Delta 9 strikes new distribution deal

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This article was published 16/04/2022 (1638 days ago), so information in it may no longer be current.

Since its founding in 2013 and as one of the original 13 cannabis producers licensed by Health Canada, Winnipeg-based Delta 9 Cannabis has worked hard to become increasingly more integrated.

One of the few licensed producers in the country with its own chain of retail stores, the company also manufactures its own climate-controlled grow pods and sells them as turnkey growing environments to other producers.

This week it has entered into a distribution agreement with Manitoba Liquor and Lotteries Corp. and will now start operating a cross-docking distribution operation to Manitoba cannabis retailers on behalf of the other 150 licensed producers in the country.

“We see Delta 9’s entry into the distribution services space to be the logical next step in the company’s vertical integration strategy,” said John Arbuthnot, CEO of Delta 9. “Delta 9’s existing relationships with the Canadian cannabis industry’s leading suppliers and centralized warehouse presence in Winnipeg make us the ideal provider of these market services.”

Producers from outside the province might want to ship to Manitoba but smaller volume shipments can mean the producer loses money.

Ian Chadsey, the company’s vice-president of corporate affairs, said, “We are already shipping our products to all of these facilities and we are not losing money at it. To add more parcels to the shipment is not going to be much of an extra cost.”

The company has already built a secure facility at its Transcona campus with 30-foot fencing around the distribution building with security cameras and swipe card entry so to start handling third party product will not cause much, if any, additional cost.

It’s now just waiting for receipt of a distribution licence from the Liquor Gaming and Cannabis Authority before it starts receiving and distributing product.

Venkata Velagapudi, an analyst with Research Capital, said this third party distribution operation will create an additional revenue stream for the company.

“We view Delta 9’s distribution agreement with Manitoba positively as it enables Delta 9 to vertically integrate further and boosts revenue and margin outlook,” he said in a note to his clients.

Delta 9 already has a dominant share of the cannabis retail market in Manitoba — about 30 per cent — and although it will be moving product from other producers it will serve to further insert itself into the cannabis supply chain in Manitoba.

martin.cash@freepress.mb.ca