HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) is a Top-Tier Canadian Cannabis Poised for Strong Potential Growth

The future of the North American legal cannabis market has never been brighter.

Canada’s legalization of marijuana for recreational use has been followed by the passage of the Farm Bill in the United States, which allows CBD extraction from hemp and removes it from the nation’s restricted list.

This growing trend toward legalization – which includes an increasing number of U.S. states approving cannabis for medical or recreational use – has helped fuel a red-hot bull market.


An Emerging and Rapidly Growing Global Market


If fact, analysts at Piper Jaffray now project that the global cannabis market has the potential to expand to $250 billion-per-year in the long term.[i]

And while investors looking to take advantage of this bull market for legal cannabis have several potential investments to consider…

One company – Quebec-based HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) – has quickly emerged as one of North America’s leading producers.

With the single largest forward supply contract in Canada – and a game-changing partnership with Molson Coors — HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) is in a great position to continue its impressive recent growth in the months and years ahead.

Canada’s Largest Supply Agreement Calls for $1 Billion in Potential Revenue

HEXO Corp is a creator and distributor of award-winning, innovative, easy-to-use products to serve the cannabis market.

The Company is working to become the premier branded ingredients for food (IFF) cannabis company in the world.

One of Canada’s lowest-cost producers, HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) has 1.3 million sq. ft. in production and growing facilities at its Quebec campus.

HEXO Corp (NYSE-A: HEXO); (TSX: HEXO)’s Canadian sales are bolstered by the fact that the Company has secured the single largest cannabis forward supply contract in Canada. With increasing production capacity and commitment to innovation, the contract is considered a starting point.

This contract is HEXO’s 20,000 kg supply preferred supplier contract – signed in April 2018 – with Quebec for the first-year post legalization.

This agreement allows for $1 billion in potential revenue over five years, with an option to renew the agreement for one additional year. It establishes a market share of more than 30% for HEXO Corp. in Quebec over the first three years of the agreement.

With this groundbreaking supply agreement in place, HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) has firmly established a leading position in the Canadian market and has its sights set on further expansion.

Award-Winning Product Innovation Helps HEXO Corp Stand Above the Competition

HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) is a leader in product innovation in the Canadian cannabis space. The Company currently has 37 unique adult-use product offerings – available for online shipping and retail – including dried flower, sublingual sprays, intimate oil and decarboxylated powders.

In fact, HEXO Corp’s Elixir CBD peppermint sublingual spray was a 2018 Canadian Cannabis Award Winner, taking home the Cannabis Product of the Year and Innovation of the Year Awards.

And HEXO Corp’s Decarb activated powder was a 2017 Canadian Cannabis Award Winner, recognized as the Best New Cannabis Product for 2017.

Joint Venture with Molson Coors Canada Offers Exposure to Rapidly-Growing Beverage Market

The cannabis-infused beverage market is in the early stages of significant growth phase.


Global Cannabis Beverages Market


Industry experts at Zion Market Research project the global cannabis beverage market will reach $4.46 billion in revenue by 2025…with a compound annual growth rate (CAGR) of 15.6% over the next six years.ii

HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) is well-positioned as a potential major player in the cannabis-infused beverage space thanks to the Company’s joint venture agreement with one of North America’s leading beverage companies – Molson Coors Canada.

This joint venture agreement calls for the formation of a start-up company – known as Truss– with a stated goal of pursuing both global and Canadian opportunities to develop non-alcoholic, cannabis-infused beverages where legal.

With the backing of two partners with deep Canadian roots, proven success and market-leading experience in the respective beverage and cannabis industries in Canada, Truss will hit the ground running.

When cannabis edibles, vapes, beverages and other consumer packaged goods are legalized in Canada – which is anticipated to happen before the end of 2019 – Truss will be ready to make its mark as a responsible leader in providing high-quality beverages for the Canadian consumer and potentially for international markets.

Truss is structured as a standalone company with its own board of directors and independent management team. Molson Coors Canada has a 57.5% controlling interest with HEXO Corp. holding the remaining 42.5%.

This potentially lucrative partnership with Molson Coors Canada serves as a unique confirmation of the potential for HEXO Corp (NYSE-A: HEXO); (TSX: HEXO). When looking for a potential joint venture partner in the cannabis-infused beverage space, Molson Coors Canada could have selected anyone.

Molson Coors Canada’s faith in HEXO Corp’s potential – in both the near- and long-term – is worth considering when investors are looking for upside potential in the North American cannabis space.

This partnership is also reflective of a “hub-and-spoke” business growth strategy favored by HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) where the Company looks to work with carefully-selected partners for entry into new market segments.

HEXO Corp’s Acquisition of Newstrike Brands Ltd. Expands Capacity

On March 13, 2019 HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) announced an agreement to acquire Newstrike Brands Ltd. (TSX-V: HIP), a licensed producer of cannabis that is licensed to both cultivate and sell cannabis in all acceptable forms.

This transaction will add talented employees and infrastructure to HEXO Corp which will help the company move closer to its goal of becoming one of the largest cannabis companies in the world.

Here are a few highlights of this transaction for HEXO Corp (NYSE-A: HEXO); (TSX: HEXO):

  • Premium indoor facility: Newstrike’s licensed indoor facility provide HEXO Corp with access to diversified growing techniques and helps broaden HEXO Corp’s market outreach across Canada and prepare  as global cannabis markets continue to open.
  • Capacity boost with state-of-the-art cultivation infrastructure: The Transaction gives HEXO Corp the capacity to produce approximately 150,000 kg of high-quality cannabis annually. The Transaction also provides HEXO Corp access to four cutting-edge production campuses totaling close to 1.8 million sq. ft. of near-term cultivation space and diversified growing and production techniques.  This is in addition to HEXO Corp’s 579,000 sq. ft. facility for a manufacturing and product development center of excellence in Belleville, Ontario.
  • Diversified domestic market penetration:Combined, HEXO Corp. and Newstrike Brands Ltd. have established distribution agreements in nine provinces including Ontario, Quebec, British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia, New Brunswick, and Prince Edward Island, allowing broad consumer access to HEXO Corp.’s products across Canada.
  • Accretive synergies: The combined entity is estimated to realize annual synergies of $10 million, allowing HEXO Corp to operate more efficiently with a commitment to continued excellence.

Expanding Capacity…Ideal Location…and Low-Cost Production

With production facilities strategically located along major highways in densely populated areas of Canada, HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) is ideally located for production success.

Gatineau, Quebec – The Company’s Gatineau facility has an anticipated annual production capacity of 237,600 lbs per year at full capacity. This facility has 10,000 sq. ft. of advanced automated manufacturing capacity for dewaxing, distillation, milling and extraction.

Belleville, Ontario – The Company’s Belleville facility has up to 2,004,000 sq. ft. available for manufacturing, processing and distribution across Canada. HEXO Corp. is establishing an R&D and manufacturing Center of Excellence for its Fortune 500 partners to work in a licensed facility under HEXO’s footprint.

By taking advantage of the region’s competitive electricity rates, attractive crop yields and competitive labor costs, HEXO Corp. can keep production costs low when compared to industry averages, giving the company a powerful advantage in the market.

HEXO Corp’s Experienced, Visionary Management Team is Leading the Way

HEXO Corp (NYSE-A: HEXO); (TSX: HEXO) has achieved a strong position as one of Canada’s leading cannabis companies…and has set its sights on further expansion – including new product lines and international growth.

This growth will be led by the Company’s exceptionally deep management team – including the firm’s two co-founders who are both still actively involved in the business and important shareholders as well.

With an entrepreneurial culture guiding the business – and experienced leaders with decades of proven success – HEXO Corp is in great hands from a leadership standpoint.

HEXO Corp’s management team includes…

Sêbastien St-Louis – Co-Founder & Chief Executive

Sébastien St-Louis is an entrepreneur with strong leadership abilities, financial acumen and operational expertise. Sébastien has wide-ranging business experience in manufacturing, distribution, trade finance and commercial lending. He has advised Canadian business owners and CEOs across multiple industry sectors, while structuring and closing $200 million in financing to support their export and growth initiatives.

Sébastien co-founded HEXO Corp with one goal in mind: to create a world-class company based on the highest standards of product quality and safety. Since 2013, he has secured more than $260 million dollars in financing for the company.

Adam Miron – Co-Founder & Chief Brand Officer

Adam Miron is an entrepreneur who has launched several successful businesses at the intersection of media, brand development, and public engagement. Adam’s ventures have included iPolitics, Canada’s premier online political news site. Adam turned his entrepreneurial talents to the medical cannabis industry and co-founded HEXO Corp in 2013. Under his leadership as Chief Brand Officer, HEXO Corp has emerged as one of Canada’s most innovative medical cannabis producers. Adam’s creativity continues to guide the development of the company’s industry-leading product line.

Veronique Hamel – Chief Innovation Officer

Throughout her career spanning over 25 years, Veronique Hamel has developed expertise in innovation through leadership roles in research and development, new product development, and in marketing and business development for global consumer goods and pharmaceutical companies in Europe, the U.S. and Canada.

Veronique has a track record for building and helping shape high growth and consumer-centric organizations through trusted and award-winning innovations. She brings a strong business acumen to the process of innovation as well as a passion for break-throughs and industry firsts.

Most recently, Veronique has built strong innovative teams in Canada at Church & Dwight Co., Bausch & Lomb and Bausch Health Companies Inc. 

1) Strong Bull Market – The market for legal cannabis is in the early stages of an extraordinary growth phase. Experts project the global cannabis market to have the potential to expand to $250 billion-per-year in the long term.


2) Historic Forward Supply Contract – HEXO Corp has secured the single largest forward supply contract among licensed producers in Canada, allowing for $1 billion in potential revenue over 5 years.


3) Infused Beverage Potential – HEXO Corp.’s joint venture agreement with one of North America’s leading beverage companies – Molson Coors Canada – under the new company name of Truss positions the Company as a potential major player in the potentially lucrative cannabis-infused beverage space.


4) Rapidly Growing Capacity – The Company’s recently announced acquisition of Newstrike Brands Ltd. boosts HEXO Corp. production capacity to roughly 150,000 kg of high-quality cannabis annually and provides HEXO Corp. access to four cutting-edge production campuses totaling close to 1.8 million sq. ft. of near-term cultivation space for even greater domestic market penetration.


5) Experienced, Visionary Management– HEXO Corp’s entrepreneurial culture is fostered by a visionary leadership team boasting decades of proven success. This team includes the firm’s two co-founders who are both still actively involved in managing the business and guiding the growth of HEXO Corp (NYSE-A: HEXO); (TSX: HEXO), as well as attracting leaders from technology and the consumer packaged goods sectors.

 

i https://www.marketwatch.com/story/canopy-growth-jumps-5-as-piper-jaffray-raises-stock-price-target-by-50-2019-01-25
ii https://www.zionmarketresearch.com/report/cannabis-beverages-market


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