Although Washington state is well known for being an early mover on the recreational cannabis industry, the market does not have the same fanfare when compared to Colorado and we believe that the market could be missing out on something big.
According to the Washington State Treasurer, the state’s legal cannabis industry generated $1.3 billion sales in fiscal year 2017, up from $786 million in fiscal 2016. Washington State represents an exciting cannabis market and we are bullish on the growth that we have seen over the last few years as well as the impact that this has had on the companies that are focused on this opportunity.
Last month, we highlighted Greenstar Biosciences (GSTR.CN) which has attractive leverage to the Washington State market through the relationship that it has with Cowlitz County Cannabis Cultivation Inc. During the last few years, Cowlitz has been a major name in the Washington State market and is a leading producer, marketer and vendor of recreational cannabis products.
Cowlitz has a proven track record of success and is known for its premium cannabis products that are available at approximately 20% of cannabis retailers throughout the state. We believe that the breadth of Cowlitz’s products has played a major role in the success of the brand and are favorable on the type of products that are being offered. Cowlitz brands include; Columbia Valley Private Reserve, Cowlitz Creeper, Cowlitz Gold, High Guys and Dab Dudes and they have seen steady growth in the past five years.
Cowlitz exceeded $14 million in revenue for the 2018 calendar year and is on pace to exceed that number again in 2019. Under the agreement, Greenstar is the owner of the property leases, brands and intellectual property of Cowlitz County Cannabis Cultivation Inc. and are favorable on the expansion opportunity when it comes to entering additional markets across the US.
Announces Management Team Overhaul
Today, GreenStar Biosciences announced significant changes to its senior management team as well as its board of directors. The company also announced the formation and launch of its strategic advisory board and we are favorable on the changes to the team and the new structure.
Following this announcement, Ralph Olson resigned as President of the company and from the Board of Directors. Rahim Rajwani has taken over as Greenstar’s new Chief Executive Officer and we are favorable on this transition. The changes are intended to strengthen the strategic resources of the company and we find this to be significant. Over the next year, we expect Greenstar to record strong growth and believe that the new team is better positioned to driver the operation forward.
A Coast-to-Coast Expansion Story to be Watching
One of the reasons we are favorable on the Cowlitz brand is due to success that it has had in a competitive market. With Washington State being an early mover on the recreational cannabis market, the market is mature and is not an easy market to be successful in. We believe that Cowlitz has the recipe for success while Greenstar has the recipe for expansion and execution and are bullish on the growth prospects of the combined company.
When it comes to Greenstar Biosciences, we believe that the strength of the management team is the most important aspect of the story. Going forward, we expect to see Greenstar take the Cowlitz brand to the next level as the management team is laser focused on entering burgeoning US cannabis markets. The Greenstar team has big plans for the Cowlitz brand from an expansion standpoint and has been targeting the following markets: California, Oregon, Michigan, West Virginia, and Nevada.
In the back half of 2019, Greenstar plans on entering 2 of these markets and we will be monitoring this aspect of the story. Based on the management’s track record of success, we are confident in the work that being done ahead of a potential expansion from a due diligence standpoint and are excited about the growth prospects associated with this.
A Differentiated Growth Opportunity
During the last year, there has been a significant increase in the number of publicly traded cannabis companies. It is important for companies to be able to differentiate themselves during a time like this and this is something that Greenstar has been able to accomplish.
Packaging represent a major opportunity for Greenstar, which has been utilizing prior relationships across Asia and India to source and secure premium low-cost products that are utilized and in demand across the entire cannabis supply. This is significant as it uniquely positions Greenstar to understand the non-cannabis product needs of all in-house and outside parties.
Greenstar packaging maintains a three-tier product catalog and provides selective cultivation equipment to growers, a wide variety of packaging and delivery products to processors, and a line of consumption devices for dispensaries. The company is able to take advantage of this interface to source-and-supply their wide range of support equipment, packaging and sundry products. We find this to be an attractive aspect of the story and believe that the packaging market represents a significant opportunity.
Another way that Greenstar has been able to differentiate itself is through its focus on securing best-in-class cultivation technology and we find this to be an important initiative. Through a joint venture agreement, Greenstar has secured sole access to a patented Micro-Pod Grow Technology. The patented micro-pod technology drastically reduces the amount of resources that are needed to deliver quality cannabis.
Currently, these systems are being utilized in a prototype operation within Cowlitz in Washington State. The project is running in conjunction with a new multi-level cultivation facility that can deliver 2,520 sq. ft. of grow space in a 1600 sq. ft. room and a cost that is significantly lower than the industry standard. We are favorable on this aspect of the business and believe that this will help support growth over the long-term.
A Cannabis Business to Put on Your Radar
The strength and the ability of the management team plays a key role in the success of any company and this is one of the first things that we look into. Over the last few years, Cowlitz has been quietly building a leading Washington State brand and has engaged Greenstar to further enhance its position in the US market.
Although Greenstar has an attractive growth profile and significant potential catalyst for growth, the shares have been under pressure and have traded lower with the market. At current levels, the valuation is attractive when compared to its peers and we find this to be significant. If Cowlitz can execute like it expects, Greenstar should report significant revenue growth on a going-forward basis and this is something that we are certainly watching.
When looking at Greenstar, we believe that this a company that has significant catalysts for growth. The company represents an emerging cannabis opportunity and we will continue to monitor how the team continues to execute. To learn more about Greenstar Biosciences, please email email@example.com
Pursuant to an agreement between StoneBridge Partners LLC and GreenStar Biosciences we have been hired for a period of 90 days beginning May 28, 2019 and ending August 28, 2019 to publicly disseminate information about (GSTR) including on the Website and other media including Facebook and Twitter. We are being paid $7,500 per month (GSTR) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own two hundred thousand (200,000) shares of (GSTR), which we purchased via private placement. We plan to sell the “ZERO” shares of (GSTR) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (GSTR) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.