Over the years we have seen an ever-growing trend as it relates to organically derived products. From consumer-packaged goods, to foods, to fertilizers, this trend has accelerated greatly over the past decade and has become a major theme across mature and emerging sectors alike. Organically derived products have not only given the consumer a greater peace of mind when making purchasing decisions but have also created cleaner and more efficient input products for manufacturers.
A vertical that is ripe for innovation as it relates to input products is agriculture. For years now companies have been using synthetic pesticides to mitigate pests and crop loss and the use of these methods has been controversial. The lawsuits that Bayer is currently settling in connection with claims centered around its Round Up pesticide causing cancer are a perfect example. We expect to see a major shift in the coming years as more effective organic pest mitigation methods come to market to eventually do away with their synthetic predecessors.
Earlier this year, we started to follow MustGrow Biologics Corp. (CSE: MGRO) (OTC: MGROF) which is focused on providing nature science-based biological solutions to replace synthetic chemicals that are used to grow high-value crops like fruits, vegetables and cannabis. We conducted due diligence on the business and believe that MustGrow has an attractive risk-reward profile and represents an attractive play on the organic vertical of the agricultural sector.
Working to Disrupt a $65 Billion Market
The trend toward organic products is one of the most significant consumer shifts of the last century and we expect this trend to become more prevalent on a year-over-year basis. MustGrow owns patented mustard-derived technology that provides it with a significant opportunity to capitalize on the natural bio-pesticide market.
Through this technology, the company has the potential to disrupt the global agricultural pesticide market which is estimated to be a $65 billion market. When compared to synthetic products, MustGrow has an efficacious product at controlling soil borne pests and disease and we find this to be an important differentiator for the business.
During the last few years, we have seen an increase in the pesticide products that are being banned by countries across the globe as well as an increase in the number of lawsuits related to these products. Although MustGrow’s products do not contain harsh chemicals to kill pests that may be affecting the plants, the proprietary solution has proved to be just as effective as synthetic chemicals and more than 100 independent studies have provided data to support this claim.
Canada’s cannabis market represents an attractive opportunity for MustGrow due to its highly regulated nature. Regulations do not allow for the use of chemical pesticides and this makes it a target market for the business. The company’s mustard-derived bio-pesticide has the potential to treat the soil before it brought into the greenhouse and we find this to be significant. Due to the climate in Canada, powdery mildew has become a problem for cannabis producers. MustGrow’s CannaPM product can treat this issue and we expect to see strong demand for it.
One of the reasons that we are excited about MustGrow is related to the capital structure. Along with a company’s management team, the capital structure is one of the most important aspects of the story and we are favorable on the tight capital structure associated with the opportunity. Another important aspect when it comes to the capital structure is related to who owns the company. Management and advisors own approx. 2/3 of the float and approx. 1/3 of the total shares outstanding.
Issues an Important Update on its Product Pipeline
Last month, MustGrow provided more insight into the business and provided an update on its biologic crop protection product pipeline as well as associated work schedule. The update included an in-depth look at the intellectual property that is owned by the business and we are favorable on this aspect of the operation. MustGrow’s intellectual property suite is a platform for several crop protection categories that aim to disrupt global agriculture markets that have historically been dominated by chemistry-based products.
One of the reasons we are excited about this is related to the size of the total addressable market associated with these crop protection categories. MustGrow’s existing patent portfolio protects production, method-of-use and the composition-of-matter claims for its signature mustard-derived approach to controlling unwanted pests and diseases. Due to the size of these markets and the applicability of the company’s liquid formulation in these categories, there is a lot to be bullish on as it relates to MustGrow and we will monitor how the team continues to drive the story forward.
MustGrow’s signature mustard-derived bio-pesticide product in “granule format” is EPA-approved for use in fruits, vegetables, nuts, turf and ornamentals. The company offers a liquid formulation that may be applied through a standard drip or through spray equipment, improving effectiveness, economics, functionality and performance features. The following product pipeline table outlines the advancement progress of MustGrow’s liquid formulation in applicable crop protection categories:
One of the reasons why MustGrow has recorded strong growth for its products is due to the effectiveness of them. Many independent groups have performed studies on the company’s proprietary products and the results have been impressive. When compared to other biological products, we believe that the results speak for themselves and we find this to be a significant aspect of the story.
Management Team has Diverse Skill Sets and a Proven Track Record
When it comes to analyzing cannabis companies, one of the first things we look into is the management team. Specifically, we are interested in teams that have diversified skill sets and expertise, proven track records when it comes to execution, and a short and a long-term vision when it comes to the success of the business. MustGrow is comprised of a world-class team of agricultural and business professionals and we are favorable on this aspect of the story.
At the helm of the business is Corey Giasson and he serves as the President and CEO of MustGrow. With more than 30 years experience in the agriculture industry, we are favorable on the expertise that he brings to the team. Corey has been involved in several high-growth industries and has experience in both the public and private market.
When it comes to cannabis experience, we are favorable on the expertise that Tom Flow brings to MustGrow. Tom is a director of the company and was a co-founder and co-CEO of The Flowr Corp. (FLWR.TO) and a co-founder of MedReleaf, which was acquired by Aurora Cannabis (ACB.TO). Tom is recognized as an industry leader in the cannabis sector and we are favorable on the expertise that he brings to the business.
Brian Quigley also serves as a director of MustGrow and we are favorable on the experience that he brings to the management team. He worked at Altria Group (MO) for 16 years and was the CEO of Altria’s innovation company. Brian also was a co-founder of Green Sky Strategy and we believe that he adds important value to the MustGrow team.
Has an Attractive Growth Profile
Over the next year, we expect to see MustGrow penetrate the Canadian cannabis market and are bullish on the amount of value that can be generated from it. In regard to MustGrow, we should be focused on its ability to penetrate markets across the world and are bullish on the global opportunity for the business. In Canada alone, if the company can achieve a 20% market penetration by 2021, it is estimated that it could be generating approx. $80 million of revenue per year and we believe that the market does not take the global opportunity into account.
One of the most important aspects of the MustGrow opportunity is related to the problems that it solves. Every year, cannabis producers are losing millions of dollars to powdery mildew and this number is expected to significantly increase as more production capacity comes on-line.
The organic opportunity is just getting started and MustGrow has attractive leverage to this burgeoning market. Over the next year, we expect to see the business penetrate additional markets and secure strategic partnerships with large scale cannabis producers. At current levels, we find the growth profile to be compelling and believe that this is an opportunity that has substantial room for growth.
To learn more about MustGrow, please send an email to firstname.lastname@example.org to be added to our distribution list.
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