NEW YORK, Mar. 1, 2019 /CNW/ -- Growing acceptance of cannabidiol (CBD) is resulting in heightened visibility, as CBD-infused products are now hitting malls across the USA. Marketed as aiding in the reduction of anxiety, inflammation and other ailments, CBD products are rapidly going mainstream, with new offerings coming every month from companies such as Green Growth Brands (CSE:GGB) (OTC: GGBXF), Tilray, Inc. (NASDAQ: TLRY), Planet 13 Holdings Inc. (CSE:PLTH) (OTC: PLNHF), Canopy Growth Corporation (NYSE: CGC) (TSX:WEED), and MedMen Enterprises Inc. (CSE:MMEN) (OTC: MMNFF).
Through a landmark deal with one of the USA's largest retail developers, Green Growth Brands (CSE:GGB) (OTC: GGBXF), is set to unleash a wave of kiosks and stores selling its Seventh Sense brand of hemp-derived cannabidiol (CBD) personal care products in nearly 100 shopping centers.
"It's going to be an explosion across the country," said Green Growth Brands CEO Peter Horvath, in an interview with BNN Bloomberg. "There'll be 100 million footsteps that will be exposed to CBD products by the end of the year."
The rollout will take place in 95 shopping malls owned by Simon Property Group Inc. across the US, in 108 locations. The kiosks will offer approximately 40 different CBD-infused topical beauty products that will sell for between US$19-$29 per item.
Late last year, market research firm The Brightfield Group published a 2018 market overview and analysis on hemp-derived CBD that predicted the market to annually grow by 147%, from $591 million in 2018 to an estimated $22 billion by 2022.
According to investment firm Cowen the total cannabis market could generate as much as $75 billion in gross annual sales by 2030.
Now in order to get there, the cannabis sector must innovate its sales atmosphere, by steadily improving its image for buyers, away from the badly lit, uncreative dispensaries of the first wave of legalization. Moving beyond the issue of supply shortages, and other regulatory hoops to jump through, cannabis retailers are making serious moves to get ahead of their competition, and establishing early name recognition and brand loyalty among their customers.
Dispensaries that find the right formula are already finding success on the bottom line.
Making the Most of Every Square Foot
Within the booming legal marijuana district of Las Vegas (Nevada went legal on July 1, 2017), is the highly productive dispensary, called The+Source, owned by Green Growth Brands (GGB) (GGBXF).
In the company's latest Q2 financials, highlighted are The+Source's impressive Annualize Net Revenue of approximately $15,700 per sq ft.
Compared to the industry average which hovers below $6,000 per sq ft, The+Source's first store alone boasts revenues over 160% above average.
Acquired back in September, The+Source has been a revenue driver for Green Growth Brands. After the closing of the business combination on November 8 until December 31, 2018, during the 52-day period, the single location reported a revenue of $3.1 million, and consolidated gross profit of $1.3 million—or $25,000 in profit per day.
However, the company sees perhaps even more potential through the launch of its Seventh Sense CBD kiosks being launched across the country through a deal with Simon Property Group Inc.. By 2020, Green Growth Brands aims to open 450 CBD-focused kiosks in prime mall locations within high-traffic, desirable sections of the mall.
Through this strategy, the company projects a 2021 revenue of $120 million across 450 mall kiosks with EBITDA of 32%—an EBITDA per kiosk of $86,400.
CEO Peter Horvath calls these kiosks a "category killer". With experience among management that comes from C-level tenures with notable brands such as Victoria's Secret, American Eagle Outfitters, DSW, Sunglass Hut, and Limited Brands, and adding in minds from DSQ, Luxottica, Virgin Entertainment and Bath & Body Works, the company is stacked and ready to revolutionize the cannabis retail space.
Accompanying the CBD-based Seventh Sense line, Green Growth Brands (CSE:GGB) (OTC: GGBXF) already boasts an additional array of brands: Camp, Meri + Jayne, and Green Lilly. By the end of 2019, the company expects to have approximately 1400 SKUs on the market.
Beyond selling its products in its own retail locations, Green Growth Brands is also utilizing its industry connections to get these SKUs on the shelves of other retailers, including a deal signed recently with DSW Inc. to sell Seventh Sense in select locations across the country. Upon the completion of a 10-week test program, the DSW experiment was a major success, selling 74.4% of all products made available.
Additional Cannabis Retail and CBD Developments
Following in the footsteps of the Green Growth-DSW deal, Tilray, Inc. (NASDAQ: TLRY) signed its own deal with shoe retailers. The $100 million deal with Authentic Brands Group (owners of brands Nine West, Airwalk, Frye, and Tetorn sneakers) gives Tilray access to over 100,000 points of sale in more than 4,500 freestanding stores and shop-in-shops. The deal involved Tilray initially paying ABG $100 million and as much as $250 million in cash and stock. In return, Tilray has the right to receive up to 49% of the net revenue from cannabis products bearing ABG brands, with a guaranteed minimum payment of up to $10 million annually for 10 years. A subsidiary of Green Growth Brands) also entered into a licensing agreement with ABG and the Greg Norman brand to develop a line of CBD-infused personal care products. Tilray will be the preferred supplier of the CBD ingredients for the products.
Through the recent deal with major Canadian convenience-store operator Alimentation Couche-Tard Inc., Canopy Growth Corporation (NYSE: CGC) (TSX:WEED) is moving itself forward into the retail space. As part of the deal, Canopy will open a single store in London, Ontario, and will be run under the "Tweed" moniker, by one of the province's recent Expressions of Interest Application Lottery winners, who will have full ownership and control of the store.
Located next to the famed Las Vegas Strip, Planet 13 Holdings Inc. (CSE:PLTH) (OTCQB:PLNHF) opened its Planet 13 Superstore in November 2018, adjacent to the Wynn Hotel. Housed in a 100,000 sq ft commercial space, the massive dispensary is the largest cannabis entertainment complex in the entertainment capital. Analysts at Beacon Securities have stated that the Planet 13 Superstore is tracking a one-year revenue run rate of more than US$40 million. The state-of-the-art dispensary is spread over 2,300 sq ft, and is open 24/7. During its first month of opening, it attracted 1,400 customers per day.
After growing its cannabis sales in the December quarter to $30 million, MedMen Enterprises Inc. (CSE:MMEN) (OTCQX:MMNFF) has been making headlines through its advocacy. The company recently hired Academy Award winner, Spike Jonze, to direct its latest commercial designed to open naysayers up to the benefits of a legal cannabis industry. The retailer now operates 20 shops and has licenses to open as many as 54 in 12 states.
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