VIDEO: The Flowr Corporation (CVE:FLWR) Research Partnership with Scott’s Miracle-Gro (NYSE:SMG)
The Flowr Corporation (CVE:FLWR) was founded by MedReleaf co-founder Tom Flow in 2016 and is focused on premium quality cannabis with improved taste and smell. CEO Vinay Tolia talks about the company’s 85,000 square foot cultivation facility in Kelowna and its positioning in the medical and recreational markets. The company recently announced a partnership with Ace Hill Beer to produce a new line of branded cannabis products, Ace Valley. Despite being a late arrival in the cannabis space, Flowr has supply agreements with British Columbia, Ontario, and Nova Scotia. Flowr has a research and development partnership with Scotts Miracle-Gro (NYSE:SMG) and Scotts is in the process of building a 50,000 square foot research facility at Flowr’s Kelowna site.
James West: Hey, welcome back. My guest in this segment is Vinay Tolia. He is the CEO of The Flowr Corporation, trading on the TSX Venture under the symbol FLWR. Vinay, welcome.
Vinay Tolia: Thank you for having me.
James West: Sure. Tell me about The Flowr Corporation.
Vinay Tolia: So, we were founded by the ex-co-founder of MedReleaf, Tom Flow, and we are focused on premium quality cannabis.
James West: Okay. You will excuse me if I say to you that that’s what they all say!
Vinay Tolia: Of course.
James West: So tell me, what is the differentiator? I mean, obviously there’s a premium in the company based on the fact that co-founder of MedReleaf Tom Flow, this is his next gig. But what else is there about the company that commands such a valuation?
Vinay Tolia: Sure. So we believe, and a lot of people aren’t talking about this, is just how hard it is to grow at scale and profitably. And that’s what MedReleaf was able to do because of our founding team, and that’s what we intend to do. So we intend to sell only premium – well, not only, but our specialty is premium, high-end cannabis which can pass Health Canada inspection without needing irradiation, which means that it smells and tastes much better than a lot of the other stuff out there.
And also, we are, call us old-fashioned, but focused on profitability. So we’re very focused on –
James West: I don’t even know what that is.
Vinay Tolia: We’re focused on, kind of, yields, you know, productivity per square foot, which is really what determines profitability.
James West: Okay. So are you going to sell this company to Aurora as well? [laughter] I’m just joking. No, but, so you’re starting with the flagship 85,000 square foot cultivation facility in Kelowna, and so the objective – are you then seeking to emulate exactly the MedReleaf business plan that focused on pharmaceutical-grade cannabis for the medical application only? Or are you, Kelowna suggests maybe more of a focus on the recreational side?
Vinay Tolia: We’ll have a presence in both. So obviously our background is in the kind of super medical side, but we also intend to play in the recreational side, and we think our real differentiating factor is a better sensory experience, like I mentioned – the taste and smell. So we think we’ll come out and really differentiate our product in the recreational market.
James West: Okay. So the facility in Kelowna, is it an ultra-high-tech indoor grow? Is it a hybrid? Is it greenhouse?
Vinay Tolia: It’s indoor grow. That’s really the only way you can control every variable and grow this clean product. It’s about 20 percent operational right now; it’ll be fully operational in the next four to five months, and, you know, we’re very excited about that. Once that’s done, we have plans for a larger facility next door that could be potentially five times the size.
James West: Okay. Does the idea of being late to the party have any bearing on your strategy at this point, in that, you know, all the deals have been done with the provincial suppliers or provincial systems, and you know, all the sort of distribution channels are sort of getting filled up and occupied by incumbents; does that concern you guys at all?
Vinay Tolia: Not at all. So I’d like to add a couple things: that is, we are, while we are late as far as we were founded, you know, only two and a half years ago, there still aren’t a lot of people growing product. I mean, there’s been a lot of talk and a lot of expectations, but these are all public companies; you can see the amount of product that they’re actually selling and growing, and it’s not a lot, because this is not easy to do. This is very difficult to do.
Our team has had success. You mentioned the kind of high-tech MedReleaf facility, which is the one that our team built, which is still kind of considered the crown jewel of Canadian cannabis; this facility is kind of three iterations of that. So we call it kind of Version 3.0. And as far as the provincial supply agreements, we have agreements with Ontario, with BC, with Nova Scotia; so we intend to play in all the big markets there.
And at the end of the day, these supply agreements – you know, they don’t mean as much as people think. The provinces are going to buy what is selling, and so whatever people is want is going to end up being what is sold to the provinces.
James West: Interesting. Okay, so is there a strategy to ultimately move into Europe and maybe United States and South America, a la the mode of all the largest LPs, or are you going to stay focused and specialized in Canada on this particular segment in the ultra-high-premium?
Vinay Tolia: So we think that there is a place for that ultra-high-premium product worldwide: US, Europe, Latin America, Australasia…so we’re looking at all of those places. I mean, that’s one of the beautiful things about being up here in Canada, is the ability to play in the rest of the world. So we will absolutely play there, and you know, really what sets us apart is our ability to set up and operate these high-end facilities anywhere in the world.
So wherever we can be and, you know, transfer that IP, we’ll be there, and we intend on playing in all those places.
James West: Interesting. So, tell me about the rest of the company. Who else is on board, what kind of team have you got? Where are the strengths, where are you a little bit maybe not as strong as you’d like to be in bend strength, at this point?
Vinay Tolia: Sure. So obviously, Tom and the construction team and the design team, that’s our core strength. Our key expertise is on the design, engineering, construction and cultivation; you need all of those to be kind of working symbiotically. If you have one and not the others, doesn’t work well. I mean, you could have a fantastic cultivation team, but if you don’t have a good construction team, the facility isn’t made the right way, and you’ll have problems with the grow.
So that’s really our core strength. We just announced a deal this morning with Ace Hill Beer to have a new line of cannabis called Ace Valley. That’s, you know, a really exciting thing for us because it piggybacks off their marketing and branding prowess.
James West: So they’re going to sell your cannabis product under their brand, or they’re going to put your product in their beer?
Vinay Tolia: So that’s something maybe down the road, but as you know, that’s still a year away. So you know, we’re really hoping to tap into their core customer, which is more of a millennial customer, and to provide them with the ultra-premium cannabis that we have.
And then on the R&D side, what we’re super excited about is this alliance with Scott’s Miracle Gro. So you know, we’re only one of three companies that have a partnership with a US, New York-listed company; there’s obviously Canopy and Constellation, HEXO and Molson/Coors, and then us and Scott’s Miracle Gro.
James West: Right. So is the sort of logic behind this tie-up the idea that they are experts at formulating fertilizers, which should result in a optimized growing mix for these plants?
Vinay Tolia: So really what it comes down to is, they’ve acquired through their subsidiary Hawthorne, they’ve made lots of investments in the cannabis space, buying kind of ancillary businesses around the actual plant, because they can’t touch the plant. So they needed a research partner up here, so that, you know, they bought irrigation companies, lighting companies, they need to know if they make a change in a light and how it affects the plant, they need to know that any change in the plant, they need to know that it’s because of the change in the light and not some inconsistency in the grow. So they talked to all the big players up here; they know all the players, and they chose us over all the big players, for this.
So they’re building a 50,000 square foot facility on our campus because of our expertise and kind of R&D prowess.
James West: Oh, okay. So is this going to be a research facility?
Vinay Tolia: It is.
James West: Oh, very interesting. Well, that’s fascinating. What other sort of development plans, what are the big milestones that investors can look for in 2018 and into 2019 that’ll be representative of execution on your business plan?
Vinay Tolia: Sure, so a big part of it is just the finish of our current facility, which is, I think we mentioned, 85,00 square feet. Right now about 20 percent is up and running; some of the big milestones will be getting that fully operational. We’re expecting to have it early 2019, and that will significantly ramp our capacity. Once it’s fully operational, we expect in excess of 12,000 kilograms a year just from that one facility.
And then the breaking ground of our larger facility right next door, which could, as I mentioned, be potentially about five times the size. We’re shooting for Q2 in ’19.
James West: Okay, very cool. I’m curious as to, from where you sit in the cannabis ecosystem, there’s sort of a growing impetus towards CBD products and extracts ex of the THC complex, that are being found to have much broader applications for everything from pets to the elderly in improving quality of life and general wellness. Is that an opportunity that you’re only going to capture as far as it’s incorporated into the premium dried flower, or is that something that requires sort of a different mindset, a different research facility, a different growing approach?
Vinay Tolia: So it certainly can be done in our facility, and we fully intend on it. So the fact that we have such a deep knowledge of the plant, really, and we have a ton of extraction expertise, allows us to extract efficiently a lot of the CBD from the hemp. We have a hemp farm; we intend on playing in that space, and we have a lot of exciting R&D with, as you said, the CBD for skincare, for, you know, muscle pain and aches, and we’re actually talking to a number of kind of pharma and wellness companies for partnerships in that thing.
So we fully intend on playing in that space; we think that our ability and our knowledge of the plant overall gives us an advantage when it comes to the R&D there.
James West: Sure. Okay, Vinay, let’s leave it there for now. That’s a great introduction; we’ll have you back in a quarter’s time or so and see how you’re doing. Thank you for joining me today.
Vinay Tolia: Thank you for having me.
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