Before COVID-19 took over the headlines, one of the hottest topics was the cannabis 2.0 opportunity in Canada. Cannabis 2.0 refers to a change in the regulations in Canada that allows for the sale of cannabis derivative products (i.e. edibles, drinkables, vape pens, concentrates, salves, and more).

There are a number of reasons to be excited about cannabis 2.0 and we want to quickly highlight this. First, the margins that are associated with cannabis derivative products tend to be higher. Second, with excess inventory on hand, producers can use the additional input to develop new products. And finally, consumer demand for these types of products is high.

Although there are a number of Canadian companies that are focused on the 2.0 opportunity, there will only be a few winners. When we analyze companies that are levered to this burgeoning vertical, we look for businesses that have formed strategic partnerships with leading US brands.

Today, we want to highlight 3 Canadian cannabis companies that are levered to the cannabis derivative product market. These businesses are highlighted for a specific reason and are opportunities to be aware of.

When will Aurora Bring Binske Products to Market?

Aurora Cannabis (ACB.TO) (ACB) is a high-profile Canadian cannabis producer that we have been following for several years. Although the performance of the business has been underwhelming, we are favorable on the leverage that it has to the 2.0 market due to the relationship that it has with Binske, a leading US cannabis brand.

Last year, the companies entered into an agreement to penetrate the Canadian market and this is a relationship that our readers should be aware of. Under the agreement, Aurora will license Binske intellectual property (IP) as part of its first foray into the Canadian edibles marketplace and we expect the products will generate traction with consumers.w

One of the reasons we are excited about the relationship is based on what is provided by each company. Aurora Cannabis has a significant footprint on the cultivation and retail side of the business in Canada. Binkse will bring its IP and know-how to the relationship and we are favorable on this aspect of the partnership.

Although Aurora Cannabis has come under heavy pressure, we are favorable on the leverage that it has to the Canadian market as it relates to this relationship. The international cannabis market has not evolved as quickly as many companies expected and this has put additional pressure on the industry. We believe that Binske can play an important role in Aurora Cannabis’ ability to benefit of the 2.0 market and is an opportunity to be aware of.

Indiva Partners with Wana Brands

Earlier this year, Indiva Limited (NDVA.V) (NDVAF) reported a major milestone and announced a partnership with award-winning Wana Brands to bring their innovative cannabis-infused products to Canada. Wana is the leading edibles brand in the US with more product sold than any other brand, according to BDS Analytics’ 2019 Brand Share Report. They command major market share in several key states such as Arizona, California, Colorado, Illinois, Michigan, Ohio and Oregon.

Under terms of the agreement, Indiva will have the exclusive rights to produce and distribute Wana products in Canada. In addition to Wana, Indiva has partnerships with Bhang Chocolate, with Ruby Cannabis Sugar, with Sapphire Cannabis Salt and with Gems. When it comes to bringing products to market, Indiva has proven its ability to execute and we believe that this played an important role in the formation of the agreement.

When the agreement was announced, we were a little surprised to see that Indiva was the business that Wana chose to partner with. The market has responded favorably to the formation of the relationship and we will monitor how the management team is able to execute on it. Earlier this year, Indiva reported to have brought Bhang products to market and we believe that this bodes well for Wana Brands.

Namaste is Capitalizing on the 2.0 Market

Namaste Technologies (N.V) (NXTTF) is a Canadian cannabis company that has been flying under the radar and we are favorable on the leverage that it has to the 2.0 market. Through a series of investments and partnerships, Namaste has been able to significantly advance its fundamental story and we are favorable on this aspect of the story.

During the last year, Namaste reported several major milestones related to CannMart, a wholly owned subsidiary of the business. CannMart’s online store offers one of the largest selections of legal cannabis products from established cannabis producers in Canada and around the world. Through CannMart, the company has been able to form strategic partnerships with leading cannabis brands and we are bullish on the amount of traction these brands can generate in Canada.

Earlier this year, Namaste announced that Choklat Inc, received a processing license from Health Canada to produce a line of chocolate bars, drink mixes and infused sugar. This development comes after the company completed a strategic investment in Choklat and owns 49% of the craft chocolate manufacturer and chocolatier.

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