Smart Companies Finding Sweet Spot in Cannabis Processing, Manufacturing Opportunities

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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Products for Pets Gain Prominence in Hemp Market

CannabisNewsWire Editorial Coverage: As the hemp and CBD markets grow, a wide variety of CBD- and hemp-based products are becoming available, including products for pets.

Geyser Brands Inc. (TSX.V: GYSR) (GYSR Profile) has recently announced an acquisition that provides the company with two brands of hemp and CBD products. Indiva Ltd. (TSX.V: NDVA) (OTCQX: NDVAF), which provides infused products for humans, is working on a new extraction facility to increase its production. Viridium Pacific Group (TSX.V: VIR) (OTCQB: VIRFF) is supporting the growth of the hemp and cannabis industries through investment, both in acquisitions and in partnership with smaller companies. Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF) (WLDFF Profile) has raised the public profile of CBD through celebrity associations and entry into prestige shops. Phivida Holdings Inc. (CSE: VIDA) (OTCQX: PHVAF) is producing CBD products for both humans and their furry companions.

Hemp and CBD products are now worth billions of dollars each year and rising.
Alongside products for humans, ones for pets are appearing.
These products are designed to increase the health and well-being of those who take them.

To view an infographic of this editorial, click here.

Hemp for People and Pets

The hemp industry has come from almost nowhere to become one of the big business stories of the past ten years. With cultivation, processing and sales facilities setting up across North America and beyond, hemp and its extracts are increasingly important products. People use them for health, well-being and relaxation. Hemp has even started to feature in foodstuffs and cosmetics.

And as recent industry moves demonstrate, hemp isn’t just for people. Pet products have also been appearing, promising benefits such as pain relief, increased energy and broader well-being. Hemp is now for pets, and companies are moving to make the most of the opportunity this provides.

Consolidating Hemp

Hemp-based pet products made the news recently thanks to the acquisition of Solace Management Group Inc., owners of the Apawthecary Pets product line, by Geyser Brands Inc. (TSX.V: GYSR).

The acquisition, whose definitive agreement was announced on May 28, represents an important step for Geyser Brands. Providing the company with more than $2 million in gross revenues, it establishes Geyser as a leader in the health-focused hemp and CBD industry. It’s an industry that has grown massively over the past few years and is continuing to grow. Recent estimates state that CBD and hemp will exceed $20 billion in value in the next few years.

Solace, the target of the acquisition, is a significant business within this market. Its Apothecary Naturals is a leading brand within the Canadian market, and Apawthecary Pets is one of the few established brands catering to pets. By leveraging its brands, intellectual property and proprietary formulations through licensing and production agreements, Solace has successfully reached out into pet stores and veterinarian clinics across Canada.

With a portfolio of 23 products using organic, unrefined, cold-pressed hemp-seed oil extract, the brands can appeal to environmentally conscious consumers as well as those wanting something cleaner to help with their pets’ health. And with a recent move into a new 7,500-square-foot GMP production facility, Solace has ensured an ongoing supply of nano-hemp for pets.

Geyser, which is taking Solace’s products to global markets, is a leading consumer healthcare company, using hemp products to improve people’s lives. Geyser has its own Health Canada-licensed CBD production-and-distribution facility and has recently built a GMP manufacturing base near Vancouver. Like Solace, Geyser has focused on natural ingredients for its products, making the two companies a good fit.

But it’s Geyser’s NanoFusion technology that makes the company stand out. This advanced delivery system quickly and efficiently transports agents directly to the bloodstream, increasing the absorption of therapeutic CBD. The insoluble nature of the molecules means that, for most hemp products, a majority of the beneficial chemicals are never absorbed. Geyer’s nano-emulsions are manufactured to improve this absorption, thanks to droplets as small as a tenth of the size of normal molecules.

The acquisition of Solace might look like just one more in a series of recent acquisitions in the CBD sector. But for Geyser, the move is significant. “This is a transformational strategic acquisition for Geyser, which will establish ourselves as a leading provider of health-focused hemp and CBD wellness products,” said Geyser CEO Andreas Thatcher. “With the constant evolution of the national and international hemp and CBD landscape, and by combining our expertise in innovation and compliance with Solace’s experience and market recognition, we will be well placed to capitalize on what is predicted to be a multibillion-dollar industry.”

Pampering Pets

The opportunity that Geyser is leaping on isn’t just driven by the rise of hemp — it’s also about broader demographic trends.

Recent decades have seen growth in the middle class around the world. The growing strength of emerging economies means that more people across Africa and Asia have wealth to spend on goods beyond the essentials. And among the nonessentials many adopt are pets. Pet ownership is growing around the world, and that growth increases the demand for the items needed that come with owning a pet, including grooming, toys and food.

At the same time, concerns about health and chemicals that are consumed are on the rise. Awareness of environmental issues has spurred waves of protest, a swing toward green parties in recent European elections, and booming sales for locally and organically produced foods. As individual consumers, many people are trying to avoid manmade chemicals, both for the sake of the environment and for their own health. That concern now extends to feeding and caring for pets, with owners looking for more natural ways to support their furry companions. And that’s where the CBD products of companies such as Geyser come in.

Apawthecary Pets provides a range of CBD treats and oral drops designed to improve the health and well-being of dogs. These products have helped owners treat pain, anxiety and seizures, making life better for their pets. And now the company is adding a new brand, WildTails, with a range of treats for both dogs and cats. Freeze-dried meat treats infused with hemp or CBD, these products minimize processing and the addition of extra ingredients to make a snack that is both natural and good for pets.

Given the growing wealth of the Asian middle class, it’s not surprising that companies are looking to that continent as a major market for this type of product. Starting with the negotiation of orders and distribution contracts in Asia, Geyser’s release of WildTails is reaching a market beyond CBD’s core territory of North America.

Part of a Bigger Picture

Just as CBD isn’t just for humans, the infusing of food isn’t just for pets.

Companies such as Indiva Ltd. (TSX.V: NDVA) (OTCQX: NDVAF) have developed ranges of edible products targeted at humans and infused with CBD. These are part of a wider range of products in which cannabinoids, the active ingredients in cannabis, are introduced to food as an alternative way of consuming them. CBD is one of the two leading cannabinoids, alongside psychoactive THC, and Indiva offers products infused with one or both of these ingredients. The company is currently developing an extraction facility that will improve its ability to extract these natural chemicals from plants and put them into food.

The work of hemp and cannabis producers is supported by companies such as Viridium Pacific Group (TSX.V: VIR) (OTCQB: VIRFF). Viridium is a Canadian public capital company that has invested heavily in the cannabis industry, developing several wholly owned subsidiaries. In addition to production and distribution of cannabis, the company is involved in related property development and resource management. Like Geyser, Viridium is making use of mergers and acquisitions as well as collaborating with other companies in the sector. One of its subsidiaries recently supplied plant clones to one of Canada’s first micro-cultivators, helping the smaller business to establish its own crops.

A Vancouver-based health and wellness company, Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF) is focused heavily on CBD. It produces capsules, tinctures, vaporizing liquids and other CBD-infused products. Aiming at an upmarket clientele, several of its products have achieved a prestigious status through their recent appearances at Kim Kardashian’s baby shower, in hotel swag bags for the Oscars and in the Saks Fifth Avenue store. The company is also reaching a wider audience, with the acquisition of City Cannabis providing more outlets in Canada.

Phivida Holdings Inc. (CSE: VIDA) (OTCQX: PHVAF) is firmly focused on functional food and beverages, a broad description for those containing active ingredients such as THC and CBD, with a particular focus on the health and well-being sector. The OKI product line is set to make beverages a central part of the business, as CBD drinks offer consumers an alternative recreational beverage to alcohol and caffeine. The company has also announced a line of CBD-infused products for pets, initially consisting of tinctures and an oral spray.

With the CBD market growing alongside that for pet products, it’s natural that the two should combine as the focus to serve expands to humans and their well-loved pets.

For more information on Geyser Brands, visit Geyser Brands Inc. (TSX.V: GYSR)