With the date now set for Canada to fully legalize adult-use cannabis on October 17, 2018, it may be useful for investors to review how companies are positioned for the event. There are a lot of moving parts at this point, with wholesale supply concerns, branding and advertising rules, and retail licensing among them. Choom Holdings Inc. (CSE: CHOO) (OTCQB: CHOOF) was formed with the sole intent of creating a recreational brand for Canada, and recent developments including a strategic investment by Aurora Cannabis Inc.(TSX: ACB) (OTCQB: ACBFF) (FRA: 21P) show that the company is on track to make a splash this fall.
Significance of Aurora/Choom Relationship
Over the last several months there has been a pattern of established Canadian licensed producers investing in, partnering with, and acquiring retail oriented companies in anticipation of full legalization. On June 18, Choom™ and Aurora announced that Aurora acquired a 6% ownership interest as a cornerstone investor in Choom’s private placement.
Aurora is one of the largest licensed producers in the world with a market cap of approximately $5.5 billion. Why would a large global company take an interest in Choom? Aurora CEO Terry Booth explained, “This strategic investment positions Aurora to participate in the emerging craft cultivation market, as well as in an exciting Western Canada retail strategy with a seasoned team of executives. Choom’s product cultivation strategy puts the cultivar first, developing a high-grade offering with unique flavour profiles, which are anticipated to resonate strongly with the adult-use consumer market, once legalized. We’re pleased to close our investment in Choom, and look forward to building a strong, long-term relationship with the team.”
In short, Aurora is interested in Choom’s retail and branding strategy. Choom is focused on building out a national retail point of sale presence to reach the cannabis consumer with upscale retail settings and handcrafted strains. As a company that is ensconced in the medical marijuana sector, Aurora is focused on ramping up production to meet a projected shortfall in Canadian cannabis supply. Its investment offers entree to the much larger recreational market and leans on Choom’s experience and retail strategy to help it bridge the gap.
For Choom, the deal offers validation of its efforts to date as well as useful capital to help speed up the company’s development. Already proceeding quickly on both the cultivation and retail fronts, Choom is looking to execute its multi-province strategy as quickly as possible with October 17 looming.
Other Choom™ Developments
Choom is carrying out an aggressive strategy to establish its retail presence in Alberta, British Columbia, and Saskatchewan. The company currently has more than 40 retail locations secured and permits submitted throughout the three provinces, and the team is actively working on securing more locations in the near future.
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