DALLAS, TX / ACCESSWIRE / February 11, 2021 / Imperium Group's Shazir Mucklai had a chat with TAAT this past week.
In a world where re-invented consumer packaged goods (CPG) of perceived unhealthy or environmentally harmful products are all the rage, TAAT Lifestyle & Wellness (CNSX:TAAT)(OTCQB:TOBAF) is attempting to forge its own niche. By introducing a hemp-based substitute that mimics the experience of a traditional tobacco cigarette, the company is hoping steal market share from Big Tobacco, as well as grow sales organically.
TAAT cigarettes are formulated from a house blend of CBD-containing hemp called Beyond Tobacco™. Hemp is blended with patented ingredients and refined in such a way as to replicate the experience of a conventional tobacco cigarette-without the addictive effects of nicotine. Furthermore, some users report feeling a calming effect after using the product-potentially from the cannabidiol (CBD) content inherent to its hemp base.
Given the way re-invented products in ancillary CPG categories achieved strong consumer adoption, TAAT is seeking to replicate a similar pathway to viability. For example, tobacco's sister industry vertical-Beer Distillers-have found success offering drinks which contain little or no alcohol.
Last year, The Conference Board of Canada's Brewing up Benefits report stated that non-alcoholic beer accounts for 1.2% of total beer sales-increasing by more than 50% between 2013 and 2018. On a global scale, Statista report that in 2020, the global non-alcoholic beer market was valued at roughly USD$18 billion and is expected to grow at 7.5 percent CAGR (compound annual growth rate) by 2024, reaching a value of about USD$25 billion.
While non-alcoholic beer sales are just a sliver of beer brewer's total revenues, if TAAT can replicate similar market penetration in the tobacco sector, a viable investment thesis may take root.
Consider that the total U.S. cigarette market is a $76 billion annual industry, according to Cowen research analyst, Vivien Azer. If TAAT can eventually tap into just half of one percent of the existing U.S. marketplace, the company could eventually drive $380 million in gross revenue to the top line. TAAT's market capitalization as of February 5, 2021: $351.54 million, or less than 1-times current revenue.
Now factor-in the possibility for similar market penetration as non-alcoholic beer sales (1.2%), international expansion and organic growth in the non-tobacco consumer segment, such lofty sales ambitions don't appear so far-fetched. After all, TAAT doesn't have to displace tobacco-based cigarette usage altogether, but rather act as a supplementary or adjunct alternative.
Building a multi-million dollar sales pipeline won't happen overnight. The company's first distribution-ready shipment of TAAT Beyond Tobacco™ cigarettes only began hitting wholesalers' warehouses last November. A prolonged marketing a product recognition campaign is required to build recognition along the sales channel.
But for a fast-growing company with anticipated healthy margins and reasonable market penetration prospects, the current valuation may be attractive to forward-looking investors with speculative capital to spare.
TAAT Partners With Prominent CPG Sales Agency To Accelerate U.S. Distribution
On February 2, TAAT announced a transformative agreement which it hopes will take sales distribution to the next level.
The company engaged the representation of CROSSMARK, Inc., a Tier-1 CPG agency with which serves retail channels across North America and Canada. TAAT intends to leverage CROSSMARK's existing relationships with over 100,000 convenience retailers to expand availability of TAAT products in Ohio, and potentially, across the United States.
In addition to providing wholesale and retail head office listing support, CROSSMARK deploys multi-faceted support through the entire sales chain, which includes in-field execution strategies, retail product adoption, merchandising, and product re-filling support. The relationship will allow TAAT to grow its sales channel more quickly than if it assembled its own sales team from scratch.
Furthermore, CROSSMARK has experience servicing the tobacco industry directly. As TAAT CEO Setti Coscarella-himself a former Lead Strategist, Reduced Risk Products at Philip Morris International-puts it:
"One only has to look at the results CROSSMARK achieved in commercializing another tobacco brand across the United States to know that they have both the experience and know-how to launch a product to an audience of legal-aged smokers, which could assist the Company in realizing its objectives for the TAAT™ product launch."
Whether TAAT can deliver on its modest goal of capturing a small fraction of the U.S. and foreign tobacco market remains to be seen. The chessboard is currently being set, even if the game has only now commenced. But given the success of parallel CPG re-inventions such as non-alcoholic beer and Beyond Meat, TAAT offers an intriguing forward-looking investment thesis if it's able to steal Big Tobacco market share and grow organically over time.
SOURCE: TAAT Lifestyle and Wellness