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DionyMed Brands Inc (CNSX:DYME) Direct-to-Consumer Cannabis Leader

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

DionyMed Brands Inc (CNSX:DYME) (OTCMKTS:HMDEF) is a vertically integrated, multi-state, cannabis brands company. CEO Edward Fields explains that 50 percent of DionyMed’s revenue is from direct-to-consumer sales. While the company is vertically integrated in Oregon, in California DionyMed focuses on direct-to-consumer distribution. DionyMed fulfills all orders for Eaze, an online cannabis retailer, in the Bay area. DionyMed is expanding to the rest of California under its own direct-to-consumer brand, Chill. Fields believes value accrues to brand holders and DionyMed aims to offer consumers an Amazon Prime-like experience. Fields anticipates the House of Representatives attempting another vote on banking normalization for the US cannabis industry and suggests that when such normalization occurs, the valuations of US cannabis companies will triple.

Transcript:

James West: I’m joined now by Edward Fields CEO of DionyMed Holdings Inc. Trading on the CSE under the symbol DYME. Edward, welcome to the show.

Edward Fields: Thanks so much, James. It’s great to be here with you.

James West: You bet, Edward. Can we start with an overview of what is the business of DionyMed?

Edward Fields: Yeah look, this is a cannabis brands company, 50 percent goes through traditional retail distribution and 50 percent of our revenue is via direct-to-consumer. We are the largest direct-to-consumer fulfillment platform in the industry delivering over 45,000 cannabis direct-to-consumer experiences every month.

James West:  Oh, wow. Okay. So, do you guys actually are you are vertically integrated supplier of the product or do you provide the just the fulfillment and consumer experience portion of the transaction?

Edward Fields:  Yeah, so we have some vertical in Oregon where we cultivate and we also have but primarily in California. Where a spot market buyer of product. We deliver finished goods.

James West:  Okay. So direct-to-consumer did where did where do you customers get their? Where do they buy their product online?

Edward Fields: Yes. That’s correct. It’s an online experience through a great partnership with our friends at Eaze.

James West: Ok and Eaze is one of the biggest cannabis courier companies in California. If I’m not mistaken.

Edward Fields: Well, Eaze is a fantastic online experience for finding and buying cannabis. We actually provide all of the fulfillment for Eaze in the Bay Area.

James West: Oh, that’s interesting. So, then you mustn’t…

Edward Fields: I think James it’s worth commenting that the new regulations in California for direct-to-consumer make it possible to now expand our offering to serve customers throughout the great state of California.

We’ve got some exciting news coming about a strategic partnership that makes it possible for us to expand our footprint beyond the Bay Area and we’re doing so under our own direct-to-consumer brand, Chill.

James West: Hmm. Okay, so is the value proposition from the investment side that there’s going to be better margin and better ultimate profitability in a direct-to-consumer models such as DionyMed relative to the vertically integrated multi-state operator who’s trying to run dispensaries as well as grow operations extraction bakeries etc.

Edward Fields:  Yeah, yeah, yeah. Look we’re a brands-focused company eventually the plant gets commoditized and we think all of the value creation accrues to the brand holders. We really like the strategy that we’re executing against we’re delivering product through 700 retail doors today.

We’re delivering product direct-to-consumers via Amazon Prime like experience and you know, there’s tremendous growth of opportunity available across the space both here in California. We’re in Oregon.

We announced Nevada earlier this month. We’re super excited about developments in Colorado. And we’ve also announced Massachusetts. This is the national footprint that we think leads to the kind of premium for investors looking for a long hold experience around actual cannabis brands.

James West: Mmhmm.

Edward Fields: Great brands like Lintbarry farms for instance.

James West: Sure, can I inquire on behalf of interested investors everywhere? What is the pedigree of your team in terms of developing national direct-to-consumer strategies like that based on brands.

Edward Fields: Yeah look, we have a world-class Silicon Valley Logistics team. We recently announced the new Chief marketing officer Michelle Sitton, an experienced and seasoned CPG executive from Nestle. Worked on the power bar business while she was an executive at Nestle and then moving over to Curly where she helped the great team at Curly a build out a portfolio of exciting cannabis brands. As our chief marketing officer partnered with a super sophisticated data driven Silicon Valley Logistics team, you know, we think we’re uniquely positioned to play a defining role in the Cannabis ecosystem.

James West:  Well you bet and in terms of copetitors on that model is there much on the landscape currently?

Edward Fields:  Yeah, look, [clears throat] excuse me. I think there are some great companies doing great work around direct-to-consumer. We’re super excited to be partnered with Eaze. We have friends at a company called Own A Life, which is getting started.

There’s a great company called Sabha which is doing very interesting subscription highly curated sort of very top shelf cannabis brands. Look, this is an exciting time to be in the Cannabis space and I’d actually suggest that you know, there’s a while there’s certainly a competitive dynamic and it’s getting more competitive, you know, sort of with every passing day. I think there’s also this notion that there’s a large ecosystem that’s trying to find its way as this industry surges and scales into you know, what will be a tens of billions of dollars industry and the next and the next couple of years.

James West: Hmm. One of the one of the challenges that were observing is for example in the state of Oregon there recently published article in The Oregonian that suggests that Oregon is producing over producing cannabis at a rate of about one hundred percent of demand and so I’m curious how does that situation resolved it A and B. How does an entity like DionyMed that used that to that dichotomy to its advantage?

Edward Fields: Look we think time is the most powerful weapon on our side. We are very long in the space. Our largest shareholder the Fields family, which I’m a part of has a decades-long vision for how this industry unfolds. These aberrations across markets which are really driven by the, you know, sort of the artificial barriers from the regulators by state and the federal government prohibition are eventually going to go away.

And you know, James one of the things I was excited to see today was news from Capitol Hill and in Washington DC suggesting that the house is going to take up another vote with the Democrats now in charge to normalize banking. And if I may for just a moment, I’d like to simply ask you and all of your investors to be powerful advocates for change at the federal level in Washington for no other reason that it makes no sense at all for the employees at DionyMed and everywhere else in the Cannabis industry to be forced to use cash currency for cannabis transactions.

It raises safety issues. It raises security issues and it’s simply an unacceptable business condition that the powers that be in Washington can fix. And oh by the way the day that the legislation signs for banking to normalize in cannabis, US cannabis stocks triple overnight.

James West: Hmm. So is that the major barrier holding back the valuations in cannabis stocks that are operating in the US, in your opinion, is the inability to efficiently bank and move capital.

Edward Fields: Look at the end of the day right, a business like ours which had you know trailing I don’t know 20 million bucks in top-line revenue. We’re guiding towards a 25 plus, 30 million dollar quarter in Q1.

I mean, James, you know doing that business and currency and asking employees to carry it around as a Safety and Security issue. It just doesn’t make sense. It isn’t right and the day that federal prohibition around the banking goes away capital markets become available in the US. normalized banking and credit lines on the cost of capital plunges.

And this is a business that can grow up and by the way support hundreds of thousands of jobs great jobs at a time when you know, you’ve got a product that’s been in the shadows for decades is now available to come out and be part of the normal mainstream, you know, sort of American Consumer palette of choices for both medical, which I’m particularly passionate about, as well as recreational.

James West:  Mmhmm. Okay. So then as an investor or interested investor in DionyMed, what are the catalyst I’m going to be looking for in 2019 that will sort of bring me to the realization that this is a winning business in a winning business model.

Edward Fields: Look I think 2019 is all about execution for the for the industry full stop. And when I say execution, I mean top line and bottom line delivery. It really does come down to who’s got the team that’s ready to scale, who has the balance sheet that can sort of lock in a stable supply chain, you know, we’ll continue to see turbulence from some of the regulators.

Will continue to see noise about you know, things like lead and vape cartridges, and thank goodness we’re starting to see consistent very high grade testing standards. It’s our view at DionyMed that the thing that consumers care most about is the safety of the product. So look, I mean, I think that you know, what investors should be on the lookout for is how well is the business scaling and performing against the plans that were published.

James West:  Hmm. That’s a great introduction to the company Edward and we’re going to follow the story with interest. Thank you for joining me today.

Edward Fields: James it’s great to be here with you. Thanks so much.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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