Weed company house cleaning: Bonify loses its LP license but grownups are emerging

“We couldn’t be happier to let registered patients know that they can now buy direct from Bonify, a company that truly puts its customers at the core of everything we do,” said company CEO and President Dalbir Bains, back in June 2018, when the company got its Health Canada cannabis sales license.

“With the Canadian cannabis industry becoming an increasingly competitive space and with customers’ product preferences evolving, delivering an elevated customer and product experience is a critical success factor. Our unrivalled commitment to rolling out a differentiated sales strategy will allow us to generate significant revenues in this rapidly growing market.”

What a load of horse shit.

Turns out, despite being in one of the most regulated industries in Canada, with cameras focused on every square foot, with compliance documentation and employee tracking and a hell of a lot to lose, the morons running Bonify were meeting consumer demand by bringing in illicit weed from illegal sources, threatening employees not to talk about it., and then sending their shitty third party product out as medicine.

Small problem with that: The ditchweed they brought in, and sent to provincial distributors for re-sale, was covered in mold, bacteria, yeast, and according to reports… E.coli. That triggered red flags during testing, which brought in Health Canada, who duly found the weed in question was not pristine product from the sparkling and expensive Canadian medical system, but dogshit-covered valley skank delivered in trash bags.

Bonify ditched its top execs in response and brought in Ravenquest to attempt to make the save, through new management and a legit operations plan. Which was a fair first step.

RavenQuest is currently engaged in ongoing communications with Health Canada on behalf of Bonify and can report that Bonify will retain its Health Canada licenses as a result of taking the immediate and decisive corrective action as described.

— Bonify (@BonifyCanada) December 27, 2018

It appears that wasn’t enough to make the save.

CBC reports:

Health Canada has suspended the sales licence of Winnipeg-based cannabis producer Bonify.

The federal agency barred Bonify Medical Cannabis from selling cannabis on Monday due to safety and public health concerns.

“The department found that Bonify Medical Cannabis was possessing, distributing and selling product that was purchased from an illegal source, and selling product that did not comply with the good production practices as required under the Cannabis Act and cannabis regulations,” Health Canada spokesperson Eric Morrissette said in a statement.

The case has been forwarded on to the RCMP and Canada Revenue Agency, said Morrissette.

Bonify joins Mettrum, which was allegedly hiding pesticide in the ceiling panels before its recall several years ago and Canopy-acquisition exit, ‘Arsenault-era’ Organigram (OGI.V), which still faces class action lawsuits for it’s mystery pesticide episode in 2017, Ascent Industries (ASNT.C) which I’m told was attempting to transition away from the grey market under a Health Canada approved timeline when Health Canada pulled the plug unexpectedly, and Hexo (HEXO.T), which managed to kick out a few recalls over the years before it got its shit together, in the Canadian LP Hall of Shame. Aphria (APHA.T), Namaste (N.C) and MedMen (MMEN.C) are fighting for their own places on that list of late.

But this Bonify case tops the others. Faced with a product shortage that the entire industry is dealing with, Bonify took the shortest of short cuts and used the same method in getting their weed that most consumers do: They figuratively ‘found a guy behind the dumpster out back of the pub who knew a guy who could get them some maybe.’

In this case, the guy in question had access to 200 kilograms of weed, which would indicate we’re not dealing with a college student who has lined the inside of his closet with foil and desk lamps, but someone a bit more organized… Some might even call it ‘organized crime.’

Recently, an exec at a large LP told me that they’re sending back around HALF of what is being sold to them as third party supply from licensed producers because it’s “unusable.” This points to a lot more companies getting desperate going forward, and lot of reputational damage being done with consumers, and an industry still, sadly, infested with amateurs.

All of which makes an even stronger case for grown ups to be respected by weed investors and blessed with your dollars.

Rubicon Organics (ROMJ.C) just got their production license and, in the wait for it, managed to not overhype their game and instead just work on delivering on their promise. They got through the recent downturn relatively unbattered, and now sit – suddenly – as the nation’s largest organic grower by square footage. Grown ups.

Supreme Cannabis (FIRE.V) just graduated to the big board, and continue to dominate consumer reviews for their product, while expanding their grow facility rationally and reasonably as demand requires. Grown ups.

Plus Products (PLUS.C) was again announced as California’s #1 edibles brand and is FLYING up in value. Grown ups.

Heritage Cannabis (CANN.C) keeps adding firepower to its board and building out its facility with a minimum of jiggeryfuckery behind the scenes and the stock is starting to rock. Grown ups.

Origin House (OH.C) and Fincanna (CALI.C) continue to finance US weed plays with royalty deals and asset purchases and partnerships that build what they have into something substantial. Grown ups.

Ianthus (IAN.C) has completed its acquisition of MPX, which gives it “operations in 11 states that will permit iAnthus to operate 63 retail locations and 15 cultivation/processing facilities.” Grown the fuck ups.

There doesn’t need to be crazy hype and rushed results to make money in the cannabis world. Indeed, though many have used that path to propel themselves to big valuations that are increasingly tough to justify, the slow builders are starting to take over.

Over on the east coast, Biome Grow (BIO.C) is taking a different path than many in the Canadian weed space. Rather than signing generic and non-committal supply agreements with provincial distributors, Biome is taking purchase orders from the NSLC, committing to supply them for the long run, and receiving prime store positioning as a local product for their efforts.

Many companies agreed to supply the provinces with product but realistically only send what they need to, preferring instead to keep their SKUs for their own online customers, at least while supplies are low.

Biome is going the other way, determined to use their local provincial bodies to earn favour with consumers in the only way permissible to realistically differentiate themselves from the rest: By being the local option.

That admittedly means they’ll receive less for their product at a wholesale price than some premiums received by big LPs for internal online sales, but the thinking there is, eventually cannabis will be plentiful, and commoditized, and when that happens, Biome will have their agreed upon supply deals in hand, while others will be cutting prices to try to push in.

That’s a true long range plan, and I think it’s a solid one, especially at the current $79 million market cap of the company.

— Chris Parry

FULL DISCLOSURE: Equity Guru marketing clients mentioned in this piece include: Biome Grow, ianthus, Heritage Cannabis, Supreme Cannabis, Rubicon Organics, and Plus Products. Ascent Industries is also a client, but remains under a program hold while it undergoes strategic alternative discussions.