Winners of the MBLL Supply Agreement
On Friday, June 29th, 2018, six cannabis companies announced sizable supply agreements with the Manitoba Liquor and Lotteries Corporation (MBLL). The MBLL is a crown agency and sole regulator of gambling and the distribution and sale of alcoholic beverages in the province of Manitoba. For a total minimum of over 17,000,000 grams of cannabis during the first year of recreational sales, the six companies’ share is allocated as follows:
Out of the six companies chosen as suppliers for Manitoba’s cannabis market, five are publicly traded. Tilray Canada Ltd, has recently been speaking of an IPO, which will likely make all six companies available on the market.
The Expected & Unexpected
With Canopy Growth Corporation & Aphria Inc. being the largest producers of medicinal cannabis in Canada, as well as their future increase in growing capacity, these two giants were expected by many investors to sign with multiple provinces, including Manitoba. Similarly, OrganiGram Holdings agreement was much anticipated, however, the total amount was undisclosed in the company’s press release.
What shocked most investors was Delta 9 Cannabis & Maricann Group’s inclusion. Delta 9 Cannabis’ agreement to supply 2.3 million grams for the first 12 months, is almost the size of Aphria’s. At the estimated retail value of $8 to $12 per gram, Delta 9 is likely to bring in over 10% of it’s current market cap in revenue from the first year alone, the largest of any licensed producer.
Where are the Others?
Other large licensed producers including Aurora Cannabis, Cronos Group, and even Hydropothecary were left out of Manitoba’s supply agreement. Does this mean that they won’t have a slice of the pie? Probably not. With Health Canada’s anticipated national demand for cannabis being over 1 billion grams by the end of 2018, the MBLL’s 17 million grams seems to be begging for more suppliers. Manitoba houses ~3.4% of Canada’s population, however the 17 million grams only meets 1.7% of the estimated demand.
In addition, Ontario’s cannabis MOUs have not been announced yet. It is anticipated to include many of the companies excluded from other provinces’ agreements due to the sheer size of demand. There will always be some winners and losers. Some companies may have been excluded from Manitoba’s MOU, but one thing's for certain - there will be many more supply agreements leading up to October 17th.