Earlier this month, we began to comply with Flora Growth Corp. (NASDAQ: FLGC) after it accomplished a go-public transaction on the Nasdaq. The firm is an all-outdoor cultivator and producer of cannabis-derived merchandise and types and is concentrated on capitalizing on burgeoning worldwide cannabis markets.
Flora is concentrated on utilizing pure, cost-effective cultivation practices to provide cannabis derivatives to its various enterprise items of cosmetics, hemp textiles, and meals and beverage. The firm operates one of many largest out of doors cultivation services and we’re favorable on the economics which can be related to cultivating in Colombia.
The local weather in Colombia is right for cultivating cannabis. Several operators within the area have been in a position to produce every gram for lower than $0.10 every and we discover this to be a key facet of the story. We consider that Flora is within the early innings of a multinational progress technique and are favorable on how the enterprise has superior to this point this 12 months.
With 5 divisions and greater than 280 merchandise, Flora has a lovely working construction and we’re favorable on the verticals that it’s centered on. Currently, the enterprise has greater than 2,500 distribution factors in Latin America and within the US. Over the subsequent 12 months, we anticipate this quantity to extend and consider that it’s going to help the expansion of the enterprise.
Operating a Large-Scale Property in Colombia
Flora’s fundamental cultivation property is the Cosechemos farm which is 247 acres and is positioned in Bucaramanga, Colombia. The facility is absolutely licensed and has accomplished three profitable pilot crop plantings on virtually 5 acres. The manufacturing price got here in at $0.06 per gram and we discover this to be a key pillar of the story.
Currently, Flora is engaged on the completion of an extraction facility on the Cosechemos farm and we anticipate this improvement to function a serious progress driver. The facility will probably be constructed to EU good manufacturing apply (EU GMP) requirements and is anticipated to be full by the third quarter of 2021.
The advantages which can be related to an EU GMP facility are substantial and we take into account this to be a key worth driver of the story. The firm has already examined 30 types of CBD cannabis flower and reported spectacular information factors from these exams. Each plant is yielding greater than 125 grams per plant and we’re bullish on this.
Expands into the EU and Latin America
Last week, Flora introduced a serious milestone and reported to have expanded into the United Kingdom (UK) and Costa Rica. Initially, the corporate will fulfill preliminary orders from two new distributors and we are going to monitor how the enterprise grows in these markets.
Flora’s Kasa Wholefoods division fulfilled an preliminary cargo of Mambe juices to a distributor for the Central American meals and beverage market. In the UK, preliminary cargo of Almost Virgin, Mind Naturals and Mambe merchandise was fulfilled and we’re favorable on the expansion prospects which can be related to these markets.
We are particularly enthusiastic about Flora’s leverage to the UK because it offers the enterprise with a launch pad to enter further markets in Europe. The order is the corporate’s first cargo of cannabidiol (CBD) merchandise in Europe and we take into account this to be a transformational improvement for the enterprise. Going ahead, Flora intends to broaden on its relationship within the UK by bringing its whole product portfolio into the market and by increasing into adjoining markets all through Europe.
Focused on Executing on a Low Cost Growth Strategy
Just a few years in the past, there was a big spike in curiosity within the Latin American cannabis market and this can be a pattern that slowed down after a number of Canadian Licensed Producers (LPs) had been unable to execute on markets within the area.
Last month, Flora’s Kasa Wholefoods division signed a distribution settlement with GMD Latinoamérica, a Costa Rica-based distributor for the Central American meals and beverage market. Initially, exports will start in Puerto Limon, Costa Rica whereas Kasa begins to register further merchandise in Central American and Caribbean markets.
Flora is led by a administration staff that’s laser centered on creating a world cannabis platform. The firm’s transfer into the UK and Central America aligns completely with its aggressive enlargement technique as it really works to seize market share and create consciousness for its premium product portfolio.
An International Execution Story to be Aware of
Over the subsequent quarter, we anticipate Flora to broaden into further strategic worldwide markets within the EU and Latin America. By specializing in the sale of CBD CPG merchandise in addition to wholesale CBD and THC cannabis flower and derivatives, the corporate will personal strategic infrastructure property in rising worldwide markets and we’re favorable on the potential income streams which can be related to the technique over the long-term.
We are favorable on how Flora’s enterprise is structured and consider that will probably be capable of finding vital synergies between its divisions. By working a number of divisions which can be centered on creating premium CBD merchandise, the corporate ought to be capable to make the most of strategic distribution networks to develop every vertical of the enterprise.
Mind Naturals is the inaugural model from Flora’s Beauty division. The all-inclusive model makes use of premium CBD and components to craft an assortment of pure skincare merchandise. The model consists of 11 distinctive merchandise and caters to the mass-market and is offered throughout e-commerce channels in Colombia and the US.
Mind Naturals’ merchandise are additionally being distributed by the most important Latin American retailer, Falabella at 15 of the highest-traffic retail facilities in Colombia. The model has the chance to broaden throughout Falabella’s 111-store portfolio and we’re favorable on the quantity of income that may be generated via this retail outlet. The merchandise are additionally out there on Falabella’s e-retailer Linio, which attracts greater than 290 million guests per 12 months, and on Falabella.com.
Mind Naturals was developed by Paulina Vega, a famend determine within the vogue and wonder business. She is a former Miss Universe and Miss Colombia and can assist drive gross sales via e-commerce channels. We are favorable on the quantity of consciousness that she brings to the model and anticipate her relationships to open new stores for the model over the long-term.
Mambe is the first model behind Flora’s Kasa Wholefoods division. Mambe’s merchandise are made in Colombia and have over 980 distribution factors within the nation. By the top of 2021, the corporate expects the model to be provided at greater than 1,200 places and this might show to be a big progress driver for the enterprise.
Mambe’s largest buyer is Tostao’ Café & Pan, which is taken into account to be the Colombian equal of Starbucks. The model incorporates each CBD and non-CBD merchandise and was based by Laura Londoño, an award-winning Latin-American actress with greater than 1.3 million Instagram followers. We are favorable on the technique to deal with manufacturers which can be based by Latin America celebrities and anticipate the model to profit from the built-in consciousness that they’ve.
The second most essential model in Flora’s Kasa Wholefoods division is Almost Virgin. The model’s assortment of botanical sexual wellness merchandise is designed to reinforce sexual experiences and relieve stress. The Almost Virgin model is on the market on the market via e-commerce channels within the US and Colombia and we’re favorable on this product class.
Strengthening of the Balance Sheet is Expected to Support Growth
Earlier this month, Flora accomplished its preliminary public providing (IPO) of three,333,333 of its widespread shares. The providing was priced on the high-end of the proposed value vary and was offered for US$5 every for US$16,666,665 of gross proceeds. We anticipate the corporate to make use of the proceeds to extend manufacturing capability and additional broaden in strategic markets within the EU and Latin America.
One of the explanations we’re favorable on the construction of the enterprise is expounded to the low-cost nature of it. The firm is concentrated on areas the place it doesn’t must assemble state-of-the-art services to fight risky climate circumstances and we’re favorable on the economics which can be related to the present footprint.
With greater than 10 million sq. toes contracted for cultivation, Flora could possibly be one of many largest cannabis producers in Latin America and we’re favorable on the size of the property. By specializing in exporting each high-CBD and high-THC cannabis merchandise, the corporate can profit from main tailwinds within the world political panorama.
A Global Growth Story that’s Flying Under the Radar
During the final 12 months, a number of nations within the EU and Latin America have legalized some type of cannabis and this can be a pattern that we anticipate to turn into extra vital on a going ahead foundation. By specializing in EU-GMP infrastructure, Flora will be capable to export cannabis merchandise to a number of burgeoning worldwide markets and we are going to monitor how this facet of the story advances.
Over the long-term, Flora expects to scale manufacturing and provide cannabis spinoff merchandise to the worldwide market. Due to the size and the variety of the enterprise, the corporate ought to see margin appreciation because it continues to develop. Based on this construction, the administration staff is inclined to shortly develop the enterprise and seize further market share.
Flora is led by a administration staff that has a confirmed monitor file of execution and we take into account this to be probably the most essential points of the story. Collectively, the administration staff has raised greater than $3 billion of capital and listed greater than 50 public corporations. The administration staff has expertise in extremely regulated industries and we’re favorable on the experience that’s related to the staff.
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