Denver, Colorado-based Dixie Brands Inc. is the latest U.S. cannabis company set to go public on the Canadian Securities Exchange, with its initial public offering scheduled for today amid plans to expand production and sales to Canada as well as several other states. The edible cannabis producer, which operates in Colorado, California, Nevada, and Maryland will trade in U.S. dollars under the ticker symbol DIXI:U with a pre-money valuation at US$105-million.
Dixie sells THC-infused drinks, confections, concentrates, tinctures and topicals, which are expected to become legal in Canada in October, 2019. Dixie, which recently completed a reverse takeover of Academy Explorations Ltd, has a license agreement in Canada with Auxly Cannabis Group Inc., which owns licensed dealer Dosecann Inc. in Charlottetown, PEI, where Dixie’s products will be manufactured. The U.S. company has also established distribution and manufacturing partners in Australia.
Below is a Q&A with Chuck Smith, CEO of Dixie Brands:
Cannabis Professional: Why is Dixie Brand trading in U.S. dollars on the CSE?
Chuck Smith: We raised our last round in U.S. currency, so everyone who invested in it invested in that currency rate and we wanted to keep it all the same. We did a non-brokered prelisting which we closed on Oct 1. It was oversubscribed and we ended up increasing the amount raised at US$25-million on US$80-million pre-valuation, so the company valuation is US$105-million for its pre-listing.
Cannabis Professional: What are your expansion plans for Canada? Mr. Smith: We have a partnership agreement with Auxly (Cannabis Group Inc). Through their licensed facility on Prince Edward Island, we are starting to develop the infrastructure and process to start bringing Dixie’s portfolio to Canada. Health Canada hasn’t set the regulations for infused products yet. We’re working with the team up there on products. Everybody’s excited about drinks in Canada and we’ve been doing drinks for nine years.
Cannabis Professional: What are your market share goals in Canada?
Mr. Smith: It’s too early to tell. We don’t really understand how many and what type of products will be allowed. Once we do, we’ll be able to better forecast our market share.
Cannabis Professional: When do you expect to be making products in Canada?
Mr. Smith: We all expect (cannabis edibles will become legal) in the fall (of 2019). But we can’t wait until Oct. 1 to start making them. The government’s going to have to give indication about what products are going to be allowed, I’ve got to think in the next four or five months. Once we know the regulatory requirements, we’ll be quick to market once they’re approved.
Cannabis Professional: Why are you expanding in Canada when the populations in states where cannabis is legal are larger and more states are seeing cannabis legalized?
Mr. Smith: The difference between Canada and the U.S. still is that Canada has made cannabis legal. It’s still federally illegal in the States so it’s very difficult now to scale in the U.S. We’re very excited about Canada because it is the first to set that platform of legalization at the recreational level. At some point in the future, we expect the U.S. will follow suit and we’ll already have a pretty good competitive advantage when the U.S. is a legal country (for cannabis).
Cannabis Professional: Do you plan to continue expanding in the United States as well?
Mr. Smith: In 2019, we have expansion plans to open four to six additional markets in the U.S. We’ll be making announcements here in the next month.
Cannabis Professional: What are Dixie’s top selling products?
Mr. Smith: We did start the company nine years ago with the main product being our drink portfolio. That continues to be a strong part of our portfolio. Drinks are a very good platform but there are also other platforms that are very approachable for the consumer. We want (customers) to have something very approachable that can be discreet. Our mint products are a strong selling product in our portfolio, as well as our soft confection, or gummy products.
Cannabis Professional: What are your production expectations in Canada?
Mr. Smith: Cannabis sales in Canada are expected to exceed $8-billion in 2019. Edible products here in the U.S., if we can use that as a benchmark, make up over 50 per cent of the market right now. We’re going to get our fair share of it.
Cannabis Professional: What challenges do you see for Dixie in Canada?
Mr. Smith: I don’t know what we’re going to be able to make and sell yet. I’m not too worried because we have such a broad portfolio of products. The sooner we know, the better we can be prepared to ensure we have inventory for consumers. There’s nothing worse than starting to sell to people then not having enough available supply. We really need enough lead time to build inventory and service the market.
Cannabis Professional: Are you concerned Canada’s current cannabis supply shortage could hinder your production plans in 2019?
Mr. Smith: We went through this in Colorado. I see that normalizing in Canada over the next three to six months. I’m hoping as the supply of raw plant material increases, that some of that will be turned into oil and stockpiled, so as we begin to build our inventory, we’ll have a sufficient amount of oil to use. That’s yet to be seen.
Cannabis Professional: Tell us about your licensing agreement and manufacturing plans with Auxly in Canada.
Mr. Smith: That allows us to bring our intellectual property to Auxly to use in conjunction with us to really build the product. They’re going to use Dosecann as their producing facility (in PEI), then will look at the best avenues for distribution.
Cannabis Professional: How is Dixie affected by the stigma of cannabis?
Mr. Smith: Every day that stigma is less and less. This is evolving from the reefer madness days of just smoking a joint to where we have this broad portfolio of products. The fastest demographic for this is adults 55 years and older. They’re looking for products that help them with their wellness approach.