With a kitted facility and investor backing, Dynaleo Inc. is on track to become the largest manufacturer of cannabis gummies in the country.
Not skipping a beat, the nascent business has signed a letter of intent with its first international partner. The agreement was made with Pantry, a premium edibles brand hailing from Los Angeles, California.
Plans for the deal come on the heels of Dynaleo receiving its standard processing licence from Health Canada last week. The company is also part of investment firm Canopy Rivers Inc.‘s (TSX-V: RIV) portfolio, which put $2 million into the gummy manufacturer in May.
According to the agreement, Dynaleo will manufacture and distribute infused peach gummies under Pantry’s brand in the Canadian market.
The partners expect production of the Pantry-branded gummies to start later this year at Dynaleo’s 27,000 square-foot facility in Edmonton, Canada’s first high-volume, purpose-built edible factory.
Dynaleo executive chairman Michael Krestell says the agreement complements Dynaleo’s already existing relationships with Candian cannabis brands.
“We are currently working towards signing a definitive agreement to determine the nature of the agreement, economic terms, product deliverables and service standards,” he told Mugglehead in an email.
LA-based Pantry was founded by a group of professional chefs and offers a variety of cannabis-infused food products. This deal will be the brand’s first entry into the Canadian market.
Brand equity in gummy segment built through consistent delivery: Dynaleo chairman
Like some other gummy recipes currently on offer, Pantry’s formulation is plant-based but will not be able to be marketed as such due to restrictions on making health claims about cannabis products in the country.
Although marketing regulations are a frequent discussion point in the industry, Krestell believes the greatest barrier to brand building in the gummy segment is the inability to keep products in-stock and on-shelf at all times.
“Brand equity is built through the consistent delivery of a quality product and service and if your product is out of stock you aren’t building your brand,” he says.
Dynaleo’s industrial scale facility allows it to help its branded customers with their brand-building efforts, Krestell says, in a way its competition can’t.
The company is primarily a contract manufacturer of gummies, but Krestell says it’s also developing in-house brands.
“Our sales pipeline is comprised of three different types of customers: “In Canada we have licensed producers that are looking to extend their brands into the gummy segment, brand houses looking to enter the market, and established international brands like Pantry looking to broaden their distribution,” he says. “We currently have the ability to sell gummies in bulk to LPs and extractors with packaging capability, and in July we will submit our sales licence application to Health Canada.”
Krestell says Dynaleo expects to be cash-flow positive next year.
In support of its business case, Dynaleo says solid edible products, led by gummies, currently make up more than 90 per cent of the top-selling infused products.
It also cites data from Deloitte that estimates the Canadian edibles market is worth $1.6 billion annually; Arcview Market Research and BDS Analytics predict that the North American edibles market will be worth more than $4.1 billion by 2022; and a new report from market research firm Headset shows an uptick in gummy purchases in several jurisdictions since the beginning of the pandemic.
Top image via Pantry