Grown Rogue International Inc (CNSX:GRIN) (OTCMKTS:NVSIF) CEO Obie Strickler shares details of the company’s expansion plans and 2019 outlook. Grown Rogue’s products are currently featured in 50 percent of dispensaries in Oregon and the company is aiming to increase that share to 70-80 percent in 2019. This year, Grown Rogue will continue its multi-state expansion, which includes growing its California footprint, where the company has already secured licenses. Grown Rogue’s goal is to take its successful Oregon platform, which has experienced 200 percent growth annually, and translate it to other markets. Grown Rogue is focused on the active enthusiast and its products are categorized into five different lines – Relax, Optimize, Groove, Uplift, and Energize – to ensure consistent and reliable consumer experience.
James West: Hey, Obie, how are you? It’s happy New Year, I guess.
Obie Stickler: Yeah, happy New Year to you, too, James. How are you today?
James West: Great, thanks. Since we last chatted, Obie, you announced the appointment today of Adam Wolf as the Chief Operating Officer. Tell me about the strategy with Adam and his background.
Obie Stickler: yeah, we’re really excited to bring a gentleman like Adam into the fold. You know, one of the big challenges, at least historically in cannabis, has been, you know, bringing in really strong talent. And as you see the industry continue to mature, folks like Adam are willing to, you know, join up with companies like Grown Rogue. We searched really, really hard to find the right executive to help us as we continue to scale into multi-state, and really try to put better controls and process around our existing operations.
So he comes with a great background from the Wonderful Company, which is a very large floral provider. He worked at MJ Packaging as their COO for a number of years. So we’re really excited to bring him into our expanding team.
James West: You bet. Okay, so tell me now again about the business model of Grown Rogue: how are you differentiated from others in the industry?
Obie Stickler: Yeah, we’re really focused on multi-state expansion. A lot of companies are doing that, and kind of following a similar model, but we really start very simplistically with the why, and the whole Why for Grown Rogue is curating the right experience for the consumer. So that’s the entire focus of Grown Rogue, all the way down from our executives, all the way down to our operational team, is to ensure in the products, the relationships, every touchpoint that we have, provides the right experience to our customers.
James West: You bet. All right, so how many customers are you servicing in the current mix, and how much are you going to get to by the end of 2019?
Obie Stickler: Yeah, so right now we’re in about 50 percent of the dispensaries inside of Oregon, so we touch about half of the market inside the state we’re currently operational. And that includes growing, since we launched our first products at the end of ’17 at over 20 percent monthly compound growth rate, in arguably the most challenging market in the US, likely the world.
And so we intend to do an Oregon is continue that expansion. We hope to be in 70 to 80 percent of the dispensaries by the end of the year 2019, as well as continue our multi-state expansion. We just announced licensing down in California, and we are actively targeting several opportunities in the Midwest.
James West: Fantastic. Is the signing of the Farm Bill something that has had a positive impact on Grown Rogue’s business prospects going into 2019?
Obie Stickler: That’s a great question. What you’re seeing from that is the general acceptance of cannabis across the world on the US in particular; what you’re seeing is a series of milestones that we overcome. The Farm Bill is a big step in that direction by reducing or eliminating CBD as one of the Scheduled narcotics in the US. We’re also seeing things like the States Act come through, which is trying to put more regulatory structure around the banking system in the US. And you see a continued trend around additional states legalizing – I mean, Utah, Oklahoma, very conservative states, have legalized medical; Michigan just legalized recreational, New Jersey is considering it.
So you continue to see an overwhelming force of legalization across the US.
James West: Yeah, you bet. Do you think that 2019 is the year that we see legalization Federally in the United States?
Obie Stickler: [laughter] I don’t know if we’ll see it that quickly. Obviously that would be a big boon for a lot of the operators who have positioned themselves to take advantage of that through exports and really establishing their brands in a much wider geographic footprint; but my prediction is, we have a few more years before it’s fully legal across the US.
James West: I see. So then, all right, what is Grown Rogue going to accomplish in 2019 that’s really going to excite its investors?
Obie Stickler: Our big focus, as I said, is taking the platform that we built in Oregon, with an over 20 percent compound monthly growth rate, which, you know, translates to over 200 percent growth per year, and taking that platform and probably the, you know, the most challenging market in the world, and transforming it, translating it into these other markets that we’re attacking. We think with our team, our expertise, our ability to navigate through the transaction from medical to recreational, we’re as well or better positioned than pretty much ay company in the US to really capitalize on that expansion and the opportunities that are coming across the US.
James West: Sure. So you’ve got both indoor and outdoor growing operations; is there a qualitative difference between what you can produce indoors versus what you can outdoors, both in terms of the quality relative to THC/CBD content as well as the quality relative to subjective elements like mouth feel, flavour, smoke, smoke intensity, etcetera?
Obie Stickler: Yeah, I mean, that’s an age-old question that I think will be debated forever. Obviously being in the Rogue Valley of Oregon, which is in the Emerald Triangle, it’s one of the most well-renowned agricultural regions for cannabis in the world. And we have a, you know, a preference for outdoor production here, mostly because of the climatic effects. We produce better terpene profiles for sure than what you can produce in an indoor environment. We just set what we believe is a record in the state for potency with outdoor product; you know, we had testing that was above 35 percent, which was, you know, a state record, at least for our laboratory.
That being said, indoor still has an optical illusion to the consumer of being a higher-quality product, mostly because of the way it looks. We expect that continue to change as the consumer becomes more educated and mature in their understanding of what they look for, and you’re really seeing a shift from, you know, potency, look, appeal, to the terpenes, and terpenes are really what create the experience and the effect, you know.
And going back to what I said earlier, Grown Rogue is so focused on the experience the consumer feels that terpenes are a big part of how we focus our manufacturing company.
James West: I see. So, tell me: how do terpenes sort of affect the overall experience in terms of the customer?
Obie Stickler: Yeah, we look at it in terms of terpenes, and this is scientifically proven, are more like the steering wheel, is the best way to describe it. Your potency is the gas pedal, if you’re using a car analogy; that really creates the, you know, the impact that you’ll have. But you know, like, for Grown Rogue, we classify all of our products into five categories: Relax, Optimize, Groove, Uplift and Energize. And it’s really the various terpene profiles within the individual products that allow us to categorize, you know, our different inputs into those categories.
James West: All right. So then, are you going to expand into other states as well? I know you had California sort of in your sights, there.
Obie Stickler: Yeah, we’ve secured licensing in California in a facility in the Humboldt region, it’s in Eureka, it’s a 16,000 square foot facility. We have our distribution license issued by the state, and the local municipality. We’ve also applied for our retail and our manufacturing licenses there, and we will be announcing the second or the third state that we will be moving into in the Midwest, probably in the coming weeks. We expect to have three by the end of 2019, and then our team is actively and aggressively looking at other opportunities that affect our timing, you know, the need for a team in these states that we go to. We really have a very systematic way we look at our expansion process.
James West: Yeah, okay, interesting. Are there anything – is there anything coming down the regulatory pipeline that makes you nervous in either Oregon or California?
Obie Stickler: I don’t think there’s anything that makes us nervous, when we look at it. I mean, obviously California is going through their transitional period where we go from medical to rec – there’s a lot of chaos as people become regulated, you have to comply with metric and all the compliance components.
Oregon is pretty stabilized at this point. You know, they’ve restricted the amount of licenses that are being issued, which obviously helps the businesses, you know, be more successful in terms of eliminating the competition. But we don’t see any regulatory hurdles or structure inside of either of those two states that are causing us concern going forward. If anything, we look at them as opportunities.
James West: Well, great. All right, Obie, let’s leave it there for now. We’ll come back to you soon – thanks very much for joining me today.
Obie Stickler: Thanks, James. Appreciate your time. Happy New Year.
James West: Happy New Year to you, too.
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