Dixie Brands Inc. (CSE: DIXI.U), (Frankfurt: 0QV), (OTC: DXBRF), one of the cannabis industry’s leading consumer packaged goods companies, and Khiron Life Sciences Corp. (TSX-V: KHRN), (OTCQB: KHRNF), (Frankfurt: A2JMZC), a vertically integrated cannabis leader with core operations in Latin America, have signed a definitive agreement relating to the joint venture the companies announced on January 30, 2019. With the execution of the Agreement, a new company called Dixie Khiron JV Corp. has been established, 50% owned by each of Dixie and Khiron.
Dixie-Khiron will take advantage of the complementary strengths of both companies to manufacture and distribute cannabis-infused products to the Latin American market. By combining Dixie’s portfolio of more than 100 cannabis-infused products with Khiron’s established footprint throughout Latin America, the companies aim to capture first-mover advantage and establish leadership in the region of 620 million people.
In accordance with the Agreement, Dixie will also manufacture and distribute Khiron’s Kuida® brand of cannabidiol (CBD)-based cosmeceuticals in the United States. Kuida is expected to be broadly distributed and is expected to have particular appeal to the growing U.S. Hispanic population, estimated at nearly 60 million.
Chuck Smith, President and CEO of Dixie Brands, stated, “In the weeks since we announced this partnership it has become even more clear that the strengths of our two companies are perfectly aligned to lead in Latin America. Our marketing and regulatory teams have analyzed the opportunities and requirements across the region, and we are completing detailed business plans to secure ‘first mover’ advantage. By leveraging our existing infrastructure, intellectual property, expertise and distribution channels, we are moving quickly to introduce products to selected markets.”
Latin American Market
Latin America is among the world’s fastest-growing cannabis markets. According to Prohibition Partners, cannabis spending in the region is expected to reach US$12 billion by 2028, and Quintiles IMS estimates that there are approximately 68 million potential patients in Latin America that could benefit from medical cannabis. With six megacities of 10 million or more located in Latin America (UN Data Booklet: The World’s Cities in 2018), the market offers an attractive, super-urban and informed consumer base for cannabis-infused consumer products, with an awareness of recognized global brands and access to a vast retail network that has seen five-year retail revenue growth averaging 10.6% per year (Deloitte Touche Tohmatsu: Global Powers of Retailing 2018).
Alvaro Torres, Co-founder and CEO of Khiron Life Sciences, stated, “Our timing for launching this joint venture is ideal. Latin America is poised to become one of the world’s largest cannabis markets, due to continuing legalization across the region and the increasing affluence of the population, particularly in urban areas. Despite these attractive dynamics, there are relatively few significant competitors, as many companies have targeted other global regions. We believe we have an opportunity to establish ourselves as a dominant player in this market.”
Khiron operates in the Colombian market and has incorporated entities and obtained certain licenses with an objective to enter the Peru, Chile and Mexico markets. The Company has announced plans to enter Brazil and Uruguay through its proposed acquisition of NettaGrowth International Inc. Upon completion of the NettaGro transaction, Khiron will be positioned in markets which collectively represent more than 430 million of the total Latin American population of 620 million people.
|1. Subject to completion of proposed acquisition of NettaGrowth International Inc.|
Cannabis-Infused Product Portfolio
Dixie’s extensive portfolio of intellectual property, developed and successfully commercialized over the past nine years, includes SKUs in each of the major categories of cannabis-infused products. Dixie and Khiron anticipate that the majority of these products can be introduced to the Latin American market in their current formulations or with minor adaptations to reflect local preferences. The following table lists a sample of Dixie’s existing products corresponding to several mainstream consumer categories, along with Euromonitor International estimates of the total Latin American market size in 2018.
Market Size in 2018 (US$ billions) 2
|Existing Dixie Products|
|Health & Wellness
Beverages and Soft Drinks
|$105.01||Carbonated and still flavored drinks including: Lemonade, Fruit Punch, and Root Beer|
|Health & Wellness
|$39.74||Gummies, Soft Taffy Chews, Chocolate Bars, Fruit Tarts|
|Skin Care||$9.63||Mild pain-relieving lotions, balms and bath soaks|
|Human Supplements||$4.36||Effervescent drink mixes, dissolvable tablets, nutrient- enriched aqueous wellness sprays|
|Pet Food and Products||$14.96||Canine and feline food toppers and soft chews|
|2. Source: Euromonitor International|
Hillcrest Merchant Partners Inc. acted as advisor on the JV and, upon completion of the JV, will receive an advisory fee payable equally by the parties in shares of Dixie and Khiron.
Completion of the JV and the commencement of operations is subject to the receipt of all required regulatory approvals, including final acceptance of the TSXV.
About Dixie Brands, Inc.
Dixie Brands Inc., through its licensed partners, has been formulating award-winning THC and CBD-infused products since 2009. Currently operating in five U.S. states, it is expecting to double its manufacturing and distribution capabilities in 2019 in the U.S. as well as expand internationally, including Canada and Latin America. Dixie leads the global industry in the development, packaging design, product innovation and quality control for the commercial production of cannabis infused products. While Dixie started with a single flagship product, the Dixie Elixir (a THC-infused soda), it is now one of the industry’s most recognized consumer brands, expanding to over 100 products across more than 15 different product categories representing the industry’s finest edibles, tinctures, topicals and connoisseur grade extractions, as well as world-class CBD-infused wellness products and pet dietary supplements. Dixie’s executive team has been instrumental in the formation of the cannabis industry for recreational and medicinal use, serving as founding members on several national regulatory and business-oriented industry organizations.
Khiron Life Sciences Corp. is positioned to be the dominant integrated cannabis company in Latin America. Khiron has core operations in Colombia and is fully licensed in the country for the cultivation, production, domestic distribution, and international export of both THC (tetrahydrocannabinol) and CBD (cannabidiol) medical cannabis. In May 2018, Khiron listed on the TSX Venture Exchange, becoming one of the first Colombian-based medical cannabis companies to trade on any exchange globally. Khiron is led by Co-founder and Chief Executive Officer, Alvaro Torres, together with an experienced executive team, and a knowledgeable Board of Directors that includes former President of Mexico, Vicente Fox.
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