After Select, a leading cannabis concentrate company, was acquired for almost $1 billion, many investors have become highly focused on the cannabis brand opportunity and this is an area that we have been focused on.
One of the most interesting aspects of the cannabis industry is the emergence of specific trends and the amount of value that can be created by being levered to these trends. First, it was the Canadian Licensed Producer (LPs). Next, it was the United States multi-state-operator (MSO). Now, it is time for the cannabis brand.
If you are trying to determine the outcome of the Canadian LP and the United States MSO trend, you only need to look at the valuations of the top three players; all of which have multi-billion-dollar valuations. The cannabis industry is in the early innings of a multi-decade growth cycle and this is an area that investors should be monitoring.
When it comes to the cannabis brand opportunity, this market is just getting started and has significant upside potential. Today, we have highlighted 5 cannabis brand companies that we have been following and are worth taking a look at.
Ionic Brands is an Emerging Cannabis Brand Company
Ionic Brands (IONC: CNX) (ZRRRF: OTC) is a company that has been able to penetrate some of the most competitive cannabis markets by accumulating a portfolio of leading cannabis brands and has been highly focused on the cannabis concentrate opportunity. The company has been consolidating leading cannabis brands and acquiring businesses that are generating significant cash flow and we are favorable on this approach. We have taken a deep dive into the assets that are owned (or will be owned) by Ionic Brands and believe that they represent attractive and scalable opportunities.
Over the next year, we expect the trend toward cannabis concentrates to become even more significant and believe that cannabis infused products or edibles will be the primary driver of this. By 2022, the cannabis concentrate market is expected to be generating approx. $8 billion in retail sales and this represents a massive opportunity. Cannabis concentrates are the primary input product for cannabis infused product companies as well as vaporizer companies and in 2017, vaporizers accounted for more than half of the total cannabis concentrates sales in the United States.
Through WW Agriculture (WWAG) and Zoots, Ionic Brands is highly levered to the Washington state market. The company owns Vuber, a vaporizer hardware company that expects to generate $8 million in revenue and $720,000 in EBITDA in 2019. Vegas Valley Growers (VVG) is an exciting aspect of the story and is a vertically integrated cannabis concentrate operation in Las Vegas that has been generating revenue from their popular retail brands Vegas M Stick and Reno M Stick.
One of the reasons we are excited about Ionic Brands is due to the potential growth associated with its current expansion. In 2019, the company has expanded into California and Oregon, which represent massive cannabis markets and we are favorable on the growth prospects associated with these markets.
Published: May 16, 2019