Some US cannabis companies, like Veritas Farms Inc (OTC: VFRM) experienced impressive growth in the last year and might surpass the Canadian cannabis companies by 2020
A year ago today, Canada made history. On October 17, 2018, Canada was the first industrial nation in the world to officially legalize the sale of cannabis. Although the monthly sales figures of the cannabis shops tend to lag a few months behind, this trend suggests that sales in the first year (October 17, 2018 to October 17, 2019) will be just under CA$1 billion (about $777 million).
The problems on the cannabis market in Canada cannot be overlooked. A number of delivery difficulties have significantly impacted the sales forecast for pretty much every Canadian cannabis grower in 2019 and 2020. In fact, the forecast now shows that 4 US cannabis stocks will generate more turnover in 2020 than Canopy Growth, Aurora Cannabis and any other Canadian cannabis stock you know.
Curaleaf
The vertically integrated company Curaleaf Holdings looks particularly interesting. According to management, the company is targeting sales of between $1 billion and $1.2 billion by 2020, but it still unsure whether it will succeed. Many companies in the industry have made unattainable forecasts. The two factors that are helping put Curaleaf in the leading sales position are the number of operating sites and the expansion strategy.
Curaleaf currently has 49 stores in a dozen US states, plus 14 growing areas and 13 processing facilities. Few operators have more than a handful of open stores, which means that Curaleaf’s 49 stores are by far the leaders. This will allow Curaleaf to increase sales faster than its competitors. The other component is acquisitions. The purchase of Cura Partners, that is the owner of the Select brand, should lead to an immediate increase in sales.
Meanwhile, the recently announced purchase of privately held international operator Grassroots will increase Curaleaf’s presence to 19 states. It will also increase the number of retail licenses from approximately 70 to 131 and the number of stores already open to 69.
Cresco Labs
Next comes Cresco Labs, which Wall Street estimates will generate nearly $664 million in revenue in 2020. Similar to Curaleaf, Cresco Labs is represented in a dozen US states and has pro forma licenses to open 67 retail locations. Assuming that all upcoming acquisitions are completed, the company would have 35 open offices and 25 manufacturing facilities. Probably the biggest growth driver for Cresco Labs is the upcoming acquisition of Origin House.
The April announcement valued the transaction at just under $1.1 billion, although both companies have seen a significant decline in market capitalization in recent months. Even though consolidation is taking place in the industry, the acquisition of Origin House is unique. This is because Origin House’s only function is to act as a cannabis seller in California. While there are thousands of cannabis products in hundreds of pharmacies, there are only a handful of distribution licenses.
If Cresco Labs can complete the acquisition, it will have access to more than 500 stores in the California market. This will be Cresco’s most immediate growth driver as the opening of new retail locations will provide the company with the opportunity to grow strongly over the long term.
Veritas Farms Inc
Founded in 2015, Veritas Farm Inc (OTC: VFRM) is a highly successful producer and distributor of CBD products. In Q2 2019 Veritas generated more than $2.9 million in total revenue. That is a 500% increase since Q2 2018. The company’s gross profits reached $1,523,413 and thanks to great results, managed to reduce the liabilities by over $1.3 million.
Veritas’ impressive growth was generated by an aggressive plan to expand its distribution network, which now hit the staggering number of 4.000 retailers and partners across the US, including 1.350 Kroger Family of stores locations. This was also achieved through huge online sales and an extensive international distribution, including the emerging European cannabis markets.
Veritas Farms focuses on transparency and on offering high-quality CBD products. The company owns a 140-acre industrial hemp farm and facility in Pueblo, Colorado. In this way, Veritas maintains control over the whole supply chain. Its nine categories of products, with over 60 SKUs, include lotions, tinctures, vape oils and vegan capsules.
Green Thumb Industries
This is slightly higher than the forecasts for Canopy Growth and Aurora Cannabis, which Wall Street expects to generate $460 million and $432 million, respectively, in fiscal 2020. Here, too, it is clear where the sales growth will come from. Green Thumb, like its competitors, is committed to opening new locations and making acquisitions as quickly as possible to lead the company into lucrative markets. Green Thumb is currently ahead of Cresco Labs, but behind Curaleaf.
The company has 95 store licenses, but only operates in a dozen states. Green Thumb had 32 stores as of October 2019. Green Thumb’s main strategy so far has been to focus on states with the largest markets. The stores are located in states with a total of 150 million people and smaller states that could have a major impact on cannabis distribution. For example, Integral Associates was purchased to serve Nevada.
Considering the figures presented, US cannabis companies are definitely going to be the next stars in the cannabis sector. Surpassing Canadian cannabis businesses, companies from the US demonstrate the huge potential of the cannabis sector over the border.