CannabisNewsWire
Editorial Coverage: With a powerhouse economy worth more than
$3 trillion, California’s economy ranks as the fifth largest in the world. Current legislation is
expected to pave the way for the state’s hemp market to
explode.
With a series of smart acquisitions and brand expansions,
Sugarmade Inc. (OTCQB: SGMD) (SGMD
Profile)appears to be a strong pick-and-shovel
presence as California looks at passing hemp-friendly legislation.
Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) just
announced a new hemp-based acquisition, while Greenlane
Holdings Inc. (NASDAQ: GNLN) and The Green Organic
Dutchman (TSX: TGOD) (OTCQX: TGODF) (TGOD
Profile) have both inked deals that strengthen their
presence in the hemp industry as well. KushCo Holdings Inc.
(OTCQX: KSHB), another industry supplier, just created a
new sales division aimed at mass distribution, industry education
and compliance, and building CBD-brand distribution networks.
- Pending California legislation could rewrite hemp demand in
California, whose economy ranks as fifth largest in the world.
- A more welcome legal environment is expected to create
significant additional demand in the marketplace.
- Sugarmade’s careful strategy may place the company in an ideal
position as the industry prepares for change.
To view an infographic of this editorial, click here.
Legislation Could Warm Up State’s Hemp
Market
No state has had a bigger impact on the growth of consumer hemp
and CBD products than California. But the Golden State may just be
getting warmed up relative to hemp and CBD consumption. Current
state legislation — Assembly Bill 228 — could rewrite the hemp
demand equation for farmers and industry supplies across the entire
United States.
While California has been liberal relative to cannabis
legalization, state regulators have been downright prudish relative
to allowing hemp cultivation and the use of CBD added to food and
beverages. This attitude could all change soon as California’s
state senate has until September 15, 2019, to pass AB 228. The
legislation, which clarifies the statues of CBD in foods and
drinks, passed with a unanimous vote in California’s Assembly, and
California Gov. Gavin Newsom is widely expected to sign the bill
into law, making the legislation effective immediately.
Hydroponics Critical Link in Hemp
Cultivation
The California market fully opening to CBD in food and beverage
is expected to create significant additional demand in the
marketplace. Not only will consumer brands benefit but so too will
cultivators and those companies that supply the industry, including
companies such as Sugarmade Inc. (OTCQB: SGMD).
Sugarmade is a brand development company with a focus on
providing hydroponics to the burgeoning hemp market. That’s why
companies such as Sugarmade are a critical link in the hemp-farming
process. Essential to growing consistent, high-grade hemp,
hydroponics provides critical lighting equipment necessary to
control photosynthesis, specialized nutrient mixes to provide
plants with the food they need, and measurement solutions and
environmental controls used by staff to measure, monitor and
control the quality, strength and health of the plants.
Companies with expertise in hydroponics are essential in the
hemp-industry supply chain, but because of the previously
restricted market, these companies have been relatively small. All
that is changing as numerous companies look to meet the needs of
the growing hemp market, and Sugarmade appears set to become a
leader among these companies.
Sugarmade’s calculated strategy entails deliberate growth on two
fronts: organically by brand expansion and through acquisitions.
Sugarmade has been working on a handful of deals that provide it
with key components that may place the company in an ideal position
as the industry prepares for change, especially in California.
“Sugarmade plans to integrate these businesses fully as soon as
is possible, making us one of the larger suppliers to this growing
marketplace,” said Jimmy Chan,
CEO of Sugarmade. “Additionally, we are in the process of vetting
other possible acquisitions to further enhance the portfolio of
hydroponic and cultivation supply products. We are certainly
excited about our prospects for the remaining part of this year and
into next year.”
Sugarmade Strengthening Position as Industry
Leader
Sugarmade has been actively seeking acquisitions and executing
new supply contracts to strengthen its place as a leader in the
hemp-industry supply space. The company’s most recent action
involves exercising its
option to invest in Hempistry Inc, a company founded by
Sugarmade’s own Chan. Utilizing advanced plant genetics and
technological innovation, Hempistry is now scaling operations to
approximately 2,600 acres aggregated between its subsidiaries,
while adding to the product value chain and enhancing production
efficiencies.
“These investments into Hempistry make sense for Sugarmade, not
only from a financial standpoint relative to probable rate of
return, but also from a business development standpoint,” said
Chan. “As Hempistry and other local cultivators grow, we believe
Sugarmade’s status as a potential supplier to cultivators will also
continue to rise.”
Sugarmade’s other brands in the hemp sector include
Zenhydro.com, a comprehensive online hydroponics supply outlet;
AthenaUnited.com, a specialist company providing hydroponic
supplies to large commercial cultivators; CarryOutSupplies.com, a
leader in paper and plastic supplies; and BudLife Cannabis Storage
Solutions, which offers the world’s only patented intelligent
packaging, storage and distribution for medicinal plants.
The company also recently announced that it is set to acquire
the flagship operation of Hydro4Less, which is expected to produce
about $5 million in revenues and be profitable this year. In the
agreement, Sugarmade gained an option to purchase two additional
Hydro4Less retail operations, currently producing in excess of $20
million annually.
In addition, expanding on an already-existing marketing
agreement with Bizright LLC, SGMD announced that it will acquire
Bzrth Inc. These accretive acquisitions will make Sugarmade one of
the largest publicly traded hydroponic supply companies in the
world.
Companies Moving into Welcome Environment
As legislation in the United States moves toward creating a more
welcome environment, Cronos Group Inc. (NASDAQ: CRON) (TSX:
CRON) has established a new growth opportunity in the
United States with its acquisition of a
hemp-based products platform, Redwood Holding Group LLC. CRON
has entered into a definitive agreement to acquire four of
Redwood’s operating subsidiaries. Redwood manufactures, markets and
distributes hemp-derived, CBD-infused skincare and other consumer
products online and through retail and hospitality partner channels
in the United States under the brand, Lord Jones(TM). Redwood’s
products use pure hemp oil that contains natural phytocannabinoids
and terpenes found in the plant. The transaction is expected to
close in 3Q 2019, subject to customary closing conditions and
regulatory approvals.
Greenlane Holdings Inc. (NASDAQ: GNLN), one of
the largest global sellers of premium cannabis accessories, CBD and
liquid nicotine products, recently announced an exclusive U.S.
distribution partnership with
Cookies for the national launch of the Cookies hemp-derived CBD
product line, including Cookies CBD cartridges for the G Pen Gio.
Cookies CBD products will feature terpene profiles inspired by
famous Cookies strains, such as Cereal Milk, London Pound Cake 75,
and Gelatti. “We are positioning ourselves as a CBD category
captain, building a portfolio of the most-respected brands in the
sector through exclusive distribution agreements,” said Greenlane
chairman and CEO Aaron LoCascio. “Over the past several months, we
have signed exclusive distribution agreements to build a portfolio
of the best existing and new CBD offerings, including exclusive
deals with Bloom Farms, Cookies, Select, Mary’s Nutritionals, and
Slang. The pace of these particular partnerships illustrate that
Greenlane continues to be the partner of choice for cannabis brands
that seek to build global brands with hemp-derived CBD
products.”
The Green Organic Dutchman (TSX: TGOD) (OTCQX: TGODF)
(TGOD
Profile) recently signed a multiyear
agreement with Neptune Wellness Inc. for extraction,
formulation and packaging services, including exclusive rights on
processing and manufacturing of certified organic products for the
Canadian market. The largest deal for a processor to date, the
agreement cements TGOD’s leadership position in organic consumer
wellness products and represents a significant investment in
high-value manufacturing and supply chain jobs. Neptune’s expertise
will enable TGOD to quickly scale up production of a wide range of
consumer wellness products. Under the terms of the agreement, TGOD
will allocate more than 230,000 kilograms of cannabis and hemp
biomass for Neptune to process and transform into premium
certified-organic consumer wellness products. The contract between
TGOD and Neptune covers a period of three years and is expected to
be back-end loaded with the first year accounting for approximately
20% of the total value.
KushCo Holdings Inc. (OTCQX: KSHB) is expanding
its platform by launching a new
retail services division. Led by an experienced team, the
division is designed to facilitate partnerships with large-scale,
go-to-market operations focused on CBD mass distribution. The new
business unit will also focus on industry education and compliance
as well as building distribution networks of CBD brands across
conventional retail channels. “The maturation of the cannabis
industry has opened up countless avenues for business development
across the industry’s supply chain,” said KushCo Holdings president
and CRO Jason Vegotsky. “The cannabis industry continues to scale
at an ever-increasing rate, and we are excited to be adding two
seasoned CPG sales veterans with analytical and customer-centric
backgrounds to our team.”
As the attitude surrounding hemp cultivation, distribution and
use continues to warm up, opportunities within the industry are
certain to increase. Companies that are committed to providing
quality services within the space look to benefit exponentially as
the market appears certain to expand.
For more information on Sugarmade, visit Sugarmade Inc.
(OTCQB: SGMD)
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