Irwin Simon on Aphria/Cannabis Industry Most may have already listened to this Podcast, but if not...a good listen.
His ultimate vision/dream...Blue Chip Stock.
From October, 2019
https://podcasts.apple.com/ca/podcast/growing-pains-with-irwin-simon-ceo-aphria/id1455998535?i=1000455489150
Topics include:
- 2:42 - Irwin started Hain Celestial Group - one of the largest organic company in the world. Build around brands and health and wellness. If it was organic, GMO-free, natural on the label Hain ensured that matched the product. A lot of companies market products that don't match the labels. Similarities between health and wellness sectors and cannabis. 5 brands at Aphria, all go through stringent regulations and quality controls.
- 6:05 - Lots of controversy heading into Aphria when Irwin came on. Hostile takeover, short report, Board transition, C-Suite changing hands, two founders leaving the company, balance sheet issues and not a clear direction. Irwin liked the challenge but fell in love with the industry and the people at Aphria and felt bad for what they had been through. Also realized it still had great assets. Assets + people + industry + prior experience = Aphria turnaround.
- 7:35 - Despite facing criticism for it, first focus was on Canadian operations. Spent half a billion building it, but first the market had to be fixed. Lots of unknowns still in the U.S. No one has ever gotten it right growing cannabis in a million square feet greenhouse - so building the right team is essential. Now over 600,00 plants growing at Aphria.
- 9:37 - Supply and demand issue or a licensing issue in Canada? Demand is there. Ontario alone will have over 3,000 stores open over the next few years, but as of January 2019 it didn't have any and it's the biggest province in Canada. U.S. will open up medically, and when Aphria is ready, will head there. South America opportunity is tremendous.
- 11:26 - Focus is on keeping costs down, but that's obvious. Quality, competitive pricing and complying with regulations means taking business away from illicit market.
- 12:45 - Canada is number one priority for Aphria. Too many unknowns in U.S. Aphria won't do an Acreage deal like Canopy. U.S. will go legal medically, but not recreationally. Even if SAFE Banking Act is signed into law, when does it go into effect? Hemp is currently only fully legal product and consumers aren't taking as strongly to hemp.
- 14:45 - Canadian companies have a leg up because they're gone through the growing pains already. Have been through brand and product development, know better about vaping (using the right oils and hardware). Made mistakes along the way but have learned important that will be brought to the U.S. space.
- 15:35 - Vaping and edibles going legal in Canada. Billion dollar illicit market, so even a slice of that is huge. Edibles and drinks won't be sold at local convenience stores; will it be able to be merchandised? Does retail become mainstream or part of the private sector and not sell through the liquor control boards, which would mean tremendous opportunity.
- 17:00 - First EBITDA positive quarter in August. Forecast to do over $700 million in sales and $95 million of EBITDA. Profitability is important. More than 250 million outstanding shares. Still need to spend on CapEx on marketing and communications. Need to make money to invest back in the business.
- 18:06 - Future of the industry. If Constellation (STZ) and Altria (MO) could get their money back, they probably would. Has to be more legitimacy in market place. No more big deals any time soon. Drug or liquor companies will come in a few years. Few companies other than Aphria have made money, and coupled with the various industry black eyes, has given investors pause. In many instances, cannabis companies weren't ready to go public. Suffered from overvaluations and executives think the stock will return to previous highs, but they won't. Big shakeout and mergers ahead.
- 22:15 - Global cannabis space. Canada will lead global stage in regards to recreational. Europe and South America will lead according to medical. Medical will ultimately be the big growth engine globally. Big opportunity in India and China with CBD market.
Ventura