Rubicon Organics Becomes Largest Organic Licensed Producer in Canada

Organic is a buzzword, a trend, an ethos that reflects a healthy approach to life. It’s also a certification that has real value in the world. In the cannabis industry, that value is reflected in a market where certified organic cannabis commands upwards of an 80% price premium in Canada. Aurora Cannabis Inc. (TSX: ACB) (NYSE: ACB), one of the largest cannabis companies in the world, recently recognized the intrinsic value of organic products when it agreed to buy Whistler Medical Marijuana Corporation (“Whistler Medical”) for C$175 million. Whistler Medical became Canada’s first certified organic licensed producer (“LP”) in 2014.

Rubicon Organics Inc. (CSE: ROMJ) (OTCQX: ROMJF) became, on February 1st, 2019, Canada’s fourth organic licensed producer, and its licensed organic footprint is currently the largest of any of the four companies’. Rubicon Organics’ Co-Founder and CEO, Jesse McConnell, was also the Co-Founder of Whistler Medical. The company’s Chief Scientific Officer, Peter Doig, wrote the certification standard for organic cannabis in Canada and designed Whistler’s original cultivation system. Together, they have figured out how to produce organic cannabis in high-yield hybrid greenhouses at an ultra-low cost of C$0.50/gram.

Organic Production is Difficult

With the built-in upside of higher margins, it is fair to wonder why more companies aren’t growing organic cannabis. The answer, of course, is that organic production at scale is incredibly difficult. Of the 150 or so licenses currently awarded by Health Canada, only four companies are organic. It takes diligent commitment, advanced systems, and a nuanced understanding of cannabis plant growth to raise organic crops at an industrial level.

Rubicon Organics has developed a proprietary production system that allows for high quality, consistent production of super-premium organic cannabis at an extremely low cost. Rubicon Organics asserts it can grow cannabis for C$0.50/gram. As a reference, Aphria Inc. (TSX: APHA) (NYSE: APHA) is touted as one of the industry’s lowest cost producers. According to an article in Marketwatch, the company was reporting cash costs to produce a gram of dried flower between C$0.90 and C$1.30, while selling grams for an average of about C$9.00. According to Statistics Canada, the average price for a gram of cannabis sold by legal suppliers, since full legalization, is C$9.70. On the BC Cannabis Stores site, you can buy a gram of Whistler Medical’s organic CBD Shark strain for C$17.99.

Hitting the Ground Running

Rubicon Organics has a head start out of the gates relative to typical newly licensed producers. Under the Cannabis Act the company is able to begin with an extensive proven genetic library of 1000’s of strains, and Rubicon Organics is already under production. The company has existing operations in both California and the state of Washington, with brands and product lines that have already been proven in those markets. When Rubicon harvests its first crop from its 125,000 sqft hybrid greenhouse facility in British Columbia, it will already have the product formulations and branding plans worked out. That BC facility has been specifically designed to be the best of both worlds by utilizing industry leading LED technology and supplemental sunlight, allowing Rubicon to produce super-premium quality at scale.

Rubicon Organic’s licenses cover both cultivation and processing, meaning the company will be able to immediately turn some of that super-premium cannabis into even higher-margin derivative products based on oils and extracts. The company’s Washington brand, Doctor & Crook, already specializes in processing cannabis concentrates for both the medical and recreational markets out of its own 40,000 sqft facility.

Rubicon Organic’s branding efforts are logically focused in California, especially in the trend-setting Southern California market. Its 1964 Supply Co. brand saturates the retail cannabis market in the area, partnering with artists for visually engaging packaging and sponsoring events like the International Surf Festival to cement its cool and hip image. The company’s plan is to marry the SoCal vibe with the eminently marketable BC organic cannabis products to create an internationally powerful brand.

Looking Ahead

Rubicon Organics’ recent licensing by Health Canada is a huge step forward in the company’s plan to become an international organic cannabis powerhouse. The company is positioned to capitalize on the overall trend to organics in an explosive, young industry that lacks significant competition for the organic slice of the cannabis market pie. By marrying proprietary organic growing systems with the most advanced hybrid greenhouse technology, Rubicon Organics is set to make a huge splash. Stay tuned for further developments.

Disclaimer 

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About Robin Lefferts