Sugarmade, Inc. (SGMD)

Sugarmade, Inc. (SGMD) is a product and brand marketing company investing in operations and technologies with disruptive potential, especially in cannabis. Headquartered in Monrovia, California, the company is recognizing new opportunities in the cannabis delivery space. After close analysis of the evolving market, Sugarmade has broadened its focus to embrace promising emerging industries.

Growth Strategy

Recognizing new investment and operational opportunities within California’s cannabis market, Sugarmade is strategizing to take advantage of strong opportunities in delivery services (non-storefront retailer), manufacturing via co-branding, and selective genetic cultivation. The company is taking a highly selective approach, targeting only the best of these opportunities for company growth.

In line with this strategy is northern California delivery service Budcars, in which Sugarmade owns a 40% interest. Budcars connects consumers with premium products sourced from top-tier farms and extractors, offering a curated menu of fully compliant cannabis products. The company maintains a competitive advantage by sourcing premium cannabis offerings within a two-hour delivery window. By maintaining its own cars, California licenses, and its own fulfillment center while orderings its premium products in bulk at lower prices, Budcars can rein in costs and commit to maintaining competitive prices for its customers. Currently serving major communities within the metropolitan area of Sacramento, Budcars plans to continue expansion of the company’s delivery reach.

Sugarmade plans to continue its expansion into burgeoning new sectors of the cannabis market through the following avenues:

  • Geographic expansion of Budcars delivery scope
  • New delivery geographies
  • Cannabis cultivation as a key component of a hybrid vertical integration strategy
  • Product technology expansion—including products containing exotic and lesser-known cannabinoids

Diversified Portfolio

Sugarmade has various business operations in diverse marketplaces, including packaging and paper goods for various industries, and agricultural supplies. The company entered the industrial hemp and CBD space by investing in Hempistry, Inc., a privately held Nevada corporation. Hempistry began planting an ultra-high cannabidiol (CBD) industrial hemp strain on a land option it holds on 23,000 acres of prime Kentucky farmland. The strain of industrial hemp being grown by Hempistry is ultra-rich in CBD but contains less than 0.3 percent of THC, the psychoactive ingredient found in cannabis.

Sugarmade’s portfolio also includes the ZenHydro.com and CarryOutSupplies.com brands. Sugarmade has completed a master market agreement with industry leader BizRight Hydroponics Inc., a leading marketer and manufacturer of cannabis and hydroponic growth supplies, including: HPS grow lights, electronic ballasts, HPS bulbs, nutrient mixes, environmental control products, pH measurement and calibration solutions and storage products. BizRight operates ZenHydro.com and other e-commerce properties and sells various products to distributors and retailers.

CarryOutSupplies.com, the leader in paper and plastic take-out supplies, serves nationwide customers by offering a wide array of high-quality products that are cost-efficient, custom-made and delivered on time. This business unit currently serves 2,000 quick service restaurants, garnering from 30-40% of the market share. Sugarmade plans to expand operations via the addition of market share and the introduction of new product offerings.

Market Opportunity

The global industrial hemp market size was estimated at USD 4.71 billion in 2019 and is expected to register a revenue-based CAGR of 15.8% over the forecast period of 2016-2027, according to Grandview Research. Market growth drivers include the 2018 Farm Bill and society’s increasing knowledge of the benefits of hemp products.

Sugarmade’s investment into the market for high-CBD hemp is expected to be highly accretive for common shareholders in two ways. First, Sugarmade’s investment will be in the form of common shares in Hempistry, allowing Sugarmade common shareholders to possibly benefit from any future initial public offering of Hempistry. Second, Sugarmade is expected to sign a supply agreement with Hempistry for cultivation supplies, which would be additive to corporate revenues.

Management

CEO Jimmy Chan is an experienced business executive instrumental in growing multiple business operations with a strong expertise in international trade and banking, and international manufacturing and importation. He is also the founder of CarryOutSupplies.com, a company that revolutionized the custom-printed paper supplies subsector of the quick service restaurant industry, which merged with Sugarmade in 2014.

Dedicated to getting the highest caliber of THC and CBD to its customers’ door, the company’s priority is to ensure that they receive the highest quality cannabis product free from logistical hassles. Sugarmade specializes in growing and acquiring innovative brands to maximize value for company employees, shareholders and other stakeholders. Sugarmade believes its future is very bright as the company expands operations within the cultivation sector and rapidly increases its revenue base.

Sugarmade, Inc. Website