The move will give the company greater control over the seed-to-sale process, increasing its margins
AgraFlora Organics International Inc () (OTCMKTS:AGFAF) revealed Thursday that it is designing two onsite farm-gate cannabis retail outlets next to its sprawling licensed cultivation and processing facilities in Scarborough and London, in Ontario.
The company’s stock recently traded up 9.1% to C$0.12 in Toronto and 4.1% to $0.09 In New York.
In a statement, the Vancouver, British Columbia, company said a 1,200 square foot farm-gate retail outlet will come up next to its 37,000 square foot licensed cultivation and processing facility in Scarborough, which sits on 16 acres of land. AgraFlora and its joint venture partner have the option to expand the current production area to 89,000 square feet.
Similarly, another 690 square foot farm-gate retail facility will adjoin its 8,000 square foot London, Ontario AAA Heidelberg-licensed craft cannabis cultivation facility. London is Canada's 11th largest metropolitan area and lies at the nexus of Toronto, Ontario, Detroit, Michigan, and Buffalo, New York, allowing the company an opportunity to tap into the cannabis tourism marketplace.
READ: AgraFlora Organics subsidiary to import CBD products into Japan and Hong Kong
On November 6, the Ontario provincial government released its 2019 Ontario economic outlook with key updates on how it will open the market for cannabis retail. The revised legislation allows licensed producers to establish retail stores on their production sites.
AgraFlora said its farm-gate marketing effort will provide “prime proximity” to a potential catchment area of over 8.5 million cannabis purchasers. AgraFlora’s onsite farm-gate retail stores will ultimately give the company greater control of the cannabis ecosystem, from production to end distribution while promoting vertical integration. It will also give the company more power to set prices.
The farm-gate stores will establish new direct-to-consumer distribution channels for AgraFlora as it progresses towards production in the first quarter of next year. The company's 2020 output of dried cannabis flower is projected at roughly 170,000 kilograms, with contributions from its 2.2 million square foot Delta Greenhouse facility, licensed producer Sanna Health/Sustainable Growth Strategic cultivation and processing facilities and its purpose-built AAA Heidelberg craft cannabis cultivation facility.
Additionally, AgraFlora expects to recapture over one million grams of premium cannabis trim to be manufactured into ancillary value-added cannabis products on an annualized basis.
“Unlike traditional cannabis distribution and marketing channels, the establishment of onsite farm-gate retail facilities will arm us with greater control over the desired seed-to-sale process, increasing margins and improving quality assurance protocols through the cannabis value chain,” said AgraFlora Organics CEO Brandon Bobby in a statement.
“It is our objective to execute on this initiative as quickly as the regulatory and permitting process allows. It is our expectation that this new direct channel will contribute significantly to our revenue and margin expansion into fiscal 2020,” he added.
AgraFlora is based in Vancouver and owns an indoor cultivation facility in London, Ontario, as well as an edibles manufacturing facility in Winnipeg, currently being retrofitted.
The company is also a joint venture partner in Propagation Services Canada Inc, which operates a 2.2 million-square-foot greenhouse complex in Delta, British Columbia.
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Contact the author Uttara Choudhury at [email protected]
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