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Cannabis company HEXO wants to become the 'Intel Inside' of pot

(The Canadian Press)

Since the early 1990s, Intel Corp. (INTC) has used the slogan “Intel Inside” to tell people to buy electronics powered by their semiconductors. The ads built strong brand recognition for a company whose product is hidden from view inside computers.

The chip-maker’s marketing success clearly resonated with Adam Miron, the co-founder and chief brand officer at HEXO Corp. (HEXO.TO) He envisions the Gatineau, Que.-based cannabis producer infusing its products into household-name consumer goods from shampoos to snacks.

“Intel Inside is brilliant,” he told attendees at the 2019 Cannabis Marketing Summit in Toronto on Thursday. “It’s one of the only components in a very complex ecosystem, a computer, which has a brand of its own. What we want to do is mirror that with ‘powered by HEXO.’”

It’s almost like hiding in plain sight. Consumers see brands they know and trust, but with a “powered by HEXO” inscription to denote cannabis as an active ingredient.

To make it happen, Miron is on the hunt for Fortune 500 partners, “brands that everyone knows,” in the cosmetics, health and wellness, and food industries. It’s about avoiding a marketing clash with well-entrenched consumer packaged goods giants like Johnson & Johnson (JNJ) and Procter & Gamble Co. (PG), he explained.

“A question we get all the time is, ‘How do you build a brand?’” Miron said. “The answer is simple. Work with someone who already has.”

HEXO made headlines in early August when it announced a joint venture with Molson Coors Canada, the Canadian unit of Molson Coors Brewing Company (TAP). The collaboration, dubbed Truss, will focus on the development of non-alcoholic, cannabis-infused beverages for the Canadian market.

“Under the Molson Coors banner, an established brand that everyone knows, you’ll see ‘powered by HEXO,’” Miron said. “Like an ingredients company that plays into brand recognition.”

HEXO raised its profile on Thursday, becoming the sixth Canadian licensed producer to secure approval to list on a U.S. exchange. Beacon Securities analyst Russell Stanley predicts HEXO will benefit from that scarcity.

HEXO said it expects to begin trading on the New York Stock Exchange on Jan. 23.

Adam Miron speaks at the Cannabis Marketing Summit 2019 in Toronto (Handout)

“Today’s NYSE announcement (and next week’s actual listing) could help put HEXO
on additional radar screens, for both strategic and financial investors,” Stanley wrote in a note to clients on Thursday.

Canada’s fifth-largest cannabis company by market capitalization has tended to fly below investors’ radar compared to larger rivals like Canopy Growth Corp. (WEED.TO), Aurora Cannabis Inc. (ACB.TO) and Tilray Inc. (TLRY).

However, HEXO’s products are undeniably popular with consumers. The company’s peppermint cannabis oil sublingual spray won the cannabis product of the year and innovation of the year categories at the 2018 Canadian Cannabis Awards.

HEXO’s splashy #NeverJaded ad campaign recently took a top spot at the AdCann Advertising Awards. Miron said the 50-day initiative spanned 20 events, 18 concerts, and 12 e-gaming tournaments. It also featured a gourmet meal with celebrity chef Matty Matheson, and a Wu Tang Clan reunion concert at a Toronto nightclub.

Miron said the exposure push cost “millions and millions of dollars.” Money well spent, perhaps, if cannabis demand is as robust he anticipates.

Miron said he expects supply pressure to persist in the Canadian market, a problem likely to be exacerbated by legalized edible sales and growing demand for oils. 

HEXO announced the completion of the first phase of its one-million square-foot greenhouse expansion in late December.

“That one-million square-foot building is now operational. That puts us at 108,000 kilograms (per year), and we still need more. A lot more,” he said. “The demand continues to grow, potentially at a rate faster than licensed producers like us are putting out space.”

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