Phivida Holdings Inc (CNSX:VIDA) (OTCMKTS:PHVAF) is a US-based functional food and beverage company operating in the health and wellness space. CEO Jim Bailey shares details of the company’s major retail launch in April. Phivida is building its brand through traditional retailers, which are interested in the infused-beverage category because of its high margins. The company recently secured its first major retail partner, Safeway, and Phivida CBD-infused, Oki-branded waters and iced teas will be available in Colorado Safeway stores next month. Bailey believes beverages will be a differentiator for the company and will generate customer interest in the other Phivida products, such as tinctures. Phivida is also launching a direct-to-consumer online platform. Bailey believes the platform will complement the company’s wholesale revenue.

Transcript:

Narrator: Phivida Holdings, Inc. is a Vancouver-based premium food and beverage company focused on whole plant nutrition and natural ingredients to maintain overall health and balance in the human body.

The company infuses organic active hemp extract into a variety of premium beverages and clinical products for everyday health. Brands include Oki, beverages infused with active hemp extract, and Vida, a line of full spectrum hemp CBD oil extracts and capsules.

Phivida Holdings, Inc. is listed on the Canadian Securities Exchange under the ticker symbol VIDA.

James West: Jim, how are you?

Jim Bailey: Excellent. Adjusting from the time zone of the west coast, but excellent. And warm weather; I left BC and it was 22 degrees when I left, so…

James West: Well, it’s 10 degrees here. Are you bragging or complaining?

Jim Bailey: I just – I moved away from Toronto a year ago, so I know the weather patterns well.

James West: Did you? I moved back to Toronto four years ago. I do miss the west coast weather. But we’re not here to talk about the damn weather, are we?

Jim Bailey: No, we are not.

James West: Okay, Phivida: give me an update just for the audience that has not heard about you before, what does Phivida do, and what is the status of the company right now?

Jim Bailey: Yeah, so basically, Phivida went public in December of 2017. Prior to going public, I actually sat on the advisory board. With my experience with Red Bull, the founder at the time had asked me to sit on the advisory board to help them understand the route to market, retail in general, and then obviously, formulations. So joined as an advisory board, and then in the New Year of 2018, they asked me to join the company full time as their CEO.

So I started as the CEO. I had a personal experience, obviously, in this space, and using CBD; we’re primarily CBD-based, that’s all we’re dealing, we’re not dealing with THC in our products, and we’re currently going to market live as we speak. We’re launching this month, or the month of April, in major retailers in the US. We just announced Safeway, Colorado coming on board with our products, and we’re introducing four flavours of iced tea, four flavours of water, and then we also have CBD tinctures. Hopefully you don’t spill them in the restaurant – and capsules to go along with it.

James West: Right. Well, I’m going to have to try this! So, is it only available in the US?

Jim Bailey: It’s only available in the US right now.

James West: State of California?

Jim Bailey: No, we’re right across the board. So you know, I said this market is not for the faint of heart. If you watch the US, especially, I probably learned more about the US regulations around cannabis and CBD than I currently know about Canada, to be honest with you, because it’s such an intricate market when you’re dealing with all the various states.

James West: Yeah, it’s very fractured, isn’t it?

Jim Bailey: It’s fractured, and it’s so dynamic; it’s changing every day. If you saw it today, California just announced that they’re opening up the markets for CBD-infused food and beverage, so that changed the whole landscape for us in the State of California.

James West: So what are your top selling products, do you think? I guess you’re just getting started, so you don’t really have that much data yet, or do you?

Jim Bailey: Well, the beverages really going to be the home run for us. You know, I tell people it’s the key to the door, to open the door, because really if you look at the competitive space within the beverage segment, you know, as it relates to CBD-infused products, there’s little to no competition out there.

So having that inroad with beverage, and our experience, past experience from my days at Red Bull and the rest of the teams, that’s really been the differentiator between us; because I would say, the world’s not really asking for another CBD tincture or capsule; the beverage gives us the open door to sell our tinctures and capsules.

James West: So is the category of beverage you’re focusing on the same as what would be Red Bull?

Jim Bailey: Well, we call it functional beverage categories where we’re positioned. You know, it’s unique space right now, because we’re seeing a lot of that consumer that, you know, used to love and infatuated with Red Bull, getting into healthier beverage options, and we’re seeing that in society as a whole, whether we’re talking food or beverage. Everyone’s looking for a functional product that’s good for you, and we deliver that.

James West: I’m seeing CBDs every day. So, tell me: how much CBD is in a typical serving of one of your drinks?

Jim Bailey: So, we put 20 milligrams of CBD in a beverage.

James West: 20 milligrams, okay.

Jim Bailey: And the beauty of what we do different than a lot of the industry, and I’m speaking specifically to the US market, is our QA/QC is beyond what the industry is even used to. I think we’ve taken the approach as a typical consumer packaged goods company, and it’s a bit of the Wild West down there right now. So we test our products, we test the raw materials, the raw CBD that we bring in, for potency and contaminants, and then post-production we test our product to make sure that when we say there’s 20 milligrams of CBD in that beverage, the consumer is getting 20 milligrams.

There’s a lot of folks down there right now that aren’t taking that same due diligence in their –

James West: Okay. So the reason I asked about California is because I’m going to be there next Thursday, and is it available at any of the dispensaries in California?

Jim Bailey: We don’t sell to dispensaries. We’ve decided, we took a different approach to this category; we’ve decided to build the brand in traditional retail. It’s tough to build a brand –

James West: Oh, okay, so yeah, you said Safeway. So I can go to a Safeway and buy it?

Jim Bailey: In April, you will be able to go to Safeway Colorado and buy our beverages.

James West: Oh, okay. So is there anywhere I can buy it in California next week?

Jim Bailey: We’re working on that now, now that this news – because right now, we’ve got distributors lined up, we’ve got brokers, Acosta’s our broker. Acosta’s the biggest food and beverage broker in North America.

James West: Sure.

Jim Bailey: And they service the accounts for us, so they do a lot of the selling, and then we’ve got both a DSD distribution platform –

James West: Well, so what’s the capacity of your entire supply chain? Like, how many states, how many servings can you produce every month?

Jim Bailey: It’s unlimited for us. We’re using a world class co-packer; it’s a company in the US called Lily of the Desert. These guys are state of the – you know, I’ve been to Red Bull facilities in Austria and Switzerland, and I tell people, you can eat off the floor of these facilities over in Europe. And we went to these folks in Texas and it’s the same sort of thing. The facilities are world class, and they, you know, have a $400,000 manufacturing facility and storage facility. So we can produce unlimited amounts.

James West: Wow, that’s great.

Jim Bailey: We’re starting our first production run next week; we’re producing 250,000 units next week with the 20 milligram servings, so.

James West: Okay, so how do I get my hands on this? I want to try it, because I consume some of these.

Jim Bailey: All our, right away our direct to consumer line, our online platform is going to be up and running in a week.

James West: Ah, so mail order anywhere in the US?

Jim Bailey: Anywhere in the US, yeah.

James West: Really. Okay, so I can order some to my hotel room in Los Angeles?

Jim Bailey: You absolutely can.

James West: Woo! I could order some for all of my –

Jim Bailey: And we’re striking up partnerships with companies like Eaze, who do door to door delivery in California. I’m not sure if you’re aware of those folks.

James West: Yeah, I know Eaze.

Jim Bailey: So we’re actually in the midst of doing a partnership agreement with Eaze as well.

James West: Oh, very cool.

Jim Bailey: So you know, I feel it’s really important to, you know, have a direct consumer platform, because I don’t want to put all our eggs in that one retail basket. So if we can control our own destiny through direct to consumer and complement that with traditional wholesale…

James West: Sure. Next Thursday, we’re shooting all the YouTube studios. We’re a YouTube partner, so if the CEO of Eaze would like to come on the show next Thursday, he has an opening. I just want to extend that to him through you.

Jim Bailey: [laughter] Well, I don’t know if I can do that, but I can certainly send you some product down to the studios.

James West: Cool, great. Awesome. Okay, so then, how much – what kind of margins are we talking about? Well, how do the economics work for this?

Jim Bailey: So, to – the retailers love this category. So just to give an example, right now in the natural especially channel, the latest report I received, there’s just about $56 million been generated over the past 52 weeks, and that’s up 298 percent over previous year. So the category, without the FDA’s involvement, is skyrocketing.

So we just feel there’s a great opportunity to take it into the mainstream. Where most people are dealing in dispensary channel and everything, we’re focused on traditional retail, because you know, much like you mentioned earlier, the benefits of this product, you know…it helped me in my recovery after breaking my hip, and I’m a big believer in it. You know, I provide it for my father, who just recently suffered a stroke. So we want to make it accessible to all.

James West: Yeah. It really is amazing. I mean, the thing that amazes me about the evolution of cannabis in the current context is that the, just the everyday person is finding out what it’s good for way ahead of all the clinical research and data, and yes the evidence is anecdotal and not strictly clinical data. But if it feels good, it must be working.

Jim Bailey: Well, you know what? It’s interesting. You know, I’ve spent a lot of time in the US, especially in California. I love going into shops like MedMen because I get to study human behaviour and how people are interacting, both with the floor staff and the products. And what I love about it is, these guys like MedMen have really lifted the stigma off of walking into, you know, the old-school dispensary. Their staff are very well educated; the products in there, the branding and the quality is bar none, world class.

And I love the diversity. Like, the age diversity…you see people in there, they’re in their 60s, that were probably, you know, using weed back in the 70s, whatever, had their children and moved on. But they’re coming back into the category now because there’s so many new delivery systems. Between edibles and beverage, you’re seeing a lot of people, you know, lapsed users coming back into the category.

James West: Yeah, for sure. I also like to visit MedMen stores, but I go to just check out what products are still on the shelf from the last time I was there; what products have displaced them if they’re different. But it’s just a kind of anecdotal way to track what’s popular in MedMen stores, which is somewhat representative of the larger industry.

In bypassing that sort of dispensary model and being a general consumer packaged good for distribution through the likes of Safeway, I mean, I would think that’s got to be, like…what is your gross margin?

Jim Bailey: For the retailer?

James West: Yeah.

Jim Bailey: Well, this is the beauty, I was going to get to that. So on tinctures and capsules, it’s 50 margin. So you think – so based on SpinStat in the US, which reports natural and specialty sales, the average selling price is $84 retail. So think of that for a minute. Think about a Whole Foods or any other retailer putting $42 of gross profit in their till every time they sell a little bottle of tincture or capsule. You know, it’s a space that everyone’s jumping to get in, because the profit margins are great to the retailers.

On our beverages, our beverages, our iced teas sell for $5.99 US for a 16-ounce serving; our waters sell for $4.99. So it’s a premium ring when you compare it to a soft drink or even Red Bull, and they’re making 40 margin off that.

James West: Would you consider, is it possible, like, I’m kind of saying this hypothetically just to see if this is part of your – but I’m also very interested, if this is a reality: would it be possible for me to commission a Midas Letter cannabis beverage that’s produced by you guys and sold through your channels?

Jim Bailey: Produced by…you have to explain that one to me. [laughter]

James West: So I want to create an organic beverage that has cannabinoids in it and aloe vera and avocado oil and cayenne pepper and is based on blueberry and pineapple flavours, and I want to call Midas Letter Raw Energy Beverage, and I want to partner with you to do that, and then I’m going to talk about your beverages every day on my show because your beverages are my beverages.

Jim Bailey: Yeah, I mean, at this point, we’re not in the co-packing business or the white label business, if truth be told; we’re primarily focused on our own brand, which is the Oki brand. So from right now we’re starting with beverages, and then from there we’re going to expand it into edibles, topicals, you know, and have all sorts of brand extensions with that, in a methodical way.

But I think most important, you know, when you said, you know, is it that simple to bring a product to market? It isn’t. We interviewed with Acosta, which is, like I said earlier, is the biggest food and beverage broker in North America; they have over 35,000 employees and over $3 billion in sales.

James West: Wow.

Jim Bailey: They interviewed over 10 brands within the CBD space, and they called us within 24 hours, because we understood retail; we understood distribution; we understood sales, we had a world class marketing team, and they got to see that come out in our presentation. And they said that’s the missing link with most brands, both here in the US and Canada; there’s a lot of people that have come from the business world, there’s a lot of people that have come from the black market. But our intimate understanding of the general retail landscape and how you bring products to market, that’s what they were blown away by.

James West: Wow, sounds fantastic. That’s a great story, Jim. I can’t wait to have you back, but we’re going to leave it there for now, and sounds like you’re going to be a very interesting contender in the space. I can’t wait to have the next conversation with you. Thanks for joining me.