The cannabis industry is no longer the Shiny New Thing. A few years ago, it took bravery for investors to dip their toes into the undervalued and uncertain promise of the market. Now, it’s a well-known, competitive, and packed landscape with thousands of names jostling for a piece of the lucrative pie. If a new company is going to step in and catch the eye of seasoned cannabis investors, it needs to make a powerful entrance.
Gone are the days when a cannabis start-up could entice investors with potential alone, when expected revenues and an optimistic growth plan were enough to pique interest. From the get-go, a company needs to be a solid investment. It needs to have a strong established revenue base, solid grounds for expansion, and a board with its head on its shoulders.
A Strong and Reputable Name
So how does a newly listed cannabis company stand out? For starters, it pays to have a strong name, and that’s exactly the case for Arizona-based Vapen MJ Ventures (C.VAPN, OTC: VMVCF, Forum). Investors might not know the name of the Company yet, but cannabis consumers are already familiar with it. The Vapen brand is a leading cannabis product and accessories brand sold in Arizona, and its social media following is one of the highest amongst cannabis brands.
Vapen MJ started with a popular and esteemed medical dispensary, Herbal Wellness Center. Next the Company grew vertically integrated and launched the Vapen brand of products, which earned high praise from customers. The Vapen brand is now sold in the majority of dispensaries in Arizona, giving the Company a solid foothold in the market.
The Vapen product lineup is massive, and all the more impressive for its consistency in quality. Everything is possible thanks to Vapen MJ’s bread-and-butter: its premium extraction facilities. By having a premium source of THC and CBD oils, it can cover the market as widely as possible.
Front and center are the Vapen Clear brand of distillate products, the fastest growing market segment for discreet ingestion, and the Vapen Extracts brand of shatter and wax, which accounts for around 20% of the Company’s overall sales. The Company also invests in its rapidly growing brands of Vapen CBD products and Vapen Kitchens crafted edibles, highly regarded entries in vital markets.
(Images via Vapen MJ Ventures. Click image to enlarge)
Of course, the best way for a brand to grow is with a complete product ecosystem. Each Vapen brand has accessories that customers can rely on, from applicators and vape pens to cartridges, pod systems, and a unique patent-pending inhaler.
Key to the brand’s rise was the vision of Vapen MJ’s Founder and CEO, Thai Nguyen. In forming the brand, he followed the rising link between hip hop culture and cannabis. There was a clear opportunity to target a specific lifestyle that associates with cannabis, and the lucrative demographics that go with it.
In an interview with Stockhouse Editorial, President and CFO of Vapen MJ, Bob Brilon detailed the Company’s strategic growth to renowned brand-producer and vertically integrated cannabis operator. Luck, as they say, had nothing to do with Vapen MJ’s success. Instead, they followed a plan for the enterprising Company to grow into a one of the top names in the market.
“We had garnered quite a bit of loyalty because we were the number two dispensary to open. That’s been very important in building the Vapen brand over several years here and outside of Arizona. It wasn’t just organic, [CEO Thai Nguyen] had a true plan, and once he saw that it made sense, we followed through. What’s great is that feedback has been awesome. We always put our products up for blind taste tests year over year and we do very well.”
As Brilon illustrates, the Vapen brand has clout outside of Arizona as well. The Company knew that they needed a lot of hype to build a hip-hop lifestyle brand, so they pursued relationships with influencers to spread the word. Those influencers include Cardi B, French Montana, Bow Wow, and Wiz Khalifa, some of the worlds’ most popular and recognizable hip-hop artists.
Overall, there are more than 50 different influencers involved with the Vapen brand with many millions of followers between them. They’ve promoted the brand through social media, given reviews, or even taken pictures or shot music videos with Vapen-branded products front and center.
(Image via Vapen MJ Ventures. Click image to enlarge)
Capitalizing on Brand and Business Prowess
When it acquired its first license in 2012, Vapen MJ set to establish itself as a strong vertically integrated machine. The Company has operations in every part of the product cycle, from cultivation and extraction to edibles infusion, wholesale distribution, and retail dispensary sales.
As the Arizona market grew, so did Vapen MJ’s expertise and revenue. Arizona has a massive cannabis market, currently valued as the 3rd largest medical market in the US at $500 million, and that’s before factoring in potential recreational sales from the State’s expected legalization in 2020. Likewise, the Company has been able to capitalize on its solid business foundations, going from $20 million in revenues in 2017 with $8.2 million EBITDA to $24 million in revenues in 2018 with $8.4 million EBITDA.
With a strong brand and reputable business model, Vapen MJ is in the perfect place to expand its reach, and management is keen to strike while the iron is hot. Since being listed on the CSE in early May, the Company has been quickly moving to expand beyond its strong base in the Arizona market.
(Image via Vapen MJ Ventures. Click image to enlarge)
Many multi-state operators would start scanning the horizon for prospective acquisitions, but during his interview with Stockhouse Editorial, President and CFO Bob Brilon outlined the benefits of a licensing and partnering strategy.
“We’re approaching it different from other MSO’s and pursuing licensing and partnering with established license holders. The way we see it, you don’t need to recreate the wheel. The operators already know what they’re doing, the Vapen brand already has awareness out there nationwide and can be rolled out. It’s quicker to market, takes less capital, and can get going very quickly. The return on investment from acquisitions can take 48-60 months. Licensing and partnering can get you a return on investment in closer to 4 months.”
Vapen MJ’s strategy is to act on its existing strengths, and the sooner, the better. By identifying existing license holders with retail and cultivation operations in target states, it can quickly enter a proven market and establish connections.
A licensing and partnering strategy also minimizes the risk and capital required. Vapen MJ is initially targeting license holders in California, Nevada, Oklahoma, and Massachusetts, with many more states on the docket. The proposals establish local Vapen LLCs and have Vapen MJ responsible for supplying SOPs, equipment and branding, leveraging the existing Vapen brand and social media strength. In turn, partners supply buildings, biomass and retail.
And operators are very much interested in the licensing and partnering strategy. On June 5, 2019, the Company announced its first successful expansion entityin Vapen-Kentucky LLC. In partnering with family-owned farming business Emerald Pointe Hemp, Vapen MJ has an initial 100 acres of a 6,000-acre farm dedicated to the cultivation of hemp for CBD extraction. Not only does the partnership give Vapen MJ an estimated $24 million in wholesale refined CBD oil in its first year of operation, it can easily grow well beyond that. Even more importantly, it gives the Company stronger footing in the rapidly expanding CBD market.
(Image via Vapen MJ Ventures. Click image to enlarge)
Engaging with Sellers, Customers, and Investors
The biggest thing that Stockhouse Editorial took away from its conversation with Vapen MJ President and CFO Bob Brilon is that the Company isn’t keen on sitting still.
On June 14, 2019, Vapen MJ announced its listing on the Frankfurt Stock Exchange. Brilon noted that while many similar cannabis entities had approached the FSE and were turned down, Vapen MJ was welcomed with open arms. The listing illustrates that the Company isn’t shy in its intended pursuit of expansion, both stateside and internationally.
The Vapen brand also continues to grow. Several new influencers have agreed to endorse the brand, and each one is being worked with to become a knowledgeable ambassador of the products. For all promotional work that Vapen MJ does, whether with influencers, promotional events, or retail sellers, the Company ensures that their words hold water.
“A lot of these guys could go out and get paid, you know, millions of dollars to endorse somebody,” said Brilon. “But they believe in their brand and they don’t want to tarnish their brand. When they do it for us, we know it’s sincere. They love our product. It’s helped a lot to have education about the brand. We make sure we have significant events where budtenders, dispensary owners, street teams, everyone knows the product and feels comfortable selling it and recommending it.”
For a successful Company to grow, it needs to understand what customers want. For the team at Vapen MJ, everything the Company is working on, from expansion to brand management, is about addressing those wants.
License holders want to work with a strong brand and proven business operator. Sellers and influencers want to sell a brand they can feel confident in recommending. Investors want a proven and successful cannabis multi-state operator, one that isn’t sitting around and acting on potential alone but has its eye on profitability. As the cannabis industry matures, the serious players will emerge as profitable, well-run enterprises, not just aggregators seeking near term valuation at the expense of solid operating metrics.
The next couple of months will be an opportune time to keep an eye on Vapen MJ. Some investors are already aware of their strong name and impressive flurry of moves. Others will be quick to notice.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.