- Flora Growth recently participated in an earnings call in which the management team discussed the company’s financials as well as its growth strategy and outlook for the remainder of fiscal 2022 as well as 2023
- The company noted it had exited a period of investment and is now focusing on execution
- The period of investment saw the company acquire synergistic brands that, collectively, create a direct-to-consumer house of brands, enabling the company to enter nearly any target market regardless of the legal status of cannabis
- The company also invested in the infrastructure necessary for the activation of its cultivation facility in Colombia, enabling it to progressively capitalize on new market opportunities that accompanied the legalization of the export of cannabis flower
The start of the second half of fiscal 2022 on July 1 marked an important transition point for Flora Growth (NASDAQ: FLGC), an internationally focused cannabis brand builder on a mission to build a design-led collective of plant-based wellness and lifestyle brands. The company, which had previously focused on expansion driven by acquisitions and other forms of capital-intensive investments, had now entered a period of execution, as CFO Elshad Garayev and CEO Luis Merchan separately emphasized in their presentations during the company’s H1 2022 earnings call held August 15 (https://ibn.fm/yaUQo).
This ongoing execution phase rests on a solid foundation built on a bed of strategic investment strategies that were markedly different from industry peers, according to Jason Warnock, Flora Growth Chief Commercial Officer. The initial thinking by a majority of companies entering a new cannabis market, Warnock says, often involves a rush to build infrastructure and allocate capital toward constructing massive facilities in anticipation of regulatory changes that may breathe life into these investments. Unfortunately, this gamble sometimes proves unrewarding as the changes do not always materialize.
On its part, however, Flora Growth took a different approach that entailed building, through acquisitions, and activating a brand portfolio that includes JustCBD, Vessel Brands Inc., Masaya, No Hemp Co, and Mambe. The resulting house of brands has enabled the company to operate legally in the United States despite the federal illegality of cannabis and the company’s NASDAQ listing, which precludes it from participating in the US domestic market. Additionally, it has ensured Flora Growth does not lock its capital expenditure (“CapEx”) in infrastructure that does not yield returns in the short or long term.
Moreover, and by integrating each brand into its operations, Flora Growth has created a collective capable of capitalizing on emerging opportunities in different parts of the world. This has, in turn, allowed the company to expand its global reach while navigating the different regulatory environments in the different target markets, as Flora Growth Chief Marketing Officer Jessie Casner explained in her presentation.
“Flora Growth’s House of Brands enables the company to enter nearly any target market regardless of the legal status of cannabis or its derivatives because of the diversity of its product offerings. This means Flora can begin to build a customer base, distribution networks, and supply chains in these regions in advance of movements on cannabis regulations affording us a revenue-generating infrastructure that positions us for the future,” said Casner.
But the House of Brands is just one pillar of the company’s growth strategy. The other, its commercial operation, includes a cultivation facility located on a 247-acre property in Bucaramanga, Colombia, and Flora Labs, the company’s manufacturing and R&D centers, located in Bogota and Bucaramanga, Colombia and Fort Lauderdale, Florida, that produce pharmaceuticals, cosmetics, and nutraceuticals for domestic and international markets. (The company also has a life sciences division that constitutes its third growth pillar.)
On April 1, following the passing of Resolution 539, which authorizes the export of cannabis flower from Colombia (https://ibn.fm/g9r26), Flora Growth commenced the full activation of its cultivation facility. Specifically, the company began cultivating different strains of the cannabis plant for export, departing from its previous focus on the cultivation of cannabis for use in the development of derivative products. According to the earnings call, the company has so far cultivated 8 hectares, five of which support high THC strains of cannabis while the rest support high CBD strains of the plant.
“We continue to invest in the necessary infrastructure of our cultivation and commercial pillar, which up until this point had been in development. We can now realize the value of that investment heading into the second half of 2022 and into 2023. With the activation of this pillar, we are now one of only a handful of companies that are actively moving cannabis-derived products across the globe. We expect that flow of goods to increase substantially in the coming months as we continue to build relationships with regulatory agencies in the governments around the world,” commented Flora Growth CEO Luis Merchan.
For more information, visit the company’s website at www.FloraGrowth.com.
NOTE TO INVESTORS: The latest news and updates relating to FLGC are available in the company’s newsroom at https://ibn.fm/FLGC
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