Editorial Coverage: COVID-19 devastated the economy but created
a surge in cannabis sales, bolstering long-term trends.
As the pandemic wreaked havoc on the U.S. and global economies,
cannabis sales rocketed higher across multiple markets in North
America. California cannabis sales
soared nearly 160% compared to the same day in March 2019,
while sales in Washington climbed 100% and Colorado saw a 46%
increase on the same day. This surge gives no indications as a one
off and is strong reinforcement of long-term trends in the
industry. After a lot of early hype, the cannabis sector is on firm
ground and is posting impressive numbers. A strong performer in the
sector, Cannabis Strategic Ventures (OTCQB: NUGS)
(NUGS Profile), is now on pace
for over $2.7 million in quarterly sales and approximately $11
million in annualized sales, based on its strong performance in
April and May. Simultaneously, the company increased its harvest
size by as much as 2.5x and is now selling product at an 11%
premium to industry standard. Powerful new deals confirm sector
viability and vitality. Village Farms
International Inc. (NASDAQ: VFF), one of North
America’s largest vertically integrated greenhouse
growers, recently launched a majority-owned joint
venture for a large-scale, low-cost, high-quality cannabis
production. HEXO Corp.
(NYSE: HEXO), an established consumer packaged
goods cannabis company, just closed a public offering for total
gross proceeds of C$57,546,000. Amyris Inc.
(NASDAQ: AMRS), a global science and technology
leader of pure, sustainable ingredients for consumer products, just
announced a major breakthrough in CBD delivery, improving efficacy
of CBD by 10-40X as the carrier oil chassis for the skin care
market. Tilray Inc.
(NASDAQ: TLRY) a global leader in cannabis
research, cultivation, processing, and distribution announced a
C$90.4 million registered offering. The surge in cannabis sales
during lockdown only adds to a sector that is thriving.
Click here to view the
custom infographic of the Cannabis Strategic Ventures
(OTCQB: NUGS) editorial.
Pandemic’s Unexpected Windfalls
COVID-19 has had a crippling effect on many industries. Shops
and restaurants forced to close, manufacturers unable to operate
their plants, companies across the manufacturing and service
sectors seeing demand plummet. The layoffs and losses are very
real, and no one knows yet what the long-term economic impact will
But some businesses actually benefited from the economic
disruption the pandemic has wrought. There are obvious ones like
pharmaceutical companies and those producing protective equipment
for medical staff. There are the tech businesses that facilitate
working from home, providing software for virtual workspaces and
online meetings. And there has been a huge increased demand for
home entertainment, which has spilled over into a less obvious
sector – cannabis producers such as Cannabis Strategic
Ventures (OTCQB: NUGS) (NUGS
COVID Lends Cannabis a Lift
Cannabis was already a boom industry in North America. This has
been driven by a range of recent changes, such as recreational
legalization in Canada, federal legalization of hemp in the US, and
the repeal of prohibition across a growing number of states. This
has allowed the growth of companies such as Cannabis Strategic
Ventures, which cater to a growing market as customers move from
criminal supply channels to legal ones.
Demand exploded during the early stages of COVID-19’s spread
through North America. According to the
Bank of America Securities, there were record sales of cannabis
as consumers stockpiled, preparing for a lockdown. While some
people bought mountains of toilet paper or tinned food, both
medical and recreational cannabis users were making sure they had
enough to see them through a crisis.
The result was a spike in sales in April and May, to the benefit
of companies with recognizable quality brands such as Cannabis
Strategic Ventures. Sales could have been stymied as states locked
down and restricted business to control the spread of COVID-19. But
classified cannabis as an essential product, allowing sales to
continue even as other parts of the economy were shutting down.
Together, these factors led to record sales for some cannabis
companies, with Cannabis Strategic Ventures celebrating increased
cannabis product from its core cultivation facility and adding
staff to address the rising demand.
Strong Contender Seizes Market Opportunity
These sales marked an extraordinary month for NUGS. Despite
restrictions on business due to COVID-19, the company had
record-breaking sales in the final week of April, putting monthly
sales 800% higher than
the monthly average for Q1.
Any fears that this might be a blip caused by panic buying at
the start of the pandemic vanished the following month, when the
company announced sales from its most recent harvest. With cannabis
sales in the US average roughly $1,525 per pound, the company
sold its product
at around $1,700 per pound, 11% above benchmark levels. This
was a particularly impressive price given that it had been selling
at a discount relative to the benchmark only six months before.
Of course, not all cannabis companies will benefit from the
crisis. Their ability to profit depends in large part on the
strength of their existing business. NUGS had been building up its
business prior to the crisis, with the addition of a
six-acre cultivation site in 2019, capable of four or five
harvests per year.
Seizing the market opportunity brought by COVID-19, the company
has announced further improvements in the first half of 2020.
Work on both the
quantity and the quality of output has more than doubled the
output of cultivation facilities while supporting rising prices for
Cannabis Industry Evolves
The long-term expansion of legal markets has led to dramatic
growth for cannabis companies over the past decade, and the
COVID-19-related influx of revenues provides well-run businesses
the resources they need for further expansion. Late April and early
May saw Cannabis Strategic Ventures sell out its
entire stock every week for a month.
“We have never seen anything like this,” said Cannabis Strategic
Ventures CEO Simon Yu. “We booked $100,000 in one day to clear out
all of our remaining inventory. We anticipated this dynamic but
still underestimated the force of the trend. Too much demand is
always the problem you want to have.”
NUGS sold $929,000 of
cannabis products in May and expects to see even greater sales
in June. Expanded inventory and product range have supported this
growth even in a time of crisis, while reinvestment from that
growth will let the company further expand its capacity.
Part of the sector’s success comes from producing a varied range
of brands and products. Rather than just selling weed, the more
successful companies have been developing a variety of cannabis
derivatives for different markets. While the recent boom in sales
has come from demand for cannabis itself, related brands have
diverse interests in supporting long-term growth of the market,
normalizing cannabis and its derivatives as consumer products, and
protecting companies against a disruption in any individual part of
Cannabis Players Execute on Varied
The boom in sales brought about by the COVID-19 crisis has
created an opportunity for a range of growing companies.
Village Farms International Inc. (NASDAQ: VFF)
is one of the largest and longest-operating vertically integrated
greenhouse growers in North America. The company announced that its
majority-owned joint venture for large-scale, low-cost,
high-quality cannabis production, Pure Sunfarms, has received from
Health Canada its cannabis cultivation sales license based on an
initial production area within its second 1.1 million square foot
greenhouse facility in Delta, British Columbia.
HEXO Corp. (NYSE: HEXO) is an award-winning
consumer packaged goods cannabis company that creates and
distributes innovative products to serve the global cannabis
market. The company serves the Canadian adult-use markets under its
HEXO Cannabis and Up Cannabis brands, and the medical market under
HEXO medical cannabis. The company recently closed a public
offering for total gross proceeds to the company of
Amyris Inc. (NASDAQ: AMRS) is a global science
and technology leader of pure, sustainable ingredients for the
Health & Wellness, Clean Beauty and Flavors & Fragrances
markets. The company recently presented clinical data showcasing
the superiority of its natural sugarcane squalane (marketed and
sold as Neossance Squalane) as a carrier of CBD versus other oils.
In order for CBD to be effective in topical applications, skin
penetration is a key factor. Amyris sugarcane squalane improves the
efficacy of CBD by 10-40X as the carrier oil chassis for the skin
care market based on new data.
Tilray Inc. (NASDAQ: TLRY) is a global leader
in cannabis research, cultivation, processing and distribution. An
industry pioneer, Tilray was the first GMP-certified medical
cannabis producer to supply cannabis flower and extract products to
tens of thousands of patients, physicians, pharmacies, hospitals,
governments, and researchers on five continents.
COVID-19 devastated the global economy but spurred a revenue
spike in the cannabis industry, substantiating the opportunity in
an already rapidly expanding sector.
For more information on Cannabis Strategic Ventures, please
Strategic Ventures (OTCQB: NUGS)
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