Cannabis is the most widely-used illicit drug worldwide; about 2.5% of the world, i.e. approximately 150 million people, consume cannabis, and Australia is among the top countries leading the trend. While it sounds the alarm on the concerning drug abuse problem, it also signals a profitable market for companies in the field.
Cannabis-based medicine and recreational product manufacturer Althea Group’s (ASX: AGH) subsidiary Peak Processing Solutions has signed a manufacturing agreement with Tweed, a subsidiary of Canopy Growth Corporation, a diversified cannabis, hemp, and cannabis device company. As part of the agreement, Peak will be responsible for developing some cannabis-infused drinks for Tweed for the Canadian market.
Peak Managing Director, Barry Katzman, said, “We are pleased to be partnering with one of the most renowned cannabis brands in the world in Tweed. This partnership is a bold step in Peak’s mission to become the most trusted, best-in class, 3rd party solution provider to the global recreational cannabis industry.
“Peak is already the preeminent industry leader in cannabis beverages, and the agreement with Tweed potentially paves the way to other opportunities for mutual growth. The Company looks forward to updating shareholders about the CMA and further Peak business developments in due course.”
Tweed, a prominent player in Canada’s cannabis beverage industry, offers a diverse range of products, such as iced teas and lemonades, containing varying THC concentrations, ranging from 2.5mg to 7.5mg per serving. Additionally, its Deep Space brand provides carbonated high-dose beverages, each containing 10mg of THC. Tweed has entered into an agreement with Peak, where Peak will serve as the contract manufacturer for cannabis-infused products, catering to the Canadian adult-use market on behalf of Tweed Inc.
The projected value of the Canadian adult-use cannabis market for 2023 is CAD$6.4 billion ($7.17 billion), with the cannabis beverage product category accounting for approximately 2.1% or CAD$134.4 million ($150.6 million) of the total market.
The Company recently also entered the Irish market. In May 2023, the Health Products Regulatory Authority (HPRA) granted approval for the sale and distribution of Althea’s cannabis oil in Ireland, a country known for its tough entry barriers. Althea’s flagship cannabis oil, which is THC-dominant and named Althea THC20:CBD1, received approval under Ireland’s Medical Cannabis Access Program (MCAP). As a result, the Company has become the exclusive provider of multiple HPRA-approved cannabis oils, including Althea CBD12:THC10 and Althea THC20:CBD1. Tilray is the only other supplier with a THC-based oral solution registered in Ireland.
The agreements are a bonus as Althea is coming off a particularly lucrative year. Althea’s total customer receipts for FY23 reached $33 million, marking a substantial 51% growth compared to FY22. Additionally, for the quarter ending on June 30, 2023, the Company achieved yet another record quarter with $9.5 million in customer receipts, representing a remarkable 44% increase on pcp. During this quarter, the net cash used in operating activities significantly decreased by 78%, reaching an all-time low of $368,000. This reduction is attributed to the combination of increased sales and the continued implementation of rigorous financial controls.
During FY23, Peak recorded $19.23 million in customer receipts, marking a substantial $8.43 million increase compared to the previous year. Moreover, in the June quarter, Peak secured 14 new listings with the Ontario Cannabis Store (OCS), one of which is for Canada’s pioneering cannabis-infused wine.
The Tweed agreement then appears as a natural progression for the Company, which has been swiftly entering the Canadian adult cannabis market. Plus, Peak is also entering the vape and pre-roll markets, transforming itself into the Snoop Dogg of the adult-use cannabis world.
Alinda is a Business Reporter for The Sentiment
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