Creso Pharma stakes its claim of the multibillion US CBD market in landmark acquisition
Health & Biotech
Health & Biotech
Link copied to
The acquisition of Sierra Sage Herbs will propel Creso into the US CBD market, as it pursues further US and international footprints.
Cannabidiol (CBD) product sales in the US are already going gangbusters, and a new forecast predicts the market will grow exponentially into a US$12bn market in under five years.
While Congress continues to debate the bill to legalise pot federally, an inevitable process is rapidly underway, state by state.
And the Aussie medicinal cannabis play, Creso Pharma (ASX:CPH), has just made its move to enter the giant US CBD market via a strategic acquisition of a private company.
Creso announced the acquisition of CEO Jodi Scott’s US-based Sierra Sage Herbs (SSH), an all female founded US$5.7m per annum revenue CBD specialist boasting established sales channels across the US.
The up-front purchase price for SSH is US$21 million; with additional future payments based on SSH achieving US$10m of sales in 2022, and US$20m of sales in 2023.
Over the last decade, SSH has built a strong sales footprint in the US, with plant-based and CBD products under memorable brand names Green Goo, Southern Butter and goodgoo.
The plant-based Green Goo and Southern Butter product ranges are especially popular, and are currently sold across 90,000 distribution points across the US, stocked in key retailers like CVS, Walgreens, Whole Foods and Walmart.
This acquisition marks Creso’s maiden entry into the US, and is the first of several opportunities the company will pursue to grow its US footprint and international presence.
“The acquisition of Sierra Sage Herbs and the company’s product range is a major milestone for us,” says Creso Pharma Group CEO, William Lay.
“It marks entry into the US CBD market, and provides a strong foundation to rapidly scale up operations, product development and sales, as well as further M&A transactions,” he added.
Sierra Sage Herbs is already positioned as a leading consumer packaged goods company focused on plant-based and CBD products.
Its brands cater to a smart and broad niche in the CBD world – first aid, beauty, sexual wellness, women’s health, as well as the pet category.
Founded by Jodi Scott, who will join the Creso board as an executive director and president of US Operations, SSH has an established physical and ecommerce presence, with an online customer base of around 150,000.
SSH has grown its sales rapidly from US$4.7m in CY18, to over US$8m in CY20 and US$5.7m in CY21.
Creso says it can utilise its own in-house IP and leverage SSH’s supply chain and marketing expertise to drive sales of the CBD-based “goodgoo” product range in the US.
Creso also has plans to immediately scale up sales of SSH’s non-CBD product range, the Green Goo and Southern Butter, through its existing international partner channels.
“We intend to aggressively leverage these relationships and the group’s existing customer base by introducing them to Creso Pharma’s existing product suite for human health, animal health and sports and recovery,” Lay said.
Lay believes that Creso will greatly benefit from SSH’s existing revenue streams, and expects SSH’s sales to continue growing significantly in coming years – which he says will result in a material accretion for Creso.
To further leverage SSH’s established channels, Creso will be launching new product development initiatives including entry into the functional mushroom sector, a market expected to be worth around US$20bn by the end of the decade.
“Coupled with our existing sales channels, we have the potential to significantly grow our earnings profile,” Lay said.
SSH founder Jodi Scott also believes the new relationship with Creso will propel the SSH brand into new heights.
“This partnership with Creso will set the stage for accelerated growth across multiple categories,” Scott said.
SSH’s brands (Green Goo and Southern Butter) are plant-based portable first-aid and body care products, crafted using a proprietary lipid-infusion process rather than with pre-made extracts.
In 2020, SSH introduced a new range of CBD-based products under the “goodgo” brand, where full-spectrum hemp oil and CBD were added for additional health benefits.
Since founding in 2008, Scott has built SSH into a company with strong distribution and sales footprint in the US.
The company expects an additional 20,000 sales points to be added during Q1 of this year, on top of the 90,00 sales points it already has.
“This is just the beginning,” Scott said.
“Together (with Creso), we will be able to expand portfolios and make synergistic acquisitions in even more meaningful ways,” she said.
This article was developed in collaboration with Creso Pharma, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.