There has been a lot happening in the marijuana market over the last few months. Starting with the federal legalization of the product in Canada as well as the continued research going into the use of the drug for treatment of chronic diseases across the globe, marijuana presents the world with one of the strongest business cases. The drug is not only creating more opportunities for countries which adopt it but also opening up investment into industries which were traditionally quite defined and their business model clear.
One such industry is the beverage industry.
This segment is currently one of the largest in the cannabis segment and has been the reason for the venture of some of the largest firms’ entry into the market. According to Business Insider, CBD-infused beverages alone are expected to hit $260 million in sales and the industry is expected to hit $600 million by 2022 in the United States alone. As a result, towards the end of 2018, there were significant investments which went into this industry. First was the investment by Constellation Brands (NYSE:STZ) in Canopy Growth Corp (NYSE:CGC) which would see the beer manufacturer partner with the firm in the production of cannabis-infused beverages.
The result of such statistics coupled with the entry of Fortune 500 companies into this market has been the venture of smaller firms with the hope of capturing the associated market share. As such, firms like SIPP Industries Inc (OTCMKTS:SIPC) have begun producing cannabis-infused beverages in a bid to boost their revenue potential and eventually increase shareholder value and it has worked.
The past month has seen the firm’s share price rise drastically from lows of $.02 per share to their current price of $.077 per share, a 285% increase in their share price. Furthermore, their turnover has over the past few days rose to over 5 million shares per day, a significant number for the company.
Readers can review the above price action in the chart below:
The result has been a postulation to the market that the firm is actually making the right decision to venture into the above market segment. As a result, we opted to have a look at the firm’s decision and the product they have brought to the market so as to evaluate their present and future prospects.
History of SIPC
The firm was founded back in 1993 and is currently based in Costa Mesa, California. It operates as a conglomerate company which engages in technology as the distribution of consumer products – following their import and export. The firm’s primary focus has traditionally been in the provision of lighting solutions useful for indoor horticultural applications, however, they are currently venturing into the marijuana business specifically with an orientation to the cannabis-infused beverages.
Following the company’s decision to invest in the beverage segment, there has been a lot of regulatory ropes the firm has had to run. As at last week, however, SIPC skipped through the final step in the regulatory process which was the receipt of a permit from the Alcohol and Tobacco Tax and Trade Bureau (TTB) which would see them venture into the business segment. The result was that they finally decided on a product launch date for their new beer.
The beer dubbed Hemp IPA beer will provide the firm with the ability to grow their product line within this business segment. Presently, the firm is working through the process of crafting two beers: Hemp-infused Brown Ale and IPA beers which are to be sold to customers. Through this the firm is working at ensuring that they attract and hold on to some of the market share present in the hemp-infused beverage segment prior to other entrants coming in.
With the market standing at $600 million by 2020, the firm has a lot it is backing its fortunes on. Going forward, the firm is bound to venture into sales and marketing so as to ensure the public is aware of their product. Their brand is also a significant factor, especially when working within a market whereby their competitors are major players such as Coca-Cola. The President of the Major Hemp – SIPC’s wholly-owned subsidiary – Ted Jorgensen had this to say:
“…It is time for us to transition from formulation and package design to bolstering our sales and marketing department in order to maximize sales and distribution of Major Hemp H-IPA… With the challenging regulatory requirements of the alcohol and cannabis sectors behind us, our focus is now on growing sales and scaling our hemp infused beers”
With the latter in mind, the firm is sure to make their entry into this market significant and grow their market share significantly as well. Through this, their venture into the cannabis market as well as the beverage market is bound to pay off, ensuring that shareholder value is increased. As a result, it comes as no surprise when the firm’s share price rises as has. Going forward, therefore, higher price surges are expected from them.
There is a lot of benefits associated with the firm’s venture into the hemp-infused beverage market. As such, we expect the firm’s price to continue rising drastically thus remain bullish about the stock.
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Disclosure: We have no position in SIPC and have not been compensated for this article.
** The article has been changed to reflect that Coca-Cola has said they will not invest in cannabis-infused beverages.