Read the Beforeitsnews.com story here. Advertise at Before It's News here.
Profile image
By Midas Letter (Reporter)
Contributor profile | More stories
Story Views
Now:
Last hour:
Last 24 hours:
Total:

VIDEO: Biome Grow Canada’s Next Cannabis Conglomerate

% of readers think this story is Fact. Add your two cents.


Biome Grow Interim CEO Khurram Malik outlines the company’s plan to win the east coast market despite being a relatively new entry to the cannabis field. The company’s leadership has considerable institutional knowledge in the cannabis industry as well as significant corporate management experience, which gives Biome an advantage over other cannabis start-ups. Biome will capitalize on strong consumer loyalty in Atlantic Canada by producing province-specific branded products. Malik believes Biome’s unique corporate strategy will allow the company to thrive when the cannabis market stabilizes in 2020. With Biome investors get “the valuation of a newbie license, with a very credible, done-it-before team.”

Transcript:

James West:   Welcome back. My guest this segment is Khurram Malik. He’s the CEO of Biome Grow. It says interim CEO here, Khurram. What is with ‘interim’?

Khurram Malik: Well, yeah, I mean, my background is investment banking, and, you know, building companies or telling other people what to do.

James West:   Sure.

Khurram Malik: So you know, we don’t have what we call, affectionately, founder’s syndrome. So we have a really credible management team coming on board to run this, and also a Board of Directors which I think will be second to none in the industry.

James West:   Wow.

Khurram Malik: Because, at the end of the day, look: we’ve been forecasting and selling in the sector for a while, so there are a lot of things lacking. So the two things that lack there, just to go into it: lack corporate governance on the Board side of things, and then on the management side of things, you don’t have a lot of managers running these cannabis companies that have run large, complicated businesses before, right? You’ve got people that have run 20, 30-person businesses, or high growth to a certain point. But yeah, running companies where you’ve got a couple hundred employees, a variety of distribution platforms and production assets, different jurisdictions – it’s quite an ask.

So having a credible team is key, which is why the interim fellow has brought it to the point that we could, and now we’re going to have an entire team come in and sort of run it, which we’ll announce very shortly.

James West:   Oh, okay. Tell us what BIOME Grow does, because nobody knows at this point.

Khurram Malik: Yeah, it’s sort of our cannabis project we’ve sort of kept under covers for the last two years, we’ve been working on just releasing product out, because we weren’t public. So I think the world should know what we’ve been up to.

James West:   Sure.

Khurram Malik: Basically what it came down to was, you know, we looked at the Canadian market and we looked at the international market, and Canada’s looked at as a global leader right now in terms of at least one thing, you know: producing cannabis at industrial scale. Rightly or wrongly, that’s what we’re looked at. That’s a narrow window of opportunity there where we can leverage that and sort of establish our Canadian way of doing things, elsewhere. That’s a very large market out there.

But you know, to do it properly, you’ve got to have a beachhead in Canada and then look elsewhere. And establishing a beachhead in Canada is tricky, and if you’re not one of the big guys with a large balance sheet and had several years to figure out how to do things, it’s tricky. So when we looked at this thing two years ago when we were putting it together, we figured out a way, in our opinion, that we could establish a very credible, sustainable cannabis platform even though we’re a little later into the game, while leveraging that to get some very interesting and aggressive international opportunities up and running to make this a truly global, and quite frankly, in about two or three years, if we’re not doing the bulk of our sales overseas, something dramatically has gone on in our execution.

James West:   I see, that’s interesting. So you’ve certainly had the benefit of a ringside seat watching everybody else’s mistakes.

Khurram Malik: True.

James West:   And so I’m assuming that you’re putting that experience to good use in BIOME.

Khurram Malik: Exactly, and not only sort of watching, we’ve made mistakes along the way with our, when we were servicing some of the guys with the largest cannabis companies in the country and in the world, for that matter. So the good thing about going later on is, you know, you can deploy capital more efficiently, but the downside obviously you don’t have that balance sheet or, you know, that large production facility and footprint ready to go the day recreational goes live. So we will have that, but we’ll ramp up to that in what we think is more of an intelligent manner for somebody who is building a slightly different sort of mid-size platform in Canada, but building a very aggressive and large platform elsewhere.

James West:   Sure. If I was to, you know, just scan the headlines for the last few months, I would get the impression that you were a Maritime-focused participant.

Khurram Malik: Yeah. So when we were looking at, okay, how do we establish something that’ll survive in Canada, because look, we’ve got over 100 licenses right now; we’ll go up to north of 200-something when it hits the apex, and when supply and demand normalize, it’s going to whittle down to a very small number at the end of the day. So, how do you build something coming later that’s going to survive what I call the day of reckoning?

James West:   That’s what I’m wondering.

Khurram Malik: And once you come to the other side of the day of reckoning, you’ll flourish and thrive. So that’s why Atlantic Canada, and quite frankly, at the end of the day, there’s very few licenses east of Ontario; 75 percent of all licenses are either in BC and Ontario, for that matter. And Atlantic Canada is highly underserved. We’re actually very active with some of the other companies in Atlantic Canada, creating, you know, billions of dollars of economic sort of value there. So we’ve got entrenched relationships out there, plus, we’re building brands in Canada which I think are rather unique compared to other people.

There’s an argument going around, what does a cannabis brand look like? If we do our job properly and build brands appropriately for Atlantic Canada, you know, they’re very sort of local brands, right? If you build local, you employ local, you entrench yourself in the local, you get a system there, they will support you through a lot of things, even if you’re higher price, your quality may not be there – not that we’re going to shoot for lower quality or anything – which doesn’t exist in other parts of the country. There may be a few provinces here and there, but Atlantic Canada as a region is very, very loyal, particularly in Newfoundland. Ontario is different, right? We buy from anyone. Couldn’t care less.

James West:   Right. Cheapest the better.

Khurram Malik: Yeah. So we’re headquartered here, because a lot of our senior executive teams prefer to be based here, but most of our operating assets for Canada are in Atlantic Canada. We’ve got a production facility under construction here in Ontario, but quite frankly, it’ll probably supply Atlantic Canada for the next little while and then we’ll turn our attention to Ontario. Ontario is more of a medical market for us right now.

James West:   Sure. So what does the actual growth profile of the company look like, in terms of productivity?

Khurram Malik:     Sure. So we’re licensed in Nova Scotia right now and we should be, I think, the first company in Nova Scotia to be in a position to actually sell cannabis later on in the summer. Newfoundland will be up and running in terms of a license later this year as well, in the second half, and in the next few months, we’ll have Ontario licensed as well. So, three licenses this year, we’ve got one right now, and two additional licenses beyond that in Canada in Q1 of next year. So, five in total.

James West:   Okay, so how much capacity production right now?

Khurram Malik: Right now it’s pretty small. It’s a small, 7,000-foot facility in Nova Scotia, which roughly translates to about 500 kilogram run rate. We’re expanding an additional 100,000 square feet there, which is where it gets interesting. Our biggest facility will be in Newfoundland, which is about 168,000 square feet, and that can probably do, the way we’re building it, about 16,000 to 17,000 kilograms a year.

James West:   Fantastic.

Khurram Malik: Dry product.

James West:   Sure, okay. So how much money have you raised? What’s the capital structure look like? Who are the big shareholders?

Khurram Malik: Sure, it’s interesting. So apart from building our local ecosystem is, we raised a lot of our initial capital in Atlantic Canada from, you know, movers and shakers and influential individuals who, you know, can help us down the road in Atlantic Canada. So we’ve raised about $10 million so far, and we’re just about raising an additional 15 right now to sort of get us to where we need to go. Once we’re listed, we’ll do something bigger later on down the road.

But if we’re good at one thing, beyond anything else, we know how to stretch an investor dollar. So, with less than $10 million, I think we’ve built a pretty significant platform here, and the way we did it is, we raised tiny amounts as we went along, not to dilute existing shareholders, because what often happens in the sector is, you know, you need to raise a lot of money to do anything; it’s very expensive to build a cannabis facility in Canada. So effectively when you’re ready to actually produce and sell, you’ve diluted the heck out of your existing shareholders – you know, your founders and your early investors are down to 5 to 10 percent.

So the way we did it, and this is a commitment we made to our investors, we’ll build you a de-risked cannabis platform which will survive the onslaught and thrive, quite frankly, but also, you will still own quite a bit of the company, the way we will raise the money. You know, by the time we’re public and trading and all that. So they own considerably more of the company than a typical cannabis company at our stage would have. So that’s the plan. I mean, ultimately, we’re going to have to raise about $80 million, and we got visibility on where that’s coming from, to prosecute our domestic production here in Canada, which results in roughly about $250 million in revenue. So you know, the returns aren’t too bad. But also, our facilities are different than other people’s. They’re unique, and there’s unique IP there. We build highly automated facilities; we brand uniquely in Canada. So, it’s not your run of the mill pod producer; we’re doing things differently.

James West:   Wow. Interesting. Besides the East Coast component, what is it exactly that you’re going to sort of try to do differently in the product category?

Khurram Malik: Fair enough. Again, what it really boils down to is, you’ve got to have a high quality product. So our strains will be – and everyone can sort of say this – will be different than other people’s which are unique to the province. But also, you know, we segment our provinces individually. So our Nova Scotia brand is specifically for Nova Scotia; we produce and primarily only sell in our facilities are small to mid-size. So we understand a Nova Scotia customer. So, for example, a 50-year-old single dad in Nova Scotia has a very different purchase trigger than the 50-year-old single dad in Newfoundland, even though he’s right next door, versus New Brunswick. So, in terms of delivery mechanisms, in terms of branding, in terms of what the genetics are, it will be specifically tailored to that province, and when we can do additional derivatives, it’ll be a very Atlantic Canadian focus to them.

And with the real innovation resides for us is on the medical side. In terms of, we’ve got a very senior medical advisory board coming onboard with basically the leading doctors in Canada and some of the low-hanging fruit areas: obviously pain, oncology, the men’s health, etcetera, etcetera, that are going to help sort of chart our path forward there. So I mean, it’s a very, very credible team for a company that is relatively young on the sector, so that should hopefully give people sort of a comfort, that, you know, this is not a run of the mill cannabis company that’s just trying to take advantage of the euphoria, because that’s not the case.

James West:   Yeah, you bet. Khurram, I can’t help but veer over to a macro look at the sector because you cover the sector and have done so as long as I have, and so I don’t know of anybody else I can generally have these conversations with. But since the onset of the first ACMPR companies – and they had the luxury of being first, so they kind of took their time, and they didn’t move too fast – but now that all of these licenses are coming out from Health Canada, and the onset of recreational is here, everybody’s sort of rushing around to stake out market share and build a moat around it as best they can, and position for the US go-Federal event that we know is going to happen one day, arguably. And then there’s of course Europe and South America, and you see all these battles shaping up between the giants and localized little guys who have rushed in to stake what was one of the few opportunities left in the whole global space.

Khurram Malik: Sure.

James West:   So, do you think that any of these little guys who have fired themselves up and are now competing for market share in markets where, call it the Top Three being Aurora, Aphria and Canopy, obviously, are able to deploy a lot of capital, acquire a lot of local expertise, and influence the decision-making process at the government level by virtue of their size and economic representation – do you think the small companies have any chance of survival?

Khurram Malik: Well, that’s a very leading question, I see where your position is on this, but quite frankly I agree with you. So yeah, if you’re small, you’re relatively new, which is what the bulk of the relatively, you know, the last 40 licenses in Canada are; they’re first-timers. The first-timers would be somewhere in the small side of things.

As we’ve learned from the folks that have been up and running for a while, it’s really challenging, first of all, to be able to grow. And it’s really challenging to grow. So even if you’re an incumbent and one of the bigger guys, when they expand their facility from 100,000 to 200,000 square feet, pretty much everything falls apart again, so they’re still trying to figure out how to grow, which is not well understood in the sector.

James West:   Right.

Khurram Malik: So the vast majority of people that have got licenses in the last, let’s say, nine months, it’s going to take them a year to figure out how to get any decent quality product out the door. So that’s your biggest challenge, provided you’ve found the capital to build these things out. And you’re right: the provinces are a little desperate for product right now, because they realize, you know, once all this inventory people are sitting on is flushed out, where’s it going to come from? And yeah, which is why they’re favouring the big guys, because they’re the ones that can provide right away and they’re leveraging that to get, you know, multi-year commitments potentially.

So it’s going to be challenging for the small guy. So, you know, not having the distribution, not having the balance sheets, and not knowing how to grow properly the way we are forced to grow, means most of these smaller guys are probably – you know, they may last for a little while, but when I think supply/demand normalizes middle of 2020, roughly – that may change, depending on what happens, but they’re going to struggle. So us being right now a small guy, we’re building a very different company. So what differentiates us from these guys are, we’ve built some of these facilities from the bigger guys. We know how to grow, right? So when we got our license in Nova Scotia last year, we got a license within six days of the building being finished, because we’re a known commodity to Health Canada.

James West:   Sure.

Khurram Malik: We built it the way we helped build other people’s facilities, right? And we’re almost ready to, you know, we’ve grown several crops while our competing LPs in Nova Scotia are still, we haven’t heard from them. So that’s the challenge.

James West:   And you kind of have your own sort of pedigree in terms of access to capital, because that’s what you’ve been doing for all of these other guys. So I think, I mean, I hope it didn’t sound like I was suggesting BIOME doesn’t have a hope, but that’s what I’m trying to say is, without a differentiator like superior access to capital and the benefit of the experience of all the companies you’ve been involved with, a new startup like, I can’t tell you how many companies I hear from who are like, ‘You’ve got to come and check out our place, we’re going public, we’ve got 15,000 square feet and we’re going to grow the best and the most.’ And it’s like boy, it’s been almost a year and a half since I’ve heard anybody even credibly trying to say that who knew that that kind of a statement had zero credibility anymore.

So that, I guess, is my point, is that there’s a lot of companies out there now. It’s like the old, mature mining market. I use uranium as an example: when the uranium bull took off back in 2006, I guess it was, there were, you know, first there were 10 companies; then there were 50 companies, then there were 400 companies.

Khurram Malik: Right.

James West:   Well, after company 100, no one of those companies are around to this day.

Khurram Malik: Exactly.

James West:   And they were all, essentially, ‘me too’ companies that really didn’t have a chance out of the gate. And so the benefit of that experience is that, it’s first mover advantage, especially in capital markets.

Khurram Malik: Certainly.

James West:   Powered companies is key.

Khurram Malik: Exactly.

James West:   So I think, it sounds to me like BIOME’s going to do great, and I can’t wait to come and visit the facilities with camera crew and tip a little East Coast pint.

Khurram Malik: Anytime. We can come out to Ontario and check out what we have here. I’ll leave you with this: I mean, this is how, as an investor, I’d look at the space in general, which you’ve sort of touched on really well. So, it depends on your risk tolerance. So you know, you can invest in funds now that are cannabis-oriented, or you can invest in the large companies, and by and large, I’d recommend most people invest in larger companies. If you’ve got a higher risk tolerance, then you want to go for the next tier and the next tier down, because they haven’t got on their big run yet, once they execute, provided they are able to execute.

So you look at the Big Three or the Big Four: what’s the upside for them over the next two or three years? Maybe a double, maybe a triple? Right? So whereas, if you can find a smaller company like us, your upside trajectory over the next 12 months is considerably more, but you’ve got to get comfortable with the fact that it’s de-risked enough for someone to pull the trigger. So all we’re saying is, you’re getting with us, you’re getting the valuation of a newbie license, with a very credible, done-it-before team, not only in the cannabis space but in other industries that have shepherded small companies to very large companies in a short period of time, and in a successful track record.

James West:   Right.

Khurram Malik: So that’s our value proposition, and I don’t think there’s many that are relatively new licenses that can say that.

James West:   Hmm. Great. Well, we’re going to follow with interest. Thanks very much for joining me today.

Khurram Malik: Pleasure.

More Great Cannabis Content

Original article: VIDEO: Biome Grow Canada’s Next Cannabis Conglomerate

©2018 Midas Letter. All Rights Reserved.


Source: https://midasletter.com/2018/09/video-biome-grow-canadas-next-cannabis-conglomerate/


Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!


Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST


Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)

Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen!

Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover -  Reduces Smart Meter radiation by 96%! (See Video).

Report abuse

    Comments

    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    MOST RECENT
    Load more ...

    SignUp

    Login

    Newsletter

    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.