CURASCIENTIFIC NEGOTIATING $150M CONTRACT TO PRODUCE KAVA EXTRACT IN PALM DESERT LAB
June 23, 2023
The Cannabis Investment Company Positioned for Parabolic Growth
Sugarmade, Inc. (OTC: SGMD) is a Cannabis Holding Company focused on the quickly growing cannabis marketplace. Their most recent investments include a growth operation capable of producing 64 tons of flower per annum, and the delivery company Nug Avenue. As cannabis legalization spreads across the states and Canada, Sugarmade is looking to make a name for themselves in this red-hot industry. On their website, they boast that, “By turning customers into active participants, we help our businesses strengthen their brands on an ongoing basis – our approach gives them the confidence to make “Iconic Moves” that spark desire and create utility, driving extraordinary results.” Given their current pace of acquisitions and the signing of a Memorandum of Understanding (MOU) for three California Cannabis Licenses, we are excited to see what Sugarmade does in the coming months.
Growing Market – According to Flow Hub, the U.S. cannabis market is worth $61 billion, and is expected to reach 100 billion by 2030. This growth is being fueled by accelerated legalization in states like New Jersey, where the governor signed three bills legalizing recreational cannabis use for adults 21+, as well as the growing interest worldwide in the health applications for CBD and THC. Growth in this market will continue for some time, and trends show that it’s still a good industry to invest in.
Supply Line Advantages – Sugarmade’s wholly-owned growth operation, Highest Valley Farm, is capable of producing 64 tons of dry flower at full capacity. The 640 acres of rich farmland make it one of the largest outdoor cannabis farms in California. The ability to control the supply of product is a huge advantage for Sugarmade, as it allows them to closely monitor quality and open doors for future distribution deals.
Proven Success – The delivery company Nug Avenue, which Sugarmade now owns 70% of, is already a successful, established brand. They serve the greater L.A. area, which is one of the biggest cannabis markets in the U.S. Sugarmade plans to capitalize on Nug Avenue’s success and open up three more locations, so they can expand their delivery radius and increase revenues.
Vertical Integration – Sugarmade now owns supply and (majority owns) distribution for their products. These synergistic acquisitions will increase operating margins, while also creating value for customers by providing a trusted, transparent supply. The intelligent acquisitions and careful vertical integration is something we are always happy to see in up-and-coming companies, and we expect to see Sugarmade making their own line of branded products soon.
New Opportunities Every Day – In the fall of 2021, Sugarmade’s wholly owned subsidiary, Lemon Glow Company, obtained a conditional Use Permit number from the Community Development Department of the County of Lake, California, which is one more step toward commercial cannabis cultivation at the property. If tall goes well, up to 32 of the 640-acres at the Property would be designated for outdoor cannabis cultivation, resulting in an annual potential cultivation yield of 4,000 pounds of dry trimmed cannabis flower per acre, or 128,000 pounds, or of dry trimmed cannabis flower each year.
Sugarmade, Inc. aims to make “Iconic Moves” that don’t just satisfy current consumer desires, but create new ones altogether. Using a combination of analytics and real-time consumer input, Sugarmade is creating the next generation of cannabis products, while providing the highest level of customer service to boot.
From their website, “We don’t just analyze the disruptive forces in the marketplace. We collaborate with real people in real-time – to identify the emerging desires and behaviors poised to disrupt or inspire next. Unlocking new opportunities and new pathways to growth. For Sugarmade, an innovative and compelling relationship between brand, botany, and business is crucial; a trifecta that will seamlessly translate to undeniable consumer value and market control. Our ability to exact this harmony contributes to the cross-pollination of our revenue sources.”
In pursuit of that lofty aim, Sugarmade has begun to vertically integrate; buying a grow operation (Highest Valley Farm) and the majority stake in a delivery company (Nug Avenue). By controlling the supply and distribution of their products, Sugarmade will have greater control over pricing, quality, and margins. This is a huge advantage in the competitive cannabis landscape, and it positions the company to accelerate their growth as they expand their Nug Avenue operations.
Sugarmade has also recently entered into a binding Letter of Intent (the “LOI”) with GenCann, Inc. (“GenCann”). This agreement gives Sugarmade a five-year license to cultivate a set of cannabis chemovars that GenCann believes are some of the most THC-rich products available. When tested by a certified laboratory in California, these chemovars resulted in THC-V yields of up to 8%.
This set is made up of three chemovars which are covered by multiple issued U.S. patents, Sugarmade plans to utilize these THC-loaded plants in the form of smokable flower and edible gummy candies. They also have future plans to produce distillate and isolate products based on its cultivated biomass.
Sugarmade recently gained a majority interest (70%) of the successful cannabis delivery company, Nug Avenue. Located in Lynwood, the delivery service is able to access a large portion of the LA market, one of the fastest-growing cannabis markets in the U.S. Just as grocery delivery has taken over big cities, cannabis delivery is seeing similar growth following the same trends. With more people working from home during the Pandemic, delivery services are experiencing a time of sustained growth, and that includes the cannabis industry.
Sugarmade CEO Jimmy Chan commented in a press release, “We strongly believe the LA delivery market is the prime spot for expansion of our business. California is the world’s sixth-largest economy, and LA County is by far the most significant driver, with over 25% of the state’s population. The Lynwood, California, site is optimal, as it is located along one of the major distribution freeways, allowing drivers to efficiently reach the more than 15 million consumers that live within a 30-mile radius of the new location. We plan to make a big impact on the LA cannabis delivery marketplace.”
People are willing to pay a premium to have their favorite products delivered to their doorstep. We’ve seen that proven through the popularity of Amazon Prime delivery, Instacart, and Postmates, and now we’re seeing it with Nug Avenue. Sugarmade has already applied for three more California Cannabis licenses in order to open up more Nug Avenue locations. With the extra marketing boost from Sugarmade, Nug Avenue is well positioned to gain market share across the greater LA area. “By using these licenses to cover manufacturing, distribution and delivery, we hope to further develop our fully-vertical approach to the dynamic California cannabis delivery market. With this agreement, we gain the potential to manufacture and package our own cannabis products, distribute them to multiple Nug Avenue locations, and then deliver them right to the front door of our loyal customer base, driving both top-line and bottom-line growth potential as we expand our footprint in this rapidly growing space,” said Chan.
And Sugarmade isn’t stopping with Nug Avenue. They’ve also implemented new cannabis delivery technology to establish a competitive advantage in its core delivery zone. The Onfleet delivery solution from Blaze Software allows Sugarmade to utilize AI-based automated dispatch, automatic SMS customer notifications with accurate ETAs, real-time driver tracking, proof-of-delivery, feedback collection tools, and powerful analytics to ensure the ideal customer experience. Just one month after adopting the software, Nug Avenue’s average delivery time reduced to 41.51 minutes and customer satisfaction rose to 4.83 out of 5 stars on average.
The Los Angeles market accounted for $4.4 billion of the U.S.’s total cannabis sales in 2020 (up 57% from 2019), and remains one of the best places to open dispensaries and delivery services. Eaze (a delivery company) reported that their subscriptions increased by 60% following the initial Covid lockdown, while State of the Cannabis Industry found that stores that offered order-ahead got 22% more sales overall. All of this points to the Nug Avenue expansion being an excellent use of capital, and we expect to see Sugarmade open up even more hubs in the near future.
In August, Sugarmade closed on a property to serve as a second licensed Nug Avenue delivery hub for the Los Angeles area. All documentation for the second location has been submitted and the company is now going through the process of getting the various inspections and approvals needed to officially open. They also signed an agreement to acquire California cannabis licenses for three brand new, vertically integrated Nug Avenue locations. This will only add to their ability to service the high and growing demand for their products in the Los Angeles area.
In December 2021, Sugarmade revealed that Nug Avenue had seen a rapid increase in growth over the last few months. At the time of writing their initial location had over 25,000 members, an increase from 10,000 members in June 2021.
In 2020, every bill involving legalizing cannabis passed, and now 1 in 3 states have some form of legal weed available. This is putting tremendous pressure on surrounding states to legalize cannabis as well, and it won’t be long before you’ll be able to purchase your favorite THC enhanced products all over the United States.
Sugarmade is getting in the game at the right time. 2020 was a flagship year for marijuana sales in California, and the LA market specifically is booming. The company’s vision of growing, making, and distributing their own products is one that enhances their business in every way. From the CEO’s letter to the shareholders, “…we continue to verticalize our model, creating a full farm-to-door structure that expects to produce high-quality branded cannabis products positioned in a vertical in-house supply chain. We expect that this will provide Sugarmade with optimal margins. We believe that we will also be better able to make use of 280e tax deductions related to production once we have a more vertical structure in place.”
Customers will seek out Sugarmade’s farm-to-door products, while the Nug Avenue delivery business will capitalize on the growing demand for fast delivery in LA. The company has even partnered with an LA sushi restaurant, further expanding availability of Sugarmade’s products. We will be watching closely to see what happens when Nug Avenue’s new locations open up, as we expect to see them gain market share in their respective areas of operation. Overall, Sugarmade is making the right moves at the right time, and they are well positioned to continue expanding in a market that just won’t stop growing.
Learn more at their website.