Exclusive Interview with INDIVA President, CEO, Director and Co-Founder Niel Marotta
New Cannabis Ventures last spoke with INDIVA (TSXV: NDVA) (OTCQX: NDVAF) in September 2019. Since then, the edibles company has received its extracts and edibles sales license, announced an expansion of its licensed production space and inked an exclusive deal with Wana Brands. President, CEO, Director and Co-Founder Niel Marotta reconnected with New Cannabis Ventures to talk about the company’s industry partnerships, approach to capital allocation and opportunities in the edibles market. The audio of the entire conversation is available at the end of this written summary.
New Team Members
INDIVA has expanded its team, adding both marketing and finance professionals. Marotta highlighted the addition of Chief Commercial Officer Dave Paterson. Paterson has extensive marketing experience, which has helped the company to deepen its relationships with potential wholesalers and retail chains, according to Marotta.
Production Expansion
The amendment to the company’s Health Canada license adds significant production space, which will allow the company to expand its chocolate production. INDIVA will be able to run multiple lines simultaneously, which will help increase efficiency as it introduces new flavors.
INDIVA’s Bhang chocolate products have been well-received in Ontario and Alberta. The milk chocolate and dark chocolate products are the number one and number two top-selling edible SKUs in Ontario, according to Marotta. The company does not have that granular data in other provinces, but sales have been strong.
The expanded production space will also allow the company to begin production of the Wana Sour Gummies.
Industry Partnerships
Wana Brands is a leading edible in the U.S. market, and INDIVA will exclusively produce and distribute the company’s Sour Gummies in Canada, Wana’s first international partnership. The company is interested in bringing award-winning products to Canada, which is the opportunity that the Wana Brands deal represents. The Sour Gummies round out the company’s portfolio, which will be important as the market matures. Gummies tend to outsell chocolate in mature markets, according to Marotta.
INDIVA has also formed a white label and manufacturing agreement with Dycar Pharmaceuticals. The agreement includes upfront financing of $3.6 million and total financing of $8 million. This deal demonstrates a big show of confidence from another LP in Canada, according to Marotta.
When considering industry partnerships, INDIVA’s team looks for brands with a track record of success elsewhere. The company also considers the strength of a brand’s team.
Distribution Growth
INDIVA has continued to expand its distribution into more provinces. It began shipping Bhang products to multiple provinces. The company’s products are available in Alberta, Ontario, Saskatchewan, Nova Scotia and Quebec. It cannot yet sell edibles in Quebec, so it is focusing on its capsule and dried flower products in that province. The company will be adding distribution in British Columbia and Manitoba in April.
As of Q1, the company was distributing its products in five provinces, and that number will soon grow to seven. At that point, INDIVA will have expanded its distribution coast to coast, according to Marotta.
Capital Allocation
The company recently closed the final tranche of its unsecured convertible debenture offering and announced a $2 million investment from Brett Wilson. INDIVA’s approach to capital allocation has always been disciplined. Rather than chasing scale for the sake of scale, the company has opted to scale productive capacity within a relatively small footprint, according to Marotta. Operating out of one facility in one country is very intentional. He expects to see an impressive return on capital as the company ramps up this year and next year.
INDIVA doesn’t favor any one particular form of financing. The company will watch what happens in the debt markets over the coming months. Lenders and investors continue to see potential in the company, and INDIVA will continue to have access to capital, according to Marotta.
The Challenges of COVID-19
As an essential service, INDIVA has still been able to ship its products across Canada. But, the company is cognizant of the concern over employee safety during the COVID-19 pandemic. The management team is having daily discussions, and the company is implementing additional protocols to ensure a clean environment and workflow. It is adding more break room space outside of its facilities and staggering start, stop and break times to help maintain social distancing.
Construction is largely complete at the company’s facility, but current events have affected bringing in new equipment. In some cases, there have been delays, but in others, delivery times of critical pieces of equipment have improved.
Growth Drivers
The introduction of new products and distribution expansion will be the main drivers of revenue growth. INDIVA will be introducing new flavors of Bhang chocolate, and it is beginning production and distribution of Wana Brand’s Sour Gummies. Additionally, the company has invested in automation for its preroll line, which will result in growth. The addition of distribution in British Columbia is also important to the company’s strategy. The province has more stores than Ontario and Quebec combined, according to Marotta. He expects the company to show sequential revenue growth quarter over quarter this year and into next year.
The company is well-positioned in the edibles market. Keeping up with demand is one of the biggest challenges it faces–a good challenge to have–and INDIVA is prepared to do so with the automation it is implementing, according to Marotta.
New Cannabis Ventures provides an Investor Dashboard for INDIVA, which is a client. Listen to the entire interview:
