In the interview below, Tolia talked about the value of cultivation expertise in the cannabis space and how that led to Flowr’s exclusive partnership with a Scotts Miracle-Gro subsidiary. He also discussed the significance of crop yield metrics in the cannabis space and how investors should not overlook them.
Below is a transcript of our interview with The Flowr Corporation CEO Vinay Tolia. It has been edited for clarity and brevity.
Investing News Network: Please give us an overview of The Flowr Corporation and your business strategy.
The Flowr Corporation CEO Vinay Tolia: The Flowr Corporation is headquartered in Toronto and is focused on selling premium cannabis from our cultivation facility in Kelowna, BC. We were founded by one of the co-founders of MedReleaf, Tom Flow. He and his team designed, built and operated MedReleaf’s Markham facility, arguably one of the most productive cannabis facilities in the country. MedReleaf was ultimately acquired by Aurora (TSX:ACB) for C$3.2B.
There’s a lot of talk about premium cannabis, but to us this means a handful of things. The first is being able to grow consistently so consumers will know what to expect when they use our products. Cannabis is very hard to grow the same way over and over again, which is something many people underestimate. The second is the ability to grow in a clean environment that meets Health Canada’s safety standards without using irradiation. Irradiation affects the smell and taste of the cannabis, making it smell and taste like hay, bark or wood. By not using irradiation, we’re able to offer a rich sensory cannabis experience that consumers are used to.
INN: You recently completed a substantial fundraising. What will you use the proceeds for?
VT: We raised $36 million in our go-public RTO on the TSXV. Out of the $36 million that we raised approximately $20 million will be used to finish building out our first grow facility, which is currently 20 percent operational. We expect the facility to fully operational within the next four to six months. The rest will be used for working capital and other strategic uses.
INN: You also mentioned a focus on yield, why is that important?
VT: Crop yields is a very underpublicized metric in the cannabis industry. The cultivation side of the business is real estate-based. Like any real estate business, you measure productivity per square foot, which is what yield is and what allows you to grow profitably. Companies that can grow more product than their competitor with the same square footage are able to lower their cost per gram and increase their revenue.
The key to growing profitably is to maximize yield and that’s where Flowr’s expertise comes in. MedReleaf was one of the only big publicly-traded companies that talked about their yields because they had higher yields than anyone else in the space. We believe that once our facility is fully operational our yield will be even greater than theirs.
INN: You have an R&D alliance with Scotts Miracle-Gro, the NYSE listed garden products company. How did that come about and what does it involve?
VT: Scotts Miracle-Gro’s subsidiary Hawthorne Gardening has made a lot of acquisitions in ancillary businesses related to the cannabis space, such as lighting and irrigation companies. However, as they are a public US company, they can’t touch the plant. As a result, they needed to find a partner in Canada so they could conduct research on different cultivation technologies on their partner’s plants.
They know all the different licensed producers in Canada, but chose us because of Tom, the team and our ability to grow quality consistent product. Hawthorne will be building a 50,000-square-foot R&D facility on our campus in Kelowna, which will allow us to share innovations and stay ahead of the curve in cultivation.
It’s also important to note, that Scotts Miracle-Gro is one of only three NYSE-listed companies that have partnered with Canadian cannabis companies, the other two being Constellation Brands (NYSE:STX) with Canopy Growth (TSX:WEED) and Molson-Coors (NYSE:TAP) with Hexo (TSX:HEXO).
INN: You are in the medical and recreational markets. What are your brands and where will they be available?
VT: We will have three brands on the market. Our medicinal brand, FlowrRx, is available nationally through clinics and directly through our website.. Our ultra-premium, high-end recreational brand, Flowr, became available in Ontario, BC, Nova Scotia and Saskatchewan on October 17, so more than half the Canadian population has access to it. Our third brand was formed under our partnership with Ace Hill, a craft beer company in Toronto. The brand is called Ace Valley and will be marketed to the younger millennial crowd.
INN: What’s next for Flowr?
VT: We’re focused on executing on our business plan. Many cannabis companies in the market have been promising to do big things but haven’t been able to deliver and have consistently missed their numbers. Part of this can be attributed to our thesis that the plant is very hard to grow consistently and well, but that’s where our edge is and where we think we have an advantage. We have heard through the grapevine that we were one of the only suppliers to fill its orders in full and on time for October 17.
Next, we’re going to finish building out our facility and continue to grow profitably and build a name for ourselves in premium cannabis. Then we’ll start to expand. We’re currently looking at opportunities abroad and we’re looking at different form factors when things like vape and ingestibles become legal. These are all growth factors for us, but none of that happens unless we are able execute.
This article was originally published by the Investing News Network in October 2018.
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