Healthcare

Creso enters US market after buying Denver-based Sierra Sage Herbs

Thu 03 Feb 22, 3:06pm (AEST)
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This article was written in collaboration with Creso Pharma
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Key Points

  • US market to grow to US$12bn in value by 2026
  • Creso buys Denver-based Sierra Sage Herbs (SSH) for US$21m
  • SSH acquisition to help expand portfolios and deliver synergies

Creso Pharma (Creso) intends to leverage SSH’s established footprint, relationships with large retail groups and consumers as a platform to introduce its CBD product suite to US consumers.

Following the acquisition of Colorado based consumer packaged goods company, Sierra Sage Herbs, LLC (“SSH”) (www.sierrasageherbs.com), global medicinal cannabis innovator, Creso Pharma (ASX: CPH) today announced its maiden entry into the lucrative US market.

Already one of the world’s largest and fastest growing markets, Creso expects the US market to grow to US$12bn in value by 2026.

Known for its range of CBD-based products under the ‘goodgoo’(www.goodgoo.com) brand, Denver-based Sierra Sage Herbs was founded in 2008, and last year segmented ‘Southern Butter’ as a stand-alone brand in the sexual wellness category.

Upscale

The acquisition of SSH for US$21m provides Creso with the company’s established product suite of plant-based and CBD products generating strong revenues, plus an existing 90,000 points of sale (POS).

The company’s [SSH] 150,000-plus direct to consumer relationships in the US include major retailers like: Army & Air Force Exchange Service, CVS, Walgreens, Rite Aid, The Kroger Family of Companies, Whole Foods, Walmart, AmazonUS and Target.com amongst others.

SSH expects to add an additional 20,000 POS with key retailers over the coming months, hence providing Creso with a significant opportunity to further scale sales growth.

SSH CEO and co-founder, Jodi Scott – who now acts as executive director and President of US Operations - believes the partnership with Creso sets the stage for accelerated growth across multiple categories.

“Together, we will be able to expand portfolios and make synergistic acquisitions in even more meaningful ways,” said Scott.

 

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Growing earnings profile

Commenting on the acquisition, Creso’s group CEO and managing director, William Lay noted that SSH’s existing revenue streams, coupled with existing sales channels gives the Sydney-based company the potential to significantly grow earnings in the near term.

While SSH witnessed a slight decrease during 2021, recording US$5.7m in unaudited gross revenue, the company demonstrated clear confidence in the revenue growth profile by agreeing to structure the purchase price for the transaction with significant earn out milestones.

As a result, there are additional future payments based on SSH achieving up to US$10m of revenue in 2022 and up to US$20m of revenue in 2023.

“The acquisition of Sierra Sage Herbs and the company’s product range is a major milestone for Creso. 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,” said Lay.

“We intend to aggressively leverage these relationships and the group’s existing customer base by introducing them to Creso’s existing product suite for human health, animal health and sports and recovery."

 

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Goodgoo ramp-up

By leveraging the group’s existing in-house marketing expertise, brand recognition, US market knowledge and sales capability, Creso plans to aggressively accelerate the broader launch of goodgoo products in the US.

The Company will utilise SSH’s relationships with established retail partners, alongside its existing direct-to-consumer customer base to scale operations.

But beyond the US, Creso reminds investors that the company has built a large base of international partners, spanning Europe, Africa, Latin America and Asia Pacific.

While many of these groups have previously been unable to sell the company’s products, due to regulation around CBD, the acquisition of Green Goo - which has a proven non-CBD product range – means Creso will be able to leverage its relationships to drive sales growth.

New product development

Creso expects the successful marketing of its sport CBD brand products, ImpACTIVE, through SSH’s existing channels, to result in strong uptake and relationships with large retail groups.

In addition, Creso plans to utilise one of SSH’s manufacturing partners for ImpACTIVE products, hence lowering lead time on orders and more favourable minimum order quantities compared to the company’s existing relationships.

DISCLAIMER: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. Creso Pharma Ltd was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice. Consider consulting a qualified financial adviser before making an investment decision.

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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