Creso Pharma’s vital competitive advantages key to the future

4 minute read

By Trevor Hoey. Published at Jul 6, 2021, in ASX Biotechs

In a development that highlights the substantial benefits of a proposed merger between Creso Pharma Limited (ASX:CPH, FRA:1X8) and Red Light Holland, the former has secured its first purchase order from Red Light Holland’s wholly-owned distribution company SR Wholesale B.V.

This relates to Creso Pharma’s leading range of Swiss manufactured hemp CBD products, marking the first purchase order between Red Light Holland and Creso Pharma, and an important step ahead of the proposed creation of The HighBrid Lab.

In further news that reinforces the long-term shareholder value that can be generated by the merged entities, the parties are also aggressively pursuing product development initiatives across the psychedelics sector.

Should the proposed merger with Red Light Holland be approved, The Hybrid Lab will explore the potential of combining functional mushrooms and other compounds with Creso Pharma’s existing product suite.

The purchase order for Creso Pharma’s cannaQIX® hemp CBD lozenges and cannaQIX® hemp instant tea announced today is valued at CHF152,220 (A$218,803 ).

The products will be introduced under the established iMicrodose and/or other Red Light Holland brands.

Pursuant to the purchase order, Red Light Holland and SR Wholesale will market and distribute the products across the Netherlands underlining the vertically integrated efficiencies and supply chain management benefits that the combined entity could potentially deliver.

Commenting on this development, Creso Pharma non-executive chairman Adam Blumenthal said, “The maiden purchase order between Red Light Holland and Creso Pharma is an important milestone for both parties, and demonstrates the synergies and strategic opportunities driving the merger of the two companies.

"Red Light Holland has a number of established brands in the Netherlands, which are well known and trusted by consumers and to be able to white label our leading Swiss manufactured product suite through these has a number of competitive advantages to drive increased sales.

"We look forward to leveraging SR Wholesale’s distribution network to create a strong foundation for future growth.”

SR Wholesale distributes to more than 400 companies

SR Wholesale has a very strong market presence in the Netherlands, as well as an established distribution network of over 400 companies that sell CBD and other products across Europe.

This includes a number of sub-distributors, which provide access to over 1,000 shops across the Netherlands, Spain, Germany, UK, France and Portugal.

It is worth noting that similar to the US, regulatory conditions are being eased across Europe, a factor that is likely to continue, providing further opportunities for revenue growth.

On this note, market research recently conducted in the US has found that nearly a third of American consumers surveyed want cannabis to be sold in their local grocery stores.

The study was conducted by marketing agency Digital Third Coast (DTC) in April 2021.

Creso Pharma’s Swiss-manufactured products use innovative buccal formulations that enhance the bioavailability of the active ingredients.

Each product has been developed following considerable capital expenditure and R&D undertaken by Creso Pharma’s experienced management team in Switzerland.

Notably, Creso Pharma’s hemp tea products are based on full-spectrum hemp plants and utilise innovative technology to optimise the hemp CBD content allowing for a superior product taste.

Hemp tea considered food in a hemp extract regulated market

The company uses native tea instead of extracts, allowing Creso Pharma to sell the product in countries where hemp tea is considered food and hemp extract is regulated, enhancing Creso Pharma’s, and now Red Light Holland’s, ability to expand market reach.

This purchase order is an important first step in the potential merger of Red Light Holland and Creso Pharma to create The HighBrid Lab.

The introduction of these products will provide existing SR Wholesale customers with a greater understanding of Creso Pharma’s leading products and formulations.

Discussing the potential value-adding benefits of the companies’ multi-faceted product offering, Blumenthal said, “We continue to work very closely with Red Light Holland’s management team to explore potential product development initiatives that may involve the combination of functional mushrooms and other compounds into our existing CBD product lines.

"We intend to initially focus on both lozenge and tea delivery methods and leverage the existing knowledge to our Swiss-based management, as well as Red Light Holland’s extensive experience to progress the introduction of these new products as quickly as possible.

"We anticipate that orders from SR Wholesale will grow as customers and consumers realise the significant benefits of our CBD products.”

Not only is Creso Pharma geared to position itself as an entity with multiple revenue streams and a highly diversified geographical market presence through the proposed establishment of The Hybrid Lab, it is also providing investors with an alternative form of investment in the sector where it is much easier to create competitive advantages through combined product offerings and an integrated supply chain management system where distributors are less likely to encounter product supply disruptions.

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