It appears cvsi put all eggs were in the fdm basket at the detriment of the natural foods segment. And the natural foods stores have been swamped by anything that has "CBD" on the label and a larger margin. Bottles of "CBD" can be purchased private label by anyone for about $5 on Alibaba. But who knows what's actually in it? We know it's probably garbage but if there's no enforcement who will stop them?
CW didn't put all their eggs in that basket, they're online sales are 50% or higher. I get why CVSI didn't push online sales, it makes them better positioned to not complete with the shops they sell to. But in hindsight clearly it was the smarter solution to diversify the sales channel like CW.
IMO the Farm Bill is the worst thing that happened to this company. It gave a public perception CBD was legal, safe and FDA approved, which opened the door to garbage flooding the market with high consumer confidence and zero enforcement.
CVSI was best positioned to capitalize on CBD becoming a legal and regulated dietary supplement selling through the fdm channel, and because that didn't happen it's been destruction. The competition is anyone with light ethics and $1000 to cash in on CBD.
I was unimpressed with management on the call. The end where Cantor Fitzgerald lobbed them a softball and basically said "give me your sales pitch, anything I can share with investors" and they crashed. I'm not saying Dowling is bad but his salary is a $100m company salary, how long can that last if sales are $25m this year? I know the Mona's are disliked but I got the sense from them they were more driven, maybe too driven. I don't hear any fire in the current management team. It's hard to give bad news but still, I'd like to walk away with some enthusiasm. And I think they botched the online sales question. By my math they were up at least 10% in the 4th quarter with online sales being around $3m, up from 2.7m in Q3. This would have been an easy win to discuss.
Anyway, I'm long, but I'm tired.
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