In this edition of "Rising High," The Fly conducted an exclusive interview with Keith Dolo, chief executive officer of Sproutly (SRUTF), a Canadian licensed producer of cannabis. Here are some of the highlights:
WATER-SOLUBLE SOLUTIONS: Sproutly is a licensed cannabis producer focused on supplying water-soluble cannabis solutions and bio-natural oils to the beverage and edibles market. The CEO said the company is cultivating cannabis but is positioned a bit differently than others following its acquisition of Infusion Biosciences Canada. “Infusion Biosciences Canada spent more than a decade strictly focused on water soluble extraction research and specifically for a large part of that decade on the cannabis plant,” he said. “We have a very unique technology that positions us to create a very unique cannabis solution that is water soluble and can be directly added into different types of beverages or different types of consumer goods products.” Dolo said the company knew it did not want to be just a high-quality flower producer as cannabis oversupply could hit the market outstripping demand. “We looked at probably 20 to 30 different technologies over about an eight to nine month timeframe and we were exceptionally impressed by the research and science team, as well as just the actual research and products that Infusion Biosciences had,” he said.
DIFFERENTIATION: The CEO said he believes Sproutly’s key differentiators include its small-scale production, its water-soluble product and its bio-natural oils. “We decided to stick to a very small-scale production facility and not acquire a ten-acre or five-acre facility that’s going to have a massive amount of kilograms coming off of it,” he said “I think staying small in the long run is going to be a better win here, focusing on the technology and the product.” Dolo said the size of the facility allows Sproutly to have a very boutique, controlled environment to create high-quality cannabis. The CEO said another differentiator is the company’s Infuz2O product. “It comes out as a truly naturally water-soluble cannabis solution,” he said. “There are a lot companies that are really opening their eyes up to seeing the variability of using this in a beverage product out there.” Dolo added that a second part of the technology process passively removes the free oils from the remaining biomass that’s left in the machine, which he views as a third differentiator. “Not only do we get a water-soluble component, but we actually get an oil component that’s drawn out of the cannabis plant as a second step,” he said. “Ours are very passively removed so they’re not denatured, they’re not altered and they’re not changed in state. The entire plant profile is pulled through for everything that is a lipid in it for a full-stream benefit into our oil.” The CEO said the bio-natural oils are a secondary product that the company is still just coming to market with and has not really touched upon yet.
LEGALIZATION: When asked which country could be the next to legalize cannabis on a federal level, the CEO said he would like to say the U.S., but he thinks more states within the European Union will legalize sooner. “Maybe not the whole EU all together but certain jurisdictions within it. Obviously many of them provide a medical avenue for people to be able to access cannabis,” he said, noting Germany is consistently talked about. Dolo added he believes Australia may legalize shortly after and that the U.S. will probably four to five years down the road.
EXPANSION: The CEO said the company will definitely look to expand as the Canadian market becomes more oversaturated and overvalued and noted the company’s joint venture agreement with Global Canna Labs in Jamaica. “That joint venture allows us to bring our know-how, our technology, our breadth of products and our portfolio products that we’re working on to the Jamaican market, which is a low-cost market where we can partner with an already existing producer without having to put the CapEx down to buy a facility and grow our own cannabis there,” he said. Dolo said the company’s next foray will probably be into Europe as Sproutly is having discussions with different companies that have access to European rights and distribution agreements.
CHALLENGES: When asked about the challenges Sproutly is facing, the CEO said the biggest hurdle currently is waiting and understanding what Canada is going to do regarding beverages and edibles regulation. “Because of the marketing restrictions and because its being federally legalized, the restrictions, the requirements and the regulations around the Cannabis Act are severely different than what we see in the U.S. in terms of branding, packaging and what can go into a cannabis edible or beverage or flower package,” he said. “There’s a little contingent upon what Health Canada puts out over the next timeframe here and how we use those regulations and mold them around our business model to make sure we can still go to market with product that consumers will recognize as a better value product.” When looking at the industry as a whole, Dolo said the main challenge he sees in Canada is the oversaturation of flower companies. “The amount of biomass coming on in the next couple of years here is just a staggering, staggering number,” he said. “If you look up the Deloitte study in terms of the kilograms that Canada could potentially produce over the next few years, it’s multiples above what we have ever smoked or ingested or taken in from a medical or adult rec brand, both legal and non-legal.” Dolo said he believes companies that don’t have a large-enough scale operation to really look at their bottom line and get their costs down are going to get stuck in a similar position to farmers in Oregon who could not sell their cannabis. “Canada will be in that same position unless it can determine how to get its product to market and that means getting it over to Germany, getting it to Australia and getting it to the European nations that don’t yet have grow facilities built but have legalized it,” he said.
OPPORTUNITES: Dolo said he sees opportunity in quality products in the edibles and beverages space moving forward. “From a consumer standpoint, consumers are really waiting for quality products in the edibles space and I say that because no major international player has yet to come into the edibles or the beverage brand products out there,” the CEO said, noting some cannabis firms’ partnerships with larger mainstream companies. “No beverages have been really put out yet by a mainstream company and I think consumers are looking for some big companies that have a lot of experience on the formulations, the branding and the know-how to create the best flavor profiles to really get into this industry.” Dolo said while there are edibles and cannabis beverages on the market, they are not mainstream type products. “I think we’re going to see an evolution of the large corporations and companies get exceptionally better at what they do,” he said. “From an opportunity standpoint, I think there’s a massive opportunity to get ahead of the curve to be one of those companies that is able to put out a beverage that’s going to last for 10 or 15 or 20 years.”
OTHER CANNABIS STOCKS: Publicly-traded companies in the space include Aurora Cannabis (ACB), Aphria (APHA), CV Sciences (CVSI), CannTrust Holdings (CNTTF), Cronos Group (CRON), General Cannabis (CANN), Canopy Growth (CGC), Tilray (TLRY), Innovative Industrial Properties (IIPR), India Globalization Capital (IGC), ICC International Cannabis (KNHBF), Biome Grow (ORTFD), MediPharm Labs (MLCPF), Indiva (NDVAF), OrganiGram (OGRMF), KushCo (KSHB), MedMen Enterprises (MMNFF), Elixinol Global (ELLXF), Planet 13 Holdings (PLNHF), Wayland Group (MRRCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), Origin House (ORHOF) and Sunniva (SNNVF).
