California’s cannabis industry is projected to become one of the largest markets in the world following the legalization of recreational cannabis last year. With the passage of the Medicinal and Adult Use Cannabis Regulations and Safety Act, or MAUCRSA, there are a lot of legal nuances that investors should pay attention to when looking at opportunities. They should also keep an eye out for future legislation that could shape the industry.
In this article, we will take a look at California’s MAUCRSA framework, what it means for companies operating in the state, and why TransCanna Holdings Inc. (CSE: TCAN) represents a compelling opportunity.
Cannabis in California
With the passage of MAUCRSA, California’s legislature has taken a very different approach to regulation than Colorado, Washington, and other states that have legalized the recreational use of cannabis.
The most important element of the new law is that it enables cannabis retailers to deliver products statewide, making already rare non-storefront retail licenses even more valuable. Not surprisingly, the most valuable licenses are those in Northern and Southern California hubs that enable easy delivery across the state’s most populous regions. Investors may want to focus on companies that are securing licenses in these areas.
Distributors also have unique capabilities. Under the new law, distributors can package, repackage, label and roll pre-rolls without an additional manufacturing license, which means that cultivators often work with distributors to get pre-rolls to market without having to add a manufacturer to the mix. Cannabis licensees can also vertically integrate and act as their own distributor, which differs from the way that the state’s alcohol industry operates.
In addition, distributors can transfer product to other distributors under BCC Rule 5307.2 if the product has already met testing and quality assurance reviews. This means that many distributors could deploy very specific business models to capitalize on opportunities. Cultivators and manufacturers may work with one distributor for compliance testing and another distributor that specializes in retail relationships for placing products in dispensaries.
TransCanna plans to take a vertically integrated approach to the market with complete control over its nursery, grow, manufacturing, extraction and distribution capabilities. By taking this holistic approach, the company will be able to produce consistent products for its premium brand portfolio at a scale that benefits both retailers and their customers across the state without having to work with separate entities every step of the way.
In February, the company acquired a 196,000 sq. ft. facility that sits on 5.5 acres of land in Modesto, California, which is situated two hours south of San Francisco in Northern California. The vertically integrated, cannabis focused facility and the 5.5 acres sit in the areas “green zone”, allowing for cannabis related activities. The 5.5 acres will allow the company to expand up to 400,000 sq. ft., indoor nursery and cultivation. In short, the property could become one of the largest cannabis facilities in the state. The facility recently received a US$8 million renovation which brought most of the facility up to demanding USDA-grade standards.
“With the recent $8 million of tenant improvements performed, this is one of the largest cannabis focused, vertically integrated facilities in California,” said TransCanna CEO Jim Pakulis. “The intended use of the facility will be to transfer branded companies that we acquire, or that we create, and bring them in house. This means we have complete control over our nursery, grow, manufacturing, extraction and distribution.”
The new facility comes in addition to the company’s existing facility in Adelanto, California, which is near Los Angeles in Southern California. The combination of Northern and Southern California distribution centers, along with the planned three additional locations, creates a unique opportunity for the company to acquire and build brands that can reach nearly every major Californian market.
TransCanna Holdings Inc. (CSE: TCAN) represents a unique opportunity to capitalize on California’s market. With vertically-integrated facilities in place, the company is well positioned to execute on its plans to own a portfolio of 15 premium cannabis brands that it can distribute across the state.
For more information, visit the company’s website at www.transcanna.com.
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