CannabisNewsWire
Editorial Coverage: With demand outstripping supply, successful
cannabis companies are following smart core strategies and
reporting strong revenues.
Golden Developing Solutions Inc. (OTC: DVLP) (DVLP
Profile) has used a mix of acquisitions, diverse
brands and products, and increased production footprint to meet
customer demand and report significant revenue increases, including
its strongest second-quarter numbers ever. Industry giant
Canopy Growth Corporation (TSX: WEED) (NYSE: CGC)
has followed a similar path, though some change may follow the
recent departure of its co-CEO. Tilray Inc. (NASDAQ:
TLRY) has invested heavily in increasing production while
reaching into new markets such as the United Kingdom.
Medmen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF)
and Curaleaf Holdings Inc. (CSE: CURA) (OTCQX:
CURLF) have both shown the potential for growing
multistate businesses in the United States, despite the challenges
created by federal legislation.
- Increasingly liberal laws have allowed demand to show in the
legal market, but supply has not yet caught up.
- To meet this demand, the industry needs to increase
production.
- Individual companies are using acquisitions and diversification
to improve their revenues.
To view an infographic of this editorial, click here.
Expanding Business
The cannabis, hemp and CBD sector is experiencing a period of
huge expansion. With medical cannabis now legal in 60% of U.S.
states, recreational cannabis legal in many states as well as
Canada, and hemp production legalized on a federal level, North
America has become home to a thriving industry. What was relegated
to illegal markets and fringe cases only 20 years ago is now the
source of an economic boom.
In this brave new world of legal business, cannabis companies
are looking for ways to maximize their profitability and ensure a
strong position as the market keeps expanding. So what are the
strategies bringing success for the growing cannabis companies,
both big and small? And how are those strategies contributing to
the development of the sector?
Expanding Production
For the companies working in this sector, such as
Golden
Developing Solutions Inc. (OTC: DVLP), their work in
the space is producing strong growth and sales numbers. From March
2018 to March 2019, Golden Developing Solutions saw an 800% jump in performance. Further growth was announced in May, as the company
went from strength to strength.
“As we projected, top-line performance is accelerating across
all metrics following our recent investments,” said Triant.
“Everything is clicking right now.”
For Golden Developing Solutions, some of its growth is coming by
expanding production. With the cannabis industry being so new and
tightly regulated, production is relatively limited. And with
demand rising rapidly, especially for hemp-derived CBD, the
industry is currently struggling to meet customers’ needs. This
demand supports high prices but still means that producers are
missing out on opportunities, as there is untapped potential in the
market.
Golden Developing Solutions is just one of the companies
expanding its production capacity in response to this trend. The
expansion is a complex undertaking, as a hemp or cannabis
production facility requires a specially adapted building,
hydroponic equipment to grow the plants, security and other support
facilities, and an appropriate license from the relevant local
authority. When a new growing space is established, such as
Golden Developing Solutions’ recently announced
25,000-square-foot facility in Denver, Colorado, it’s big news
for both the company and the industry.
This move in Colorado by Golden Developing Solutions was a
direct response to that gap between supply and demand. Already
equipped with much of the equipment it needs, and with licensing in
place to produce marijuana infused products, DVLP has identified an
ideal space with promising potential.
“Our CBD Infusionz segment is bursting at the seams right now,”
said CEO Stavros Triant. “Demand already vastly outstrips supply
capacity. This new facility directly addresses that issue, and
should provide the necessary room for the explosive growth that we
anticipated when we made that acquisition in March.”
Acquisitions and Subsidiaries
Increasing production space is the only way for the industry as
a whole to address supply shortages. But for individual companies,
other options to increase their presence in the sector are
available.
The past two years have seen a huge surge in acquisitions in the
cannabis sector. These acquisitions have allowed companies to grow
in size, resulting in increased supplies and sales. Though it
doesn’t directly lead to an increase in overall supply, the
benefits in scale and efficiency mean that, in the long term, this
coming together of companies could lead to better supplies.
For Golden Developing Solutions, its most important recent acquisition has been Infusionz
LLC, a manufacturer of CBD products. Completed in March, the
acquisition gave Golden Developing Solutions control not just of
Infusionz’s production base but also of its established brands and
retail links. Building relationships with customers is a tricky
business in an industry where licensing limits marketing options
and where brand allegiances are just starting to form. Acquiring a
brand for which demand already outstrips supply is invaluable.
This is a common pattern for mergers and acquisitions in the
cannabis and CBD space. Though brands may be relatively small scale
compared with other industries, they are often not folded into
existing lines on acquisition. The benefits of experimenting with
new brands and tapping into their customer base outweigh what might
be gained by merging output to supply a smaller number of
brands.
A More Diverse Approach
Infusionz isn’t the only subsidiary in Golden Developing
Solutions’ armory. In addition to Where’s Weed, a core pillar of
the company since 2011 connecting medical and recreational cannabis
consumers with local dispensaries, delivery services, strains and
more, the company is also focusing its attention on Where’s
CBD.
Similar in nature, Where’s CBD is a new technology resource and
future online marketplace connecting CBD consumers with local
businesses, brands and educational content across the United
States, helping people quickly find the right products for
themselves or their loved ones.
Providing a powerful opportunity to capture both customers and
purchasing data while providing distribution channels for brands,
Where’s CBD is a diverse addition to the company that inherently
adds more value to the overall ecosystem and foundation that has
been built thus far.
By increasing production, acquiring smaller competitors, and
diversifying their products and services, cannabis companies are
becoming stronger than ever.
Among these strengthening companies is Canopy Growth
Corporation (TSX: WEED) (NYSE: CGC). If any company can be
considered an established giant in such a young industry, it’s
Canopy Growth. Emerging from the Canadian market in 2013, Canopy
Growth quickly rose in power off the back of the Canadian medical
cannabis sector. As of April 2019, Canopy Growth was the largest
cannabis company in the world as measured by market capitalization
and showed no sign of faltering. Like Golden Developing solutions,
it has followed the three main paths to growth in the sector,
including diversifying its product line to suit a market that now
includes recreational cannabis and CBD derivatives as well as
medical cannabis. The recent departure
of co-CEO Bruce Linton has caught observers by surprise but is
unlikely to disrupt Canopy Growth’s ongoing rise.
Another of the big Canadian companies, Tilray Inc.
(NASDAQ: TLRY) recently announced the investment of $32.6 million in expanding its
cultivation and manufacturing facilities. The expansion work,
taking place over three sites, will increase the company’s
production and manufacturing footprint to 1.3 million square feet.
The company’s growth includes reaching into new markets, with the
recent announcement that it has exported bulk
amounts of cannabis oil into the United Kingdom. The United
Kingdom only allowed the use of cannabis oils recently — with
stringent restrictions. Some expect this to
become the thin end of the wedge, as many in the country would like
to see cannabis rules liberalized, especially where the drug can
meet medical needs. By being one of the first bulk providers in the
country, Tilray could establish itself as an important name before
the British market is even fully formed.
Of course, there’s still room for improvement in the legal
situation in the United States, and Medmen Enterprises Inc.
(OTCQX: MMNFF) (CSE: MMEN) has established itself as one
of the largest financial supporters of progressive
marijuana laws. The gap between federal laws and those in
individual states is an ongoing problem for companies working in
North America, making it hard to carry out cross-state operations.
Despite this, Medmen has managed to establish a multistate business
working across 19 facilities that, through a move
into Arizona, bring business to five states.
Another U.S. company, Curaleaf Holdings Inc. (CSE: CURA)
(OTCQX: CURLF) is a vertically integrated medical and
wellness cannabis company whose strategic focus is specifically on
areas where demand is most likely to go unmet. Working in states
such as Florida, Massachusetts, New Jersey and New York, which are
highly populated but have limited licensing, the company is
bringing its products to customers who may struggle to get the
cannabis and CBD derivatives they are looking for. Curaleaf has
used acquisitions to help with this strategy, with the recent acquisitions of Emerald Dispensary.
By diversifying, increasing production and acquiring other
companies, cannabis businesses are expanding to meet previously
unmet demand.
For more information on Golden Developing Solutions, visit
Golden
Developing Solutions Inc. (OTC: DVLP)
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