I've been trying to find something less noticed in the hemp, CBD, and Nutraceutical space. I've already got a few Canadian names along with some MSOs, but now I'm adding another name to the list: Grove Inc (GRVI) .
This vertically integrated company came public only a few months ago so I won't be splashing a chart on the screen. It doesn't look that great on the daily front anyhow. What that means is someone should like the story here if they plan to scoop up some shares. And, maybe, consider legging into the position.
Unlike competitors, Grove began a multi-tier approach to its business operations from very early on. There are five components to this:
- Automated Low-Cost Manufacturing
- Wholesale Sales
- Private Label Offerings
- In-house Brands
- On-Site Fulfillment
This pertains to the hemp product and plant-based vitamin markets. And this is a strong and growing market, as evidenced by the company's financials.
Last month the company announced preliminary fourth quarter and full-year financial results. Management projects revenues between $10.1 million and $10.4 million, an increase of over 300% year-over-year. Even more impressive is the net income expectations of $1.5 million to $2 million, reversing a $700,000 loss from a year earlier. Full year net income in the range of $2 million to $2.5 million is a huge turnaround from a $5 million loss in 2020. That's what happens when revenue climbs from $7.4 million to approximately $23.75 million in a single year. These results even surpassed Grove's internal projections.
Furthermore, they invested in and own facilities that allow for automated production equipment. This creates the ability to produce consistent results, keep costs down, and produce in large capacities. All of this results in lower pricing abilities, which helps Grove compete in the wholesale markets. Additionally, Grove offers customers respected third party lab tests to assure quality. Trust matters as much as price. Pair that with a two day or less turnaround time on orders and you'll understand why revenues are growing so quickly.
Grove provides customers with the opportunity to private label CBD and Botanical offerings. They make formulations in all categories for clients. These creations add research and development fees to Grove's top line.
The company also organized CBD.io, the largest hemp convention in the world. I can't think of a better way to create leads and bring new business in the door. The best part about it is Grove gets paid to do so. From this, they can draw both revenue and transition clients to use the Grove platform. During COVID, the company expanded CBD.io into an online marketplace where its customers could sell their white label product and get help from Grove in multiples areas like creation, manufacturing, and selling.
Grove offers its own brands direct-to-consumer. Since they are vertically integrated there is no middleman to slow delivery or weigh on pricing. These brands include Qubes, CBD Infusionz, grn, and Zest. To compliment these, Grove recently acquired VitaMedica. This purchase opens up the enormous nutraceuticals market. VitaMedica sells multiple supplements in the nutraceuticals space, including:
- Health & Wellness
- Skin & Beauty
- Surgery & Recovery
This acquisition is immediately accretive to both the top and bottom line of the company. Put everything together and Grove caters to multiple market segments like Beauty, Pet Care, Botanical Health & Wellness, Rare Cannabinoids, and even trade shows.
The overall diversity of the revenue model paired with the vertical integration has me thinking this will be a double-digit stock by next summer. I'm a buyer.
