February 25, 2019

High Tide Inc (CNSX:HITI) Cannabis Accessory Retailer Backed by Aurora Cannabis (TSE:ACB)

Midas Letter
Midas Letter
High Tide Inc (CNSX:HITI) Cannabis Accessory Retailer Backed by Aurora Cannabis (TSE:ACB)

High Tide Inc (CNSX:HITI) (OTCMKTS:HTDEF) (FRA:2LY) is a cannabis accessory manufacturer and retailer. CEO Raj Grover explains that the company manufactures 75 percent of the products sold in its stores. High Tide has cornered the market on licensed accessories, producing and selling officially licensed Snopp Dogg and the Trailer Park Boys products. High Tide’s accessories are sold in 3000 stores worldwide and are available in 20 countries. High Tide’s Canna Cabana retail outlets are a one-stop shopping solution, selling accessories, merchandise and, in Alberta, cannabis. The company has signed deals to provide logistical support to Ontario retail lottery winners. In December, High Tide received a stamp of approval from Aurora Cannabis Inc (TSE:ACB) (NYSE:ACB) (FRA:21P), when the industry giant invested $10 million in the retail play. High Tide went public in December and has since doubled its share price.


Narrator: High Tide is an Alberta-based cannabis corporation focused on the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products.

High Tide is a vertically integrated company with portfolio subsidiaries including RGR Canada Inc., Kush West Distribution Inc., Smokers Corner Limited, GrassCity.com, Canna Cabana Inc. and the majority of Kush Bar, Inc.

High Tide Incorporated trades on the CSE under the ticker symbol HITI.

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

James West:   Joining me now is Raj Grover. He’s the CEO of High Tide Inc. Raj, welcome to the show!

Raj Grover:   Thank you for having me.

James West:   It’s so great to finally have you here.

Raj Grover:   I have to get you a little present for hosting me.

James West:   For me? For me??

Raj Grover:   All for you. And that’s a pre-launch piece as well, so this is limited edition; it’s not out yet. So we’re launching that on February 28th at a convention in Vegas.

James West:   What have we got here?

Raj Grover:   You’ve got an all-in-one case, signed by Snoop, of course. So you know, you can facilitate this for herbs, and when that’s legal in Canada, then you’ve got it all. Until then, you’ve got to save your dab tube there, but everything else works.

James West:   So this is my dab deck?

Raj Grover:   That’s right.

James West:   And what about this one?

Raj Grover:   That’s a carp cap to control the air flow of your dab.

James West:   Wow.

Raj Grover:   This one’s your bowl, which is interchangeable, and that’s your dab tube.

James West:   Beautiful glass.

Raj Grover:   Yes, this is designed by ourselves and Snoop in California, and manufactured overseas in one of our facilities.

James West:   Wow, I’m going to get high as fuck tonight just trying it all out.

Raj Grover:   Hey.

James West:   Look at that. Thank you, Raj, that’s awesome. You’ve got it right there. For those who don’t know, what does High Tide do?

Raj Grover:   So you know, High Tide is 10 years in business. We’re celebrating our 10th year. So, High Tide started in 2009 with a single store operation called Smoker’s Corner, and today we’re made of six different operating entities. So we’ve got, to simplify it, we’ve got two operating entities in the wholesale distribution division, which is manufacturing, wholesale and distribution. So we sell, you know, water pipes, hemp pipes, Sherlocks, grinders, vaporizers, you name it.

The difference between us and any other regular distributor in the cannabis industry is, we manufacture 75 percent of our catalogue just like that piece over there. So you know, we have seed to sale margins when it comes to accessories. So that’s the wholesale division.

What we’re very proud of in our wholesale division is, we’ve also cornered the paraphernalia licensing market. So we’ve got licenses such as Snoop, Trailer Park Boys, Paramount Pictures, Lionsgate Studios, Guns N Roses, Sublime, to name a few.

James West:   Wow.

Raj Grover:   And counting every day.

James West:   And Midas Letter.

Raj Grover:   Of course, I have to do a deal with you.

James West:   [laughter] Yeah! So we’re going to start selling a lot of this merchandise as branded Midas Letter in due course, here.

Raj Grover:   I’m very excited about that, because that’s where our 10 years of expertise comes into play, you know? And I want to talk a little bit about our retail play, which is Canna Cabana, which is one of our most ambitious, you know, cannabis retail store rollouts.

So we started with accessory shops; we have 14 accessory shops, you know, running in the country, but we also have maximum permits achieved in Alberta. So we’re not behind any of our competitors that have maximum permits which are either publicly traded or private companies. We’ve already achieved that, but on top of that, including, you know, a couple of LOIs in Saskatchewan, a couple of LOIs in Ontario, we signed two deals with the lottery winners, but what makes us different is, you know, we’re not trying to be the Apple Store. We’re not trying to be a record store. What we really are is the one-stop-shop of cannabis.

We know our customer for the last 10 years. You know, it’s the same customer. You know, we have the age, the demographic, the average income, what they like, what they buy. We know the accessories that sell. So you know, the differentiation between a Canna Cabana outlet and any of our other competitors really is that it’s a one-stop-shop for our customers. They come in, you know, we’re not sending them to a smoke shop or a head shop after to buy stuff; we’re all in one solution, and we can provide them the variety, and even our competitors are buying our products.

James West:   Wow. So, do you guys sell cannabis?

Raj Grover:   Of course. So we have four Canna Cabana locations that are selling cannabis in Alberta; we have 8 opened in total. We have 26 more that are in various stages of construction. You know the moratorium in Alberta, but that’s not affected us from opening them up as cannabis accessory shops, educate the customers, sell accessories, because that’s what we’ve been doing for 10 years; and then we still have four stores open for cannabis.

But every day, every month, the supply is getting better, so we have more and more coming online. We’re ready to rock and roll with maximum locations pretty much everywhere in the country.

James West:   Yeah, wow. So, do celebrities come to you and say, hey, we want to license our stuff, our paraphernalia, to you?

Raj Grover:   So you know, I take a lot of pride in this because we were the first guys to go to Paramount Pictures and convince them to give us a studio license. You know, a studio is a billion-dollar enterprise; they don’t deal in the marijuana world. But they’ve seen our level of packaging, our quality, what we do. We had a deal with Snoop, and that kind of opened up the doors from there.

And because we were manufacturers of pretty much everything we sell, or 75 percent of what we sell, it was an easy connection there. Now we’re with Lionsgate Studios, you know, we have some really interesting licenses coming, so stay tuned.

James West:   Mmm. American Psycho Water Pipes, ooh. Raj, you’ve been the recipient of a pretty significant investment from one of our favourite companies, Aurora. They put $10 million in on February 13th, and that’s a coup no matter how you cut it. What attracted Aurora to High Tide?

Raj Grover:   So you know, this is another moment where High Tide is extremely proud to be partners with Aurora. Aurora’s kind of kept an eye on us for the last couple of years when they were looking at accessories, not just investing $10 million in High Tide; they’ve also given us our largest PO to date, and we’re not only manufacturing Aurora branded accessories but we’re also distributing it through our platforms and our 3,000 stores worldwide, so the Aurora name gets out.

You know, Terry’s kept a close eye on our accessories business, and it’s just taken off from there.

James West:   3,000 stores worldwide?

Raj Grover:   That’s right. Our accessories are sold in 3,000 stores worldwide, in 20-plus countries.

James West:   Wow. That’s incredible. So, can I ask you, what does the revenue picture look like in 2019?

Raj Grover:   So when we were a private company, last year, 2017, or 2018, our revenue was $10 million; now that we’re public, we’re expected, if a single, if we don’t open a single location of cannabis anymore, which is highly unlikely because I said we did two LOIs in Saskatchewan, two in Ontario, we’ve got some in the line in Alberta – we’ll do about 25 million-plus, and if any of these stores come online, we’re talking about north of $50 million.

James West:   Wow. Okay, so what kind of net income are we talking, here?

Raj Grover:   So you know, our gross margins are absolutely fabulous because of accessories, but again, cannabis retail –

James West:   Because you manufacture 75 percent of your stock.

Raj Grover:   That’s right. So you know, some of our competitors have put numbers out there on what their breakdown is between cannabis and cannabis accessories; we can proudly tell you that our average Canna Cabana store, out of the four locations that are open, we do 16 percent of all of our revenue in accessories.

So once you have 50 to 100 stores open and you’ve vertically integrated completely, you know, you’re self-sustaining, all of that margin is going to add up. So we’re looking better, just because we’re not just cannabis; we’re so much more than cannabis.

James West:   Wow, excellent. So tell me about some of these other accomplishments over the last little while: you’re listed in Frankfurt, you’ve got deals with the lottery winners, some lottery winners in Ontario…I mean, so what’s, where is all this going? What’s 2019 going to do for High Tide and its shareholders?

Raj Grover:   So we’ve had quite a bit of a run since December 17th; we only went public, like, seven weeks ago, and we did so good, Aurora wanted to put a press release about us, you know, and they mentioned everything: going to Frankfurt, getting listed in Canada, doing two deals with lottery winners, two letter of intents in Saskatchewan.

So 2020 and 2019 is going to continue building on these successes. We’re very focused on cannabis retail outlets, so we’ll have the maximum allowed retail outlets anywhere in the private provinces – you know, the ones that have allowed recreational cannabis. And then of course, we’re trading on CSE, so we’re looking at some American opportunities as well.

James West:   Okay, great. I’ve got the chart up here on my NDI if that’s visible in the control room, and looks like you’ve essentially doubled in price since you started trading. When did you start trading, exactly?

Raj Grover:   December 17th, and when we started trading, we started trading in the worst month, you know, in the history, in decades. So we’re just getting ourselves out of it, and we’re just getting started, because, you know, we were at 97 million pre-market cap before going public, and today we’re 110. So there’s a lot of room to run, and we’re only just getting started.

James West:   How many shares outstanding?

Raj Grover:   197 million.

James West:   197 million. I can see what Aurora liked about you! No, that’s great. Okay, so then, in markets around the world, you’ve got stores selling cannabis accessories. Does that mean that you’re perfectly positioned to be the first retail location to sell cannabis in those other jurisdictions once it goes legal there?

Raj Grover:   So you know, we have partners for the last 10 years; these are partners that we’ve had existing in our database, like, 300-plus, and that’s what differentiating us. I just had a trip to Amsterdam and I could literally add, you know, $50 million to my top line with friends of mine that have been doing business for 10 years. So we’re just only getting started, but of course, these relationships built over the last 10 years are really helping us, you know, build the future play for High Tide.

James West:   You bet. All right, Raj, we’re going to leave it there. That’s a great intro to the company, and looking forward to having you back. Thank you very much for my brand-new brain destructing water pipe.

Raj Grover:   You got it.

James West:   I will be using it with love, and we’ll come back to you soon.


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