Cannabis M&A activity is heating up, with Cresco planning to pay $823 million for Origin House. However, there’s a much bigger story here that I had to make sure you understand…
Cresco Labs (CSE: CL, OTC: CRLBF) is in the news right now because it plans to buy Origin House (CSE: OH, OTC: ORHOF) in a deal valued at US$823.5 million, but there’s much more to this story, which I will talk about in just a bit.
Cresco is a multi-state operator with cultivation, processing, and retail assets.
By adding Origin House to its holdings, Cresco will have an activist investment firm under its belt that gives it a strong foothold in California.
Origin House’s strategy is built upon the premise that very little value will accrue to cannabis growers and that most of the value will be captured by downstream activities. There’s just not a lot of money to be made from purely growing cannabis.
So these downstream assets generate more income from essential services related to the cannabis industry such as product testing, research, extraction, product development, production, distribution, branding, and retail operations.
Now, a merger and acquisition (M&A) valued at almost $1 billion is noteworthy, and this type of activity is only going to ramp up. Cannabis firms are in a race to become the biggest players in the world, and to get there, it involves big acquisition deals like this.
Having said that, there is something much more important about this deal than just the final cost to Cresco.
It’s a cannabis investing theme I’ve mentioned a lot, and it’s going to help you spot the biggest and best profit opportunities, way before everyone else…
Successful Cannabis Branding Is the Key to Profits
One of the reasons Origin House was such an attractive acquisition target was that it’s a top-tier branding company. It has a total of five owned or licensed Origin House brands, it owns two California cannabis distributors, and it distributes 35 brands in California.
And if you remember from back in January, I said that I want to see the Starbucks of cannabis branding.
Here’s what I meant by that…
Whether you walk into the Starbucks near my office here in downtown Baltimore or you visit one at Miami Beach, you know your coffee is going to taste exactly the same, no matter where the store is located.
The cannabis industry is moving so quickly even its staunchest opponents have come around. Even former Speaker of the House John Boehner is telling Americans to go “all in” – and he’s revealing three events set to unleash the profit opportunity of a lifetime. Take a look…
Being able to go to a store and get the same experience, no matter a store’s location, is how a successful brand should operate. The Seattle coffee giant has earned customers’ trust through branding, and that is why Starbucks is now worth $92 billion.
Right now, cannabis firms are still figuring out their branding strategy.
It’s hard to create a cohesive branding experience if each state has such different cannabis laws in place.
Until recently, smokable cannabis was not allowed in Florida. That means a cannabis firm won’t have the same type of products in the Sunshine State as they do in Denver. There just hasn’t been enough time for cannabis companies to build brands that are associated with quality, consistency, and have global or even regional recognition.
Though, as in the case with Origin House, you can see in the chart below that making branding a central focus can lead to handsome profits.
As part of my research reports, I always evaluate how well a company is executing on its branding strategy. In fact, it’s one of the reasons Origin House received a 5 rating in our NICILytics database.
NICILytics includes every publicly traded cannabis company, a number of companies planning on going public soon, and a lot of extremely promising new startups.
All of these companies have undergone our comprehensive vetting process.
They’ve all been rated on our simple 0-5 scale.
If you want to see all the cannabis tech stocks, or the medical firms, or the up-and-coming brands – you can sort this database by market sector.
Or, if you want to find just the best of the best, you can sort by rating.
Utilizing this tool is just another way you could gain an edge over other retail investors.
Before you go, I wanted to show all of our readers another way to profit from the cannabis sector. Make sure to read this report on an interesting little bank we found. We think it has a lot of room to run, much like this other company dashing in where most banks fear to tread.
Executive Director, National Institute for Cannabis Investors
P.S. If you want a shot to get even richer from America’s next trillion-dollar transformation, you need to know about the ULTIMATE pot stock investing tool. Our comprehensive cannabis database contains protected information on every publicly traded cannabis company on the market, future IPOs, and numerous front-runners and startups. We call it “The Vault” – and you can see how it works right here.
22 responses to “This Is the Strategy That Unlocks the Biggest Cannabis Profits”
April 02 2019