'Taking Short Cuts Will Catch Up To You In The End': Aphria CEO Vic Neufeld On Success In The Cannabis Industry

After two decades in the pharmaceutical industry, Vic Neufeld entered the cannabis space in 2014 as the CEO of the low-cost, large-scale cannabis producer Aphria.

What makes your company different from others in the cannabis space?

There are three components that differentiate Aphria from others in the industry: First, our strategic growth plan is factual, a reality and committed. This includes a four-part expansion of our facility in Leamington, Ontario, which will increase our greenhouse footprint from 100,000 square feet to 1 million square feet by August 2018. The expansion will give us the capacity to supply more than 75,000 kg of high quality cannabis at one of the lowest costs in the industry.

Second, we have a stringent quality management program in place. Aphria has always held itself to the highest standards when it comes to the cultivation and production of medical cannabis. Our management team has over 35 years of experience in agriculture and 20 years in the pharmaceutical space, and places a stringent focus on producing quality, safe and clean medical-grade cannabis.

And third, we are one of lowest cost producers in the industry. Through our experience, we have developed a very efficient production process that uses advanced growing techniques. Aphria functions as a 100% greenhouse operation that is powered by sunlight, which not only allows for the most natural growing conditions available, but helps to keep production costs down.

How did you get into the cannabis space?

I was just finishing up 21 years as the CEO of Jamieson Laboratories and was planning on easing into retirement when I got a call from a long-time friend, Cole Cacciavillani. Cole had been running a successful greenhouse operation in Leamington growing flowers and hanging plants for large grocery stores. In 2001, he got a federal license to produce a few marijuana plants for medical customers and as the government’s regulations evolved, so did Cole’s business. In 2014, he was looking for a CEO to run Aphria and help grow the business. I wasn’t planning on switching industries, or working at all, but I saw an opportunity to work with a talented team and really make something of our combined expertise.

Walk us through a normal day.

There’s no such thing as a normal day for me. On any given day, I am speaking to investors, focusing on our expansion plan, helping to maintain our Quality Management Program, or speaking to our employees at our greenhouse in Leamington. It’s an exciting industry that keeps me very busy.

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What do you see as your biggest opportunity?

The opening of the recreational market next year in Canada, coupled with our expansion plans in Canada and the US to meet the current and anticipated demand.

Do you have any thoughts or concerns about Sean Spicer’s statements indicating the Administration’s intention to crack down on recreational cannabis?

I’m not inclined to comment on speculation. But what I can tell you is that we are in favour of regulation that keeps profits out of the hands of the black market, restricts access to youth, and ensures the production of high-quality, clean and safe cannabis.

What sets you apart to make you a potential leader in cannabis?

Aphria’s management team has a proven track record for building successful operations and producing high-quality products. Our co-founders, Cole Cacciavillani and John Cervini both come from generations of growers. Cole, an industrial engineer by trade, comes with 35 years of experience in agriculture and greenhouse industry. He knows how to best utilize nature’s light and proprietary growing techniques and technologies to create competitive, safe and cost effective products. John brings hydroponic agricultural experience bringing proficiency in greenhouse growing technology and greenhouse expansions. As for me, during my 21 years at Jamieson, the company went from $20 million in annual sales to over $250 million and expanded the company’s distribution network to over 40 countries.

Aphria is one of the lowest cost producers in the industry. We are well positioned to continue to provide shareholder value and meet the increasing consumer demand for medical and recreational marijuana,

What is the most frustrating aspect of the cannabis industry today?

There is still a bit of a Wild West mentality in the cannabis industry, as we see a flood of new entrants into the market and the government looks to introduce legislation for recreational cannabis.

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Recently, there have been reports surfacing of some licensed producers using harmful pesticides in regulated medical cannabis. This is frustrating because Aphria does not use chemical pesticides in the production of medical cannabis, and those who do are impacting the credibility of the entire industry. As a solution to the industry’s safety problem, we have proposed that Health Canada introduce a strict product-testing regime across the sector. Like the pharmaceutical industry, we believe these costs should be absorbed by the industry, not the government. This eliminates any foreseeable staffing or resource problems the federal government faces and prevents producers from not abiding by regulations. This new regime would include Health Canada visiting industry members regularly and, in addition to surveying their operations, testing their products for safety.

What would you say to those who are considering investing in your company?

We are the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters. We have established operations and an experienced management team. We have completed our Part II expansion and are awaiting approval from Health Canada to being operations. Part III and IV expansion will follow, which will grow our greenhouse footprint to 1 million square feet and provide the capacity to supply more than 75,000 kg of high-quality cannabis at one of the lowest costs in the industry. And finally, we recently launched our U.S. expansion strategy through a lead investment in an entity that will operate in the United States under the brand “Aphria USA”. Our success story is no longer limited to Canada and our expansion provides significant growth opportunities for our shareholders.

What are the biggest challenges of being a publicly offered cannabis company?

The uncertainty of what the industry will look like has certainly made some shareholders nervous. But there is a growing investor base interested in the cannabis industry. Our recently announced $100 million raise is a testament to the confidence of the investment community in Aphria's success to date and our vision for the future.

What advice would you give to anyone looking to get into the cannabis space?

Taking short cuts will catch up to you in the end. Like the pharmaceutical industry, it’s critical to meet regulations and produce quality, consistent and clean products to ensure the safety of consumers. Licensed producers and any other companies looking to get into the cultivation cycle or supply chain needs to have the commitment, passion, funding and the right plans to deliver on this and succeed.

Do you see any big changes coming in the future of cannabis?

Definitely. With the federal government recently announcing the legislation to legalize marijuana, we’re going to see big changes over the next 18 months. Canada is on the global stage for cannabis legalization and we’ve reached a milestone in our history, with more to come. There were a lot of gaps and uncertainties in the government’s announcement and now the provinces need to figure out their distribution models. We look forward to working alongside all levels of government on the drafting and implementation of the regulations to ensure product quality and consumer protection and safety.

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