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Cannabis One aiming to build the premier house of brands

Last updated: 12:00 03 Mar 2020 GMT, First published: 22:40 22 Apr 2019 BST

Snapshot

Cannabis One is focused on expansion into a number of cannabis-legal US states and is primed to bring a portfolio of established brands to new markets

cannabis flower
  • Focused on aggregating cannabis retail distribution and brand manufacturing
  • Targets, acquires and legitimizes legacy cannabis assets purchased at discounted purchase prices

  • Flagship Hona brand continues to exceed management’s expectations

What Cannabis One does: 

Cannabis One Holdings Inc (CSE:CBIS) (OTCMKTS:CAAOF) is a Denver-headquartered cannabis company that focuses on aggregating cannabis retail distribution and brand manufacturing.

The company is expanding its footprint across the US as it tackles the goal of becoming a premier house of brands, embodied by its tagline: "If we brand it, they will come."

Cannabis One is focused on a house-of-brands approach, meaning it is home to numerous brands, independent of one another as it seeks to capitalize on a unique arbitrage opportunity. Its goal is to target, acquire, and legitimize (and grow) legacy cannabis assets.

Currently, Cannabis One is focused on expansion into a number of cannabis-legal states - Nevada, Washington, Colorado, California - and is primed to bring a portfolio of established brands to new markets. The firm currently has more than 30 targets in the pipeline.

The company wants to bolster its business model nationally through the aggregation of premium cannabis brands and operations. It also envisions becoming a globally recognized house of brands with a portfolio of clients that offer award-winning products with extensive markets.

How is it doing:

For the past 12 months or so, Cannabis One has been expanding its umbrella of cannabis brands, products and services. 

In July, the company boosted its footprint in the Pacific Northwest by acquiring Green Lady IP Inc via a subsidiary. Green Lady provides infrastructure services to three dispensaries in Olympia and Lynnwood in Washington State. Cannabis One now has diversified exposure to the state’s highly regulated cannabis industry under which out-of-state ownership of licensed assets is prohibited.

Cannabis One also is looking to Nevada, and has announced a series of agreements to acquire Evergreen Organix, a Nevada-based cultivation, manufacturing and brand house. 

But one of the biggest announcements came last spring when the company acquired a well-known Washington State cannabis-infused products company, Honu Enterprises. The award-winning company offers edibles and other products, and a line of infused topicals under the Honu Naturals line.

Alongside the Hona brand line, the company also has three more: INDVR Stealth, a premium line of fashion-meets-function vaporizers, INDVR Strains and INDVR Fire, both of which offer a more discrete way to vape. 

But it is the Hona brand that continues to exceed management’s expectations. 

In fact, the brand’s retail penetration in Washington State has grown to well over 412 stores and is available at 93% of the state’s dispensaries. Retail sales for the brand between August-October 2019 reached $1.8 million. In Oregon, the Honu brand was available in more than 350 stores and 54% of dispensaries. 

Cannabis One, which secured nearly $2 million in financing last fall, is poised to expand into more US states where cannabis is legal, using its Colorado experience in cultivation, production and retail.

The company is well on its way, with its franchise-ready retail brand, The Joint, as it continues to target acquisition and partnership opportunities.

And Cannabis One in December made a milestone move by actually getting into the franchise business.

It has combined with One Cannabis Group (OCG) to create the first US-based vertically integrated cannabis franchise and brand company. OCG has inked agreements for 15 franchises in Colorado, Illinois, Massachusetts, Missouri, and Ohio. Under the model, franchisees pay a $100,000 fee upfront with 5% gross royalty on top-line revenue and a 2% marketing fee.

Cannabis One kicked off 2020 by expanding its brand portfolio after building out a second branded flower cultivation facility in Colorado known as Fox Street -- a 13,000 square-foot craft-quality cultivation facility that can produce 4,800 pounds of flower per year, boosting capacity by nearly 200%.

The company hopes to crack average monthly flower production of 600 pounds, leading to annual topline Colorado cultivation revenue of US$11.7 million and gross profit of US$7.5 million. The first harvest is expected in March 2020. 

The facility was built to meet the demand for “three specific strains” that American comedian Cheech Marin, famous for embodying half of irreverent stoner comedy duo Cheech and Chong, selected for Cheech's Stash line. The company expects to drive margin growth through the expansion of its Cheech pre-roll and other craft cannabis lines that are currently sold in over 175 dispensaries across Colorado.

Separately, Cannabis One said that due to “exceptional demand” for Cheech's Stash-branded flower and pre-rolls in Colorado, it has drawn up a blueprint to expand the Kingston cultivation facility from 8,500 square feet to over 16,500 sq ft.

Inflection points:

  • Estimates brands in Washington and Oregon to bring in revenue of up to $24 million in 2020
  • Expects to exit 2020 with cultivation run rate of $14.4 million and gross profit of $10 million at Fox Street facility
  • Cannabis One-OCG combo expected to achieve EBITDA positive in 2020 
  • Open additional The Joint locations in Colorado and other legalized states in 2020 and beyond
  • Mulling entry into Northeast and upper Prairie states, as well as Florida and Illinois markets 

What the boss says: 

Cannabis One CEO Jeffery Mascio has said: "We're more of a house of brands rather than a branded house... we really believe that there's going to be selection and choice that dominates the cannabis space." 

"The philosophy was born out of really understanding how the consumer shops for cannabis. We've found that the shopping habits of cannabis consumers is very similar to that of the alcohol space, and that's where we adopted that model of the house of brands." 

 

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