Cannabis is essential in California!
That statement may reflect the opinion of certain members of California society, but in actuality, at the start of the coronavirus pandemic in early March 2020 cannabis retailers were in fact declared an essential service industry by California state.
We were reminded of that in a video conference presentation in September done by CEO and Director, Andriyko Herchak, of FinCanna Capital Corp. (CSE: CALI | OTCQB: FNNZF). We were also reminded that California is the largest cannabis market in North America and in 2019, had legal sales of 21% of the global market – Canada was only 11%, the US was 61% and the rest of the world was only 7%.
Putting that into numbers, in 2019 the global market was $14.9 billion, with California representing $3.1 billion in legal cannabis sales, although black market sales are estimated to be double that number. According to the LA Times, licensed cannabis sales are projected to total US$7.2 billion by 2024, making California the global leader. Keep in mind that the state of California is the fifth largest economy in the world and has had legalized medical cannabis since 1996 with new laws that came into effect in January 2018 which significantly changed supply and demand dynamics.
Key success factors for the cannabis business – go to the biggest market, be the early entrant, keep your cost structure low and be the most profitable. Unfortunately, as many investors will attest, investing in cannabis has been a real challenge to navigate as capital intensive companies continue to lose money quarter after quarter. Recognizing this fact, FinCanna has a business model that is low cost, not capital intensive and is designed to be profitable.
FinCanna is first and foremost a capital company and their vision is to become the capital partner of choice for high growth, rapidly emerging private companies operating in the licensed U.S (California) cannabis industry. Management is focused on delivering high impact returns to its shareholders by way of a strategically diversified investment portfolio. They seek to invest in “best in class” businesses and align the interests of the existing company owner/operators with FinCanna shareholders.
This is done predominantly as a royalty company, which is perfectly designed for this business model. Management of FinCanna invests in various private cannabis industry companies that do not compete against each other – it could be said that they are complementary to each other in the overall cannabis market. So far, this strategy has worked well for FinCanna.