October 16, 2018

VIDEO: Newly Public Biome Grow Inc (CNSX:BIO) Launches Virtual Dispensary WeedVR

Midas Letter
Midas Letter
VIDEO: Newly Public Biome Grow Inc (CNSX:BIO) Launches Virtual Dispensary WeedVR

Biome Grow Inc (CNSX:BIO) CEO Khurram Malik talks about the challenges of being a newly listed cannabis company competing with established industry leaders. The company is uniquely situated to take advantage of provincial regulatory differences because the company operates in under-served provinces in Atlantic Canada and has established strong local brands. Malik thinks this provincial branding strategy positions the company for success versus the industry’s big players when supply and demand stabilizes in 2020. Biome intends to do the majority of its sales overseas in the next two or three years as more and more countries come online in 2019 and beyond. Biome has launched a virtual dispensary education platform called WeedVR, an innovated approach to customer education and branding.


Fraser Toms:  Hey, welcome to Midas Letter Live. I’m here with Khurram Malik, who’s the CEO of Biome Grow Inc., trading on the CSE under BIO, and that’s as of October 9th, so, very recent. And right off the bat, I just wanted to ask you about being a new listing coming into the space, being a bit of a smaller company and having to compete with the likes of Aurora, Aphria, Canopy, those big, big guys.

Khurram Malik: It’s a great question. I mean, you know, why should anyone care about yet another LP? I mean, there’s plenty of us out there, and let alone a relatively newer one than some of the more established ones which have multi-billion-dollar market caps, huge amounts of liquidity.

[stock_chart symbol=”BIO:CNX” align=”left” range=”1M”]

What I would tell sort of the investing sort of public out there is, you know, if you look at our pedigree in the space – we’ve helped, you know, take public or build or done something with, you know, the majority of the really large players in the space, because we got involved early. Not that we’re geniuses or anything; we got involved early. So we’ve been studying and analyzing and working in the sector for a while.

So all Biome is, is taking our best learnings from all the, you know, the priors in terms of what worked and what didn’t work, and building a more efficient mousetrap. But also recognizing we’re later in the game, so we can’t compete head to head against a Canopy, an Aurora or an Aphria, for example. But the good thing about the sector is, it’s still pretty young. So by definition, whether it’s medical or recreational coming online, young sectors are highly inefficient, which means there’s a lot of opportunities in the sector that are being ignored by incumbents.

So what we’re initially doing in this company, and it may look a little weird from the outside looking in, but it all sort of ties together in the coming years – is going and filling holes and gaps other people do not exist, are sort of filling right now. Dominating those holes and gaps and inefficiencies, and you know, when you’re a little bit larger, let’s say 12 months from now, then you go head to head against the incumbents.

Fraser Toms:  So, well, speaking of some of the, I guess, missteps some of the bigger guys have had – can you point to, I don’t know, just one or two things that you’ve been able to not have to deal with?

Khurram Malik: Sure. So I mean, if you were building a facility and you had a decent balance sheet, let’s say three years ago, or two years ago, when it was very much medical and there was no real sniff of recreational anytime soon, the philosophy was, and quite frankly we were advising the same thing, so we’re at fault here as well, but who knew in those days – was, you know, plunk a million square feet down somewhere, and then supply all of Canada. Put it in a jurisdiction where you’ve got the lowest power costs, like in Alberta or New Brunswick or Quebec, for example, and you’ll be good to go.

Well, what we found out shortly thereafter was that Health Canada or the Federal government was going to punt all distribution responsibilities to the provinces. And then, you know, obviously you’re going to have regional biases and support and all of that, which means, you know, supplying the entire country from one massive facility in one province is not going to work. So we said, okay, fine: so when we designed this company, we decided to set up facilities in each one of these under-served provinces where there really weren’t a lot of LPs, and build local brands, what we call biomes, or local ecosystems.

And that works in some provinces and not others. So the cool thing about Atlantic Canada is, if you build local, brand local, supply local, employ local – and, quite frankly, have investors that are local, in your company – they will be more loyal to your product, provided you provide a quality product, than somebody importing product into those provinces.

Ontario is an interesting contrast; we don’t care, we’ll buy from anybody. Ontario-made product? Whatever. Whereas Nova Scotia, particularly Newfoundland, PEI, even New Brunswick, that’s not the case. Newfoundland, I think, is the extreme example; to some degree, they still consider themselves Newfoundlanders before Canadians. Later to the Union, right? So if, and there was no licenses, even to this day, in Newfoundland, and we should be the first one, hopefully in the next few months, that are licensed, provided Health Canada cooperates.

So building a local brand there is very powerful. There’s an argument in this industry right now, what is a cannabis brand? You can have a recreational brand, a company brand, a pan-Canadian brand…those are all legitimate ways of doing it. I think we’re the only ones that are building provincial brands that are very unique to our provinces.

So if you’re a Nova Scotia consumer, you’re buying our Highland Grow product. You’re not buying a Biome product, which is an interesting way of looking at it. If you’re in Newfoundland, for example, you’re buying a Back Home Cannabis Company product; Biome is nowhere on the packaging. We’ve got local Board members, local university partnerships, local R&D partnerships and the governments, as well. A lot of them are liquor control boards. So it’s an educational partnership, as well.

So these are very entrenched ecosystems we’re building in our province. So when supply and demand normalizes in 2020, and you are competing head to head against the big guys that are greater, let’s say, resources, you know, it’s a very defensive position to have because you’re locally well-entrenched to have that ecosystem. It’s harder for an Ontario company to come in and start trying to flood the market with product.

Fraser Toms:  Yeah, I mean, you can’t argue with putting down roots and giving people pride. I mean, that’s a very powerful thing. So, let’s get into some of the subsidiaries we’re talking about here. Highland Grow, Nova Scotia – expanding 200,000 square feet. Do you want to just elaborate on some of the specific sites you have going?

Khurram Malik: Sure. So we’ve announced three sites, a fourth one shortly to be announced. It adds up to roughly 400,000 square feet of production space in Canada. If I build a single square foot beyond that, I would be very surprised, for a few reasons. First of all, Canada is the most expensive place in the world to grow cannabis, so we’re not that interested in that, and being a large production footprint in Canada.

And by and large, if we’re not doing the bulk of our sales overseas in the next two or three years, I’ll be executing on this company, and so is our management team. It’s a small population in Canada, there are plenty of licenses here. We’re doing the Atlantic Canadian sort of focus; that’s our Canadian beachhead, it’s our home country, we’ll do that. But this is really an international medical marijuana company story. We are coming online with international jurisdictions in the coming months and through 2019, which I think will be very disruptive for the industry in how we do it. And that’s really where the bulk of cash flows are going to come from.

But obviously, in the interim, we’ve got rec as well as medical here in Canada.

Fraser Toms:  So when you talk international, is there, you know, obviously there are some places more attractive than others. But are you prepared to kind of say where you’re most interested in…

Khurram Malik: Unfortunately, I can’t, since we’re a publicly traded company, so I’ve got to be a little muzzled, but here’s what I can tell you our philosophy and our actual. Again, as I spoke about earlier, we go where other people are not. So if you look at the larger players that have got the bandwidth to go overseas, they’re primarily focusing on western Europe like Germany or Brazil or South Africa or Australia, for legitimate reasons: great markets, in some cases the regs are considerably better than what we have here in Canada related to medical cannabis, because they’ve looked at what we did in Canada and improved on it.

And that’s fine; we may do those jurisdictions at some point, but we’re a small company. You’ve got to pick your spots. So we’re going to jurisdictions where nobody exists right now, and in some cases, helping to write the regulations. So what that affords us is first in the door, hopefully some exclusivity, and the other sort of privileges and benefits, and so that sort of meet our constraints or requirement. So that’s, again, very different.

So we’ll hopefully be announcing some of that in the coming months and quarters, we’re, you know, first one in the door. And that, I think, is more powerful, because these countries, at the end of the day, have considerably larger populations than Canada’s. We’re what, 32, 33 million people? You know, it’s small, whereas these other countries are multiples of that.

Fraser Toms:  I wanted to, before I forget, because you guys have this VR Retail catalogue, and I’ve experienced it before, but can you just tell our viewers a little bit about that and why you did that in the first place?

Khurram Malik: Sure. We aggressively deploy innovation of technology in our company, whether it’s on the growing side of things or other side of things. So this is on the more consumer-facing side of things. We found a Canadian cannabis technology which we liked, which is rare; most of the innovation, unfortunately, in cannabis, does not happen in Canada. We just have large balance sheets on production facilities; a lot of it happens in the US and Europe and Israel.

So we did find an interesting one here; it was filling a problem that was in the sector, which is, again, the philosophy of this company – go and fix a problem or an inefficiency. And the problem was that, if you look at all these retail stores that are coming online post-recreational, going live, they’re not conducive for the casual consumer to buy cannabis. So traditionally, if you don’t know what you’re doing as a consumer, you know, you traditionally would go into a dispensary, legal or not, in a jurisdiction, and spend about 10, 20, 30 minutes with a bud tender. And he or she would walk you through the safe ways to consume it, or this or that.

Alternatively, all you can do right now is go online and look at some very good resources, but they’re just pages and pages of text. And you know, the human brain can only retain so much information. If you walk into a store, whether it’s in Newfoundland or elsewhere, you’re going to be in there for, like, a minute or two, or five minutes and they shove you out the door again, so you’ve got to know what you want before you walk in.

So what we did with this thing was, this was initially designed as a virtual dispensary for e-commerce, which unfortunately doesn’t really apply to Canada yet. So we re-purposed the base technology to be an educational platform. So it’s a way for a human being to put on some VR goggles and be immersed in a virtual dispensary environment with an avatar that will walk you through different strains and how to consume them, and what strains work. Ok, these are, for example, the 12 Biome strains or Highland Grow strains in Nova Scotia, you can play around with them, you can turn them into a vaporizer, you can grind them up, you can have tinctures, oils, and the human brain retains that a lot easier than just reading text or whatnot.

So it’s a way of shortcutting and fixing your problem, and then ultimately, it will be an e-commerce platform overseas.

Fraser Toms:  Sure. And I actually think that, and I don’t know if you agree, maybe because you have adopted that technology, that there will be, you know, a significant number of people that are willing to dabble that aren’t necessarily vets, and are going to need that learning experience.

Khurram Malik: Yeah. So our goal with this is, look: let’s make it as easy as possible for people that are a little bit, have a little bit of trepidation, to make it accessible in a safe and effective manner. So you could also just sit in your living room, put on your smart phone, put in one of those $5 Google cardboard goggles, and you’re immersed in our 3 dimensional environment and you’re good to go. There’s an AR component as well, but it’s primarily VR right now.

And you know, what’s pretty interesting about this sector in general is that it’s a controlled substance. So unfortunately, we’re very handcuffed in how we can market our product and our company to the end consumer. You got retail locations, you’re vertically integrated, that’s pretty good, that’s one way of doing it, but having robust educational tools and platforms and delivery mechanisms to get out there to your local communities and actually educate people on cannabis, and then specifically also you, is really the most powerful way, in our opinion, to get your brand out there and establish it in your communities.

Fraser Toms:  Sounds good. Okay, so just looking forward for investors in the next few months and maybe six, nine months down the road, what can they look for?

Khurram Malik: I think they can look for, we’re going to be a very newsy, and you know, very tangible, not just fluffy news coming out. There’s a lot of things we’ve sort of geared towards being product cost line shortly after going public. So for the next three or four weeks, or next two or three months, what you’re going to see is, we’re going to be signing a lot of large contracts, which a small company is not supposed to be signing. It will look really weird, and when we announce it, we’ll sort of educate the broader masses or the investor community on why we were able to pull it off where typically these things are only signed by the three or four largest companies in Canada. But we’re not that, but we’re still getting them across the line, and the reasons for that, and we’ll reveal those in due course.

Fraser Toms:  Great. We’ll look forward to reading those press releases, and hopefully after they’ve hit the public airwaves, you can get back in here and explain how significant they are.

Khurram Malik: Happy to.

Fraser Toms:  Thanks for coming in.

Khurram Malik: Pleasure.

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