The CSE warmly welcomed Vejii Holdings Ltd. (CSE:VEJI) for a virtual Market Open on November 10, 2021.
Vejii is a unified digital marketplace and fulfillment platform featuring thousands of plant-based and sustainable living products from a growing list of hundreds of vendors. The platform offers an easy-to-use, omnichannel experience for both vendors and buyers, leveraging big data and artificial intelligence to elegantly connect brands with a targeted consumer base, both organically and through specialized marketing programs.
CEO Kory Zelickson and other members of the amazing Vejii team kicked off the day’s trading at the virtual Market Open.
For more details about the CSE, including information on other Market Opens, please visit theCSE websiteor follow us onsocial media.
In Episode 5 of the Exchange for Entrepreneurs Podcast, the CSE’s Anna Serin is joined by Jon Matonis, Chief Economist of Cypherpunk Holdings Inc. (CSE:HODL) to discuss privacy and cryptocurrency, as well as disruptions to financing and banking in the rapidly digitizing economy.
Watch the full interview, or scroll down to read the transcript.
About Cypherpunk Holdings Inc.
Cypherpunk Holdings Inc. is a Canadian-based holding vehicle, set up to invest in technologies and cryptocurrencies with strong privacy.
I have the honour of being joined today by Jon Matonis. He is Chief Economist with Cypherpunk Holdings, which is a CSE issuer. But Jon, first of all, thank you so much for joining us today.
Jon Matonis:
No problem, Anna. I’m glad to be here.
Anna Serin:
First of all, I’d love for you to tell us a little bit about your background. You have quite an interesting background. We’re obviously here to have a discussion around finance and banking in digital securities and digital assets, and what’s coming to market. But first of all, why don’t you tell us a little bit about you?
Jon Matonis:
Right. Early on in my career I was the foreign exchange trader for Visa International, going back to the nineties. As the chief foreign exchange dealer for Visa, we covered about $18 billion in international currency trade at that time. Anytime a transaction was made, an exchange rate would hit your statement. That was our team that was putting that exchange rate in.
That gave me a glimpse into the international payment system and how all that worked with various currencies and cards and payment instruments. Which was also about the same time that the world was moving into cryptography, because Visa then became one of the early investors into Verisign. And I moved over from Visa, going into Verisign in the payments division with digital certificates and encryption.
The whole financial cryptography area was booming in the mid to late nineties. And this is all pre Bitcoin, pre cryptocurrency. In fact, the institutions back then were looking at ways to get into the market for being their own currency issuers. You had a group at Visa that was examining how they could be a digital currency issuer by creating a Visa monetary unit, even. They were, in a way, forecasting a lot of the things that we were to see later on.
But it was that blend of finance and cryptography that was so interesting to me, that was booming at the time. And eventually just led me into being involved with digital currencies, going all the way from the mid nineties to when Bitcoin was created in 2008, released in 2009. I wrote extensively on Bitcoin. I wrote for Forbes, I wrote for CoinDesk, and I eventually joined the Bitcoin Foundation as a founding member in 2012.
I was the person behind the Bitcoin conferences that we had in 2013 and 2014. We had the biggest Bitcoin conference in the world at that time in Amsterdam in 2014. The Bitcoin Foundation today is not so much of a driving force in Bitcoin because so many other companies have taken up the task of dedicating money, dedicating developers, and dedicating promotion. But back in the early days, there was nobody that was even forming a narrative for the press. We wanted to fill that vacuum and not let the press deviate into bad press for Bitcoin.
And we were successful in doing that. That takes us to about 2015, 2016, where I, at that point, started working with various companies, as a board director, that were in the crypto space. Focusing on fintech, payments, gaming companies, but also privacy tech and the intersection of privacy tech with finance. Which led me to Cypherpunk Holdings, the current listed company.
The reason that Cypherpunk Holdings and privacy tech is so interesting in this space is that you won’t have any success with cryptocurrencies, or DeFi, or NFTs, or any of those things unless you have a solid foundation of privacy. You’re not going to have any businesses adopt things where payrolls will be public information, or you won’t have any large finance deals happening if the sensitive information is not confidential. There’s a whole entire sub-industry working to solve the privacy problem with these startups. And that’s what Cypherpunk Holdings focuses on.
Anna Serin:
First of all, it’s so interesting to say that you started working with this foundation in 2012. It’s hard to believe that Bitcoin has been around for that long, because I feel like it’s a conversation that people are finally having just within the past maybe two to three years. It’s so interesting that the stuff has been around for so long. And even your work with Visa in the nineties, which might be considered the first digital currencies that were working.
I saw you do an interview and I thought you said something that was really interesting. You said, “Money doesn’t do bad things, bad people do bad things.” And I think that’s a really interesting way to view it. I think people are afraid of privacy around currency, but you did dive into that a little bit. Can you tell us a little bit more about that?
Jon Matonis:
I think you’re right. I think that government and media use the opportunity to tarnish what they want to tarnish. But if you strip it down to its essence, it’s really nothing different than what we already have. The paper cash in your pocket has the same privacy attributes that something like Bitcoin or Ethereum would have.
And mainly those three privacy attributes are: user defined privacy. You get to decide if you reveal information. The second attribute is the irreversibility of the transaction. If you give someone a $100 bill, they have it and you no longer have it. It’s irreversible. And then the third attribute is the non-traceability. You’re not able to link a cash transaction to an individual in all cases as that paper cash moves along the transaction chain.
So when we move to the digital world with something like Bitcoin, it doesn’t add any new, hidden secret privacy techniques. It’s just the same ones that we already had in the analog world with paper cash. Which I don’t think that certain “powers that be” want those same attributes to remain in paper cash, so then they become concerned that those attributes are actually able to be retained when we go digital. This really wasn’t the focus of Visa so much, but it’s a focus of decentralized systems such as Bitcoin on the internet.
Anna Serin:
The original dollar was an IOU, essentially. That’s how paper money was created. We obviously had coins that were made out of certain metals, but the original paper money was IOUs. And now we live in this digital world, so it seems to make sense that we’re entering that side of it.
Can you just tell us a little bit about some of the themes that you’re seeing in finance and banking when it comes to digital securities or digital assets? We can talk about cryptocurrencies, but just in general, what themes are you seeing? What are you seeing come to market in the banking world?
Jon Matonis:
There’s so many new business models that are made possible by this technology, so it ultimately will affect every single area. We’re seeing it go with the low-hanging fruit initially, low-hanging fruit being obviously financial services in the larger sector. But focusing in further within financial services, it’s the early applications around DeFi and decentralized finance, such as lending and earning.
These are normal banking functions, but when you throw it into the world of DeFi, it automatically sometimes takes on this new glamour, because people aren’t used to it without having a physical bank or an old institution. Staking your digital assets refers to earning a yield on your current holdings. It’s just like earning interest that you would earn interest on a CD. You want to earn a yield. There’s many products that are evolving around that. And the entire yield farming market is something that’s new to a lot of people still, but it’s exploding in DeFi land.
Then on the other side of it, you have the lending business. People want to be able to use their collateral for fiat loans. For instance, let’s say that you have a Bitcoin or Ethereum portfolio. You don’t want to liquidate your portfolio, but you want to use it as collateral to get a loan in dollars or euros so that maybe you can make a down payment on a house or something like that.
And there’s a multitude of companies that are springing up to be able to do that and address that market. It’s moving so fast and so quickly that the regulators, not only can they not keep up with it, but they can barely even understand it.
Anna Serin:
Do you think that the financial institutions are resistant to this change?
Jon Matonis:
Largely I do, but I don’t think it’s their fault. I think the financial institutions are resistant to the change because right now they’ve been deputized to be almost a law enforcement wing for financial surveillance. Their agenda is very conflicted.
If you go into any major bank right now and try to discuss anything about new product offerings or the future of finance, what you’ll run into is not open-minded product people, but you’ll run into a wall of attorneys. I mean, the compliance team and the legal teams outnumber the new product teams by a wide margin in banking.
I don’t think it’s their fault because they’ve been deputized in this way and they’ve been chartered, and regulated. But I do think that there’s a certain number of financial institution players that are looking at this space and they’re looking at this space for acquisitions, and that’s how they’ll enter the market.
Anna Serin:
Do you think that we’re going to start seeing this in all of our daily banking? For example, do you think at some point you could go to your brokerage account, deposit Bitcoin, and buy stock?
Jon Matonis:
It’s funny you should say that. I think one of the brokers just announced that they’re accepting cryptocurrency deposits, that was last month. We might start seeing that sooner than you think. But absolutely, the answer is yes, and I think it’s going to be driven by the wallets. And Cypherpunk Holdings has the thesis that it will be driven by the wallets.
Which means just like the browsers steered our entry into the web and how we navigated the web, the digital wallets that people have, whether it’s on their phone or their desktop, it won’t be like a normal wallet. It’ll do so many things for you behind the scenes that you won’t even realize. That user interface is what’s going to allow this technology to go mainstream because it’s going to simplify it for the end user.
For instance, some of the things that you’ll be able to do with your digital wallet, you’ll be able to construct complex smart contracts in DeFi by just plugging your wallet into the web. You’ll be able to have privacy on transactions that you define, which will all be managed by your wallet. The wallets will be able to talk to each other, but everything will still be under your control. Just think of it as we’re moving from browser-based land to wallet-based land to access these services.
Anna Serin:
It’s so interesting. Now my final question for you, and this is a bit of a big one. Hopefully I’m not overwhelming you with an answer. Obviously we know Ethereum and Bitcoin, obviously people can create cryptocurrencies, they have the ability to do so. We also have crypto exchanges that are coming to market where people can trade these.
If we’re implementing this into our everyday banking life with lending, with investing, with financing, how is it being dealt with as far as going back to regular currency exchanges? How are we valuating these cryptocurrencies as they’re coming to market and implementing them into our everyday financial life?
Jon Matonis:
Excellent question. I mean, I’ve never really said that Bitcoin or cryptocurrencies is going to totally eradicate the government fiat currencies. It’s not a situation where you’ll immediately see a replacement like that. I think what you’ll see is Bitcoin keeping the fiat currencies competitive, keeping them honest, so it’ll just be another point of competition for fiat currencies.
And I also don’t think you have to be overwhelmed by 5,000 different cryptocurrencies, because there’s only going to be a handful, maybe two or three, that function as a pure store of value, which would be a currency that people want to hold onto for a store of value to use later. A lot of the other cryptocurrencies are application specific. They give you access to certain smart contract platforms, different blockchains. So we’re not getting into a world of 5,000 different stores of value. There’ll be a small number of competitors.
Think of it like how we settled around Celsius and Fahrenheit and Kelvin for measuring temperature. I mean, we only have three different ways to measure temperature. We’re not going to have a thousand ways to measure value.
Anna Serin:
Super interesting. Jon, everything that you said today I found super interesting. I hope I can bring you back at some point to do another interview.
Definitely take a look at Cypherpunk. I think it stands out a little bit in the market, just the fact that you focus so much on privacy, which is an important element of it. Thank you for your time today and look forward to chatting with you again.
CEO Richard Carleton was pleased to sit down with Greg Hasty from Highly Capitalized during MJBizCon Las Vegas to discuss the CSE’s position in the global cannabis space, how the industry as a whole is maturing, as well as M&A activity and brand building among US cannabis MSOs. Read the transcript of the interview below.
Greg Hasty:
Hey everyone. Welcome back to our continuous coverage of MJBizCon 2021. I’m Greg Hasty here in downtown LA at the HCN studios. And I have the pleasure of being joined by Richard Carleton, the CEO of the Canadian Securities Exchange. Richard, how are you doing?
Richard Carleton:
I’m doing well. Thanks Greg. Pleasure to be back at MJBiz in Las Vegas after a couple of years off.
Greg Hasty:
Absolutely. I’m very jealous. I’m already envious of you being on the floor while I’m stuck back here in the studio in LA, but great to see you again. Great to connect with you again.
Lots of changes, lots to talk about since the pandemic hit, but not all of them negative. Some really, really good developments in cannabis and adjacent markets. Tell us a little bit about what’s exciting you. What are you pumped about coming out of 2021?
Richard Carleton:
I think for people who don’t know who the Canadian Securities Exchange is, just a bit of a backstory, we made the fateful decision about five years ago to not just list companies from Canada in the cannabis space, but to begin to work with the industry in the US as well. And we really became the partner for the US multi-state operators to access public capital in Canada, and the United States as well. And all of the significant MSO operators who are public now are listed on the Canadian Securities Exchange.
We have roughly 160 odd companies in the cannabis space on the exchange overall. And it’s a significant percentage of our market capitalization, and daily trading turnover. From that strength, we have levered that position in the industry to work with companies from Latin America, South America, the Middle East, in particular, Israel, as well as Asia.
So we’ve really achieved a lot for a small Canadian startup. We’re now 20 years old, in a significant position in the cannabis finance space globally. So it’s been a wild ride up to the pandemic. And of course, we all had some uncertainty in the early days. And broader markets were certainly under extreme stress. But then by June, things had recovered dramatically, not just in the broader market, but in the cannabis market specifically when it became obvious that consumers were in fact rotating their purchases in the cannabis space and really supporting the industry in a big way.
And so, as the companies reported ever-improving results in Canada and the United States, increasing sales and moving towards profitability, that’s opened up a whole new range of opportunities for these companies to raise more capital and to begin to think about planting the flag in new states and new jurisdictions, and expanding their businesses organically.
Greg Hasty:
Absolutely. And I just love the journey that you’ve been on. I’ve been following you for at least six or seven years now and I remember even in my earliest interviews, people talking about getting involved with the CSE and how the CSE is really helping them get out there. And you really were the launchpad organization for so many businesses in the US, let alone businesses in Canada itself.
So talk to me a little bit about the current state of MSOs and Canadian businesses as well. There’s a lot of activity. M&A is a big thing right now. Tell us about the market shift and what trends you’re seeing.
Richard Carleton:
I think the important driver across the board here is a decreasing cost of capital for the large Canadian LPs and the US multi-state operators, with the number of opportunities that are opening up in new jurisdictions in the United States. We obviously have the tri-state area on the east coast. Michigan is obviously developing jurisdiction, Pennsylvania’s developing, maybe Ohio at some point in the not too distant future. They’re even talking about medical in Texas.
So there’s still tremendous opportunities for growth in the US markets, specifically. All told, I think it’s about a hundred billion a year between the illicit and the legal markets in the US now. So we know that there’s an enormous addressable opportunity for the operators to take advantage of, and they are. What we have seen is that companies from the US space, through the CSE, have raised more than $4 billion on a year-to-date basis.
That money is pretty much earmarked for mergers and acquisitions activity, as well as to build out in some of the states where they’re currently already operating. And again, there’s a significant cost of capital advantage. We’ve seen debt capital raised by a number of these companies that are now down in the single digits from a coupon perspective.
A year or two ago, companies were looking at 15% interest on debt. We saw last week an issuer raised debt at a 7% coupon. And the difference, of course, is that they have cash flows to secure that debt financing against, and so, the cost of capital has come down. They will use those advantages, as I say, to be very active in mergers and acquisitions activity, and they will continue to expand their footprint in the United States in particular.
Greg Hasty:
Do you see any difference in how MSOs are approaching M&A activity compared to what they were doing pre-pandemic? We saw a lot of MSOs build themselves up. And sometimes, it was a little “cart before the horse” in a lot of cases, and sometimes they would tackle almost too much in activity.
Are you finding that these MSOs that you’re working with and have partnerships with are being a little bit more strategic in their approaches? What’s kind of top of mind for them right now when they’re looking at different M&A opportunities?
Richard Carleton:
I think we understand well now where the value in the chain is highest. With cultivation assets, I think this is what you were saying was a big focus of investment in the early stages. And we now see over-capacity in a variety of regions in the United States, particularly California. Clearly that’s not going to be a source of margin for these companies moving forward.
It’s all about building brands, rationalizing your supply chain, and getting more and more product on the shelves, whether you own the dispensary, or through license agreements or agreements with recognized retailers, to get your high margin products in the hands of consumers. And I think that’s a sign of the increasing maturity of the industry, and understanding where future revenue and margin growth is going to come from.
Greg Hasty:
I’m personally really excited by that as a marketing and branding guy, to see people focus on consumer experience, on brand loyalty, on proper brand stewardship in cannabis, and not just cannabis-adjacent markets. You have psychedelics that are coming online. You even have technology companies that are now focused on the consumer experience and quality and stuff like that. So it’s really nice to see that maturity come into the industry, and it sounds like it’s just going to be more and more of a benefit for our partners moving forward.
Richard Carleton:
That’s absolutely right. And when we look at, for example, the Canadian LPs, they have real challenges in building brands because of the marketing and advertising restrictions that are placed on those companies.
That’s actually why you see the Canadian LPs wanting to invest into the US business lines, because that is where you’re able to develop those brands, and build consumer loyalty. Because again, this isn’t really the same as any other consumer packaged goods where you’re trying to build a brand from scratch because you know there’s an addressable market. You’re trying to win back share from the illicit market.
And so to do that, to command a bigger and bigger share of that brand loyalty and a successful consumer experience, it’s obviously going to be absolutely critical in winning that share.
Greg Hasty:
Wonderful. Well, Richard, I really appreciate your time. I love chatting with you. We can go so much deeper in the flow of the markets, but what’s wonderful about cannabis is that it’s always exciting and there’s always something going on. So every time we talk it’s a new and amazing adventure. But that being said, the trend of maturity keeps going. Seeing these markets come online stronger, seeing these companies come back stronger is such an exciting thing. But thank you again, Richard, I love the chance to talk with you, and I hope you enjoy your time on the floor. Always make sure to check out the Canadian Securities Exchange on their website, and Richard, I believe you also have CSE TV, which is your social media outlet, correct?
Richard Carleton:
That’s correct. That’s our YouTube channel. We encourage everybody to subscribe. Through the pandemic, we’ve been doing a lot of our shareholder and company education through the medium of YouTube, as well as LinkedIn and Twitter and Facebook and so on. But we really like YouTube.
Greg Hasty:
Beautiful. So make sure to go on YouTube, check out CSE TV. Really great quality content. And they’ve really put in the work, especially over the pandemic. Richard, thank you again. It was great to see you. Make sure to also check us out on highlycapitalized.com to stay up to date on today’s events and all the interviews you may have missed, as well as the upcoming interviews. And make sure to follow us on LinkedIn and Facebook to stay up to date on our broader services. We’ll be right back. Stay tuned. See you for the next interview.
There are many ways to achieve success in the cannabis industry, but the core of most business plans tends to reflect one of two extremes: complete vertical integration or a focus on just one field, be it cultivation, processing or retailing.
4Front Ventures (CSE:FFNT) is positioned firmly in the former camp and styles itself as a “House of Operators.” The company operates in multiple states, cultivating and retailing mass-produced, low-cost, yet high-quality branded cannabis products.
4Front’s brand portfolio spans more than 21 names, including Marmas, Crystal Clear, Funky Monkey, Pebbles, and the Pure Ratios wellness collection. The brands feature prominently in third-party retail outlets as well as in 4Front’s own chain of Mission dispensaries in Illinois, Massachusetts and Michigan.
Additionally, the company plans to bring its brands to the world’s largest cannabis market later this year when it commences operations at what is expected to be one of the biggest manufacturing facilities in the United States, at 170,000 square feet in Commerce, California.
Public Entrepreneur sat down with 4Front Ventures Chief Investment Officer Andrew Thut recently to find out what makes the company tick.
The “House of Operators” concept sees your team operate multiple divisions across the cannabis value chain. Can you explain to us how this works?
At 4Front, we have licenses and operations in five states. Notably, our facilities in Washington state have a dominant position in that market – we have close to a 10% market share, and rank as the number two flower producer and number one edibles producer.
Our strategy is really quite straightforward. Longer term, you don’t want to be a cultivator, though it is necessary, particularly in these early stages of the market. We also don’t want to be a large retailer.
We think the value in the industry is going to be in manufacturing finished goods, meaning having branded products in the market that people really enjoy and that have dominant market share.
As a result, we’re replicating the low-cost finished goods production that we’ve fine-tuned in the Washington facilities, and we’re putting this into four other states: Massachusetts, Illinois, California and Michigan. We’re also hoping to get a license in New Jersey.
In a nutshell, if you can get a customer because of a great product at an excellent price, you tend to take outsized market share. And because we have low-cost production, we have the ability to offer customers great value and still make very good margins.
You are completing a new manufacturing facility in California and your production is increasing. Do you have plans to begin selling excess product into the wholesale market?
Absolutely. In California, we are ready to roll out what, to my knowledge, is the largest cannabis production facility in the world. It’s about 170,000 square feet and we’re going to make our entire product line of tinctures, edibles, gel caps, vape pens and infused pre-rolls there.
As mentioned, we have developed what we think is some of the industry’s lowest cost production in our Washington facilities. But because we’re going into California, which is the biggest cannabis market in the world, we’re able to invest a lot more on automation. We’re basically taking the low-cost methodologies developed in Washington and putting them on steroids for the California market.
This is really a large-scale consumer packaged goods facility, and we intend to have the capacity to do about half a billion dollars of revenue out of it. We plan to really attack the California market and put all of our products into it eventually, starting this summer.
Your retail model is customer-centric and highly scalable. How did you develop your model into what it is today?
We started officially in 2011 as a consultancy for the industry and developed one of the earliest training programs, not only for cultivation and production personnel but also for retail staff.
When we look at what differentiates us from a retail standpoint, it’s having a warm and welcoming environment for customers. We’re trying to normalize the cannabis experience but we’re also having really knowledgeable sales staff there.
And we also have what we think is a terrific breadth of product in the store, together with great availability of that product, meaning we’re not out of stock often because we are producing most of what we sell.
We also lead on price. In cannabis, you have what we call an 80/20 rule back from my finance days, where 80% of the product is consumed by 20% of the customers. And those customers that are big consumers of cannabis are very, very price sensitive, which means they’re looking for a quality product at a terrific price. That’s exactly what we are giving them.
4Front says it has some of the best minds in the industry, providing depth of knowledge and operational expertise. Are there other areas you could adapt this expertise to?
This is a very nascent industry and we think that we are in the second inning of what is roughly a $100 billion industry here in the US.
We are so early that some of the big alcohol, tobacco and consumer packaged goods companies haven’t really been able to enter the space because they trade on US exchanges that will not allow them to enter a federally illegal business.
We have a lot of the boxes checked with the consumer products expertise that we bring, plus a finance team that has been in the game for over 20 years. So, we have the ability to navigate the capital markets and capitalize the projects that we need to fund.
All of this is in preparation for building out our beachhead well before some of the bigger brands come in. We feel that if we can prove that we have tried and true production methodologies that would be valuable to a larger player, with products and brands that would also be valuable and that have meaningful market share in the states in which we operate, then that would be attractive to other folks that come in.
We’re really focused on executing on that in a terrific industry where you’re learning new things every day, and we’re just plotting our own course as the industry unfolds. But it’s mostly about keeping your head down and making sure that you’re executing and creating products that customers love.
What can investors expect from 4Front in the medium term?
We have a great growth trajectory in front of us. We’re in five states currently and, hopefully, we’ll add New Jersey. We have a lot of confidence in our capabilities and our business. And when we go into a state where we can execute, and the numbers start to bear that out, we are seeing great revenue growth and profitability. When you’re taking market share, you want to take on more projects and have more assets that you can operate and sprinkle your know-how and pixie dust on.
4Front is very much in growth mode. We’ve been very clear to the market that we want to be bigger and have aspirations to be very solidly in that top 10. And we think that as this industry continues to unfold, we’re going to be part of that conversation.
I think investors should really figure out where they want to be in the value chain and look at who has executed.
We think the sweet spot is in consumer packaged goods, so that’s where we want to be. And we have a very clear runway to create a lot of value organically, just with the plan we have in front of us.
I would also say to stay tuned for a lot of M&A that’s going to come in the cannabis space in the coming year. People are looking to get bigger; people are looking to fill out geographies; they’re looking to fill out skill sets they don’t have. I think there is going to be a big wave of M&A in the industry over the next 12 to 18 months.
Red White & Bloom Brands (CSE:RWB) is positioning itself to become one of the top three multi-state cannabis operators in the US legal cannabis and hemp sector.
On the cannabis front, Red White & Bloom is predominantly focusing investment on major markets, including Michigan, Illinois, Florida, California, Arizona and Massachusetts. For hemp-based CBD products, US and international markets both feature prominently.
The company is also building on existing advantages through investments and pending acquisitions in Michigan and Massachusetts, plus a completed purchase in Illinois. It recently entered Florida and has been operating in California through its Platinum Vape brand for some time.
Public Entrepreneur sat down with Red White & Bloom Chief Executive Officer and Chairman Brad Rogers to find out more about his fast-growing company’s outlook and business plan.
Red White & Bloom has said its goals for the rest of 2021 are to build upon the Michigan footprint and focus on growing market share and expanding earnings. How will you achieve this?
The plan is to grow the bottom line as vertically as we can, and obviously to cut costs where we need to. But what we’re also going to be doing is holding the price point with our brand strategy.
In Michigan, specifically, we have the biggest brand in the state, which is Platinum Vape. And we’re rolling out our High Times line there.
When you look at the potential of when commoditization happens – after October, November, December or so – what you’ll see will be prices coming down. But we’re holding our price because of our brand strategy and our distribution strategy, with respect to how we’re handling our product portfolio and product mixes into stores.
Beyond that, with operational efficiencies, as well as our best practices and buying power, we have a strategy to make sure that we’re well fortified when this stuff commoditizes, much like coffee. We’re going to be well positioned to be able to sustain pricing and increase margins as well.
You are also looking for additional strategic relationships and to enter more US states with a “brands only” strategy that minimizes capital spending. How is this progressing?
This is going incredibly well. We’re getting a lot of interest for our brands across many states. Platinum Vape, for instance, is going into Oklahoma, and we’re also doing other brands there. High Times is now in demand too in other states, such as Nevada and the rest of California. It’s really expanding.
Red White & Bloom has closed a number of deals in a short period of time. What advantage do you have in deal-making over your competitors?
I think the real competitive advantage is the fact that this is not our first time. We’ve done this before. When you look at what I’ve done in the past, I’ve had two very successful exits on companies that I built. One of those was Mettrum, which was bought for half a billion. I took another fledgling company in the medical space in Canada from zero to about a billion and a half in market cap in about 12 months.
There’s strong belief in what we do and how we do it. What we’re also doing is fortifying our product strategy to bring in some of the players and get deals done. We make sure that they know that we know what we’re doing and that their products will have the best chance to be able to actually succeed in the market with the distribution channels we’re setting up across each state.
And then, of course, what they get is the halo effect of all the other brands that we’re bringing in and the distribution channels that we already have. And they can build upon that as well.
There is a lot of potential when bringing in new folks and getting new deals done that are aligned with Red White & Bloom’s strategy.
What do you think you personally bring to the company as its CEO and chairman?
Well, like I said, I’ve been through the wringer here before. I’ve seen the space grow from its infancy, all the way down to full commoditization in Canada, and how that affects the marketplace and the customers. And having seen this twice already, in building companies from that embryonic state to where they are now, it really gives us a good solid vision as to what’s happening.
The Wayne Gretzky analogy I use is: “Go where the puck is going, not where the puck is.” That’s where we want to be. We want to be where the puck is going and build for that versus where the puck is right now. Because everyone’s there, everyone thinks that “If you build it, they will come,” but that’s not the case.
What’s happening is that this is going to be a commodity and your brand is going to be the only thing that you’re going to be relying on, so you need to have great product, great strategy and good distribution.
Another analogy is Starbucks. I don’t know who grows the beans, and I don’t care because it always tastes good. It’s never something you think about. Once you build a good brand, with quality, price and convenience attached to it, you’re going to be standing tall.
And that’s what I bring to the table. I’m bringing vision and marketing and a lot of strategy with respect to where this market is going. I’ve been very successful twice at it and I think the US right now is a great place to use that experience.
What should Red White & Bloom shareholders expect from the company for the rest of the current year and beyond?
Well, we finally got past our pre-qualification in Michigan, which is a huge thing for our company. It means that we can actually now report revenues from Michigan on the assets that we’ve invested in. And that’s transformational for us in that our investors have not seen to date what those assets are doing because we couldn’t report them.
Now we’re going to be able to report those earnings, as well as grow the Platinum Vape business we purchased a little while ago in San Diego. So you’ll see exponential growth in that company in Michigan and California. We’re also entering Arizona and we’ve got Florida coming as well.
When you look at the assets in the new states that we have, and the revenue that is going to be starting in Arizona and in Florida, we’re going to be seeing some nice revenue streams, both from existing states and from new ones. We’re really excited about that.
Overall, I think it’s about the strategy in terms of who we are, what we do, and how we do it. It all comes down to how you’re approaching the market and what you’re doing in that market. We can be asset light and brand rich, and that’s what we’re executing on right now. And it’s playing out well for us.
To create the winner that we’re going to be in the space, we’ve got some catching up to do. We’re about five years late to the market, but when you look at what we do and how we spend, we’re very judicious with our dollars and we’re making great strides with respect to how much ground we’ve covered in a very short period of time. We’re looking forward to catching up to the big boys and really being at that top echelon.
CSE’s Barrington Miller is joined by Sean Bovingdon, CEO of The Green Organic Dutchman Holdings Ltd. (CSE:TGOD) to discuss how his company’s expanded focus on the US and recent listing on the Canadian Securities Exchange is setting course for a bright future for the firm.
Here’s an overview of what Barrington and Sean cover in this edition of the “Exchange for Entrepreneurs” podcast:
0:00 – Introducing Sean Bovingdon and TGOD
1:45 – Sean’s past experience in global growth companies
4:30 – The features of organic cannabis
6:54 – Delivering “craft cannabis” at scale
9:20 – Shifting focus to local markets, the US and paying debt
13:53 – Growing revenue and being agile during COVID
16:50 – Prospects for Germany and Mexico
19:00 – What really matters in the cannabis industry
About The Green Organic Dutchman Holdings Ltd. The Green Organic Dutchman Holdings Ltd. is a premium certified organically grown cannabis company focused on the health and wellness market. Its organic cannabis is cultivated in living soil, as nature intended. The Company is committed to cultivating a better tomorrow by producing its products responsibly, with less waste and impact on the environment. In Canada, TGOD sells dried flower and oil, and recently launched a series of next‐generation cannabis products such as hash, vapes, organic teas and dissolvable powders.
Jonathan Sandelman, Chief Executive Officer of Ayr Wellness (CSE:AYR.A), takes interviews in a decidedly different direction than most CEOs. Rather than highlighting his company’s assets and achievements, Sandelman prefers to talk about the thing that, in his mind, most determines commercial success: corporate culture.
Ayr has big goals, and with nearly US$1.5 billion in assets on its balance sheet is well on its way to achieving them. The company expands organically thanks to exceptional product quality, and also through acquisitions, which can be tricky at the best of times.
But at the end of the day, if everyone at Ayr embraces Sandelman’s philosophy, and everyone pulls in the same direction, that’s the edge needed to come out on top. It’s an old saying in the investment industry, where Sandelman rose to become President of Bank of America Securities, that if you can’t tell someone what your edge is in just a few seconds, you don’t have one. Sandelman knew what Ayr’s edge was the day he established the company.
We connected with Sandelman in early July to discuss Ayr’s growth to date and the foundations of his confidence about its future.
Ayr has a very clear vision of where it is going and how it intends to get there. Talk to us about Ayr’s mission as a company and the corporate culture you need to make it a reality.
Our goal and mission statement at Ayr is to be the largest scale producer of high-quality flower in the United States. We don’t mean to insinuate that there aren’t smaller, boutique growers that grow really high-quality flower. But in the large MSO arena, we think one of the things that differentiates our company is our cultivation of high-quality flower at large scale.
Now, why is that important? First of all, in business you need to do something that differentiates your brand. In business school, we were taught about the unique selling proposition – what differentiates your brand from all other brands?
When we think about the industry and when we listen to our competitors, they talk a lot about branding, being a CPG (consumer packaged goods) company, and they are very focused on their box. “How does my box look?”
At Ayr, we tell our teammates, those in the marketplace, and our investors that it’s not about the box, but what’s inside the box. We believe that any time you underestimate the consumer, who has choice, who has multiple alternatives to consider – and for sure this industry is going to get more competitive – when you underestimate the consumer, I don’t care what business you’re in, you’re making a mistake. Because they know.
When I started my career as an investor, I typically bought into companies I thought had the best product in that category.
A lot of people in business want to be like Nike and Apple. I don’t buy Nike because it’s in an orange box. I buy it because I’ve been a marathoner and what’s inside the box is what motivates me to buy their product. When I think about Apple, while I think they have beautiful white boxes, I buy it because it’s the best laptop or phone. If it was simply an orange box or white box without being the best product, I wouldn’t buy it.
In Pennsylvania, we had our first harvest, our first flower for wholesale and our store shelves. The market tried our product and it sold out in a week. The consumer knows. We aimed to produce the highest quality flower in a market lacking high-quality product and it sold out in a week.
And then we recently introduced our Seven Hills flower brand. Again, consumers recognized the quality of our product and it sold out in a week. That’s why our focus is on growing the best quality flower.
Acquisitions are an important part of Ayr’s growth strategy. How do you assess potential acquisitions, and how do you successfully integrate acquired businesses?
We identify early on which states we want to build our businesses in. Then we have our M&A and strategy teams go into those markets and try to find the best assets. I’ve said from day one that the way I want to build this business is to cluster and penetrate. I like contiguous states so that when the consumer travels into a nearby market, they may not know the brands, but then they see the Ayr brand and they know what that stands for. They are going to buy Ayr even when they have other choices.
Equally important, that seller, who will remain with the company in most cases, must believe in our ethos. They must believe in honesty, integrity and transparency, and have values consistent with ours.
With talent, you win. For me, the companies that have the best culture, the best vision and the best talent pool win. The perfect transaction is one where we get a great asset as well as more team members.
Ayr was incorporated in July 2017, yet you have hundreds of millions in revenue and some US$1.5 billion in assets. How did the company grow so quickly?
I’ve been an investor and an operator for more than 30 years, with a deep understanding of the capital markets. I told my investors that Ayr would be EBITDA positive and cash flow positive from day one. That’s the disciplined way to act.
We would be disciplined because we understood that the public markets are cyclical. We thought we could be more aggressive when a correction happened and assets got cheaper because we were EBITDA and cash flow positive.
That’s exactly what you saw us do. We bought our initial companies, we paused for 13 months, the correction happened, and then we got aggressive about certain companies. It’s my belief that this once-in-a-lifetime opportunity to buy assets at bargain prices will eventually go away. There will be some form of federal legalization, and then what I call the “wall of money” will come in. It will flood the market and these multiples we are buying at today will trade even higher.
We are still aggressive about buying because I don’t think this will last even another year or two. That is the thought process behind what the future will bring for Ayr.
Given your background in finance and understanding of the cannabis industry, what is your outlook for the next five years and how does that shape Ayr’s business strategy?
I expect federal legalization of this industry because it is irrational that it’s not already legal. When almost every state in the US has some type of cannabis program, does it really make sense not to be federally legal?
For those who are uncertain about cannabis, I would vote for the SAFE Banking Act because it puts controls around the industry and creates insight and transparency that doesn’t really exist on the federal level. If you bank this industry, you know all the cash flows, from where the money is coming and where the money is going.
If you think about where alcohol is trading in terms of multiples, there is a lot of upside in our industry’s multiples and in individual stock multiples.
Ayr news often highlights acquisitions or new retail locations. Talk about the team and the dedication it takes to operate successfully at the pace you set.
I’m a believer in a culture of excellence. I’ve always had this philosophy that talent is free. That whatever I pay, or our shareholders pay, the rewards they are able to produce are just spectacular. Even when we were just a two-state operator, we had some of the best EBITDA and cash flow in the industry.
I think about the vision, what talents are required, what are the job functions, and then I think about who that type of individual would be.
It’s culture. You can’t just be the smartest person in your lane, you also have to be an extremely respectful person. When we’re in a meeting and I’m pushing you, you always understand that I am not pushing you to herd you, but to get you to think at a pace, at a level that you haven’t been able to in the past.
When I hire people, I always tell them my goal is for them to say to me a year from now that they’ve become the best version of themselves. There is something about this culture and this team that inspires them to do their best work and be the best person they have ever been in business.
I think our culture is the secret asset on our balance sheet. If the 1,500th person has the same vision as the people at the top, and we have 1,500 pairs of oars all rowing in the same direction, toward the same vision, then we win.
You are talking to me for this interview, but I am getting too much credit. I am the one talking, but it’s because we have a great team. We have built the best operating system and tech stack so we integrate these companies seamlessly. The people are so talented, and the systems and controls are so good, that we make it look easy. But it’s not.
Ayr is its people, and its dedication to its teammates, to its community, to its shareholders. That’s the ethos of this company.
The CSE warmly welcomed Eat Well Investment Group Inc. (CSE:EWG) for a virtual Market Open on September 28, 2021.
Eat Well Investment Group is an investment company primarily focused on high-growth companies in the agribusiness, foodtech, plant-based and environmental, social and governance (ESG) sectors. The team has financed and invested in early-stage venture companies for more than 25 years, and maintains a current investment mandate in the health and wellness industry.
Founder & President Marc Aneed and other members of the incredible Eat Well team kicked off the day’s trading at the virtual Market Open.
For more details about the CSE, including information on other Market Opens, please visit the CSE website or follow us on social media.
The CSE warmly welcomed Blender Bites Limited (CSE:BITE) for a virtual Market Open on September 23, 2021.
Blender Bites is a Canadian food company that sells pre-portioned “easy smoothie” products that are organic, vegan, non-GMO, gluten free, soy free, and with no added sugars. Sustainability is at the forefront of their company, with minimal plastic packaging and a focus on plant-based ingredients. Blender Bites products are distributed nationally across Canada and are currently sold in over 800 stores, with a launch planned to enter the United States marketplace.
Founder & CEO Chelsie Hodge, Director of Sales and Marketing Jessica Evans, and other members of the incredible Blender Bites team kicked off the day’s trading at the virtual Market Open.
For more details about the CSE, including information on other Market Opens, please visit the CSE website or follow us on social media.
When it comes to cannabis in the state of Michigan, Gage Growth (CSE:GAGE) is the name an increasing number of consumers are turning to. Still a young company, having been in operation for just over 18 months, Gage has nonetheless amassed one of the largest asset portfolios in the state. Experience at the leadership level is key to this success.
Gage’s Chief Executive Officer, Fabian Monaco, is a former lawyer and investment banker who was actively involved in the evolution of the cannabis industry. He was a key member of the team that transacted the first cannabis acquisition, Tweed (now known as Canopy Growth)’s purchase of Bedrocan, and also the first-ever cannabis IPO. Also on the team is cannabis impresario Bruce Linton, who serves as Chairman. Another big name is TerrAscend’s Executive Chairman Jason Wild, who has a large stake in the company.
What is it about Gage that attracts some of the most successful executives in the cannabis industry? For one, Gage is on track to be Michigan’s number one operator by the end of 2021, with 14 facilities either in operation or planned. Its first set of financial statements as a public company showed a big quarter-over-quarter jump in revenue, and a corresponding increase in its profit margin.
Clearly, the decision to start things off in Michigan was a good one.
“One of our founders is from Michigan and the other founder has a strong connection to Michigan through family,” says Monaco. “The biggest reason we chose the state, though, is that it had the second-largest medical cardholder system behind California for many years. Their caregiver program was introduced in 2008, and thanks to that, individuals have been going to dispensaries for over a decade.”
Monaco goes on to explain that close to 75% of the population in Michigan is of age to consume, and that after December 1, 2019, which was the first day of adult-use sales in the state, cannabis commerce skyrocketed. Michigan was outside the top 10 states by revenue at the time, but quickly vaulted to sixth, just behind Illinois. Today, it surpasses Illinois consistently and ranks third.
“It’s been playing out pretty much as we thought it would,” says Monaco.
In a market that size, there is bound to be healthy competition. But Gage has established some important points of differentiation and leverages them to the fullest.
“We really focus on every part of the value chain of the business, from seed to smoke,” says Monaco. “We’re constantly hunting, looking for new cultivars to bring to the table for patients and for consumers. A lot of producers out there – especially some of the publicly traded ones – don’t really grow a lot of varieties, and we pride ourselves on having 40, 50, sometimes even 60 different flavours within our retail locations for people to choose from.”
Monaco says that post-production processes are just as important, and that Gage hang-dries its product, trims it, and packages it. “We have this fun, bright, engaging packaging as well for our flower that people enjoy, and we manage most sales through our own retail channels.“
In addition to having identified a prime jurisdiction in which to operate, Gage also knows who it’s targeting to buy its products.
“In general, we’re going after the former medical user – a refined consumer, someone who has been consuming the product for many, many years,” Monaco explains. “We have a really wide variety of customers.”
The Gage business strategy calls for vertical integration and establishing operations strongly in a single state before taking its proven model and applying it in other states.
“We’re going to focus on one market for the better part of 2021, although we do anticipate doing something outside of Michigan near the end of the year,” Monaco says. “We’re trying to follow that Trulieve (Trulieve Cannabis; CSE:TRUL) model where you execute really well in one state and use that as a springboard to enter other states. Once we feel comfortable with where we’re at, especially as we approach the end of the year, you’ll see us branch out into other states.”
With expansion seemingly just around the corner, the question of where Gage will decide to go next is an obvious one. Monaco believes there is “phenomenal” opportunity throughout the United States and his team has already assessed several states this year. He says there is a lot to like. Plans call for focusing on some of the larger markets with Gage’s first few acquisitions. Massachusetts, Illinois, Ohio, Maryland, California and Pennsylvania are all in the running.
“You’ll probably see us make a move into one of the larger states pretty soon,” says Monaco.
Looking out over the next two or three years, Monaco says Gage is strongly positioned to take advantage of a wide range of opportunities that present themselves as the industry evolves.
“We have a solid cash balance to execute our plans in Michigan and didn’t really take on any harsh payment obligations, in terms of sale leasebacks or debt, over the past couple of years,” Monaco explains. “Now we have the opportunity to tap into some of the lower cost of capital opportunities that cannabis companies are seeing these days. Because our cultivation assets are unencumbered, and we own our retail locations, it really affords us the opportunity to go after some debt to fuel growth without having to dilute shareholders.”
From an earnings perspective, Monaco believes Gage can both increase revenue and expand margins rapidly, because Gage products so frequently sell out.
As for the higher goals, Gage is probably not all that far from achieving some of them already, though the walk before you run mindset remains firmly in place.
“Personally, I’d love to be number one in Michigan, our home base, and then a top player in two or three other states. I think it’s important to remain focused in Michigan before we branch out. We’ll look to be one of the top three in each respective state we go to within the next 24 to 36 months.”
