Creso Pharma's Mernova enters Canada’s largest recreational cannabis market

By Hannah Goldman. Published at Feb 17, 2021, in ASX Biotechs

Creso Pharma Limited (ASX:CPH, FRA: 1X8) has announced that its wholly-owned Canadian subsidiary Mernova Medicinal Inc. has secured four purchase orders (“PO”) for its leading Ritual Green product range, with a total value of C$494,131 (A$502,199).

These POs mark Mernova’s entry into Canada’s largest recreational cannabis market, with two separate purchase orders from the Ontario Cannabis Retail Corporation (“OCRC”), which operates as the Ontario Cannabis Store (OCS), valued at C$228,323 ($A231,911) and C$115,008 (A$116,815), for a total value of C$343,331 (A$348,726).

Along with this, additional POs from Cannabis NB in New Brunswick and Nova Scotia Liquor Corporation highlight a shift towards a recurring revenue model.

Further PO’s for Ritual Green products are expected to materialise in the coming months, as well as additional POs from its recently launched Black Mamba strain and pre-roll joint range.

Mernova is on track to deliver a record quarter of POs, and continued repeat orders and customer uptake is highlighting Mernova to be a strong revenue generator for Creso.

The shortened interval between receiving new POs and the growing value of each PO is extremely encouraging – outlook for remainder for financial year is extremely positive.

Mernova Managing Director, Jack Yu said: “We are very pleased with the strong demand that we are witnessing for our Ritual Green Brand across Canada and the opportunities that are beginning to materialise. Importantly, these purchase orders mark the Company’s entry into Ontario, which is Canada’s largest recreational cannabis market.

“We anticipate that purchase orders will continue to grow in frequency, size and volume, especially with the launch of our latest premium, artisanal, craft strain, Black Mamba. To support the launch and increase brand awareness, Mernova has initiated a number of branding and sales campaigns, including on social media, in coordination with high profile Canadian influencers.

“We will utilise these marketing tools to promote the launch of other products in the pipeline, including our pre-roll joint range, which will significantly increase the number of options available in our product line, and grow our customer base and market share.

“Mernova has a number of growth initiatives planned in the coming months, and we look forward to providing regular updates to shareholders.”

Mernova recognised as a supplier to the OCS

The OCS is a crown agency solely owned by the Province of Ontario. It reports directly to the Ministry of Finance and is Ontario’s only retailer and wholesaler of legal recreational cannabis.

The group provides legal cannabis to a large customer base through Health Canada approved suppliers. Ontario is currently Canada’s largest recreational cannabis market and represents a major opportunity for the Company.

In December 2020, we reported that Mernova had been formally recognised as a supplier to the OCS.

The initial POs are for the company’s Ritual Green products, which will be sold through established stores and the OCS online sales platform.

Creso expects to deliver the first purchase order in the coming weeks, with the second PO to be completed shortly thereafter.

The company anticipates ongoing orders from the OCS over the coming months, and expects them to increase in size and volume as Ritual Green’s market share continues to grow across Ontario.

Additional purchase orders

Mernova has also secured a repeat purchase order from Cannabis NB, New Brunswick’s only legal cannabis retailer, valued at C$81,800 (A$83,402) for an assortment of its Ritual Green cannabis strains.

Cannabis NB is the government-owned retail cannabis monopoly in the Province of New Brunswick. The group has an established footprint, boasting 20 retail outlets across the province, as well as an online sales platform.

This is the second PO the Company has received from Cannabis NB, once again highlighting the considerable demand Mernova is witnessing for its products.

The Company has also obtained a C$69,000 (A$70,352) order from the Nova Scotia Liquor Corporation (“NSLC”) for its Lemon Haze strain, which will be delivered by the end of the month.

This marks the ninth PO for Mernova’s products in Nova Scotia, highlighting the Company’s recurring revenue model.

New strains and growth initiatives increase demand

Creso anticipates additional POs to include its recently launched Black Mamba strain. Black Mamba is an Indica dominant strain, testing at over 20%+ THC content.

It has been developed from the well-known and sought after cannabis stains Grand Daddy Purple and Black Domina.

The Company also has a number of growth initiatives pending, including the launch of its pre-roll joint range, and entry into the emerging hash market.

Mernova is also exploring a number of potential licensing agreements that may significantly scale up operations.

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