It Takes A Village
Village Farms wants to feed the world fresh-first canna.
We’ve been a fan of Village Farms for many moons and have the receipts to prove it…
…and while that stock has enjoyed 15-20X returns not once but twice since we penned that first report in August 2017, it subsequently succumbed to the brutal bear markets that have come to define all things cannabis. With that in mind, we headed north-by-northwest to Delta, British Columbia to see for ourselves what’s going on, up (t)here.
To understand Village Farms, you first have to know CEO Michael DeGiglio, who has served in that role since he founded the company in 1989. A pioneer in the greenhouse industry, it only takes a few minutes with Mike to understand he’s a leader of people.
In his prior life, he served on active duty in the United States Navy as an officer and tactical carrier jet aviator from 1976-1983 and the Naval Air Reserves from 1983-2001, retiring as a Captain after logging over 5,000 hours of jet flight time.
I immediately liked him when we first crossed paths six+ years ago. He was genuine and authentic, his no bullshit demeaner was unapologetically old school and we both hailed from Long Island. Plus, we believed in how he was building VFF: as a low-cost, high-quality producer that patiently awaits regulatory clarity before deploying capital.
In the meantime, they continue to hone their craft in the ultra-competitive produce segment as one of the top-selling tomato producers in North America, a dynamic that has created one of, if not the most robust distribution platforms in the industry (which might matter big-time depending on the upcoming Farm Bill language).
Breaking Bread
As we got caught up at Gotham Steakhouse in Vancouver Tuesday night, I couldn’t stop thinking of the parallels between Glass House Brands and Village Farms.
Both are superb greenhouse growers with industry-leading COGS, both serve about the same-sized market (California and Canada @ ~$10B) and both have a much larger TAM option (USA via interstate, and the rest of the world as it unlocks).
The parallels between how the U.S. cannabis industry evolved—state-by-state, first medical, then adult-use—is the precise playbook abroad but with more clarity than exists stateside; which begs the question: if MSOs are a “thing,” will Village emerge from the global clubhouse as a leading MCO (Multi-Country Operator)?
Suffice to say that if you believe “the left side of the equal sign,” as Graham Farrar at Glass House likes to say, will drive the long-term success of cannabis operators, then GLASF and VFF are birds of a feather, even if they don’t yet flock together.
[note: one of the whales at ATB, out of all the companies he met, was smitten with GLASF and VFF, offering, “If I’m going to enter the space, I want to know there is that long-term fundamental competitive advantage]
We discussed this at dinner, “You have a U.S. doppelgänger in GLASF,” I said while not drinking wine, “which maybe the easiest way to help articulate this story: when interstate opens, GLASF will leverage their operational successes in Cali across the nation but you’re set-up to be the GLASF to the world.”
Village People
As pioneers in the greenhouse space, we already knew that Village Farms has been iterating their cultivation SOPs at scale for over 30 years but yesterday afternoon, we got to learn more about the who’s and their special why’s.
As the closing bell tolled after another ugly day on Wall Street, I hit send on our latest note, grabbed our analyst Josh and headed down the road to Delta to tour the Village Farms and Pure Sunfarms greenhouses and meet with the management teams of Pure Sunfarms, ROSE LifeScience and VFF international.
[pro-tip: if you want to agitate VFF CEO Mike DeGiglio, tell him that investors and analysts are confused by the marriage of pot and produce. “We’ve been low-cost, high-quality growers in an ultra-competitive market for over thirty years,” he told me as a matter of fact, “Our DNA was forged in a competitive industry; this is in our blood.”
The man speaks the truth. Kirk, his head grower on the produce side (Village Farms) is a sixth generation farmer while his #2 Maurice is the third-generation in his family to hone his hoe on tomatoes. What struck me most, however, won’t be found on any resume: it was their passion—their purpose—that they brought to the table each day.
That loyalty/ culture/ energy was ever-present among the senior staffers that we spoke with, starting with the ROSE LifeScience team that joined us from Quebec. We knew why VFF bought 70% of ROSE in 2021 (distribution at scale for the abundance of Pure Sunfarms supply), but the quality of the human capital and the rate/pace of innovation opened our eyes.
That left us feeling good about their prospects in their home state country of Canada, where they continue to take share as others struggle to compete on price and quality.
They’ve been the #2 LP in Canada since 2022 and have posted nineteen consecutive quarters of positive AEBITDA (every Q since commencing sales) and they’re the #1 selling dried flower producer in Canada.
Orville Bovenschen, who now helms Pure Sunfarms, is seemingly intent on infusing a legacy culture into the grow operations. A large, fit and annoyingly handsome man, he walked us through the various rooms of his sprawling operation while noting several innovations and highlighting their speed-to-market in a competitive landscape.
We circled back to the corporate board room to sit with Paul Furfaro, SVP of Strategy, and hear about their international strategy. That conversation was separate and apart from the discussion we had around their mammoth Texas facility, which will provide U.S. optionality as the regulatory landscape evolves.
He walked us through their global roadmap: Village Farms currently exports MMJ to Israel, Australia and Germany and has an adult-use relationship in the Netherlands, on top of “other things in the works.”
And that’s another thing: Village is approaching jurisdictions both home and abroad with the intention of being part of the long-term solution. They are helping provinces + countries obtain the information, insights and deliverables they need to roll-out the most robust program possible, creating incredible amounts of goodwill in the process.
“We want to be the world’s largest supplier of cannabis,” he told me, “and by creating JV’s and strategic partnerships with the right people in the right places at the right time, in a way that helps drive the industry forward, we’re positioning to do just that.”
See Food Diet
That collaborative competition was on full display when the management teams from Village Farms, Pure Sunfarms and Rubicon Organics gathered for dinner at the Blue Water Cafe in Vancouver. All of these companies are based in Delta, BC, which, I’m told, has everything to do with the unique microclimate in the region.
Mike D stood up at the beginning of dinner and announced that it is tradition at VFF dinners for everyone to stand and make a toast, which he started by saying, ‘knowing your competition is a great advantage and the ability to sit here, break bread and open up to one another is a unique gift, even if tomorrow we’ll go back to being rivals.”
But that was sorta the thing: both of these B.C-based ‘rivals’ weren’t gnashing their teeth at one another. They knew that the cannabis opportunity was big enough for the both of them, particularly as one produces super-scaled “fresh first” “everyday premium” and the other is the go-to premium brand in Canada.
After Orville and I returned from a “making a phone call” outside, and after we circled the table with each attendee offering a poignant perspective, Orville offered his words of wisdom to close the night.
“We’ve all been through a lot to get to this point but let’s leave that in the past—it’s time to look ahead and be thankful for the opportunity that we now share.”
As heads began to nod in agreement and his words lingered in the air, we made our way toward the bus for our trip back to Delta. The first half of this leg of the trip—Village—and the transition to part II—Rubicon, which starts later today—was over.
As my east-coast body clock hit my hotel room around midnight PST and just before my head hit the pillow, I sent myself one last email that simply said, “buy more VFF.”
/end
CB1 has positions in / advises some of the companies mentioned and nothing contained herein should be considered advice.
Invaluable Research...Thanks for all your effort Todd and for to Village Farms in making available so many key players. Impressive all around.
You've called this company from the begining. I have always believed it was a sleeping giant. Good to know you still feel the same. Buy more VFF. Oky doky