BRNT Designs Announce Partnership with Valens GroWorks (CVE:VGW)
BRNT Designs CEO Simon Grigenas joins Midas Letter to introduce the company. The company is a Canadian cannabis design house, with a focus on creating hand-crafted cannabis accessories sold in retail stores nation-wide, and online. Products are now shipping UK, Australia, Netherlands, Spain, Germany & Belgium. James and Simon discuss the Valens GroWorks Corp (CVE:VGW) deal, and Simon elaborates on what it entails and shares more about that relationship. With BRNT Designs in the process of becoming a publicly traded entity, Grigenas speaks to what that landscape looks like, how much has been raised, and who are the main shareholders.
James West: BRNT Group CEO Simon Grigenas joins me now. Simon, welcome.
Simon Grigenas: Thank you very much for having me.
James West: Simon, tell me about BRNT Group: what is your business model, where do you operate?
Simon Grigenas: So the BRNT Group is a Canadian cannabis design house. We really focus on creating and designing impactful brands that Canadian landscape, as well as cannabis-related hardware.
James West: Hmm, okay. So, specifically, you recently announced a deal with Valens Gro, who’s one of our Valens Groworks, rather, one of our favourites. And tell me about that deal; use it as an example to sort of demonstrate your revenue model.
Simon Grigenas: Yeah, for sure. So we’ve had a great relationship with Valens to date, and, you know, we saw the potential and opportunity with the capabilities that their team has, and talents around extraction, formulation, development, and everything from their processes and their facility. And really, the deal was, you know, a step forward for an unlicensed entity, like the BRNT Group, to leverage our expertise in brand and hardware, and be able to really focus on the CPG side of the industry and create relationships with consumers, and leverage Valens on the back end for the execution of the actual extract in the pens themselves.
James West: So, do you have other clients other than Valens Gro at this point, or is Valens Gro sort of your flagship client right now?
Simon Grigenas: No, so we do have an existing brand and market called BRNT Designs, so it’s cannabis accessories around flower consumption, so obviously, the first form factor legalized. So everything from storage to preparation accessories to consumption. So that was in market on October 17th of last year, in approximately 170 stores now to date and available in the US and the EU markets, as well.
James West: Right. So, not to sound like I’m trying to make this any more cruder than it needs to be, but, in Canada, we have a simple way of sort of relating everything to the mining industry. So this is best described, then, as the picks and shovels component of the cannabis industry?
Simon Grigenas: Exactly.
James West: Right, okay. So now, the thing I like about this is that, being an unlicensed entity, you can cross borders. You can offer your designs to any LP, any extractor, anywhere in the world?
Simon Grigenas: Yeah. There’s something to be said about, you know, being an unlicensed licensed producer, for lack of a better word. It’s nice being able to play in the space where, you know, we have that freedom around the art design and creativity behind creating the hardware and the brands, and being able to move into new marketplaces without the barriers and restrictions that, you know, traditional LPs would see in Canada.
James West: Right. So, is your expertise, then, in industrial design and microengineering and all that stuff, or, like, where is the brain trust in this company?
Simon Grigenas: Yeah, exactly. It’s in just probably three main areas. So it really revolves around art, design and engineering. Really, those are kind of the matrixes, I guess, that our team excels within. So, everything from –
James West: Oh, like my relationship.
Simon Grigenas: Exactly. So we have our industrial designers, our engineers, supply chain management, everything to kind of oversee audited manufacturing. And then, you know, of course, leveraging Valens for their capabilities in science. So between, you know, art design, science, and engineering, we kind of see our suite of products come to life.
James West: So, do you have products right now in any of the cannabis stores in Ontario, for example?
Simon Grigenas: Yeah, we do. So we are listed with the OCS as well as the BC government stores, as well as, like I said, approximately 150 to 170 private retailers aside from the government channels. But this will be our first product in the market that is actually cannabis containing.
James West: Right. And so, getting back to the Valens Gro deal, specifically, you’re creating extract pens?
Simon Grigenas: Yeah, exactly. So extract pens obviously, with what’s been going on in the US with vape news, you know, it’s of utmost importance being, you know, as regulated and as cautious as possible. So everything on going above and beyond Health Canada standards on hardware manufacturing, so holding ISO certifications, restriction of hazardous materials and everything under the sun, and, of course, Valens being accountable to Health Canada as well for lot testing and their QAQC procedures is really where we thrive.
We want to create, you know, a regulated, safe offering that is reliable to consumers at the end of the day, and offer an alternative to all the black market products that are being sold to date.
James West: Yeah, you bet. Okay, so what other sort of delivery systems do you produce, apart from extract pens?
Simon Grigenas: So vaporization technology is obviously going to be the flagship product, so introducing the Made By brand, which focuses on small-format, recyclable, disposable pens. And then moving into some smart vaporizers with closed-loop systems. In terms of the products that we currently have, it’s mainly around combustion accessories, so for actual smoking, as well as all the preparatory accessories. So, everything you see from, you know, grinders to rolling trace and everything in between.
So, kind of covering that spectrum of ancillary products, and then moving into vaporization specifically.
James West: Sure. So my question is, who are all of the other LPs using to package up and to containerize and deliverize [sic] their products and extracts, if they’re not using you? I’m just curious, because that’s, like, do they do this in-house primarily, or is this the opportunity?
Simon Grigenas: Yeah, for sure. So, like I said, we like to own the brand and the space, and own the whole creative marketing and sales component behind it, which is why Valens is a great partner to be able to provide their extract expertise on the back end. A lot of licensed producers do have it in-house; they are ordering, you know, off-the-shelf hardware from, you know, offshore manufacturing or working with, you know, kind of a third party entity in the North American market to get their hardware.
So you look at, you know, Green Tank Technologies, Jupiter with TILT that just announced some financing today, and kind of similar entities like that; but it’s all white label hardware. So because we own, you know, hardware all the way to the consumer-facing brand, we really look to just fill the gaps on the back end with the extraction capabilities. So that offers us, you know, agility to move into new markets like the US and work with the bigger extraction players down there as well, and still maintain everything around the brand.
James West: So as far as the brand is concerned, is this more, for example, Valens Gro powered by BRNT, or is it more like BRNT powered by Valens Gro in the white label relationship?
Simon Grigenas: Yeah, for sure. So it’s definitely a lot more like BRNT powered by Valens, and the reason being, they do have to be the licensed producer listed due to it being their specific license that we’re using to go to market. But all the marketing communications materials and what a consumer would actually see, would be the Made By brand, and that’s really the core focus that we’re driving, is, you know, having that focused approach and kind of questioning, I guess, what the cannabis industry has done to date as opposed to, you know, the need for vertical integration to have a retail entity all the way to extraction processing in-house, be the brand, be everything.
We’ve picked the two pillars that we’re best at, which is brand and hardware, and really just driven our focus from, you know, staffing, talent efforts, as well as just time and capabilities around those two pillars.
James West: So does, and you can tell me if I’m stepping into NDA territory here – so, does Valens Gro pay you per unit to fill your product with their product and buy your shelf space, or do you buy wholesale extract from Valens Gro and basically get whatever margin you want?
Simon Grigenas: Yeah, so as far as I can go into the details, it is just a profit-sharing relationship. So we both share in the revenues, profits, as well as the costs. So with that fixed structure, we’re both seeing the return from, you know, whichever party is purchasing the product, if it be, you know, a retailer direct in Saskatchewan or the government body at the AGLC, and so on.
James West: Very egalitarian of you. Okay, so then, finally, you are in the process of becoming a publicly traded entity at some point. What’s the landscape look like? How much have you raised, who are the main shareholders?
Simon Grigenas: Yeah, for sure. So we actually just closed up our seed round about a month ago, so we were raising 2.5 million in equity financing; just closed out an over-subscribed round at just over 3 million. We’ll be raising our Series A in Q2 of 2020, so with execution of Made By being able to raise some capital for additional growth. So the capital that we’ve already raised to date has got us to an EBITDA-positive mark, and we’d be looking at that new capital for additional market entrance and so on.
Some of the predominant shareholders are some of the angel groups here locally in the Toronto and GTA area, as well as some of the funds based out of Edmonton and Western Canada, specifically. Our main headquarters is out of Edmonton, and we’ve stayed pretty true to Western Canada, aside from, you know, some of the software marketing teams that we have here in Toronto.
James West: Very cool. Well, congratulations on that. We’ll continue to follow your story; it’s very interesting, Simon. Thank you very much for joining me today.
Simon Grigenas: Awesome. Thank you very much for your time as well.
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