Tainted Cannabis and Vaping Illnesses Push Consumers Towards Premium Organic Products
NEW YORK, Oct. 22, 2019 /PRNewswire/ -- Ongoing news about tainted cannabis and vaping-related illnesses has put the spotlight on the quality of cannabis products on the market and many consumers are looking to get their hands on premium pot for better quality and taste. But, what does premium really mean? And is organic cannabis a safer option? Cannabis companies are like The Supreme Cannabis Company (TSX:FIRE) (OTCQX:SPRWF), MedMen Enterprises Inc. (CSE:MMEN) (OTCQB:MMNFF), and Cronos Group (TSX:CRON) (NASDAQ:CRON) are increasingly marketing their marijuana products as premium in a bid to attract this niche market and charge higher prices for their products. At the same time, companies like Canada's The Green Organic Dutchman (TSX:TGOD) (OTCQX:TGODF) and US-based Citation Growth Corp. (CSE:CGRO) (OTCQX:CGOTF) are offering certified organic cannabis. But it is organically grown cannabis that is becoming a differentiating factor for cannabis companies in an increasingly competitive market. What's more, offering organic products allows companies to sell their products for 26% more than regular-grade cannabis. So, what's the difference between organic and premium?
Premium vs Organic Cannabis
Organic refers to products that are grown without pesticides, fertilizers and genetic modifications. The global demand for organic products has been growing at a rapid pace in recent years due to environmental concerns and consumer awareness and is expected to reach $323.56 billion USD by 2024, while the US organic food market is on-track to reach $70.4 billion USD by 2025. As cannabis consumers become more educated on the importance of what is used to grow cannabis, the organic cannabis market is expected to follow suit.
That trend is already starting. According to Brightfield Group, nearly half of the cannabis consumers they surveyed were willing to pay more for premium marijuana strains, while 32% would dish out more money for certified organic products and 30% said they'd willingly pay more for lab-tested cannabis.
Canada and legal US states have all put their own sets of regulations in place to ensure products go through stringent lab testing. However, there aren't any rules in regards to labelling products as "premium" and cannabis companies are definitely not required to offer certified organic cannabis, which is why companies like Citation Growth Corp. (CSE:CGRO) (OTCQX:CGOTF) and The Green Organic Dutchman really stand out.
The Green Organic Dutchman (TSX:TGOD) (OTCQX:TGODF) has made a name for itself as the only Canadian licensed producer offering 100% premium certified organic cannabis products, however, when it comes to delivering premium organic cannabis to the legal cannabis market in the US, Citation Growth Corp. (CGRO-CGOTF) takes the cake.
Like its Canadian counterpart TGOD, Citation Growth can say with 100% certainty that its ultra-premium cannabis products are 100% triple organic certified.
In fact, Citation's North Las Vegas facility remains the only Nevada facility to be triple organic certified, giving the company the opportunity to realize higher margins on its products. Citation Growth Corp. (CGRO-CGOTF) uses premier award-winning seed genetics, proprietary organic cultivation techniques and medical-grade equipment to exceed production standards and significantly decrease the chance of crop failure.
Citation Growth Corp. is currently building out its North Las Vegas facility, which is expected to be 275,000 square feet in size once completed. Add that facility to its cultivation licenses in Pahrump and Citation has approvals in place to build 569,600 square feet in Nevada, making it one of the largest license-holders in the state.
Earlier this month, Citation Growth Corp. (CGRO-CGOTF) announced the launch of its new premium line of triple organic certified extracts. The new Diamante Brand product line will consist of Diamonds (high TCHa crystalline formations with fractionated terpene 'sauce' added), live resin, sugar waxes and live resin vape pens, all of which are made with the company's Fiore triple organic certified flower.
These new products provide Citation Growth access to the global cannabis concentrate market, which is expected to grow at a CAGR of 17.8% over the next seven years to reach $13.78 billion by 2026.
The company's Superior and triple certified organic brand Fiore along with Citation's other notable brands, Blunt Box and Gardens of WeEden are being sold in 47 of 60 dispensaries in Nevada and its Diamante extracts are expected to hit the shelves in the near future.
On the other hand, premium refers to products that are of superior quality or value. One example of this is opting for Hennessy XO Cognac over Costco's Kirkland Signature Cognac. Sure, it costs more to buy Hennessy, but you can definitely feel and taste the difference of high-quality premium alcohol over generic brands due to the care that's put in to create it. It's much the same for premium cannabis products like The Supreme Cannabis Company's (TSX:FIRE) (OTCQX:SPRWF) KKE cannabis oils. Supreme uses a multi-phased, whole plant CO2 extraction that preserves the cannabis plant's true terpene profile, resulting in flavorful oils that produce the desired effect.
Global cannabinoid company Cronos Group (TSX:CRON) (NASDAQ:CRON) also offers premium strain-specific cannabis oils through its BC-based COVE Cannabis brand. COVE uses a proprietary ethanol-free CO2 extraction method and makes its oils from indoor-grown terpene-rich cannabis flowers blended with MCT oil. Cronos Group is faring well in the cannabis extracts sector, with 20% of its $10.2 million Q2 2019 revenue coming from extract sales.
In September, Cronos Group established a foothold on the US market by acquiring Redwood Holdings Group, a US-based manufacturer of hemp-derived CBD skincare and other consumer products including high-end brand Lord Jones.
Meanwhile, US cannabis retailer MedMen Enterprises Inc. (CSE:MMEN) (OTCQB:MMNFF) claims to carry the widest selection of premium cannabis and CBD products at its dispensaries. Indeed, some of MedMen's products, like its Humboldt Apothecary topicals and tinctures, are premium small batch handcrafted products. However, with upwards of 20 brands on its menu, it's unlikely all of these products are premium.
Consumer Awareness Expected to Drive Demand
As cannabis consumers become more educated on the value of buying organically grown cannabis, the market for such products will likely take off. Not only is organic cannabis safer for consumption and environmentally sustainable, but it also offers a more robust flavor profile and better quality effect for the user.
Of course, there will always be a market for premium products like the ones offered by The Supreme Cannabis Company and Cronos Group as long as consumers continue to desire the so-called finer things in life. However, unless these companies can make a move towards organic products, they may not stand the test of time.
Even if they do jump on the organic cannabis bandwagon, Citation Growth Corp. (CGRO-CGOTF) and The Green Organic Dutchman are already way ahead of the game.
While TGOD has already taken the lion's share of the Canadian organic cannabis market, Citation Growth Corp. is making all the right moves to dominate the US market. From its premium triple certified organic dried flower to its Diamante extracts line, CGRO is moving into various sectors of the US organic cannabis market very quickly.
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