Biome Grow (BIO.C) has signed the largest cannabis supply agreement in Atlantic Canada through its new deal with Province of Newfoundland and Labrador.
By Ethan Reyes – The Equity Guru
The three-year deal will see Biome Grow supply the Province with 24,000 kg of cannabis through its NL-based brand, Back Home Medical (BH).
Biome Grow will supply 4,000 kilograms in the first year and 10,000 kilograms annually for the remaining two years. The deal also enables Biome Grow to recover as much as $52 million through reduced remittances to the NL liquor board.
Khurram Malik, CEO of Biome Grow, said financial incentives and the opportunity to create jobs in NL were two interwoven factors behind the move into Atlantic Canada.
“75 percent of all the licenses are in Ontario or BC. The rest of the country is not as well covered, and, as distribution has been punted from the Federal government to the Provincial governments, being local and branding local makes a difference,” Malik said.
As a partner with Jacob Capital Management, Malik is as much a market forecaster as he is a CEO. Sometime around 2020, Malik predicts the Canadian cannabis sector will experience a normalization of supply and demand, what he calls ‘The Day of Reckoning.’
“You’re going to go from about 200 names to a dozen big guys and a handful of craft, niche-y guys. Everyone else is going to be bankrupt and gone. Canada only has 34 million people,” Malik said.
Biome Grow is valued at $112 million. With deep-pocketed players tightening their grip on a small market, Malik said his company has to “build something defensible” in order to survive.
“The way we feel we can do that is to build provincial brands and to stick our facilities and our businesses into economically depressed regions where we will have a greater impact in that community.
As an example, Malik cites Biome Grow’s presence in Nova Scotia: “We’re not near Halifax, we’re in Antigonish. We’re the largest new employer there they’ve seen in generations and that’s really important to us.”
By integrating themselves into a community, Malik said he feels it will be difficult for a larger Ontario-based company to dislodge Biome Grow from their foothold…
ABOUT BIOME GROW (CSE:BIO)