South African cannabis company details expansion plans following R300 million cash injection, including Europe and US

 ·19 Jan 2022

JSE-Listed investment holding company Labat Africa says it is diversifying its healthcare offerings through large-scale acquisitions and retail expansion.

The company has acquired a 100% share in Miami-owned CBD lifestyle brand Echo Life which comprises a diverse FMCG product portfolio and has obtained exclusive rights to distribute American pre-rolled hemp smokable Ace & Axle as well as its other products.

Labat listed on the Johannesburg Stock Exchange in 1996, repositioned and made a strategic shift to become a fully integrated cannabis healthcare company in 2019.

In December, the group announced a R300 million cash injection from California-based GR Global Ventures in exchange for ordinary shares, funds of which will be allocated over a three-year period.

Echo Life and Ace & Axle will form part of Labat’s retail portfolio that already includes Cannafrica, a medicinal and luxury CBD lifestyle brand with three outlets in South Africa, an online store and three additional stores opening in the coming months. In addition, e-commerce exists for Cannafrica, Echo Life and Ace & Axle, respectively, it said.

According to Labat’s group executive for Business Development, Herschel Maasdorp, the company’s expansion presents potential investors with a unique opportunity to diversify their stock portfolios as it comes with solid growth prospects.

“Labat is a first mover in the cannabis economy and a market leader. We are involved across the value chain in the cannabis industry, from farming and manufacturing to beneficiation, distribution and, more recently, retail.”

Labat said it is going into the market with retail products that are compliant with health regulators.

Cannafrica’s products, which include cannabidiol medicinal drops, edibles, and supplements, are aligned to South African Health Products Regulatory Authority (SAHPRA) regulations whereas Echo Life adheres to standards set out by the US Food & Drug Administration (FDA), it said.

Retail leap

Labat said it entered into retail in the thick of the Covid-19 pandemic when it opened its first of three Cannafrica stores in Cape Town in October 2020. It has since evolved the Willowbridge Cape Town store into a retail 2.0 offering, which is South Africa’s first cannabis experience store and has also opened additional outlets in Johannesburg and Hartbeespoort as well as an online store.

“The pandemic placed a premium on wellness and self-care,” said Maasdorp. “CBD’s popularity rose because it showed that it can contribute towards promoting homeostasis by boosting endocannabinoid activity and therefore enhance immunity.”

Springboard into retail in Europe and US 

Cannabis is transforming from a back-alley product to a sophisticated legal commodity.

Labat Healthcare CEO, Stanton van Rooyen, said that the transition of cannabis from the informal sector to a formal economy enhances the group’s retail business, while it also offers a springboard to Europe and the USA through the FSE listing and its deals with American-based products.

The group listed on the Frankfurt Stock Exchange (FSE) in 2021.

“Labat’s responsibility is to ensure that we take the proposition of South Africa – with its quality raw materials and processing capabilities – to the globe by being part of the largest capital markets in Europe and the USA,” said Van Rooyen.

According to Statista, the US is the globe’s biggest and most sophisticated cannabis market valued at US$61-billion (R927-billion). Recreational cannabis alone is predicted to exceed $40-billion (R619-billion) in annual sales by the year 2026, he said.

Prohibition Partners, a cannabis market think-tank, predicted that Germany will continue to lead the European cannabis market as over a million German patients will have access to medical cannabis by 2024, and the German medical market alone will be worth €7.7 billion (R135-billion) by 2028.

Van Rooyen believes Labat’s global footprint can be extended largely through its retail portfolio.

“It is evident that for us to engage the cannabis economy on a global stage, partnering with and acquiring international retail brands remain an integral part of our strategy. This will give us the opportunity to broaden our retail reach to international consumers as well as bring quality international products to South Africa.”

Read: South African cannabis company lists on German Stock Exchange

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