Plus Products Inc (CNSX:PLUS) California’s Leading Gummy Manufacturer

Plus Products Inc (CNSX:PLUS) (OTCMKTS:PLPRF) (FRA:0T1) is one of the largest edibles manufacturers in California. CEO Jake Heimark shares details of the company’s story and its unique approach to the crowded California market. Plus Products is focused on producing low dose edibles, which allows consumers to make personalized choices. Unlike many in the space, Plus has a small portfolio of products. Heimark explains that by focusing on just 4 different products, the company can ensure consumers have the same product experience across numerous  jurisdictions. The company’s Uplift Sour Watermelon Sativa gummies are the number one product in California across all categories. The company also offers CBD Relief Pineapple & Coconut gummies and is working with regulators to achieve the correct dosages for CBD products.

Transcript:

Narrator: Plus Products, Inc. is based in California and manufactures cannabis-infused edibles which it sells to both the regulated medicinal and adult-use recreational markets.

All products under the Plus brand are made with high-quality ingredients in the company’s dedicated 12,000 square foot food-safe manufacturing facility in Adelanto, California, staffed with chemists and food scientists.

Plus Products, Inc. is listed on the CSE under the ticker symbol PLUS.

James West:   Jake Heimark joins me now. He is the CEO of Plus Products, trading on the CSE under the symbol PLUS. Jake, welcome.

Jake Heimark: Thank you. Thanks for having me.

James West:   Jake, quick overview: what is the company all about? How was it founded, and where are you at now?

Jake Heimark: So Plus is an edibles manufacturer in California. We’re one of the largest edibles manufacturers there, which is, of course, the largest cannabis market in the world.

James West:   Right.

Jake Heimark: We started in my parents’ garage in Pao Alto; I was actually looking at the cannabis industry, thinking about getting interested in sort of the banking side, which in the US is a real problem, because it’s still Federally illegal, and saw an opportunity as I was visiting dispensaries that many places really didn’t have good food products. They weren’t dosed correctly, they were packaged very poorly.

My uncle used to run a $100 million contract manufacturing plant in Austin, Minnesota, so I knew what it was supposed to look like. I didn’t really know how to do it; we had to figure that out along the way.

James West:   Sure.

Jake Heimark: But we started there, and we grew sort of through the last three years to be one of the largest players in California.

James West:   Wow. So your gummies, I take it, are available in, like, MedMen stores, for example?

Jake Heimark: They’re available in most stores in California; MedMen is one of the stores they’re actually not available in.

James West:   Oh, okay. Great, so tell me: what is the dosage that is the most popular?

Jake Heimark: Yeah, so we focused on low-dose edibles. So we found that people are using –

James West:   That’s strategy [laughter]

Jake Heimark: It is, right? Because it turns out you can actually have more than one. We’ve found that the key to cannabis edibles is, first of all, on the company side, getting the dosage right. And then on the other side what you have to do, on the consumer side, is start to understand how the dosage works. So by having low, really consistent dosage, you can find your just-right – that’s what we call it. When you have that dose that maybe it’s 5 milligrams and 10 for others, or maybe it’s 2.5 milligrams, you need to bite them in half. And by providing low-dose edibles that speak to everybody, everybody can find their own ‘just right’. It works really well.

James West:   Interesting. So, what kind of sales volume are you doing, presently?

Jake Heimark: We are a public company, of course, so I don’t give our revenue numbers; but I’ll say from what is publicly available in the retail sales numbers from the data analytics trackers, we’ve 10 x’ed our sales over the year. We started at the beginning of 2018 to where we ended, was a huge difference in the number of Plus products that were getting sold in stores.

James West:   Okay, so what is the product called that I look for in the store?

Jake Heimark: So when you go to a store, you’ll see four different products that are Plus every day; they’re all different types of gummies. What we focused on is a little bit different than other companies, is that just a few products really had sku velocity, and we sold more of those than companies that have hundreds of different products, because in this industry, you’re going to have to make products in California, New Jersey, New York, Massachusetts, Nevada, Canada and Europe, and have them all taste the exact same way.

If you have a portfolio of 100 products, that’s a really hard problem. Coke didn’t have to make Coke in New Jersey and New York and make sure it was the same. Now, with problems come opportunities, and that’s what Plus is really focused on. So, by having only a few products, we get that customer loyalty, and then we can have those same products available everywhere.

James West:   Right. That’s interesting. So what is the most popular product?

Jake Heimark: Number one is our Sour Watermelon uplift. Actually, in all of California, across flower, concentrate, edibles and vapes, it is the number one selling product.

James West:   Really?

Jake Heimark: Yeah.

James West:   Huh! And what’s the potency of that?

Jake Heimark: That’s 5 milligrams each.

James West:   5 milligrams?

Jake Heimark: So for about $20, depending on the dispensary, you get 20 individual units of 5 milligrams each.

James West:   For $5?

Jake Heimark: Well, $1 per unit.

James West:   Oh, okay. So that’s pretty cheap. I have experimented with a wide range of edibles from the stores in California, and I’ve found that I’m really not much – I’m not very functional with even the slightest amount of THC. I become somewhat catatonic and antisocial and I just want to go lock myself in a room with a drum kit and just do that instead of deal with people.

So does the audience for these products on the THC side, do they trend towards the younger crowd?

Jake Heimark: Actually, interestingly, we thought they would, but they don’t. They’re all the different age groups. What we’ve found is that as we’ve gotten the dosage right – what a lot of companies have had difficulty with was getting that dosage right, because if you have too much, you actually get what we call ‘couch locked’; that’s when you’re locked in the couch and can’t move at all.

James West:   Yes.

Jake Heimark: And by getting that dosage right and a low dose, we found that people don’t have that effect. That’s sort of what’s made us successful, was getting that right.

James West:   Yeah. One of the things that I’ve found with edibles is people, especially with less experience, will eat one and say ‘oh, well, yeah, I feel it a bit, but that’s nothing’. And they’ll eat another one, and they’ll go, ‘yeah, I feel that a bit more, but I’m still good’ and then they eat another one. This all happens in 45 minutes and they don’t understand that, many times, it takes a long time for the edible to come into your system. And, you know, two hours later they’ve got couch lock. So how do you – is that a process of education and labelling where you say to people, you know, try one, give it a solid hour, maybe two hours, until you know how these are going to work in your body?

Jake Heimark: So it’s part marketing, it’s part labeling, but the most important part is, it’s actually time. When I look at markets like here in Canada, and I look at people who are in New York or other states where they just haven’t had the history, the consumer isn’t as educated.

In California, it’s been legal for more than 20 years. That means that the brands that are in California have had to be playing against each other for more than 20 years, and the consumers are used to a different level of product. They’re used to higher-quality products, and they’re actually used to using them in different ways. Edibles are a different experience, and as other consumers start to learn that, what we’ve found is that over time, as markets move to recreational, the consumption of edibles increases over time as a percentage of the market as people get familiar with them. They start to trust them, and the brands that are able to capture that are actually going to be really successful brands.

James West:   Sure. So are people who were formerly hard-core premium flower smokers gravitating more towards edibles as they age because the smoking does take a toll on your exhaust system?

Jake Heimark: So, a lot of our consumers are what we call accepters. That’s people who had used cannabis historically, and maybe stopped using it for a long time, and are now back into the industry and they’re accepting of it.

James West:   Right.

Jake Heimark: And those people, we’ve found, have actually really high repeat purchase rates once they find the products that they like.

Another group that’s amazingly large are people who are looking to solve their pain problems. If you’re looking to solve pain, you will try anything once, and then if it works, you keep buying it.

James West:   Right.

Jake Heimark: By tuning the different molecules in our different products, we actually can start to solve those states. I think any company that says that they’re doing it right now is crazy, because it’s so early on in this industry; it’s going to look very different in 10 or 15 years. But the companies that are focusing on getting that right, they’re going to create really successful brands.

James West:   Wow. Where do you source your inputs, your THC and CBD?

Jake Heimark: We have two main suppliers in California, but what’s really important to understand about Plus is, we focus just on the food manufacturing part. Less than 1 percent of what we do is actually the cannabis content. We have a really strict regimen of testing to make sure that as we source, we’re getting the right compounds in there and we’re mixing them together in a way that’s really consistent, but it’s sort of input-agnostic. It can be BHO, it can be ethanol, it can be different types of input material, and as we go to other jurisdictions, that’s really important, because if you want to make something that’s the exact same in every place, you’re going to have different extractors and different suppliers.

If you’re not going to own the whole supply chain, you need to actually focus on making sure that you can work with different quality and quantities of inputs.

James West:   Do you guys have a CBD-focused line?

Jake Heimark: We do! We have a CBD-only product, it’s our pineapple and coconut, what we call CBD relief. It’s actually the Top 4 seller in California, meaning it’s number four.

James West:   Wow, yeah.

Jake Heimark: Yeah!

James West:   So what is the dosage of CBD in there?

Jake Heimark: That’s 5 milligrams of CBD. Now, the State of California only allows, at the most, 100 milligrams of CBD in each product, and we think companies like Plus have a responsibility to help educate not just consumers, but the regulators as well. It’s quite clear that higher doses of CBD are really important to getting the effects of CBD, so we’re working with that.

James West:   So when you say 100 milligrams max, is that like the whole package?

Jake Heimark: The whole package can only have 100 milligrams.

James West:   Ah. I do 43 milligrams per dose each day and that’s just like, that just keeps me mellow and feeling sort of groovy.

Jake Heimark: Exactly. We’ve found that 50 milligrams is about the just-right for many people, but of course, some people, you know, you can be a very large person and it could be a small amount, depending on how it works for you.

James West:   Sure.

Jake Heimark: We joined the National Cannabis Roundtable, like, by John Boehner, to actually start working on regulating the cannabis industry; and we’re interested in the CBD industry as well at a national level. I think that you have to play both on the product side and the marketing side, but also help regulators understand, because they want to do the right things. They don’t know very much about this, especially when it’s illegal in the US to do research, and it’s something that companies like us have a responsibility to help change.

James West:   Sure. Will you participate in the Canadian market when it’s legal here, which is supposed to be October this year?

Jake Heimark: Yeah. We’ve been talking to a lot of potential people up here in Canada. I think that the most important thing for us is that we have a really successful product. In California, it’s sort of like playing in the major leagues, if you’re familiar with baseball; it’s like being the Yankees, if you can win there, and then you go to other markets where people aren’t used to making products. We make hundreds of thousands of products a month; that’s hundreds of thousands of times that we get it wrong, that we can get it right the next month.

James West:   Right.

Jake Heimark: That gives us a lot of learning. So when we launch in other jurisdictions, we want to make sure that we control the manufacturing process. That doesn’t mean that we have to actually own it, it just means that we have to control it, and that’s really important to product quality. And we think product quality, and what we call ‘leading with product’ is a way to actually help develop the brand in the long run, in this industry.

James West:   Sure, sure. So did you guys sort of pioneer the creation of these from back before it was legal, or are you recents to this?

Jake Heimark: Good question! We actually started in the medical market in California with a cannabis-infused gum. It has all these great attributes, it’s low calorie, it’s fast-acting…I thought it was going to be a hit.

Turns out, and this is where by making lots of things, you learn that’s actually a little bit too far ahead of the consumer, even in California where people have been doing it for so long.

So all these learnings about what makes it successful, we’ve actually learned by putting it in the market. We’ve had to adjust machinery, we’ve had to adjust our recipes just to get it right, and that’s what we’re bringing with us as we go to other places.

James West:   Cool. So from an investment perspective, what’s the growth catalyst, what’s the primary driver of growth in the value of the company?

Jake Heimark: This year, the primary driver of revenue for us is actually going to be regulatory. So if you look at what happened in the 2018 versus 2017, when the first year of recreational sales in California, the total market shrank, which means one of two things happened: people consumed less cannabis the first year it was recreational, or, more cannabis moved to the black market. I would be surprised if people consumed less cannabis.

James West:   Me too.

Jake Heimark: So as we look to 2019, we’re really excited that the California State seems to be stepping up their regulatory enforcement. It’s going to move more people toward the legal market, and what’s really interesting is that, as people move from black market shops to legal shops, what they purchase changes. People don’t feel comfortable purchasing edibles from their corner drug dealer; that feels weird. But when you walk into a store that’s beautiful, that’s well-kept, it has great products all over it, you actually may want to try one of these edibles, and once you do, keep purchasing it.

James West:   Very cool. So I’ve heard that up to 90 percent of the vendors of cannabis in California are still not properly registered and licensed.

Jake Heimark: That sounds like a number that’s hard to quantify. I’ll say we got one of the first annual licenses in California. We’re really proud of that. We got one of the first temporary licenses as well; we have a Chief Risk Officer who monitors not just compliance, but actually helps educate the regulators on what we’re supposed to do. She came from both Uber and Facebook.

James West:   Oh, very cool so, will you guys create more products as the market matures, like, across different categories?

Jake Heimark: Of course we will. You can’t be relevant, and there’s an opportunity here to create an infused product manufacturer that really can span the entire infused product manufacturing spectrum. So that’s everything in edibles, but also tinctures, oils, vapor cartridges, anything where manufacturing is adding something to it, that’s where we see the value of the brand can actually provide something to the customer.

When we do what we do, well, we like to keep it secret until we launch it.

James West:   Yeah, sure. Okay, well, that’s awesome, Jake. That’s a great introduction to the company; I’ve not been familiar with it. The cannabis deals are starting to fly faster than I’ve ever seen.

Jake Heimark: They are.

James West:   But we’ll leave it there for now, we’ll come back to you in due course. Thanks for joining me today.

Jake Heimark: Thank you so much for having me.

James West:   You bet.

Original article: Plus Products Inc (CNSX:PLUS) California’s Leading Gummy Manufacturer

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