Although COVID-19 has negatively impacted the global economy, some industries have recorded strong growth during these challenging times. Due to much of the market confusion, we have been working to identify those industries that are best positioned to survive a prolonged slowdown.
The cannabis industry is considered to be an area of opportunity and we are favorable on how the market has held up during COVID-19. From infused products to cultivators, we have noticed some pockets of opportunity in the cannabis sector and believe that, it is an industry to be focused on.
During the last two months, there has been a spike in the level of traffic at dispensaries in Colorado. We have communicated with operators in other US cannabis markets and have received positive data points related to the delivery market. We are impressed with how businesses have been able to adapt and want to highlight a company that we are excited about.
The cannabis sector has changed a lot over the last two years and our readers need to be aware of this. Investors need to be cautious and focus on companies that are well capitalized, led by a management team with a proven track record, have a sound financial structure, act in the best interests of shareholders, and continue to execute on business initiatives.
HYTN is a business that meets and exceeds these criteria. HYTN is a leading cannabis brand, focused on the cannabidiol (CBD) and tetrahydrocannabinol (THC) beverage market; in addition to edibles and topicals. We believe the company represents an attractive investment as it possesses the right traits and continues to execute on initiatives.
HYTN Possesses the Necessary Business Traits for Success
We believe that HYTN is a business that has substantial catalysts for growth and is an opportunity that is expected to be a major beneficiary of the “Cannabis 2.0 market”. The company has secured strategic agreements with several leading Canadian distributors and will start shipping its product in the coming months.
So far this year, we have seen a substantial increase in the number of cannabis infused product brands. This makes it more important than ever for a company to be able to differentiate itself from the competition. With regard to edibles and drinkables, one of the most important aspects of a product is related to the amount of time it takes to feel its effects.
Differentiation is an area where HYTN has been able to excel and we are favorable on the amount of time that was spent on developing a premium product. One of the ways that HYTN has been able to differentiate its product line is through the development of proprietary emulsion technology that allows the consumer to rapidly feel the effects of the cannabinoids. The technology is expected to make HYTN’s products have an onset time (and per unit dosage) similar to that of alcohol and we find this to be significant, as the HYTN is positioned as a recreational beverage in the fast growing RTD (ready to drink) product category.
We are bullish on how HYTN has been able to reduce the amount of time to feel the effects of THC. The amount of time that it takes to feel the effects of an edible or drinkable is a common consumer complaint and we are favorable on how that HYTN has approached this issue. Over the long term, we expect the emulsion technology to play a key role in how the product line gains traction and we are favorable on the growth profile that is associated with the business.
The Management Team is Building a Brand that is Built to Last
Based on how the business has evolved, it is easy to understand that HYTN is led by a management team that has significant experience in the cannabis industry. The management team has put the necessary pieces in place for growth and we expect this to support the performance of the business.
HYTN’s management team is comprised of executives that have significant experience in the consumer packaged goods (CPG) and beverage space. The team has been focused on developing unique product formulations and we are favorable on how they have been able to drive the story forward.
One of the core pillars of our thesis on HYTN is the existing sales channels and the relationships that are in place. This has been a major focal point for the business and HYTN has secured strategic relationships with liquor distribution branches and leading cannabis retailers in Canada. Currently, HYTN can co-package product out of British Columbia (produces up to 10 million products per year and provides R&D and lab services) and Nova Scotia (produces up to 7 million products per year and can scale to 26 million).
Through a three-phase strategy, HYTN is expected to become a leading brand in Canada and is an opportunity to be aware of. With regard to the strategy, we have highlighted the phases below and will monitor how the management team is able to drive the story forward:
- Phase 1 – The initial phase includes the production of cannabis infused beverages
- Phase 2 – The second phase is related to the launch of an edibles product line and represents a major growth opportunity for the business
- Phase 3 – The final phase is focused on the launch of a CBD product line that can be sold over the counter and at participating pharmacies
A Growth Story to be Following
Going forward, we believe that HYTN represents an attractive play on the Canadian cannabis 2.0 market and is well positioned to capitalize on a burgeoning market. There is no clear leader in the cannabis 2.0 market and this puts HYTN in a great position to capture market share. From the packaging to the emulsion technology, HYTN is a brand that we expect to be a major beneficiary of the growth of the cannabis industry and is an opportunity to be aware of.
Previously, we have seen large acquisitions in the beverage space and think that the HYTN management team is bringing the business down a similar path. In 2007, Coca-Cola purchased Glaceau’s VitaminWater for more than $4 billion and the beverage giant has kept an eye on the cannabis industry. In late-2018, Coca-Cola met with Aurora Cannabis Inc. (ACB.TO) (ACB) and expressed interest in CBD beverages. We believe that HYTN has developed a premium product that is differentiated from its peers and expect to see beverage giants like Coca-Cola express interest in the business over the long-term.
Later this year, HYTN expects to complete a go-public transaction and is a private opportunity that we are bullish on. If you are interested in learning more about the cannabis beverage company, please send an email to email@example.com to be added to our distribution list.