The General Mills of the Cannabis Industry: Bhang Corporation

August 29, 2016 by Rob Meagher — Some people are destined to do one thing their whole lives, while others take chances and risks to expand their experiences and try new things. Scott Van Rixel is a mixture of the above. As a certified master chocolatier, he makes great chocolate and candies. For the last five years, however, he has become a master entrepreneur by growing Bhang Corporation into an edibles powerhouse, while diversifying its holdings and interests into premium oil filled vape cartridges and hardware with his business partner.

It started innocently enough when Scott and his brother ran the Chocolate Cartel in Taos, New Mexico. They supplied chocolate to upscale shops like Dean & DeLuca and Whole Foods. They also had a gelato business and noticed that the gelato they were making seemed to take on a different texture at certain times of the year.

They couldn’t figure out why, so Scott searched for a chemist to run some tests and hopefully provide some answers. He came across an expensive, but highly recommended option in California —a guy he called Doc Martin. Robert “Doc” Martin is the founder of CW Analytical Laboratories in Oakland, CA and the founder of the Association of California Cannabis Laboratories. Scott swears that they are, bar none, the best edible testers in the country.

After arranging to barter Doc’s services in exchange for chocolate for his wife (which turned out to be a cheap and fortuitous trade!), he flew up to meet him with gelato samples in hand—and his life changed forever! Doc discovered that the lactose content of the milk Scott and his brother were using in their gelato had a higher sugar content during several months of the year, and the lactose crystals were responsible for the texture change!

The Beginning of Bhang

During that fateful trip, Doc also introduced Scott to his soon to be co-founder, partner and Bhang’s COO, Richard Sellers. At the time, Sellers was General Manager of a large, family owned luxury European auto dealership in the Bay area, but had been an active “closet” player in California’s Medical Marijuana market since the turn of the millennium. Bhang_Cannabis_Wins_Partial_VictoryRichard brought in strong hands-on experience and a network of existing relationships with the Northern Californian growers where he assisted them in gaining dispensary distribution. He eventually became an owner of multiple dispensaries in the state. By the time the two partners were connected, Sellers represented the peanut butter to the confectioner’s (Van Rixel’s) chocolate and the Bhang Corporation we know today was created.

To navigate the legal complexities that the nascent industry presented in California and other rising markets, the partners traded a minority stake of shares to, then attorney, William Waggoner. Multiple strategy meetings resulted in a plan to establish the industry’s first brand based on several key criteria that still represent the heart and soul of the company’s brand identity.

From the beginning, Bhang aligned themselves with relationships that provided access to the growing community, as well as activists, people with access to the infrastructure required to be in the processing business, and those with the financial wherewithal to execute.

Building the Bhang Brand

This was very important to long-term national brand building, especially since the barriers of entry into other states were subject to unique terms like the ownership residency requirement in Colorado. These varying rules led to the licensing model Bhang employs to this day. All licensees are set-up so Bhang Corporation supplies the IP, and Bhang receives a royalty fee for allowing the production of their IP. Carefully crafted terms and conditions are geared towards achieving a consistent, quality experience for consumers regardless of where they purchase Bhang product.

Central to early brand development was creating high quality packaging, which was revolutionary in the early days and initially not easily accepted. In 2010, most edibles packaging was non-existent. Products looked like they came from a grade school baking fair, but soon consumers began equating the packaging with the high quality ingredients and consistent taste and dosing that the Bhang brand represented.

Armed with a Lloyd’s of London Product Liability policy, Bhang pursued California dispensaries to carry their chocolates. Many dispensary owners originally thought the product was a joke and that he must have been a cop since it was so far ahead of any of the products making their way onto their shelves. But persistence paid off. Bhang’s distribution and revenues in California began to grow, and new opportunities were presented to expand the business.

Like most companies in the industry that have a goal of making their brand available to customers in all legal markets, domestic and abroad, Bhang closely monitors the legal status of cannabis worldwide. When new locations become legal and viable, they follow the best practice of already having the framework in place for expanding Bhang’s footprint and introducing new consumers to their high-quality products. Whether in California or New Mexico or Holland or in a new location, the hallmark of Bhang’s brand is that their products deliver a safe, consistent, and premium experience. They will only expand into a new territory if the circumstances will allow Bhang to continue to operate at the high standards they have set for themselves and their licensees.bhang 2

Scott and Richard stressed that Bhang brings a lot to the table for potential licensees: a compelling brand identity, robust distribution knowledge, top tier cannabis industry experience, integrated marketing collateral, and ongoing research and development. They are very proud that Bhang, with their licensee and partners at women-owned Etain LLC, is the only brand currently available in NY state.

Additionally, Bhang invests heavily in their innovative product R&D department. As a market driven company, they invest significant resources in research and developing innovative products to answer consumer demands. An integral part of their expansion plan is that all Bhang products must pass rigorous third-party, lab testing for quality, purity and safety prior to being distributed.

In addition to expanding their footprint in medically approved states, Bhang products (specifically CBD and vape batteries) can be found in the retail distribution outlets in all US states and abroad in Holland, where THC infused edibles are not currently allowed. Vape products can be found in smoke and head shops; and CBD products are currently distributed in licensed dispensaries, wellness, and vitamin or supplement outlets. This established national footprint will surely come in handy as more states legalize and the partners are very attuned to the ballot initiatives taking place in November.

Setbacks
Like most companies in the industry, Bhang has not been immune from experiencing setbacks. These setbacks come as a result of the unique learning curve and challenges that the industry faces, less than ideal partner scenarios and the invisible hand of prohibitionists and over-zealous local law enforcement. At least two strategic decisions have gone sour over the past 2 years.

In March 2014, Mentor Capital reportedly purchased 60 percent of Bhang Chocolate for $39 million. That deal unraveled in June 2014 when Bhang Chocolate Company, Inc. declared Mentor Capital in breach of the agreement and the corresponding legalities were finally settled last month.

This past January, Bhang’s California processing licensee, San Diego-based Medwest Distribution, operated by James Slatic, was raided and shut down by local law enforcement. Fortunately, Bhang was already in the process of moving on. Now that Bhang and Slatic have officially parted ways, Bhang has a new licensee arrangement in California which has successfully met demand without missing a beat.

What’s Next
Like any great consumer products company, Bhang has focused on deepening their connection with their growing user community. They are in the process of launching a new website that will engage current and future cannabis consumers with a multi-sensory experience that shares Bhang’s story. Visitors will be able to become part of the Bhang community, while exploring their expanding product line. They also plan to announce a new joint venture with a celebrity brand soon.

In addition to the joint venture and new website, the company is creating and distributing marketing collateral across multiple areas of consumer engagement. This strategy is designed to solidify the knowledge that Bhang’s commitment and guarantee to using only the finest ingredients and state-of-the art delivery tools will deliver a premium cannabis experience. They believe that with this approach and their singular goal of consistently delivering a premium cannabis experience, Bhang will continue to be one of the most recognized, awarded, and distributed cannabis brands in the world.

After six years in the business, Scott Van Rixel and Richard Sellers have built one of the most valuable brands in the Cannabis Industry and are poised to continue expanding worldwide. Scott told me that Bhang Corporation was becoming a General Mills on the back end with lots of highly recognized brands.

We can’t wait to see what’s in (the) store next!

Company Name: Bhang Corporation

Year Founded: 2010

Ownership structure/operating entities: Corporation

Management Team: Scott Van Rixel CEO, Richard Sellers, COO

Headquarters: Oakland, CA

Website: www.gotbhang.com

Industry Segment/Category: Processor and Ancillary Business with an extensive Line of Branded Cannabis Products – see attached page.

Current Markets/States Served: AZ, CA, CO, FL, IL, MI, NM, NV, NY, WA, Canada, Holland, Spain, Uruguay, Puerto Rico

Current Number of employees: 175+

Market Strategy/Goal: Since its inception, Bhang has raised the bar for the cannabis industry by producing top-quality, professionally-packaged cannabis products. Their dedication to safety which includes all products being extensively lab tested, providing patients with nutrition information fact panels, and being the first company in the industry to provide product liability insurance listing cannabis as an ingredient makes them unique.

They connect with their ever growing customer base by consistently delivering premium cannabis experience whether you buy Bhang products in California, Nevada, Colorado, Canada, or Uruguay.

2015 Revenues: NA

2016 Projected Revenues: NA

Expansion Plans: With arguably the largest footprint of any cannabis provider in the world, Bhang will continue to move into markets as their products become legal worldwide.

A key piece of their expansion model’s success to date is a dedicated and innovative product R&D department. Like McDonald’s Corporation, they invest significant resources in market research and developing innovative products to answer consumer demands.

Financing strategy: To date, from operations and minimal seed capital with no shortage of interested investors Bhang is open to exploring all the options; however, our strategy is to be deliberate and cautious when considering new financial opportunities and relationships

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