Extracts Supply Demand Heightens with Surging Alternative Cannabis Markets

June 06, 2019 - Baystreet.ca

Later this year another large legal cannabis market will open up, with the lifting of prohibition on edibles and extracts in Canada. Following in the footsteps of larger markets, such as California, Canada is about to experience a heavier strain on supplies, as producers struggle to meet demand, particularly with the capability to yield extracts needed for these new products. Several companies already in the business of edibles and/or extracts have led the way through their example of how to prepare for delivering for these markets, such as Plus Products Inc. (OTC:PLPRF) (CSE:PLUS), MediPharm Labs Corp. (OTC:MEDIF) (TSX.V:LABS), Valens GroWorks Corp. (OTC:VGWCF) (CSE:VGW), Neptune Wellness Solutions Inc. (NASDAQ:NEPT) (TSX:NEPT), and Trulieve Cannabis Corp. (OTC:TCNNF) (CSE:TRUL).

Expectations on the alternative cannabis products market (drinks, edibles, and topicals) is very high, with Deloitte recently predicting the market’s worth to reach as much as $2.7 billion annually.

Already, the example of success is in California, where edibles are surging, led by innovators such as Plus Products Inc. (OTC:PLPRF) (CSE:PLUS), whose proprietary infused gummies are dominating the state’s edibles market. California is the largest cannabis market in the world, and according to Arcview Market Research / BDS Analytics is projected to be $5.6B of retail sales in 2022.

California’s cannabis market is rapidly shifting towards manufactured products. This demand shift requires significant amounts of cannabis oil for products that include vapes, concentrates, and edibles. In Q1 2019, these manufactured products made up 56% of all retail sales—up from 49% in Q1 2018 according to BDS Analytics.


In order to maintain its market dominance in California, Plus Products Inc. (OTC:PLPRF) (CSE:PLUS) just acquired an option to purchase Emerald Bay Wellness LLC, a California-based cannabis oil manufacturer. The option grants PLUS the irrevocable right, but not the obligation, to purchase all of the business assets of Emerald Bay Extracts.

Strategic by its nature, the potential purchase of Emerald Bay Extracts marks a heightened importance to securing extract supplies. Given that extracts are essential to the cannabis edibles market, assuming a supply within a vertically integrated system could potentially be a major benefit to companies like PLUS.

“Acquiring Emerald Bay would give PLUS the opportunity to directly interact with the cannabis plant as we work to unlock the many benefits it is capable of delivering,” says Jake Heimark, Co-founder and CEO of PLUS. “We targeted this acquisition because it allows us to reap the benefits of vertical integration while maintaining a focus on product manufacturing. Beyond the benefits of internalization, we believe that the team at Emerald Bay, possess the professionalism and know-how to rapidly scale their wholesale oil business under our umbrella of resources. Ultimately, this is a rare opportunity to improve quality control, cut costs, and grow revenues all at the same time.”


When it first received its California manufacturing license in December 2017, Plus Products Inc. (OTC:PLPRF) (CSE:PLUS) was ranked the 50th best-selling brand among the hundreds of legal products in the state. As of the beginning of April, their offerings including the #1-selling Sour Watermelon and #3 Restore-Blackberry Lemon products hold five of the top 10 selling products in the state—and two of the top five.

Their rise has not gone unnoticed, as PI Financial recently launched coverage on the company at the end of May 2019—projecting the company could be nationally recognized edibles leader in time.

Analyst Jason Zandberg stated, “We believe that PLUS Products represent a cannabis company that has established itself in California and has a great chance to become one of the few national recognized cannabis brands over time.”

The analyst launched his coverage calling for fiscal 2019 revenue and EBITDA of US$23.5 million and negative US$3.2 million, respectively, and fiscal 2020 revenue and EBITDA of US$72.8 million and US$13.9 million, respectively.

“California’s consumers have made PLUS a leading cannabis brand in the State. Direct feedback from consumers in California, which is the largest and most competitive cannabis market in the world, will enable brands like PLUS to have a significant product edge when launching products in other jurisdictions” said PLUS CEO Jake Heimark. “If you win California, you can win the world.”


As California has set the example, the concern comes back to Canada and how it too will handle this surge in demand when edibles are made legal later this year. Here are some examples of companies that will likely be called upon to deliver when that prohibition is lifted:

MediPharm Labs Corp. (OTC:MEDIF) (TSX.V:LABS)

A leader in specialized, research-driven cannabis extraction, distillation, purification and cannabinoid isolation, MediPharm was the first Canadian LP licensed under ACMPR to focus exclusively on cannabis oil extraction. The company is widely recognized as a pioneer in the extraction field, and currently supplies some of Canada’s most well-known cannabis companies, including Canopy Growth and Emerald Health Therapeutics. Their 70,000 sq ft extraction facility is capable of processing 150,000kg of dry cannabis flower per year. This capacity is expected to increase to 250,000kg per year in 2019.

Valens GroWorks Corp. (OTC:VGWCF) (CSE:VGW)

Multi-licensed to provide cannabis products and services in Canada, Valens GroWorks already has signed hemp extraction agreements with huge names such as Canopy Growth, Tilray, The Green Organic Dutchman, and Organigram. With the capacity to process 240,000kg of dried cannabis and hemp per year, Valens boasts a leading edge cannabis research laboratory housed within Agritech, and Valens Farms, a 400,000 sq ft cultivation greenhouse that is in the early stages of development. To complement its extraction business, Valens also sells product development and white-labelling services.

Neptune Wellness Solutions Inc. (NASDAQ:NEPT) (TSX:NEPT)

Wellness products company Neptune Wellness Solutions specializes in the extraction, purification and formulation of health and wellness products. Across its team, Neptune brings 50 years of combined experience in the diversified wellness products market (ie. marine oils, seed oils, pet supplements and more). Since 2017, the company has signaled its intent to enter the high-growth legal cannabis market. However, it wasn’t until January of this year that the company finally received its license to process cannabis from Health Canada. Now playing catchup, Neptune has been able to satisfy on its previous multi-year supply agreements, including a June 2018 deal with Canopy Growth. The company has a 50,000 sq ft GMP-certified facility in Quebec, which later this year is expected to increase processing capacity to 200,000kg of dried cannabis later this year.

Beyond Canada and California, another example of potential for touching upon the edibles and extracts market like PLUS, is multi-state producer, Trulieve Cannabis Corp.

Trulieve Cannabis Corp. (OTC:TCNNF) (CSE:TRUL)

Trulieve Cannabis has grown its multi-state national presence, through a strategy to bring together operations across the California, Connecticut, Florida, and Massachusetts markets. In February, Trulieve found itself bridging markets between Colorado and Florida, by inking a deal with Colorado-based Love’s Oven LLC to bring their edible cannabis-infused baked goods, craft concentrates, and other products to Florida's growing patient base. Also recently, Trulieve signed an agreement with California-based Blue River Extracts & Terpenes™ to bring their award-winning terpene extracts and other trademark branded products to the growing patient base in the company’s home state of Florida.

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