Orchid Ventures CEO talks licensing, hardware, challenges, opportunities and more
In this edition of "Rising High," The Fly conducted an exclusive interview with Corey Mangold, founder and chief executive officer of Orchid Ventures (ORVRF), a California-based multi-state operator focused on cannabis innovation. Here are some of the highlights:
LICENSING AND HARDWARE: Orchid Ventures is a cannabis innovation company launched in Oregon and California in 2017 with a line of vaporizer products. “The purpose of that was to develop a platform and a brand as well as a following and brand voice that we can than spread throughout the United States and even internationally through licensing deals,” Mangold said. He noted Orchid brought over Richard Brown, former president of H&R Block’s (HRB) Canadian operations, to serve as president. “He’s been heavily involved in franchising and licensing for the last 25 years and since he joined, Orchid has developed a really solid licensing platform,” the CEO said. “That allows us to bring a product offering, brand, marketing support and sales support to operators, contract manufacturers and even distributors in other states to get the brand out to market.” He added the model allows Orchid to limit its capex investment required to get into a new state as the company does not need to build out facilities or get licensed.
Orchid has deployed licensing deals in the last three to four months in Nevada and Oregon with rights in Colorado and Oklahoma, Mangold said, and the company is in negotiations on several different states and international opportunities as well. When asked about the company’s key differentiators, the CEO said he believes Orchid’s competitive edge comes from its hardware, which is manufactured by subsidiary PurTec Delivery Systems. “PurTec manufactures the only AFNOR standards emissions-tested vaporizer hardware available that we know of in the world,” he said. “AFNOR standards are a consumer safety standard that was deployed in France quite some years ago on the nicotine side.” He noted with the emissions test, the smoke coming out of the device is tested rather than just the oils sitting in the device at room temperature. “That is a huge key differentiating factor, that we have hardware that is more tested and documented than any other hardware out there, which will come into play big time as amid federal legalization and FDA involvement,” he said. “Colorado, three weeks ago, was the first state to pass a regulation requiring emissions testing. This goes back to how we manufacture the hardware, the products and our steadfast effort to maintain consumer safety.”
LANDRACE, 1933 AGREEMENTS: Orchid announced in November that it had entered into a sales and distribution agreement with Landrace to handle all sales and field activities in California. “That is helping us to scale our outbound sales efforts to onboard new retail accounts and to spread geographically throughout the state,” Mangold said. The CEO said the deal enables Orchid to retain capital and invest it on the inventory side. “They’ve done a great job in the past couples of weeks,” he said. “They onboarded some major accounts. We’re now being sold through High Times delivery and we got into SDRC, which is a very large retailer in San Diego. We’ve opened several key accounts in the Bay Area in Northern California, so we’re not only bringing on new retailers but spreading geographically.”
In October, 1933 Industries (TGIFF) announced it had entered into a supply and licensing agreement with Orchid for manufacturing and distribution of Orchid products into Nevada. “They will manufacture the oil, mix it with our terpenes and our SOPs, blend it with our formulas, put it into our hardware and packaging and then distribute it out to the marketplace,” Mangold said. “That spreads our brand into Nevada.” He added Nevada was never a large focus of Orchid, however it’s a good market to be in from a brand awareness standpoint. “Obviously it’s a heavily tourism-based state that will allow our product to be seen by users in other states,” he said. “Then the key is once you’re in Nevada, you have to be in the home state that they return to in order to get continual sales and build on that brand equity. We’re keenly focused on the Midwest and the East Coast right now and that will make the Nevada play ever more important as time goes on.”
LEGALIZATION: When asked about the potential federal legalization of cannabis in the U.S., the CEO said he estimates a timeline of about 18 to 24 months. “In regard to the federal legalization, obviously we’re in a severely turbulent political dilemma right now, but the new administration coming in in January has publicly stated their views on cannabis,” he said. “Hopefully within the next six months there should be some movement towards legalization and I hope to see it within the first four years of the administration.”
DELIVERY SYSTEMS: As technology advances and delivery systems for cannabinoids become more diverse, Mangold said he does believe there will be a prominent delivery system in the future. “Vape is still going to be a huge chunk and the leading chunk eventually just because of discretion, ease of use and safety,” he said. “Although there are some things that need to be more transparent. Hopefully the regulators will get to that.” The CEO noted that Orchid is working on a technology to be released within the next 30 days and the company feels it will be an industry standard. “The focus is going to be on safety and cleanliness moving forward,” he said. “That will eliminate a lot of the manufacturers of vape hardware out there and the price will go up because at the end of the day to have a clean, safe product, you have to have clean, safe materials and those materials cost more than cheap, dirty materials.”
CHALLENGES: When asked about the biggest challenges facing the industry, the CEO said the biggest hurdle in the space is consumer safety. “The level of testing that’s out there on cannabis products is not sufficient,” he said. “It’s not comparable to pharmaceutical, nutraceutical or even food testing so I think the biggest thing that regulators can do to improve the industry is to focus more on consumer safety and be more strict on licensing.” Mangold said regulators must defend the businesses that have spent millions of dollars to be licensed and operating as legal businesses. “They need to pursue the illicit market and shut down rogue dispensaries, manufacturers and companies that are operating in that market,” he said. “Otherwise the industry is never going to be seen as a real industry. It will always be a laughingstock of the neighborhood unless we have real regulations that are supported and enforced.”
OPPORTUNITIES: As the cannabis space develops, Mangold said he believes opportunities in the industry are vast with huge value on the brands side. “As in any consumer goods industry, the brands are going to be the biggest winners at the end of the day and I think we’re starting to see a shift on the contract manufacturing side,” he said. “We’re starting to see more experienced relevant companies come in that understand contract manufacturing, distribution and the professionalism in supply chain management that comes with that.”
CANNABIS STOCKS: Other publicly-traded companies in the space include Acreage Holdings (ACRGF)Akerna (KERN), Aleafia (ALEAF), Aphria (APHA), Aurora Cannabis (ACB), Auxly Cannabis (CBWTF), Biome Grow (BIOIF), CannTrust (CTST), Canopy Growth (CGC), Canopy Rivers (CNPOF), Charlotte’s Web (CWBHF), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos Group (CRON), CV Sciences (CVSI), CURE Pharmaceutical (CURR), Delta 9 (VRNDF), Emerald Health (EMHTF), FluroTech (FLURF), General Cannabis (CANN), Greenlane (GNLN), Green Thumb Industries (GTBIF), GrowGeneration (GRWG), Harborside (HBORF), Harvest Health (HRVSF), HEXO (HEXO), Hemp Inc. (HEMP), India Globalization Capital (IGC), Indiva (NDVAF), Indus Holdings (INDXF), Innovative Industrial Properties (IIPR), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm Labs (MEDIF), MedMen (MMNFF), Mjardin (MJARF), Neptune Wellness (NEPT), Omnicanna (ENDO), Organigram (OGI), Planet 13 (PLNHF), Sproutly (SRUTF), Stem Holdings (STMH), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Valens (VLNCF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Village Farms (VFF), Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Wildflower Brands (WLDFF), YSS Corp. (YSSCF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).