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Smoke Wallin’s Vertical Cos. Sees THC, CBD Portfolios Come Into Focus

August 18, 2020

California cannabis operator Vertical Companies and its CBD arm Vertical Wellness are helmed by drinks industry veteran Smoke Wallin, who in recent years has made the leap to cannabis. The company has pursued a two-pronged strategy as it built out brands and infrastructure on both the THC and CBD sides of the industry. It has established a place in the California market with brands like Trees by Game, repped by rapper The Game, but its full brand launch was delayed by the arrival of Covid-19. Now the company is preparing for its next phase of growth.

In May, Vertical Wellness announced that it had entered a comprehensive partnership with model and entrepreneur Kathy Ireland to develop CBD products for her numerous brands. Vertical will develop CBD products across categories including beauty, health, pets, and—as regulations permit—food and beverage, all to be marketed under Kathy Ireland brands like Better Living, Loved Ones, and Gracie & Delilah, among others. Ireland also joined Vertical Wellness’ advisory board. The brands will initially launch online as a direct-to-consumer play, followed by a national rollout early next year.

The partnership was serendipitous, Wallin told SND. They were put in touch by mutual veteran friends, as both are involved in causes relating to veterans affairs. The pandemic also complicated finalizing the partnership, as in-person meetings were no longer possible. “I never would have predicted I could close a deal with Kathy Ireland over Zoom, but that’s what happened,” Wallin said.

The pandemic pushed back brand launches that were planned for earlier this year, but it also presented unexpected opportunities for Vertical. The company has invested more than $22 million into its hemp processing operations in Kentucky, building out facilities and increasing capacity. Last year Vertical Wellness grew approximately 1,800 acres of hemp, yielding about 4 million pounds to process. Amid the capital crunch that has gripped the industry for the past year, a number of large hemp processors have gone bankrupt, narrowing the field. Vertical has stepped in as a contract processor and is on track to quintuple last year’s figure with 20 million pounds this year.

California’s ongoing struggle to contain Covid-19 has also resulted in an unexpected upside for Vertical’s delivery operation, acquired late last year. The service is called Cali Coast and was clearing around $50,000 a month when Vertical took it over, Wallin estimates. Now, with increased delivery orders it’s up to $300,000 a month, he said.

Vertical’s California cultivation sites are fully operational now as well, after an investment of around $50 million. They’re now generating more than $1 million a month in terms of flower alone. With six new brands in the pipeline for launch, Wallin says Vertical’s branded strategy for cannabis will soon become a reality. “Q1 was a struggle but both sides of the business took off in Q2,” Wallin said of this year. “Now we’re really hitting our stride in Q3.”—Danny Sullivan

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