The public cannabis markets are in the midst of a correction, but that hasn’t dampened enthusiasm for the growth of the industry.
According to various estimates, the global cannabis industry is projected to be worth $31 billion by 2022. The Canadian cannabis market is estimated to be worth $10.2 billion by 2023 (which would be greater than the wine, beer, and spirits markets), and by 2030 the U.S. cannabis market is projected to be worth greater than $75 billion.
Recently, executives from 10 cannabis companies gathered at the KCSA Cannabis Investor Event to present their plans for 2020 and explain the direction of the company to investors. Below are highlights from eight of those presentations.
iAnthus Capital Holdings, Inc. (OTCQX: ITHUF; CSE: IAN) is a vertically integrated multi-state operator with licenses for 68 dispensaries (30 of which are open) in 11 states.
The company is rebranding all its stores in 2020 under the Be. brand, where they sell products under the MPX, CBD For Life, and Mayflower brands. The first Be. location will open in Brooklyn across from the Barclays Center.
“In cannabis in the United States today we have a choice. We have licenses to grow, we have licenses to process, and we have licenses to sell cannabis. With those licenses we can choose to be farmers, we can choose to be retailers, or we can choose to be a seller of branded goods and trade at 5-6x revenue. We’ve chosen to focus on that last piece,” said CEO Hadley Ford.
“The only way to create product brands in today’s market is with an old-time business model. It’s very hard to advertise, very hard to use social media...To create a product that people can’t live without, we first have to be physically in front of them in a brick-and-mortar store.”
Founded in 2011 as a consulting company to help businesses obtain cannabis licenses, 4Front Ventures Corp. (OTCQX: FFNTF; CSE: FFNT) has evolved into its own cannabis operator, thanks in part to its 2019 merger with Cannex.
The company has three divisions: Brightleaf for cultivation and production, Mission, its branded retail stores, and Pure Ratios, a CBD and wellness brand. According to CIO Andrew Thut, 4Front is focused on the low-cost production of mass-market cannabis products across its licensed operations. By the end of 2020, 4Front expects to have seven cultivation and production facilities and 18 retail operations across nine states.
“The days of cannabis companies being afforded lofty valuations merely because they’ve cobbled together a far-flung portfolio of licenses is over,” said Thut. “Operations and execution matter today more than they ever have in this industry.”
Choom Holdings Inc. (OTCQB: CHOOF; CSE: CHOO) is a Canadian cannabis operator with 14 stores in two provinces. Their goal is to eventually operate 120 stores across six provinces, 75 of which they expect will be in Ontario and 32 of which will be in Alberta. To help fuel that growth, Choom received a $27 million investment from Aurora Cannabis Inc (NYSE: ACB) in 2018.
“The idea for us is to really focus not only on the recreational cannabis user, but the emerging leisure use that is certainly becoming more and more prevalent in the country, and we believe we’re positioned well as an approachable retailer for that customer,” said Corey Gillon, Chief Executive Officer. “
MariMed Inc. (OTCQX: MRMD) is a vertically integrated multi-state operator with 14 licenses across six states.
Historically, they’ve derived most of their revenue from consulting and other fees without ever touching the plant or owning a cannabis licensing business. But the plan now, according to Founder & CEO Robert Fireman, is to acquire and consolidate licensed businesses under the MariMed brand to become a seed-to-sale MSO, expand their brands across the U.S., Latin America, and Europe, and establish a medical board of advisors to support CBD clinical trials.
“Part of our mission is to build this business and put some science into it so we can validate some of the folklore into peer-reviewed quality medical journals like the New England Journal of Medicine,” said Fireman.
Plus Products Inc. (OTCQX: PLPRF; CSE: PLUS) is a California-based maker of cannabis and hemp-infused edibles. The company is focused on branded packaged goods (as opposed to operating retail locations, distribution channels, or growing operations) because the packaged goods segment typically has better sales margins than other areas of the retail supply chain.
For example, while the price of cannabis flower and concentrates has collapsed in Colorado and Washington since legalization, prices for edibles & tinctures have gone up in part because customers shop based on branding and not simply price.
“There are a lot of companies in the cannabis industry who are trying to do everything. They’re trying to be in agriculture, they’re trying to be in retail, they’re trying to be in distribution, and they’re trying to be in branding having never done any of those things before. And if even doing just one of these four things is extremely difficult, trying to do all four of them at the same time is pretty much impossible,” said Jake Heimark, Plus Products’ CEO and co-founder. “At Plus, we are focused on one thing, which is building the best consumer packaged goods company that we can.”
The Valens Company
The Valens Company (OTCQX: VLNCF; TSX-V: VLNS) is an extraction and manufacturer of cannabis products and is currently the largest extraction company in Canada.
Valens recently gave Q4 pre-revenue guidance of $27-30 million, which if achieved would be above analyst estimates and the fourth such quarter in which they beat the estimate.
The company is currently focused on oil-based products (as opposed to flower-based products) because of the belief that the former will eventually grow to represent 75% of the global cannabis market, according to Executive VP of Strategy and Investments Everett Knight.
“The reason we think that is two reasons. One, I’ve never met a doctor that wants you to smoke cannabis. And two, if you look at the incremental consumer coming online...the incremental consumer wants a more convenient method of consuming cannabis. They don’t want to roll a joint. They maybe want it in a beverage so they can consume it with their family.”
KushCo Holdings Inc. (OTCQX: KSHB) is a California-based provider of goods and services that supports the cannabis industry. This includes everything from packaging and labeling to vaporizers, supplies, and retail services.
The company currently gets 61% of its revenue from its vaporizer cartridges and batteries, and 20% from packaging, papers, and supplies. KushCo’s net revenue for 2019 was $149 million, and the company is guiding for that figure to be in the $230-250 million range in 2020.
“The vision for our company is to power the global cannabis ecosystem, and currently we’re focused on doing that by providing products and services to...the plant-touching companies,” said Nick Kovacevich CEO, co-founder & chairman. “Our job is we don’t touch the plant, but we need to support the businesses that do with valuable products and services. If you pick up a product, there’s a high likelihood that KushCo was behind it in some form or fashion.”
urban-gro, Inc. (OTCQX: UGRO) is a designer and developer of cannabis cultivation facilities, with operations in the U.S. and Canada and potential future operations in Latin America and Europe.
Urban-gro works with cannabis operators helping to develop and design industrial grows from the design stage through when they become operational. The company was contracted to build 1.5 million square feet of operations in 2019.
But rather than focus purely on growth, the company made a pivot in the second half of 2019 to focus more on profitability, according to Co-Founder and CEO Brad Nattrass, cutting $220,000 of monthly cash burn from the company
“With the change in capital markets, urban-gro had to pivot from a company only focused on top-line [growth] looking at increasing land grab as quickly as possible, not focused on profitability. But we have taken substantial steps to adjust our focus to be laser-focused on positive EBITDA in 2020.”
Image credit: Sarah Stierch