Update on OCS “Flow-through” Program

Stratcann provided an update on the OCS flow-through program, an additional distribution model where retailers can order from an expanded catalogue of products that are not stocked in the OCS Distribution Center

The Breakdown

• The flow-through program is designed to allow retailers more options when selecting various SKU’s which can help enhance their ability to differentiate offerings to the consumer and providing more access points for producers.
• The OCS will still facilitate the wholesale purchase from producers, as well as the shipment to retailers
• The OCS pushed back the initial launch date of September 2021 and has now completed the pre-pilot phase and now moving towards the pilot-phase with a soft and full launch expected to take place later in the year.
• The flow-through program is a massive undertaking, but the frameworks appear to almost be in place. However, producers will still need time to test and understand consumer demand and several adjustments will likely be made over the next 1 -2 years.

Our Perspective

It appears the flow-through program was a bigger undertaking than the OCS originally expected. Although some may criticize the phased approach that the OCS is taking as slow, the flow-through program could have a huge impact on helping retailers differentiate themselves in a crowded market, increase accessibility for smaller producers and offer more selection for consumers. For a smaller retailer, having the OCS still in the middle of the flow-through system could help in a complex distribution system but may not quite be the direct B2B distribution system that the industry is hoping for.

Medreleafs Acquires Shelter Cannabis IP

MediPharm labs announced that it has acquired Shelter Cannabis with a non-dilutive transaction that is a 100% performance-based cash payment.

The Breakdown

• Shelter Cannabis offered white-label services to the medical market and known for its online marketplace of high-quality craft producers but in January announced it was closing shop.
• The purchase is said to include the entire IP portfolio of Shelter including trademarks, marketing assets, provincial listings and will allow MediPharm to access the dried flower and pre-roll market through the Wildlife and Craft brands and products.
• MediPharm will move production from Shelter’s facility in Saskatchewan to Barrie, Ontario.

Our Perspective

The closure of Shelter came as a shock to many in the cannabis industry, with medical patients in particular being negatively impacted by the surprise announcement. Shelter was beloved by many cannabis enthusiasts boasting some of the best producers of high-quality cannabis on their roster. Increasing access to these types of high-quality products and brands would be welcomed by consumers. However, with MediPharm primarily focused on cannabis extraction and processing in the medical it may also signal a lack of focus and discipline related to their original value proposition.

New Jersey Expected to Approve First Batch of Cannabis Cultivation Licenses

The Cannabis Regulatory Commission is expected to approve the first batch of conditional license applications for the cultivation and manufacturing of recreational cannabis on Thursday, March 24.

The Breakdown

• Five alternative treatment centers currently serving medical patients that applied to expand and also sell to recreational users are also expected to be approved.
• In order to receive approval, the treatment centers must demonstrate their ability to handle the supply demands for medical patients first and foremost and the adult-use supply is secondary.
• Late April or early May is the earlies we would see sale of cannabis to non-medical customers begin.
• Conditional license applicants, impact zone business applicants, and those that qualify for priority consideration will have their applications at the front of the line for consideration , part of the social-equity approach New Jersey has taken.

Our Perspective

The legalization of recreational cannabis in New Jersey has been a lengthy process since being approved by voters in November 2022. Approval of new producers and manufacturers will provide additional tax revenue, job opportunities, and increase access to legal cannabis overall. Particularly interesting with New Jersey’s approach is its clear commitment to prioritizing equity applicants and recognition of the impact the War on Drugs has had on minorities. New Jersey will likely face many challenges including supply shortages that plagues nearly every new cannabis market, and it would be naïve to think there won’t be other major issues that will need to be addressed once the market is up and running.