Management Perspective: Sproutly to Try and Dominate Cannabis Beverages Market with New Technology

Sproutly Canada [stock_market_widget type="inline" template="generic" color="default" assets="SPR" markup="(CNSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] Inc. has revealed its plans to become the global leader in the emerging cannabis beverage industry.

The Vancouver-based firm has developed the world’s first water-soluble cannabis solution that can be formulated into drinks without altering the marijuana compounds.

Competitors use butane or CO2 to extract the compound from the plant, altering the cannabinoids, and in doing so destroys the strain-specific benefit. But Sproutly uses the patent-pending Aqueous Phytorecovery Process, from Infusion Biosciences, which is said to retain the true compounds of the cannabis strain.

Sproutly uses this technology to produce a proprietary cannabis solution called Infuz2O. It then makes energy drinks, relaxation drinks and sleep and anxiety relief drinks to tap into the growing trend for cannabis beverages. The APP technology allows Sproutly to manage the precise amount and potency consumers ingest in its drinks.

It also creates a second product called Bio-Natural CBD oil, which can be turned into capsules, edibles, and topicals.

Capital10x caught up with Sproutly’s chief executive, Keith Dolo, to find out more about its plans to expand into international markets and his messages to investors about why they should give his firm serious consideration.

“We have global ambitions to provide the best available infusion products that allow existing brands, as well as our own, to create the very best cannabis-infused beverages or edibles,” he said. “We are looking to partner with multinational companies that can help us launch our products on a global scale.”

A Healthy Future

Dolo believes that the oils, emulsifiers, and encapsulation technology currently being produced will lose out to more innovative products in the next decade. Drinks and edibles that adhere to a true strain profile and have the ability to limit the number of additional chemicals being used in their formulations are the ones to back, according to Dolo.

He began his career as an associate at PwC and then served as vice president at global HR consulting firm Robert Half before becoming chief executive of Sproutly in April 2017. The firm went public in July 2018 and he has since set about expanding its footprint across Canada and further.

It has acquired the exclusive rights to Infusion Biosciences’ APP technology in certain jurisdictions, and it recently completed the first two harvests at its cultivation facility in Toronto, Ontario.

The APP technology is impressive and innovative, but how well guarded is the firm against copycat brands? “There are many smart individuals working within the cannabis space, so I can’t say down the road somebody won’t create a similar technology to us, because there are hundreds, if not thousands of scientists working within the cannabis industry on a daily basis,” said Dolo. “What I can say is we are vigorously protecting our intellectual property. Infusion Biosciences has done it’s best to protect the technology.”

Dolo anticipates that THC and CBD will be added to a huge range of products in the years ahead, as companies bid to revitalize dying categories. “They will also be working on new product categories that involve CBD and THC, both from cannabis or hemp,” he said.

He expects to see more research being done in the next 10 to 15 years and he believes the results are likely to drive consumer trends. But he sees a healthy future for cannabis beverages and Sproutly is ramping up production as it anticipates increased demand for its products.

Message to Investors

In January, Sproutly announced Q3 results for the three months to Nov. 30, 2018. It reported a net loss of C$2.8 million, or $0.02 per diluted share, and it also delivered a net loss of $9.5 million for the nine months to Nov. 30.

Sproutly noted that it has not yet generated any revenues since inception, and the company’s operations have thus far been funded through financing activities. It completed a $20.7 million bought financing deal during the quarter, “which strengthened our balance sheet and provides us the ability to accelerate our objectives for fiscal 2020”.

It has also signed a letter of intent with Global Canna Labs, the Caribbean’s largest medical cannabis producer, for the firm to develop, produce, and market edibles and topicals using Sproutly’s licensed APP technology.

The firm’s share price stood at C$0.40 on Tuesday, March 11, and it has been fairly stable throughout 2019 so far.

“The cannabis beverage market has an opportunity to launch into a multitude of industries,” said Dolo. “Don’t think of it as just a cannabis hemp water. Think of everything from sports nutritional drinks to functional beverages to replacements for alcohol and replacements for simple things like tea or coffee in the morning.

“The global beverage market is a massive $50 billion industry. If we only carve out a small percentage of that market within the beverage space, it [still] represents a huge upswing in our business model for the next 10 to 15 years as we continue to expand into the CBD and THC beverage arena.

“As for investors who are looking at us, we are leading this industry with a truly water-soluble cannabis solution that is starting to attract the attention.

“There are many products out there currently that hold a small place within the industry. There are some gaining more momentum from a mainstream perspective, but I think we’ve yet to see a true mainstream beverage adopted by a multinational or large enough corporation to really push it on a global scale and that’s where Sproutly will come in with our best in class cannabis solution.

“We are literally evolving our company to go after this market and we will make a name for ourselves.”

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Martin Green
Martin Green is an experienced journalist with a strong focus on the cannabis, alcohol, and gambling industries. He is particularly interested in the political issues affecting the global marijuana trade, and he has a keen focus on regulation changes and legal topics. He holds a BA English Literature, MA Creative Writing and a National Qualification in Journalism diploma. He has worked in journalism since 2009 and written for a broad range of newspapers, business titles and magazines, including The Sun, The Metro, The Journal, Livestrong, Drinks Retailing News, Harpers, Sportsbook Review, Vital Football, Essex Live and Surrey Live. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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