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Cannabis manufacturers are looking for small scale manufacturers to diversify product offerings

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Licensed cannabis producers are looking to make deals with both small and medium sized retailers to add variety to their product offerings for the recreation market.

Since October 17, potential manufacturers have been able to apply for Microcultivation Licenses from Health Canada. The license limits the plant screen size to 200 square meters, but has less stringent safety rules than the standard cultivation license. Health Canada says so far that it has received 15 applications under the micro-subcategory to grow or process cannabis.

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Although the first microcultivation licenses are not expected to be issued for many months, established Licensed manufacturers have negotiated with small manufacturers and in some cases have signed offer packages. Some of these small producers are new players, while others currently produce cannabis illegally or grow under medical licenses.

Someone in the industry warns that the peasants may be in a disadvantage over the long term with these agreements, but the big companies that enter into the agreements emphasize the benefits a big partner can offer.

"If you have a microclass license and you are limited to how much you can produce, it will be difficult to have branding, packaging, a sales team – all you need to stand out in consumer minds," said Jordan Sinclair, Vice President of Canopy Growth Corp.

Canopy has a dedicated team focused on making deals with craftsmen, who are also Canopy Growth has not announced any finished deals yet, but negotiates with micro-makers while waiting for licensing. [19659007] "It's a very competitive room, even the ear, so we have a lot of interest from micro-manufacturers and potential micro-makers who wonder how to get the product to market," says Mr. Sinclair. "There may be someone who comes from the black market that wants to go over, or there may be someone who used to grow cannabis in the medical system."

The offers Canopy are negotiated, says Sinclair. A manufacturer can agree to sell a certain percentage of cannabis at a predetermined price on Canopy, which can offer funding and support for licensing and handling branding, packaging and distribution. If the cannabis producer already has its own established brand, it can maintain it and use Canopy as one of its distribution channels, "says Sinclair.

Cam Battley, CEO of Aurora Cannabis, says that the company obviously can not be involved in anything outside of the regulated system, but sees the potential to work with microcultivators that will fall under the new licensed regime.

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"We are in contact with a large number of people across the industry and we want to see the quality of the product that comes from the various microcultivators," says Mr. Battley. "We choose the very best craft manufacturers and we investigate the opportunity to help them develop their market and enable us to deliver high quality handwashed cannabis to our patients and customers. "

He says that with Aurora on track to produce 150,000 kilograms of cannabis next year, he does not need microcultivators to fulfill the company's delivery agreements to distributors.

" We are lacking supply but we are always looking for interesting crafts and interesting genetics. "

BC Craft Supply, a Victoria-based company that is becoming licensed, works mainly with black market manufacturers wishing to go legally. The company has registered half a dozen manufacturers so far and offers to help them become licensed with Health Canada for a premium of USD 25,000. Consumers agree to give BC Craft Supply the first right to reject cannabis at market prices.

Bron Hogan from BC Craft Supply says the interest of the manufacturers is high, but many are staying for now as they wait for the municipalities to determine the zoning rules for cannabis facilities so that they know where they can legally grow.

Surre Y, BC-based Zenabis is another licensed manufacturer offering that helps manufacturers with compliance, distribution and financing. The company has six craftsmen who have registered so far for their Zen Craft Grow program.

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Jaclynn Pehota from Vancouver Althing Consulting says that some of these schemes are good for independent manufacturers, but she recommends caution. "The licensing process is new and there is a lot of fear among the microcultivators. There is a lot of paperwork for people who are not used to the kind of paperwork and people think they need someone to do it for them. I've been contacted by many people who are afraid that they do not get into the legal market any other way and I do not think it's true. "

A medical producer in BC's Fraser Valley, James Gallagher, says agreements between major players and craftsmen can have negative consequences in road. He worries that if a player is going to dominate the market, it will be able to set prices for the smaller players.

Instead, Mr. Gallagher wishes to work with other craftsmen who will allow them to increase and share costs. Ideally, he says that they will be able to find a property that can be split so that more licensors can operate close to each other and get a default processing license to pack cannabis.

"By putting together a multitude of craft brands, it becomes much stronger and more investible," he says. "If we continue to build a processor ourselves, we control our own distribution, and as long as we are not bound to any contracts, we are more free to do what we want and set our own price."

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