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Q&A with Bhang CEO Scott Van Rixel

Dave Jackson Dave Jackson, Stockhouse
0 Comments| July 2, 2019

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Click to enlargeBhang Corporation, (P.BHNG, Forum) known best for the 8-time cannabis cup award-winning gourmet chocolate bar, is built on a tradition of innovation and trust that has wowed consumers over the last nine years and helped re-define the cannabis market today. Their unique business model brings together a love of cannabis confection, along with a full suite of CBD, terpene and cannabis-infused products, vapes and accessories.

What started with that chocolate bar has grown into a diverse global house of brands with over 100 celebrated and award-winning products and is home to some of the most-recognized CPG brands in cannabis.

Stockhouse Editorial caught up with Scott Van Rixel, Chairman & CEO of Bhang, to talk about the company’s accelerated business model, their upcoming RTO on the Canadian Securities Exchange (CSE), and their expansion into the U.S., Canadian, and global markets.


Let’s start with the beginning, Scott. Your bio says you’re a chocolatier and European-trained chef by trade, but now you’re a serial entrepreneur heading a multi-million-dollar house of cannabis brands. How did you make the transition?
In 2010, I was invited to tour one of the first cannabis labs in California and as a trained chef, I was shocked by the lack of industry standards. Cannabis edibles were sold in zip-lock bags without a nutrition fact panel or indication of dosing consistency. Quite simply, consumers were unable to rely on all the information you expect to see on a product at your local grocer or pharmacy. At the time, I was producing chocolate, gelatos and other products across the U.S. and saw a natural fit to take what I knew from CPG, working with Whole Foods, Dean & DeLuca and other major retailers, and apply it to cannabis. So, I left New Mexico and went to California to start Bhang Corporation in the fall of 2010. From day one, we were the company getting it right. We didn’t need the government to force us to be safe and compliant. We were committed to producing high-quality products with best-in-class packaging, public lab-testing results, clear ingredient lists, standardized dosing and a cannabis-free taste. For the last 9 years, we’ve built considerable brand equity with consumers and used this platform to grow into other cannabis products and brands while scaling nationally. Today, Bhang operates 8 in-house brands with 100-plus products distributed in over 10 countries across the world.

Now the big news – your soon-to-be listing on the Canadian Securities Exchange (CSE). Can you give our investor audience an update on the planned rollout?

We have an exceptional management and advisor team at Bhang that has worked diligently to position our Company for the public markets. Our go-to-market strategy is built on a strong platform of trust and innovation, focusing on accelerating distribution and manufacturing of our award-winning THC and CBD products, while leveraging our terpene products for the mass markets.

We are partnering with some of the best operators in the US, Canada and Europe to advance our aggressive expansion plans and ensure that Bhang’s fans have access to the quality product they have come to love over the last 9 years. As regulations ease throughout the globe, we anticipate e-commerce sites selling our CBD products to become a large revenue and EBITDA source. With that in mind, we just recently relaunched our direct-to-consumer store at bhangcbd.com and enhanced our supply and procurement team to ensure fast delivery to our audience worldwide.

Our low CAPEX/OPEX model means we don’t have multi-million-dollar greenhouses or extravagant retail operation costs to worry about – instead we have a solid distribution pipeline with over 1,000 stores selling Bhang’s brands across the world and expect to hit 2,000 stores by Q4.

Your investor deck says that Bhang’s existing brand serves as foundation for your “house of brands” expansion program. Can you expand on that and explain to our investor audience how you plan to increase market share in an ever-increasing cannabis retail space?

The key to winning in this space is access to retail shelves and soaking up the valuable real estate. We’ve found a way to get on the shelves of major retailers with our brands – before other cannabis companies. The strategy is simple, we leverage our 9 years of consumer insights by offering products and brands in each lifestyle vertical that are designed to fit the demographic. From the beginning, it was clear there would be strong market segmentation when cannabis went mainstream. While the underlying product is similar, the 22-year-old first time cannabis user and the 67-year-old medical patient are both looking for a different experience, so we started working very early to address these markets with our own, in-house brands. Today, we operate 8 brands under the Bhang umbrella covering THC, CBD and terpenes and over the next 9 months, we will have 3 new brands specifically targeted at consumers that we believe are vastly underserved.

But brand loyalty can only take you so far. You need exceptional talent to make it happen and I spent a lot of time building a management team who know CPG and combined that with the existing executive team’s deep cannabis knowledge. I just recently brought in Tom Stein as Bhang’s new President who previously worked with Diageo, Palm Bay and Edrington. Similarly, Samantha Ford Collins, our new CMO, held leadership positions with Diageo and Treasury Wine Estates.

Last, but hardly least, given our decade of experience in cannabis, stewardship will remain a core value and part of our strategic plan. From hiring, to packaging, to innovation we keep those that paved the way in this industry in our hearts and minds, and we will continue to operate in a way that promotes restorative justice and sustainability.


Bhang is one of the most awarded cannabis brands and maker of one of the most widely distributed cannabis chocolate bars on the planet. Even with those accolades under your belt, you’re looking to scale even further. How do you plan to accomplish this, and do you have a time frame?

As we grew our cannabis brands, I saw the opportunity to expand nationally, but the realities of state legislative red tape would have hindered the double-digit growth we were seeing in California. Instead, we licensed the Bhang brand, concept and formulas for our THC products with credible and established distribution partners, including Origin House in California and Trulieve in Florida, to help us scale quickly, leading to sales of 6 million units and 2.5 million chocolate bars. Our capital light model means that without physically touching the cannabis plant, we have secured Bhang products on shelves in 7 states and over 10 countries, spreading our brand messaging and customer following. Our geographic reach will continue to grow as we extend our distribution to Asia later this year.

With our first-mover advantage in place, we transitioned from a licensing and royalty model to selling and manufacturing our CBD and terpene products directly to capture higher revenue and stronger margins. We continue to license our THC anchor products to introduce loyal customers to our new product lines.
Click to enlargeAnd then there’s the terpenes! Terpenes represent a significant growth opportunity for Bhang with no barriers to entry, and they serve to satiate mass-market demand for cannabis-derived products in markets where THC and CBD are currently unavailable. Terpene products are significant, as these are products where we don’t have to wait for farm bills or deal with slow legislation and we are leading the market with new product categories and lifestyle verticals. We believe that as we consistently introduce and place innovative terpene products in the marketplace, driving our position as a global first mover in this market segment, we will successfully secure our larger position within the cannabis CPG industry. This is our unique competitive advantage – we can establish strong placement on the shelves of major retailers who won’t accept CBD products until the FDA comes out with a firm decision. Our ability to establish a unique platform of products that allow our brand to soak up shelf space with major markets and retailers strategically sets us apart. As we continue to build our Bhang house of brands, and regulations evolve, we have the unique opportunity to quickly and effectively position Bhang products on the shelves of the world’s top retailers, leveraging our established sales pipeline.

Finally, our fourth product vertical, our CBD Brokerage business, provides further support for our continued growth as the frontrunner in the cannabis CPG market. Our CBD brokerage allows us to take advantage of our long-established industry relationships to help satisfy the huge existing demand for CBD. The CBD Brokerage also enables us to reduce our CBD costs via higher volume purchase discounts.


Recently, Niel Marotta, CEO of Indiva Ltd. (of which Bhang shares a joint venture) said the future of the marijuana market is not in traditional dried flower, but in edibles, oils and infused products. What has your market research told you about this and how will this impact investors moving forward?
We are witnessing a transformational shift in the cannabis industry today from a focus on medicinal wellness to a lifestyle supplement. Cannabis is a life-enhancing product and its versatility can lead to the creation of cannabis products in virtually any form. So where are the trends? The trends in cannabis closely mirror consumer macro trends in general so, wellness and a focus on clean, natural ingredients, cross category products and segments such as the beauty industry are all areas, we are interested in. At Bhang, we have been quite focused on CBD and are continuing to innovate with terpenes as we believe that both the flavor and wellness benefits, they offer will be a great benefit to the cannabis-curious and cannabis-comfortable consumers.

Ultimately, we believe that as more studies are done on the many beneficial uses of cannabis, we will see full federal legalization in the U.S. and more widely across the globe. From topicals to athletic recovery drinks to beauty-focused supplements, the opportunities are practically endless. While this will lead many people to chase what we call “shiny penny” opportunities, our focus is to create satisfying products that help consumers live their best life.

…and as a segue question, can you tell us about Bhang’s partnership with Indiva and how the joint venture will work in Canada?

I’m very excited to partner with Indiva and hit the Canadian market with a Bhang! Our partnership is structured as a 50/50 joint venture owned by both Bhang and Indiva which will manufacture and distribute products throughout Canada as well as select worldwide distribution. Our Canadian edibles will be made with Indiva cannabis and become available once edible sales are legal in Canada later this year. Indiva is building a $5M manufacturing facility in Ontario which will be used to manufacture and distribute Bhang cannabis and CBD products, including chocolates, gums and oral sprays, isolates, vapes and vape cartridges and accessories.

Last February, we held sensory sessions across Toronto at 180 Smoke shops (acquired by our California partner Origin House) which were extremely successful and were just the start of our work with Indiva to educate and familiarize new consumers with the Bhang product line as well as proper edibles usage. We are looking forward to edibles hitting the Canadian market!

In September of 2018, Bhang announced a licensing deal with Trulieve to offer cannabis patients in Florida access to Bhang’s edible cannabis products across the state via their 29 dispensaries. Can you update us on the progress of the deal and a summary of the partnership?

When Trulieve approached us in 2018, they already controlled the majority of the market in Florida and had received strong consumer feedback and demand for the Bhang brand. We were delighted to align with an operator who understands that providing quality products and experiences is paramount to their customers. Bhang’s brand fits that vision.

The partnership means Bhang edibles will be on the shelves of the dominant cannabis operator in Florida with 29 dispensaries and approval to increase to 49. Combine that with a medical cannabis market that is projected to hit $1.7 Billion by 2022 according to Arcview Market Research across 200,000+ medical patients and Bhang’s products will be subject to a lot of foot traffic. Vertically integrated operators like Trulieve and Indiva love to partner with Bhang to leverage off our existing brand and use their distribution channels to scale.


Mass markets are starting to open as regulations ease and entrenched distribution channels, such as national drugstore chains, are beginning to enter the hemp-derived CBD product market. How does Bhang plan to separate itself from the competition and how does your business model differ from others in the edibles, beverages and infused product sectors?
To answer this, we have to go back 9 years to the beginning of Bhang. I created this company deliberately as a CPG-first company. We were the first to introduce CPG packaging that was compliant to FD&C food requirements. We were the first to lab test all products to ensure that our consumers were getting exactly what our product offered (and that could help consumers dose accurately & consistently). We were able to take a premium position in the market and build one of the world’s most-recognized and trusted brands. In our DNA, we have always performed like a P&G or General Mills and we have over 250 trademarks that will serve the current and future market. Our 9 years of cannabis consumer knowledge gives us the competitive advantage in any market that we enter as everyone else plays catch up.

Click to enlarge
(Photo Dave Jackson / Stockhouse
)

Finally, Scott, you say that Bhang’s house of brands covers 100% of the cannabis consumer market, – everything from beet juice shots to vape pens to hemp pre-roll straights and the first “cannabis-inspired” no-THC terpene products and that you’re now positioned to expand and become “the first global cannabis brand”. This is a big, bold statement. Can you tell us how the Company plans to achieve this lofty goal?

We’re attacking every angle that this plant has to offer and that’s something we do not see with other cannabis companies. We have an aggressive growth-by-acquisition strategy including strategic acquisitions and JV’s with manufacturers who are the experts and market leaders in new consumer segments. This will allow Bhang to quickly enter new multi-billion-dollar verticals via tier-one retailers and provide a solution to the category needs. We’re also spending a lot of time making sure consumers have access to our products in as many legal places as possible – not just their neighbourhood dispensary. Take our hemp cigarettes for example. Tobacco is a horribly-addictive product – our hemp cigarettes give someone an alternative, and anytime you can move someone from an addiction to a place of choice, that is a good thing. There are over 374,000 places in the U.S. that sell cigarettes. There is no state or collection of states that have that many dispensaries, so that is something Bhang again has as an opportunity to market to mainstream consumers.

We continue to satisfy our customer base who is familiar with cannabis products and is adventurous to explore our new offerings. At the same time, we are introducing new consumers daily to cannabis in a friendly, non-intimidating way. We believe that we are the stewards of this industry with a responsibility to ensure that cannabis is approachable and understood. Our new product offerings will introduce this vast new segment of consumers into cannabis using familiar products that are “cannabis inspired.”

Henry Ford said if I’d asked customers what they wanted, they would have said, “A faster horse.” Instead, we leverage our nine years of customer data and market analytics to figure out what customers want before they do. This has led to some of our highest-selling products in the marketplace today and we have a strong pipeline of new products that will roll out throughout 2019 and 2020.


(Images provided by Bhang. Click to enlarge)



FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.


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