Building a Cannabis Conglomerate
Ryan Allway
October 2nd, 2020
App, Exclusive, News, Top News
Investors don’t have to look hard to find conglomerates in the alcoholic beverage industry—a close proxy for the recreational cannabis industry. AB InBev (NYSE: BUD) generates about $50 billion per year in sales with more than 400 beer brands while Diageo (NYSE: DEO) generates over £10 billion in annual sales with many popular liquor brands in its portfolio.
While cannabis lacks the uniform regulation of alcohol, multi-state operators, or MSOs, are on a mission to build the nation’s future cannabis conglomerates. These companies are launching multi-state brands and streamlined operating procedures across state markets, which puts them in a great position if and when national legalization takes place.
Let’s take a look at Red White & Bloom Brands Inc. (CSE: RWB) (OTC: RWBYF) and why it has become a leader in the race to build cannabis conglomerates.
The Rise of the MSOs
The cannabis industry is projected to reach $73.6 billion by 2027, according to Grand View Research, which translates to an 18.1% compound annual growth rate. While Canada pioneered the industry, the United States represents the largest single market for cannabis, making it one of the most attractive destinations for investors in the space.
Multi-state operators provide diversified exposure to the rapidly growing industry via their presence in multiple states. In addition to spreading out risk, MSOs have economies of scale when it comes to everything from legal procedures to product development to marketing campaigns—and soon, it could expand to production across state lines.
There are several well-known multi-state operators in the industry, including Curaleaf Holdings Inc. (CSE: CUR) (OTC: CURLF) and Green Thumb Industries Inc. (OTCQX: GTBIF), which have already achieved multi-billion dollar market capitalizations, but it’s the up-and-coming ones that might have the most blue-sky potential for investors.
Click here to download an investor presentation and receive corporate updates
The so-called Cannabis 3.0 evolution represents an investor focus on profitability and sustainable growth. Rather than the growth-at-all-costs of Cannabis 2.0, investors are increasingly seeking out experienced management teams that are capable of building true cannabis conglomerates that will sustainably grow into the next industry leaders.
Why Red White & Bloom?
Red White & Bloom Brands is a relative newcomer to the multi-state operator space having gone public just a few months ago—but it’s certainly not a newcomer in terms of its operations. Led by proven cannabis cultivators and operators from Canada, the company already operates more than ten dispensaries with annualized pro-forma revenue in excess of $100 million.
Currently, management is focused on building an early presence in limited license states like Michigan, Illinois and Massachusetts, but it has plans to expand into Florida and California in the near-term. The team has already gone from zero to $100 million in revenue during an extremely challenging market while remaining profitable—and that’s just the start.
The company’s unique strategy has already resulted in a 22% market share in Michigan’s high-growth market and one of the largest CBD cultivation operations in the United States. In addition, the company’s exclusive licensing agreement with High Times combines the largest Midwest cannabis operation with the most iconic cannabis brand over the past 50 years.
Despite its significant progress, the company’s investor presentation notes that the stock trades at just 6.5X its EV/EBITDA compared to a median of 19.2X for other large U.S. MSOs. The company’s stock would trade at about $4.50 per share if investors valued the company at the same multiples as these competitors, suggesting a potential discount.
Click here to download an investor presentation and receive corporate updates
Looking Ahead
Multi-state operators are jockeying to become the next large cannabis conglomerates. While many remain saddled with debt following the industry’s boom over the past two years, Red White & Bloom Brands Inc. (CSE: RWB) (OTC: RWBYF) has focused on rapid—but profitable—growth in limited license states where it can build strong competitive advantages.
Investors can learn more by visiting the company’s website or downloading the investor presentation.
Disclaimer
The above article is sponsored content. CannabisFN.com and CFN Media, have been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation: https://cannabisfn.com/legal-disclaimer/
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.
About Ryan Allway
Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.
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