Having worked for an integrated cannabis grower/processor/packager/retailer I've done some thinking and research on comparable business models among publicly traded companies. Cannabis is vertically integrated to a higher degree than most other industries.
Imagine a banana company that has locations to sell bananas. An agricultural producer, a retailer and some varying degree of processing and packaging in between. As far as I can tell Chiquita doesn't do as much of that, nor does Dole, Del Monte, Driscoll Berries, Diamond Nuts, Altria, Phillip Morris, Heineken or many others. Maybe some small brewers lean in this direction. Maybe some retailers own farms or production facilities, I'm not sure.
Crimson Wine Group is one interesting company I found.
From Scottrade, which I'm pretty sure uses some subscription level of S&P Capital IQ data and information:
Crimson Wine Group, Ltd. owns and operates boutique, estate-based wineries that produce wines in the wine growing regions of California, Oregon and Washington. The Company operates through two segments: Wholesale Sales and Direct to Consumer Sales. The Wholesale Sales segment includes all sales through a third party where prices are given at a wholesale rate whereas Direct to Consumer Sales segment includes retail sales in the tasting room, remote sites and at on-site events, Wine Club sales, and other sales made directly to the consumer without the use of an intermediary. The company through its subsidiaries owns four wineries: Pine Ridge Vineyards, Archery Summit, Chamisal Vineyards and Seghesio Family Vineyards.
They are growing grapes, processing them then selling wine. That is what we did at the company I worked for, but with a different crop and market.
Crimson does sell a lot of wine wholesale to distributors across the world, but a not insignificant amount of revenue is from direct to consumer retail/tasting room locations and wine clubs.
If you care to see it although it's not on weed, here is a link to the most recent 10-K for Crimson.
Crimson holds northern California, Oregon and Washington wine acreage, and was spun off from conglomerate Leucadia. Leucadia has a fundamental investing and insurance culture. Ian Cumming, a builder of Leucadia, still owns a high single digit percentage of the shares of Crimson. There has been major consolidation in the wine, beer and spirits industry and many would be comps are part of multi-billion dollar drinks firms. Crimson's stock is currently trading right around book value, but looks expensive compared to recent financial performance. About $205 million market cap, with roughly $16 million in debt.
Thinking about beautiful California wine country got me thinking about my trips up to Sonoma during graduate school in SF, cannabis/wine tourism and B&B's. We usually stayed with my wife's uncle, sleeping in a tent outside in the dense Redwood forest of northern Sonoma, on the coast near Fort Ross. You can smell the outdoor cannabis and see the farms as you stroll around in the right areas. Usually, it was no B&B for my wife and I. One time we drove up for a night and stayed at a great little B&B, it was quite memorable. Some family was visiting Napa from Chicago, so it gave us a reason to splurge.
The Mary Jane Group is now pursuing this market for cannabis tourists in Colorado. After being inspired by fond memories, Mary Jane's Colorado B&B business will be the topic of my next post.
One last thing, just because I find it useful, is a piece by McKinsey that breaks down vertical integration of industries and companies. I like using it as a framework to think about the cannabis industry. Perhaps in a future post I'll explore that further.
Disclosure: I have owned shares in Crimson Wine Group since last August and Heineken ADR's since 2011. I do not own stock in Mary Jane Group. You can see my portfolio as of the middle last month here. I'm not a very active trader.
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