California lays claim to the largest cannabis market on Earth. In its first full year of recreational legalization, the state projects Californians to spend over $3 billion in 2019. That is more than the entire country of Canada has spent on legal weed since legalizing in October 2018. There is no clear leader in the state, so opportunities abound for a well-run company to enter the market and establish a leading cannabis brand. Hollister Biosciences Inc. (CSE: HOLL) (FRA: HOB) believes they have what it takes to become a dominant player in the Golden State.
Welcome to Hollister, California
When most people hear the word “Hollister”, they probably think of the clothing brand owned by the same name. While the founders of the clothing brand claim to have invented the word out of thin air, there is, in fact, a town called Hollister that is just south of the San Francisco Bay Area, which is more pot-friendly than almost anywhere in the world. The area is well-known for its rich agricultural history and has all of the resources needed to start a cannabis company, most notably the large labour pool with extensive experience working with plants. Hollister Biosciences obtained the first license to produce cannabis and cannabis products in the city.
Founder, President & CEO: Carl Saling: Mr. Saling has been involved in the cannabis industry for over 5 years, having previously held executive positions at a cash management company and a company that sells edibles for pets. He also has a strong background in digital marketing and social media management. He has the skills and experience to bring cannabis and hemp products to market using a fully modernized marketing strategy.
Co-Founder & Vice President: Amasa Lacy: Amasa has worked in a variety of industries. She studied film and television in college and worked in the industry for six years. She then joined the U.S. Army and was stationed in several European countries. After serving her country, she returned to school and studied business, receiving her MBA from Wake Forest. Most recently, she worked as a Real Estate Broker, where she specialized in luxury and high-value properties in the area surrounding Hollister. Ms. Lacy’s diverse background and strong leadership skills will allow the company to be both innovative and disciplined.
Chief Financial Officer: Geoffrey Balderson: Mr. Balderson has worked as a financial officer for several public Canadian companies. Before that, he worked for several highly respected investment firms. He has a very strong background in working with exchanges and regulators. His extensive knowledge of business finances will allow the company to control costs and raise whatever capital is needed for expansion.
Hollister’s Business Strategy & Vision
Hollister intends to establish a vertically integrated consumer packaged goods company that specializes in cannabis and hemp products. Management wishes to offer its consumers the highest quality products possible, so they plan to maintain control of their product from seed to retail shelves. The company currently operates a manufacturing facility and intends to purchase a growing facility in the near future. To bring their products to market throughout the state, the company engaged Indus Distribution (CSE: INDS), one of the leading cannabis distributors in the state. Management expects its products to be in over 350 stores by the end of 2019. Indus’ automated supply chain management system, WAYV, will assist Hollister with ensuring their product remains in stock while also ensuring that inventory does not build up at any one location.
Central to management’s plans is its proprietary NanoPure technology. The NanoPure process results in a cannabis-infused additive that, when ingested, activates more quickly and wears off faster than regular edibles, allowing for precise control of the effects the user wishes to feel. Management intends to offer a line of edible products based on the NanoPure technology. The technology is also an attractive candidate to license to other companies for use in their edible products.
Hollister is currently generating revenue by selling a line of hash infused pre-rolls, pre-rolls, bubble hash, and full-spectrum CBD pet tinctures. The company’s HashBone brand features a line of pre-rolls infused with bubble hash, resulting in a higher margin product. Also under the Hollister umbrella is MighyMeds, a vape brand with a line of disposable cartridges.
The company also has a hemp division that will bring to market hemp-based beverages, edibles, vapes and pre-rolls. At the MJBiz Conference in Las Vegas on December 12th, the company announced a new co-branding relationship with Easyriders, a global lifestyle brand with millions of followers globally as well as the rollout of Rebel Tea, the first product of their hemp division that is very unique to the market. The THC-free drink is brewed with hemp, is organic and contains 15mg of full-spectrum hemp cannabinoids. With hemp recently becoming federally legal, management intends to seek national and eventually global distribution of the product, with California being its first priority.
Thanks to strong sales of their current product, multiple products in the pipeline and management’s dedication to cost control, Hollister is projecting both strong revenues and margins. In 2020, the company expects to bring in $20 million in revenue at a 35% operating margin. The company expects to progress rapidly on both fronts, projecting $42 million in revenue at a 48% operating margin in 2023. With a current market cap of $18 million, the company sports a much lower valuation than many other cannabis companies, even after the sector-wide downturn throughout 2019.
California is the crown jewel of the cannabis industry. The Golden State and its 40 million inhabitants have a larger appetite for pot than most countries. The fledgling recreational cannabis industry is highly fragmented, with no clear leader.
This void allows for companies to enter the market and not have to battle a behemoth for market share. Hollister Biosciences has the management team, technology, and strategy to become a serious contender for the California Cannabis crown.
Cap Table, Chart & Due Diligence Links
- Shares Outstanding: 108,777,373
- Shares Restricted by Lock-up Agreement: 80,222,666
- Shares Held by Insiders: 40,739,726
- Shares in Public Float: 68,037,647
- Shares in Tradable Float: 28,554,707
Hollister Biosciences is a paid client of The Cannabis Investor.
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