CannabisNewsWire
Editorial Coverage: As the cannabis sector consistently shows
impressive growth, acquisitions within the market allow cannabis
companies to develop greater vertical integration.
- Cannabis companies are looking to acquire other organizations
to strengthen specialist knowledge and skills.
- Similar moves have led to impressive success in industries such
as coffee production.
- The strength of the cannabis market is also attracting other
additional investment.
Youngevity International Inc. (NASDAQ: YGYI) (YGYI
Profile) is following the vertically integrated model,
having recently acquired a company specializing in cannabis
processing machinery. Canopy Growth Corporation (NYSE:
CGC) finalized an all-cash transaction to acquire one of
the world’s most technologically advanced vaporizer companies. In
an all-stock option, Aurora Cannabis Inc. (NYSE:
ACB) agreed to purchase a British Columbia-based craft
grower, which offers premium organic products produced at low
volumes. Late last year, MedMen Enterprises Inc (OTCQX:
MMNFF) signed a definitive agreement for the acquisition
of one of the largest medical cannabis providers in the United
States. And with the cannabis sector as a whole seeing healthy
growth, GW Pharmaceuticals Plc (NASDAQ: GWPH)
recently completing a public offering to fund further growth,
raising $345 million to expand its cannabis-oriented
pharmaceuticals work.
To view an infographic of this editorial, click here
Cannabis Companies Turn to Vertical
Integration
The global cannabis industry continues to grow — especially in
the United States and Canada — creating promising opportunities for
companies eager to find ways to improve their productivity and
leverage their strengths. A wide range of companies covering the
production, processing, marketing, and sales of cannabis and
cannabidiol (CBD) products are vying for a position in the space.
Consequently, smart organizations are looking for ways stand out
from the rest.
Many are opting for vertical integration. Their strategy is
simple and straightforward — by bringing together production,
processing and distribution, companies can cut costs, improve
efficiency and ensure quality control.
Acquisitions for Growth
This all-under-one-roof strategy is one that the management at
Youngevity
International Inc. (NASDAQ: YGYI) not only believes in
but has successfully applied. A leading omni-directional lifestyle
company, Youngevity recently moved into the cannabis sector through
investment in CBD.
CBD is one of two significant active ingredients found in
cannabis. Unlike THC, which until a few years ago was the
best-known of these chemicals, the nonpsychoactive CBD does not
induce the highs or impairment that accompanies THC. In addition,
recent research has indicated that CBD could have a broad range of
benefits general well-being and health, leading to a burgeoning
market for CBD products. This promising research, along with a
growing popular acceptance of cannabis, has led to a resurgence in
the growth of hemp — a variety of cannabis that can be rich in CBD
but low in THC — and hemp-based products.
Youngevity saw the opportunity and entered the cannabis space
last year, with the release of its Hemp
FX product line. Hemp FX products are designed to help
consumers relax and soothe muscle pain. As it launches this new
product offering, the company will leverage the success it has
already seen through its hybrid model of direct selling, social
selling and e-commerce.
To further take advantage of this opportunity, Youngevity has
announced its acquisition of
Khrysos Global, a large hemp and CBD machine manufacturing
company. Khrysos’s proprietary technology is specifically designed
to extract active ingredients from hemp and cannabis, thereby
providing the best possible yields from crops. The company also
offers planning and consulting for cannabis companies looking to
take full advantage of technology throughout the extraction
process.
“Our acquisition of Khrysos is extremely exciting on a number of
levels,” said Youngevity CEO Steve Wallach. “Beyond the fact that
Khrysos’ hemp-CBD extraction technology is far more efficient than
most anything else on the market, we’re acquiring a turnkey
business model here. Their systems are applicable to the entire
industry and are immediately implementable across our own line of
HempFX products as well as in offtake agreements we have through
our existing business relationships. We see this as providing not
only immense value to our company, but also to our investors–by
selling not just the extraction systems, but also servicing and
operating those systems via a rental model, they will provide us
with continuous, ongoing profitability.”
Field to Finish
The Khrysos acquisition appears to be a logical step for
Youngevity, not only because of the company’s interest in the hemp
market but also because of its already-proven business model. This
model, which the company refers to as “field to finish,” has been
successfully tested through its CLR Roasters subsidiary.
In this model, CLR is involved in
every stage in the coffee production process, from farming and
green coffee distribution to roasting and sales of branded goods.
This vertically integrated approach includes a plantation and
dry-roasting facility in Nicaragua, established U.S. facilities and
sales networks, and the company’s own coffee brand. The
comprehensive approach allows the company to control the entire
process of coffee production from the field to the consumer’s cup,
not only delivering profit at every level but ensuring the quality
and the reputation of the company’s branded products.
The acquisition of Khrysos and a 20 percent ownership stake in
the Carolina Cannabis
Company allows Youngevity to follow a similar model in the
cannabis sector. By taking ownership of the production, processing,
branding and sales of its CBD product line, the company plans to
profit every step of the way, while also ensuring that its products
are produced both efficiently and to the highest standards.
The acquisition also gathers the skills and experience of
Khrysos’s technical and managerial staff under the same roof as
Youngevity’s already assembled team, another critical advantage.
The cannabis sector is still young, and smart companies regularly
evaluate and refine their processes as the industry grows and
evolves. Having specialist knowledge about the equipment used in
processing cannabis will only strengthen Youngevity’s ability to be
nimble and adapt, optimizing its processing systems and ensuring a
smooth supply chain and efficient manufacturing.
Like any win-win acquisition, both the purchasing company and
the company being acquired are set to benefit from the deal.
Youngevity’s experience in reaching customers will provide
opportunities for the technology developed by Khrysos to expand and
reach a wider market, scaling up its equipment and advisory
business.
“This is an exhilarating time for us,” said Dave Briskie,
president and CFO of Youngevity. “This is just the first step
Youngevity plans to take as we look to continue developing in the
hemp-derived CBD industry. Right now, that industry is expanding so
quickly that companies are struggling to keep up with demand. So
acquiring the production capabilities of Khrysos, and adapting a
creative model that allows us to upscale the usage of its
technologies across our own properties and the properties of our
partners — I feel — really stakes our claim within the industry at
large.”
An Industry Expanding
Youngevity’s work represents only one part of a broader wave of
expansion for the cannabis industry.
Canopy Growth Corporation (NYSE: CGC) has
acquired Storz & Bickel, a vaporizer design
and manufacturing company with a 22-year track record of
breakthrough innovations. The move brings together the world’s most
technologically advanced vaporizer company and world's leading
cannabis company and will enhance Canopy Growth's product device
development capabilities. Canopy Growth is dedicated to advancing
the world’s perception of cannabis by focusing on research, product
development, and innovative production capabilities by offering
brands consumers can trust.
In January, Aurora Cannabis Inc. (NYSE: ACB)
signed a letter of intent to acquire Whistler
Medical Marijuana Corporation in an all-share transaction
valued at up to approximately $175 million. Whistler has developed
one of Canada's most iconic cannabis brands, built on quality,
award-winning organic certified BC bud. The Transaction is expected
to provide Aurora with a premium and differentiated organic
certified product suite, expanding both its medical and adult-use
offerings, and reinforcing Aurora's presence in the
well-established west coast cannabis market.
In one of the largest cannabis acquisitions in history,
MedMen Enterprises Inc. (OTCQX: MMNFF) entered an agreement for the acquisition of
Chicago-based PharmaCann, one of the largest medical cannabis
providers in the U.S. The move is will permit the company to
operate 76 retail stores and 16 cultivation and production
facilities in 12 states. Through the transaction, MedMen is
anticipated to add licenses in Illinois, New York, Pennsylvania,
Maryland, Massachusetts, Ohio, Virginia and Michigan.
A world leader in the development of cannabis-related medicine,
GW Pharmaceuticals Plc (NASDAQ: GWPH) has built a
strong research program and developed remarkable manufacturing
expertise. With its public-offering
expansion, the already-strong company becomes a major presence
in one of the most attractive investment sectors. This funding
allows GW Pharmaceuticals to keep growing its impressive research
and production work.
With these strategic moves made by companies intent on
leveraging their positions in the growing cannabis market, the time
appears ripe for interested investors to take a closer look at the
industry’s potential.
For more information on Youngevity, visit Youngevity
International, Inc. (NASDAQ: YGYI)
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