The Midwest: The Next Cannabis Frontier

The West Coast has become the de facto capital of cannabis in the United States, but there are signs that voters across the country are ready to replace prohibition with responsible regulation. With the legalization of recreational cannabis in Illinois and Michigan, midwestern states are finally starting to feel the pressure to take action, particularly given cannabis’ potential to address budget shortfalls stemming from the COVID-19 pandemic.

Let’s take a closer look at what makes Illinois and Michigan compelling cannabis markets and how investors can participate in the region’s growth.

Illinois

Illinois is the sixth largest state in the country and home to Chicago—the third largest city in the country after New York and Los Angeles. On January 1, 2020, the state legalized recreational cannabis for adults over 21 years old. Under the new law, residents can purchase recreational marijuana from licensed retailers and possess up to 30 grams of cannabis flower, five grams of concentrate and 500mg worth of THC edibles.

During the first four months of the year, Illinois recorded nearly $150 million in recreational cannabis sales. These numbers would have been significantly higher if it weren’t for supply challenges, including delays in awarding 75 new licenses to dispensaries due to the COVID-19 pandemic, especially given the soaring demand during the pandemic.

Illinois sales could reach nearly $700 million this year, according to BDS Analytics, and it could become the largest state-wide legalization after California. The sheer size and lack of nearby states with recreational legalization in place has made it attractive to multi-state operators, including Red White & Bloom Brands Inc. (CSE: RWB) (RWBYF), Green Thumb Industries Inc. (GTBIF) and Cresco Labs Inc. (CRLBF).

Click here to learn more about investing in a large Midwest cannabis producer

Michigan

Michigan is the tenth largest state in the country. On December 1, 2019, the state legalized recreational cannabis for adults over 21 years old. Residents can purchase recreational marijuana from licensed retailers and possess up to 2.5 ounces of marijuana at any time or up to ten ounces at home. In addition to cannabis flower, the state permits edibles, tinctures, capsules, lotions, pre-rolls and extracts.

The state’s home cultivation laws are some of the most liberal in the country, permitting up to 12 plants per residence—an amount capable of producing several pounds of dried cannabis. However, it’s commercial cannabis laws are more restrictive with only 20% of individual communities opting to permit recreational marijuana sales within their borders.

Cannabis sales in Michigan hit nearly $110 million during July 2020, according to the Michigan Marijuana Regulatory Agency, representing an annualized rate of $1.3 billion. These sales levels could put the state on par with states like Colorado that are regularly generating billions of dollars in sales each year, along with hundreds of millions of dollars in annual tax revenue.

Investing in the Midwest

There are several cannabis companies with a presence in the Midwest, but few have most of their assets focused in the region. Red White & Bloom Brands Inc. (CSE: RWB) (CWBYF) has become one of the best plays on growth in Illinois and Michigan while still providing exposure to other state markets and select international markets.

In Michigan, RWB has more than 40 licenses and 23 individual facilities across the entire cannabis value chain, including ten dispensaries and five cultivation facilities. These facilities are strategically located in limited license cities like Detroit where it operates ten percent of all dispensaries. With over one million sq. ft. of indoor/outdoor cultivation space, the company has access to high-quality supply.

In Illinois, RWB has built the world’s largest CBD greenhouse, consisting of 3.6 million sq. ft. of licensed space capable of producing up to 600,000 pounds per year. The first offtake agreement for API COC CBD distillate is in excess of $25 million for 2020. Management is looking for ways to license the facility for THC production for up to one million sq. ft. of cultivation space.

In total, the company plans to operate 35 dispensaries by the end of the year along with 468,000 sq. ft. of operating cultivation and 3.6 million sq. ft. of CBD cultivation. The company is operating at a $100 million revenue run rate, but projects that it will reach $166 million in revenue in 2020 with $57.5 million in EBITDA by the end of this year.

The company recently announced that it would upsize its previously announced bought deal to $25 million in conjunction with a syndicate of underwriters co-led by PI Financial and Eight Capital. The deal involves 29 million units priced at $0.75 a piece along with an option to purchase an additional 4.35 million units (overallotment).

Click here to learn more about investing in a large Midwest cannabis producer

Looking Ahead

The Midwest has become the next frontier for the cannabis industry with the legalization of recreational maraijuana in Illinois and Michigan. Investors looking for exposure to the region may want to consider Red White & Bloom Brands Inc. (CSE: RWB) (RWBYF) given its exposure in both states along with Massachusetts, and soon, Florida and California, as well as its $25 million capital raise that provides it with a fresh infusion of funding to execute its plans.

To learn more, visit the company’s website or download their investor presentation.

Disclaimer

The above article is sponsored content. CannabisFN.com and CFN Media, have been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation: http://www.cannabisfn.com/legal-disclaimer/

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.