There are few companies in the junior space that enjoyed a stronger rise in March and early April than Naturally Splendid (
TSX:V.NSP,
Stock Forum). The Canadian hemp omega product developer has stacked its board and advisory board with big retail, food, pharma and MLM players, has done a deal that gives them access to more production facility room than any company their size should ever have a right to use, they’ve got research partners demonstrating the immense potential of their IP, and the shift into their initial purchase order phase was one that had investors clamoring.
Then the first purchase order came, and the market hiccupped.
From the
news release announcing the PO:
Laguna has signed a letter of intent with Naturally Splendid Enterprises Ltd. whereby Laguna and NSP plan to enter into a research, development and manufacturing agreement for the purpose of pursuing mutually beneficial business opportunities in the hemp food products area.
Pursuant to the terms of the Proposed Transaction, Laguna will place an initial Purchase Order of $100,000 for the HempOmega(TM) infused hemp protein formulations ("Laguna HempOmega(TM) Infused Protein Products"). Laguna anticipates ordering a further $1,500,000 of the HempOmega(TM) Infused Hemp Protein Products in the first year of the Agreement and $4,500,000 of the the HempOmega(TM) Infused Hemp Protein Products in the second year of the Agreement.
Not a bad deal, and likely the first of many.
But after a $0.24 to $1.00 spike in six weeks, the short sellers were always going to be looming, and as soon as the news release landed, those shorters and their agents were barking on penny stock messageboards that the deal was ‘exclusive’, meaning no more POs would be coming for NSP from anyone else, and ‘who the hell is Laguna anyway?’
In reality, the only ‘exclusivity’ mentioned in the deal was that NSP would be creating a blend specifically for Laguna. It didn’t lock NSP into only selling its products to Laguna, a point that was obvious from even the most basic reading of the news release.
And unlike many who seemed to be judging the deal as BS based on the fact that Laguna had purchased their web domain only a few weeks earlier, I actually called the company and asked what Laguna was planning. And then went to their offices to see for myself.
Happily, they had some early prototype blends on hand and allowed me to give them a try.
This is what Laguna Blends, at the prototype stage anyway, looks like.
I wish I could impart upon you what the products taste like, but you’ll get a chance to register that for yourself soon enough.
Stockhouse’s office kitchen is stacked with Naturally Splendid’s Natera hemp protein powder and hemp seeds. Big Ron, the Stockhouse video guy, inhales the stuff. It’s like watching Tony Montana bury his face in a pile of cocaine.
“First you get the maple. Then you get the power. Then you get the women.”
But while Natera is high quality stuff that I use often, hemp powders often have a little bitterness to them, much like stevia, and they get a bit clumpy sometimes. It’s early days in the hemp product development cycle and sometimes it shows.
That said, the Laguna guys rolled out a Natera protein drink for me and put a Laguna Blends drink side by side. No offense, NSP, but the Laguna drink is legit.
While Natera is a nice niche product that I’m more than happy to have in my pantry, the Laguna hemp protein drink is a product good enough for national retail right now. The colour, the soluble nature of it, the taste; it’s not ‘hempy’ at all. It doesn’t sink to the bottom. It doesn’t clump. As it uses NSP’s HempOmega and Laguna’s recipe, it’s the best of both worlds. It will sell, and I’ll be buying it.
But that’s only the first product they rolled out. The second kicked my ass.
I’m a Four Hour Body guy. To the uninitiated, the Four Hour Body program, among other things, advises you hit 30g of protein every morning within 30 minutes of waking up, to fuel the burning of fat. That’s not always easy, especially when I have to make room for my morning cup of coffee lest I have to cut a guy.
Laguna’s hemp coffee product DESTROYS. The coffee isn’t some burned and ground, brown water bush league stuff; it’s high level artisan caffeine that leaves that gorgeous coffee coating on the cup as it goes down and tastes divine.
Yes, I just said the word ‘divine’. I’m comfortable with my masculinity.
That Laguna’s hemp coffee also features a hefty shot of hemp protein doesn’t change the flavour profile one iota. It’s delicious coffee by itself. I owned a restaurant a few years ago and we prided ourselves on the coffee we stocked. This was better.
That it also delivers your morning protein shot is, frankly, some next level stuff.
This is a very well developed product that, if it hits the market in the format I tried it, will sell ridiculously well.
Speaking of sales, Laguna will be retail-ready but not retail-reliant. Central to their management team are a series of folks who have ridiculously large multi-level marketing networks, the likes of which will see this product sold to their families and friends by thousands of MLM folks the day they’re made available for sale.
If you remember MLM as being old high schools friends calling you up out of the blue to sell you Amway floor cleaning products, you’re behind the times. Think Herbalife (
NYSE:HLF,
Stock Forum), which boasts a $4 billion market cap on the NYSE. Or Avon, which did $10.7 billion in revs in 2013, or Alticor (that’s the rebranded Amway) which did $11.3 billion.
Mary Kay, Tupperware, Pampered Chef, Scentsy, even A-list elite brands like Hermes have MLM strategies. In fact, there were 100 MLM companies in 2013 that notched $69m in sales or more. 13 registered a billion dollars or more.
Why is MLM such a big deal? Because while you may hit Safeway for your Natera purchases, the vast majority of the world doesn’t have a grocery store nearby, and the vast majority of companies have little interest in hiring a sales team in every major city. MLM gives companies the ability to have a sales force anywhere, first world, third world or otherwise.
Want to see how it works? Here’s
MonaVie, an acai drink that ramped up from $100m in sales to over a billion in just three years.
Naturally Splendid is not averse to the MLM scene, or MonaVie. In fact, two of the big names that have joined the group recently, David Racz and Charlie Brink, were raging heavy hitters at Mona Vie.
I invested my hard-earned in NSP because I think their technology, team, and strategy are going to go apeshit. That their first big PO, and it is a big PO, came from an outfit that has heavy cred in MLM circles only proves out that impression.
If you’re holding NSP because you really hope it can do a single deal for six figures which you’ll then sell it on, you’re doing it wrong. I’m holding it because it will fuel startups like Laguna to do things unheard of to this point in time, for revenues that, in my opinion, can’t even be honestly guesstimated at right now.
Today, NSP dropped below $0.60 and I pulled the trigger on the opportunity to buy more so, if you’re so inclined, take all of the above love with a grain of salt.
But if anyone is silly enough to sell more at that price tomorrow, I’ll do it again. And when NSP goes on another run, I’ll look hard at Grenadier (
TSX:C.GAD,
Stock Forum), Laguna’s RTO company (currently halted), as a backdoor option to get more on the cheap.
--Chris Parry
https://www.twitter.com/chrisparry
FULL DISCLSOURE: NSP is a Stockhouse Publishing marketing client, and the author has purchased stock in the open market. Please do your own due diligence.