In a recent interview, Canadian licensed medical cannabis producer Aphria (TSX Venture: APH) CEO Vic Neufeld discussed that wholesaling to other licensed producers (LPs) accounted for about 20-25% of sales and that he was expecting to sign more deals. A month later, the company has delivered on this promise, announcing contracts with several LPs to provide up to 550 kg over the next year at up to $1.9mm.
Leveraging on our growing strengths of strain selections that are in demand and Aphria`s low cost producer status, these contracts further endorse our secondary strategy of wholesaling dried cannabis.
Aphria CEO Vic Neufeld
Despite continued growth in our patient onboarding platform, which represents our primary retail strategy, we have been able to successfully balance the demand for Aphria products, generating strong financial returns.
The retail price for medical cannabis provided by LPs in Canada is typically $7-9 per gram, so the $3.45 per gram price that Aphria indicates suggests that many growers can likely acquire product from Aphria, which grows in a greenhouse in Leamington, Ontario, at prices perhaps lower than their own cost of production. Aphria indicates that it will generate gross margins of “between 35-45%, depending on the selected strain and quantity supplied.” At the mid-point, this math suggests that its costs are about $2.07 per gram.
