Harborside Archives - Green Market Report

Debra BorchardtAugust 31, 2021
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After the close of the market on Monday, Harborside Inc.  (CSE: HBOR) (OTCQX: HBORF) reported its financial results for the second quarter ending June 30, 2021, as revenues were essentially flat year over year, but up sequentially. The revenue for the quarter was $16.19 million versus last year’s $16.14, but an improvement over the first quarter’s total revenue of $12.9 million. There are two analysts covering Harborside who had an average estimate for revenues of $12.4 million. 

Harborside delivered a net income attributable of $1.8 million in the second quarter versus a net (loss) of approximately $(1.7) million in 2020, an approximately 201% increase in net income on a year-over-year basis. The company attributed the year-over-year increase was due primarily to fair value gains related to other current assets which were recognized during the quarter.

“I’m thrilled with the strong sequential growth we drove in our second quarter while continuing to make solid improvements to our gross margins and profitability,” said Matt Hawkins, Chairman and Interim Chief Executive Officer (“CEO”) of Harborside. “We continue to build a robust business, supported by our high-quality cultivation, leading consumer brands, and best-in-class retail experience. Our continued focus on improvement has allowed us to become a leader in the California cannabis market and we expect our business to continue to advance as we begin to integrate the synergies afforded by the Sublime Acquisition that closed in July.”

Revenue Breakdown

Harborside noted that the retail gross revenue was $11.0 million and the wholesale gross revenue was $5.2 million, for total gross revenue of $16.2 million, as compared to retail gross revenue of $10.0 million, wholesale gross revenue of $2.9 million and total gross revenue of $12.9 million during the first quarter of 2021. The company said that on a quarter over quarter basis, retail revenues improved by approximately 9% as the Company adjusted its customer loyalty program from a points-based plan to a new model that rewards frequent buyers while relying less on cumulative discounting at the point of sale. Wholesale revenues increased as the Salinas production campus delivered improved harvest yields and flower quality in the second quarter, which allowed the company to bring more bulk products to market during the quarter.

Expenses Rise

The company noted that total operating expenses increased to approximately $9.0 million over last year’s $7.1 million. The year-to-year increase in total operating expenses was primarily due to an increase in general and administrative expenses of $0.9 million, to $5.4 million as compared to $4.5 million in the comparative period in 2020 and an increase in professional fees of $1.0 million, to $3.3 million as compared to $2.3 million in Q2 2020, which was primarily due to an increased level of legal and professional fees in the current quarter related to the Sublime Acquisition and the settlement of litigation. In July, Harborside completed its previously announced acquisition of Sublimation Inc., an award-winning cannabis manufacturing company located in Oakland, CA, for a total consideration of $43.8 million.

Harborside had total current assets of approximately $38.4 million, including approximately $26.9 million of available cash, as compared to current assets of approximately $21.9 million, including approximately $13.6 million in available cash as of June 30, 2020. During the first quarter, Harborside closed a brokered private placement for aggregate gross proceeds of approximately C$35.1 million and entered into a loan financing arrangement with a federally regulated commercial bank in the amount of $12.0 million pursuant to a senior secured revolving credit facility due March 19, 2023. On May 28, 2021, Harborside drew down approximately $11.4 million on the revolving credit facility in advance of purchasing the cultivation/production facility in Salinas on June 1, 2021.

Hawkins added, “As we move into the second half of the year, our focus remains on further scaling our reach through accretive M&A opportunities and building our leadership team, including our goal to bring in a new CEO, which together with our strong foundation will position Harborside for long-term growth


StaffJune 1, 2021
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Harborside Inc. (CSE: HBOR) (OTCQX: HBORF) reported its financial results for the first quarter ending March 31, 2021, after the market close on Monday. Harborside reported that its net revenues fell 9% to $12.4 million versus last year’s $13.7 million for the same time period. This missed the Yahoo Finance average analyst estimate for revenues of $13.65 million. The company blamed the decline on decreased store traffic due to COVID-19 restrictions, however, there were also declines in the wholesale business related to lower yields. The net losses for the quarter grew 21.9% to $2.9 million from last year’s $2.3 million. 

“Our Q1 results reflect the strength of our business as we demonstrated sustained profitability while we executed on the opportunity to scale up our cultivation activities, improve the breadth and depth of our product portfolio, and expand consumer access to our retail stores,” said Matt Hawkins, Chairman of Harborside. “Throughout the quarter, we continued to build Harborside’s management team with a focus on operational strength and deep industry experience which, together with our strong balance sheet, has positioned Harborside with both the resources and depth of talent to execute on our California focused growth strategy.”

Sublime Acquisition

Following the earnings announcement, Harborside said it was buying California-based Sublimation Inc. also known as Sublime for $43.8 million. The acquisition is expected to close in July 2021. Founded in 2016, Sublime is best known for its expansive line of high-potency, high-quality and affordable, Fuzzies branded pre-rolls, a leading brand of pre-rolls in the state of California, as well as vapes and roll-your-own flower kits.  Since 2019 Sublime has delivered a revenue CAGR of approximately 70% and ended 2020 with a 7.9% California pre-roll market share.

“This acquisition adds an iconic, award-winning California brand, with an exceptional product offering and consumer following, to our growing brand portfolio,” said Peter Bilodeau, Interim CEO of Harborside. “Harborside has been a customer of Sublime for many years and we know the quality of their products.  With the existing production capacity and soon to be completed upgrades at our Salinas cultivation facility, we are well-positioned to support the continued growth of the Sublime brands while expanding the reach of Harborside’s existing branded product portfolio in both the retail and wholesale markets, which we expect to ultimately drive increased profitability across our entire business. We’re very excited to continue to provide consumers with innovative, high-quality products while delivering strong value for our shareholders.  The company will issue new guidance in due course.”

Revenue Breakout

Harborside’s retail operations saw its net revenues drop 2% to approximately $10.0 million for the quarter. Gross margins improved from 51.3% to 55.0% on a year-over-year basis. The company said in a statement, “While retail revenue has been supported by improved in-store merchandising and a focus on selling more items that are produced in-house, it was hampered somewhat in Q1 2021 by decreased in-store foot traffic due to COVID-19 capacity restrictions in California, particularly in Alameda County.” On a positive note, Harborside’s retail stores branded products represented 5 of the top 10 selling SKUs in Q1 2021.

Harborside’s wholesale operations net revenues dropped 31% to $2.4 million for the quarter. The company attributed the decline to a lower-than-expected flower yield from Harborside’s cultivation/production facility in Salinas, California, which was caused by several factors, including a delay in completing the planned greenhouse capital improvements due to a COVID-19 related disruption in the supply chain for grow light fixtures; a weather event which damaged the roof over a portion of the flower canopy; and, a subsequent infestation of non-beneficial insects, which was addressed through implementing a more robust plan for how pests are managed. The aforementioned events affected harvests and limited the overall supply of sellable flower during the quarter.

Mr. Hawkins added, “With adult-use consumer sales officially underway at our San Leandro retail store, as well as a new, more conveniently located store expected to open in the second half of the year, and our strong pipeline of acquisition opportunities under review, we have built a strong foundation to accelerate our growth and drive strong value for our shareholders.”

Looking Ahead

In January 2021, Harborside announced that for the full year of 2021, it expects standalone gross revenues of between $68.0 to $72.0 million.  The anticipated increase in revenues for 2021 is expected to be derived from improved retail pricing combined with continued increases in both flower yields and processing efficiencies from the company’s wholesale operations.  In addition, the company said it expects an Adjusted EBITDA in the range of 15% to 17% of net revenues for 2021.  Management expects to attain this higher level of Adjusted EBITDA in 2021 through more efficient procurement of goods sold and stronger cost discipline on overhead spend.


Debra BorchardtApril 26, 2021
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Harborside Inc.  (OTCQX: HBORF)reported its financial results for the fourth quarter and full-year ending December 31, 2020. In the fourth quarter, Harborside delivered total gross revenues of approximately $13.1 million, which was a 12% increase versus 2019’s fourth-quarter revenues of $11.7 million. The company beat the average analyst estimates from Yahoo Finance which was for revenues of $12.4 million. The net loss per share was $0.14 for the fourth quarter, which was worse than the analyst estimate for a loss of $0.09 per share for the quarter. 

The operating loss in the quarter was approximately $5.4 million versus $43.6 million in 2019 for the same time period.  The net loss was approximately $5.4 million versus $45.0 million in 2019, an approximately 87.8% improvement on a year-over-year basis.

For the full year, 2020 gross revenues increased 29.4% to $63.4 million from approximately $49.0 million in 2019.  The net loss for fiscal year 2020 was $11.9 million versus 2019’s net loss of $49.4 million.

“2020 marked a turning point year for Harborside. Despite experiencing a pandemic, we worked hard to better serve our customers, improve and scale our cultivation operations,  increase the availability of our branded products and create a strong foundation for future growth,”  said Matt Hawkins, Chairman of Harborside. “The impact of our efforts is evident in our impressive full-year financial results, where we drove solid top-line revenue growth of 29% while actively managing our expenses and driving operating leverage throughout our business to expand our total gross margins to 47% and generate $7.4 million in Adjusted EBITDA in 2020.”

Mr. Hawkins added, “We have also ensured that Harborside has a strong balance sheet, successfully raising C$35.1 million and securing a $12 million revolving credit facility subsequent to year-end.  In addition, we have also started taking definitive action towards settling our preexisting 280E liabilities, which includes the recent 9th Circuit affirmation of the prior lower court ruling with respect to our appeal. We have already accounted for and reserved for these liabilities, and the ruling does not change the company’s plans to negotiate with the IRS.  We have both the resources and focus to execute on our California first growth strategy.”

During the fourth quarter, Harborside recorded an income tax expense of approximately $1.5 million, compared to approximately $0.7 million in 2019, based on estimated federal income taxes payable at each period-end.

Looking Ahead

In January 2021, Harborside had said that it expects standalone gross revenues of between $68.0 to $72.0 million in 2021. The company said that the anticipated increase in revenues for 2021 is expected to be derived from improved retail pricing along with continued increases in both flower yields and processing efficiencies from the company’s wholesale operations. In addition, the company said it expects an Adjusted EBITDA in the range of 15% to 17% of net revenues for 2021. Harborside said it expects to attain this higher level of Adjusted EBITDA in 2021 through more efficient procurement of goods sold and stronger cost discipline on overhead spend.

Harborside said that it plans to accomplish the following over the next year:
 expand its retail footprint throughout California;
 continue to increase the sell-through of in-house brands at Company-controlled retail stores;
 improve its cannabis production efficiencies and yields/manufacturing capabilities;
 expand the wholesale distribution of its branded consumer packaged goods throughout California;
 shift more of its wholesale sales from bulk cannabis products to branded packaged goods;
 increase the number of branded cannabis product offerings, including non-flower cannabis products; and
 create or acquire new California centric consumer brands.

Mr. Hawkins concluded, “We’re thrilled with the progress we have made and excited for the year ahead. With the initial cultivation upgrades at our Salinas production campus now complete, a recently strengthened balance sheet and a refreshed team of operators with deep industry experience at the helm, Harborside is well-positioned to accelerate our growth and continue to extend our leading position in the California cannabis market.”


StaffMarch 8, 2021
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California-based Harborside Inc. (OTC: HBORF) has completed a $5 million strategic investment in LPF JV, LLC otherwise known as Loudpack, through a 15%, secured convertible note due December 2022. Loudpack is a California-based cannabis company with a broad cultivation, manufacturing, processing, and distribution footprint. Loudpack’s brands include Kingpen, Loudpack, Dimebag, and Smokiez.

“We are focused on improving our profitability through implementing best-in-class, highly efficient production techniques, increasing the quality of our supply chain, and expanding our inhouse brands into manufactured products,” said Matthew Hawkins, Chairman of Harborside. “Through this capital investment, we have strengthened our partnership with Loudpack and will look to leverage their expertise as we explore opportunities to expand our cultivation, production, and distribution capabilities to improve the availability of our high-quality cannabis products for consumers across California.”

In addition to the funding, Harborside said it has engaged Loudpack to provide services aimed at identifying production efficiencies as well as improving harvest yields at the company’s cultivation facility located in Salinas, California. Loudpack will also be providing contract manufacturing services for a suite of Harborside branded products and Harborside will be increasing the availability of shelf space for Loudpack branded products at the company’s retail stores.

Marc Ravner, Chief Executive Officer at Loudpack, said, “As a pioneer and innovator with a strong reputation in the California cannabis market, Harborside’s capital investment is a great validation of the confidence they have in Loudpack’s team, technical production insight, and overall capabilities. We look forward to using the funds from this investment to scale our operations to better serve all of our customers across California.”


Debra BorchardtFebruary 18, 2021
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California-based cannabis company Harborside Inc.  (CSE: HBOR), (OTCQX: HBORF) has been fighting the IRS over tax payments related to IRC Section 280E, which
prohibits businesses engaged in the trafficking of controlled substances (including cannabis as specified in Schedule I of the FCSA) from deducting normal business expenses associated with the sale of cannabis.

The company announced that the United States Tax Court ruled in favor of the Commissioner of Internal Revenue with respect to Docket Nos. 12313-15,12353-15, and 15714-18 to disallow all of SJW’s deductions pursuant to I.R.C. sec. 280E for all the years at issue.  Harborside said in a statement that the accrued liabilities in connection with its SJW dispensary will now be less than the provision previously set aside. The SJW refers to San Jose Wellness which had two pending tax court cases.

“Since our new Board of Directors was seated on November 24 th, we have committed to resolving all 280e disputes with the IRS and more importantly, the end of federal prohibition,” said Matt Hawkins, Chairman of Harborside. “I’m encouraged to report that our provision more than accounts for the potential liability with respect to the Cases. Harborside has developed a strong reputation for providing high-quality products and retail experiences to the California market and will continue to support the legal cannabis industry.”

In a company filing, Harborside had noted that on September 30, 2020, the reserve for that tax payments totaled approximately $38.2 million (December 31, 2019 – $36.5 million), which was comprised of the tax liability of approximately $26.7 million, a sum which includes the separate tax proceedings described below, and accrued interest of approximately $11.5 million (December 31, 2019 – approximately $9.8 million).

San Jose Wellness

The first case involves the 2010, 2011, and 2012 tax years, and in this case, the IRS has asserted a tax deficiency of $2,120,215. The second case involves the 2014 and 2015 tax years. The IRS has asserted in the second case that SJW owes an additional $2,259,528 in tax and penalties. Both of these proceedings involve substantially the same issues as the PMACC cases. The first SJW case has been stayed before the U.S. Tax Court, pending the outcome of the above-described tax cases involving PMACC. The second SJW case is proceeding without trial and briefs are being submitted. The Company expects that ultimately the SJW cases will also be controlled by the outcome of the PMACC Ninth Circuit appeal proceedings.

“The Company, after consulting with outside counsel, believes that only its subsidiaries that are either cannabis license holders or are otherwise plant-touching are subject to IRC Section 280E. However, there is a general risk that the IRS could attempt to apply Section 280E to other subsidiaries of the Company, in which instance the tax liability of the Company could be greater. While the Company would contest such efforts, the outcome of any such litigation is unpredictable.”

280 E Issues

The problem with cannabis businesses being unable to claim typical business deductions is that it affects a company’s profits. Many of the central issues relating to the interpretation of Section 280E remain unsettled, and there are critical tax accounting issues regarding the allocation of expenses to the cost of goods sold (thus avoiding disallowance as deductions under Section 280E). IFRIC 23 – Uncertainty over Income Tax Treatments (“IFRIC 23”) provides guidance that adds to the requirements in IAS 12 – Income Taxes (“IAS 12”) by specifying how to reflect the effects of uncertainty in accounting for income taxes. The Company evaluated these uncertain tax treatments, using a probability-weighted approach to assess the range of possible outcomes as required in its adoption of IFRIC 23 and, although it strongly disagrees with the positions taken by the IRS and the findings of the Tax Court, the Company has determined that a reserve for an uncertain tax position should be recorded for all years subject to statutory review.


Debra BorchardtJanuary 20, 2021
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California-based cannabis company Harborside Inc. (CSE: HBOR), (OTCQX: HBORF) upsized its previously announced brokered private placement of units of the company at a price of C$2.55 per SVS Unit for gross proceeds of approximately C$27 million, representing an increase of C$7 million, due to excess demand.  The stock was lately selling near $2.22, which isn’t far from the company’s 52-week high of $2.40.

ATB Capital Markets and Beacon Securities Limited are co-lead agents to the offering. The company said it expects to use the net proceeds from the offering for general corporate and working capital purposes. The company said in a statement that it has granted the Agents an option to sell up to an additional 15% of the Units in the Offering, exercisable in whole or in part at any time prior to the closing of the Offering. As previously announced, Entourage Effect Capital, LLC, one of the largest shareholders of Harborside, is participating in the offering with approximately C$9.0 million in commitments.

C-Suite Changes

Harborside has been making some moves in the C-suite and the board lately. Last week, it was announced that Chief Operating Officer Greg Sutton stepped down from his position effective January 15, 2021. At the time Interim CEO Peter Bilodeau said, “On behalf of the whole team, I want to extend my heartfelt appreciation to Greg for his contributions and tireless efforts during his tenure with Harborside. We wish him the best in his future endeavors.” At the beginning of the month, the company announced that it and Steve DeAngelo were separating and that the company was eliminating the role of Chairman Emeritus, effective December 31, 2020.

At the time Steve DeAngelo said, “Harborside was founded on the principle of providing safe and affordable access to cannabis for those who require it. I’m proud of the immense work that has been completed to get us to where we are today and wish the very best for the company as it continues to grow. Moving forward, I will continue to focus on environmental, social and corporate governance (ESG) issues and opportunities in the legal cannabis industry.”

 


StaffJanuary 4, 2021
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Harborside Inc.’s (OTCQX: HBORF) Co-founder Steve DeAngelo is parting ways with the company as the company said it is eliminating the role of Chairman Emeritus, effective December 31, 2020. A longtime activist and strong advocate for the cannabis reform movement, Mr. DeAngelo co-founded Harborside in 2006 as a non-profit medical cannabis dispensary. Harborside was granted one of the first six medical cannabis licenses in the United States and was one of the first in the nation to support comprehensive cannabis education for seniors, veterans, and families with severely ill children.

DeAngelo said in a statement, “Harborside was founded on the principle of providing safe and affordable access to cannabis for those who require it. I’m proud of the immense work that has been completed to get us to where we are today and wish the very best for the Company as it continues to grow. Moving forward, I will continue to focus on environmental, social, and corporate governance (ESG) issues and opportunities in the legal cannabis industry”.

DeAngelo co-founded several iconic cannabis businesses and organizations including Harborside, Steep Hill Laboratory, the Arc View Group, the National Cannabis Industry Association, and the Last Prisoner Project. Steve’s creative projects include a book, The Cannabis Manifesto, and a Discovery Channel mini-series, Weed Wars. He was a lead organizer and fundraiser for I-59, Washington DC’s medical cannabis initiative, and is famed for his successful litigation against the Department of Justice (the “DOJ”), which halted DOJ’s last-ditch 2011 campaign to shut down California’s medical cannabis dispensaries.

However, long before Harborside was even a thought, DeAngelo joined the Youth International Party – also known as the Yippies as a young adult. He went on to become the lead organizer of the annual Fourth of July Smoke-In in D.C., carrying the position for a decade. DeAngelo graduated summa cum laude from the University of Maryland. He also opened a legendary D.C. counter-cultural gathering place that became known as a refuge for local cannabis and peace activists during the Reagan-Bush era, including William KunstlerWavy Gravy, and author Jack Herer.

Matt Hawkins, Chairman of Harborside, said, “On behalf of the Board, I’d like to thank Steve for his service to Harborside and for his history of activism in furtherance of building the robust, legal cannabis industry that exists today.”


StaffDecember 4, 2020
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Peter Bilodeau is a serial entrepreneur with extensive leadership experience across many sectors, including the cannabis industry, merchant and investment banking, retail, manufacturing, real estate, and oil & gas. He is President and CEO of Foundation Markets Inc. and FMI Capital Advisory Inc. Prior to launching his entrepreneurial career, Peter worked for one of Canada’s major chartered banks quickly advancing to the senior management ranks. Peter is a former real estate appraiser with extensive experience in various types of real property valuation. Mr. Bilodeau’s business prowess is frequently called upon through his finance and consulting business and as a member of the Board of Directors of several companies.

Full birth name: Peter Bilodeau

Title: Interim CEO

Company: Harborside Inc.

Years at current company: 1

Education profile: Peter has a Masters Degree in Business Administration, with a specialty in Financial Services, from Dalhousie University, Halifax, Nova Scotia, Canada.

Most successful professional accomplishment before cannabis:

Over the years, Peter has assisted multiple clients in various business sectors, including cannabis, retail, manufacturing, agriculture, and the resources sectors, with financing requirements as well as management and consulting mandates, often assisting in pushing companies past their operational roadblocks and helping them achieve their business goals. Most recently, Peter helped Quinsam Capital Corporation through their transition to a focus on cannabis, raising roughly $15M in financing and serving as President and director before resigning to dedicate his time fully to Harborside.

Company Mission:

Harborside’s mission is to be the preeminent retailer of cannabis products in the markets in which we serve by providing quality cannabis at affordable prices: quality, choice and trust. Since day one in 2006, we have taken pride in staying steadfast to our mission of taking an individual approach with each patient, providing them with knowledge, transparency and a variety of options to make the best decision for their own needs.

Company’s most successful achievement:

As one of the first six dispensaries in California, Harborside’s history is full of firsts and we are proud to be known as industry trailblazers. In 2019, we opened the first and only recreational drive-thru in California at our Desert Hot Springs location. We are also extremely proud of our Harborside Farms facilities in Salinas, where we cultivate our own quality-tested, craft cannabis for our in-house brands as well as others in the California market, allowing us to become a successful vertically integrated company and maximizing returns.
Our fourteen years of operations have been filled with multiple victories, not only for the company itself but also for the industry as a whole. One monumental industry win was our 2016 victory over the federal government, with the forfeiture of their five year-long attempts to seize Harborside’s leased premises in Oakland as part of their crackdown on the California medical marijuana industry.

Has the company raised any capital (yes or no): Yes

If so, how much?: Over several financings throughout the years, we have raised over USD $42M to date.

Any plans on raising capital in the future? We will announce more on this topic in the months ahead after a strategic review, which is currently underway, and the installment of our new board.

Most important company 5-year goal: Our goal is expansion across the board – from our California retail and wholesale footprints to our in-house brand presence and brand offerings. Ultimately, we want to maximize and reap the benefits of vertical integration and in turn, maximize our stakeholder value.


StaffOctober 13, 2020
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Harborside Inc. (OTCQX: HBORF) released preliminary unaudited third-quarter 2020 financial results for the period ending September 30, 2020 showing that gross revenue for the quarter is expected to exceed $18.5 million.  Net revenue for the quarter ending in June was $15.2 million with net losses of $1.7 million. 

The company did not release any information with regards to profits or losses. investors may need to be reminded that Harborside changed its ticker symbol from “HSDEF” to “HBORF” on the OTCQX market effective today October 7, 2020.

“I’m thrilled with the ongoing performance of our business and proud to have seen the whole Harborside team rally together this year,” said Peter Bilodeau, Chairman and Interim CEO of Harborside. “We have come a long way in just 9 months and today more than ever, we are well-positioned to take advantage of the opportunities ahead of us while continuing to provide our customers with the highest quality products and driving strong returns for our shareholders.”

The company said that growth in the quarter continues to be driven by improved harvest yields and production of premium flower varieties combined with higher sales volumes and higher average prices per pound of the company’s farm operation in Salinas, California combined with the strength of the company’s retail operations, where enhanced merchandising and pricing initiatives have resulted in, amongst other things, improved product mix, selected pricing changes and higher sell-through of internally produced products.

 


StaffJuly 30, 2020
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Editors Note: This story was written by Jackie Bryant.

Like everything else touched by COVID-19, unexpected trends and shifts have occurred in the cannabis industry. One such shift is towards consumers seeking value products, which are rising in popularity due to a reduction in work and income across many different industries as the COVID-19 crisis wears on. In particular, low price/high THC combinations seem to be the magic bullet for anyone shopping for cannabis on a budget. 

Canndescent, a brand that initially entered the market with a luxury-focus, recently launched the company’s third brand, Baker’s Cannabis Co. The brand offers lower-cost but still decent quality products, like $6 one-gram pre-rolled joints and $55 half-gram pre-ground pouches, which come equipped with rolling papers and crutches. 

Old Pal

The style echoes one of the original legal value cannabis brands, Old Pal, which began selling its pre-ground cannabis flower in similar packaging and has gained popularity for its surprisingly high-quality product despite being priced comparatively lower than others in the space.

“Quality weed at fair prices has always been in high demand,” says Rusty Wilenkin, CEO of Old Pal, noting that this isn’t exactly a specific-to-COVID trend. “Value at Old Pal means more than just perceived value of low cost, to us value is the best quality at fair prices. During COVID, we’ve seen steady demand from consumers for our products. The industry overall has felt disruption with changing and varying regulations for retail shopping state to state. And while this is not unique to the cannabis industry, with the industry being as young as it is, these changes have been even more demanding.”

Canndescent

“Consumers aren’t visiting dispensaries as often as before,” explains Canndescent’s CMO Sam Arellano regarding a specific buying trend that can be directly attributed to COVID. “When they do, they’re opting for cannabis in larger weight/sizes with strong value equations to carry them between visits. We’re experiencing this increase in demand with Baker’s Cannabis Co. Despite COVID-19, demand has been consistently strong and steadily growing as consumers come to trust Baker’s quality, price, and availability.”

Arellano continues, speaking to a very specific type of customer–people who genuinely use cannabis as part of their daily routine. So much of the cannabis industry revolves around the highest potency possible, which is expensive to cultivate and produce. Add in state and local taxes on top of dispensary mark-up, and suddenly, someone who was used to paying legacy market prices faces an incredible new sticker shock for something that is part of their everyday life.

“Beyond price, they care about efficacy, availability, and trust,” Arellano says of frequent users. “Trust that the cannabis they choose is free from pesticides and other harmful containments, grown responsibly by a cultivator they respect. Availability as in, always there when they want it. And efficacy as in quality product and consistent experience.”

Harborside

CEO Peter Bilodeau from Harborside (OTC: HSDEF) in Oakland also sees the low price/high THC correlation, but suggests there are other value trends afoot, too, and that rather than hunting for potency regardless of any other factors, buyers are instead settling on personal ratios of price to THC relative other factors. 

“For some, low price and high THC correlates to value,” he says, “but we still have a varied customer base that is looking for high quality, small-batch items, flavor, consistency, and a wide selection of strains/options. We think this is why people tend to shop for the sales items for the best deal versus only shopping for items that are consistently priced lower.” 

Overall, Bilodeau says, Harborside has seen an increase in customers shopping for their sales products as well as increased basket sizes.

In any industry, the value market has always been, well, invaluable to the success of most brands that don’t market themselves to be exclusively luxurious. In an age where inequality is rising and in an industry where inequality is always at the forefront of political issues, like cannabis is, it makes even more sense that value-marketing would become an increased priority for cannabis brands looking to corner the market. 

Now that cannabis has been deemed essential in many states, sweeping federal legalization is again being discussed and it appears that economic upheaval is here to stay, at least for a while, the market for value cannabis brands has never been brighter.

 


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