Earlier this month, Kaival Brands (OTCQB: KAVL), the exclusive global distributor of products manufactured by Bidi Vapor, LLC, announced the expectations for FY 2021 are to exceed a staggering $400 Million in revenues. These are NASDAQ caliber company numbers and what makes it even more impressive, the company is less than a year old. Kaival Brands commenced business operations in March of 2020 and has been growing month over month and quarter over quarter ever since. Ok, we do not have 400 million reasons why we are bullish on KAVL, but the explosive growth and projected revenues make this a rare JEWEL not JUUL in OTC land.
- Exclusive global distributor of Bidi Vapor product line
- Agreements with Circle K, Fas Mart and 7-11’s
- Captured 27.9% of the market share in December of 2020
- Added Morgan Lewis and Spencer Stuart to Assist with Rapid Growth
So, Kaival Brands Innovations Group, Inc. is focused on growing and incubating innovative profitable products into dominant brands such as “Bidi Vapor” for their respective share markets. Their team of industry experts have created safe and high-quality products, designed with the user in mind and have set higher standards that transform perceptions and elevate adult consumers’ experience in the Vape world. They have put together an expanding distribution network across the U.S. for the quality Bidi Vapor product line.
Product Line and Distribution
Bidi Vapor’s primary offering, the Bidi® Stick, is one of the fastest-growing closed system vaping product in the U.S. The tamper-resistant Bidi® Stick is also the only vape product on the market with an ecologically friendly, mass-recycling program. Kaival Brands also recently launched the Bidi™ Pouch by Bidi Vapor, a tobacco-free nicotine pouch. Pouches are the alternative to chewing tobacco, also known as “dipping”.
The Bidi Pouch was engineered to provide a premium smokeless nicotine experience to its users and is made from a tobacco-free nicotine formulation packed into an on-the-go pouch. Worldwide, the nicotine-pouch sector is projected to grow to $3.35 billion by 2025, up from $637.8 million in 2019, according to Market Study Report, LLC. The category has continued to explode recently, with New York-based Nielsen reporting an increase in unit sales of 498% in U.S. convenience stores over the 24 weeks ending May 30, 2020. The pouches will add tremendous growth, the Bidi Stick also has numbers that do not disappoint.
New Goldman Sachs Equity Research data for December solidifies the explosive growth for the company where U.S. based retail sales for the last 12-week period showed a 907.9% increase in sales during the same period ending December 26, resulting in now a 27.9% market share in calendar fourth quarter. This accumulates to an additional 16.7% market share grab in less than 3 months.
Kaival Brands has established a strong wholesale-distribution network for Bidi Vapor’s premium product line. Bidi Vapor continues to expand its partnerships with nationally recognized convenience retail chains such as Circle K and Fas Mart. Pending inventory ramp up, the company has positioned itself for rollout in more than 10,000 more partner locations within the quarters. With its existing distribution network from the Bidi Stick, the company is hoping to capitalize on the product launch of a new line of smokeless tobacco products that can capture this unique submarket. With this network already in place, additional new product lines can be rolled out quickly and effortlessly adding new sales revenue to the bottom line.
“We have enjoyed tremendous revenue growth in a rapid fashion. We are now in a position to build the appropriate infrastructure to match our current and aspirational revenue targets.” – Niraj Patel CEO
It’s safe to say it’s always a compliment if someone is copying you, as this is the case with imposter products already circulating through the smokeless community. The official Bidi Stick is a superior product and the image above diagrams 4 ways in which a consumer can verify they are not buying a counterfeit product but rather a Bidi Vapor’s premium stick.
Management has taken quick action and on December 11, 2020, a federal judge in the Southern District of New York granted a temporary restraining order and asset freeze against 24 defendants—most based overseas in China—selling counterfeit Bidi-branded products through the wholesale website, DHGate.com. The federal lawsuit is a part of Bidi Vapor’s comprehensive, anti-counterfeit program designed to combat the sale of counterfeit and infringing products. Through the robust program, the company aims to help create a more responsible marketplace consisting of high-quality, authentic products.
Even with the additional competition, remember, KAVL still has taken that 27.9% market share and is on the winning side of lawsuits unlike its competition like JUUL, who has faced major challenges in the smokeless industry.
Competitor JUUL and LAWSUITS
JUUL has had a tough year and as of July 22, 2020, there were 758 Juul lawsuits from around the United States combined in multidistrict litigation (MDL), MDL-2913. Many lawsuits claim Juul’s marketing targets minors, and the company denies this.
“We have never marketed to youth and do not want any non-nicotine users to try our products,” Juul Labs spokesperson Ted Kwong told VICE. “These suits largely copy and paste unfounded allegations previously raised in other lawsuits, which we have been actively contesting for over a year. These cases are without merit, and we will defend our mission throughout this process.”
The cases represented both class action lawsuits and individual personal injury cases filed in four states. The litigation is expected to continue growing.
Whether this is true or not, Bidi Vapor goes after marketing a premium product that is sleek, made of quality light-weight aluminum and delivers a consistent puff. The focus is on the product and CEO Niraj Patel is passionate about vape education and underage usage. No one under the age of 21 should use nicotine in any form. We only distribute the product to certified manufacturers. They also uphold the same age restriction standards to our partners and suppliers.
JUUL lawsuits, besides underage high school users, there have been wrongful death allegations and one of which JUUL sold 1 million contaminated pods. Early on, JUUL e-cigarettes were dispensing 2-5x more nicotine than other e-cigarette companies according to Professor Robert K. Jackler and Researcher Divya Ramamurthi, Stanford University.
The company has had its growing pains whether things were done intentionally or not, they were the predecessors in the industry. Kaival Brands and Bidi Vapor have come along and are taking this sector by storm, learning what not to do from companies like JUUL before them. With the growing market share, they must be doing something right, and the market was ripe for the taking with JUUL having a black eye in the space.
Management – Jan 13th Event
Kaival Brands is led by Nirajkumar Patel who is a young energetic 35 years old. He attended AISSMS College of Pharmacy in Pune, India, and received a Bachelor of Science Degree in Pharmacy in 2004. After moving to the United States in 2005, Niraj finished his master’s degree in Chemistry from Florida Institute of Technology and earned a Six Sigma Black Belt Certification.
Niraj recently presented at the Inflection Partners Growth Conference on January 13, 2021 and further discussed the drivers behind the robust growth profile in the ENDS sector. This was a great opportunity for the company to show the investment community what Kaival Brands is all about and what in store for 2021.
Niraj sees much potential in synthetic nicotine, which led him to establish Kaival Labs. The science behind the patent has discovered that the S-isomer controls the addictive qualities, whereas the R-isomer controls the beneficial attributes of the nicotine that a user enjoys. This patent’s uniqueness is that it allows Kaival Labs to control the levels of each isomer in the final synthetic nicotine molecule it produces. Some of these nicotine products are patches, lozenges, gums, vape sticks, e-liquids, and more, which are still useful and satisfying for the user but free from nicotine’s addictive traits.
Mr. Patel knows that billions of smokers and tobacco users worldwide are looking for an answer and a real solution to their nicotine addiction problems. Niraj imagines a world with patent-protected products, either approved pharmaceutically or made available over the counter that offer a way to truly ease users from their addictive cravings for nicotine without losing any of their accustomed benefits. Through Kaival Labs, he channels this passion for developing these innovative patents and bringing effective, enjoyable smoking cessation products to an expanding market, helping all nicotine users lead healthier and higher-quality lives.
Eric Mosser, age 41, is Niraj’s right hand man. He attended Arizona University and studied Business Management. He then graduated from Rio Salado College with an associate degree in Applied Science in Computer Technology in 2004.
The team has seen rapid growth so very quickly, they just announced the additions of Morgan Lewis and Spencer Stuart. Morgan Lewis, who have more than two thousand attorneys worldwide, will make available sophisticated and experienced legal counsel that will help enable Kaival to improve its workflow and meet legal needs that will expand as the company grows and takes on a greater presence in the public markets. Additionally, Spencer Stuart, a leading executive search and leadership advisory firm, will provide Kaival with the ability to build and enhance high-performing, senior-level teams.
With KAVL floating in the $0.70 range, we feel it is undervalued based on basic valuation of if the company has projections to do $400 million in revenues this year, with an outstanding share structure of 277M, the simple formula of trading at 1x sales would be approx. $1.44/share. Being that there is tech involved in the products that are sold, mixed with the growing market share and rate of sales increase, one can argue assessing them at a much higher multiple such as 3x sales which would equate to $4.32/share.
Investors need to realize this is a future NASDAQ company in the making. Increasing resellers for distribution, future additions to the product line, or an expansion in territory will all create a recipe for even bigger success.
The Goldman Sachs’ Equity Research Report now shows the Bidi® Stick by Bidi Vapor is the largest disposable electronic nicotine delivery system (“ENDS”) offering in the U.S. based on December’s retail sales. If you like this space, KAVL is a must-own in your portfolio and even if you do not, one still has to be impressed with how fast this company has grown in such a short period of time.
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Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. This article was written by a guest contributor and solely reflects his opinions.