Canopy Rivers Inc (CVE:RIV) President on Joint Venture with LeafLink Inc

Canopy Rivers Inc (CVE:RIV) (OTCMKTS:CNPOF) President Narbe Alexandrian discusses the company’s recent agreement with LeafLink Inc. Alexandrian explains that the joint venture is designed to take LeafLink’s scalable platform to other jurisdictions where cannabis is legal, including Canada and international markets. Alexandrian stresses the need for a platform to help brands, dispensaries, and licensed producers create synchronized management systems. He believes LeafLink’s successful B2B e-commerce platform can provide this synchronicity. He notes that the investment in LeafLink complements Canopy Rivers’ earlier investment in Headset Inc and the combination provides insight into both retail and wholesale cannabis sales. Alexandrian suggests the cannabis industry is still significantly undervalued in the market and believes cosmetics and consumer packaged goods represent significant segments.

Transcript:

James West:   I’m back here with Narbe Alexander. He’s the President of Ca – Alexandrian. Sorry, I keep saying Alexander.

Narbe Alexandrian: No worries.

James West:   He’s the President of Canopy Rivers. Congratulations on your advancement to President!

Narbe Alexandrian: Thank you. It’s a pleasure being here.

James West:   Yeah. Narbe, we recently, or earlier today, we spoke to Mr. Smith from LeafLink, and he outlined an interesting business opportunity. It’s funny that, so they do basically behind the scenes logistics and fulfillment, IT kind of stuff, and I’ve never heard of them before – but obviously you guys have, and have been tracking them. So how long have you known about LeafLink, and what attracted you to the transaction?

Narbe Alexandrian: So for the last four to five months we’ve been talking to LeafLink in order to create a deal where we take their software platform that’s been so successful in the US, and move it over into the Canadian and international jurisdictions, as well. LeafLink is a business to business e-commerce platform for wholesale markets, so if you’re a retailer right now in the US, you’re most likely using LeafLink to buy product from the variety of different brands that are out there.

We did a lot of research on this topic; what we were noticing was, there’s a ton of brands out there, a ton of dispensaries out there, and the industry is so fragmented. We were seeing the rules coming in by the Ontario government that could even create more fragmentation with the privatization of retail, and there needs to be a platform out there that helps these retailers, these dispensaries, understand what brands are out there, what companies are out there, what product reviews look like, order in bulk, and create more of a synchronized inventory management system through the use of technology.

James West:   Okay. So it’s a way to stay efficient and keep the supply continuous?

Narbe Alexandrian: Yep.

James West:   Right. Okay, so then, is this what you would call a typical transaction for Canopy Rivers, where you’re taking a minority stake and providing assistance, exposure to the capital markets, and with an eye down the road to some kind of an exit in the public markets?

Narbe Alexandrian: Absolutely. So we take minority stakes only in businesses, so under 50 percent. We want to leave the control with the operator, leave the incentive to the operator to grow this business into becoming a billion-dollar business, whether that be through an IPO, RTO, or even through an acquisition of some sorts.

When we looked at LeafLink, we looked at a group of individuals who are past successful leaders within the software-tech space, have already sold something. Both founders had. They created a platform within the last few years that was capturing 50 percent of whatever market they were touching into, so they have about 16 states that we operate in currently, and we thought, why don’t we take that platform – that very scalable platform, which is LeafLink – and apply it to legal jurisdictions, whether it be Canada, Australia, the UK, other parts of Europe – and create the commerce and the ecosystem for that wholesale trade within the cannabis, so that you don’t have dispensaries calling up 400 brands trying to get product. Instead, they go to one resource and they can get all that information.

James West:   Okay, so there’s bi-directional information flow too, isn’t there? Because I would think that with the eyeball on all of those dispensaries, as I was saying to Mr. Smith earlier, the data feedback must be incredible in terms of customer preferences and what people are actually interested in buying.

Narbe Alexandrian: Yeah. You really see sophistication of supply chain with some of the brands, and when you look at the data, you see sales progress and how things are growing within the different brands. It really complements our investment within Headset as well; we’re actually seeing what’s being sold within the stores. Now you’re actually seeing what’s being sold on the wholesale side of things, as well. So it’s a good mirroring of that data; really gets the understanding of what CPG and what Consumer Product Good or brand companies out there are the ones that are really going to succeed, and which are the ones that are tied to the growth of the cannabis industry and are just milking it for all they can do it for.

James West:   So in terms of trends, what do you see that you sort of see emerging as a result of the exposure to all this data?

Narbe Alexandrian: I think a couple of trends come to mind. In Canada, we’re going to see a move towards other ways to consume cannabis outside of smoking it, so whether it be sublingual, edible, beverages, anything that can be infused. I think this really caters towards those individuals who are on the fence of whether or not they want to use cannabis; it gives them a good entry point to try the product.

In a larger macro view, I think micro-dosage is going to be a huge trend that we’re going to see. Right now, you get an edible in the US in any of the States, and it’s got 100 milligrams to 250 milligrams of THC. That’s crazy to think of one cookie –

James West:   That’s bedtime for me.

Narbe Alexandrian: Exactly. You eat a bite of a cookie and you’re told to stop when you have all that sugar rush going through you. So we see a whole trend towards micro-dosage, and I think Health Canada did a great job of forcing micro-dosage onto the whole – well, the draft regulations – onto the new era of edibles that are coming out. And we see that being a big trend being created as well, because you want the consumer to enjoy the cannabis product without feeling like they’re never going to do this again because of bad trip or bad situation that they had.

James West:   Right. And so when you say that Health Canada has gone a good job of forcing micro-dosing, what are their kind of…what is the guidance, what are the limitations in the legislation?

Narbe Alexandrian: I think the draft legislations show that it’s about 10 milligrams per dosage.

James West:   Oh, okay.

Narbe Alexandrian: Which is great, because right now, again, you’re seeing 100 milligrams to 250 milligrams. Huge difference between the two, and when you do it that way, then you allow the – and you combine that with emulsification and ability to feel the dose much quicker and get it out of your system much quicker – then you really create a strong proposition for the end consumer who understands the product, knows what’s going to happen to them. It’s stable in the sense that every single bite they take, they’re going to expect something out of it specifically, and they’ll know what the ups are and the downs are, and they can just create their own experience using what they know.

James West:   So is Canopy Rivers, as an institutional investor, most interested in what’s going to happen with extracts and consumer packaged products like food and beverage, or are there other areas that interest you more? Or are you trying to keep a more or less agnostic sort of viewpoint and be open to anything?

Narbe Alexandrian: I mean, it’s a million-dollar question. You have to really stay agnostic, because anything could happen in any which way. There could be regulatory changes that kicks out a bunch of edibles or beverages; there could be a mass boom in cosmetics. We think that there’s two areas that we’d really like to focus in on right now: one would be on the cosmetic side of things, we think that’s going to be pretty big. There’s a ton of anecdotal evidence showing the ability of CBD to help consumers with everything from arthritis to sleeplessness to a bunch of other symptoms as well.

And then we think that on the plant science side, there’s a lot we can understand about the plant, as well. Right now we’re doing so much with the THC and CBD, but there’s so many other cannabinoids that, mixed with THC and CBD, and even entourage effect of the terpenes could provide a long list of medical characteristics for consumers out there.

James West:   Sure. I’ve often, people often say to me, ‘Oh my gosh, the cannabis market is so overbought’ and I say to them, not if you consider that we’re looking at a future where every man, woman, child, horse, dog, and cat might turn to cannabinoids as a remedy for one of any number of ailments. So when you think about that on a global scale and where we’re at today, it’s like, this is still not maybe the first inning, but certainly still early in the game – second, third. And is that sort of where Canopy Rivers looks at it from at this point?

Narbe Alexandrian: Absolutely. I personally think that CBD is going to be the biggest cannabinoid out there, more than THC has ever been. There’ so much you can do with it. I have, my parents for example, my mom uses CBD cream for arthritis, and she says it’s better than everything else she’s ever gotten from a doctor in the past. So she’s a big fan of that.

There’s so much application you can do with CBD, from mints to topicals to vapes, and it caters towards the sports market, the wellness market, the aging demographic as well. And there’s a ton that you can do from that side of things. So I think it’s going to be, it’s going to touch upon a bunch of different areas.

I’m super excited about the pet space, too, because you have the ability to help your pets not freak out when there’s a thunderstorm or fireworks or anything like that, and you can kind of give them the peace of mind that nothing is wrong. And we’ve even seen CBD being potentially applied to, in slaughterhouses, when before they slaughter an animal for meat to be sold in a grocery store, you give them a CBD-type product in order to calm them down so their cortisol levels don’t jump and you don’t get gamey meat out of it as well, which hasn’t been approved yet by the regulators, but it is still a promising application of CBD.

James West:   I was reading research by Raphael Mechoulam, who is largely credited with the initiation of the study of cannabis back in 1963 – I date I remember, because it’s the year I was born. Anyways, he is, he issued a paper where they’ve done these studies on traumatic brain injury in young people, where through physical trauma, the body and the brain automatically synthesize endocannabinoids. And he’s saying that, with the addition of exogenous cannabinoids, certain CBD groups, that the ability of the brain to regain functionality is super-enhanced. So, you know, that’s traumatic brain injury is just an area where you would think, well, I can’t see how cannabis is going to help you if somebody hits you in the head, except maybe for pain. But it turns out there’s a relationship there with the endocannabinoid system.

Narbe Alexandrian: For sure.

James West:   So is there a risk, in your opinion, that the proliferation of CBD becomes so oversupplied because it’s so easy to create from plant matter, especially if everywhere is going to be legal, that is it going to be a commoditized item that’s going to be tough to make money out of ex of consumer packaged goods and that retail margin?

Narbe Alexandrian: I think over time, there definitely will be commoditization; you see this in the plant space, the cannabis space in areas like Colorado, where the price per kilo is dropping over time. When we look at the market, we see it in different waves. We see the first wave being cultivation, which in Canada it’s pretty much spoken for; you have the scarcity of licenses and the value of a license is slowly decreasing.

But in areas such as Europe or Latin America, you’re still seeing high value for cultivation assets.

The next step would be the ancillary industries – companies like the Headsets or the LeafLinks that are helping give the picks and shovels for the cannabis industry to become even better, and get more knowledgeable.

Wave Three, we see it being consumer product goods. Right now, you don’t see, not a lot of businesses out there have that mind share for the end consumer; consumers don’t know the difference between the different brands yet, because they haven’t tried a bunch of them yet, we’re still too early. So there’s still a lot of space for market share to be grown.

Wave Four, I think is going to be the biggest one, which is the medicinal side. And that is Wave Four because you need a bunch of time, such as what Raphael was building out there, to get the research and the medical knowledge to the point where clinically you know that this cannabinoid is going to do that with this entourage effect of using different cannabinoids and terpenes.

And then we think Wave Five is going to be mass market, and mass market is when you have three to four big companies that manage the big bulk of the market share within the industry, with a bunch of brands underneath them in a bunch of different areas, as well.

I think cannabis is a very undervalued asset right now in the market. If you take the Top 3 companies of beverages, CPG, pharmaceuticals, beer, spirits, anything of that sort, you take the Top 3 players, mash together their market caps, you’re at about the $200 billion to $500 billion mark; you do the same thing for cannabis, you’re at $40 billion. So there’s practically a decimal place in between those two comparisons of how big this industry can get.

James West:   You bet. All right, Narbe, let’s leave it there for now. We’ll come back to you soon; thanks very much for joining me today.

Narbe Alexandrian: Thank you for having me.

Original article: Canopy Rivers Inc (CVE:RIV) President on Joint Venture with LeafLink Inc

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