A business concept pivot intended to make money while waiting for Health Canada to process a medical marijuana grow application is paying heavy rewards for True Leaf Medicine (CSE:C.MJ, Stock Forum), if recent coverage in the national Metro newspaper chain is any indication.
CEO Darcy Bomford confirmed to Metro’s Emily Jackson Wednesday that his company plans to help with the nutrition of pets, not get them stoned.
“It’s not pot for pets… it’s completely non psychoactive,” Bomford said of the treats. “Hemp actually is the highest natural source of omega-3. That’s the primary function of hemp in this initial pet supplement.”
The long term plan is to develop a natural supplement based on cannabidiols (the non-high, heavy-health aspect of cannabis) that can help older pets with joint pain. In the meantime, the company has agreed on a deal with established pet product manufacturer Wodema Industries to help develop, then produce new products as a co-packer.
Bomford isn’t wading in unknown waters here. In fact, he has a long history of turning pet products into retail sales, and an even longer history working with animals.
“I began in the pet care industry at the age of 14 when I worked at my first veterinary practice,” Bomford says. “In 1987 I took out a bank loan and opened a pet food factory in Vernon, B.C., and expanded production through North America and Asia in the years after.”
That company, Darford Industries , was his bread and butter (and kibble) until 2002, when he founded First Pacific Enterprise Inc, a packaging solutions company serving the natural foods, coffee and pet industries. He still sits atop the First Pacific empire, doing business as Trademark Packaging.
And, just because growing companies is what he does, he purchased the Al Tomkos Real Bones smoked treats product line, establishing Trademark Pet Products as yet another tendril into the $53 billion pet business.
So when Bomford announced he would enter the medical marijuana business, it seemed an ill fit to many.
“I was very comfortable in the pet sector, most definitely had strong domain knowledge and a great distribution network. I was overseeing three federally inspected plants in the US and Canada, I know manufacturing systems inside and out, and I’ve started several brands, and successfully rebranded others.”
Indeed. Darford Treats boasts 51 all natural pet treat SKUs alone, having been purchased by Can-Am Pet Treats in 2012.
“But yeah, marijuana,” he laughs. “I had a plan to incorporate it into the world I had lived in for thirty years, but we had to keep it to ourselves until all the pieces were in place.”
Those pieces are now in place.
Despite screaming and incorrect headlines from analysts in Europe, True Leaf is not yet manufacturing pet products, but they’re not far off. A deal has been struck with Wodema to ensure there’s a scalable, margin-friendly, organic-ready production facility in place when it’s needed, and existing supply chains and distribution networks to utilize. True Leaf maintains first right of refusal on purchase of the facility as part of the deal.
Developing products, for someone with no domain knowledge, could take a lot of time and money. Any Dragon’s Den or Shark Tank viewer has seen an endless lineup of well-meaning cat ladies baking pet treats in their kitchen and hoping to become a mega-corp. Bomford has seen more than a few of those in his time, and even acquired one or two.
But the True Leaf strategy isn’t just to make pet products. It’s to make hemp-based pet products. It’s combining two hot sectors – cannabis and pets - into one very achievable play.
“Wodema has been doing business since 1996 in Kelowna B.C.,” says Bomford. “The plant is US-approved, which is a big deal – much bigger than a lot of people know. We’re formulating the products now, designing packaging, and we’re really focused on the fall as the likely launch time.”
That plan will see soft chews going out to pet stores, natural health stores and veterinarians in Canada and the US, while the longer process of developing cannabis-based animal drugs, while a lot shorter than getting FDA approval for human medicines, will still likely take a few years.
“We’ll be straight into pilot trials and working with regulators to ensure they’re all satisfied by the science,” says Bomford.
While the CEO undeniably knows his stuff, he’s going to need a little lobbying muscle on that front. The path to veterinary approval is tough by itself, but adding cannabis-based elements, even if they come from hemp and not marijuana proper, will make for some sticky negotiating.
He’s confident that will come.
“It’s early days now, but we have former Vancouver Mayor and BC Premier Mike Harcourt serving as Chairman of the company, and we plan on bringing experts aboard in an advisory capacity before we start the approval process.”
Investors are often leery of pet plays, as the gap between concept and product on the shelves can be tough to bridge. Just getting a standard food product into retail stores requires a heavy sales and marketing component, expensive ‘shelf fees’ in which chain stores charge you for the privilege of having your product on their real estate, and then there’s the fickle nature of consumers.
“I’ve said since we started this company, investors should hold us to a high standard. They shouldn’t judge us on potential, they should judge us on what we deliver. As the weeks and months pass, you’ll see a steady stream of news as we develop our plans and products. You’ll see people join us that bring unique talents and networks of contacts. You’ll see deals with manufacturers, suppliers and eventually stores. You won’t see us projecting billions of dollars in sales, you’ll just see us laying out our plans and consistently delivering on them. And in this market, that’s a nice differentiator.”
Back in February, nobody knew of the pet product plan and the stock was double where it is now based only on the company’s Health Canada MMPR application. Now you get the stock at a 50% discount with the pet product drive for free – AND, should that MMPR come through, the company can become its own best customer, using its own product to fuel the Wodema factory.
“I think, for all that, the current market cap is a deal,” says Bomford. “$2.8m on today’s valuation? We have a long way to go to get where we want to be, but we’ve taken some sure steps on the way there. Lots of smiles at True Leaf today.”
Smiles and volume. Add it to your watchlist.
--Chris Parry
https://www.twitter.com/chrisparry