WeedMD Inc (CVE:WMD) CEO on Pioneer Cannabis Corp, Joint Venture with Pita Pit Canada

WeedMD Inc (CVE:WMD) (OTCMKTS:WDDMF) (FRA:4WE) CEO Keith Merker shares details of the company’s recent joint venture with Pita Pit Canada, a successful quick-service restaurant chain, to launch retail service provider Pioneer Cannabis Corp. Merker is enthusiastic about the deal because it combines WeedMD’s extensive cannabis knowledge with Pita Pit’s retailing, franchising, and distribution experience. Merker suggests that cannabis retail and franchising will be more difficult than typical retail enterprises and as a result, partnering with an experience food and beverage company gives WeedMD a strategic advantage. Merker also discusses the company’s edibles strategy in anticipation of Q4 2019 legalization. He highlights the company’s existing joint venture with Phivida Holdings Inc (CNSX:VIDA) to create infused beverages at WeedMD’s Strathroy facility.

Transcript:

James West:   Guess who’s here? It’s Keith Merker, CEO of WeedMD. Keith, welcome back.

Keith Merker: Thanks for having me.

James West:   Keith, it’s 2019. New year, new set of regulations in the United States, rules changing all across Canada. We’re going to have beer. We’re going to have drinks. we’re going to have physical stores in Ontario, assuming that these people get it together. What is going to change for WeedMD in 2019? Nice preamble, eh? You didn’t even give me any warning about that.

Keith Merker: Where do you want me to start?

James West:   Okay, the list is embarrassingly long?

Keith Merker: No, it’s not even that. So fundamentally it’s all systems go. The platform that we are creating that’s now one of the most prolific production platforms in the industry and will continue to be so as we expand across it is the most important thing.

So, let’s forget about the noise and the hoopla and all the other things that are happening out there. That is where our numbers are coming from this year and I believe that 2019 is the year of the number.

James West:   The year of the number?

Keith Merker: The year of the number. The year of the metric.

James West:   The year of the balance sheet? I took the words right out of your mouth.

Keith Merker: Holy cow. Income statement.

James West:   Whoa income statement

Keith Merker: Cash flow. Let me teach you. EBITDA.

James West:   I don’t even know what that means anymore. [Laughter]

Keith Merker: EBITDA, EBITDA, Tomato, tomato. Listen, this is where the industry is going from, I think from the fundamental standpoint. WeedMD is well positioned for that. When we go beyond that we’re looking to create interesting partnerships so that we don’t take our eyes off of that core competency in cultivation and extraction that we’ve built and have well in hand. The rest of these pieces yeah, we’re going to play there but we’re going to play there in ways that again we don’t take our eye off the ball but we find interesting partners to work with.

Let’s take an example, Pita Pit. We just announced a partnership with Pita Pit a couple of days ago.

James West:   Yeah. That was really interesting. I have a Pita Pit around the corner near my house. I’m like great, weed sandwiches.

Keith Merker: Well, it’s not necessarily going to be that and we’ve definitely taken the brunt of a few comments along the way about WeedaPit or Pita Pot. So, I’ll just bring up that, but that being said this is a very interesting partnership between two great Canadian companies. Pita Pit has been around for a long time. They’ve got a very successful operation. They’ve expanded to 220 stores in Canada. There’s another 400 odd stores internationally including the U.S and great operators.

James West:   Peter Piper picked peck of Pita pits.

Keith Merker: Keep going [Laughter]. No, but so the aspect here is not like we’re not going to be flipping your local Pita Pit to a cannabis store anytime soon. The concept is how do we take all the wonderful things WeedMD’s got to bring to the table in cannabis knowledge, regulatory  compliance knowledge and so and so forth and combine that with another great entity that has a platform that they have developed very successfully in retail; dealing with landlords and franchisee network and all the vendors and supply chains that they needed to put into place in order to make their business successful and put them together to create an all-Canadian great platform that wants to work with like-minded partners in the retail space and cannabis.

Cannabis retail is going to be a hard thing, a hard nut to crack. I think people are always already realizing that. Retail is hard enough to begin with you add in the layers of complexity and regulations and security and compliance and licensing and they’re going to need friends. They’re going to want friends. That’s the premise of what we put together with Pita Pit.

James West:   I see. Okay interesting, you know, the retail situation in the United States is a good sort of precursor sort of a crucible of experimentation of what’s going to come in Canada and I can tell you from firsthand experience and after much peregrination through the dispensaries in America that the general level of the quality of product is very low, very low and I think that’s one of the great opportunities for entities like WeedMD who turn out a consistently superior product.

Keith Merker: Thank you.

James West:   That is always you know, I’ve been experimenting and so I know, that is always presented in the appropriate frame of perishable window because a lot of companies don’t realize that cannabis dried flower is a perishable. So,  one of the one of the criticisms that I have in the Canadian context, is that a lot of the cannabis that’s in the on the shelves of the provincial distributors in particular has been there a little bit too long and has been subject to a little bit too much de-humidification. So, by the time it ends up in your pipe where you want to smoke it it’s so dry that it basically starts on fire.

Keith Merker: Yeah. It was a bit of a catch-22 for some folks who were trying to be super prepared well in advance of the product calls from the provincial agencies, and so they were packaging the product as far back as last spring and so then it’s sitting in a container up until the fall when it’s sold and then who knows when it’s consumed from there? You’re not wrong.

James West:   Yeah. So, my question that’s my long-winded opening to the question is, so how does WeedMD stay ahead of that curve because to me that’s what’s going to win the day in the hearts and minds of the consumers of the cannabis, is like who can deliver high quality cannabis in an appropriate window of a perishable product.

Keith Merker: Yeah. And so obviously we’re talking about dried flower here specifically because those same factors don’t play into extract for instance. Look, I mean, it’s again going back to my earlier comments. It’s keeping your eye on the ball staying focused on what you do best. I think we’ve carved out a niche and a name for our self in dried flower as a premium producer that’s you know, brought to the market and the provincial agencies at affordable prices. And as we expand our cultivation platform and are able to deliver more and more of this, it’s just rinse and repeat.

I mean, we’re just expanding on the same principles that we’ve already put into place and successfully executed on and so we keep doing that and people are going to keep coming back and buying our product.

James West:   Right. Interesting. Okay. So, then in terms of the universe of new products that are being allowed into the marketplace, we’re going to see beverages this year. We’re going to see edibles this year. Does WeedMD have a strategy already in place for all of that?

Keith Merker: We do and so there’s you know, I’m not going to give you a ton of specifics, but I’ll give you some some teasers. [Laughter]

James West:   Okay. Well, I feel like teasers.

Keith Merker: So I mean we announced a ways back a partnership with a group called Phivida in the in the beverage space and so Phivida is a listed company here in Canada, and they’re rolling out of CBD line of beverages in the U.S right now and we’ll be bringing that transplanting it and rolling it out here in Canada using the WeedMD distribution platform and obviously inputs. And so that’s one area where we have it covered by virtue of a partnership with a very successful group of operators that we’re very pleased to be working with.

Here’s another example. So not too long ago we partnered with a lab in Montreal. So a guy named Domenico Fuoco is now our Chief Innovation Officer. This is a guy who kind of had me at hello when he started talking about, I’ll give you packaging as an example. So, I got very excited that you saw the passion light up in his eyes when he starts talking about packaging for topicals as just one random example. So that’s the kind of guy. I want to get involved with someone who is thinking through. He’s a scientist at heart, but truly knows how to get a product from the bench to the market and all the pieces that you need to put into place to make that happen and has a specific niche in topicals. So you can imagine that’s another category that will want to play in.

James West:        Yeah, absolutely.

Keith Merker: Just to give you a couple of examples and again, you can see the MO behind those go back to my first comments which are, it’s not WeedMD trying to take over the world with all these different endeavors. It’s finding the right partners to work with so that we can focus again on our core competencies.

James West:   I see so more partnerships like the one with Pita Pit are on the horizon in 2019?

Keith Merker: I would assume so yeah.

James West:   [Laughter] Okay forward-looking statements notwithstanding. Great! So then where do you see the biggest opportunity in the whole global matrix of cannabis opportunities for WeedMD in this upcoming year?

Keith Merker: Again, I’ll revert back at the risk of sounding repetitive.

James West:   I think I just asked the same question for a third time [Laughter]. That’s polite way of saying it.

Keith Merker: Listen, I’m happy to drive this home all day and that is you know, we’re going to put up some numbers based on the cultivation platform that we’re successfully rolling out right now.  When you take away all the bells and whistles and hoopla from this industry, what’s going to matter at the end of the day to investors, show me the money.

James West:   Okay. Well, that’s pretty much best case from an investment perspective great. Okay, Keith will let’s leave it there for now. We’ll come back to you very soon and we’re going to keep an eye on the balance sheet.

Original article: WeedMD Inc (CVE:WMD) CEO on Pioneer Cannabis Corp, Joint Venture with Pita Pit Canada

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