Kevin Bottomley:
Executive Summary
Overview
True Leaf Medicine International Ltd., is a Canadian medical marijuana company carving a niche in the fast growing and dynamic $60 billion pet industry.1
True Leaf Pet will enter the natural pet product sector with a product line consisting of innovative hemp-‐based functional pet chews, followed by CBD supplements for pets in the USA market. This will lay a profitable foundation for the company’s long-‐term strategy to secure a new animal drug application for a cannabis-‐based pet medication sold via veterinary prescription in the $13.8 billion pet medication market.
TheProblem
Statistics show that consumers are looking for higher quality products that address health needs common to their pets, without having to worry about food safety or harmful side effects. Products containing hemp, including hemp seed oil, hemp protein and cannabidiol (CBD), are gaining significant acceptance as evidence of their nutritional and medicinal effectiveness becomes recognized. The vast majority of the companies in this market space lack mass appeal or scalability; they offer weak product platforms and often focus on the recreational marijuana consumer.
TheTrueleaf™Solution
True Leaf is well-‐positioned to meet the consumer demand for innovative pet health by marketing hemp-‐focused natural products that are professionally designed, scalable and legal for sale in the USA and Canada. The company’s initial product line-‐up will provide hemp-‐based antioxidant, joint and calming support in a soft-‐chew format that will be sold in the USA and Canada. This will be followed by an innovative product line utilizing cannabidiol (CBD) derived from hemp as the active ingredient for anti-‐inflammatory and anti-‐anxiety supplements to be sold in USA market only.
TheMarket
The USA pet industry has tripled in size since 1996 from annual revenues of $21 billion to over $60 billion today.2 This dramatic rise can be linked to three significant paradigm shifts:
•§The personification of pets as they become members of our family
•§The increasing focus on product ‘premiumization’, wellness and quality of life in our society
•§Rising awareness of food safety and security concerns related to continuing pet food recalls
True Leaf Pet’s initial hemp-‐based soft chews will enter the $3.2 billion natural pet product market and compete in the ‘functional chew’ category. This market segment continues to grow as sophisticated ‘treat’ formulas provide functional health benefits and attract supplement consumers.3 True Leaf’s CBD supplement will be sold online and offered as an anti-‐inflammatory and anti-‐anxiety supplement, capturing consumers from the supplement and pet medication market who are seeking more natural -‐ yet effective -‐ alternatives. These two products lay the foundation for the company’s 5 year goal; to receive FDA approval for a cannabis-‐based pet medication that will be sold by veterinary prescription in the $13.8 billion pet medication market.
1
http://www.americanpetproducts.org/press_industrytrends.asp 2 2014 APPA
3
http://www.packagedfacts.com/...upplements-‐Nutraceutical-‐7259313/ Competitors
Several companies have similar offerings to True Leaf, but none have combined the functional benefits of hemp or CBD into an all-‐in-‐one product offering with professional packaging and a soft chew format.
Popular functional chew products include: Zuke's® ‘Hip-‐Action’ Hip and Joint Chews, Pet Naturals® ‘Calming’ Soft Moist Chews, Cloud Star® ‘Dynamo Dog’ Hip and Joint Treats, Blue Buffalo® ‘Jolly Joints’ Jerky Treats.
CBD supplement products: There are three companies who are currently operating in this category. They are offering products in capsule and baked biscuit formats; Canna-‐Pet™ ‘Canna-‐Biscuits’ and ‘MaxCBD’ capsules, Canna-‐Companion™ Hemp CBD capsules and Treatibles™ baked CBD dog biscuits.
RevenueModel
All products will be made in the USA utilizing large-‐scale co-‐manufacturing companies featuring multiple plants and the ability to scale production to meet the market demand. The company has secured Canadian hemp seed for True Leaf’s pet chews and is currently reviewing USA and European CBD suppliers. The chew formulations will be professionally designed with research-‐backed, standardized botanical ingredients and will comply with current pet supplement marketing guidelines. The company will launch the CBD supplement range when a standardized supply is secured and the dosage levels are validated through pilot trials and/or research findings. The company plans to launch the initial hemp chew range in the fall of 2015 and will utilize a central USA distribution center to supply all of North America.
TheManagementTeam
The company is led by an exceptional management and director team, all of whom have a proven history of execution and leadership in business. True Leaf Chairman Michael Harcourt is a former Premier of British Columbia: CEO Darcy Bomford has three decades of experience in executive management and a 25 year history of manufacturing and marketing pet products throughout the USA and Canada. The remaining team has pet industry experience in finance, manufacturing and retail distribution. In addition, the marketing team brings vast knowledge and experience in branding, ecommerce and social media.
FinancialPerformance
This well-‐positioned company is predicted to achieve a $100 million valuation over the next 5 years, based on projected gross revenues of $32.8 million and a target share price of $1.21. The company expects to achieve 60% gross margins on its pet product range and over 70% on future medicinal marijuana sales from True Leaf’s co-‐division, True Leaf Medicine. Given these assumptions, capital market performance, a ‘3x sales’ multiple and a premium for being an early entrant into a new highly profitable industry -‐the company strongly forecasts that this valuation is achievable.
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