CannabisNewsWire
Editorial Coverage: Ever since the Farm Bill was signed into
law, farmers across the United States have rushed into hemp
cultivation, driving demand for the supplies needed to grow the
crop necessary to meet surging CBD use.
- Global hemp industry to reach $22 billion in 2022.
- CBD market could increase 40 times in the next four years.
- Hemp farming skyrockets to meet demand.
- Serious squeeze on hydroponic and cultivation supply
products.
Hemp is booming across the country, and nowhere more so than in
Kentucky, where the applications to grow hemp are expected to
increase fivefold, and acreage dedicated to growing the crop is set
to more than triple this
year. At the forefront of this explosive market growth,
Sugarmade Inc. (OTCQB: SGMD) (SGMD
Profile) recently inked a strategic supply contract with Hempistry Inc., a
leading Kentucky-based cultivator of high CBD content hemp. Since
passage of the farm bill, other major Canadian producers have also
been making deals to expand hemp and CBD operations south of the
border. Tilray Inc. (NASDAQ: TLRY) announced the
acquisition of a large hemp foods maker, and Canopy Growth
Corporation (NYSE: CGC) (TSX: WEED) is making substantial
investments in New York state. Aphria (NYSE: APHA) (TSX:
APHA) temporarily withdrew from the U.S. market while
fighting off a hostile takeover bid. And after a $1.8 billion
investment from a U.S. tobacco giant, Cronos Group Inc.
(NASDAQ: CRON) (TSX: CRON) is expanding globally with eyes
to the U.S. markets in the future. Even the largest Canadian
licensed producers are betting on hemp CBD, underscoring titanic
market growth.
To view an infographic of this editorial, click here.
The Money Pump
In the course of only a few years, CBD extracted from hemp is
now marketed for everything from pain relief and reducing
inflammation to relieving stress and anxiety. CBD is sold in an
array of products from shampoos, lotions and oils to drinks, pet
treats and granola. The popularity of CBD isn’t likely to wane any
time soon, and the soaring popularity is reflected in market
projections.
The CBD boom was presaged by passage of the Farm Bill, an
absolute sea change in the balance of power in global hemp markets.
Historically, the United States had been an importer of hemp
products, but now the U.S. market is expected to lead the global
hemp industry reaching an eye-popping $22 billion in
2022. With a market expected to increase 40-fold in the next
four years, it’s little wonder there’s such an enormous upsurge in
hemp cultivation.
To achieve quality and consistency, much of the hemp cultivated
in North America isn’t grown from seed but is cloned or propagated
from existing hemp plants. Known as micropropagation, this process
allows for a large number of plants to be readied simultaneously,
facilitating stable, consistent production and guaranteeing that
the plants are exact genetic copies of the most desirable mother
plants. It's exceptionally important in hemp cultivation to produce
healthy, high-content CBD plants with all the characteristics
required by hemp-product producers.
This process gives cultivators more control over how their
plants grow and results in more valuable crops. The rapid
vegetative propagation of plants under the controlled conditions of
light intensity, temperature and precise nutrient mediums requires
unique equipment and supplies. The nationwide surge in hemp
production has created shortages and increased demand for these
much-needed hydroponic supplies. With the boom in hemp cultivation
occurring this planting season, many of the supplies required for
successful micropropagation operations are in short supply. This
supply squeeze has spawned an unprecedented industry
opportunity.
The Right Moves
Identifying the upside early, Sugarmade Inc.
(OTCQB: SGMD) has been making all the right moves to
capture an outsized share of this burgeoning new market. A
specialty product and brand marketing company, Sugarmade invests in
and develops products and brands with disruptive potential.
Expanding its footprint in the supply of high-demand hydroponic
and cultivation products, the company has been on an acquisition
spree and executing new supply contracts to capture an
ever-increasing market share. The latest supply contract with hemp
cultivator Hempistry reflects Sugarmade’s hydroponic trajectory.
Utilizing advanced plant genetics and technological innovation,
Hempistry is now scaling operations to approximately 2,600 acres
aggregated between its subsidiaries, while adding to the product
value chain and enhancing production efficiencies.
To achieve these objectives requires a secure, reliable source
of specialty equipment and supplies. Sugarmade recognized the
potential windfall last year and locked in an option to invest $1
million in Hempistry. That relationship has blossomed into a supply
agreement that should serve both companies extremely well.
Hempistry is acquiring supplies for its hemp micropropagation
operation from Sugarmade, and expectations are that this supply
relationship will flourish as Hempistry expands operations
domestically and internationally. The agreement will ensure
supplies reach supply-starved Kentucky, which is on the
leading-edge of the hemp cultivation boom.
"Industrial hemp is promising and is the fastest area of growth
in Kentucky agriculture," said Ryan Quarles, Kentucky commissioner
of agriculture, in an interview with CNBC. "We
don't know if industrial hemp will replace tobacco, but we are
going to champion it."
Sugarmade CEO Jimmy Chan, now also a director at Hempistry,
commented, “With at least 42,000 acres of hemp expected to be
planted in Kentucky and considering an average plant density per
acre of well over 1,000, farmers in Kentucky will need hundreds of
millions of clones over the coming years. When these numbers are
multiplied over the many other hemp cultivation states, it is easy
for anyone to see the strong demand scenario that is quickly
developing. We have already received our first shipments of
micropropagation supplies, and we are in process of making
deliveries. Sugarmade plans to significantly expand our operations
relative to hemp cultivation.”
E Pluribus Unum
Out of many, one. The Latin phrase emblazoned on U.S. currency
should be the slogan for what’s happening in the fractured and
fragmented specialty hydroponic supply industry. With demand
reaching epic proportions, the clutch of small and inefficient
supply companies is ill prepared to service the requirements of the
blooming hemp industry.
Cognizant of the shortfall, Sugarmade is on a mission to
consolidate the fragmented industry by strategically acquiring
other synergistic hemp-based operations. Sugarmade's brands already
include: Zenhydro.com, a comprehensive online hydroponics supply
outlet; AthenaUnited.com, a specialist company providing hydroponic
supplies to large commercial cultivators; CarryOutSupplies.com, a
leader in paper and plastic supplies; and BudLife Cannabis Storage
Solutions, which offers the world’s only patented intelligent
packaging, storage and distribution for medicinal plants.
Continuing its consolidation strategy, Sugarmade recently
announced that it will acquire the flagship operation of Washington
State-based Hydro4Less, which is expected to produce about $5
million in revenues and be profitable this year. In the agreement,
Sugarmade also gained an option to purchase two additional
Hydro4Less retail operations, currently producing in excess of $20
million annually.
“Sugarmade is expecting to realize exceptional revenue growth
this year from all of our hydroponic-related market sectors,” said
Chan. “We are excited about having the very talented staff of
Hydro4Less join the Sugarmade family of companies. We continue to
seek additional acquisitions to further boost our already expected
robust revenue growth rate.”
Expanding on a 2017 master marketing agreement with Bizright LLC
where Sugarmade would sell its products, Sugarmade also announced
that it will acquire Bzrth Inc., a sister company of Bizright.
These accretive acquisitions will make Sugarmade one of the largest
publicly traded hydroponic supply companies in the world.
"Sugarmade plans to integrate these businesses fully as soon as
is possible, making us one of the larger suppliers to this growing
marketplace,” stated Chan. “Additionally, we are in process of
vetting other possible acquisitions to further enhance our
portfolio of hydroponic and cultivation supply products. We are
certainly excited about our prospects for the remaining part of
this year and into next yea" stated Chan.
Northern Neighbors Look to Capitalize
In its most expensive acquisition to date, Canadian based
Tilray Inc. (NASDAQ: TLRY) announced that it has
agreed to purchase Manitoba Harvest for $317 million in cash and
stock to bolster its thrust into the U.S. CBD product market.
Manitoba Harvest claims to be the world’s largest hemp food maker.
With operations around the globe, Tilray now expects to launch
CBD-derived products in the United States as early as this
summer.
Less than a month after the signing of the 2018 Farm Bill,
Canopy Growth Corporation (NYSE: CGC) (TSX: WEED)
announced plans to invest up to $150 million to establish its first
U.S. production facility in New York state. The company plans to
establish large-scale production capabilities focused on hemp
extraction and product manufacturing. Canopy called its expansion
into the United States “another example of the strategic advantage”
last year’s $4 billion investment Constellation Brands provides the
company.
Aphria (NYSE: APHA) (TSX: APHA) temporarily
withdrew from the U.S. market while fighting off a $2 billion
hostile takeover bid from U.S.-based Green Growth Brands. Aphria
rejected the bid saying it was being undervalued. Located in the
greenhouse capital of Canada, Aphria Inc. is one of world’s lowest
cost producers.
With international production and distribution, Cronos
Group Inc. (NASDAQ: CRON) (TSX: CRON) is committed to
building disruptive intellectual property by advancing research,
technology and product development. The Cronos Group is building a
global network with partnerships, joint ventures, production and
distribution spreading across five continents. Cronos Group is
intent on building an iconic brand portfolio around the globe.
Evaluating what has transpired and the projections of what is to
come, the hemp markets and affiliated products and services appear
to be sectors that could offer incredible returns. With multiple
contracts in place, several acquisitions completed with more
pending and planned, plus immense opportunity ahead, Sugarmade is
hotly pursuing its mission to be a dominant player in the
hydroponic supply industry piece of that pie.
For more information on Sugarmade, visit Sugarmade, Inc.
(OTCQB: SGMD)
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