Earlier this month, Constellation Brands (STZ) announced a $4 billion investment in Canopy Growth (WEED.TO) (CGC) and this sent the cannabis sector higher. The investment has led to a significant increase in the number of investors focused on the burgeoning cannabis industry.

We have been focused on Canadian Licensed Producers that represent underappreciated growth opportunities. One company that meets this criteria is Emblem Corp. (EMC.V) (EMMBF) which has been nothing short of an execution story.

With a market cap of approx. $168 million and approx. $80 million in cash, Emblem is attractively valued when compared to its peers. The company is in the middle of a major growth cycle and we are monitoring this one.

Alcohol Industry Vet Joins The C-Suite

Thank you very much for joining us today Maria Guest CMO of Emblem Cannabis. Congratulation on your recent appointment to CMO of Emblem!

Thank you for having me. It’s been an incredibly exciting few months at Emblem, working to shape our portfolio of brands and launching our first adult-use brand, Symbl.

How do you plan to leverage your 20 years of experience building brands in the beverage alcohol space to drive initiatives at Emblem?

Over 20 years, I have learned how critical it is to bring a 360 approach to brand building so that we can deepen our connections with consumers across every touch point. I’m bringing marketing discipline and training to Emblem to ensure that we grow our brands strategically, using deep consumer insights and smart, effective creative to bring our brands to life.

Will you be focusing more on the adult use or medical side of the business?

My focus is on building Emblem’s adult use portfolio to develop and grow strong brands that resonate with consumers. We recently launched Emblem’s first adult use brand, Symbl. Leveraging Emblem’s existing brand strength in the medical market, Symbl was created to offer an equally thoughtful brand experience for those seeking cannabis for recreational use that fits within their productive lifestyle.

Symbl has a simple mission to inspire curiosity. We know that Canadians are curious about cannabis as we approach legalization and there is a learning curve that comes with this. Through Symbl and our new “Get Curious” platform, we’ll connect with Canadians of legal age to educate them on cannabis’ unique properties – from different strains to sharing our expertise and knowledge about the plant – to act as a trusted go-to source for brand and product education.

With your main focus on the adult use market, how do you feel your expertise will translate from the beverage alcohol into cannabis?

The liquor industry is also highly regulated, and with that comes the need to dig deep on creativity. I truly believe that having restrictions in place pushes marketing teams to think outside of the box and apply new thinking to traditional ways of reaching consumers.

The same goes for cannabis. We’re working across a number of different marketing disciplines – from experiential activation to PR – to pursue ideas that inspire consumers and connect with them in new and innovative ways. We will be there for them as they navigate the new legal cannabis landscape.

The other important takeaway for me is the notion of responsible use, which is very established within beverage alcohol. Cannabis will need to follow suit to help legitimize and sustain the industry for the long-term. Marketing needs to lead the way on this to ensure products and brands are marketed responsibly and targets those of legal consumption age in a way that promotes moderation. Responsible use is important to Emblem and we are building it into the DNA of all of our adult-use brands.

How big of an impact do you think beverage alcohol companies will have forming strategic partnerships with major LP’s other than being a big-name capital source?

Cannabis is an emerging market that has a lot of exciting momentum and a ton of potential to complement existing portfolios and drive long term growth.

The impact is yet to be seen, but I believe it will help to grow the cannabis industry by opening it up to new distribution channels, de-stigmatizing cannabis through brand association and make way for new product innovation.

With Constellation being the first to act, do you see the other sharks starting to circle and eyeing LP partners?

It would appear that more partnerships between beverage alcohol and LPs are likely as CPGs begin to see the rich opportunities in the cannabis space. It’s already happening with Molson’s partnership with HEXO. It will be interesting to see how this continues to take shape.

Focused on Capitalizing on the Burgeoning CBD Opportunity

Earlier this month, Emblem and GreenSpace Brands (JTR.V) formed a strategic partnership to develop and commercialize CBD infused health and beauty products for the recreational cannabis market. This partnership unites a highly-regarded consumer packaged goods company with one of Canada’s most trusted licensed producers of medical cannabis.

The partnership will leverage GreenSpace’s expertise in consumer brand development and distribution to launch products infused with Emblem’s CBD extracts across a number of verticals. We are favorable on this move due to the value that will be added by GreenSpace.

The CBD market is massive and is expected to see incredible growth. We think the CBD is barely in the first inning of a major growth cycle and see tremendous upside due to the health benefits associated with it. This will create a new revenue stream for Emblem and we will monitor how the companies execute on this.

Under the terms of the agreement, GreenSpace will commit to a five-year exclusive CBD supply agreement with Emblem. In addition, Emblem will make a $2 million investment in GreenSpace and will earn a 4% royalty on all hemp-based CBD product sales and a 7% royalty on all cannabis-based CBD product sales.

Focused on Growth and Distribution

In late July, Emblem announced a major acquisition and acquired the remaining portion of Natura Naturals, which operates a 662,000 sq. ft. licensed greenhouse that is currently undergoing a phased conversion and retrofit that is expected to bring up to 15,000 kg of annualized cannabis production online in 2018. Once completed in 2019, the facility is expected to bring total annualized cannabis production capacity to approximately 70,000 kg per year.

With more than 40 years of greenhouse production expertise, Natura will bring a wealth of expertise and talent to Emblem’s production side, with the capacity to produce high-quality, greenhouse-grown cannabis at a lower cost than an indoor facility. Natura will also bring 32 proprietary cannabis strains to Emblem’s library, significantly increasing Emblem’s intellectual property.

During the last year, Emblem has been nothing short of an execution story and has been able to significantly improve distribution. Emblem currently has supply agreements with Shoppers Drug Mart, the Alberta Gaming and Liquor Commission, and has an LOI to form a joint venture with German pharmaceutical wholesaler Acnos Pharma GmbH.

A Stock to Watch

Emblem continues to execute and has several levers for growth, the shares have been trading higher with the market and we are monitoring this. Emblem bounced higher after Constellation Brands (STZ) announced a $4 billion investment in Canopy Growth Corp. (WEED.TO) (CGC) and we are monitoring how the shares move from here.

2018 has been a big year for Emblem after Nick Dean took over as CEO and we are bullish on the road ahead. The Canadian cannabis producer has been focused on growth and building a brand. Emblem is in the middle of a major growth cycle and we are monitoring how the team executes on this.

The opening of the recreational cannabis market in Canada will prove to be a major value driver for Emblem. The focus on increasing production capacity via the acquisition on Natura is going to prove to be accretive and we are favorable on the impact this will have on numbers. Emblem has recorded strong patient growth when compared to the prior year and this is a trend to watch.