As the cannabis industry continues to develop so do consumption methods. Benzinga recently shared a look into the rise of marijuana concentrates, one of the most popular product categories, with sales only trailing buds ("flowers") and pretty much on par with pre-rolled joints and vapor pens or vaporizers.
What was particularly interesting about the information cannabis industry analytics firm Headset shared was the rise in demand for smoke-free pot products, which accounted for almost 50 percent of all sales — according to a recent study they conducted. Confirming this trend, BDS Analytics published its own paper saying that roughly 20 percent of cannabis dispensary sales in California during the second quarter of 2017 came from concentrates — with 61 percent of those stemming from vape pens. Finally, weed delivery service Eaze reported a 400 percent surge in vaporizer sales in 2016, to 24 percent.
Against this backdrop, Cura Cannabis Solutions, one of the largest cannabis brands in America, focused solely on cannabis oils, seems poised for success. Interested in how the company is capitalizing on the smoke-free weed consumption trend, Benzinga spoke with the company’s CEO Nitin Khanna, and asked him a few questions about a business that, unlike most other large ones in the cannabis industry today that are trying to be vertically integrated, seeks to remain horizontal and hyper-focused on the oils segment.
Doubling In Size
This narrow approach to the market has helped Cura Cannabis Solutions grow at a vertiginous pace. Between April and December of 2016, the company doubled its size every month, pushing revenues from $50,000 in April, to more than $1 million in December, to roughly $4 million in September of 2017. It's now the largest cannabis company (in terms of revenue and employees) in Oregon, with a 20 percent market share.Related Link: How to invest in marijuana stocks
At this speed, sales are expected to reach $40 million in 2017 and $120 million in 2018. Revenue does not only derive from wholesale and retail of vape cartridges, Khanna explained, but also from oil sales to edibles and drinks companies.
In April, the company expanded into California and is already generating more than $1.2 million in revenue per month. Its flagship product line, Select Oils, entered the Nevada market this month, and sales are expected in a similar range than in California. Cura anticipates moving into Arizona, Florida and Canada next.
A Shift In Preferences
Even though the concentrates category is gaining traction at a rapid pace, not all products are created equal.
“In January, our sales were 80 percent CO2-extracted oil and 20 percent distillate or clear oils [made via ethanol extraction]. Now, we’re seeing a dramatic shift in consumer preferences toward clear oils, which accounted for 80 percent of our September sales,” Khanna told Benzinga.
Looking to satisfy every consumer in the spectrum, from recreational users to medical patients who need high amounts of THC without smoking weed or consuming it with sugar — which most edibles have — Cura has come up with a line of oils that range from zero percent THC-high CBD to 99.9 percent THC-A.
“As flower consumption declines over time and people move to safer alternatives, we expect vape cartridges to continue to gain traction,” Khanna said.
Nitin Khanna leverages years of experience working for big companies like Oracle Corporation ORCL as well as founding and running his own startups, driving revenues of more than $300 million each year. In addition to a tech background, Khanna brings experience working with elected officials, regulators and lobbyists, which proved very useful when trying to enter new states with Cura Cannabis Solutions.
The company recently completed a $12.8 million raise on a $200 million valuation, which represents one of the largest valuations given to a privately held cannabis company in the U.S. The raise consisted of $6.0 million in debt and $6.8 million in equity. While the equity tranche was subscribed by several investors, the debt tranche came from Hamilton Investment Partners.
Douglas AP Hamilton, co-founder and managing partner of the aforementioned investment firm also weighed in on the issue.
“I have been focusing a large amount of my time over the last three years looking at and analyzing companies in the cannabis space," he told Benzinga. "I have made several investments in vertically integrated companies, but in the aggregate, I have passed on 90 percent of the opportunities presented to me. The reasons fall into several categories from weak financials, poor execution, and strategies that did not have long-term potential. However, the main reason, far and away, was weak management teams."
Cura is unique, he added.
“Not only does it have, in my opinion, the best management team in the business, but its strategy, dominate market position, and unique IP and product quality, all of which contribute to the lowest cost of production I have observed. This has resulted in a competitive advantage unique in my more than 35 years of private equity investing. I am well aware of the crazy valuations being placed on companies in the space. Cura will most likely be the first real billion dollar company.”
Image Credit: Javier Hasse
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