2019-06-01_Market_Watch

JUNE 2019 | MARKETWATCHMAG.COM | MARKET WATCH 71

cial hemp production and sales passed in 2018, we realized that
we suddenly had a federally legal product. By spinning out our
hemp and CBD assets into their own company, we can now
raise institutional capital, go public, and get to scale quickly,
and we’re going to be able to sell at every channel. We
announced that spinoff at the beginning of the year, and now
we’re in the process of executing it.

SND: What’s the current state of play there?
Wallin: This year we already have 2,500 acres locked up
contractually with farmers, and they’re about to plant those
acres with our seeds. We’re buying $5 million worth of seeds
right now. That lets us track the whole process, if and when we
sell the extract to a bigger company. We think that’s a huge
advantage. The Targets and the Walmarts of the world don’t
necessarily want to put CBD from China on their shelves. We
have a huge differentiation with that visibility. CBD and other
cannabinoids are going to develop much faster than legal THC.
THC will catch up over time, because there’s more than just
the party aspect—there are medicinal benefits as well. We’re
just scratching the surface of all the possibilities.

SND: Is Vertical more focused on outdoor grows than green-
house grows compared to Canadian companies?
Wallin: For hemp, definitely. With 2,500 acres, we’re
talking about a massive amount of space dedicated to this.

We’re also doing big-time outdoor grows in California.

Santa Barbara County is the only county that removed the

cap on the number of licenses, so we have hundreds of

licenses that we’re able to use to grow outdoors. And

there’s something about sun-grown organic flower farmed

in the wine country of Santa Rita Hills in Santa Barbara;

from a marketing standpoint, that can win over a lot of

consumers, even though there isn’t as much control as

there is indoors. We can grow a pound of cannabis in our

outdoor grows for probably about $75. A greenhouse is

probably around $400, and an indoor grow is probably

$550, due to the infrastructure. The competitive landscape

and the scaling of brands is going to drive more and more

outdoor grows.

SND: How is the development of cannabis beverages

progressing?

Wallin: We’re partnering with some of the best flavor houses

in the beverage industry that I’ve worked with in the past,

focusing first on CBD. That’ll be first out of the chute for

us. We’ll have a variety of different beverages coming. On

the THC side, it’s more complicated, but we think if we can

get CBD right, we’ll get THC right too, concentrating on

products that are low-dose, fast-acting, have no calories, and

have an onset time similar to alcohol. That could eventually

be a multi-billion dollar category. mw

Vertical Companies is focused on producing and distributing cannabis, CBD, and hemp brands and products (above), rather than
becoming a retailer itself. Recently, the company spun off its CBD and hemp brands into a separate company, Vertical Wellness.