Grown Rogue International Inc (CNSX:GRIN) Branded Products for the Active Enthusiast
Grown Rogue International Inc (CNSX:GRIN) (OTCMKTS:NVSIF) is a US-based, vertically-integrated cannabis company with 100,000 square feet of mixed indoor and outdoor production. CEO Obie Strickler identifies the company’s branding focus as the “active enthusiast” and notes that Grown Rogue prioritizes appealing to professional clientele. Grown Rogue has developed patent-pending nitrogen-sealing technology, designed for use with products like pre-rolls, to ensure freshness. The company offers simplified purchasing for the customer in the form of five distinct experience product lines, developed using crowd sourcing and sophisticated analytics. Strickler believes the Farm Bill will act as a catalyst in the US cannabis space because it allows companies to scale businesses in practical ways and will help normalize cannabis consumption.
James West: Obie, how are you doing?
Obie Strickler: I’m doing very well, James. Thanks for having me on the show this morning.
James West: You bet. Obie, why don’t we start with an overview: what is it that Grown Rogue International does?
Obie Strickler: Yeah. Grown Rogue International is a US-based cannabis company. We’re really focused on three primary mandates: the first is brand; we believe the future of this industry is really in the brands, the consumer packaged goods space, so we’re very focused on the long-term goals of establishing trust and transparency with the consumers.
Secondarily, because of the challenges in the supply chain, we’re very focused on vertical integration, at least in the near term, and there’s a lot of issues around ensuring quality of product. It starts with the manufacturer and ends up at the final retail consumer.
And then obviously thirdly, with the Federal restrictions around interstate commerce, being a multi-state operator, making our geographic footprint is extremely critical. So Grown Rogue has a focus, kind of at a high level, at achieving those three primary objectives, and we do that with a great team, a definite focus on quality of product, compliance in the regulatory side, you know, to ensure that we bring, you know, proper procedures and are normalizing cannabis as the industry matures and consumers get more comfortable.
James West: Okay. So essentially a multi-state operator that’s vertically integrated. Tell me about your rowing footprint and what’s your customer base look like right now?
Obie Strickler: Yeah, good question. The growing footprint right now is on the manufacturing side; we have about 100,000 square feet of mixed indoor and outdoor cultivation. We use a lot of our outdoor cultivation for feedstock for our derivative products: that’s pre-rolls, concentrates, cartridges. There’s been a big push towards, you know, terpenes and other profiles that are associated with the product, and the outdoor growing really creates much better input for those types of consumer products. We also have a large, state-of-the-art indoor facility that we produce mostly a base flower that goes to the market.
The consumer right now is still, you know, it’s transitioning to more of a professional, more of normalized, mainstream consumer – you know, doctors, and soccer moms, attorneys, you know, more that professional network. And so really the grow of brand is focused on appealing to that demographic. But obviously there’s still a lot of the conventional, historical, you know, smokers and consumers of the product that are a big part of our market today.
James West: Okay, you’ve got an interesting sort of unique thing that I’ve never seen before, is your nitrogen-sealed pre-rolls. What is that all about?
Obie Strickler: Yeah, we have a huge focus on quality of products, and in order to reach the quality that we expect, you know, our goal is to provide the freshest possible product that we can achieve. And so as we look at different ways to preserve cannabis to preserve that it’s as close to when we harvest as to when the consumer gets to purchase the product, we look at different ways to, you know, stabilize the degradation. And so we settled on nitrogen as an inert gas in order to provide that, and what we found is that in the pre-rolls, and we did this in our flower as well, that we can create a solution that allowed us to essentially preserve a pre-roll to that point.
So we have a nitrogen patent-pending sealing technology that we use to ensure that the pre-rolls that we put to the market are the freshest possible.
James West: Okay. So in the context of the markets in Oregon and California, is it a case where it’s getting tougher and tougher to compete in terms of margin because there is such an over-supply of cannabis in the marketplace, or has that not really become a challenge for anybody yet?
Obie Strickler: You’re definitely seeing compression in pricing. You know, everyone anticipated, you know, supply/demand mechanics working – I don’t think anyone anticipated it occurring as fast as it has, but obviously with producer-based states like Oregon and California, I mean, we’re centralized in the MO triangle, which has been one of the world-famous regions for production of cannabis for a long time. You know, we anticipated some of this coming.
As far as impact on our business, obviously when, you know, pricing compresses, you know, your margins start to shrink some. That being said, Grown Rogue’s continued to be able to excel and expand our business model. While we don’t anticipate, you know, this type of growth continuing as the company grows and gets bigger, you know, through Q3 of 2018, you know, we’re at a 30 percent month-over-month compound annual growth rate.
So while we’re in a very competitive market with compressing prices, our approach, you know, our brand, our transparency, or commitment to the consumer, is really, you know, reaping the benefits of that philosophy that we hold inside the company.
James West: Mm-hmm. So what would you say is your competitive differentiator that allows Grown Rogue to compete so successfully in these competitive marketplaces?
Obie Strickler: Well, it comes down to the team that we’ve put in place; that’s from the execution standpoint. Really the way we’re separating ourselves with the consumer is establishing a much simpler way for consumers to purchase. So pretty much every single product that we manufacture or bring into our portfolio is classified into five simple categories: it’s based on upon the grower of name, based upon Rogue, which we’re in the Rogue Valley; it’s Relax, Optimize, Groove, Uplift, Energize. And this allows the consumer to really understand and make a decision for their purchased based upon the experience that they want to have when they consume cannabis.
We promote a very active and healthy lifestyle. Some companies are moving towards the experience component or the classification to simplify purchasing decisions, but Grown Rogue is the only company that’s actually validating where we place those products based upon crowd sourcing data. So we actually brought to the consumer available to participate in a survey that we put on, that, you know, asked them questions about demographic, height, weight, you know, other things that they experience when they consume that allows us to, you know, prove a psychoanalysis component and firm the classifications to put our products in.
And then we also have a very robust and sophisticated analytical program that we use that takes in CBD and THC ratios, terpene profiles and which terpenes are associated to products, so that we really create a right experience every time.
James West: Okay, and so, did the passage of the Farm Bill yesterday constitute any sort of advantage or future catalyst for Grown Rogue?
Obie Strickler: Absolutely. I mean, in the near term there will obviously be some benefits around normalization of cannabis; you know, the regulatory structure in the US is starting to change, which is beneficial to everyone. You know, it really is going to help with, like, hemp, and CBD, which is becoming a big market in the US. One of the things that Grown Rogue is navigating into as part of, like, some of our edible products; you know, CBD allows you to place products in the United States where THC is not legal. Also allows you to ship, you know, from a single manufacturing centre…you know, it really allows you to scale your business in a much more efficient and pragmatic way.
James West: Okay, and so you’ve established in California and Oregon so far. Are there other states that you have your eye on at this point?
Obie Strickler: Absolutely. As part of our mandate to our Board and our shareholders, you know, be a multi-state operator, to expand a geographic footprint is extremely critical. So we’re constantly evaluating states. We took a very, you know, an approach that’s really factored in, you know, the parameters that we’ve identified. Most of it comes down to the timing from medical to recreational transition, is really where Grown Rogue focuses: is establishing our foothold, you know, our team, during that transition.
If you get into a state too early, obviously, you know, your time horizon to create a return on your investment is a little bit longer than you’d like, and as you’ve seen in other more mature states; you get in a little too late and the competitive nature of the markets, you know, really, the ability to put our platform in place becomes much tougher.
James West: Okay. So what is it that excites you most about the emerging markets in the whole United States?
Obie Strickler: I think the most exciting part is really to, you know, provide to the consumer a healthier alternative to a lot of the, you know, existing vices that are out there, you know, from alcohol to tobacco, and you’re seeing some of those larger companies coming into our sector. You saw Constellation’s investment, you just saw Altria come in with their investment into Cronos.
What Grown Rogue is really focused on is providing, you know, normalizing, I guess, the cannabis component, and really providing an opportunity for people to utilize this in a healthy and active lifestyle. We really look at the market as, there’s three different critical components: there’s the true medical side, which we believe will be dominated mostly by pharmaceutical-type companies that are focused on lab studies, and really taking a scientific approach to the medical benefits.
That’s really not Grown Rogue’s focus; while we believe and support and are committed to those types of products, you know, we’re not building that type of company.
On the adult use side, you really see a bifurcation, where there is, you know, your conventional, call it stoner who is smoking to get, you know, a very specific effect, and again, that’s not the Grown Rogue focus; our focus is on the active, you know, enthusiast who is looking at these products to, maybe it’s help with sleep. They’re stressed out because of a relationship or a job. You know, maybe instead of taking caffeine in the afternoon they’d like to take an energizer and they’d to get that bump that you need to get through the rest of the day. You know, we’re big on active, outdoor lifestyles, and we really want our company and our products to be supportive of that focus.
James West: Okay. Well that’s great, Obie, that’s an interesting introduction. We’re going to follow with interest; we’ll come back to you in a quarter’s time and see how you’re doing. Thanks for joining me today.
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