Cronos Group (CRON) has been one of the best performing large-cap stocks in the cannabis sector despite having a very small production capacity next to competitors of similar size. Cronos is expected to produce between 110,000 and 120,000 kg per year by 2020. Cronos has done a fantastic job with strategic partnerships that are sometimes more valuable than just production capacity alone, and this brings us to the age-old saying: quality over quantity.
Cronos received a massive 2.4 billion-dollar (CAD) investment from the Altria late last year which sent the stock on a massive run from $13 to over $30 per share. This was big tobacco’s first large scale investment into the cannabis sector and many still believe that Cronos holds a massive advantage over their competitors due to the simple fact that they have Altria and its highly reputable brands backing up the company now.
A lot of us that follow or invest in Cronos already know this, but it’s always great to revisit past accomplishments to gauge if the company is on track and setting themselves up for the future. We all know that the market sometimes cares more about the future so what is Cronos up to right now that could have a positive impact on their share price and make them one stock worth buying today?
A Strategic New Hire Could Open Huge Doors
On Tuesday, July 9th Cronos announced it has hired Dr. Todd Abraham as Chief Innovation Officer. Dr. Abraham has worked for Nabisco, Pillsbury and more notably Mondelez in the past. Mondelez is a massive corporation that has a long list of highly successful consumer brands under their belt from Cadbury to Oreo’s. Dr. Abraham worked at Mondelez for 17 years prior to joining the Cronos and surely has deep ties in the company. This not only caused a jump in shares of Cronos but high speculation that Cronos plans to enter the consumer-packaged goods market in the future. This market is virtually untapped and could prove to be highly profitable with the right partnerships in place. Abraham will be working on research and development when it comes to consumer-packaged goods for Cronos.
Cronos Wants To Be Different
This is a perfect example of how Cronos is using strategic hires and potential strategic partnerships to set themselves apart from their competition. Investors put too much emphasis on production capacity and not enough on valuable connections. This is where Cronos excels when it comes to its competition. They are also preparing to enter the CBD market in the United States as the market is set to explode and become a multi-billion dollar industry in just a few years. Their strategic partnership with Altria in America will more than likely give Cronos an advantage when sourcing hemp for CBD extraction. With this partnership in place, Cronos can use Altria’s distribution network and presence in over 250,000 stores to move their product when they see fit. Moreover, Cronos has a global footprint that spans across five continents with plans to build out its proposed global network via strategic partnerships and joint ventures.
When it comes to picking a cannabis company to invest in, there are so many options nowadays and we have seen many companies promise a lot and not deliver when the time comes. Like any growth industry, there are visionaries in the form of CEO’s promising that their companies are going to be industry leaders and make many millionaires rich. When we look at Cronos, we like the company for a few solid reasons. First off, Cronos is not showing as much emphasis on the Canadian recreational market as other companies, they are building a global network that we feel will be more lucrative in the future and will reward patient investors. Second, Cronos has already attracted one of the industry leaders in the tobacco business in the form of their massive 2.4 billion dollar investment, which is an accomplishment in itself, and paves the way for an immense distribution network that other competitors do not have when looking at the US market. Third, we like the fact that Cronos is making strategic hires and putting emphasis on markets like the consumer-packaged goods market, which will be a multi-billion-dollar opportunity if the US legalizes cannabis federally. These are some of the main reasons we think Cronos is worth looking at if you can stop comparing production capacity and look outside the box.
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Disclosure: No position.
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