- 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://nnw.fm/DcwO3).
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://nnw.fm/2w5Md), 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://nnw.fm/u1fRQ). “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://nnw.fm/NeFO5). 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://nnw.fm/tX73z).
A recent report by BDS Analytics projected the U.S. CBD market to hit $20 billion in sales by 2024 (http://nnw.fm/rZI7v), 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://nnw.fm/SUGAR
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