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GILLA BOTTLING DISTRIBUTION STRATEGY PUTS STARTUP ON TOP OF THE CLOUD

By Don Fenton

At the 2016 SAG Awards, Best Actor Leonardo DiCaprio made headlines by vaping at his table. The Urban Dictionary now defines ‘Cloud Chaser’ as someone who uses a personal vaporizer to expel large amounts of vapor and the act itself has become a competitive sport in cities far and wide. Even national health departments have endorsed vaping as the best means to help millions quit smoking.

Few startups can offer something so popular that celebrities and governments recommend it. But that is one of the many advantages enjoyed by Gilla, a company founded in 2011 that now operates in more than 30 countries on several continents. Gilla is the only public company focused on e-liquids for the skyrocketing vape business. The New York listed (OTCQB:GLLA) designer, manufacturer and marketer of e-liquids for vaporizers www.Gilla.com has experienced rapid growth in the disruptive new business of e-cigarettes and vaping.

In the ten years since people started switching from smoking to vaping it has become a lifestyle for about 10% of all adults and 15% of adults under 40 in the United States, with similar trends in Britain and Europe.

Gilla marketing team members Milka Subotic and Tamara Radocaj
Gilla marketing team members Milka Subotic and Tamara Radocaj

Gilla marketing team members Milka Subotic and Tamara Radocaj

With just 10% of shelf space in 2,000 vape shops and sales of 400 thousand bottles of e-liquid a month, Gilla can generate up to $38.4 million of revenue in one year. They are clearly on to something.

The company’s ambitions are evident in its bold strategic moves in recent months to meet the growing global consumer demand for variety in brand choices, quality products and broad geographic availability.

  1. In 2015 it acquired a scalable manufacturing platform with its E Vapor Labs Daytona Beach, Florida-based e-liquid facility
  2. In 2016 it established global sales and distribution with its Gilla Europe multinational distribution platform and built a strong North American sales team
  3. Also this yearGilla developed and acquired a fourteen product portfolio of premium and value brands
  4. And in 2016 it diversified manufacturing platforms with reduced jurisdictional risk and efficiencies in distribution and logistics

Now the firm is expanding its global reach by entering new markets in China, South Korea, South Africa, Russia and the Middle East. With a focus on operational synergies, Gilla has spread marketing costs across multiple brands and is taking advantage of low-cost jurisdictions for talent retention.

Its mission is to become the global leader in the manufacturing and distribution of e-liquid brands and proprietary recipes for the vapor industry.Global consumers in the high growth e-liquid industry have shifted in large numbers to vaporizers and e-liquids away from e-cigarettes. In the US, this well-developed market is expected to grow to $2.8 billion in e-liquid sales by 2025. Growth is accelerating in Europe from a solid base while early stage Asian markets provide high growth potential.

In the short term Gilla is uniquely positioned to leverage its advantage with an established global sales and distribution platform. Its North American sales are driven by industry veterans with a proven record. Internationally, its sales and distribution platform services over 30 countries in 30 languages. An established Chinese partner distributes brands across Asia.

Catering to differing global tastes, Gilla offers a portfolio of 14 e-liquid brands and plans to up-list to the NASDAQ and dual list in Canada to improve liquidity and valuation.

gilla-brand-portfolio

Graham Simmonds, Chairman and CEO says the company is well positioned to be the industry leader through both consolidation and organic growth. His strategy is to gain shelf space in vape shops globally – there are now about 19,000 such retail outlets, half of them in the US – by replicating successful business models of other bottling and distribution companies like Diageo and Coca Cola.

“We offer vape shops a comprehensive solution with a broad portfolio of premium brands, aggressive pricing and market value brands to replace ‘house juice’, while continuing to develop and acquire new brands,” says Simmonds. “Gilla provides innovative pricing, terms and marketing support including targeted sales programs and point of sales (POP) marketing to help develop long term relationships with vape shop owners.”

Graham Simmonds, Gilla Chairman & CEO

Graham Simmonds, Gilla Chairman & CEO
Graham Simmonds, Gilla Chairman & CEO

Gilla built an account management team to service clients locally, catering to unique geographic needs with high levels of customer service.

Some of the key drivers of growth in the mushrooming vape industry include winning a place as the premium e-liquid in every market. Premium brands can generate as much as 85% in gross margins. An aggressive push in early stage European and international markets has already born fruit with Gilla products being preferred in the United States, Canada, Belgium, Ireland and England.

In early August Gilla launched new E-liquid brands for the US market in advance of the final Deeming Regulations imposed by the U.S. Food and Drug Administration (FDA) which went into effect the same month restricting the introduction of new E-liquid products in the United States without prior approval of the FDA. Gilla introduced two new flavors to its award-winning Coil Glaze brand and three new e-liquid brands: The Drip Factory, Surf Sauce and Siren. The brand portfolio has been organically developed with consumer input to meet emerging trends. Coil Glaze has already won awards in Las Vegas, Oklahoma City, Kentucky and Toronto.

In the European Union regulations came into effect in May of this year and require that member states adopt national legislation implementing what are known as the TPD provisions under Directive 2014/40/EU. New products can only be introduced into the EU after filing a notification to each Member State Competent Authority.

With its full product portfolio already established in the marketplace, Gilla sees global regulation as a net positive for the company. The shifting landscape shows that consumer demand has drastically moved from the “cig-a-like” e-cigarette business that big tobacco controls through its corner store distribution channel. The global consumer of the more affordable and growing vaping lifestyle seeks better performance, affordability and an assortment of flavors and products.

Gilla delivers a diversified brand portfolio across categories and price points and global geographic reach. A multilingual call center supports the international customer service, logistics and supply chain management platform. The company has efficient supply and procurement through a 10,000 square foot manufacturing facility in Florida with in-house capacity of 30,000 bottles a day. It also has co-pack manufacturing partners in the UK and Hungary.

The brand portfolio offered by Gilla and its distributors includes a full slate of premium and value brands. “It is very much like the selection offered at your favorite restaurant or bar”, says Simmonds. “But instead of Johnnie Walker, Crown Royal and Baileys our premium brands are Coil Glaze, The Drip Factory, Surf Sauce, Siren, Craft Clouds, Craft Vapes, Vapors Dozen and Vape Warriors. We also offer value brands Vapor Liq, Crown, Replicant, The Mad Alchemist, Miss Pennyworths Elixers and Vinto Vape.”

Gilla has five business operations with margins varying from 30% to 95%

  1. OEM Private Label
  2. Distribution partners
  3. Wholesale buying groups
  4. Vape shops
  5. And online retail

For now, Gilla is the company to beat in the high growth, high margin global business of vaping. If even a small percentage of the millions of cloud chasers buy one bottle each month of Coil Glaze or Vape Warriors, Gilla will be right where it aspires to be, on top of the cloud.

* http://www.reuters.com/article/us-usa-ecigarette-poll-analysis-idUSKBN0OQ0CA20150610

* http://www.ibvta.org.uk/matters-many-people-vape-regular-basis-not-many-try