• Melodiol subsidiary Mernova Medicinal continues to grow as a dominant player in lucrative Canadian cannabis market
  • Product range expands into six Canadian provinces
  • Further cost optimisation initiatives to remove $400k from Mernova annual operating expenses

 

Special Report: Cannabis play Melodiol Global Health’s wholly-owned Canadian subsidiary, Mernova Medicinal, has inked deals with six different provincial markets to stock new products from its established Ritual brand.

Melodiol Global Health Limited (ASX:ME1) subsidiary Mernova Medicinal continues to achieve further operational milestones during Q1 FY24 after reaching agreements for new stock keeping units (SKUs) in six different provincial markets for Ritual.

The new SKUs are in addition to existing ones in the various Canadian markets and include:

  • Nova Scotia Liquor Commission has accepted Halifax Sage 3×0.5g pre-rolled joints and SugarBomb punch 1g vaporizers with an early April launch;
  • Newfoundland Labrador Liquor Commission will launch Halifax Sage 3×0.5g pre-rolled joints, Black Mamba 1g vaporisers and Black Mamba 10×0.5g pre-rolled joints on February 14;
  • Alberta Gaming and Liquor Commission will launch Sugar Bomb Punch 1g vaporisers by the end of February;
  • Ontario Cannabis Store has an early April launch date for Sacred Sage 3.5g dried flower, Sacred Sage 3x 0.5g pre-rolled joints, and Sugar Bomb Punch 1g vaporisers;
  • New Brunswick has accepted 3×0.5g Halifax Sage pre-rolled joints; and
  • Manitoba Liquor Commission will order Sugar Bomb Punch 1g vaporisers and Black Mamba Bubble Hash Infused Blunt at the end of February.

 

Dominant player in lucrative Canadian market

Mernova has become a major player in the lucrative Canadian cannabis sector, with its products legalised for both medicinal and recreational use.

Medicinal cannabis was first legalised in Canada in 2001.

Seventeen years later, in 2018, it became only the second country after Uruguay to legalise cannabis for recreation.

The Canadian cannabis market is projected to reach US$2.9bn in 2023, and with an expected annual growth rate of 15.4%, its market volume will likely hit $US7.98bn by 2028.

The company’s products are currently available in all major Canadian provinces including Ontario, Saskatchewan, Nova Scotia, New Brunswick, Yukon, Manitoba, Newfoundland and Alberta.

Mernova produces the Ritual brand of cannabis products from its 24,000 square feet (2,230m2) Nova Scotia facility that is scalable to 200,000 square feet (18,581m2).

To get a foothold of market share, Mernova’s products typically contain >25% THC content, making them some of the highest THC products available on the Canadian market.

ME1 says the additional ranges demonstrate Mernova management’s ability to further penetrate existing markets and conduct new product development for growth.

 

Focus on cash management

Additionally, ME1 management says Mernova has been focused on reducing operating costs in multiple areas, including:

  • Optimising shipping costs;
  • Reducing labour associated with using labelling equipment automation;
  • Removing underutilised office leases; and
  • Using third-party warehousing to store and ship products, and other ongoing streamlining processes.

ME1 says the costs-savings initiatives are forecast to remove ~$400k in annual operating expenses from the business and will be fully implemented by the end of Q2 FY2024.

Meanwhile, Mernova has delivered more than $1 million in revenue to date during Q1 FY24 through ongoing sales of the company’s dried cannabis flower, pre-roll joints and electronic vaporiser products.

The strong start to Q1 FY24 follows record unaudited revenue in Q4 FY23 of A$2.13m.

The Canadian subsidiary’s performance also assisted ME1 achieve record unaudited group revenue of A$21,577,431 during FY23, a 141% rise on PCP.

 

‘Impressive growth trajectory’

ME1 managing director and CEO William Lay is “very excited” by the range of new products across various provincial markets in Canada.

Lay also says he’s confident the additional range will assist Mernova in continuing strong growth that has been demonstrated over the last several quarters.

“This achievement is a testament to the strong reputation Mernova has for quality in the market, and management’s ability to develop new products,” he says.

“With further penetration into existing markets, Mernova has an opportunity to continue its impressive growth trajectory.”

 

This article was developed in collaboration with Melodiol Global Health, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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