With up to $20 million in financing secured, 1606 Corp is staking out its footprint in the booming cannabidiol (CBD) market through its acquisition-led strategy.
A spin-off from SinglePoint Inc (OTCQB:SING), 1606 has positioned itself to benefit from the growing demand for CBD commodities in the United States with its diverse portfolio of CBD products.
The CBD market, valued at US$9.1 billion in 2021, is expected to reach US$59.3 billion by 2030 at an 18.2% compound annual growth rate during the forecast period of 2022 to 2030, according to a report by Market Research Future.
More than a quarter of Americans (26%) used CBD in 2022, according to the Center for Advancing Health, with recent studies projecting a surge in 2023 as high as 10% year-over-year.
1606 CEO Greg Lambrecht told Proactive that “CBD is here to stay,” noting that demand was skyrocketing for CBD products ranging from sleep aides to topical products such as roll-on CBD for bumps and bruises.
“The predictions for CBD are hockey stick growth,” he said.
Lambrecht, who also founded SinglePoint, brings to 1606 a track record of successfully developing startups, including leading consumer product distribution company PCI through a NASDAQ initial public offering (IPO) that raised $10 million.
Consolidating the fragmented CBD market
1606 believes it has an advantage over its rivals because, through its acquisition-led strategy, it can generate more revenues than a company solely focused on its operations.
In February 2023, 1606 announced it had entered into an equity financing agreement with GHS Investments for up to $20 million for the purpose of acquiring CBD businesses.
The Phoenix, Arizona-based company is looking to take over existing CBD brands that can be distributed though physical retail locations or online, but not manufacturers or growers of hemp.
“We are focused on companies that are selling CBD products, so we can try to grow those companies,” Lambrecht said.
He told Proactive that there were a lot of good acquisition opportunities out there, with many companies created around the time the Hemp Farming Act of 2018 rescheduled CBD from a Schedule I controlled substance to an ordinary agricultural commodity now looking for either a cash injection or an exit strategy.
1606’s aim is to consolidate the fragmented CBD market by bringing some of these CBD brands together under the company’s umbrella.
“Our ultimate goal is to acquire these companies and get significant revenues and move up to a higher [stock] exchange,” Lambrecht said.
“We’re having no problems finding deals and we’re in conversations with four companies about an acquisition.”
Signature smokable hemp product
1606’s in-house product is a tobacco- and nicotine-free smokable hemp product called CBD Singlez. When smoked, it provides the consumer with the same effect as other CBD products such as a capsule or gummy, Lambrecht said.
In the wake of the US Food and Drug Administration’s 2020 ban on certain flavored e-cigarette products that appeal to children, such as fruit and mint, and its proposed ban on menthol cigarettes and flavored cigars, there is a significant market opportunity for smokable hemp.
As such, 1606’s CBD Singlez (which come in original, mango, and menthol flavors) has become a popular product for consumers who are attempting to quit smoking, the company’s CEO said citing feedback and testimonials from users.
“For a lot of people, it’s the up and down [smoking movement] that they’ve got used to over the years, but instead [with CBD Singlez] it’s with a hemp cigarette which is a lot better for you than nicotine and not addictive,” Lambrecht said.
“It’s an excellent way of quitting smoking.”
In March 2023, 1606 added 45 CBD products across a range of categories, including gummies and topicals, to its line-up with the company’s purchase of a majority stake in CBD product developer and distributor Brio Nutrition.
With the completion of its acquisition of a 51% stake in the company, 1606 gained access to Brio’s distribution channels for cross-marketing its existing products.
Brio’s revenue was about $760,000 in 2021, with 1606 expecting this number to grow significantly with the acquisition now completed.
A proven strategy
The company commenced trading on the OTC Market on January 17, 2023, under the ticker symbol ‘CBDW’, and in February became Depository Trust Company (DTC) eligible.
And in the short time the company has been trading, 1606 has already proven its strategy of boosting its revenues through acquisitions is a winner.
Lambrecht said the company went from no revenue to about $1 million in annual revenue in just two months with the acquisition of Brio Nutrition.
“Since we started trading, we’ve already acquired one company and we’re talking to four more,” Lambrecht told Proactive.
Just days after finalizing its acquisition of Brio in early March 2023, 1606 revealed it has signed a definitive letter of understanding to purchase 51% of India-based nutraceutical company Sanctum Herbal Corp for $7.2 million in cash and stock.
The deal is expected to close soon, pending an inspection of Sanctum’s facilities, and bring 1606 another step closer to fulfilling the listing requirements of a national exchange.
“Hopefully, at the end of the year we will be doing $10 million or $20 million in revenues,” Lambrecht told Proactive.
“It’s like we’d started to crawl and now we’re starting to walk, and pretty soon we’ll be starting to run.”