Hello everyone,
It is hard to believe we are already heading into the month of September after what seemed to be a whirlwind summer. While we may be looking forward to the change of seasons, we have lots to report from the month of August.
Regulatory Framework
It would be hard to write this letter without first addressing the highly anticipated Bill AB 228 out of California. While I have heard from many of you since Friday’s announcement that the Bill is “held under suspension,” I do not see the news as gloomy as others do as the aforementioned term is defined by the California State Legislature as An action taken by a committee when a bill is heard in committee, and there is an indication that the author and the committee members want to work on or discuss the bill further, but there is no motion for the bill to progress out of committee.
We have seen similar instances in other States where they simply want to ensure detailed labelling standards etc. Based on a statement released this week by the Hemp Roundtable where they state “we’ve been assured that AB 228, or a bill like it, will pass before the end of January, if not earlier” we are confident that AB 228 or a similar bill will move forward.
As I have learned in this industry, nothing is guaranteed, and it is never safe to assume anything, hence the reason we have doubled down on direct to customer (DTC) in an effort to control our own destiny. With the acquisition of Wikala and their team of talented digital experts, this will allow us to fast track our DTC platform while building our retail platform on a state-by-state level.
Sales and Distribution
As I have communicated in the past, while the regulatory framework is being sorted out, we have made a conscious effort not to name retailers in press releases or newsletters to not draw attention to their business. While this makes it somewhat difficult to excite investors, I refuse to compromise the traditional retail business we have built to-date.
With that said, I am really excited to report our launch in Colorado was a resounding success, particularly with one retail chain where we became their #1 selling CBD beverage within two weeks of being on the shelf, and they have since decided to expand us into another 20 stores in the state of Florida. Much of this success can be attributed to the great shelf sets the sales team secured along with a robust sampling program, which has yielded incredible results. Also very important is the quality of the product itself and the efficacy it delivers to our customers. I have long said that if we can get the product on to the shelf and into the hands of the consumers, we will win every time against our competition.
Our DSD (direct store distribution) efforts have also paid off in the greater Los Angeles market as we are now in over 120 stores with some premium local chains coming on board in the month of September. Based on this success, we have decided to double down on our selling efforts and will be conducting a market blitz in the greater L.A. area the entire month of September – selling Oki up and down the street to complement our local distributor sales and distribution efforts. Our focus will not only be traditional retail, but we will also focus on strategically important businesses such as fitness studios, specialty grocery and boutique hotels. Along with our up-and-down the street efforts we also have 19 regional account meetings upcoming or pending, which our partners at Acosta have been working on tirelessly. Our time is now, and we have every intent on capitalizing upon it.
Market Observations
If you have spent any time in the USA observing the CBD market, you will quickly learn that it is changing almost on a daily basis and we have witnessed a lot of change over the past few months including traditional supplement companies entering the category. With the likes of Garden of Life now offering CBD tinctures and capsules, they have quickly changed the competitive landscape. Based on industry sales data, many of the supplement companies are now squeezing out long-established players such as CW Hemp and Plus CBD and overtaking them in their respective sales rankings. Another market dynamic we are seeing is price compression starting to happen. With the onslaught of the supplement companies entering the space, this has the potential of lowering the average net selling price in the category. While it is easy to drive sales through aggressive promotion, I am a firm believer that the strength of a brand will always win out against short-term selling tactics. My confidence is even more buoyed when you package all our assets together; great packaging, a great product that delivers on its promise, world-class marketing assets and, most importantly, a knowledgeable and reputable team.
Sampling
We have continued our sampling efforts and expanded into the L.A area with both the commencement of in-market events, guerilla and in-store sampling efforts. We now have sampling efforts being coordinated across two markets; Colorado and L.A with the focus in Colorado mainly around in-store sampling until we build broader distribution. In L.A, our sampling efforts are focused around supporting distribution with in-store sampling and event sampling primarily in the areas where we have the greatest distribution penetration. In the first few weeks of the programme we have sampled over 2,700 consumers across both markets with over 1,000 consumers alone sampled in-store in Colorado retail stores with a conversion rate (sampled consumers to sales) of 43%!!!
 
New
In anticipation of our growing retail distribution base in California, we have ordered some new Oki fridges for key retail accounts. The fridges will be used to support new distribution and visibility for Oki in key stores over and above the cold space we secure in the stores with other functional beverages. The fridges will give Oki additional points of visibility and increasing awareness and presence and of course, sales.
New Vida+ packaging
Over the last few months, we have been working to refresh the Vida+ brand, which was looking tired in an increasingly competitive category. The packaging has not changed since its original design in 2017 and with so much competition, higher standards, and change in the category; it was felt the brand needed a facelift to align with the new Vida+ website. The new packaging is clean, natural-looking and positions the Vida+ well in its role as our lead personal care brand. The new packaging, pricing and product formulations will be live on the Vida+ website by October 1, at the latest.
As it relates to our DSD platform, we now have distribution partners in the following states; California, Nevada, Colorado, Texas, Pennsylvania and New York, with Florida contracts currently being negotiated. As I have stated before, having a robust DSD platform complemented by a seamless DTC (e-commerce) platform certainly safeguards us as we wait for states to move on legislation.
Wikala and e-commerce
Throughout August, we have focused on building and optimizing all of Phivida’s websites. We launched enhanced e-commerce capabilities and refreshed branding for FeelOki.com and HempVidaPlus.com.
We have also refreshed Wikala’s content site, Greencamp.com, and launched the fully operative accessory e-commerce platform, Bloomgroove.com. Bloomgroove is now shipping all across North America. We are also working on fully building out Wikala.com, which will focus on the CBD market. Both Bloomgroove.com and Wikala.com are run on our proprietary ecommerce platform.
One of our biggest challenges has been obtaining a reliable payment processor, particularly in the United States, which is a common issue in the industry at large. We secured this in August, which was a major milestone, and we are now able to launch our marketing campaign, which starts in September.
Our e-commerce platform offers numerous unique features, including a third party seller module. We expect to first bring this to life on Bloomgroove.com, along with other product comparison tools which in our industry will be unique to our platform. We feel that in the long run, developing our own platform will provide us with a sustainable competitive advantage. We also believe this will give us a headstart once Wikala.com launches towards the end of this year.
Thanks for your continued support. I look forward to providing another update of our progress at the end of the month.
Respectfully,
Jim
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