Canada’s second-largest province by population signed multiyear supply deals with six licensed cannabis cultivators for its recreational market, a move that provides much needed certainty for businesses and investors, analysts say.
The six companies will supply an aggregate of approximately 325,000 kilograms (359 tons) of cannabis over the life of the deals.
Quebec-based Hydropothecary got the biggest share.
Hydropothecary will supply 20,000 kilograms of products in the first year, 35,000 kilograms in year two and 45,000 kilograms in year three.
Supply in the following two years will be determined according to demand, but the company approximated supply for years four and five at about 50,000 and 55,000, respectively.
“Assuming the mix of products supplied moves towards less flower and more value-added products as anticipated, (Hydropothecary) estimates the total volume to be supplied over the five-year term of the agreement could exceed 203,950 kilograms,” the company said in a news release.
The initial mix is expected to be 80% flower, but that could fall to 30% by year five, CEO Sebastien St. Louis said during a conference call.
“It’s a pretty good representation of where the industry will be going,” said Vahan Ajamian, a Toronto-based analyst with Beacon Securities, who called the announcement a “bombshell” because of the term and quantity involved.
“It marks a shift more towards extracts, especially as more