KushCo Holdings Inc. and Terra Tech Corp. are not just blowing smoke in the cannabis industry.
Their sales are soaring, as evidenced by taking two of the top three spots among the fastest-growing public companies on the Business Journal’s annual list ranking small companies under $100 million in sales.
KushCo, which moved its headquarters from Santa Ana to Garden Grove in July, placed first in the category, reporting $40.8 million in annual sales for the period ended June 30, a 452% increase from two years prior.
“We’re in a growth industry, and we’re growing faster than the industry,” Chief Executive Nick Kovacevich said.
“We’re servicing our clients very well. We’re very sticky. We’ve differentiated our offerings. We’re selling more products to our clients. We are first-movers in many markets.”
Irvine-based Terra Tech is in third place on the list with sales of $38.5 million, a 149% increase from two years earlier.
“It’s predominately retail” driving the growth, Chief Executive Derek Peterson said, saying the company has expanded from four stores a year ago to seven. It also plans to open three new stores in Santa Ana.
The sales boom was undoubtedly aided by the legalization of marijuana in states like Nevada and California. And with Canada legalizing the weed this month, there are more possibilities.
Powerful Strain Namesake
Kush, named after a particular strain of marijuana known in the industry for its potency, was founded in 2010 by Kovacevich and Dallas Imbimbo.
It’s best known for supplying bottles that adhere to consumer safety regulations, such as pot being stored in child-proof containers.
It’s also expanded to supplying cartridges for vaping. In August, it started Kush Energy, a unit to supply solvents and hydrocarbons, which are essential in the extraction process for the production of products including oils, edibles and waxes.
The bottles and vaping cartridges each supply about 45% of its sales, while Kush Energy brings in another 10%.
“They’re all growing in unison,” Kovacevich said. “It’s so exciting.”
Kush went public in 2016 when it began trading at $2. Since then, it’s fallen as low as $1 and eventually soared to as high as $8.51 last January. As of press time, it hovered around $5.55 with a $434 million market cap.
Some analysts are projecting the company will generate $90 million in sales in fiscal 2019; Kovacevich is hopeful to top $100 million.
To expand marketing capabilities, Kush purchased a creative agency in June in Santa Rosa, which its press release described as “the gateway to the Emerald Triangle.”
It’s opened offices and warehouses in Toronto, Las Vegas and Worcester, Mass., while expanding its Denver facility. It plans to open another distribution facility in the Bay Area city of Hayward and is eyeing possible facilities in Michigan and Illinois.
The company has expanded from 40,000 square feet of warehouse space two years ago to 200,000 square feet now. It will grow further to around 300,000 square feet within six months, Kovacevich said. “Our story is making strategic acquisitions to diversify, but it’s really organic growth.”
Terra Tech, Again
Also founded in 2010, Terra Tech has appeared on the fastest-growing public companies list three of the past four years.
It operates medical marijuana retail and adult-use dispensaries under the name Blüm, which provides a selection of medical and adult-use cannabis products, such as flowers, concentrates and edibles.
It has a popular brand IVXX, the Roman numeral for 420 and a slang term for marijuana usage.
The company has decided to focus on the California market because it’s so large, and expansion elsewhere requires much infrastructure, Peterson said. It’s bolstering its wholesale unit, having bought a 100,000-square-foot facility for $20 million in Santa Ana, he said.
It’s expanding into beverages by selling drinks laced with principal psychoactive ingredient THC, tetrahydrocannabinol. The drinks, which supposedly don’t taste like marijuana, will be introduced next year with flavors such as champagne, margarita and sparkling lemonade.
“It will be a big growth driver—a lot of people don’t want to smoke,” he said. “Beverages is a natural kind of thing. People love their drinks. If we can socialize it, it will be similar to the alcoholic industry. That’s why the beverage industry is so concerned.”
While revenue is climbing, so are expenses. For example, it reported second-quarter sales of $8.7 million and a loss of $11.3 million, mostly because of higher salaries, new employees, stock compensation and a new accounting system.
“This industry is like the Amazon model,” Peterson said. “Everyone is running a gigantic loss. Everyone is focused on building market share. The profitability will come into play once there is saturation and the federal laws” are changed.
