Agile like the superstar athletes supporting their science, CaniBrands made the decision earlier this year to divest its THC business to focus exclusively on its CBD operations ahead of its go-public transaction anticipated for 2020. With a day-to-night portfolio of products and multi-channel distribution, the company has set out to raise $5.0 million to continue rapidly scaling its business.
In the emerging cannabis market forecast by Grand View Research to hit $66.3 billion by 2025, many companies are a mile wide and an inch deep as they look to capitalize on every trend. Not CaniBrands. The savvy management team has extensive experience in consumer packaged goods and branding and after only a few months in the THC market, it was quickly realized that the byzantine nature, flood of competitors and low margins didn’t make sense for them. However, the opportunity to be differentiated in the CBD market did.
The Prescient Move to CBD, Superstar Support
To many, cannabis is often confused with some of its compounds and remains a gray area because of a misunderstanding of the difference between THC (tetrahydrocannabinol) and CBD (cannabidiol). In short, THC is responsible for the “high” associated with cannabis, while CBD has zero psychoactive qualities. CBD is widely trumpeted for a litany of health benefits and can also be derived from hemp, which, by definition contains little or no THC. The passage of the 2018 U.S. Farm Bill legalized hemp nationwide, opening up interstate and international commerce for hemp-derived CBD. Cannabis, THC and CBD from marijuana are 100% illegal at the federal level.
This topic is touched on in a recorded conversation between 12-time Olympic medalist Dara Torres and acclaimed high-performance trainer Andy O’Brien. Torres serves as a global spokesperson for CaniBrands, while O’Brien is the company’s Sport Science Advisor. Apropos, Paul Bissonnette, a retired NHL player and founder of the wildly popular Spittin’ Chiclets Barstool Sports Podcast, is CaniBrands’ Sport Media Ambassador.
Hundreds of professional athletes have come forward in recent years in support of the benefits of CBD, particularly as a natural alternative. Adding Torres, O’Brien and Bissonnette as brand ambassadors speaks volumes to the quality of CaniBrands products and gives the company a loudspeaker to millions of followers and fans for their marketing efforts.
Focusing on hemp-based CBD is savvy for many reasons. The company runs extremely lean, avoids capex related to regulations with THC products, has massive distribution potential and, maybe most importantly, is taking a lead in a market driver. According to a first-of-its-kind study by Manifest7 recently, there is a school of thought that medicinal applications are the future of cannabis, not recreational uses.
Arc View sees the U.S. CBD market climbing from $800 million in 2018 to $20 billion by 2024.
Take What They’re Giving You
Every good athlete knows the key to victory is often in taking what is easily available. A hockey goalie struggles when facing a lot of shots on goal? Don’t look for the perfect shot; keep firing away. A football defense can’t stop the run? Don’t spend the game throwing; hand it to your running back.
Taking the concept to business, right now U.S. regulators are supportive of hemp-derived CBD. Sure, there are some indications that cannabis prohibition is futile, but building a brand in a higher margin model that allows ubiquitous sales is easily the path of least resistance. Get name recognition now, expand within your lane and see where the future takes the company.
Utilizing ingenuity that sets it apart from competition, this is exactly the playbook CaniBrands is following.
CaniBrands already offers the premium product lines dubbed Can-i boost, Can-i mend, Can-i fresh and Can-i sleep through its growing distribution channels across the U.S., including Amazon.com and other e-commerce locations with brick-and-mortar sales part of the go-forward strategy. Considering these products command margins of 60%+, it is not hard to see why management left THC products behind and is leaning on the direct-to-consumer portion of its business.
Some companies are making a mistake by thinking they can win over consumers by taking existing products and simply packing CBD in them. With a flood of products coming to market, consumers are reacting and associating with novel products with science-backed wellness benefits. CaniBrands’ products are innovative with the formulations differentiated through the addition of nutraceuticals for high efficacy. Consumers can feel confident in the products given that all are third-party tested in a GMP-compliant and FDA-certified facility.
So far, the consumer response has been positive at worst, extraordinary at best. A stunning 92% of customers say they would recommend CaniBrands products. The company’s net promoter score, a management tool used in the industry as a barometer of loyalty typically correlated with revenue growth, recently came in at 55. That’s a score higher than the national average and the likes of Apple, Amazon, Pepsi, Kraft and many other household names.
Comments are one thing, but consumers opening their wallets is another. The data reinforces brand loyalty being strong. The average order for Canibrands products is $102, which is higher than competitors offering similar products. Importantly, the value of the average shopping cart is up 26% even though usage of incentive codes has dropped 40%. Moreover, buyers are coming back quickly, as measured by an average return time between purchases of just over a month (34 days).
With the momentum gathering, the company is readying to launch products into key international markets. Canada is first on tap, with sales expected to commence in January 2020.
Additional scaling strategies include launching Softgels, beverage and other product forms (topicals, CBD bars, ready-mix powders, etc.); developing products with other cannabinoids (e.g. CBN, CBG); licensing and co-manufacturing in more international markets; relaunching OMG Farms CBD brand; and expanding the CaniBuy™ e-commerce management platform. CaniBuy is robust online architecture integrating websites, e-commerce, payments and fulfillment in one, client-facing portal.
$5.0 Million Raise
With no long-term debt, a seasoned team, increasing sales and a solid business model, CaniBrands is ready for the next phase of expansion. To that end, the company has initiated a $5.0 million capital raise. CaniBrands’ founders and two strategic investors have already committed to more than $1.0 million of the funding round. Management says the proceeds will be used for a variety of revenue-driving activities, as well as R&D and general operational expenses.