Cannabis CPG company Plus Products (CSE: PLUS) (OTC: PLPRF) focuses exclusively on edibles. The company started in California four years ago, and now it is expanding into more markets. Co-Founder and CEO Jake Heimark spoke with New Cannabis Ventures about the company’s plans in Nevada, a new partnership with John Legend and a recently launched $1 million marketing campaign. The audio of the entire conversation is available at the end of this written summary.
Heimark has a background in technology–before launching Plus Products he worked at Facebook and payment startup Gumroad. He first entered the cannabis sector with a finance focus, but quickly realized consumers were looking for alternatives to smoking. His uncle was the CEO of a large contract manufacturing plant, and Heimark knew what food manufacturing was supposed to look like. That process had not yet come to cannabis.
Heimark met his fellow co-founder Justin “Crunchy” Gwin, a chef with professional experience at Michelin-starred restaurants, in Denver and moved to California to start Plus Products.
It is important for a CPG company in cannabis to build a team with relevant experience in consumer goods, according to Heimark. Plus Products’ Chief Revenue Officer, Marc Seguin, was previously the President and CMO of snack brand Popchips. The company’s recently added Chief Scientific Officer, Dr. Ari Mackler, previously worked at The Wonderful Company and Merck & Co. CFO Jon Paul has experience at public and private companies and knows how to deploy capital effectively, according to Heimark.
The California Market
“At Plus, we believe that the strongest brands in the world are actually going to emerge here in California,” said Heimark. The company has focused on establishing its footprint in this competitive state. Plus Products has a 1,100-square-foot manufacturing facility in the southern part of the state. The company has products in 360 of the roughly 500 dispensaries in the state.
Plus has launched its products into the Nevada market with a very conscious focus on maintaining its brand quality and consistency. Heimark’s family history in food manufacturing has helped guide the company’s development of standard operating procedures and personnel training. Plus is also partnered with TapRoot, which has helped the company cross-train its employees and use the same equipment to manufacture its products.
Three months ago, the company was focused mainly on organic growth, but now the company is looking at the possibility of acquisitions, according to Heimark. Plus has a healthy balance sheet with no need for financing in the fourth quarter of this year, while many other companies in the space are experiencing a cash crunch. Plus would be remiss not to consider the possibilities, according to Heimark.
Branding and Products
The Plus brand is built on consistency, precise dosing, and high-quality food manufacturing. The company has focused on edibles, electing to avoid vapes and flower products. That narrow focus has helped the company cement its leadership position in the edibles space, according to Heimark.
The company uses data from BDS Analytics and Headset to gain insight into market trends, and Heimark is seeing a move away from smokable products. Whether due to the recent news on the vaping crisis or a larger movement away from smoking, Heimark expects other forms of ingestion, such as edibles, to benefit.
While much of the cannabis industry is excited about beverages, Heimark has a different opinion. Thus far, cannabis beverages launched in California, a testing ground for new products, have not had much success, he pointed out. If the nutraceutical industry is any indication, beverages may not emerge as a highly popular form of consumption. Many consumers opt to consume things like vitamin C or melatonin in gummy, pill, or tincture form rather than beverage form, according to Heimark. Until on-site consumption becomes a larger part of the market, he does not anticipate beverages becoming a significant category.
The CBD Opportunity
Plus Products has just launched a new, national brand of CBD edibles. This move will, in part, serve as a stepping stone to establishing the Plus brand before THC becomes federally legal. The company has partnered with musician John Legend and direct-to-consumer mattress brand Casper to launch its new product line. The company will have a recognizable and trusted source–John Legend–to explain the product. Casper, a well-known sleep brand, will help the company create the narrative around its CBD and melatonin product.
Plus is backing the launch of its CBD products with a $1 million marketing campaign. The campaign focuses on the company’s branded gummies: Uplift, Balance, and Sleep. The market initiative is designed to position the company as a trusted source that delivers on experience. Heimark hopes the campaign will play a role in separating the company from its competitors over the coming quarters.
Funding and Important Investors
Plus Products was founded with investments from friends and family. Over time, the company went through a series of financing rounds with smaller, private investment groups. Before going public a little over a year ago, the company gained support from some institutional funds, including Navy Capital and Gotham Green. Tiger Global is the company’s largest investor.
In today’s market, Heimark believes it is important to have a strong investor base with not only retail investors, but institutional and strategic investors as well. A strong investor base will keep a company financed and help create strategic connections that will strengthen the company.
CPG Company Growth
Plus reported $3.6 million in second-quarter revenue. The company does not provide guidance, but Heimark expects brands like Plus to begin gaining more power in terms of the final retail dollar. When it comes to tracking the growth and success of CPG companies like Plus, Heimark recommends looking at market share and SKU velocity (how many of a given SKU are flying off of the shelves).
The current public market environment represents both a challenge and an opportunity, according to Heimark. He sees the current climate as an opportunity for successful operators to differentiate themselves, and he is confident Plus will be able to do that.
New Cannabis Ventures provides an Investor Dashboard for Plus Products, which is a client of New Cannabis Ventures. Listen to the entire interview: