Early projections were announced in early January that Kaival Brands (OTCMKTS: KAVL) could do $400-$450M in revenues for 2021, but we feel the company is being very conservative and that the electronic vaping company could flirt with that magic $1 billion in sales milestone by year end. In a short period of time, Kaival Brands and Bidi® Stick have become synonymous with excellence and premier product offerings within the ENDS industry. Another segment of business is how their increase in distribution, along with the roll out of their smokeless pouches will be synonymous with sales growth.
Right now, as we speak, the company has increased their potential distribution network by an impressive 440% in just 3 short months by going from nearly 10,000 stores to a potential network of 54,000 stores. Our stretch that the company could actually do $1 billion in sales requires a little math, but it’s as simple as this. If they did $100 million with 10,000 stores, then 54,000 stores would equal $540 million right? But let’s not stop there, the company as of 2/1/2021 is shipping bidi pouches so stores are potentially ordering 2x the amount of product from Kaival so $540m x 2 = $1.08 billion. Sure, there are plenty of “what ifs” but then again we are not even factoring in the increase of product sales month over month from new and repeat buyers becoming more familiar with the bidi brand. One store owner tracking his sales showed the progress of averaging 3 sticks a week to 5, then 7 and now 11 bidi sticks per week as repeat business picks up. The company also knows that the more convenience stores that sell their brand, the more self-advertising and easily consumable for customers to be repeat buyers knowing they can purchase them at multiple stores rather than primarily Circle K and 7-Eleven as in 2020. The last “what if” we want to mention is… do you honestly believe management is stopping at 54,000 stores? Of course not, the team will be aiming to achieve an even larger distribution network and we are not even factoring potential territory expansion outside of the U.S. or additional smokeless products or flavors brought to market.
Kaival Brands – Recap of 2021
The company was able to produce $100 million in revenues for 2020, impressive stats for a company that began in March of the previous year. Although the company is confident it can achieve $400-$450M in revs for the year, we optimistically speculate those numbers have a potential to break $1 billion in sales.
On Jan. 12, 2021, the company retained both Morgan Lewis and Spencer Stuart. The Company believes that these engagements will allow them to continue its expansion and assist in reaching its next iterative stage of growth. Morgan Lewis’ scale and global capabilities (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.
On Jan. 20, 2021, the company’s legal counsel, Morgan Lewis & Bockius, began the process to “up-list” Kaival Brand shares of common stock from the OTC Markets Group Inc.’s OTCQB® Venture Market to The Nasdaq Capital Market. Kaival Brand’s expanded distribution, corporate strategy and premium product offering has led to significant growth and getting on the NASDAQ Market would open the doors to a new tier of investors.
Smokeless Pouches announced late January just started shipping February 1st. This new product offering enables the company to sell an additional product to its network essentially doubling their sales. The company’s counter displays are set up to accommodate both the bidi sticks and the new smokeless pouches making it easy for the store owner to display and ultimately sell bidi’s quality products. A recent Market Study report indicates the nicotine pouch market is expected to grow to more than $3 billion in revenues by 2025, up from $637.8 million in 2019.
February 3rd, the company landed the 4th largest convenience store distributor H.T. Hackney which brings a massive network of nearly 25,000 point of sales locations. Hackney’s first order of Bidi® Sticks shipped on January 28. Following that order, Hackney can now begin to distribute the Bidi® Stick throughout its distribution network in 22 states in the eastern U.S.
On Feb. 24, 2021, Bidi® Vapor, LLC, announced it received a Premarket Tobacco Product Application (PMTA) filing letter from the U.S. Food and Drug Administration (FDA) for its family of disposable e-cigarettes called Bidi® Stick, which comes in 11 flavor varieties. The Filing Letter was the last hurdle before advancing to the final phase of the PMTA process, the Substantive Review. Bidi Vapor has now successfully completed the first and second step of the process, initially submitting its PMTA on September 8, 2020, a day before the official deadline. On February 9, 2021, the company received an acceptance letter from the FDA, which was the first step. Now having received the filing letter, the application has met the Agency’s baseline criteria to move onto the third and final phase, called the “substantive” or “scientific review” portion of the PMTA process.
The next day, Feb. 25th, Kaival announced it had landed 3 new distributors: 1) Smoker Friendly International, an industry-leading tobacco-shop chain; 2) Avail Vapor LLC, a 12-state vape-store network (tobacco behemoth Altria recently became a minority owner); and 3) Hilmes Distributing, a large Midwest wholesaler. These three additional distribution agreements push the potential store count for Bidi Vapor products to over 46,000.
The company did not stop there as they added 2 additional distribution agreement partners a week later. On March 1, 2021, Kaival welcomed Imperial Trading with a network in the South, Southeast and Midwest and 2) Chambers & Owen with a network throughout the Midwest. These two new agreements boost the potential store count for Bidi Vapor products to over 54,000 stores.
As you can see, a very encouraging first 10 weeks to the 2021 year.
The Road Ahead in 2021 and Beyond
The remainder of 2021 looks very bright if the start of the year gives us a telltale sign of what is to come. Many shareholders look forward to the company achieving a Nasdaq up-listing. This means it met a threshold of $4+, a nice price gain from current levels, and a confirmation the company does not need to reverse split the stock in order to qualify. With bidi Pouch sales starting to contribute to revenues numbers, year over year and quarter over quarter numbers should continue to show impressive growth and increase market share among its competition. Investors would continue to welcome future announcements of increased distribution networks and expansion into new territories or countries as they will only result in beefier sales numbers.
The company is not shy and communicates consistently with its shareholder base. There were 5 press releases issued in both January and February of this year and 2 so far in March with expectations of another 3 in the remaining 3 weeks of the month. Publicly, the company has little to no competition other than RLX Technologies (NYSE:RLX), a Chinese based vaping company that has seen more than 800% sales growth in 2019 and 81% sales growth in 2020. With such a massive sales growth, RLX is expensive at 17x forward sales. With that, the company claims to offer unique technological advancements, which I don’t actually believe. In my opinion, the growth of the e-vapor industry in China and massive market expenditures are the main drivers of the company’s success story. We mention RLX because KAVL is trading less than 2x forward sales, creating the argument that Kaival is not garnering any respect in the industry and is extremely undervalued or RLX is a bit overvalued. Needless to say, the risk vs. reward is very low, and feel it’s just a matter of time before analysts on the street realize the potential for big future gains.
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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.