Big Alcohol Makes Historic Crossover into the Global Cannabis Market
After much anticipation, the federal government has finally announced the legalization of cannabinoid-infused foods and beverages in Canada. This announcement included in the approval and release of edits to Bill C-45. Included in the law’s amendments was a deadline stating that edibles (cannabinoid-infused foods and beverages) will be available to the public, alongside the marijuana adult use legalization, set to launch in 2018.
Legalizing cannabinoid-infused edibles adds a long-awaited consumer package goods and edibles brand vertical to an already explosive cannabis market. This momentous change will shift the landscape of the global cannabis sector as the Canadian market welcomes the top legal cannabis category in US legal state market; cannabinoid edibles with premium brands.
The historic news on the legalization of edibles in Canada came on the heels of a game-changing deal involving Canopy Growth (TSX: WEED) (OTC: TWMJF) and beverage giant Constellation Brands (NASDAQ: STZ) — owners of iconic beers brands; Corona, Modelo, etc.
Constellation bought sold a 9.9% equity stake of Canopy, marking the first time a blue chip has crossed over into the now global cannabis market - and as many expected - it came from big alcohol. The deal, valued at $245 million, kicked off the biggest rally in nearly a year for Canopy— raising the share price from $12.79 to a high of $20.38 for an increase of nearly 60%.
Most analysts see the deal as a defensive move, as the global cannabis industry poses the largest threat to big alcohol’s monopoly on legal recreational products. Big pharma and tobacco are also set to cross over, as M&A within the global cannabis market makes the first big splash.
This historic news provided a huge boost to a booming sector. The news gave major cannabis players like; Aurora Cannabis (TSXV: ACB) (OTC: ACBFF), Canopy Growth Inc. (TSX: WEED) (OTC: TWMJF) and Liberty Health Sciences (CSE: LHS) (OTC: LHSIF) more fuel for growth.
Among publicly traded cannabinoid infused beverage companies, Isodiol International, Inc. (CSE: ISOL) (OTC: ISOLF), had a massive 300% growth this month, skyrocketing to a $254 million market capital. Tinley Beverages (CSE: TNY) and Nutritional High (CSE: EAT) also saw double digit growth on the Constellation deal, both now trading above $50 million valuations.
Critics are wondering if retail investors have missed the trade, as value investors look to get in early. One cannabinoid infused brands company with equal growth potential, but a value based entry point is Phivida Holdings Inc. Phivida (pronounced “fii-vee-daa”) has an impressive suite of cannabinoid-infused foods, beverages and nutraceuticals with distribution, across the USA.
Phivida Holdings launched their Initial Public Offering last week at a $10 million pre money valuation and is set to list on the CSE under the ticker symbol (CSE: VIDA ). Based on the comps, Phivida’s IPO valuation is just one twentieth of the closest sector peer, providing massive post IPO upside potential.
CANNBINOID INFUSED-BEVERAGES – THE NEXT WAVE OF GROWTH
Clearly, the cannabis infused-beverage industry is set to explode into the mainstream, as shown with a mature edibles market in legalized states. There is a huge potential for infused beers, wines and other beverages through groups like Constellation, or health and wellness based - “functional” cannabinoid infused beverages, like CBD iced teas, juices and shakes from Phivida.
Cannabidiol (CBD) is the non-psychoactive cannabinoid - found in both hemp, and cannabis, and has already begun to be infused into products on the market. CBD’s medicinal functions are as an anti-inflammatory and anti-anxiety remedy that have been recognized by top medical research centers around the world, and the World Anti-Doping Agency, who recently removed it from its prohibited substances list. Most Canadian investors are not aware that US retail stores across California and the Pacific coast already sell hemp based CBD-infused sports drinks, juices, nutritional shakes and teas from their shelves, as it is federally legal if hemp oil derived.
The edibles category has been leading the cannabis market for years in the USA. In 2015, Leafly reported edibles as the most popular form of cannabis across the USA, and the foundation of the most powerful brands in state legal markets. In 2016, Hightimes published its top 10 edibles list, with cannabis beverages leading the pack. In hindsight, the legalization of cannabis edibles and brands in Canada may seem long overdue, but the new laws in Canada include the product testing and consumer safety regulations currently missing from the burgeoning US edibles market.
Given that Bloomberg predicts that the US cannabis industry alone is to be worth $50 billion by 2026, it’s likely that the titans from food and beverage and big alcohol will continue to circle. Sector experts say the consolidation trend has only just begun and the most premium brands will likely be targeted.
AN EARLY-EARLYBIRD ADVANTAGE
With CBD product lines already successfully marketed and distributed across the USA, Phivida Holdings Inc. only had one thing left to do to join the excitement in the public markets — IPO.
Phivida launched its IPO last week and is set for listing on the CSE under the symbol “VIDA”.
As a long-form prospectus offering, the Phivida IPO was priced prior to WADA’s approval of CBD, Health Canada legalization of edibles and the Constellation-Canopy beverage deal announcement. A fortuitous opportunity for retail investors.
Phivida Holdings Inc. IPO price has been locked in at a mere $10 million pre-money valuation, while its closest cannabinoid-infused beverage-market comparables ranged from $50 million, on the lower end (Tinley Beverages), to over $250 million (Isodiol International). For investors looking for an early entry point into the cannabinoid infused beverage market, Phivida is value priced to the market peers.
Phivida’s IPO structure is also unique. As a Long Form Prospectus, the IPO has; no minimums, no accredited investor limitations, no subscription agreements, and investors can submit orders by phone or email to their investment advisors. The IPO is led by Canaccord Genuity, Haywood Securities or Mackie Research, but any advisor in Ontario or British Columbia can participate.
Phivida’s IPO is led by the top Bay St. investment banks in the cannabis sector – but is value priced for retail and structured for the everyday main street investor - a rare combination in this market.
From a future growth perspective, Phivida is strategically positioned at the intersection of several major growth verticals within a $1 Trillion Global Health and Wellness market. Bloomberg predicts US cannabis is a $50 billion US market by 2026, the organic functional food and beverage market is valued at over $400 billion US, and Phivida’s CBD infused nutraceutical products are positioned as opiate replacement products, to tap into a $400 billion USD therapeutics - NSAIDS markets.
Phivida is coming out of the gates with an assertive multi-market approach, competing for a leadership share in; five channels, four segments, and in four key state markets – starting with the on US Pacific coast. Phivida is ready with dozens of custom-formulated CBD food and beverage infusions, nanoencapsulated - for greater absorption and timed release, and a whole menu of premium CBD innovations in the pipeline for continued leadership in the cannabinoid edibles space.
Phivida’s CBD infused products are premium branded, doctor and food scientist formulated (via the Wholefoods Acceptable Ingredients List), cGMP manufactured, and product quality and safety tested.
HOW TO GET A BEVERAGE ADVANTAGE
As a prospectus offering led by the most active investment banks names in the space, the Phivida IPO comes with the seal of approval from the street. Launched last week — and still open for new investors — the IPO is getting serious recognition across the Canadian capital markets, from the retail investors, to major cannabis players.
Phivida’s value proposition is anchored by impressive senior leadership, with a board of directors that includes former C+ class executives from global food, beverage and pharmaceutical conglomerates.
Phivida Founder and CEO, John Belfontaine is a career entrepreneur, focused on building and managing consumer brands. John has dedicated his career to brand marketing for Fortune 500 CPG brands, like Nestle, Molson and PepsiCo Frito Lays. John adds energy, creativity and vision to the management team supported by with the experience, networks and good governance of the board.
Director James Bailey is the former CEO of Red Bull Canada and an expert in traditional marketing and sports endorsement branding for multinational brands. Corporate Advisor John D. Silverman is the former CEO of Seagram’s Int., former Strategic Advisor for John Labatt’s, and former EVP and COO of Grupo Empresarial Bavaria. Mr. Silverman grew GEB’s annual sales from $200M to nearly $1 billion US and led the sale of GEB to Anheuser-Busch InBev (NYSE: BUD) for $7.8B US – representing one of the largest merger acquisitions in the history of the global big alcohol industry.
Another key advisor is Chris Hoffmeister, current President of Select Wines, and former General Manager at Mark Anthony Group with hundreds of wine brands in distribution across the Pacific Coast and a strong distribution network throughout southern California.
The Phivida board of directors also includes former senior Vice President of Proctor and Gamble and current Vice President of Corporate Advisory at the Business Development Bank of Canada. Also on the board is a partner at national law firm Gowlings WLG. Phivida’s management is stacked with experience which is not the typical story for a $10 million market capital company.
Phivida is well ahead of this most recent growth cannabinoid beverage growth trend. Phivida has been operating since 2013 with a specialization in cannabinoid functional foods and beverages.
Phivida has perfected their product formulas, with supply and distribution channels in place and are slotted to capture the Pacific coast USA next year. For consumers, Phivida’s CBD-infused; iced teas, fruit juices, nutritional shakes, tinctures, tablets and capsules have built a reputation for premium quality at an aggressively competitive price – descriptors now synonymous with the Phivida brand.
Phivida CBD products are sold across the USA and are ready for prospective distribution partnerships in Canada, the Caribbean, South America, Asia and Europe. Phivida has built a marquee brand, with; expert management with a proven track record, quality products, and strong distribution, as well as the seal of approval from the tier one investment banks in the Canadian capital markets. Phivida has all the right ingredients to be the leader in the global cannabinoid infused edibles market. This is definitely a story to watch – so stay tuned on Phivida, and keep CSE:VIDA on the radar in 2018.
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