It ended with a keg party, a stumbling walk back to the hotel with too much vodka under my belt and two very ordinary hot dogs at 3am.
It had began with a lot of coffee, the red eye in from Vancouver, a suit change in a damp airport restroom, and a butt ache from the sewer grate that passes as an Air Canada economy seat.
But it ended with a keg party, so I’m not complaining.
GreenRush Vancouver was a good first step for a Canadian medical marijuana sector looking out from under the covers for the first time. But GreenRush Toronto
was all business. The number of exhibitors had jumped markedly, and the crowd was less broker-y and more former-mining-investor-y.
The stars of the show were three companies that ended things on the same stage: Bedrocan, Organigram and Tweed (TSX:V.TWD
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They couldn’t possibly be more different.
Bedrocan, Europe’s supplier of medical marijuana, is set up, growing, producing and selling to patients with full licensing in place. They’re not listed publicly yet, but will be soon, and if growing is your thing, you’ll be on it when that happens.
Organigram is a smaller player, but also licensed up and on the move. They’re expecting their listing sometime around August and have a softly/slowly approach to growing out their business. They also grow a strictly organic product, which they think will differentiate them from the market and be something that some patients and doctors see as a dealbreaker for many of their competitors.
Tweed is the big swinging johnson of the Canadian sector, having come to their market debut with 9-figure market caps and hefty cross-border investor bases and much hullaballoo. Tweed had first mover advantage but has suffered of late through poor product reviews and, they admitted to me at the conference, problems with their first few crops.
Mark Zekulin, Tweed Executive VP and General Counsel, told me, when asked about the crops, “Yes, our first crop wasn’t where we wanted it to be. The next one was better. The third will be better still. Everyone has growing pains and we’re no different.”
He continued, “Obviously the loudest people are the people who are unhappy with things, but the vast majority of our customers are really happy with what we’re providing.”
To counter those growing pains, Tweed has moved to snap up an Ontario greenhouse facility run by Park Lane Farms, reasoning that if their warehouse facility is having issues, having a different kind of facility at the ready will help them lock down future production.
Zekulin didn’t hide the fact that the early production issues led to the Park Lane move. But if any company has the means to buy its way through problems, Tweed’s that company.
Others at the conference questioned how a greenhouse next door to a vineyard and nursery will manage to keep bugs out, or whether the new facility will actually get its MMPR, or whether Tweed is growing its customer base faster than it’s losing them, but I’ll say this for the Tweedians: They’re performing a service to the sector by being the convenient piñata for everyone else to lay into in an effort to make themselves look good, and they’re taking their beatings with good grace. I found Zebukin to be nothing short of pleasant and, mild spinnery aside, open to rough questions.
As an example of that, he came to find me, after I put the boot to his company in my presentation, and accepted the criticisms offered willingly.
I had expected he’d unleash a storm of ninjas on me and send out a hunting party to put my family in the ground, but the smile was wide and the outstretched handshake decidedly short of hand buzzers.
I hope Tweed can get it together. The sector needs a couple of big dogs to do the hard work of doctor education and best practice establishment, and if the first mover falters too much, the competition will bear some of the backlash.
Organigram was the #3 application in to Health Canada for an MMPR and is the 13th
to get one issued. They say they have their first 100 customers in place and are scope-locked on making sure those 100 are evangelists for the product. They have a 30k sq. ft. facility producing currently in which they’re running a three level grow operation, which they say helps keep CO₂ perfect while keeping overhead down. They’re hoping to be producing 2000kg of medical organic weed by Christmas.
They also say they need 2200 patients to be profitable.
Which leads to what I saw as the big takeaway from the conference: Distribution is getting serious.
And the company that showed up to the party with the most in-demand dance card is smack dab in the middle of the distribution game, as well as the ‘most in need of a new name’ game: MedCannAccess.
You’ve probably not heard of them yet, because they’re not public but rapidly moving towards a reverse takeover. They have a few million bucks raised privately, and they have two small grow sites waiting for final security okays from Health Canada.
What’s impressive about these guys, other than the fact that they were existing suppliers under the old MMAR system for some six years, is that they have 400 referring physicians already in the bag, and 1850 patients on a waiting list to do business.
Now, these aren’t ‘old patients they hope will move over under the new system’, this is 1850 people ready to do business on the new system.
Blair Dowdle, the CEO of the company, says the bulk of their outreach to doctors initially came from patients showing those doctors the success they had treating their own ailments, and that the doctors are now starting to evangelize to their other patients. He sees this shift picking up steam at present and says all companies will benefit, but with a hefty slice of doctors lined up alongside MedCannAccess, they expect to continue growing their distribution arm at pace.
MedCannAccess says they’re spending $100 per acquired patient, which is about what Scotiabank spends convincing someone to open a new bank account. Profitability on that patient is projected to take three months to achieve.
Why the small grow sizes? Manageability. And the belief that they’ll be able to buy good product from others at a low wholesale price going forward. The 2k sq. ft. facility is lined up to be a testing and development operation. The 7k sq. ft. facility will be where they grow their premium product.
The leadership team says that when Health Canada was trying to figure out the rules of the MMPR, it asked them for assistance, and they sent their grow manuals, many pages of which have ended up in the final regulations. Side note: I heard this from three other companies on the same day, which is not to say any of them were lying, just that Health Canada was likely plagiarising from several targets.
While dispensaries are not part of Health Canada’s plans, ‘solution centres’ (being places where patients can receive advice and assistance) are okay under present guidelines, and to that end MCA has four clinics already in operation in Ontario with 34 more planned in the next two years.
I asked Dowdle if he’s had approaches from bigger players desperate for distribution, but I couldn’t hear his answer for the champagne popping and whooping. Dude was practically making it rain, he was so happy with how things are progressing.
“We’ve had a lot of talks and calls. But it’s too early. We’re not jumping into any deals right now. We’re just going to keep snapping up patients and then it’s going to cost someone a lot to make us their distribution arm. For now, we’re comfortable going it alone and we know we’re onto something good.”
I kind of hated Dowdle because he’s not blowing smoke, no pun intended. He knows his company, small as it is right now, is achieving something that the grow-sector in general isn’t, and which will be the difference between their creating a sustainable business model or watching those big companies turn into giant repositories of weed that needs to be dumped cheap.
Lock down distribution, and Tweed, Bedrocan, Organigram, Medican, Creative Edge, etc etc etc become the farmers to your ConAgra.
Speaking of Creative Edge (OTO:FITX
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), I was expecting/hoping to get a chance to chat with CEO Bill Chabaan (and the conference had, perhaps ominously, put our pictures side by side on promotional material) so I could congratulate him for not making more claims that his Lakeshore Ontario site will be the largest in the world (one day, some day). Alas, I never saw him. FITX didn’t have a booth, and a few people suggested he never showed, while others said he was there momentarily. Either way, his company presentation was performed by someone else.
I didn’t go see it as I was chatting with the Supreme Pharmaceuticals (CSE:C.SL
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) crowd as it was happening and was more interested in watching them hold court.
Crop King Seeds was at the show. I didn’t talk to them but heard on the grapevine from several execs that they had been sending out free seeds to companies at the show. This was not well received: The last thing a company going through a security clearance process needs is illegal seeds showing up in the mail. In fact, at least one company called in the RCMP to dispose of the package. When asked about it, a Crop King rep reportedly dismissed it all, saying, “Oh, we’re not worried about the RCMP.”
Geez. I am, and I’m just writing
about the business.
Spent some time with the crew behind Vodis, a small B.C. grow play that is lining up a listing. They got their ready-to-build in February and were #41 in the MMPR application order.
The Vodis crew are growers through and through. That’s kind of their thing. They used to be part of Advanced Nutrients, and claim their people were four of the first ten licensed to grow in Canada under the old MMAR system. They have a master grower.
28 strains as of now. They’ve operated dispensaries before, which gives them a network of potential customers, and they’re looking to move into the Washington State dispensary/grower game with a couple of LOIs signed for leaseback deals in place.
Potential gamechangers: They say they have 5100 clients signed up and ready to go as of March, though I can’t possibly verify that so take it with a grain of salt. But if they’re telling the truth – that’s a massive deal.
Again, distribution is the key to the gates of weedco heaven. In my mind, it won’t matter how much you can grow in six months’ time, it’ll matter what you can move.
Vodis also says their grow cost is around $2 per gram, under the new MMPR rules that require testing that wasn’t required under the old system. They’re thinking they’ll sell for $4 a gram, which keeps them under Tweed’s $5 compassionate pricing, $7 expected average, and $9 current average. Supreme Pharmaceuticals is aiming for a similar $4 per gram average, with $2 at the low end.
On the marketing side, the company shares some execs with Newnote Financial (CSE:C.NEU
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), the Bitcoin mining play that ramped up from $0.05 to $0.55 in three months earlier this year before a bunch of free-trading paper sent it back down over the past week. I’ve got a chunk of that stock, so I don’t write about it as a general rule, but I like what they’re doing enough to add on the dip. Do your own due diligence.
Also on the ‘I own it’ side of things, I bought a little Satori Resources (TSX:V.BUD
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) Friday. Yes, I know that seems bizarre coming from the guy who coined the name SadStori Resources many months ago, but I chatted with CEO Jennifer Boyle at the conference and am told she’s bringing a team of people to BC this week to look at an opportunity. She’s keen enough on it that she’s invited me along.
That's not a first: I've been invited to so many grow facilities over the last few months I feel like I should go get a Walter White pork pie hat. But Satori's stori has been quiet so long, with the Venture exchange breathlessly ready to pounce on any suggestion they're doing something non-mine-related, that I figured it's time to muck in.
That’s as much information as you’ll get from me - mostly because I’ll be under a confidentiality agreement but also because I don’t write stories about companies I own shares in. So if I write a story about Satori next Friday, you’ll know what’s up..
Finally, sat down with Endexx (OTO:EDXC
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) CEO Todd Davis to talk about vending machines.
Davis is a brave man because, as I’ve told him several times previously, I *hate* vending machine plays with a passion. But he found me, he sat me down, and he talked it over.
I hesitate to say he brought me around on the topic but he at least brought me back to the middle. Actually, beyond the middle, if I’m honest.
Here’s the deal: He’s not making soda vending machines filled with weed. Those low-end machines have been kyboshed in Colorado, with companies using them being told they can’t hold actual weed but rather weed-related products, and they have to be attended to by an employee who checks ID and ensures they’re not being used by kids.
So, basically, those machines are high tech shelving and nothing more.
Endexx’s machine isn’t described as a vending machine by the company, but as a ‘vault level secured dispensing system’. In other words, their system is designed to serve as a product vault that eliminates shrinkage (IE: employees walking off with product, which is a real problem in the US dispensaries), handles two-level ID checking, has ATM-level strength and security, and reduces product dispersal times significantly.
Yes, you still need someone to watch it, but being as the machines go in dispensaries and those dispensaries already have a security guard at the door, that’s not a dealbreaker.
Concerned about kids using the system? You can’t get access to the product without your ID and a thumbprint.
Concerned about people using the system at every dispensary in town, going way over their allotted medicine? The system can be hooked into state wide reporting that restricts users to their allowed limit.
Concerned about someone driving off with the machine, which would have 750 bags of weed – or $50,000 worth of product - inside? Endexx has been testing for the last two years in a Santa Ana, California and has video footage of people doing everything they can to make off with the system, to no success. Davis says the system is insurable as a security vault, which is a big deal as far as legitimacy is concerned.
Davis also claims the machine takes 3 to 4 minutes per transaction in beta testing, compared to up to 25 minutes for an over-the-counter sale – similarly a big deal. In fact, the company says that, in testing, 55% of patients went straight to the machine rather than a clerk.
Downsides: It costs Endexx $25,000 to make a machine. And it’s going to take some time to get regulators to be okay with them.
But if I’m honest, if Endexx can iron the wrinkles out, I’d rather be running a dispensary with six of these machines and two staffers watching it than trusting my jars of Turkish Purple Head Explosion Gym Sock Kush to Weird Harold and Patchouli Suzy, who are making minimum wage and walking in and out of the vault all day.
Also on the Endexx front, and possibly a bigger deal: M3 Hub, software that allows growers, processors, and retailers to follow every aspect of the process from seed to sale, with patient tracking, batch tracking, scheduling, compliance and everything else a weedco could need at hand. Early days on that front – pricing plans are still being figured out – but it’s something a lot of companies don’t know they need - yet.
And finally, me. So I gave my ‘we’re all going to die’ presentation at the conference, leading into the keynote, and it was a packed house for it. Plenty of laughs, a few gasps (I may have called Tweed’s product ‘lawn clippings’ – I can’t recall as I was red eye drunk at the time), and lots of iPhones being whipped out to take shots of some of my slides. It was an updated version of the presentation given in Vancouver and judging by the receiving line afterwards (I shook hands and chatted with interesting folks for about three hours afterwards – mental note, next time hit the head BEFORE the presentation), it was pretty well received.
The ensuing evening brought a pair of advisory board offers (!), which I suspect says less about me and more about the industry’s intense desire to figure out a workable future direction, investor-friendly business plans, and the legitimacy that comes with aligning yourself with someone known as an industry critic.
It's kind of like getting Bob Moriarty to buy into your mining private placement. Only I'm better looking.
Here’s the thing: Just being involved in marijuana is not a business plan. We’re not running a motorcycle enthusiast clubhouse here. We’re not moving baggies in the men’s room at The Roxy and we’re not sitting at the Gas And Sip on a Saturday night completely alone drinking beers with, like, no women anywhere.
Here’s my super magical secret method for determining whether a weed business plan is legit: Substitute the word ‘wheat’ wherever you see ‘marijuana’ in the plan. If it still makes sense as an investment, put your money there. If it suddenly doesn’t look so great, abandon ship.
Let’s try that out with a few companies we know:
: Grow 150,000 sq.ft. of wheat to sell to the growing medical wheat market. Feh.
: Use proprietary software to identify strains of wheat that can be used to treat glaucoma. I like it.
: Do partnership deals with wheat growers with a view to selling said wheat down the line. Meh.
Papuan Precious Metals
: Do leaseback deals with bakeries in Colorado with a view to rolling them up and creating a marketable brand. I like it.
: Largest wheat grower in Europe seeks to grow in Canada. Okay.
: Organic wheat for artisan home bakers. Fair enough.
: Identify bread enthusiasts across Canada and sign them up to only receive wheat from you. Hmmm…
See what I’m getting at here? Remove the buzzword and take an honest look at the business plan and it becomes quickly obvious who has exponential potential, who will do decent business for the long run, and who is going to need to retool quickly.
You can grow the coffee, or you can sell the coffee. Juan Valdez or Starbucks?
In conclusion, if the object of a conference is to facilitate people doing business in a given industry, then my one single hour of sleep is an indicator that a LOT of business was being done, well into the night. In fact, I think I helped put together a few deals by introducing several interesting projects to dealmakers and vice versa.
Next Gen Metals (CSE:C.N
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) CEO Harry Barry, the event organizer, told me he plans to get a Seattle show together quickly to take advantage of the momentum GreenRush has picked up over the last two shows. I’d go so far as to say that any company that doesn’t have a booth at the next event will be doing themselves a disservice. The crowd was professional, the number of exhibitors would put your average mining show to shame right now, and the crowd is increasingly knowledgeable.
Highlight of the day: On an otherwise collegial LP panel, Tweed rep noted Bedrocan doesn’t have a lot of strains, which led to Bedrocan rep noting they didn’t think they needed 80 strains to help their customers get well. Organigram rep between them smiled happily.
@Chrisparry on Twitter