In 2014, amid a swarm of sector-jumpers and johnny-come-latelys, True Leaf emerged as a smallcap Canadian medical marijuana applicant. But the True Leaf story had a missing element. Why, asked many, would a CEO coming from the pet food industry have anything to offer in the marijuana space?
True Leaf (CSE: MJ, Stock Forum) management didn’t argue the point. They did what they said they would do and rolled out a an MMPR application that is moving forward with Health Canada currently, but like many early adopters in that space, they’re waiting for the bureaucrats to check their boxes and finish their pondering so they can get down to real business.
Only True Leaf isn’t actually waiting around at all. The missing part of their pitch last year has just this last week been revealed.
Why run a weedco with a pet food CEO? Because dogs need CBDs too.
We sat down with True Leaf CEO Darcy Bomford to find out whether this strategy is a late stage switcheroo, a hail mary, or a master plan.
Q: How many times have you heard the ‘he should stick to dogs’ line in the last twelve months?
I actually haven’t seen that much negative feedback regarding my experience in the pet industry, but I can certainly understand them wondering why! I actually feel my experience is a good fit – the pet space is highly regulated, requires good manufacturing practises and successful marketing in order to be successful. You can see these points are very relevant to success in Canada’s MMPR as well.
Q: Can you describe your experience in the companion animal industry before this whole weed thing came along?
I started selling pet vitamins for a vet when I was 16, then started making dog biscuits full time when I was 18 back in 1987. That company was called ‘Darford’ (you can guess how I came up with the name) and grew to a pretty sizeable company, which I took public in 2010. We launched a great pet food formula called ‘ZERO-G’ along with a ‘give-back-to-dog-rescue’ campaign called ‘The Plus One Movement’… it was an exciting time in my life that’s for sure. In the back of my mind I had always thought that with proper research, Cannabis could probably offer some fantastic medicinal benefits for older dogs. The timing was right to enter the marijuana space regardless, so I studied the regulations, put our initial team together and ended up being a very early applicant (number 48 to be exact) into Canada’s new MMPR program
Q: Let’s be honest – there are a lot of companies that have ‘tacked on’ a pet line of products over the last few years with the promise they can jump into a $53 billion a year industry and peel off a piece. What’s the reality of the work needed to make a dent in that market?
The reality is that it's a tight-knit, highly regulated industry that's become extremely competitive over the past few years. As the space has become more sophisticated, pet brands are attracting higher valuations and a ton of venture capital. A friend of mine started in his home and sold to Purina for $50 million after 10 years, and I’ve seen brands grow from zero to almost a billion in the same amount of time. It’s a dynamic and fast moving industry full of ‘me-too’ companies all trying to get market share. This creates an opportunity for companies who can bring some innovation to the table, and that's what we are focusing on now.
The regulatory landscape for selling pet foods in Canada is pretty straightforward, but the US is another story altogether. Every US state has its own unique product registration rules and a product line needs to be designed to comply with all of them. Hemp as an ingredient itself creates some challenges, but we are confident that we have found a clear regulatory path, which is key. All-in-all, I have the contacts and experience to shave decades off the learning curve and I think really gives us a unique competitive advantage.
Q: So while the dot.bong world has been ignoring True Leaf through 2014 or thinking of you as just another pot applicant, you’ve been quietly using that time to put the pieces in place to really build a pet supplement and medication brand.
That pretty well sums it up. As I mentioned earlier, I’ve been eyeing this opportunity from the beginning and instead of waiting for Health Canada, we are now executing a different part our strategy sooner rather than later. My personal mandate for the company has been to bring the absolute best people to the team and we’ll be making more announcements soon.
Our strategy and positioning for the company is actually pretty simple and can be summed up this way:
‘We are the GW Pharma of the pet industry. Ultimately our MMPR license will allow us to grow the GMP material that we can use for our own proprietary medications, except our medicine will be for pets, not humans, at least not yet.
Q: Now, a lot of weed investors will be rolling their eyes at the mention of cannabis for pets, thinking of it as a niche business. But if I take the percentage of people in North America who own pets and extrapolate from that how many medical marijuana patients will see the value in giving the CBDs that medicate them to their animal friends… If you’re first into that market, we’re talking something that could be half the size of the human space, aren’t we?
Yes, once you notice the pet market and start looking around you realize it is huge. Check out the pet aisle in any grocery store, or look at some of the $100 best-selling bags of pet food at your local pet store … I can guarantee you will be surprised! The pet food market in North America is $20 billion, the pet medication market is $13 billion and the pet supplement market is over $1.5 billion per year. Ask anybody with an older dog: “How much would you spend to make your dogs last few months or years more comfortable?” and the answer will be “Almost anything”. Here is my opinion: there is no price on being able to return the unconditional love that a dog gives us every day. A product that can help a dog with minimal or no side effects will be able to occupy a highly lucrative niche in the marketplace.
Q: Okay, so let’s assume you can get a brand together. Then you have to produce a product, build out distribution networks, get FDA approvals and the like. Suddenly the pet food CEO makes a lot of sense. How close are you to actually having a product on shelves?
We have been working hard at securing potential US manufacturing partners and/or possibly an acquisition and are happy with our progress. Our plan is to have a product to market and on the shelf, along with a full e-commerce site launched in Canada by early September this year. If all goes well, the US market will follow shortly thereafter.
Q: I would assume that companies like Naturally Splendid (TSX:V.NSP, Stock Forum), which is rocketing right now on the news they’ll be putting out a pet-focused hemp omega product line, might look at your fast road to market as being something worth acquiring at some point down the road. Has the recent burst of value-added cannabis companies hitting the market given your team a kick in the ass to get things rolling? Or were they already rolling but now the market is more open to the story?
We’re not jumping into the Pet space for a ‘quick buck’; it's in our DNA! As I mentioned earlier, this was part of our original long-term plan from the beginning so we are just executing sooner than later.
I really believe if there is any company that can go from ‘zero to a billion’ in this space, it is True Leaf.
Q: Your company is trading at a 52-week low and the share structure is nice and tight, which is basically what a smallcap investor is looking for in advance of news. Straight up: Are we expecting news?
I recently laid out 18 sheets of paper on our boardroom table and each one of them represents a news release over the next 10 months….so yes, expect some news!
--Chris Parry
https://www.twitter.com/chrisparry
FULL DISCLOSURE: True Leaf is a Stockhouse Publishing marketing client