Nutritional Holdings picks up R780m Japanese CBD contract

Nutritional Holdings, which has set itself an ambitious target of more than ten-fold growth in revenue after acquiring cannabis business Ukusekela, says it has secured a R780m cannabidiol (CBD) contract in Japan that will make it the first African company to access this market.

Nutritional, which brought in R40.8m in revenue in its year to end-February, said the world’s third-largest economy is characterised by both a cultural appreciation for cannabis, and is advanced in terms of its regulatory framework for CBD.

Legal CBD is one of the world’s fastest growing markets, and is used in health applications such as pain-relief or reducing inflammation.

Nutritional completed its R65m acquisition of Ukusekela in October, after Covid-19 delays, through a combination of cash and shares.

Ukusekela holds various licences in Lesotho, Zimbabwe and Swaziland for the cultivation, harvesting, manufacturing, distribution, importing and exporting of cannabis. The company also has a research laboratory in SA.

The contract in Japan is for supply for use in consumer goods such as health supplements. Cannabis has a major role is Japanese symbolism, tradition, religion and medicine, the group said.

Hemp is of great importance to the Japanese and is mentioned as a symbol of persistence and strength, although the psychoactive use of cannabis is banned in the country, and the market is strictly regulated.  

The Japanese market is also characterised by an aging population, with significant disposable income, and who “are very much advocates of plant-derived healthcare products”, the group said.

The contract comes after the group announced in September that it had secured a three-year contract in Germany, worth about R1bn, for the supply of “the ultimate immune booster” to a leading manufacturing and distribution company.

The group said at the time that this contract alone had put it a third of the way towards its five-year target of R500m in annual revenue.

The global legal marijuana market is expected to grow to $73.6bn (R1.2-trillion) by 2027, according to market research group Grand View Research, implying a compound annual growth rate of 18.1% for the industry.

Nutritional is just one of a number of JSE-listed counters seeking to grow their presence in SA’s rapidly growing cannabis market, with Labat Africa also seeking to grow its footprint in the market. Labat said in September that it wants to acquire a licensed cannabis cultivation group based in the Eastern Cape.

In afternoon trade on Wednesday, Nutritional’s little-traded share was unchanged at 1c, giving it a market capitalisation of R137m.

gernetzkyk@businesslive.co.za