Tilray, Inc (NASDAQ: TLRY) is expanding its operations in a big way. The Nanaimo-based company announced May 8 an increase of US$32.6 million to its production capacity in Canada. It will add 203,000 square feet in three different facilities, bringing its total space to 1.3 million square feet. The new space promises growth and will help TLRY meet the shortages in the Canadian supply chain.
Tilray acquired Natura Naturals Inc. earlier in the year, which is now operating as High Park Gardens. The B.C. cannabis company is planning to expand the most in Ontario, with taking over a large growing facility called High Park Gardens in Leamington that will see an increase of 127,000 square feet to grow more pot. As well, it will add the High Park Processing Facility in London to produce and process adult cannabis products, and for research and development. The London facility will double in size with an additional 56,000 square feet. It also plans to make a more modest increase at its headquarters in Nanaimo where it will add 20,000 square feet.
For 662,000 square feet in that deal, with a purchase price that could reach as high as CAD$70 million, the potential cost comes to CAD$106 per square foot. However, there might be other advantages besides square footage as Tilray is expanding its existing facilities as opposed to acquiring brand new space.
Significant Growth Opportunities Lay Ahead
Given that edibles will be open for business October in Canada, and with supply shortages already being a big problem in the country, it’s easy to understand Tilray’s large expansion. The cannabis industry needs more supply, and while the issue could be solved if U.S. companies were able to move marijuana across the border, particularly from Oregon where there is a glut in supply, for now, it’s up to Canadian growers to address these issues.
In addition, Tilray joined forces with Anheuser-Busch Inbev SA, a partnership to explore the potentials of the cannabis beverage market. The joint venture may not guarantee a co-branded product, but Tilray’s expansion will create an advantage when the sub-market opens for business in Canada later this year with more options to develop supply for a beverage product line.
And Tilray is not only expanding in Canada. In the U.S., it recently acquired a big producer of hemp foods sold in Canada and the U.S. that could help it penetrate the market south of the border. Globally, Tilray also inked a deal with Novartis pharmaceutical group’s Sandoz AG, where the two companies will look to sell medical marijuana products around the world.
Tilray growing need for more cultivation and manufacturing capacity may mean more expansion on the horizon. In order to prevent itself from spreading too thin along these multiple growth opportunities, it’s going to be paramount for Tilray to have the production capacity needed to meet all the demand.