US cannabis producer signs 5-year deal with Canada

Cannabis producer Hydropothecary has signed a five-year deal with Quebec’s alcohol distributor, with total volume estimated at more than 200,000kg, ahead of Canada’s expected marijuana legalisation this year.

Hydropothecary announced yesterday (11 April) that it had signed an agreement with the Société des alcools du Québec (SAQ) which will see the distributor become “the preferred supplier of cannabis products for the Quebec market for the first five years post-legislation”.

The contract also includes an option to extend the term for an additional year. Hydropothecary’s products include cannabis flowers, powders and oil.

Under the terms of the agreement, Hydropothecary will supply 20,000kg of cannabis products in the first year, 35,000kg in the second and 45,000 in the third. The volume for the final two years will be determined at a later date.

In a statement, the company added: “In the event the volume requirements in years four and five of the agreement amount to 49,500 kg and 54,450 kg respectively based on an anticipated 10% growth rate in both the cannabis market and the Company’s supply requirements under the agreement, and assuming the mix of products supplied moves towards less flower and more value-added products as anticipated, the Company estimates the total volume to be supplied over the five-year term of the agreement could exceed 203,950kg”.

Co-founder and CEO of Hydropothecary, Sébastien St-Louis, commented: “Becoming the preferred supplier to the Quebec market out of the gate post legalization is a source of great pride and a vote of confidence in our ability to scale operations to meet our supply commitment.

“This agreement marks an important step in the execution of our growth strategy, which is focused initially on the Quebec market by expanding our Gatineau facilities and hiring new employees, and then establishing our presence in other Canadian markets.

“By doing business with Hydropothecary, the SAQ is engaging with a company that complies with the law and adheres to best practices in both corporate governance and the development and manufacturing of high quality and safe products”.

This follows news last year that drinks giant Constellation Brands had bought a 9.9% stake in Canadian marijuana company Canopy Growth Corp for £141 million and plans to make cannabis-infused drinks.

In this case however, Hydropothecary is benefitting from SAQ’s distribution model, especially given the Société québécoise du cannabis (SQDC) is a subsidiary of the SAQ, and there is no mention of making cannabis-infused drinks.

by Phoebe French for  Drinks Business

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