gate stores in a high population density area with hopes of attracting new customers, while taking greater control of their in-house production.
The farm-gate stores offer greater distribution reach for Agraflora while putting the company in a strong market where they could potentially reach upwards to 8.5 million cannabis purchasers. The company’s onsite farm-gate retail store Ais will give the company better control of its cannabis ecosystem, letting them influence everything from seed to sale.
“Unlike more traditional cannabis distribution and marketing channels, the establishment of onsite farm-gate retail facilities will arm us with greater control over the desired seed to sale process, thus increasing margins and improving quality assurance protocols through the cannabis value chain. It is our objective to execute on this innovative initiative as quickly as the regulatory and permitting process allows. It is our expectation that this new direct channel will contribute significantly to our revenue and margin expansion into fiscal 2020,” said Brandon Boddy, chairman and chief executive officer of Agraflora.
The company’s current 2020 projections for dried flower are approximately 170,000 kilograms, throughout their facilities in Delta, Sanna Health/Sustainable Growth Strategic cultivation facilities and its AAA Heidelberg craft cannabis facility. The company expects to recapture over one million grams of premium cannabis trim which it can use for value-added cannabis products.
The notion of a farm-gate store wasn’t a thing before 2019, and more specifically November 6, 2019, when the Ontario government released its 2019 Ontario economic outlook and fiscal review, which announced updates for how it will open the market for cannabis retail. The revised legislation lets LP’s have a retail front on their production sites.
It’s a small step towards acceptance, but it’s a step nonetheless. Governments in Canada, both federal and provincial, have been so wary about the cannabis rollout as to slap considerable regulations on everything cannabis related using a harm-reduction model. There’s nothing intrinsically wrong with this approach, but there is a fair amount of overreach, leading ultimately to the throttling of the cannabis industry in certain circumstances.
The company’s two proposed sites are in Scarborough and London, Ontario respectively.
Agraflora Organics International is architecting the following on-site farm-gate cannabis retail facilities:
- 1,200-square-foot farm-gate retail facility adjoining its 37,000-square-foot licensed cultivation and processing facility in Scarborough, Ont.;
- 690-square-foot farm-gate retail facility adjoining its 8,000-square-foot London, Ont., AAA Heidelberg licensed craft cannabis cultivation facility.
Agraflora’s recent $23 million acquisition, earlier this month, of Sanna Health/Sustainable Growth Strategic facility in Scarborough is situated on 16 acres and includes 27,000 square feet for cultivation and processing. The company has an option to expand that space to 89,000 square feet, and ample commercial-industrial space for future expansion beyond that. The company forecasts that once optimized, Sanna’s extraction facility will boast annual extraction capacity of 250,000 kilograms of dried cannabis and hemp biomass, much of which will be supplied by the company’s 88-acre outdoor cannabis grow located less than 90 minutes from its GTA headquarters, permitting streamlined logistics and reduced transportation costs.
Meanwhile, in nearby London, Ontario, their AAA Heidelberg dispensary will let Agraflora capitalize on 1.5 million purchaser catchment area within a 90 minute radius. London is Canada’s 11th largest metropolitan area and more or less in the middle of Toronto, Detroit, and Buffalo, giving them a large enough footprint to cover.