All posts by Jon Hopkins

4Front Ventures: A “House of Operators” focusing on the sweet spot in the cannabis value chain

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.

This story was featured in the Canadian Securities Exchange magazine.

Learn more about 4Front Ventures at https://4frontventures.com/

Red White & Bloom Brands: Strong brands and acquisitions underpin rapid growth strategy

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.

This story was featured in the Canadian Securities Exchange magazine.

Learn more about Red White & Bloom Brands at https://www.redwhitebloom.com/

Clarity Gold: Unearthing big value in overlooked projects

Founded in 2019 and publicly listed on the CSE in July 2020, Clarity Gold (CSE:CLAR) has the objective to acquire and develop gold projects that have been “overlooked or underfinanced.”

Headed by Chief Executive Officer James Rogers, Clarity’s management team has certainly proven its ability to identify, evaluate and execute transactions, having collectively completed over 100 resource project deals.

In November 2020, the company acquired an option on 100% of the Destiny Project, a gold project located in the prolific Abitibi Greenstone Belt, which extends from Wawa, Ontario to  Val-d’Or, Quebec.

In addition to Destiny, Clarity has three 100% owned projects on its books in British Columbia: Empirical, a gold, copper and molybdenum project located 12 kilometres south of Lillooet; Tyber, a gold, copper and silver project located 18 kilometres south of Parksville; and Gretna Green, a gold, copper and silver project located 24 kilometres southwest of Port Alberni.

Rogers spoke recently with Public Entrepreneur about his views on building a company in the resource sector and what the future holds for his industry and Clarity shareholders.

Let’s start by delving into Clarity Gold’s mission statement and your guiding principles. 

Clarity’s objective since inception has been pretty clear – we’ve been entirely focused on gold in North America, with an emphasis on Canada. Our mandate has been to become an explorer concentrated on discovering and building ounces in stable jurisdictions within North America. 

British Columbia was our starting point, and we’ve grown by establishing a strong foothold in Quebec with the Destiny Project. 

Destiny is a project you acquired in November and it is in the famous Abitibi Greenstone Belt. Tell us about your decision to obtain a 100% option on this project.

Destiny is an exciting gold project on a lesser-known structure in the belt. The Abitibi is an important jurisdiction in Canada, and in the world, really. It is one of the most prolific greenstone belts there is.

The Abitibi is comprised of six dominant structures. The 400-kilometre-long structure that the Destiny Project is located along is called the Chicobi. It is a less-explored structure that is proving to have gold mineralization associated with it, just like on the Cadillac and other well-known structures through the Abitibi. This is one of the reasons we were attracted to it. Dominant structures play an important part in controlling gold mineralization within the Abitibi.

When we look at the main structures in the south, they are largely near surface. Nobody really found the Destiny Project until 1998 because it has a thin veneer of overburden and till – it is just not on surface.

It started in 1998, which kicked off multiple campaigns totalling over 50,000 metres of drilling, culminating in a historic resource in 2011. And it has basically lain dormant since 2012. Our mandate is to take a fresh look at this, peeling back the previous data and thinking more about this project’s optionality as a high-grade, structurally controlled gold deposit. 

You also have three projects in British Columbia. How do these fit into your near-term plan?

We started with Empirical, which was our flagship project in British Columbia. We then acquired two more grassroots projects in the province. My background is in project generation and one of my strengths is keeping an eye open for new opportunities and projects. When our team saw Destiny, we recognized the opportunity for a more advanced project to create value in a jurisdiction that we’re comfortable working in and understand really well. We see the best opportunity to create near-term value for the company in advancing Destiny, but will continue to maintain and advance the rest of our portfolio.

How are you funded to move forward with the planned work following your recent private placement? 

We just finished a $4.5 million financing. The next step for us is two-fold. We are financed to carry out exploration to advance Destiny but are also on the lookout for more projects with a similar profile where we could add value with our expertise. Destiny is a foothold – it is really our first step into a large gold camp where we have experience operating. 

You have somewhat of a different background than the typical junior company CEO in that you run a large services company for the industry as well. What do you consider is your main strength as head of Clarity Gold? 

I’d say looking at data and coming up with an idea. A cool stat is during the hunt for Destiny, I compiled 200,000 drill holes in Quebec and Ontario inside of the Abitibi and started thinking a bit about why the Chicobi structure just hadn’t been looked at the same as the others and why this is an important and underexplored part of the Abitibi story. 

Bear in mind, the Abitibi has produced more than 180 million ounces of gold, which is an incredible number. It’s actually hard to keep track of the number of headframes you pass as you drive from Val-d’Or to Timmins. One of my strengths is definitely looking at data but also in executing. 

I come from an exploration background, running a services company where our specialty is grassroots exploration and running drill programs, up to say 70,000 to 100,000 metres of drilling in a year. But when we get in and take a look at data, and we’re able to manipulate and think about things differently, that’s where we find things that get exciting. Where things have been overlooked or interpreted in a different way. Then we’re able to bring a fresh perspective to something and bring it to life. 

Let’s finish up with a look at what investors should expect from Clarity in 2021.

This year is going to be big. It will include our maiden drill program on Destiny, which should be kicking off before winter’s end. We’ll start with about a 10,000-metre program, which will then carry on into subsequent drilling as we get results and continue to move it forward.

This story was featured in the Public Entrepreneur magazine.

Learn more about Clarity Gold
at https://claritygoldcorp.com/

Taat Lifestyle & Wellness: Helping smokers kick the habit by embracing the cigarette experience

The world of smoking has undergone quite a transformation over the past couple of decades, with cigarettes, cigars and pipes giving partial way to vaping and other next-generation products that more closely align with positive health and lifestyle values.

Few people are positioned better than Setti Coscarella to understand this change and assess whether it is here to stay. So firm is his belief in the segment’s potential that he left cigarette industry titan Philip Morris International (PMI) earlier this year to join young start-up Taat Lifestyle & Wellness (CSE:TAAT) as Chief Executive Officer.

Coscarella was a top strategist for reduced-risk products (RRPs) at the tobacco giant, where his insight led to initiatives that collectively yielded a fivefold increase in RRP leads and purchases.

Taat is focused on hemp-based products, so it should come as no surprise that the group’s Beyond Tobacco cigarettes feature CBD and CBG, both of which are known to provide a wide range of health benefits. The cigarettes contain no tobacco or nicotine, making them ideal as a tobacco replacement or cessation tool.

Public Entrepreneur caught up with Taat’s new boss a few months into the job to find out more. The first question was obvious.

You have just moved from the world’s biggest tobacco company to a start-up. Was this a big leap of faith or a no-brainer?

In a lot of ways, this might be considered a leap of faith, as there were the combined risks of giving up the stability and prestige of working at PMI and replacing that role with a position at a brand new company. 

If one’s modus operandi is to just collect a salary and grow within the parameters of a corporate environment, then a move like this would definitely be a leap of faith. I don’t feel that way about it, though, and there are two reasons.

The first is that I see greater potential in Taat as an alternative to traditional cigarettes than I do in any of the alternatives brought to market by Big Tobacco. PMI has spent US$7.2 billion producing smoke-free products, but how much market share has that earned them? It’s then arguably a leap of faith to stay on the Big Tobacco side, since it assumes their alternatives will become and remain profitable.

That brings us to the second reason, which is that a leap of faith is very different from a calculated risk. As an entrepreneur and investment banker by trade, calculated risks are something I’m very familiar with. When you take smaller risks, you position yourself for smaller rewards, and while there’s nothing wrong with that, I’ve become very comfortable taking educated and balanced risks when making business decisions.

What is the advantage of Taat’s Beyond Tobacco cigarettes over other non-nicotine products? 

I love this question because it highlights an interesting discrepancy in the category of alternative products to tobacco cigarettes. Tobacco-free products such as gums, patches, lozenges and vapes all have two things in common. The first is that they generally contain nicotine, and the second is that they’re in a completely different format to what a tobacco smoker is conditioned to using.

I think most people can understand it doesn’t make sense to try to leave nicotine behind by continuing nicotine intake using a different method. As for the format, it matters far more than you think. If nicotine was the only thing smokers craved, then things like gums and patches would work much better. The fact that smokers frequently abandon these alternatives to return to tobacco cigarettes suggests they crave the sensory and motor elements of smoking, which none of those alternatives can provide. 

Taat is built around an objective of mimicking those elements: the stick format, tobacco-like smell and taste, the crackling sound from combustion and the ability to flick ashes off the stick as the product burns. You can’t do that with a vape device, and you certainly can’t do that with gum or a patch.

Part of that is the patent-pending refinement technique we use for the Beyond Tobacco base material, which creates a taste and smell resembling tobacco. While others sell difference, we sell similarity, and for a transition such as giving up tobacco, similarity is priceless.

You are targeting the launch of Beyond Tobacco cigarettes in the fourth quarter of 2020. How wide will the launch be? 

We’ll be launching in the state of Ohio, which puts us into a market of about 11.7 million people, with 22.5% of Ohio adults being cigarette smokers, based on 2016 data.

We are not concentrating on any particular part of Ohio. The big three cities of Cincinnati, Columbus and Cleveland are spread out geographically, which will allow us to examine regional trends during the launch, to better shape our expansion strategies. Our near-term intent is to expand our footprint outward to other states and organically build traction that way.

Does the company have international ambitions? 

Most definitely. And this isn’t just because other countries represent more smokers who might be interested in switching to Taat. It’s also because there are unique opportunities in international markets. For example, not many people know how expensive cigarettes are in Australia. Try nearly $50 per pack.

We also mentioned in October how the recent US$5 million private placement led by a prominent Hong Kong financier could help to expedite our entry into Asian markets.

But our current focus is on maximizing our launch in Ohio, as I believe that will build far more sustainable momentum than moving to expand internationally right away.

Can you give us an idea of the size of the market the company is aiming at?

Globally, about 1.3 billion people use tobacco, according to the World Health Organization. In 2018, the tobacco market at a worldwide level was valued at approximately US$814 billion.

Naturally, not every tobacco user necessarily wants to switch to a nicotine-free and tobacco-free product such as Taat, but there are enough tobacco smokers who have had enough of nicotine and want or have attempted to quit. One figure I believe reflects this in the United States is 2018 data from the CDC (Centers for Disease Control and Prevention) that says 55.1% of adult smokers had attempted to quit in the past year, though only 7.5% succeeded.

Therefore, if I had to answer this question in one sentence: hundreds of millions of people, and hundreds of billions of dollars. 

What can investors expect from Taat in the future?

Putting myself in the investor’s shoes for a moment, a start-up in the tobacco industry offering an analogue product such as Taat should present a clearly defined plan for commercializing it in a way that makes it a credible competitor to incumbent tobacco products. Further, I would expect visibility into how Taat is made and what the supply chain is like. Finally, I would expect transparency regarding the company’s progress, whether good or bad, both during the launch phase as well as during any expansion.

This story was featured in the Public Entrepreneur magazine.

Learn more about Taat Lifestyle & Wellness Ltd.
at https://trytaat.com/