Meet Rubicon Organics: A World-Class Cannabis Grower

[Editor's note: This article has been modified from the version originally published on October 25, 2018]


“Fortune favours the bold”

So says Jesse McConnell, a veteran cannabis industry entrepreneur, who also holds a philosophy degree to compliment his astute understanding of game-changing historic events.

Hence his decision to name his just-listed cannabis start-up Rubicon Organics. This favourite expression of McConnell’s has long been a call to action for the kinds of people who not only think big, but also have the confidence and the talent to follow through and execute at a high level.

One of those people was Julius Caesar. And by crossing the Rubicon River, he took the first momentous step towards becoming an all-conquering Roman emperor.

In 49 BC, he led his small but highly skilled renegade army across the Rubicon River to confront and subsequently defeat the far superior forces of his rivals to Rome’s seat of power.

Fast forward to 2018 and stock market newcomer Rubicon Organics Inc. (CSE: ROMJ) seems analogous to a modern-day Caesarian army. To this point, it has the skill set, deep experience, and confidence to battle it out for meaningful market share with its much bigger rivals in the industrial-scale organic cannabis market segment. I’ll delve into why in a moment.

That said, this was not McConnell’s original vision of Rubicon when he first named the company. His thinking was that Rubicon should become worthy of its name for crossing the US federal border to be an early-market entrant in lucrative recreational markets for high-margin organic products, including CBD oils and premium-quality, pharmaceutical-grade organic dried flower for discerning consumers.

By doing so, Rubicon symbolically swept aside the US federal government’s prohibitionist attitude towards cannabis. It also did so legally. As long as Rubicon continues to adhere to all of California’s legal requirements for operating exclusively (for now) within its state borders, it remains a good, law-abiding corporate citizen.

In British Columbia (B.C.), the company is has a completed a year long retro-fit of a 125,000 sq. ft. of high tech greenhouse, and will expand to 565,000 sq. ft. by 2020, to achieve its production goal of 67,000 kg/year.

This facility includes a 15,000 sq. ft. GMP-euro certified processing and extraction lab. The GMP certification is important, because the company currently has an LOI to supply the German market, and must meet its stringent regulations.

However, it is important to note that this is just the beginning of the company’s plan. Upon achieving its public listing, Rubicon intends to seek further global expansion opportunities.


Image above is from an indoor organic growing operation – Whistler Medical Marijuana Corporation – that was co-founded by Rubicon CEO Jesse McConnell. It is renowned for being Canada’s first Certified Organic Producer.

Introducing a Multi-National Organic LP
With so many new listings hitting the public markets, it can be hard for investors to keep up. As the green rush attracts new entrants into the public cannabis markets, investors have more choices than ever before.

However, Rubicon Organics stands out from the crowd. Here’s a few key reasons why:

• The company’s leaders are among the most experienced in the cannabis industry
• A focus on building consumer brands, especially for cannabis connoisseurs
• Extremely low-cost premium organic production
• Assets in both Canada, California and Washington
• An LOI to supply the German market
• Management team has over 130 years in consumer packaged goods including an ex-president of Red Bull and an executive VP from Diaego

Organic Premium — A Lucrative Market Segment
We’ve written before about the attractiveness of the premium organic segment of the cannabis market. In the first week of legalization in Canada, organic product from Whistler sold for an industry leading $17.99/gram, proving what we all know – consumers care about high quality cannabis.

We therefore continue to believe that this is a very attractive segment for consumers who are currently under-served by the options in the marketplace.

That said, organic production isn’t just a marketing gimmick for Rubicon -- it’s in the company’s DNA. CEO Jesse McConnell, M.A. was a co-founder of Whistler Medical Marijuana Corporation, Canada’s first Certified Organic Producer.

Chief Scientific Officer, Peter Doig, M.Sc., P.Ag., literally wrote the Certified Organic Cannabis Standard in Canada, and led Whistler through the certification process. In other words, these are organic cannabis pioneers.

According to Cannstandard, consumers in Canada are willing to pay up to a 24% premium for organic cannabis. And Hill & Knowlton Strategies’ Topline Report states that 57% of consumers in Canada prefer organically produced products.

With Rubicon soon to be one of only a small handful of Certified Organic Producers in all of Canada, we think the company has an excellent opportunity to build strong consumer brands. The company has already made excellent progress here and currently has two in-house brands that have been in the market for over a year, 1964 Supply Co., in California, and the award-winning Doctor & Crook Co., in Washington.

Premium Organic at the Lowest Cost in the Industry
We know that consumers are willing to pay `for premium organic products, but the downside is that these products are typically more expensive to produce. But this case could be different.

Rubicon’s cultivation team has spent the last 10 years developing a proprietary cultivation program that the company believes will allow it to produce premium organic cannabis for less than $0.50/gram! This is a lofty goal, but if Rubicon can even come close to achieving it, the company’s margins should be among the very best in the entire sector.

The company expects the receipt of its cultivation license from Health Canada is imminent as it part of a small group of very late stage applicants who have already submitted their video evidence package. Upon receipt, Rubicon will be in production immediately with its huge library of premium, proven genetics, with an initial capacity of 12,500 kg. annually, ramping-up to 67,000 kg/year by 2020.

We are favorable on this production allocation. This creates enough capacity to supply the launch of the company’s premium brands without committing to a huge volume of output, unlike many other growers, including its big-league rival, The Green Organic Dutchman.

We fear some firms may be over-producing, and could end up with far more cannabis than they are able to sell. This is not the case with Rubicon, and we think this is a wise decision. But as noted earlier, the company’s assets and ambitions extend beyond Canada.

First North America, Then the World
Rubicon Organics is based in Greater Vancouver, but also has operational brands and assets in California and Washington.

In the US, the company owns a 16-acre property in Washington, with a brand new 40,000 sq. ft. high-tech greenhouse built by the same engineer who designed Aurora Sky and TGOD’s facilities, that is capable of 4,400 kg/year of premium indoor quality cannabis a year.

In Washington, the company owns the brands and the real estate. In turn, it licenses and leases them out to existing reputable operators in that state. In particular, these brands are in high demand.

When you pair this facility with Rubicon’s craft cannabis brand, Doctor Crook & Co. -- which won the 2017 & 2018 Dope Cup award for Best Oil --, you have a powerful combination.

In the multi-billion-dollar California market, the company has supply offtake agreements with licensed cultivators that grant Rubicon access to production, extraction, and distribution. The “Supplied by 1964™” brand is already considered one of the best flower brand and pre-rolls brands in the market according to Leafly and Entrepreneur Magazine. [JM1]

Investment Synopsis
Rubicon has strong management and a resolute focus on producing some of the best organic cannabis on the world. Notably, it should be one of the lowest cost producers of premium organic cannabis in the sector. We are bullish on the organic niche, and the company’s management is as well positioned as anyone for success in this high-end lucrative market segment.

Also, the combination of a premium organic product that commands a premium price, lowest cost production, and a strong brand, lends itself to margin preservation in an industry that could see significant margin evaporation as competition intensifies.

As of the company’s most recent capital raise, Rubicon was valued at approximately CDN $120 million. It has 36.8 million shares outstanding (43.9 fully-diluted), and shares were priced at $3.25, raising $13.2 million for the company.

Such a tight share structure, when matched with positive news flow, typically acts as a catalyst to much higher share price valuations. The good news is that management is fully invested with their shareholders as they hold over 60% of the shares and are subject to 36-month escrow terms

In essence, Rubicon Organics is positioned to be a premium organic cannabis company for people who love cannabis and therefore promises to be a stellar performer as the company continues to execute on its innovative business plan.


About the Author: Marc Davis has a deep background in the capital markets spanning 30 years, having mostly worked as an analyst and stock market commentator. He is also a longstanding financial journalist. Over the years, his articles have also appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post and AOL.