The legalization of cannabis derivative products in late 2019 by Health Canada is proving to be a major value drive for companies that are levered to the burgeoning vertical and is a trend that we are bullish on.

Many brokerage firms and research analysts refer to this era of the industry as cannabis 2.0 and we consider this vertical to be one of the most exciting aspects of the Canadian cannabis industry.

One of the biggest surprise winners of the Canadian cannabis 2.0 market has been Auxly Cannabis Group Inc. (TSX.V – XLY) (CBWTF), a leading consumer packaged goods (CPG) company in the cannabis products market.

Last week, Auxly reported a major milestone and announced that it had the largest market share of cannabis 2.0 products in 2020. The data was confirmed by Headset Canadian Insights data which is considered to be a leading data aggregator for the legal cannabis industry. We consider this to be a major achievement for Auxly and is a development that captured our attention.

According to Headset Canadian Insights, Auxly had a 19.2% share of the total vape market and a 12% share of the total edibles market. These two market segments were significant enough for Auxly to capture the largest amount of market share and we expect the company to launch new cannabis 2.0 products this year.

The performance of Auxly’s vape products in 2020 was impressive and was the best performing segment of the business. According to Headset Canadian Insights, Auxly had 23% of the national vape market share in the fourth quarter and we will monitor how the trend continues in future quarters.

With these results, Auxly has proven its ability to execute on the cannabis 2.0 market as well as its dedication to selling premium differentiated and innovative cannabis products. Going forward, we expect the cannabis 2.0 market to serve as a major revenue generator for the entire business and will be closely monitoring this aspect of the operation.

One of the developments that helped Auxly achieve this milestone is related to the completion of the second-floor expansion at its Dosecann facility. The completion of the expansion made it so the company could significantly increase production, fulfillment rates, and the sale of cannabis products.

In 2020, Auxly introduced several new cannabis products to the market with the launch of the Back Forty brand, Foray Hard Maple Caramels, Dosecann Capsules, Kolab Project Cherry Cola Pop milk chocolates, and Kolab Project 232 Series live terpene vape cartridges. Going forward, we expect the company to bring additional 2.0 products to market and will monitor how the product line continues to gain traction.

We believe that Auxly is an opportunity that has been flying under the radar. We attributed the muted response to how the company used to operate but believe that the business could be turning a quarter. If Auxly is able to build off this momentum, we expect to see more interest in the opportunity and we will continue to closely follow the story.