- California’s
cannabis-industry designation as essential service leads to sharp increase
in industry sales
- SGMD
enjoyed strong start to year; delivery business’ volume grows by more than
300%
- Company
seeking to leverage growth opportunities in delivery services
As businesses shuttered and residents sheltered in place,
confined to their homes as a result of the COVID-19 worldwide pandemic, the
State of California designated the cannabis industry as an “essential” service,
allowing those in the cannabis space to continue operating. Sugarmade Inc. (OTCQB: SGMD), an early pioneer within
California’s regulated cannabis industry, has been quick to respond to the
opportunity.
The designation as an essential business signified a new
chapter for the state, which initially legalized the use of recreational
cannabis in 2016 but has mired the sector in red tape ever since. In 2019
California saw licensed cannabis sales rise to a record $3.1 billion, with
sales rising 24% compared to 2018, the first year of licensed cannabis sales in
the state (http://ibn.fm/wlA1y).
However, those figures masked past disappointments. The
first year of licensed cannabis sales actually saw spending drop from $3
billion to $2.5 billion, as higher taxes and stringent regulatory requirements
led to a gram of product in the legal market costing 77% more than it would
have done otherwise. As such, it was unsurprising that the sales figures paled
in comparison to those seen in California’s lucrative black market, which
witnessed an estimated $8.7 billion spent on illegal cannabis last year – more
than doubt the amount of legal sales.
However, licensed cannabis stores have recently seen an
uptick in sales after Californian regulators mounted dozens of raids against
illegal and unlicensed marijuana retailers in early December (http://ibn.fm/NBuQQ), with BDS
Analytics, a Colorado-based sales-tracking firm, projecting that legal cannabis
sales in California could grow to $7.2 billion in 2024, with illegal sales
declining marginally to $6.4 billion.
“The regulated cannabis market in California is changing
quickly with new investment and operational opportunities opening… as the
crackdown on black market operators continues,” Sugarmade CEO Jimmy Chan stated
in a news release (http://ibn.fm/IXIrR).
“Several market sectors where prospects looked bleak only a few months ago now
hold strong promise. In particular, we are seeing strong opportunities in
delivery services, manufacturing via co-branding and selective genetic
cultivation.”
Sugarmade recently announced that its BudCars Cannabis Delivery
Service has seen a remarkable rise in delivery volumes in February and March,
with the company noting that it expected BudCars to reach as much as $20
million in annualized revenues in 2020 (http://ibn.fm/774Xg). If BudCars meets that target, the
equity income corresponding to Sugarmade’s 40% stake alone would more than
double the company’s FY 2019 revenues (http://ibn.fm/ZjOk5).
A recent report by BDS Analytics projected the U.S. CBD
market to hit $20 billion in sales by 2024 (http://ibn.fm/nbuvM), with major retailers such as CVS
Pharmacy, Walgreens and Kroger now stocking CBD-infused products. Meanwhile, the
explosive growth trend witnessed within the sector has led to a flurry of
co-branding partnerships between CBD producers and retail giants, with Urban
Outfitters, cosmetics retailer Ulta Beauty and Abercrombie & Fitch all
signing agreements in recent months to market and launch CBD-infused products.
As one of the few cannabis companies pursuing a vertically
integrated business model, SGMD is placing its current focus on the expansion
of non-storefront cannabis delivery. Sugarmade has benefitted from a remarkable
growth spurt thus far in 2020 and will seek to maintain its recent trajectory
going forward.
For more information, visit the company’s website at www.Sugarmade.com
NOTE TO INVESTORS: The latest news and updates
relating to SGMD are available in the company’s newsroom at http://ibn.fm/SUGAR
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480.374.1336 Office
Editor@QualityStocks.com
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