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CFN Media Exclusive Q&A with Pistil CEO

Rachelle Gordon

April 10th, 2019

Exclusive, News

Greg Vermeulen is ahead of the game. The Canadian cannabis industry vet (he was one of the first employees at Bedrocan Canada and stayed on after their merger with Canopy Growth) is on a mission:  convert tobacco growing farmers in the Southeast United States over to CBD hemp production. The cannabidiol market in the US alone is predicted to reach a value of $22 billion within the next three years, and Vermeulen’s latest endeavor, Pistil, is poised to grab a significant piece of the pie.

 

CFN Media caught up with Vermeulen at the recent CannaBrunch Summit in Ft. Lauderdale, where the CEO and President of Pistil took first place in the event’s pitch competition.

 

CFN:  How did your experience with some of Canada’s biggest licensed producers help lead you to found Pistil?

Greg Vermeulen

Greg Vermeulen:  We had the lowest cost producing facility in Canada at Bedrocan. It cost us $30 million to build, and we were producing cannabis at $2 a gram, maybe $1.50. Then, I realized, “Well, wait a minute. We can grow this stuff outdoors way cheaper… we grow outdoors for a cost of about 2 cents a gram,” and that, really, production is going to move to these low cost producing regions of the world, so why not just focus on that and get ahead of the game? That’s what we did. We were looking at cannabis in Jamaica, Greece and South America, but we also focused on the United States, and we shifted gears a bit and found this tremendous opportunity with CBD hemp.

Going back to my team, I was then able to call up my former friends at these wonderful companies and say, “Hey, let’s work together.” We had this loyalty and this bond, so I was able to attract really top talent. My top grower is Marta Gold. She’s Bedrocan’s former head grower. She’s famous in Europe for growing cannabis. She’s operationalized facilities all over the world, advanced medical grows, large scale outdoor hemp farms, so technically our management is very strong. Everyone’s academically credentialed and has only worked in the legitimate cannabis space.  I think we have the best management team executing this business plan.

 

CFN:  You partner with tobacco farmers in the Southeastern US in order to create a mutually beneficial relationship. What has the local response been?

 

GV:  The response has been phenomenal. We’ve come up with basically a modified tobacco contract, where we contract with the farmer, and we pay them for the service of growing hemp. We provide the genetics for free to the farmers. We grow our own genetics over the winter, and because we’re such experts at it, our genetics are, by far, superior to what you would get if you were just going to some other startup who’s just doing this for the first time.

We provide all the technical expertise to the farmers so they can succeed. We send in agronomists and horticulturalists to actually monitor the crop. They give the farmers directions. “Today we plant. Today we water. Today we…” you know, everything. We don’t give away the IP. We just give them directions, and basically, we own the crop. They own the land. They’re paid for the service, and at the end of the year, we harvest the crop, process it, and sell it off, usually to an extractor or CBD product manufacturer.

 

We’re building a gigantic facility down in North Carolina. We’re in this economically depressed area, and we’re going to contribute hundreds of jobs to this local area. It feels great, because we’re basically setting the stage for generations of growth. We’re building a community of farmers. My phone’s ringing off the hook. These farmers want to participate in the program. I think we’ve signed up about 45 farmers to date for 2019. We’re targeting about 1,000 acres under production, and I think we’ll be at 60 farmers by the end of the year.

 

CFN:  What are your projections for 2019?

 

GV:  This is the year where hemp is fully legal. We were growing last year under an academic license, so we have the relationships and local connections. We’ve done this. We know how it works, so this year, we’re taking that model that was so successful last year, and we’re scaling it up 200 times. That’s a lot. Basically, we’re targeting about $10 million in revenue in June. That’s going to come from us selling our clones to third party farmers, not the farmers in our program, but other people want to have a go at growing hemp. It’s a great model. They pay $5 a clone. It costs us $2 to make.

 

The margins are amazing, so that gives us a bit of revenue in June. We grow the crop over the summer. We’re going to plant about 1,000 acres. We expect to grow at least a million pounds of CBD-rich hemp. That crop, based on last year’s prices, should be worth about $40 million, so we’re targeting about $50 million in revenue just from clone sales and hemp biomass sales. We think we’re going to take home about $25 to $30 million in EBITDA.

 

CFN:  What makes a perfect partner for Pistil?

 

GV:  We are technical experts at doing this. We’ve got all the right advisors and everybody in place, so we don’t need a strategic partner per se, but anybody who wants to invest in something that’s cannabis-related but doesn’t want to invest in things that are going to get people stoned, because I do believe that there are still a lot of people who have sort of a moral or ethical issue with investing in cannabis. While I don’t personally share that view, I sympathize with it, and I understand it. I think hemp is a really great way to get upside exposure to cannabis, because it’s a phenomenal investing opportunity.

This is a once in a lifetime scenario where you have:  the end of prohibition happening. That doesn’t happen every day, so you want to participate in this, but you don’t want the moral hazard of investing in companies that are going to get people stoned or whatever. CBD hemp is a great way to do that. You’re going to help farmers. You’re going to produce a product that is healthy and beneficial to people. There’s really very little health risk to people consuming CBD, and there’s just huge applications for this. People are using it for health and wellness in the most amazing and innovative ways. Any investor who that appeals to, I think, should be investing and looking at CBD hemp.

 

CFN:  You have an incredibly disruptive model. How is the market changing and why is Pistil poised to come out on top?

 

GV:  This whole business of growing very expensive flower buds in fancy facilities is not going to last. Canada does not have a comparative advantage to growing cannabis. They have a regulatory advantage, because they were early to legalize, but the cost of production is very high. I think you’re going to see a lot more outdoor cultivation happening. I think a lot of that outdoor is going to get put through an industrial process of extraction, and that consumer, at the end of the day, is never going to know or care.

I love flowered buds. Don’t get me wrong. There’s always going to be a place for that, but you can see it already. It started at 80, 90% of the market. Dried flowers have dropped significantly, and now oils are already half the market. As new consumers come into the market, they’re going to be mass market consumers, and . they’re not going to be smoking flower. They might be vaporizing, but I believe they’re going to be consuming it in edible oil format, so I think that our model is going to be very disruptive to those expensive indoor grows.

 

I expect to be one of the top five CBD hemp producers in the United States in the next three years. The supply chain in the United States is more or less at zero, at least in terms of a validated supply chain that’s producing a transparent product that you can track from beginning to end, that’s doing it at an ISO or GMP accredited level, it’s just not there yet today, but it is coming, and Pistil intends to be at the forefront.

 

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Rachelle Gordon

Rachelle Gordon is a Minneapolis-based writer. Find her online at www.rachellegordon.net.

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