As cannabis concentrates and extracts continue to rise in popularity, few companies are better positioned to capitalize on this market than Valens GroWorks.
As we reach the end of Edibles, Extracts and Concentrates month here at The Green Fund, we wanted to reach out to some of the experts in this space.
If you've had your eye on the industry at all, you'll know that one of the undisputed experts in cannabis extraction is Valens GroWorks.
Based in Kelowna, British Colombia, Valens GroWorks (TSXV: VGW) (OTC: VGWCF) is the largest third-party extraction company in Canada and boasts a titanic annual capacity of 425,000 kg of dried cannabis and hemp biomass.
The extraction powerhouse has already entered into several agreements with key cannabis players like Organigram, Tilray, TGOD, Hexo, Canopy Growth, as well as a research agreement with Thermo Fisher Scientific. This past quarter alone, Valens' revenue increased to $8.8 million, which represents an enormous 296% increase over the first quarter of 2019.
We believe Valens has been making all the right moves in the cannabis extraction space, which happens to be the fastest-growing sector on the planet. As a result, we even listed Valens as one of our top picks in cannabis stocks this year.
To learn more about why Valens is so successful, we spoke with Executive VP of Strategy and Investments, Everett Knight.
While Valens has shown strong growth recently, Knight predicts that this is "just the beginning" for the company, as Canada approaches legalization 2.0, which is set to take place on October 17, 2019. The new phase of legalization will see cannabis edibles, extracts and concentrates become legal for sale in Canada, including all form factors of cannabis concentrates, such as vape pens and cartridges, extracts (wax, shatter and oils, etc) as well as chocolates, beverages, and other edibles.
"The future is bright. It's just the beginning for Valens, even in Canada, as most oil-based products are just being added as offerings to the legal market this fall/winter," Knight said.
"From an operations standpoint, we have been very much a processor to date with the majority of our revenue deriving from toll processing services."
And they're only getting bigger, as they've also confirmed that construction has commenced on their recently acquired facility in Kelowna, British Columbia. Once operational, the new facility will increase their input capacity to 1,000,000 kg per annum by 2020.
"With our new expansion here in Kelowna, we will be able to not only process and formulate but develop a plethora of products for our clients ultimately making us a one-stop collaborator to get their products to market."
"We are very excited to build out our product development/white labeling capabilities in order to service both Canadian consumers and global consumers in the near future," Knight said.
With proprietary services including CO2, ethanol, hydrocarbon, solvent-less and terpene extraction, analytical testing, formulation and white-label product development, Valens is a likely pick for any company looking to enter the edibles or extracts space.
On top of this, Valens also uses centrifugal partition chromatography—to separate compounds—and emulsion technology (for water solubility and homogeneity in edibles and beverages) to further develop for end-user products.
This versatility will serve Valens well, with edibles continuing to take an increasingly larger bite out of the total cannabis market.
"Edibles proved to be the most sought-after products that will launch this fall with over 58% of surveyors saying they will, or definitely will, try edibles. We see a great market here in Canada," stated Knight.
This is partially the result of rising global health concerns surrounding smoking, which are prompting individuals to seek smoke-free avenues for consuming cannabis. Luckily, cannabis-infused food and beverages tick all the boxes.
This also compounded by the growing evidence regarding the health benefits to THC and CBD, which has further promoted the consumption of these products.
When it comes to cannabis beverages, we're already seeing giant players vying for the top spot in Canada. The most notable entry into the cannabis beverage space was Constellation Brands, producer of Corona beer, who invested $5 billion into Canadian weed giant Canopy Growth, giving Constellation a 38% stake in the company with plans to introduce a line of infused drinks and other products.
Quebec company Hexo Corp—through their partnership with Molson Coors—recently launched a cannabis beverage company called Truss, while BC-based licensed producer Tilray has partnered with Anheuser-Busch InBev SA to research THC and CBD drinks in Canada, with both companies investing $50 million in the venture.
And let's not forget, Valens is in partnership with all of these giants.
Though it isn't exactly full-steam-ahead for edibles globally, as certain states in the U.S. are banning cannabis-infused foods and beverages. The bans are the result of misleading advertising when it comes to CBD products, with some store owners claiming that their products can cure cancer and Alzheimers.
According to Knight this is something on the back of Valens' mind, as the company believes that, "when it comes to edibles, they need to be done right."
"There is so much variability with the way humans ingest due to homeostasis, bioavailability, tolerance and more, and this sensitivity is heightened when we add psychoactive compounds like THC. We must tread lightly. A lot of research and development needs to go into these types of ingestible products to ensure that consumers are effectively and consistently consuming a stable product."
"Beyond this, the other side is education to consumers. Making them extremely aware of the variability of ingesting cannabis, understanding that going low and slow is better, knowing that it can take up to 2 hours to kick in so they don't consume another before feeling it's full effects," he said.
On the point of knowing what's in your product, Valens isn't slacking. A subset of the company is Valens Labs, which entered into a partnership last year with Thermo Fisher Scientific to develop a "Centre of Excellence in Plant-Based Science" in Kelowna, BC.
The partnership will allow Valens to utilize Thermo Fisher's instruments to improve the analysis and testing of their products.
"At Valens, we believe you cannot have a well-oiled (excuse the pun) extraction company without a reputable analytical testing lab."
"By having both, this allows us to streamline the process for us and our clients by having a lab at our fingertips pre-processing and post-processing," Knight said.
"In most cannabis-friendly countries, cannabis testing methodologies are not standardized which creates variability."
– Executive VP of Strategy and Investments, Everett Knight
Thanks to this in-depth analysis, Valens is able to provide their high profile clients with the confidence that their product is reliable and consistent.
This specificity when it comes to product quality will prove crucial for Valens in the face of the upcoming arrival of legalization 2.0 for a number of reasons.
In fact, Knight claims that Canada's regulations on the planned edible legalization will help to minimize companies making further outlandish claims in future.
"In Canada, there are strict regulations in place as to how much you can dose as well as what you can say it does," he said.
"Without being able to legally market any health claims and create false expectations and by only allowing small doses, we believe this sets consumers up well to ease into this market segment."
Secondly, as we've seen with terpenes, there are more compounds within the cannabis plant than just THC and CBD, and there are likely more to come. When people want the latest cannabis compound in an isolated form, it seems likely that they'll turn to Valens.
"As we learn more about what compounds are responsible for specific results, it will be increasingly more valuable to be able to isolate specific compounds to formulate for targeted products."
"Additionally, homogeneity and dosing are also extremely important, thus requiring expertise on the formulation side to ensure effective products," Knight said.
With great strides and partnerships made throughout 2018-19, Valens has continued to dominate the extracts space. And in the face of Canada's legalization 2.0, it's looking like Valens will be well positioned to capitalise on the upcoming market boom.
Anyone with their finger on the pulse will want to keep a watchful eye on this company as we predict big things to come.