In this edition of "Rising High," The Fly conducted an exclusive interview with Taz Turner, chief executive officer of CordovaCann (LVRLF), a cannabis-focused consumer products company with operations in Canada and the U.S. Here are some of the highlights:
VERTICAL INTEGRATION: CordovaCann is a Canadian-based company focused on building a vertically-integrated cannabis products business concentrated on North American markets. The company currently operates two retail stores in Ontario, has another eight in the pipeline across markets in Ontario, Alberta and British Columbia and has a cultivation facility in Oregon. “What we’ve done is we’ve gone after strong assets that we think will have a strong cash flow profile, that’s defensible,” Turner said. “In Canada we’ve gone after retail assets that are in less competitive markets and in Oregon, we purchased assets to a grow operation where the operation has maintained excellent wholesale pricing.” Turner said while CordovaCann is not currently vertically integrated in its markets, the company has the opportunity to be so in Oregon. “We have a pending processing license as well as an option to purchase a retail location in Portland,” he said. “We think being vertically integrated in some markets is more beneficial than in others. Vertical integration offers built in buyers of both flower and manufactured products, so there is less risk in finding customers while the underlying commodity prices can move around a lot depending on the market.” The CEO added vertical integration can help with tax efficiency as well.
STAR BUDS IP: When asked about the company’s key differentiators, Turner pointed to CordovaCann’s IP in Canada to open cannabis retail stores under the Star Buds brand. “We do believe the brand already has substantial value given its success in the U.S. market,” he said. “The CEO and founder of Star Buds U.S., Brian Ruden, is a special advisor to the company and we’re able to leverage his experience and the platform that’s been successful in the U.S. to help us grow our retail operations in Canada.” The company's first Star Buds store in Barrie generated gross revenues over $213,000 in the first 15 days of August, with a gross margin of 35%, equating to a run rate of over $5.1M in annual gross revenues. Additionally, the company's second Star Buds store in Bradford generated gross revenues over $144,000 in the first 15 days of August, with a gross margin of 35%, equating to a run rate of over $3.4M in annual gross revenues. “It’s worth pointing out that of the additional eight in the pipeline, the vast majority of those are completely built out and we are looking for additional locations to open both in the markets where we’re already in but also in new provinces as well,” Turner said. The CEO also noted the option on the dispensary in Oregon and said CordovaCann will look to expand in that market and additional markets in the U.S.
EXPANSION: The CEO said CordovaCann currently doesn’t have any plans to take the company global but is actively looking at near-term expansion in other Canadian provinces and U.S. states. “We’re mostly looking at Western U.S. opportunities so that would include states like Washington, further expansion in Oregon, California, Nevada, Colorado, Arizona and those types of opportunities,” he said, adding the Western U.S. is a more developed market. “We like entering markets where there is a consumer that’s a bit more knowledgeable, certainly a market that has seen the commodity price compress over time so you don’t have that risk as much as you do in the more nascent markets.” Turner said the idea is to focus on those markets and possibly acquire assets where CordovaCann can generate strong return on capital.
LEGALIZATION: When asked about the potential of the U.S. federally legalizing cannabis, Turner said he expects the U.S. to make some movement towards legalization in the next presidential cycle. “Regardless of whatever party wins, I think in the next four years we’ll see some movement towards that,” he said. “Whether or not its fully recreationally legal by the end of the next presidential cycle, I don’t know, but I do think we’ll get some significant strides to that end.”
FLOWER VS. DERIVATIVES: As cannabis products become more diverse, the CEO said he expects derivatives to comprise more of the market as time goes on. “Some of it will be due to R&D and technology but I think it mostly will be attributed to new cannabis consumers shying away from smoking flower in favor of edibles, drinks and topicals,” he said, adding he thinks edibles and topicals will continue to make up more of the market over time. “There’s a lot of ability to improve in those mediums from an R&D and technology perspective,” he said. “I do think those two mediums will improve globally over time.”
CORONAVIRUS: When asked about the impact the coronavirus outbreak has had on CordovaCann, the CEO said the company has benefited from the increased demand for cannabis. “We’ve benefited from it in our Canadian stores, in the two stores that are open, and also our operator in Oregon has seen very strong pricing for flower given the increased demand,” he said.
INVESTOR INTEREST: As investor interest increases in the space, Turner said investors should keep an eye out for companies with a focus on returns on capital. “By that I mean where to allocate the time and money to then generate the quickest turn of profits and that’s always been the focus of the company,” he said. “It’s just now starting to become the focus of investors in this industry where prior to this, it was a lot about a land grab and the largest assets, not necessarily the most efficient operations in the best markets.” The CEO said as the industry matures, he believes investors will focus more on returns on capital and the space will be treated like any other industry from an investor standpoint.
CHALLENGES: When asked about the biggest challenges facing the industry, the CEO said the federal illegality of cannabis still creates a lot of hurdles. “Traditional banking and financing resources are really hard to find and also differing regulations must be tracked and adhered to,” Turner said. “Even in Canada as well as the U.S., the market is so nascent. It needs time to grow up.” He added the industry needs more analytics and more systems need to be created to advance the space. “Logistics chains need to become less fragmented and I also think standard operating procedures can be vastly improved,” he said. “All of it really leads to more efficient, profitable operations across the industry.”
OPPORTUNITIES: As the cannabis space develops, Turner said the company is excited about expansion in Oregon and the current pipeline of retail stores in Canada. “We have a license in the queue in Oregon that’s still transferring for the cultivation operation,” he said. “Once that transfers, we’ll go out and pursue our processing license and dispensary license there to help bolster that operation. We also have a strong set of retail cannabis stores to open in Canada in the coming months. I’m pretty excited about the expansion opportunities moving forward and with that expansion comes increased revenues and profitability.”
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Akerna (KERN), Aleafia (ALEAF), Aphria (APHA), Aurora Cannabis (ACB), Auxly (CBWTF), Biome Grow (BIOIF), CannTrust (CTST), Canopy Growth (CGC), Canopy Rivers (CNPOF), Cresco Labs (CRLBF), Cronos Group (CRON}, CV Sciences (CVSI), Delta 9 (VRNDF), FluroTech (FLURF), General Cannabis (CANN), Green Thumb Industries (GTBIF), Greenlane (GNLN), GrowGeneration (GRWG), Harborside (HSDEF), 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 (MEDIF), MedMen (MMNFF), MJardin (MJARF), Neptune Wellness (NEPT), Omnicanna (ENDO), Organigram (OGI), Planet 13 (PLNHF), Sproutly (SRUTF), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Valens (VLNCF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Wildflower Brands (WLDFF), YSS Corp. (YSSCF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).
CordovaCann
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APHA
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Aurora Cannabis
+0.2 (+2.14%)
CV Sciences
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CannTrust
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Canopy Growth
+0.05 (+0.30%)
Cronos Group
+0.05 (+0.93%)
Trees Corporation
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IGC Pharma
-0.075 (-5.58%)
Tilray
+0.055 (+0.85%)
Trulieve Cannabis
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ZYNE
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