Will CRONOS GROUP INC COM NPV (OTCMKTS:PRMCF) Vertical Integration Strategy Lead To New Highs?

The news on the legalization of marijuana in Colorado took the world by storm, being the first state in the world’s greatest superpower to do so. The move had not only come to curb the effect of a rising opioid epidemic but also created a demand side for cannabis and its related products that remains ever-growing to date.Following this statement, there has been a proliferation of companies investing in the sector with the hope of having their share of the over $7.2 billion industry. Positioning and alignment for these companies has proved to be an uphill task. However, one company has taken upon itself to develop a strategy that they think will ensure they take over the industry in the near future.CRONOS GROUP INC COM NPV (OTCMKTS:PRMCF) is unlike your ordinary marijuana production and distribution company. The company has opted to move away from the traditional ‘produce and distribute’ mentality to a ‘diversification and vertical integration’ strategy where they acquire the best entities in an area or region and harness their prowess and knowledge-base to grow their revenues (as will be seen later). This strategy not only ensures efficiency in their operations but also guarantees quality for the demand side of the equation: their clients.Such foresight has had a great impression on their share price with the company closing at $2.50 on 20^th October, 25% higher than it did in April 2017. The chart below underscores this position: PRMCF Daily ChartDespite the great story above, for the sake of first time readers, it is important to go back and answer the question, who is PRMCF?PRMCF: An OverviewThe company was founded in 2012 and registered in Toronto, Canada. The company was previously known as PharmaCan Capital Corp until December 2014 when Hortican Corp completed a reverse takeover of the company, later necessitating the name change.PRMCF’s business has grown in two segments. The first segment is the business of investing in companies either licensed, or actively seeking a license, to produce medical marijuana pursuant to the Access to Cannabis for Medical Purposes Regulations, (“ACMPR”), which replaced the Marihuana for Medical Purposes Regulations (“MMPR”). The second segment is the operation and continued development of entities which are already licensed under the ACMPR.Their involvement in the second segment has led to them building on a strategy to be a geographically diversified and vertically integrated company, linking us to the introduction.Is their strategy worthwhile?The company aims at providing patients with compassionate and personalized care while creating an international iconic brand portfolio.For the latter, they have made significant investments that have since been beneficial to their financial position. PRMCF currently operates two wholly-owned licensed producers: Peace Natural Project Inc and In the Zone Produce Ltd. They have also made investments in other entities such as Whistler Medical Marijuana Company among others. However, given that In the Zone Produce Ltd was purchased in 2014, our main focus will be in the Peace Natural Project Inc and the other investments.Peace Natural Project Inc was acquired in September 2016 and has since then been the backbone of the revenues generated at PRMCF. With a portfolio of over 4,750 patients under their care, the company has amassed a huge client base from which to generate revenues into the future.The addition of companies such as Whistler Medical Marijuana Company among five other companies has been with the goal of harnessing already set structures in a bid to make them more efficient and generate revenues in the process. Such moves have benefited PRMCF with entities such as Whistler making them $313,390 in incomes over 2017.With the backdrop of legalization in the global market, Germany is the newest client of PRMCF with a five-year exclusive distribution agreement, Cronos' global subsidiaries will supply Peace Naturals branded cannabis products to Pohl-Boskamp for distribution within Germany. With over 82 million people and federal insurance coverage for cannabis, Germany is currently the largest legal cannabis market in the world.According to Mike Gorenstein, CEO of Cronos:

"We are ecstatic to partner with Pohl-Boskamp, an established and reputable pharmaceutical leader. This partnership allows us to leverage an existing industry leading pharmaceutical distribution channel to immediately create the world's largest medical cannabis distribution platform."

Source:Their entry into this market is a step in the right direction which, however, begs the question; do they have the financial muscle to handle such deals?FinancialsPRMCF has built its financial strength with their financial position standing stronger than ever in 2017. Their revenues were up 25% from $514,000 in 1Q2017 to $643,000 in 2Q17. During the same period, the company recorded a net income of $174,879. Its gains on investments stood at $1.3 million over the same quarter.Over this period, they also made a mortgage payment amounting to $4.0 million on an estate which they later used to acquire a loan of $40 million for the construction of 315,000 sqft expansion of their land for the increased output of cannabis. This is in line with the expected rise in demand for cannabis in Germany, one of the largest cannabis markets in the world.Finally, they also entered into a letter of engagement with PI Financial Corp. to purchase for re-sale 4.76 million common shares of the company on a "bought deal" basis pursuant to the filing of a short form prospectus, subject to all required regulatory approvals, at a price per Share of $3.15 for total gross proceeds of $15.75 million.The Company intends to use the net proceeds of the offering for general corporate purposes, to fund growth and to provide for possible future acquisitions.Ove the course of this analysis, it is clear that they have both the financial muscle as well as the professional management that enables them turn profits. The company is therefore poised for growth is this trend is maintained into the future.ConclusionPRMCF is a story of sustained growth that will continue to the future. It presents a great investment opportunity in the cannabis industry, which is growing rapidly worldwide.We will be updating our subscribers as soon as we know more. For the latest updates on PRMCF, sign up below!For the full story, check out our complete coverage on PRMCF.Image courtesy of GoToVan via FlickrDisclosure: We have no position in PRMCF and have not been compensated for this article.