Amazon.com Inc. (NASDAQ: AMZN) has rapidly grown to become the largest online retailer in the world, with over 270 million customers buying nearly $90 billion worth of products and services. In fact, the company reaches an astounding 74% of the U.S. population and its revenue continues to grow at a brisk 20% annual clip, making it an ideal sales and distribution partner.
Earlier this month, Peak Pharmaceuticals Inc. (OTC: PKPH) announced that its Canna-Pet™ products would be appearing for sale on Amazon.com with free shipping to Amazon Prime members. The move could pave the way to significantly higher revenue as it’s able to leverage Amazon’s trustworthy website and brand to ship its products to new customer markets.
In this article, we’ll take a look at the company’s existing sales and how the agreement with Amazon could propel them moving forward.
Canna-Pet’s Promising Start
Peak Pharmaceuticals acquired a perpetual, exclusive, worldwide license to Canna-Pet™ back in July of 2014 in exchange for sales royalty payments. After the agreement was signed, the company began selling the products on October 16, 2014 and reported revenue of $161,360 for the year 2014, with gross profit of $117,338 and an attractive gross margin of 72.7%.
By early 2015, the company indicated that it had processed more than 3,000 orders – exceeding its initial forecasts, suggesting that order volume was strong and accelerating into the New Year. The company’s next major update on revenue will come for the first quarter of 2015, which is expected to be filed at some point after the quarter’s end on March 31, 2015.
“We have been extremely busy as we continue to build momentum on a number of fronts in this fast paced industry,” said Peak Pharmaceuticals Inc. CEO Dr. Soren Mogelsvang in a January 2015 press release. “Launching into the companion animal sector has been a big and exciting opportunity for us. Our sales have been excellent and it’s gratifying to work with a consumer audience.”
Potential Boost from Amazon
Amazon.com’s expansive distribution channels provide an excellent venue for companies to increase their sales. In fact, a full two-thirds of Amazon orders come from repeat customers, suggesting strong brand loyalty. These customers won’t even consider purchasing from another website unless they can’t find what they want on Amazon, which makes it an essential distribution channel.
By using Fulfillment by Amazon (“FBA”), Peak Pharmaceuticals could benefit from even greater trends. A 2014 Amazon survey found that 71% of FBA users reported unit sales that increased by more than 20% since joining the FBA program. In addition to the sales benefits, the process frees up the company’s team to focus on more pressing issues rather than simple order fulfillment.
Finally, it’s worth noting that many of Amazon’s most successful products are those amenable to repeat orders – including animal foods. Since Amazon makes it extremely easy to reorder products, these companies are able to keep customer onboard much more easily than they would be able to using their own proprietary e-commerce platforms and websites.
Significant Long-term Potential
The pet supply and OTC medication industries make up $14 billion and $13.72 billion, respectively, of the $51.58 billion overall pet industry. Since November 1st, the Dow Jones Industrial average has risen 2.29%, which pales in comparison to the 19.2% growth of Pet Med Express Inc. (NASDAQ: PETS) or the 15.2% growth of VCA Inc. (NASDAQ: WOOF) over that same time period.
The $14 billion pet supply industry is a particularly strong market segment, since over 41% of pet owners have considered or tried various alternative therapies. Peak Pharmaceuticals’ Canna-Pet products fall squarely into this category.
The rapid growth of the cannabis industry has created a lot of awareness throughout the general public. With the growing popularity of medical cannabis among humans, the pet industry remains a relatively untouched opportunity. Hemp-based products are fully legal to sell after the 2004 HEA v. DEA court decision, which excluded it from the DEA’s Schedule I Controlled Substance list.
Combined, the significant market size and growing popularity of cannabinoid-based products equate to a large potential opportunity for Peak Pharmaceuticals. With initial revenue already starting to flow, the company is well positioned to grow its presence as one of the only providers of CBD-based supplements for pets and other animals.
Peak Pharmaceuticals trades with a market capitalization of just $18 million, according to Yahoo Finance, despite its early commercialization and significant long-term potential that goes beyond just pet products. Management plans to leverage its hemp farm agreement, research laboratory, and other infrastructure to expand into the human health market in the future.
To learn more about Peak Pharmaceuticals, visit the company’s website at www.peakpharma.com.
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