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Retail is King in the Burgeoning Cannabis Industry -- CFN Media
SEATTLE, Aug. 28, 2018 (GLOBE NEWSWIRE) -- via NEWMEDIAWIRE -- CFN Media Group (“CFN Media”), the leading agency and financial media network dedicated to the North American cannabis industry, announces publication of an article covering important trends toward retail that investors should be watching within the cannabis industry and why MedMen Enterprises Inc. (CSE: MMEN) is well positioned to capitalize on these trends.
The legal cannabis industry is projected to reach $146.4 billion by 2025, according to Grand View Research, growing at a blistering 34.6 percent compound annual pace. In addition to the international expansion of medical cannabis and decriminalization, the recreational cannabis market has experienced rapid growth across North America. Canada legalized recreational cannabis on a federal level, while California is poised to become the world’s biggest market.
Rising Investment in Cannabis Retail
Most investors have been focused on cannabis cultivation over the past several years — particularly with the federal legalization of cannabis in Canada. Of the eight cannabis-related companies that have achieved $1+ billion market capitalizations, six of them are licensed producers of medical cannabis in Canada, according to The Marijuana Index. Several other licensed producers are also approaching ‘unicorn’ status with $500+ million market caps.
With the influx of capital and new cultivation coming online, the price of cannabis has fallen across North American markets. Canadian cannabis prices fell 7.7 percent last year in their steepest drop in a decade, according to Statistics Canada, while Colorado cannabis prices have more than halved between 2015 and 2018. The market is likely to stabilize over time but cultivators could struggle with lower prices for some time.
Many investors — both big and small — have turned to retail as an alternative to investing in cultivation. Constellation Brands’ $4 billion investment in Canopy Growth Corp. is perhaps the most visible example of these trends. Canopy Growth CEO Bruce Linton said that the new investment would not be used to increase production capacity.
There are also a growing number of opportunities for retail cannabis firms. In April 2019, Canada’s most populous province, Ontario, will permit the privatized sale of recreational cannabis. Many licensed producers have sought to acquire retail licenses in the province, along with other provinces that are operating under a similar model. Many U.S. states have also opened the door to recreational cannabis in recent months, including California.
Finding the Best Investment Opportunities
There were about 28,000 cannabis businesses in the United States last year, according to Statista, including more than 500 dispensaries in Colorado alone. The legalization of recreational cannabis in California and Nevada in 2018 could dramatically expand this number over the coming years. But, not all cannabis businesses are created equally and investors should do their due diligence before investing in the space.
MedMen Enterprises Inc. (CSE: MMEN) has become the standard bearer in the fast-growing state-sanctioned, legal cannabis industry in the United States. With 18 cutting-edge facilities spanning the entire supply chain, from cultivation to manufacturing, the company has built-up a dominant presence in California, Nevada, and New York, which account for about half of the country’s addressable cannabis market.
Last quarter, the company generated $19.2 million in revenue with a 90 percent average retail markup over wholesale.The company attributed the strong results to its stores in Southern California’s recreational market, but its other locations reported 94,000 new customers and nearly 130,000 returning customers with an average spend of $77.76. These figures make its stores higher grossing per square foot than Apple or Tiffany & Co. stores.
Recently released tax revenue numbers in California also show that MedMen stores on average are outperforming other retailers by a factor of three. MedMen stores accounted for about 2 percent of all licensed retailers, but about 6 percent of all sales.
Despite the strong financial performance, the newly-public company trades at a fraction of the valuation of many other cannabis companies.
|Company||Last Quarter Revenue Annualized|
|Canopy Growth Corp. (WEED)||$||79.8||$||11,450||143x|
|Aurora Cannabis Inc. (ACB)||$||49.6||$||5,673||114x|
|Aphria Inc. (APH)||$||37.0||$||2,622||71x|
|MedMen Enterprises Inc. (MMEN)||$||76.8||$||1,577||21x|
* Expressed in USD at 1 CAD to 0.77 USD.
MedMen Enterprises Inc. (CSE: MMEN) represents a compelling investment opportunity in North American cannabis industry. In addition to its market-leading retail presence right now, the company plans to expand into additional states and into Canada over the near-term. Management’s focus on vertical integration and high barriers to entry should enable it to continue to see industry leading margins and strong revenue growth rates into the future.
Please follow the link to read the full article: http://www.cannabisfn.com/retail-king-burgeoning-cannabis-industry/
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