CannabisNewsWire
Editorial Coverage: The growth of the hemp sector is having a
beneficial effect for both hemp companies and hydroponic
suppliers.
- The growth of hemp more than doubled in the United States last
year
- More companies are moving to produce hemp, causing a surge in
demand for cultivation and hydroponic supplies
- Shortages are particularly acute relative to the hemp
micropropagation and hemp cloning supplies as the spring planting
season looms
Sugarmade Inc. (OTCQB: SGMD) (SGMD
Profile) via its pending acquisitions is poised to
accelerate its growth rate as a result of this hemp cultivation
boom, along with other leading companies. Tilray Inc.
(NASDAQ: TLRY) has been expanding through the acquisition
of other companies and a move into Europe, with a successful
harvest in Portugal. Canopy Growth Corp. (NYSE: CGC) (TSX:
WEED) is using outside investment to expand from Canada to
New York and to develop CBD-infused drinks. Cronos Group
Inc. (NASDAQ: CRON) (TSX: CRON) has also seen substantial
outside investment thanks to growing faith in hemp. Aphria
Inc. (NYSE: APHA) (TSX: APHA) has even faced a hostile
takeover attempt as some companies look for ways to force their way
into greater influence over a growing sector.
To view an infographic of this editorial, click here.
Hemp — The New Cash Crop
This year is set to be a record breaker for the hemp industry.
The ongoing transformation of the plant’s legal status in North
America is opening up possibilities for farmers, processors and
retail outlets. The whole playing field is changing as the
nationally legalized Canadian industry develops and the United
States contemplates an agricultural future with now-legal hemp
cultivation. This momentum appears to be drawing in big investors
as well as industry pioneers that are intent on setting up new
businesses.
The Farm Bill, which was signed into law in the United States in
December, includes clauses making the farming of hemp legal on a
nationwide level. Hemp doesn’t contain a significant quantity of
the psychoactive chemical tetrahydrocannabinol (THC), which is
present in other variations of the plant. Instead, hemp is valued
for its nonpsychoactive chemical cannabidiol (CBD), which is used
in a growing number of health, wellness and relaxation products.
Hemp also is a source for fibers that can be used for anything from
cloth to building materials. The bill therefore has made it far
easier for farmers, many of whom are struggling to get by on
current crop yields, to look for profits through the hemp
sector.
Even before the Farm Bill’s passage, the expansion of hemp
cultivation in 2018 had been staggering, growing from 25,713 to
78,176 acres spread across 23 states. Those states issued 3,546
hemp licenses in 2018, more than double the 1,456 issued in 2017.
Since the law passed, states with existing hemp infrastructure have
been overwhelmed with applications for licenses, and it’s clear
that the growth should stay strong.
With Growth, Shortages Loom
Like any dramatic development in the economy, this emerging
sector brings with it challenges and difficulties. One of these is
providing the cultivation supplies that new and expanding hemp
growers will need. Shortages of critical cultivation supplies,
particularly relating to plant tissue micropropagation and cloning
are being reported potentially threatening the plans of many
farmers to get their hemp crops planted this spring. But one
person’s challenge is another person’s opportunity, and in this
case, the opportunity will go to companies that have prepared for
the growing need for cultivation supplies.
This young hemp cultivation supplies industry is not dominated
by established corporate giants, which leaves plenty of space for
relative newcomers such as Sugarmade Inc.
(OTCQB: SGMD), via its pending acquisitions.
Generating New Revenue Streams
Recently, Sugarmade announced its intention to acquire Sky
Unlimited LLC, which is a major supplier to large commercial
agricultural cultivation operations. The acquisition is anticipated
to generate new revenue streams from not only large hemp growers
but also from more traditional hydroponic oriented cultivators.
The acquisition of Sky Unlimited and its www.AthenaUnited.com marketing website has been almost
perfectly timed to make the most of the boom hemp cultivation
trend. The brands fit well with Sugarmade’s existing business,
allowing the company to smoothly expand its hydroponic sales
operations and better meet growing customer needs.
Profiting from Supply and Demand
Acquisitions have also been the order of the day for many hemp
cultivators, allowing them to expand their operations into newly
legalized spaces.
Canadian company Tilray Inc. (NASDAQ: TLRY) has
been on an expansion spree, setting up Tilray Latin America SpA to reach Latin American
markets, acquiring Canadian
rival Natura Natural Holdings Inc., and recently adding
the world’s largest hemp foods company,
Manitoba Harvest, to its roster. While the Americas currently offer
the largest markets for the plant, Tilray also has an eye on future
markets. The company is rapidly expanding its
operations in Europe.
The growth of the hemp sector has drawn interest from other
industries — most notably in the form of a $4 billion investment in
Canopy Growth Corp. (NYSE: CGC) (TSX: WEED) by
Constellation Brands. This sees the U.S. beverage manufacturer
looking for fresh markets to profit from as the two companies
collaborate on developing CBD-infused drinks. One of Canada’s
largest hemp cultivators, Canopy Growth has used this influx of
cash to support its own expansion plans. It is spreading across the
border to set up a hemp production
facility in New York State. It is also bolstering hemp’s status
as a health drug through work with the National Hockey League on
the potential use of CBD
in treating concussions.
Another of the big Canadian players, Cronos Group Inc.
(NASDAQ: CRON) (TSX: CRON) has also drawn interest and
investment from south of the border. The company announced March 8
that it had closed a C$2.4 billion
investment from Altria, the owner of such famous brands as
Marlboro and Benson & Hedges. Like the Constellation Brands
investment, this move shows the wider business world’s faith in the
enduring power of hemp as a consumer product and the viability of
the companies producing it.
The heated competition in the hemp market is reflected in the
recent attempt by Green Growth Brands to achieve a hostile takeover of cannabis company Aphria
(NYSE: APHA) (TSX: APHA). A company with interests in
North American, Latin America and Europe, Aphria’s board has
rejected the takeover and encouraged shareholders to do the same.
This reflects the company’s faith in its own value and the profit
potential of the coming year.
Like other companies in the cannabis sector, Sugarmade has
announced a host of acquisitions over the past year, which it is
currently working to close. With these, the company holds the
potential to generate up to $90 million in annualized revenues,
which could make Sugarmade one of the largest suppliers in this
booming industries.
For more information on Sugarmade, visit Sugarmade, Inc.
(OTCQB: SGMD)
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