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Heating Up: Who Benefits from the Growth in Vaping?

Ryan Allway

July 20th, 2017

News, Top Story

Smoking tobacco has been popular for thousands of years, but vaporizers are quickly replacing the habit with a healthier alternative – especially in the cannabis industry. These vaporizers provide a cheaper and healthier alternative to smoking, while providing a smoother and more socially-acceptable experience. Investors may want to stay ahead of these trends by looking at high-quality companies operating in the space.

In this article, we will look at why vaporizers have been gaining popularity and why investors may want to consider companies like Nutritional High International Inc. (CSE: EAT) (OTC: SPLIF) as a way to capitalize on that growth.

Vaping Gains Popularity

Tobacco smoking began as early as 5,000 to 3,000 B.C. and became widespread after the development of automated cigarette-rolling machines. By the 1600s, tobacco had become a major cash crop within the United States and most civilizations embraced the practice by the mid-17th century. German scientist Frtiz Lickint published the first paper citing formal statistical evidence of a lung cancer-tobacco link and governments began taking action in the 1980-90s.

Herbert Gilbert invented the first smokeless non-tobacco cigarette in the 1960s by replacing burning paper and tobacco with flavored steam that contained nicotine. But, it wasn’t until 2003 that Chinese marketer Hon Lik successfully marketed a vaporizer product. While there’s disagreement on whether vaping is healthy, most people agree that it’s a much safer and healthier alternative to traditional cigarettes filled with harmful chemicals.

Modern vaporizers have become increasingly popular thanks to their widespread availability, perceived healthiness, and low-cost relative to smoking. While nicotine vaporizers are the most common variety, the cannabis industry has embraced the technology as a novel way to precisely control dosing of tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”) in a socially-acceptable format compared to smoking cannabis cigarettes.

Beneficiaries of These Trends

Vaporizer providers operate using a unique and highly-attractive business model. In addition to buying a vaporizer, consumers must purchase juice cartridges that are vaporized before being consumed. This razor-razorblade business model generates both upfront and recurring revenue for companies operating in the space. At the same time, vape juice tends to have a relatively high profit margin given the regulated nature of the industry.

Most vaporizer brands purchase their hardware from China and liquids from the lowest cost wholesale producer. Often times, this translates to poorly designed – or even unsafe – hardware and vape juice that is cut with agents designed to thin out cannabis concentrates to work with low quality vaporizers. Some manufacturers even use polyethylene glycol (“PEG”), which is classified as a carcinogen by the International Agency for Research on Cancer.

Investors may want to consider higher quality brands due to their higher brand loyalty and healthier profit margins. For example, Nutritional High International Inc.’s (CSE: EAT) (OTC: SPLIF) FLI liquid concentrate product line is manufactured through a process of cold ethanol extraction and short path distillation to ensure a high level of consistency and purity for discerning customers.

The company’s licensed tenant Palo Verde sells these products through various dispensaries in Colorado, where customers pay a premium for high-quality, clear, and pure cannabis oils. In addition to vaporizer cartridges and syringes filled with oil, Palo Verde is also moving toward introducing a full line of cannabis-infused edible products to these same customers under the FLI brand. Management hopes to generate recurring revenue through these sales, as the distribution is expanded into more dispensaries.

Looking Ahead

It’s no secret that vaping is well-positioned to become the preferred method of cannabis consumption relative to smoking. In addition to being healthier, vaping has become increasingly ubiquitous, cheaper, and more socially-acceptable. The companies best-positioned to profit from these trends will be those focused on high-quality products that compete on value and quality rather than purely on price.

Nutritional High International Inc. (CSE: EAT) (OTC: SPLIF) represents a compelling opportunity in this subset of the cannabis industry with its FLI brand of vape cartridges. The company differentiates itself from other companies by sourcing the higher end cartomizer for Palo Verde to fill with oil to ensure that the product is suitable for a wide range of consumers, rather than simply purchasing the cheapest cartridges from China.

For more information, visit the company’s website or CannabisFN’s company profile.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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CFN Enterprises Inc. (OTCQB: CNFN) owns and operates CFN Media Group, the premier agency and financial media network reaching executives, entrepreneurs and consumers worldwide. Through its proprietary content creation, video library, and distribution via www.CannabisFN.com, CFN has built an extensive database of cannabis interest, assisting many of the world’s largest cannabis firms and CBD brands to build awareness and thrive. For more information, please visit www.cfnenterprisesinc.com.

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