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Australian industrial hemp and medicinal cannabis company Elixinol (ASX: EXL) saw its revenue fall by 31 per cent quarter-on-quarter in the first three months of 2019, but the group has bounced back in April with a major US retail order.
As the country's largest listed cannabis outfit with a market capitalisation of $639 million, Elixinol's $8.2 million revenue result is still up 21 per cent year-on-year while the company has $27.4 million in cash.
The company notched record sales in the US from Black Friday and Cyber Monday activity, but the strategic withdrawal from private label services ultimately impacted the bottom line for the period.
This is reportedly all part of a bigger plan however, as by reducing focus on the low-margin private label business in the US Elixinol believes it will build capacity for future growth.
The first signs of this approach appear to be making headway already this month following an order from one of the largest 'bricks and mortar' retailers in the US for 13 hemp-derived Elixinol-branded cannabinoid (CBD) topical and dietary supplement products.
Shipping will start in April with 330 stores initially before an expected rollout to more than 1,000 across the retail chain's national network.
Elixinol notes the distribution deal was secured through its partnership with independent natural and organic food broker Presence Marketing, which has access to more than 15,000 retail stores across its client base and will allocate a network of more than 100 sales representatives to gain shelf placement for the CBD range.
In parallel, Elixinol has enlisted PR and analytics agency Multiply to assist with its brand development in the US, where retail groups have been opening shelf space to the CBD and hemp sector after the passage of the 2018 US Farm Bill which federally legalised hemp-extract products.
"In the US, we are experiencing strong interest from national retailers to stock our products on the back of growing consumer demand," says Elixinol CEO Paul Benhaim.
"We are very excited to receive our first order from one of the largest national retailers in the US."
"It's a historic time to be participating in this rapidly growing industry as CBD pushes into global mainstream channels."
Elsewhere the company has secured a promotional partnership agreement with Cambrian Alliance Group in the UK, which has more than 1,200 member pharmacies, and a purchase order has been received for distribution to a popular UK high-end retail chain.
The company claims conversations are also underway with leading distributors and chains in Europe, while Japan continues to provide significant export opportunities as the industry matures
"We have continued to diversify our business across a variety of channels and made significant investments into a number of key geographies globally, including strong headway in Europe," says Benhaim.
"The positive movement in legislation across industrial hemp markets, in combination with our own investment into top line growth during the March quarter, underpins EXL's objective of becoming a global leader of CBD consumer products."
He adds the company remains very confident in its future growth strategy as it continues to diversify its branded product mix with a focus on national retail sales, while the board has also made some new appointments.
"To assist with the Company's growth, we are excited to have the expertise of Greg Ellery join the EXL Board and expansion of our global executive team with Stratos [Karousos] stepping down from the Board to become Chief Commercial and Legal Officer," he says.
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