Cresco Labs (CSE:
The burgeoning cannabis industry can be broadly divided into three sectors: medicinal marijuana; recreational or adult use-cannabis; and wellness products made using CBD. Cresco is already firmly established in the first two categories, with 10 production facilities and 16 retail locations spanning six states: Illinois, Ohio, Pennsylvania, Nevada, California, and Arizona.
The Chicago-based firm is now making a play for the wellness sector through Well Beings, which will allow it to target all 50 states with a range of branded CBD derivatives.
Scott Wilson, a former Nike global creative director and Cresco’s chief experience officer, is heading up the new subsidiary. “The purpose of this new business line is to demystify and build trust in CBD products, guiding consumers to understand the benefits of hemp and how to incorporate CBD-based wellness products into their daily lives,” he said.
Cresco already produces a range of brands including the eponymous Cresco, plus Remedi and Mindy’s Edibles, and it will now set about creating CBD versions of them for Well Beings to sell.
An Emerging Hemp Market
CBD was legalized at a federal level with the passing of the 2018 Farm Bill and researchers at Brightfield Group expect the market to grow to $22 billion by 2022. CBD is now one of the most on-trend ingredients on the market, used in face creams, drinks and pet treats alike. It’s also currently benefiting from many positive stories about its ability to treat a range of medical complaints, from stress and anxiety to pain associated with epilepsy, multiple sclerosis, and chemotherapy.
Many view it as the next healthcare phenomenon thanks to its anti-inflammatory properties, its effectiveness at relieving pain and the lack of side effects, as it is separated from THC. It is found in cocktails, skin creams, and all manner of edibles as it continues to surge in popularity as a wellness fad, and many firms are bidding to make inroads into this emerging market.
Cresco Bidding to Capitalize on Brand Recognition
Cresco believes it can emerge as one of the winners in this sector due to the consumer trust it has built up with its existing portfolio. It is targeting retailers, grocers, health stores, and online marketplaces across the U.S. as it aims to build up a business in the CBD market.
The firm was founded in 2015 and last year it closed a $100 million round of Series D funding, bringing the total investment to $185 million. It marked the second largest round of private fundraising in the U.S. cannabis industry, following the $119 million that Acreage Holdings raised a few months earlier. It then began on the Canadian Securities Exchange on Dec. 3 following a reverse takeover of Ontario-based Randsburg International Gold.
A Compelling Investment Story
At the time, chief executive Charles Bachtell said he felt Cresco offered a compelling investment story for institutional and retail investors looking to participate in the dynamic growth of the cannabis industry. Its share price stood at $4.96 on Dec. 3, and it increased to an all-time high of $9.25 on Feb. 25 after the news of Well Beings was announced, so it has certainly delivered in the short term.
Yet most cannabis stocks have been on a tear in the first couple of months of 2019, so it is not drastically outperforming the market, but its performance has nevertheless been strong. It is bidding to expand into three more states – New York, Massachusetts and Maryland – with its cannabis operations, and that would create a broad footprint that gives it an advantage over several rival firms. It has several years of cash left to burn and its price to sales ratio is extremely strong.
In December, it announced third-quarter revenue of $12.2 million, up 335% year-over-year and 51% quarter-over-quarter. It hired more than 400 staff in 2018, bringing the total to almost 500, while bolstering its management team through numerous hires from Fortune 100 and other major companies, and it continues to display a great deal of ambition this year.
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