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RIGHT DIRECTION …

January 16, 2019

 

Cannabis branding our favorite subject: Since our inception, First Jersey Cannabis Corporation has focused on branding, believing in the long run  cannabis will  trade as a commodity and sell for less that $500 per pound. Consensus models are based on a price range of $2,700 to $4,100 per pound on average over the next four years.

 

Now for the “Right Direction” ---  Tilray Inc.  (ticker: TLRY) must be reading our commentaries, especially our negative comments of excessive market capitalization and inability to generate profits as a cultivator.  Their first step 1/ into “branding” is a major improvement of their business model, notwithstanding an overvalued cultivation base.  Today, Tilray Inc. (ticker: TLRY) announced a deal to get its cannabis products into more mainstream retail outlets — both brick-and-mortar and online — than the cannabis dispensaries’ direct-to-patient sales that are Tilray’s primary modes of sales right now.  Through the deal, Authentic lists Walmart (WMT) and Macy’s(M), among others, as partners on its website. The revenue-sharing agreement with Authentic, Tilray will supply various cannabis-based products to be sold. In exchange, Tilray will initially pay $33 million in cash and $66 million in stock, and as much as $250 million in cash and stock on changes to regulations in the U.S. and elsewhere; Tilray will receive 49% of the net revenue from cannabis products with a guaranteed minimum of up to $10 million each year for 10 years. Wow! Doesn’t even  pay or amortize their front-end costs!!!

With few recognizable national or international brands, Tilray aims to use this partnership to quickly get its products in the hands of consumers, Chief Executive Brendan Kennedy said in an interview with MarketWatch. He noted that only Walt Disney Co. (DIS) makes more money than Authentic from consumer-retail brand-licensing revenue. “We are extremely interested in our conversations with [Authentic] regarding the opportunity to distribute a portfolio of cannabis consumer products,” Kennedy said over the phone. “Brands are important to us and obviously to ABG. They have a massive global footprint.”

Initially the companies will focus on cannabidol, or CBD, products, which do not have a psychoactive effect on most people in the same way tetrahydrocannabinol, or THC, does, Kennedy said. In the U.S., prior to the government shutdown, President Donald Trump signed the farm bill into law, which included provisions legalizing industrialized hemp — which CBD can be extracted from. Even though hemp is now legal, CBD will remain largely off-limits, and the Food and Drug Administration said it remains illegal to add it to food or health products without the agency’s approval.

Kennedy said he expects revenue from the arrangement within the next 12 months, and noted that the cosmetics chain Sephora currently sells at least one CBD-based product on its website. An employee at a brick-and-mortar Sephora store in San Francisco told MarketWatch on Monday that consumers shouldn’t expect CBD products on the shelves until February or March because of legal issues. She said the company would pay for shipping if consumers wished to buy CBD products online and ship them to the store for pickup.

 

1/ Tilray has announced several strategic partnerships recently, including a deal with Anheuser-Busch InBev (BUD) to research cannabis drinks and with a Novartis (NVS) subsidiary for a supply and distribution deal involving medical marijuana.

 

 

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