CannabisNewsWire
Editorial Coverage: In between growers and sellers lie several
potential places for companies with expertise to firmly establish
themselves in the burgeoning cannabis space.
Savvy companies such as Youngevity International Inc.
(NASDAQ: YGYI) (YGYI
Profile) recognize the potential payoff of being
involved in the back end of the cannabis industry. The company’s
wholly owned subsidiary Khrysos Industries Inc. just signed a
five-year contract to purchase hemp plant biomass for extraction,
end-to-end processing and production of hemp-derived products.
Indiva Limited (TSX.V: NDVA) (OTCQX: NDVAF) has
successfully received an amended license from Health Canada for
three additional grow rooms and three additional processing rooms.
Neptune Wellness Solutions Inc. (TSX: NEPT) (NASDAQ:
NEPT) recently announced that its wholly owned subsidiary
received a notification letter from Health Canada indicating that
all requested license amendments have been approved. Other cannabis
companies are making strategic moves in the industry as well.
CannaRoyalty Corporation (CSE: OH) (OTCQX: ORHOF)
has obtained final approval to move forward with its plan of
arrangement with Cresco Labs, which will result in the largest-ever
public company acquisition in the U.S. cannabis sector. And
KushCo Holdings Inc. (OTCQX: KSHB) has partnered
with C.A. Fortune, a leading full-service national consumer
products sales and marketing agency, with the intent to grant
viable CBD companies access to large-scale, conventional retail
channels.
- Youngevity is extending its reach beyond offering products to
the potentially lucrative areas of processing and
manufacturing.
- YGYI subsidiary just signed a five-year contract to purchase
hemp plant biomass for extraction, processing and production.
- Company moving forward to implement plan to increase processing
capabilities by ten-fold.
To view an infographic of this editorial, click here.
Big Business May Be in the Back
The growth of the cannabis industry has been well touted.
Consumer spending in the United States topped $10 billion for the first time last year, and
that number is only expected to increase, with numbers projected to
reach $23 billion by 2022. Some estimates reach even higher — ranging from $31 billion to an
almost incomprehensible $130 billion.
With all those big numbers, smart companies are eager to find
their place in the industry. An obvious play might be in retail,
focusing on getting the highly sought-after products into the hands
of eager consumers, whether it be in the medical field or adult-use
recreational sector. However, in the world of cannabis,
opportunities for a lucrative payday reach beyond simply selling
products. In fact, the space between growers and sellers house a
number of potential places for companies with expertise to firmly
establish themselves in this burgeoning area of commerce.
Picks-and-Shovel Approach
This picks-and-shovel approach is the strategy employed by
Youngevity
International Inc. (NASDAQ: YGYI), a leading omni-direct
lifestyle company that produces a range of consumer-focused CBD
products. Recently, however, YGYI is extending its reach beyond
offering products to the potentially lucrative areas of end-to-end
processing and manufacturing.
With that in mind, the company completed its acquisition of
Khrysos Global, a leading manufacturer of commercial hemp-based CBD
extraction and post-processing equipment, and an end-to-end
processor of CBD isolate, distillate, water-soluble isolate and
water-soluble distillate. The company made headlines recently when
it opened a turn-key manufacturing facility for
various hemp-related finished products.
"We are excited to offer turn-key product solutions to our suite
of services,” said Khrysos president Dwayne Dundore. “We believe
this expands our competitive advantage within our hemp enterprise
by covering all facets of product development to our growing list
of clients. The relatively low minimum-order quantity capabilities
of this operation combined with our comprehensive testing services
should offer a unique value proposition for our customers and those
seeking to enter this growing market opportunity."
"The Khrysos Industries multi-dimensional business model is
capable of providing turn-key solutions in this dynamic
marketplace," said YGYI president and CFO Dave Briskie. "The
vertical integration of our hemp enterprise provides the potential
of higher profit contribution as it leverages the other selling
segments within our company. We anticipate expanding the
capabilities within the coming months in order to more fully take
advantage of these competencies throughout all facets of our
business."
Multidimensional Business Model Gaining
Momentum
In addition to its turnkey product solutions, Khrysos just
signed a five-year
contract to purchase hemp plant biomass for extraction,
processing and production of hemp-derived products. The supply
contract with Magu Maiden Farms LLC notes that Khrysos will provide
extraction services and end-to-end processing to produce isolate,
water-soluble isolate, distillate, and water-soluble distillate
hemp-derived products.
“We are excited to add this new long-term contract to our
portfolio,” said Dundore. “We have strategically targeted multiple
long-term relationships that we believe places Khrysos in a
stronger position to leverage the expansion taking place within the
post-processing area of our business.”
Based on this contract alone, YGYI anticipates extraction and
post-processing fulfillment and revenues to begin in the fourth
quarter of 2019, with revenues forecasted at $60 million through
2024 based on current market conditions and assuming, among other
things, ability to secure buyers for the produced product and the
supplier’s ability to supply the biomass for extraction and
processing.
“The Khrysos Industries multidimensional distribution business
model is gaining momentum,” said Briskie. “The team at Khrysos has
executed multiple projects including the buildout and move to our
post-processing facilities and the completion of our assembly
operations. We continue to see that our pre- and post-processing
expertise, combined with the capabilities of our analytical testing
lab INX, provides a distinct competitive advantage within the hemp
space.”
Gearing Up for Ten-Fold Increase in
Capabilities
The momentum doesn’t end there. YGYI’s Khrysos Industries also
inked an $11-million supply contract for the
sale and processing of 99% pure CBD isolate powder earlier this
year. Shipping under the contract began earlier this year and is
expected to continue through March 2020.
“We are excited to reach the revenue stage for the end-to-end
processing component of our business model,” said Dundore. “This
contract encompasses 50% of our production capacity, and we
anticipate executing contracts for the balance of our current
capacity within the next few months. Based on customer demand, the
company is moving forward to implement its plan to increase
end-to-end processing capabilities ten-fold by 3Q 2019.”
“The Khrysos Industries business model is multi-dimensional, and
we are just now starting to fully leverage the capabilities of our
extraction systems, end-to-end processing platform, and the
capabilities of INX Labs,” said Briskie. “We anticipate gearing up
our production capabilities across the platform as we move through
2019.”
Making Headway in Cannabis
Other companies are making headway in the cannabis industry as
well.
Through its newly announced partnership with C.A. Fortune,
KushCo Holdings Inc. (OTCQX: KSHB) plans to offer
the first large-scale,
go-to-market operation focused on helping compliant CBD brands
achieve mass distribution across legal markets in the United
States. The combination of KushCo's extensive network of brands and
specific hemp-industry knowledge paired together with C.A.
Fortune's industry-leading reach into all retail channels may offer
KushCo clients an additional avenue to activate their CBD
products.
Indiva Limited (TSX.V: NDVA) (OTCQX: NDVAF) has
successfully received an amended
license from Health Canada for three additional grow rooms and
three additional processing rooms, bringing the company’s annual
cultivation capacity to approximately 1,000 kg. The three
additional rooms will be immediately populated with plants, using
advanced aeroponic grow technology, with the first harvest expected
in less than 10 weeks. Indiva has completed the video-evidence
package for an additional five rooms, including additional
processing space, with the expectation for those rooms to come
online in third quarter 2019, subject to Health Canada approval.
Once all eight rooms are online, Indiva’s annual flower capacity
will be approximately 3,000 kg.
Neptune Wellness Solutions Inc. (NASDAQ: NEPT)
announced that its wholly owned subsidiary, 9354-7537 Quebec Inc.,
has received a
notification letter from Health Canada indicating that all
requested license amendments have been approved. The approved
amendments permit expansion of Neptune’s cannabis operation areas
to include an additional extraction room for cold-ethanol
extraction, which is faster and more cost-effective than the CO2
extraction currently used. The amendment will up Neptune’s input
capacity from 30,000 kg to 200,000 kg., a seven-fold increase that
allows the company to accelerate production and enable fulfilment
of commercial commitments. The amendment also includes expansion
for an encapsulation room where Neptune will produce cannabis-oil
capsules.
In what has been called the largest public-company acquisition
in the history of the U.S-cannabis industry, CannaRoyalty
Corp. (CSE: OH) (OTCQX: ORHOF) has entered into a definitive agreement with Cresco Labs
to form one of the largest vertically integrated, multistate
cannabis operators in the United States. CannaRoyalty, dba Origin
House, has become a leading distributor and providing of brand
support services in the state of California, delivering more than
50 cannabis brands to more than 500 dispensaries in California,
representing approximately 60% market penetration. The new
agreement will result in the two companies forming the premier
distribution company serving California, which is the largest
cannabis market in the world.
For more information on Youngevity, visit Youngevity
International Inc. (NASDAQ: YGYI)
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