California is already the world’s biggest and most important market for cannabis.
The wealth being generated is immense.
In his most recent budget, California Governor Gavin Newsom has forecast his state would generate $288 million in cannabis sales tax in 2019 and $359 million in 2020.
And that is before full Federal legalization.
Once Federal legalization happens, which now seems inevitable following a recent historic Congressional Committee vote, growth in the Golden State’s cannabis sector is set to rocket.
Fortunes will be made here.
The trick now is to pick the likely winners in this unstoppable Green Rush.
One firm that is positioning itself to ride the Great Cannabis Wave is Halo Labs Inc. (OTCQX: AGEEF, NEO: HALO).
Building a world-class business
As every operator in the cannabis space already knows, if you don’t have a seat at the Californian table then you will never be a serious global player.
Already a bulk distillate and concentrate player in California, Halo has been pursuing an ambitious, well-executed growth plan to secure its exciting future.
Using a strategy known as “vertical integration”, Halo unites its strong position in the market and robust balance sheet with a winning leadership team.
The mix is potent and has turned Halo into a hungry predator, hunting down valuable acquisitions at astonishing prices.
But what is “vertical integration” and why does it make so much commercial sense?
Vertical integration is the key to Californian success
“Vertical integration” is a tried and tested strategy, adopted by some of the world’s most successful high-growth firms.
The goal is to take complete control of a supply chain, from the production of raw materials all the way to the manufacture of products, and ending with their final sale and distribution to the end user. This is usually achieved by buying other businesses.
The combination can be incredibly powerful.
By building a full, vertically integrated business, a company can expect to sell much more product and realize far higher profit margins.
After all, the successful vertical integrator can guarantee quality and delivery of supply in ways its competitors can’t.
This is especially true for the cannabis sector, where consistent quality of product is vitally important.
Halo’s management team recognized this early and has used this as the single most important guiding principle in building the company.
The Emerald Triangle, the cannabis breadbasket
Located in Northern California and stretching into Southern Oregon, the Emerald Triangle is one of the most ideal locations on the planet for growing cannabis.
The hot, dry summers combined with cold rainy winters, latitude, elevation, and UVB (ultraviolet b-rays) light, make the climate perfect for cannabis cultivation.
It is no wonder this region has been at the forefront of the push for global legalization.
In fact, the marijuana industry was practically born in Mendocino County when Wavey Gravey established his commune in the late 1960s; such is the consistency of strains grown locally.
This is why Halo has focussed so much attention on its Northern California vertical integration strategy.
Having secured cannabis facilities at Cathedral City in Southern California in early 2019, Halo turned its attention north.
In August 2019 the firm announced its proposed acquisition of 17.5% of Ukiah Ventures, a cannabis distribution, processing and manufacturing company. The deal, which Halo will pay for in stock, will allow it to directly dry, trim, package, freeze and store its cannabis.
This is a crucial aspect of Halo’s long-term vision, as it means the company can process its biomass locally, incurring less transportation costs.
Next, on 25 November, Halo executed on an agreement to merge Mendo Distribution and Transportation into its organization for US$4.75 million. Again, Halo will pay for this deal using its stock.
Based in Ukiah, Mendo Distribution and Transportation is an established, licensed cannabis distributor, with the ability to assemble manufactured products and infuse edibles through a management arrangement.
Not only will this deal significantly increase Halo’s reach across the Emerald Triangle, it will also mean the company can extend its product lines and move into the edible cannabis business in California.
Given the close proximity of the new operations to the Bay Area and Sacramento, two of California’s largest markets for sales, this deal has the potential to add increase Halo’s revenue significantly by the end of 2020.
And that’s not all.
This is only the second step in Halo’s acquisition spree.
With over $19 million in working capital and the ability to buy companies using its stock, Halo is perfectly positioned to continue its quest to become California’s leading vertically integrated cannabis company.
Expect to see much more activity on this front over the coming months.
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