Interview with Steve Klein (FLOWR)

On September 13, 2018, Steve Klein of FLOWR will speak at Kahner Global's Cannabis Private Investment Summit in New York City. This event gathers industry leaders and investors for a day of collaboration and networking.

Steve Klein is Chairman and Chief Strategist of The Flowr Company, a Canadian licensed producer focused on premium flower production.  Flowr also has an exclusive cannabis R&D alliance with Hawthorne Gardening Company, a division of Scotts Miracle Gro.

This interview has been edited for length and clarity.

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How did you get into the cannabis business?

I’ve run a family office in New York for many years investing in everything from hotels to hedge funds to tech start-ups.  We started looking at investing in cannabis when U.S. states started legalizing many years ago and that led to me meeting Tom Flow.  Tom is one of the pioneers of the Canadian industry having co-founded Med-Releaf.  After learning about Tom, his team’s capabilities and the Canadian market, I realized I didn’t want to make another cannabis investment, I wanted to start a business with Tom.  We’ve been building Flowr together for the past couple of years and are now quickly ramping up production.

What sets Flowr apart from the other Canadian LPs?

The big differentiators for Flowr are our rare ability to grow premium product and do it efficiently at a profit.  That focus drives everything we do.  

Tom and his team have the ability to build cultivation facilities that are super clean – they meet pharmaceutical manufacturing standards – and run very efficiently.  So the cannabis we grow will meet Health Canada purity standards.  Most other growers aren’t able to grow that cleanly and they have to treat their flower with gamma irradiation to kill mold and other prohibited matter.  Irradiation cleans the product enough to meet health standards but it really hurts the taste and smell.  Flowrs’ plants won’t be irradiated, so we’ll provide a much more aesthetically pleasing experience.

That high quality will allow us to stay on the premium end of the spectrum and our efficiency at growing will keep costs low.  Those two inputs will lead us to be a very high margin business.  As we ramp up to full capacity in our first facility for 2019, we’re scaling that model and expect to be one of the most profitable cultivators and one of the largest LPs.

The holy grail in this business is growing quality flower at scale and at a profit.  That’s what we’re building Flowr to do.

What markets are you going to serve?

We think there is going to be a shortage of high quality flower in Canada in both the medicinal and recreational markets.  We’re focusing on meeting the demand there initially.  Flowr has agreements in place with several of the major medicinal suppliers and recently announced an agreement with British Columbia for recreational use there. 

Further down the road, there are lots of opportunities.  First and foremost, aligning with other provinces for retail distribution where Flowr will command a premium price for the premium quality product we will be selling.  Given Canada's national legalization, Canadian growers are able to export to other countries with legal cannabis programs and we are looking at opportunities for Flowr in export.  Eventually, as other form factors become legal to produce in Canada, we’ll look at those products in order to align with and create brands that share our values.  We also see massive opportunities emerging from our R&D partnerships. 

You recently announced a partnership with Scotts Miracle-Gro.  Tell us about that.

Of course.  Scotts Miracle Gro is one of the largest and most respected companies in the agriculture business.  Their Hawthorne division, which owns many of the best in class products for growing cannabis was looking for a partner to build and test new systems with.  After talking to most of the large Canadian LPs, they chose Flowr because of Tom and his team's experience and reputation.

Scotts will fund the construction of a 50,000 sq ft research facility integrated into Flowr’s Kelowna, BC cultivation center that will be designed, built and staffed by Flowr.  They will develop cultivation systems and benefit by being able to test them in real world conditions in our facility.  Flowr will be doing research on plant genetics and applying data analytics to managing cultivation.  We’ll also benefit by using the systems they develop to maintain our competitive advantage in cultivation. 

What’s next for Flowr?

It’s a very exciting time for the company and the industry with recreational use coming in Canada in October and so much other change around the world.  In the midst of all that, we’re working on two things, completing the build out of our facility and completing our go-public transaction.

On the financial side, we’re working to complete a process that will lead to us being listed on the TSX Ventures exchange.  That should be done by September.  On the operating side, we’re completing the build out of Kelowna this year, including the Hawthorne research center.  It’s about 20% operational now but we need to finish it and ramp up through 2019 to a 14,000 kilo per year production rate.

We are excited to be at the forefront of a once in a lifetime opportunity and are excited to deliver tangible benefits to both our customers and investors in 2019 and beyond!

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The Cannabis Private Investment Summit brings together the best and brightest cannabis entrepreneurs and ultra high net worth investors & family offices. It is the premiere summit for institutional investors, family offices, and ultra high net worth investors.  For additional information, please visit www.cannabrunch.net or email us at info@kahnerglobal.com.