As the cannabis industry expands, companies are eyeing strategic opportunities in the sector designed to help them establish a foothold in the promising space.
-- Cannabis and related products are legal in Canada and an increasing number of states. -- Businesses have responded with a growing range of diverse products. -- Companies making the smartest investments, including carefully selected mergers and acquisitions, are in the best position to profit.
SinglePoint Inc. (OTC:SING) (SING Profile) has invested in a number of other cannabis companies to grow its portfolio and leverage its position in the market. Supreme Cannabis Company Inc. (TSX:FIRE.TO) (OTC:SPRWF) just signed of letter of intent with Malta Enterprises, the economic development agency of Malta. MedMen Enterprises Inc. (CNSX:MMEN.CN) (OTC:MMNFF) recently wrapped up its previously announced acquisition of Kannaboost Technology Inc. and CSI Solutions LLC, two vertically integrated Arizona-based operations. Charlotte’s Web Holdings Inc. (OTC:CWBHF) (CNSX:CWEB.CN) reported more than 10 times growth in harvested hemp compared to its 2017 grow season. And Curaleaf Holdings Inc. (OTC:CURLF) (CNSX:CURA.CN) has signed a definitive agreement to acquire Eureka Investment Partners LLC.
To view an infographic of this editorial, click here.
A Big Year for Big Investment in Cannabis
In only a few short weeks, this year is shaping up to be an important year in the cannabis market. The legal groundwork for industry changes was laid last year, with milestone legislation being passed in Canada, the United States and elsewhere. With legal regulations in place, new opportunities for the market to grow and for companies to make strategic moves within the sector have become more frequent — and appear to be more profitable.
This upward movement is fueling the ongoing development of two important trends: The first one is product diversification, as cannabis companies and the businesses supporting them develop a wider range of products for an increasingly varied market. The second one is big investment, as both outside businesses and larger cannabis companies move to create a presence in the market. Money is flowing in, making the most of the opportunities that legal and product changes provide.
A Changing Global Context
This year’s promise is rooted in last year’s significant growth and impressive forecast. SinglePoint Inc. (OTCQB:SING), a young tech company that has moved into the cannabis sector, saw its revenue hit the $1 million mark. In addition, like many cannabis companies, the company ended the year with even better things on the horizon, including a prediction that revenue should dramatically increase over the next 12 months.
Making such claims in a relatively untried sector may seem bold, but closer scrutiny reveals why such predictions appear to be solid.
To begin with, the changing attitude of lawmakers to cannabis has been crucial to the industry’s forward momentum. The prohibitory model for managing the drug that has dominated for half a century is increasingly recognized as not just ineffective but harmful to public health. As a result, governments are legalizing cannabis for medical use and are even creating regulated markets for recreational cannabis. This is especially true in Canada, where the trade became legal countrywide last October.
For American companies such as SinglePoint, progress has come on a state-by-state basis. Though the majority of Americans favor legalization, the federal government has been slow to follow what appears to be a nationwide attitude. Instead, individual states have created legal markets, with Michigan becoming one of the most recent with cannabis legalization taking place there in December. Two-thirds of U.S. states now allow medical cannabis, and one in five have legalized its recreational use; more are expected to follow suit in the near future. This swing in attitude — and government support — has allowed SinglePoint to begin investing in cannabis without having to consider a national cannabis business.
The end of the year saw a significant step towards wider legalization. Following months of wrangling, the 2018 Farm Bill was passed making industrial hemp legal on the federal level. This nonpsychoactive from of cannabis has provided many companies, including SinglePoint, with an important entry point into the sector, as the chemical cannabidiol (CBD), which can be derived from hemp, can be more widely sold than other forms of cannabis. CBD’s impressive popularity has provided a further boost to the sector, especially to companies entering the industry with CBD offerings.
Undoubtedly, the Farm Bill is set to allow cannabis businesses to grow significantly through hemp and provide a precedent as federal politicians reconsider the wider cannabis industry.
Now that companies have identified CBD as a promising step into the market, they are doing what they do best — finding new ways to sell their products and services. This has led to a wave of innovation and an increasingly diverse range of cannabis-based products.
Two of the biggest areas for innovation are the creation of confectionaries and beauty products. The former offers a way to consume cannabis without inhaling it. The latter appears to be a natural fit given the suggested well-being benefits of CBD and THC, along with the willingness of customers to try new plant-based beauty products. But innovative companies aren’t stopping there, with options such as Phyto-Bites, a product SinglePoint distributes on its website SingleSeed.com, designed to improve the health and well-being of pets.
Human health and well-being remain a huge driver for innovation in cannabis. Aware of that, SinglePoint has also been adding health and wellness products to its sales lines. Its SingleSeed store recently unveiled a range of TorusMed Hemp CBD products to its offerings. The new products include treatments such as Sport Relief Topical Cream, an ointment designed to provide pain relief for professional and amateur athletes.
Smart Investing in the Cannabis Sector
The growth of the cannabis sector has not occurred without a few bumps along the way. Companies are operating in a space that didn’t even exist 20 years ago, and the sector is evolving quickly, with the last few years triggering a wave of consolidation. In a fast-changing market, challenges are expected, and the ability to meet such challenges successfully is essential to a company’s success.
The secret to smart investing in this new space is the same as for any sector: research, understand the businesses being invested in, identify a plan and execute it. Understanding the specifics of the cannabis market is critical, and the trend within the industry most recently has been mergers and acquisitions, as companies such as SinglePoint have expanded through investment in promising companies that provide products and services that will complement and support its strategy.
SinglePoint’s most recent investment has been in TorusMed, a company developing new ways to optimize CBD output from hemp and, consequently, increase the profitability of this piece of the cannabis sector. With the Farm Bill pointing to hemp creating a new boom in the industry, SinglePoint has used its understanding of the market to invest in a company that appears to offer great potential to make the most of this moment.
Moves such as this can put a company in a strong position heading into what may be the biggest year yet for cannabis. “[This year] will be a banner year for SinglePoint,” said SinglePoint CEO Greg Lambrecht. “We are equipped with the proper funding, partners and opportunities to be firing on all cylinders. We as a team expect to position SingleSeed and SinglePoint as market leads in the CBD market while continuing to enable the founders of the companies we have acquired to grow their businesses. We are well diversified and have large opportunities across many emerging markets that should enable us to be successful into 2019 and beyond.”
New Year, Fresh Growth
The move for Supreme Cannabis Company Inc. (TSX:FIRE.TO) (OTCQX:SPRWF) to partner with Malta Enterprises is the company’s first step to obtain a Cannabis Production License in the country. The license would allow Supreme to produce and process cannabis for medical use within Malta, one of Europe’s principal commercial entry points, and to export cannabis for medical use to certain international markets.
MedMen Enterprises Inc.’s (CNSX:MMEN.CN) (OTCQX:MMNFF) acquisition of Kannaboost Technology and CSI Solutions LLC includes retail locations in Scottsdale and Tempe, as well as 25,000 square feet of cultivation and production capacity in Tempe and Phoenix. The acquisition also includes a 40-percent stake in top-selling brand K.I.N.D. Concentrates, which is currently distributed in more than 90 percent of Arizona dispensaries.
Charlotte’s Web Holdings Inc. (OTCQX:CWBHF) (CNSX:CWEB.CN) claims the No. 1 position in market share in the hemp CBD market, with its products sold in 3,680 retail locations as well as on its website. Charlotte’s Web had 300 acres of hemp planted in 2018 compared with only 70 acres in 2017, resulting in a harvest of 675,000 pounds of hemp last year. The legalization of hemp in the U.S. should open the doors for Charlotte’s Web to expand its retail opportunities with national chains.
Curaleaf Holdings Inc.’s (OTCQX:CURLF) (CNSX:CURA.CN) definitive agreement to acquire Eureka Investment Partners will provide access to California’s wholesale market through an existing 110,000-square-foot greenhouse facility in Salinas, California, with the potential to expand up to 270,000 square feet, which could generate more than 50,000 pounds of dry flower per year at full scale. Headquartered in Massachusetts, Curaleaf has a presence in 12 states, owns and operates 42 dispensaries, 12 cultivation sites and 10 processing sites with a focus on highly populated, limited-license states including Florida, Massachusetts, New Jersey and New York.
Legal changes are encouraging an increasingly diverse cannabis market, in which companies that make smart investments are primed for profit.
For more information about SinglePoint, please visit SinglePoint Inc. (OTCQB:SING).
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