Canada marks one year of legalized cannabis
This time last year, Canada became the second country in the world to legalize recreational cannabis. While the industry has had a few missteps; supply shortages and lagging store openings due to licensing approval delays, cannabis has emerged as a massive growth driver, contributing more than $8.26 billion to Canada’s economy and adding 9,200 jobs. And we anticipate continued growth for the industry as consumers demand natural and effective plant-based products. We are seeing cannabis as something that’s relevant across several categories, including consumption, personal care and home care products.
As the industry reflects on the past year, we, at Neptune, also wanted to look back at what we accomplished in the last 12 months. In terms of corporate development for Neptune, the last year has been the most active we have been in a long time.
Neptune’s biggest year ever
Canadian cannabis operations
Kicking off in January, Neptune Wellness Solutions received a license from Health Canada to process cannabis. This marked the end of a long wait for the company and a concrete step to finalize our transition into the cannabis industry. With our license in hand, we started commercial operations in March 2019.
To support our newly installed capacity, in June we welcomed two new high-profile clients Tilray and The Green Organic Dutchman.
In October we expanded our capacity seven fold to 200,000 kg of biomass annually with the addition of our cold ethanol extraction process. And with our phase IIIa expansion, we are on our way to become one of the largest cannabis and hemp extractors in Canada. We estimate that our cold ethanol extraction technology could be up to 5x quicker than our current CO2 equipment and could consume 2x less energy than our CO2 technology. Our cold ethanol extraction process combined with a high level of automation positions us as a low-cost manufacturer in Canada.
2019 marked Neptune’s entry into the U.S. In July 2019, we closed the acquisition of North Carolina-based hemp producer Sugarleaf Labs and its consumer brand Forest Remedies™, which made Neptune one of the very few Canadian extraction company with a U.S. presence. We believe the U.S. market will be the largest cannabis and hemp market in the world and having a presence is essential to execute on our growth strategy.
In August we announced the creation of Neptune Ventures, our venture capital arm to foster strategic partnerships. We will actively invest alongside our customers , helping them to scale globally and grow into new markets while creating new brands, technologies and business models to drive the industry.
In October Neptune announced a product development collaboration with International Flavors & Fragrances Inc., to make hemp-derived CBD products for the U.S. market. IFF is a global leader in flavors and ingredients and we could not be happier to partner with such an established company.
We also recently announced a strategic partnership with American Media LLC, to help support the growth of our existing and future brands in the U.S., including Forest Remedies and OCEAN03
Neptune’s ambitious growth has created close to 100 jobs this year, including key management roles. The company welcomed Dr. Graham Wood as Scientific Officer, Martin Landry as Chief of Corporate Development & Strategy and Stephen Lijoi as Vice-President Operations. Neptune also appointed Michael Cammarata, as our new CEO in July. His diverse background in new market expansion and growing product lines is an asset for Neptune.
Strengthening our balance sheet.
In July we closed a $41 million private placement, to solidify our balance sheet. Our new CEO and our Chairman invested alongside existing and new institutional investors, a strong sign of confidence in our outlook. This new cash infusion will be utilized in part to fund an $11 CAPEX for the expansion of turnkey packaging and formulation and also our phase IIIa capacity expansion.
With our 20 years of extraction, Neptune is poised to leverage this acquired expertise to continue to expand. Once our expansions are complete and approved, our capacity is expected to reach 3,000,000 kg of biomass to be processed annually, spread equally between Canada and the U.S. Hence, with these sizable capabilities, Neptune is well positioned to capitalize on new product categories that come into effect today. So, some fits and starts for Canadian cannabis overall, but a clear road ahead for Neptune on this milestone day.