1933 Industries CEO Chris Rebentisch is optimistic that his company’s recent changes will help it survive the recent economic downturn.
1933 Industries (CSE:TGIF,OTCQX:TGIFF) CEO Chris Rebentisch joined the Investing News Network to discuss his company’s fiscal Q2 2020 results, its recent pivot in operations and how COVID-19 is expected to influence the cannabis market moving forward.
Like many cannabis companies in the North American space, 1933 Industries experienced a pullback during the second fiscal quarter of the year. “The quarter wasn’t as rosy as everybody had anticipated. The company has pivoted its business model over the last six months. We are now heavily focused on consumer branded goods and the revenue that’s generated through that,” said Rebentisch. “The way that you get revenue in this industry is either through retail partners or by owning a retail location. Our business model is to generate revenue through our brand presence, brand equity and consumer loyalty, all of which will drive consumer demand for our brands.”
1933 Industries focused on securing initial revenue before pivoting to scale its successes. “We realized that as experienced operators, we can still build revenue without having to invest in big infrastructure projects. Our approach was to go get revenue, go get sales and then build the infrastructure to support the sales and increase the margins on it, and so the company went out and built a 67,000 square foot cultivation building a year and a half ago that is now running and is fully functional,” said Rebentisch.
The company’s focus on revenue generation has become especially critical following the downturn in sales in the United States, which Rebentisch feels was partially driven by the vaporizer crisis in late 2019. “Sales erosion happened throughout the fall with the vape crisis, and we were heavily dominated by vape sales and distillate sales, so that impacted us,” he said. “The vape crisis contributed to our sales erosion on the marijuana side and then we had some sales erosion on the CBD side too.” In addition to the issues with vape cartridges in the United States, Rebentisch feels the lack of regulation in the American CBD market has hindered the growth of legitimate companies in the sector. “The complete oversaturation of CBD products with new companies coming online every hour has been challenging. With a lack of regulations, anybody can get into the CBD industry and claim whatever they want as they put products out. This really hurts the CBD industry so we’re championing and lobbying behind those who are trying to get regulations in place as soon as possible,” he said.
Moving forward, Rebentisch has recognized the importance of staying nimble in the CBD sector as a means of maintaining revenue and supporting the company’s existing infrastructure. “We’ve had to make some shifts on the CBD side from selling to brick and mortar retail locations to more of a direct to consumer e-commerce approach.”
In line with its strategic adjustments, 1933 Industries has also cut its operational expenses in order to extend its runway. Moving forward, Rebentisch feels that the company is headed in the right direction after a difficult start to the fiscal year 2020. “We identified a lot of things in the company that had to be fixed. We made all those corrections and we funded our infrastructure. Unfortunately, a lot of those expenses and the sales erosion fell out in Q2 as a result of that. But moving forward, the company is now on a strong path to fly once we return to normal conditions.”
“On March 13th Nevada announced its ban and stay at home order to deal with the COVID-19 crisis. They named marijuana dispensary, cultivation and production facilities as essential businesses. There was a line wrapped around the building for about three or four days until the governor came out and said no one would be allowed in dispensaries neither would curbside pickup be permitted,” said Rebentisch. “Nevada has never been a delivery-dominant industry as far as marijuana goes. There’s no infrastructure to support the demand and there’s no way to serve the customers. Over the last three weeks, the industry has come together and applied to get expedited approvals on drivers, vehicles and systems to deliver.”
Despite the hardships all businesses are facing during the COVID-19 pandemic, Rebentisch is optimistic that his company has made the right moves to successfully move forward. “We’re putting a lot of resources into brand equity and consumer demand for our products. We have shifted heavily on the CBD side into e-commerce with direct to consumer delivery. So that’s really a major focus for us as people are shifting more towards buying everything online rather than going into stores.”
Moving forward, Rebentisch believes the cost-cutting the company went through before the COVID-19 pandemic has positioned the company well to navigate the rocky path that the cannabis industry will face this year. “When I took over as CEO, we identified a lot of spending that we could cut. We had already cut that prior to COVID-19. Since then, we have temporarily paused all of our projects that have CapEx needs. By doing that, we’re conserving and holding on to our cash. We’re working closely together to make sure that everything we’re spending money on goes to sales. Unfortunately, we’ve had to make cuts on certain things to do that. But the mantra of the company is ‘survive then thrive’ so that’s what we’re doing. We want to conserve our cash position the best we can and weather the storm, knowing that we’re positioned perfectly for when the industry can restart.”
This interview is sponsored by 1933 Industries (CSE:TGIF,OTCQX:TGIFF). This interview provides information that was sourced by the Investing News Network (INN) and approved by 1933 Industries in order to help investors learn more about the company. 1933 Industries is a client of INN. The company’s campaign fees pay for INN to create and update this interview.
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