Forget Production - Retail and Brands Are What Matter in Crowded Cannabis Industry

November 13, 2018 - Coinbit Blockchain Solutions


The cannabis industry is still in its infancy, but there is already a substantial push for companies to create legitimate brands. Aphria (NYSE:APHA) (TSX:APHA), one of the largest licensed producers (LPs) in Canada, acquired premium cannabis producer Broken Coast in Q1 2018, nine months before legalization. Curaleaf Holdings, Inc. (OTC:LDVTF) (CSE:CURA), Green Thumb Industries Inc. (OTC:GTBIF) (CSE:GTII), and MedMen Enterprises (OTC:MMNFF) (CSE:MMEN) are all actively pushing their products out to retailers. Meanwhile, Green Growth Brands (CSE:GGB) the American cannabis company that had Mad Money’s Jim Cramer shouting ”I Cannot Wait Until You Come Public”, has already started building a diverse portfolio of brands.

Canada’s decision to legalize recreational cannabis has provided companies with first-mover advantage. Canadian LPs had time to establish production, create brands and market them to their consumers. Cannabis companies in the United States have caught on to this and are now racing to develop their recreational blueprint that focuses on retail, products, brand identity, and the cannabis lifestyle. Green Growth Brands (CSE:GGB), who focuses on cannabis consumer products, is one company that may flourish in the U.S. market through its implementation of a retail cannabis plan that is based on brand power and an experienced management team.

Brands Matter in the Cannabis Industry

The importance of brand power has already been seen in the Canadian market. Aphria invested $10 million during the formative stages of Hiku Brands and through their purchase of premium cannabis producer Broken Coast.

American companies are working to develop their product lines to establish customer loyalty early on. Green Growth Brands (CSE:GGB) approach to brand loyalty is through the creation of a variety of cannabis lifestyle products. Each of their brands has been designed to cater to a specific type of cannabis user. These brands include:

1) CAMP (mental clarity and relaxation)

2) 7th Sense (CBD-focused)

3) The Source (chain of retail dispensaries)

4) Meri + Jayne (millennials)

5) Green Lily (products designed specifically for women)

6) Xanthic (a proprietary THC / CBD absorption technology)

Through a reverse takeover by Xanthic Biopharma, Green Growth Brands (CSE:GGB) managed to secure ownership of the Xanthic release method. Xanthic’s proprietary manufacturing process allows Xanthic to deliver THC and CBD in water-soluble formulations, offering convenience and ease of use. Water-soluble formulations are fast acting — they only take 10 minutes to take effect. They can easily be white labelled and added to beverages, making them a great segway into the beverage industry.

The company plans to market these brands by focusing on the individual user and their experience. This localized strategy puts the consumer first and lets them pick the brand that they identify with most.

The Cannabis Retail Experience Needs Improvement in the U.S.

The U.S. cannabis market was worth an estimated $8.5 billion in 2017. Due to the limited market share available, and with cannabis only recreationally legal in California, Nevada, Colorado, Oregon, Washington, Michigan, Vermont, Maine, Massachusetts, and Alaska, companies are fighting to secure as much of it as they can.

The cannabis retail experience in the U.S. will need to be improved if companies want to gain market share. Retail stores in the industry are typically run as small businesses, resulting in a lack of professionalism, inconsistency, and inefficiency. Both MedMen Enterprises and Green Growth Brands (CSE:GGB) are actively changing this through their retail brands, including Green Growth Brand’s The Source dispensaries. These two companies are heavily focused on building brands, but unlike Aphria, they own the retail side of the business as well. By controlling both production and retail, they can provide their brands with the exposure they need to grow during the early stages of the U.S. cannabis sector.

Hundreds of Millions Being Poured into Cannabis

Green Growth Brands (CSE:GGB) managed to raise $140 million through a private placement prior to being listed. A portion of the investment was led by the retail fortune of Ohio’s Schottenstein family. The company was initially seeking $55 million, but increased investor demand led to an oversubscription and an additional private placement.

“We’ve seen a significant amount of interest in the company, not only from consumers and industry partners but from the investment community at large,” said CEO Peter Horvath in a news release. “We’re very focused on quickly expanding our footprint across North America, and this funding will allow us to acquire additional cannabis licenses and grow facilities.”

MedMen Enterprises recently raised $87 million from a bought deal and in October, closed an additional CAD$94 million senior secured term loan facility. Curaleaf raised CAD$140 million and is seeing a $4 billion valuation. Curaleaf is one of the largest cannabis retailers in the U.S., owning 28 dispensaries, 12 cultivation and 9 processing sites in 12 U.S. states.

Green Thumb Industries just closed a CAD$101.66 million bought financing deal last month. Cannabis has been the gold rush of 2018.

Inexperience Is a Problem in the Cannabis Industry

Cannabis regulations in the United States are state-sanctioned. Federal law prohibits the transfer of cannabis across state lines. Scaling has been an obstacle for smaller businesses in the industry. U.S. companies who are fully engaged in every facet of the industry must secure production, processing, and retail within the individual states they operate within.

Many smaller producers and dispensaries rely on cannabis experts who lack the relevant management skills needed to build and scale a brand to the national level. Acquiring top-level talent has been a struggle for these micro companies. In addition, obtaining the capital required to increase their production and retail capabilities has been a difficult challenge for them to overcome.

Green Growth Brands (CSE:GGB) solved the problems their competitors face by hiring branding genius Peter Horvath, an executive who has worked for major brands American Eagle Outfitters, Victoria’s Secret, Bath & Body Works, and Designer Shoe Warehouse. Jim Cramer praised that decision, saying, “Finally someone who knows retail.”

Horvath’s experience with major consumer brands is one of their major assets. While cannabis production is essential, retail is still required to sell products and is an underserved part of the industry. Green Growth Brands’ (CSE:GGB) possesses cannabis lifestyle products that are marketable, as well as proprietary technology that can be licensed to other companies to generate additional revenue.

The Cannabis Industry Is Only Getting Started

Cannabis in the U.S. is still in its early stages. Most companies exist on a state-by-state basis. Green Growth Brands’ (CSE:GGB), Curaleaf Holdings, Inc., Green Thumb Industries Inc., and MedMen Enterprises are developing their footprint well in advance of federal legalization.

In Green Growth Brands’ case, they have established product lines that appeal to all types of consumers. With billions of dollars of market share still available, companies with adequate production, processing, and retail capabilities should have the necessary capacity to take advantage of this burgeoning industry.

For more information on Green Growth Brands (CSE:GGB), please visit Potstocknews.com.

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