CannTrust Holdings Inc (TSE:TRST) (OTCMKTS:CNTTF) (FRA:C9S) President and COO Brad Rogers discusses the company’s new partnership with Breakthru Beverage Group. Significantly, Breakthru’s parent company is Diageo plc (NYSE:DEO), the largest distributor of alcoholic beverages in Canada. CannTrust has already developed a zero taste, zero calorie water soluble cannabis product that can be added to any beverage or edible and can reproduce it at scale. As a result of this product development and the deal with Breakthru, CannTrust is perfectly positioned to enter the recreational beverage market. Rogers explains some of CannTrust’s CBD-infused medicinal products and addresses the company’s decision to absorb the excise tax for its medical patients.

Transcript:

James West: Mr. Brad Rogers is here. Brad, come on in, come on in, come on in! Don’t stand on ceremony. How are you?

Brad Rogers: I’m well, thank you.

James West: How’s that for an entrance, eh?

Brad Rogers: Oh, just yeah, it’s fun times. I’ll put my glasses somewhere.

James West: Yeah, just leave them there.

Brad Rogers: I just came off a plane.

James West: Is that right?

Brad Rogers: I just did BNN, and now I’m here, and everybody wants to talk about –

James West: You flew to do BNN?

Brad Rogers: I flew in to do Midas and then BNN asked me to do that.

James West: Oh, very cool.

Brad Rogers: It’s all about Midas, of course.

James West: Good thing you got your priorities straight, there. Where were you flying around to?

Brad Rogers: I was flying in from Chicago, where our newest partner resides.

James West: Breakthru?

Brad Rogers: Breakthru Beverage Group.

James West: Now, the significance of that went right over my head until one of our viewers wrote me and said ‘You realize that Breakthru is Diageo’s agent in Canada’ and I was like ‘whuttt?’

Brad Rogers: That’s right.

James West: And that’s the big holy –

Brad Rogers: That’s one of a portfolio of huge brands that they represent in alcohol. They also represent Brown Foreman, who is Jack Daniels, and so there’s a lot of representation there, and they’re a foundation of credibility with respect to what we do now. So we’re incredibly excited about what this deal brings for us; it’s a level of expertise and detail at the retail level that we would take a little while to get to. They’ve got systems in place, they’ve got everything ready to go. So it’s a turnkey for us, and they saw us as a strategic partner as well.

And so they’ve also made an investment in us. So unlike other distributors that have partnered up, these guys saw an opportunity here –

James West: To make some money.

Brad Rogers: Well, it’s not even just money – I think what they want to do is, in the United States, there’s three tiers of alcohol distribution that you can’t cross lines on. So you’re either a producer, a distributor or a retailer, and so they’re in the middle, they’re a distributor, and this is, they’ve brought basically alcohol out of prohibition; they’ve been around that long, generations and generations. And so they saw this as an opportunity where there are no lines, you can be all things in the space, to be able to actually capitalize and be all things in the space.

And so they’ve got the level of expertise on the distribution side of it, but they also want to experience the other pieces of it, which is producing, manufacturing, branding, and perhaps, you know, some of those brand partners that are out there are going to have a look our way now, because, and they all have, actually, to be frank. But it’s just again, one more vote of confidence for CannTrust in that the biggest alcohol distributor in Canada and second-biggest in the United States, and they’ve got some really interesting things going on to maybe even become the biggest – you know, they’ve chosen us, and they’ve invested for us. That’s massive for us. We’re incredibly happy. It’s a first-class organization, by the way; the Wirtz family? Top notch.

James West: Interesting. So now, has CannTrust got a development process going in the recreational beverage space at this point, or is this just the first –

Brad Rogers: Yes.

James West: You have?

Brad Rogers: Oh, look: we are –

James West: I should have known, I should have known.

Brad Rogers: We don’t press at all; we make sure we have what we have, and we do have what’s called a zero taste, zero calorie input to anything.

James West: So it’s soluble.

Brad Rogers: Soluble, stays in solution, looks like water and tastes like water – like, you can build any beverage, any food product, any edible, anything around it. And so it’s a turnkey solution for anyone of those big alcohol companies to come in and say look, what do you have? And here it is – we have it. We have it at scale, and it’s readily reproduceable. So that’s an incredible advantage for us, yet again. You know, that’s also, we can standardize that as well, and we have standardized it.

So that’s one more turn of the wheel. We’re turning products now, we’re looking at 2022, ’23, ’24 in terms of our product pipeline. So you know, all that’s in play, and you know, when it’s ready to go, we have it.

James West: Yeah. What do you think is going to happen? Like, I mean, I look at the idea of having, for example, a beer that also has a THC component to it, and I’m not interested. I like to have my beer, and if I feel like augmenting my reality with a little cannabis, that’s a separate thing. I’m not looking for efficiencies in terms of dosing and convenience; I like to go out and twist one up and light it up and smoke just as much as I want to, come back into the warm bar and rejoin my friends and have a beer, you know?

Brad Rogers: Absolutely.

James West: So I’m wondering, like, where is this all going to fall in terms of cannabis beverages? Is this, like, instead of alcohol idea?

Brad Rogers: It’s an option too. So when you look at what the potential here is, is that, you know, when it becomes legal October 17th, the people who don’t smoke aren’t necessarily going to run into the OCS or any of the other provincial distributors or retail operations and say hey, I’m going to start smoking today. I think what’s going to happen is that an option to what’s already socially acceptable in someone’s mind – be that drinking or, you know, maybe something more discreet than smoking, such as an edible, that’s a viable option as we see it. So we’re creating products around that.

We’ve got our beverages, we’ve got our inputs for all of our edibles as well, and so that’s in place right now. And so, when you look at the smoking versus non-smoking versus alcohol, I think it’s an option, too. Alcohol is what I say is a lock on the mind-escape market. That’s the only legal mind-escape that there is right now recreationally. And so herein lies the opportunity to put a portfolio of product out there and say to somebody, hey, where are five mind-states we can get you to: we can get you to relaxed all the way to invigorated through a portfolio of beverages that alcohol just can’t deliver on.

James West: That worries me.

Brad Rogers: That’s what’s in the works right now.

James West: I want on of those, and one of those, and oh yeah, mix me a drink!

Brad Rogers: Why not, absolutely! And so that’s an option. And what we’re also able to do is standardize it. And so it’s not going to be a hey, I’m never going to do an edible again, because the last time I did an edible, I was knocked out for days. And that’s what I hear, time and again. And so what we’re able to do is just say look: start low, go slow, with what might be an equivalent to a beer. So put it in a 5 mg content for a beverage that just gets you to a nice, smooth, easy state. And you know, if you want to go past that, that’s another one on top of that.

And so similar to alcohol, you can dose and titrate yourself into whatever mind state you feel you want to get into.

James West: Sounds like fun.

Brad Rogers: And again, that’s the beauty of this. It’s really amazing.

James West: So do you think that there’s going to be a case of like where we’ll have bars where you can have one or the other? Do you think that’s coming?

Brad Rogers: I think so. I hope so. You know, I mean, it’s, alcohol is one thing; I couldn’t imagine, you know, the cannabis bar, and then you have the alcohol bar. I think the differentiation will be there on a choice for the customer in the same venue, I would hope. In an age-restricted environment where everybody has freedom of choice, those products, I believe, should be an option within those environments.

James West: Certainly in the Ontario winter, where you do risk your life if you have to go outside for anything at 3 in the morning.

Brad Rogers: [laughter] A little chilly.

James West: That’s what I’m looking forward to – oh, we don’t have to go out! That’s amazing. So, like, so CannTrust is – I mean, still to me, the stock has doubled since the last time we were here. Remember I tried to buy it at $4.01 and I didn’t get filled?

Brad Rogers: [laughter] That’s right.

James West: And then the stock takes off the next day? I never got it.

Brad Rogers: It’s $12 today. So you missed. You know what? There’s some big upside, there really is.

James West: Exactly. The future of CannTrust, though, is just like, it always is sort of – it just shifts a bit and shifts a bit, and the result is that you’ve got a broadened horizon. So now with this deal with Breakthru Beverages, you’re now perfectly sort of poised, positioned, to take advantage and enter into the recreational beverage market as we’ll call it, or the mind-escape market – I like that. I always found it a bit of a mind intensification market, generally.

Brad Rogers: Well, that too.

James West: As an Irish person. [laughter] What do you mean, you think I’m a liar? But so, what else is there in the cannabis space/ I mean, what else is there?

Brad Rogers: Look, we’ve got – we operate in three verticals right now, as we discussed before. We’ve got medical, we’ve got recreational now coming, and we’ve got pet. And so our pet is a focus, and again, what we’ve done is standardized our inputs. So when you look at cannabis, it’s an input; it’s an input to all of these things. So you look at CPG, you look at food, you know, I believe it’s going to be, you know, CBD is going to be the new probiotic, it’s going to be the new Omega-3. And so you know, that’s an option for food, and that’s an option for the pet industry as well. It’s an option for nutraceuticals, it’s an option for CBD sports recovery drink that we’re working on as well.

James West: Well, interestingly, you know, CBDs in my household have gone from, you know, being mildly amusing to the point where everybody, including the pets, are on it every day, all day long now.

Brad Rogers: It’s a daily routine.

James West: It’s like – it has so many health benefits, it’s like, my mother-in-law has got arthritis, swollen hands, she’s from Peru. For the first time, she’s like ‘I can’t believe it, I’ve got no swelling, I’ve got no pain, this is the best I’ve felt in years’ thanks to these CBD patches she’s doing.

Brad Rogers: It’s a phenomenal thing when you experience what the power of tis is. It’s not one indication, it’s a horizon of indications that cover, you know, everything from pain relief all the way to, you know, anti-spastic properties as well, so, you know, the neurospasticity in the epileptic children, Dravet syndrome, mal seizures, etcetera. You know, we get so many letters from that, all the way to the pain relief. And we’ve, just for interest, CannTrust is now in four clinical studies.

James West: Right. I saw that you had partnered with McMaster University.

Brad Rogers: Yeah, and that is a feather in our cap, and hopefully a feather in their cap when they prove efficacy. And so when you look, it’s one of the biggest pain studies in Canada; 309 patients, I believe, is the number. So when you get Phase 1, Phase 2, double-blind crossover study with an organization such as McMaster, it really validates you, and you know, the health care professionals are starting to look at this as a front-line option to the opiates. So when you think of pain relief, it’s not just straight to the opiate, it’s front-line potentially is now, you know, a standardized dose. Vegan capsule, from CannTrust, THC option or 1:1 option or CBD option. So there’s a lot of potential there, and we’re looking forward to those results of that study.

James West: Fantastic. One of the things we didn’t get to talk about yet is your decision to absorb the excise tax for medical cannabis patients. Now, I mean, everybody’s in love with CannTrust enough already, as far as I can tell; and now you’re going, bending over backwards literally, financially, for your patients?

Brad Rogers: Yes, we are.

James West: And what is the – what is the burden of tax on an average medical patient?

Brad Rogers: It’s $1.00 a gram.

James West: A buck a gram?

Brad Rogers: It’s a big number. So when you look at the potential of somebody putting that out themselves, somebody who may not be able to afford it, or, you know, are on the verge of saying okay, you know, can I afford this or do I get my health care to pay for opiates? Which is the last resort for some of these folks who cannabis actually works for.

And so we saw that as a good corporate citizen duty to make sure that everyone who is medicinally in need, to be taken care of. And so, that’s just who we are, and that’s how we operate. So we’ve heard a lot of really good things from the street about that, and from our customers alike, and we’re hopeful that it really does make a difference.

James West: Sure. Is this something that all LPs do?

Brad Rogers: No.

James West: It’s not done, is it?

Brad Rogers: By no means, no.

James West: I was going to say, why doesn’t everybody do this?

Brad Rogers: Well, it’s an economical decision for a lot, and you know, again, we’re very – you know, CannTrust the brand is very medicinally focused. Corporate CannTrust wants to do its good deed as a corporate citizen, but the brand has a lot of very in-need patients. So we’re very happy to help in supporting the excise tax.

James West: That’s great. And so, how’s everything going with the buildout in Niagara? That thing’s all up and running now?

Brad Rogers: Oh, you know, it changes by the minute. You know, I see pictures of it; I’m flying around and doing my thing, you know, and I get down there every so often, and every time I go down there, there are more and more people and there’s more rooms filled, and you know, the processing, it’s just the industrialization of cannabis in front of your eyes. And when you look at our facility down there, I call it the modern manufacturing plant. It’s to a degree walking into, you know, a Toyota and/or a Ford, for that matter. But the care and diligence and standardization that we have allows us to get to that same result every single time. And so, you know, we’re getting incredible results. Our canatonic CBD is at 28 percent.

James West: Wow.

Brad Rogers: Our Gold Kush, 27 percent standardized. So it’s just, the results are just – it’s outperforming itself, and of course, the grams per square foot are increasing over and over and over again. So I can’t enough –

James West: I’ll have to come down with a crew again.

Brad Rogers: You have to come down.

James West: For another visit.

Brad Rogers: Absolutely.

James West: Maybe October 17th would be a good day to come down there. [laughter]

Brad Rogers: [laughter] That’s probably a great date to come down.

James West: All right, Brad, we’ll leave it there for now. Thanks again for coming in today.

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