The Global Cannabis Executive Summit, or CanExec Summit 2021, is an exclusive “By Invite Only” event for executives from some of the world’s leading cannabis producers. Its inaugural event took place on Nov. 2-3 at Sheraton Centre Toronto Hotel. Grow Opportunity is a media partner.
The road to profitability
If you want profitability, get out of cannabis, David Traylor joked.
Traylor is a senior managing director at cannabis investment bank, Golden Eagle Partners, in Centennial, Colo. He joined a panel of industry experts to talk about the current challenges to profitability in the North American cannabis market.
“What’s interesting is I’ve lived through this a lot with biotech, this funding cycle of up and down in the early 90s was really problematic and I think the (cannabis) industry is going through that now,” said Traylor. “There was a bunch of money flying around in Canada and it’s not anymore. So these companies now need to really talk about discipline.”
Rob Wilson, chief finance officer of Nutritional High International Inc. (to be renamed High Fusion), agreed that after entering the market and establishing their own footprint, companies are still burdened with many obstacles to profitability. High taxes and constantly changing regulations means making tough decisions for growth.
“I have six different banks that help me deal with a small company like ours, just to be able to do wires, that you should be able to do very quickly in a regular industry,” said Wilson. “There’s a lot of challenges that will create extra management time, extra costs.”
Setting prices that have durable profit margins is key to profitability, said Chris Naprawa, board chairman of Khiron Life Sciences Corp. As the economy faces rising inflation rates, he said low margins could be “company killers” in today’s market.
Naprawa advised that early stage companies have to really examine the “real margin” of the business, accounting for other factors, such as regulatory banking or taxation. Then, companies must also take a very shar eye at the market and set prices that allow for durable margins long-term.
“In our particular case, our margins are in the 80 per cent range so we can handle a bit of inflation,” said Naprawa.
Testing, testing and testing is the best way to ensure consistency.
At CanExec’s session on “Creating Consistent Products,” panelists agree that several rounds of testing and trials is important to ensuring a positive consumer experience.
Quinn Shiskin, director of products and innovation at The Valens Company, moderated a panel discussion that explored the different elements that contribute to a brand’s consistency in the eyes of the consumer.
Milka Subotic, marketing director of Bhang Inc., said consistency has to be examined as a whole picture – from product development, to packaging, to marketing, and to overall consumer experience. A strong brand identity will make for a loyal consumer base, even as a brand moves through the Canadian market and the United States market.
Gregg Steinberg, chief executive of Belushi Farms, said that developing new genetics to a brand’s product line has to take the individual brand’s identity into account. Belushi Farms in Eagle Point, Ore. is a cannabis company founded in partnership with actor and comedian, Jim Belushi. The farm produces for three signature brands – The Blues Brothers, Captain Jack’s and Belushi’s Secret Stash.
“We work with a couple of breeders in Oregon and California to specifically help us figure out what our phenotypes are going to be for each of the individual brands,” he said. “And then as we branch out with different partners… maybe soon with an LP here in Canada, we figure out how we have consistency among those strains among each individual brand.”
From the manufacturing perspective, Aurora Cannabis general manager Chi-Hae Marcelo said consistent input materials are important in ensuring that quality is embedded in the process. Marcelo is general manager of two Aurora facilities, Aurora River in Bradford, Ont. and Aurora Ridge in Markham, Ont.
“You have to make sure that process you develop is repeatable,” she said. “When they’re repeatable, you’re going to get consistent product and then that creates a product that consumers will have that expected experience with that same amount of dose for every time they use their products.”
For CanBreed co-founder and chief executive, Dr. Tal Sherman, consistency can be ensured starting from the seed.
At the CanExec Summit, he presented how his company uses CRSPR gene-editing methods to optimize a cannabis plant’s growing performance. CRISPR/Cas9 edits genes by precisely cutting DNA and then letting natural DNA repair processes to take over.
Sherman said that cloning from mother plants is an outdated method. A disadvantage to this method is that as the mother plant ages, it’s technical code changes which can create inconsistency in how cloned plants perform.
“Taking a clone from a one-year-old mother versus a clone from a two-year-old mother perform differently,” he said. “And eventually, the variation from performance requires changing mothers. When you change your mothers, by definition, you change the genetic makeup of that mother and you lose consistency and uniformity again.”
Sherman presented the case that stable genetics through seed development could be the future of cannabis cultivation, beyond cloning from mother plants. He said CanBreed aims to supply stable genetics for the Canadian cannabis industry.
“If you know the gene that controls a trait (for disease resistance), you can edit that gene and get the desired effect without going through 10,000 plants. This allows for a more efficient and accurate breeding program,” he said. “And because we’re using CRSPR without concern for any fallen DNA into the plant, this would be considered as a non-GMO.”