Creso Pharma Ltd (ASX:CPH, OTCQB:COPHF) subsidiary Mernova Medicinal Inc has recorded strong sales growth in Nova Scotia across all product formats and a market share as high as 15% in some categories.
The medicinal cannabis company recently achieved a major milestone, achieving a market share of more than 5% in its home province of Nova Scotia for the first time in the week beginning February 28, 2022.
This milestone follows a consistent trend of increased sales in Nova Scotia since the end of the second quarter of 2021.
Brand positioning
The upward trajectory can be sheeted home to the positioning of Mernova’s Ritual Green brand as a premium product at a reasonable price.
It can also be attributed to the efforts of Mernova’s sales and marketing team, and the product knowledge sessions conducted with budtenders and managers at individual dispensaries throughout Nova Scotia in the last year.
The company is now expanding the product knowledge training approach to new markets, with the objective of repeating the growth it has seen in Nova Scotia.
Creso Pharma CEO and managing director William Lay said: “I’m incredibly encouraged by the progress our team has made with sales in Nova Scotia. To reach 15% market share within certain sub-categories is a testament to the quality of our products and the hard work and dedication of our production staff and sales and marketing team.
“We look forward to taking our successful Nova Scotia approach and methodologies to other markets as we target further sales growth. These figures also highlight the opportunity presented by the Ritual Gold oil vape range which will come to market later this year.”
“Separately, I’m very pleased to see the ongoing improvements to our growing processes leading to such a significant increase in crop yield. By improving these processes, we will be able to take advantage of operating leverage as we push towards profitability in this business unit, which I view as a critical key performance indicator.”
Plant yield improvements
Production improvements have allowed Mernova to increase volumes and decrease cost-per-gram, and to benefit from operating leverage.
Mernova’s market share in the product categories in which it participates in Nova Scotia – dried flower and pre-rolls only – is 7.9%, and its market share in the specific product formats that it offers is 14.6%.
This data highlights the opportunity for additional growth presented by the upcoming introduction of the Ritual Gold oil vape product range, which will expand the company’s product offering in the province. The range is expected to launch later in the second quarter or early in the third quarter of this year.
A January report from ATB Capital Markets estimated that the value of the Canadian recreational cannabis market will grow to C$4.8 billion in 2022, an increase of 19% from an estimated C$4.0 billion in 2021.
New plant-growing regimen
Mernova has also progressed several initiatives to improve its growing process to increase plant yield and quality.
These activities consist of investments in higher-quality nutrition products, irrigation system upgrades and new FLUENCE SPYDR lighting.
The company has completed its first harvest and drying process of a batch of its high-THC Black Mamba strain from a growing room with both the new lighting and nutrition products.
Total yield of trimmed dried flower from this batch was a 56% increase in yield compared with the average of the 14 previous batches of Black Mamba harvested prior to the new lighting and nutrition.
New lighting has now been installed in two grow rooms in the facility, with the remainder of the rooms expected to be retrofitted over the course of the 2022 financial year.
The upsurge in yield not only increases the total product available for sale but also reduces the cost of growing on a per-gram basis, given a high proportion of fixed costs in the growing process.
The new FLUENCE SPYDR lighting was installed in two of 10 grow rooms at Mernova’s grow facility, and improved nutrition was rolled out across all rooms.
The first room harvested with both new lights and nutrition products indicated an increase in plant yield of approximately 56% – promising news for the company, which hopes to retrofit the remaining grow rooms with the lighting over the course of the year.
Appointment of Micheline MacKay
The company hopes the appointment of Creso Pharma executive director Micheline MacKay as Mernova’s managing director will turbocharge the current upward trajectory and consolidate the link between the Creso Pharma board and the Mernova senior management team.
MacKay has 22 years of experience in regulatory environments, including pharmaceuticals, medical devices and government-regulated industries.
Her appointment will see her managing all business aspects for Mernova, and overseeing all operational areas including strategy, budgeting, forecasting, tracking and growth.
“Micheline has been a strong contributor to our business over the last few years, has a tremendous work ethic and is the ideal person to lead the continued growth of this business unit,” Lay said.
CPH shares are up 10.91% to A$0.061.