The Winnipeg cannabis confections plant — designed to be the largest in the country — is set to kick off production this week, two months after it was sold to another licensed cannabis producer.
Edibles and Infusions Corp., the brainchild of Cavalier Candies CEO, James Fletcher, will start making cannabis-infused soft chew gummies this week on a small production line that is capable of making 8,000 pieces per hour.
Equipment for much larger production rates — 31,000 pieces per hour — is en route from Germany and is expected to be commissioned and in production by the end of the summer.
The plant was originally a partnership between Fletcher and AgraFlora, a B.C. licensed producer.
But in April it was sold for $22 million to Organigram Holdings Inc., a licensed producer based in Moncton, N.B. (The purchase price was paid for in Organigram shares and Fletcher and Agraflora will receive up to an additional $13 million in shares of Organigram if certain sales milestones are met.)
Fletcher, who sold his stake to Organigram, which now owns 100 per cent of the Edibles and Infusions Corp., stays on as president of Edibles and Infusion and is happy with his new partners.
"Organigram have been fantastic partners," he said. "Their team has helped out with everything I could ask for. I’m happy we’re getting into production."
The enterprise has received $500,000 from the federal-provincial Growing Forward program and Fletcher said he is glad to be in the position of giving back to the province, hiring about 30 people over the next few weeks.
Paolo De Luca, chief strategy officer for Organigram Holdings Inc., believes the company’s investment in the Winnipeg production facility will give it a leg up on the competition.
"The future of cannabis is in derivative products like soft chews (gummies) and other forms of cannabis not related to combustion," De Luca said.
Currently the dried flower and pre-rolled market represents about 70 per cent of the Canadian recreational cannabis market. But most industry observers believe the derivatives, or so-called cannabis 2.0 products, will gain significant market share.
"Over time people who are shy about using cannabis or don’t want to smoke anything… (will mean) the derivatives product is going to be a big growth opportunity."
As the head of a company that has been making candy since 1922, Fletcher is very confident with the recipes he’s created for the cannabis products that include gummies (both gelatin and pectin-based) lozenges and caramel are going to be well accepted.
"Cannabis distillate is easier to work with than some other additives like vitamins that are very heat sensitive," he said.
As well as having the largest facility in the country at 51,000 square feet, a significant underlying goal of the design of the facility is that it will be the lowest cost producer.
Similar products now sold in some U.S. states where recreational cannabis is legal are less than half the price of similar products in Canada.
De Luca said marketing, branding and pricing plans have not yet been disclosed.
At the outset, virtually all the production will be distributed as Organigram-branded product but in the future both he and Fletcher said it is likely the Edibles and Infusions will make product for other licensed producers and sold under different brand names.
One month before Organigram’s acquisition of Edibles and Infusions, that was finalized in early April, the Moncton company received a $221-million investment from British American Tobacco (BAT) for close to a 20 per cent equity stake in the company.
Part of the rationale for the investment — the third tobacco company to make a significant investment in the Canadian cannabis market — is to expand the tobacco company’s market in non-nicotine and non-combustible products.
As part of the deal they will help fund a product development research and development lab at Organigram’s headquarters.
Although De Luca said BAT was unaware of the Edibles and Infusions deal, he said BAT people were very supportive when they heard about it.
"They are certainly looking forward to leveraging this asset," De Luca said.
The subsidiary of BAT that invested in Organigram is part of the company’s initiative to have 50 million consumers of non-combustible products by 2030 and to accelerate revenues in that category to $8.5 billion by 2025.
"They are looking for growth opportunities in safer and healthier categories," De Luca said. "Cannabis derivatives would be a play that could grow that category."
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.