The CBD space is already getting crowded with investors inundated with noise from numerous suppliers staking claim to be “the world leader” and establishing “the leading brand”. The reality at this point is that there remains to be much regulatory confusion and an abundance of bottlenecks as hemp-derived CBD, the non-psychoactive component of cannabis, gains widespread acceptance for its medicinal uses and becomes a broadly adapted elixir for the world’s health conscious consumers.
Meanwhile, Geyser Brand Inc. (TSX.V:GYSR) is taking a slightly different approach, as a licensed producer (LP) Geyser is using the Canadian regulatory framework to grow, develop, manufacture and sell a spectrum of healthcare products including cannabis-derived product such as CBD. Geyser is building upon a portfolio of existing hemp-and plant-derived product brands – and is readying them for its proprietary NanoFusion as the regulatory landscape clears and more jurisdictions are de-risked. Geyer’s “Apothecary” brand is already known in every dispensary in Canada, while international requests are coming almost daily, according to management. The company is lining up more conditions-based brands and products to acquire customers, expand current markets and penetrate new markets as they come available. Geyser’s focus is to become a “global cannabis-led consumer and healthcare company” with a portfolio of products in pain relief, skin health, sleep disorder and anxiety relief, pet health and other wellness categories.
Geyser also had the foresight to become a LP in the province of BC to sell through dispensaries and government stores and produce products for international export. The company acquired 7,000 square foot facility in Port Coquitlam, B.C., ultimately to manufacture and distribute its hemp-based CBD products and to establish it as an R&D centre. Meanwhile, the facility is earning revenue by growing cannabis for Licenced Distributors (LD) in Canada. However, growing and selling marijuana is not the end-game.
In February, Geyser announced the acquisition of Solace Management Group. Solace is known for its brands, intellectual property, and proprietary formulations in the hemp and cannabis markets. Its brands have established themselves by selling already legal hemp-based products, without the use of CBD. The aggregate purchase price Geyser paid for Solace was $3.9 million, composed of 5.8 million shares at $0.60 and $400,000 cash. Solace’s 12-month trailing revenues are approximately $2 million, a 120% increase from the prior year, with an EBITDA of about 33%. A current cash position of $2.3 million gives Geyser Brands the base to fund their CBD product development, and ramp up their global sales and marketing including these brands:
Apawthecary Pets – a leading hemp-based pet treat brand, combination of other plant components
Apothecary Naturals – a line of hemp based topical products, pain creams, organic soaps, lip balms and men’s topical grooming products.
Apothecary Ink – a line of hemp based all-natural tattoo after care products.
WildTail Pets – a line of single ingredient freeze-dried pet products, including hemp-infused pet treats, kibble and freeze-dried pet foods for dogs and cats.
Apothecary Labs – a research and development arm of Solace engaged in technology and formulation development for beverages, topicals and other cannabis and hemp infused nutraceutical products.
In Canada, Solace currently distributes its products through mainstream retail outlets including Bosleys, PetLand, Pharmasave, Bukerfields, Master-Feeds, Global Pet Foods, Shoppers Drug Mart, Woofies, PetValue, Pet Planet and Bone & Biscuit. International distribution extends to the UK, Caribbean Islands, Austria, Belgium, Netherlands, Italy, Spain and the USA. That’s not a bad kick-starter for Geyser.
The new Geyser prides itself on its all-natural NanoFusion technology developed for its conditions-based hemp seed oil products and its now emerging line of CBD products. This process will be developed and tested in their BC licenced facility.
“Our NanoFusion technique is one of the few all-natural processes out there,” says Andreas Thatcher, Geyser’s co-founder and CEO. “It’s an all-plant-based process that, unlike most similar technologies, does not use a solvent for emulsification. The advantages of our proprietary process are that products are shelf-stable, not bitter, permeate skin and cell membranes for deeper and site-specific targeting and provides improved dosage control. We can utilize the same ‘nanon-ization’ we do with hemp-oil products for CBD, and if we want to, for THC, but we’re focused on CBD because of its greater market potential.
“We’re brand focused, so we establish our needs-and-conditions-based brands everywhere with legal hemp products, and we can very efficiently add the CBD component when the regulatory conditions allow.” He adds that the company has also developed relations with other international manufacturers that can make their formulations. “We can sell now to the industrial-hemp market in eight US states, most of Europe and China. In some jurisdictions, CBD is legal where the product is not edible, but topical.
“Some Cannabis companies will struggle to reward their investors because real revenues are bogged down by jurisdictional and regulatory hurdles,” he adds. “Our goal is to give ourselves the upside of the regulatory environment, for instance with our LP, but preserve our shareholders’ capital by building a supporting base of stable revenue streams. The products exist, the delivery methods exist. Tinctures are actually an antiquated way of consuming these products. There are other delivery mechanisms such as food, beverage, and topical applications already out there that just need that extra ingredient – CBD –for mass consumption. We’re treating hemp-cannabis as the next ‘halo-ingredient’ for our conditions-based products.”
Meanwhile, back to the global roll-out of CBD, where is the real revenue coming from? According to Statistica, sales of hemp-derived CBD in 2018, by country, are led by the US with 49%, Europe 35.2%, China, 11.2% and South & Central America 4.5%. Surprisingly Canada, the global bell weather for legalization of cannabis brought in a paltry 0.01%. US sales of CBD Products grew 57% in 2018 to $238 million, according to Nutrition Business Journal, which means that current global sales are nearing the half billion-dollar mark. Clearly, there are now pockets of the production and real revenue, but the pie is expected to get big–really big.
Technavio’s market analysts estimate that the global CBD oil market will grow to almost $2.7 billion by 2022 with an estimated CAGR of more than 31 % (2018-2022). It identifies top players include CV Sciences, Endoca, Gaia Botanicals, Isodial, Medical Marijuana, Aurora, and the list goes on.
It’s a constantly changing landscape. In Canada CBD is legal;, however, it is strictly regulated, just like cannabis. Only Licensed Producers may make it, and only registered retailers may sell the products. In the US, hemp-derived cannabis has recently been removed as a federally controlled substance; however, it is only legally sold in eight US states where cannabis is legal at the state level, except California, where CBD is banned until its has been de-risked by the FDA. There are also 18 states that allow medical CBD use. The lines are indeed opaque.
In the UK, CBD is now legal. However, like Canada, government is taking action to classify CBD as medicine, which being regulated, may make it more difficult to buy in the future.
In Europe, medical cannabis, and therefore CBD, is legal in multiple countries within Europe including Austria, Belgium, Denmark, Netherlands, Romania, Spain, and Italy. CBD is legal in Japan and China.
Meanwhile, virtually all of the global health and wellness segments Geyser is going after are in the billions, even trillions of dollars, so lets just acknowledge the space and market opportunities are infinite.
“We are building and marketing the world’s best-loved cannabis-led consumer healthcare products,” says Thatcher. “We aim to have brands that consumers will trust and use. It’s conditions-based, so if you’re tired, you can’t sleep, you’re stressed, or you’re in pain, we intend to have the brands that you will think of first. CBD, and our ability to develop products with it, will certainly become a significant element in that goal.”
Geyser has enlisted a team of digital marketing and direct-to-consumer experts – GetFresh Ventures, led by Diraj Goel, former VP Operations for Hootsuite and who spent seven years with Angus Reid building Vision Critical, a digital market research firm – and appointed Dave Eto, former CEO of Naturally Splendid to its Board. Kuldip Gill was recently appointed as head of R&D. Gill developed more that 3500 product formulations sold globally and a proven track record in personal care goods, NHPs, and OTC pharmaceuticals. Thatcher, who holds an MA in Economics has 20 years experience in the finance, media and distribution industries.
The company has just announced a partnership with Anthony Webb – a brand expert and strategist, and Founder and CEO of Brandeavour – as its consultant of record for strategic branding and creative counsel. This includes overall brand direction for Geyser Brands’ subsidiaries and a focus on commercializing new brands, working alongside GetFresh Ventures – Geyser Brands’ strategic partner providing data-driven digital growth services – on developing new channels to market for Geyser Brands.
Of the company’s 21 million shares outstanding, management holds about 5.5 million. Other escrowed equates to 4.6 million, while 3.3 million warrants are now exercisable at $0.80 to May 2020. On April 18, the company also announced a $400,000 private placement, comprised of 615,385 units at $0.65 and a full 2-year warrant at $0.85. With $2.3 million cash and estimated net assets of $24 million, the company is valued in the market at about $16 million and trading in the $0.75 range. The Solace agreement will add another 5.8 million shares, but on whole a nice tight structure.
As an early stage investment, Geyser is it at the bottom rung of valuation against its Canadian-listed CBD focused peers who are in the $50-$150 million market cap range. The strategy makes sense: be the first to market using your existing brand equity and build upon your base. Win more loyal customers, grow your revenue in the process, continue your product and market research, then guide your customers into a cannabis-driven marketplace that everyone is chasing after, but are stalled waiting for…(arg!)…government approval—when it is eventually all legal and de-risked.
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