There's more to the cannabis industry than just the plants themselves.
It's a lesson made crystal clear by Kush Bottles Inc. (KSHB) , a small-cap, Santa Ana, California-based company carving out a name for itself in a market that's just getting started.
The company was founded in 2010 to service a burgeoning cannabis industry on the West Coast. Last year, Kush grew to over $18.8 million in revenue.
It's touted as a sales and distribution platform offering products and services for businesses and consumers in the cannabis market. But it's really a "one-stop-shop for all things ancillary," said CEO and co-founder Nick Kovacevich in an interview with TheStreet.
The company goes as far upstream as growers, but never touches the cannabis plant itself. While its bread and butter is child-safe packaging for cannabis products, Kush also develops labels, accessories, vapes, pipes and more, plus offers its sagacity in regulatory and brand design areas. In seven years, it's sold over 100 million units and now services more than 4,000 legal cannabis entities.
But its 100% year-over-year growth goal hasn't come easily.
"It's extremely difficult to grow a business in the cannabis industry," Kovacevich said. Even when the company doesn't come close to touching, let alone growing, cannabis plants, there's a stigma that can make the simplest tasks, such as finding a bank, more difficult.
"It's two steps forward and one step back in this industry," Kovacevich added.
Despite that, Kush has impressively kept its nose to the grindstone. Kovacevich's aim is to focus on smart business practices and do things the right way, and not get caught up in the hype of a growing cannabis sector.
"We are able to participate in every transaction...without touching the plant," he said.
Kovacevich makes a point to highlight the scalability of Kush Bottles. For example, the business operates on Oracle Corp. (ORCL) - Get Report cloud products -- it's not small potatoes, and it's got the tech-forward infrastructure to grow beyond its small-cap label.
Kovacevich said Kush's growth comes from a number of converging factors. First, the market for cannabis and cannabis-related products or services has grown immensely. New Frontier Data estimated the industry could grow to $24 billion by 2025.
Kush Bottles also aims to a diverse business portfolio. It's not just Kovacevich peddling rolling papers -- he's capitalized on a corner of the business that not many others have.
That's because according to the State of California Assembly Bill 110, which becomes law Jan. 1, all cannabis packaging must be certified child-resistant. Before the bill, Kovacevich said Kush was competing with ZipLoc and brown bags. Now that there's regulation, his business could become the leader in a newly regulated, fully legal market.
When the company started up, legal marijuana was a "very clandestine" industry, Kovacevich said. There was risk involved in marketing yourself, because if you got caught, you could easily become the scapegoat for a far broader group involved in the very same business.
Now that's all changed.
29 states and the District of Columbia have some sort of law legalizing cannabis in varying degrees. In an October Gallup poll, 64% of respondents said they thought marijuana should be made legal.
"When public opinion reaches a certain tipping point, policy is sure to follow," Kovacevich noted.
And with an estimated $1 billion in tax revenue about to roll into California from legal cannabis sales, it's sure, Kovacevich said, "to be a wake up call."
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