The Supreme Cannabis Co. (TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1) reported fiscal third quarter revenue that soared 382% year-over-year and 29% sequentially to $10 million. The gains were largely due to a 63% increase in recreational cannabis sales.
“Revenue growth was driven by an increase in our capacity at the 7ACRES facility, a ramping up of our product packaging capabilities and, we believe, consumer preference for high-quality cannabis,” says CEO Navdeep Dhaliwal.
While many licensed producers have focused on expanding production capacity, the company’s consumer-oriented approach has led to strong consumer feedback, status as a top-ten revenue producer in the industry, and recognition as a coast-to-coast award-winning premium brand. The company’s leading position as a premium brand could insulate it from the effects of commoditization and maintain premium margins over time.
The company began selling products into the recreational market with its award-winning “Respect the Plant” marketing campaign. Sales revenue from recreational markets were a key revenue driver during the quarter with a 63% sequential increase. In addition, the company continues to provide high-end dried flower to wholesale buyers, including Tilray Canada Inc. (NASDAQ: TLRY), under the original terms of those agreements.
Growing Revenue & Profitability
Supreme Cannabis plans to further expand its revenue and profits by increasing production capacity and moving into new higher-margin markets.
7ACRES recently received Health Canada approval for an additional 50,000 sq. ft. of production space, which brings its total licensed production space ot 230,000 sq. ft. Along with new technologies and the licensing of all 25 flowering rooms, management projects that its production capacity could reach approximately 50,000 kilograms per year.
At the same time, the company has been working with MediPharm Labs Inc. (TSX-V: LABS) to produce premium oil products. The two companies are operating under a three-year agreement whereby 7ACRES will supply a minimum of 1,000 kilograms of high-quality cannabis trim as input for extraction and production of premium oil products. These high-margin products will be sold under the Supreme Cannabis brand.
The company also agreed to acquire BlissCo, a distinct and authentic premium wellness brand, following its strategic partnership and prior investment. The transaction enables BlissCo to focus its business around the production and commercialization of cannabis oils and topicals for the premium wellness consumer and opens the door to a new revenue stream and market opportunity for Supreme shareholders.
Investing in the Future
Supreme Cannabis also continues to invest in research and development initiatives aimed at improving its products.
For example, the company recently launched a cannabis genetics company, Cambium Plant Sciences, that will focus on developing next generation premium cannabis genetics for recreational, medical and wellness applications. The subsidiary will operate out of a 34,000 sq. ft. facility in Goderich, Ontario and has already commenced the Health Canada licensing process that’s required prior to entering operation.
Its Medigrow investment, located in Lesotho, also continues to make progress in building future international expansion opportunities. The company scaled its operations to more than 250 employees and successfully achieved a positive Certificate of Analysis from a U.S.-based laboratory. Supreme Cannabis believes that the company could reach an annual run rate of 40,000 liters of cannabis extract with additional scaling efforts.
The Supreme Cannabis Co. (TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1) has made significant progress in growing its revenue during the fiscal third quarter. In addition, the company continues to advance its efforts to grow revenue, increase profitability, and expand its operations into international markets through various initiatives.
Investors may want to keep an eye on these efforts over the coming quarters.
For more information, visit the company’s website at www.supreme.ca.