Paul Manning built one of NZ’s biggest ad agencies by transforming the image of businesses like the $2 Shop. Now he wants to do the same with cannabis. Don Rowe reports.
In a secret location somewhere south of Auckland’s CBD, New Zealand’s largest indoor cannabis operation is rising like a monolith from the earth. A concrete structure fully 10,000sqm, blueprints for the facility comprise two laboratories, a nursery, oil extraction capabilities and the capacity to grow thousands upon thousands of medical grade weed plants at any one time. Protected by “world class, bespoke security systems”, the $15 million facility is the latest declaration in an arms race of companies rushing to be the first to capitalise on the expected legalisation of medical marijuana in New Zealand.
Founded by Auckland adman Paul Manning, property investor JP Schmidt and former Red Bull kingpin Gavin Pook, Helius Therapeutics is determined to fix what they see as cannabis’s public relations problem. The want to harness the momentum of a worldwide shift in attitude towards the plant to capture the New Zealand market – if and when it is legislated from the shadows.
“There are a lot of passionate people in New Zealand who really believe in cannabis as a medicine right now, but in wider society there is a rebranding that is required,” says Manning.
In 1999, Manning, then 22, launched ad agency Metromedia from his home with a friend, Ant Hassett. The pair built a solid body of small clients, most notably a $600,000 spend from the $2 Shop, before hitting a clear ceiling. The firm, they realised, was hamstrung by the perceived scale of their business. So they rented a whole floor on lower Queen Street, shutting off the central heating and renovating only the client-facing aspects to save money.
“Clients saw us a small operator so we had to make a move we couldn’t afford in order to change the image of the business. But that was the key moment.”
That shift in perception, together with the exposure from a 2005 Ernst and Young young entrepreneur award, lent Metromedia the legitimacy it needed to land the giant Fuji Xerox account. By 2006, Metromedia was the largest independent advertising agency in New Zealand, worth somewhere between $10 and $15 million. Manning and his business partner sold 90% of their shares to Ogilvy at the end of 2006, and Manning stayed on as a very wealthy managing director. He believes Helius can have the same success with cannabis.
“The medicinal marijuana market in New Zealand is right now conservatively worth about $500 million,” says Manning. “And I’m an entrepreneur at heart.”
Helius Therapeutics prototypes’ are the iPod of medicinal products: sleek, clean, smoked glass vials with the company’s logo – an abstraction of the sun. Helius has a spaceage minimalism about the brand; if Tesla sold drugs they’d probably look like this. Even the name itself is at once both etymologically sincere and painfully corny in that messianic, supervillain sense that typifies startups. In a market dominated by hapless hippies and policy wonks, Helius are betting it all on a silicon valley aesthetic.
“Like any product, medicinal marijuana needs to communicate what it is and what it stands for. Branding is an important feature. Cannabis has an image problem.”
More significantly, cannabis still has a legal problem.
In the final days of 2016, Peter Dunne removed some of the bureaucratic restrictions around medicinal marijuana, and Sativex, one of two products available in New Zealand, no longer needed ministerial sign-off – though it remained prohibitively expensive at around $1,100 a prescription.
Dunne hit out at big pharma’s “extortionate pricing” at the time, noting the “the building resentment” to the attitude companies were taking to the sick and vulnerable.
In Labour’s 100-day plan they vowed to introduce legislation to make medicinal cannabis more available for people with terminal illnesses or in chronic pain. And while Green MP Chloe Swarbrick’s medicinal cannabis bill failed at its first reading in January, a fairly conservative bill by Minister of Health David Clark progressed to the health select committee with more bipartisan support in early February. Two weeks later Manning left his plush role as managing director of ad agency 99 for what he characterised as “one of the greatest entrepreneurial opportunities of our time.”
But that select committee report is not due until the end of July, and there are huge questions around how exactly legislation will be written. Even a small tweak to legislation – who gets licences, who gets access, where manufacturing standards sit – could mean market dominance for some players, and leave others out in the cold.
Helius has submitted to both the house and the select committee, and Manning gave an hour long oral submission in person in Wellington last month arguing for stringent quality benchmarks – of a type Helius is perhaps uniquely building towards – and international certification as a prerequisite to entry.
“We want to set up and position this industry in a way that is really founded on legitimacy,” says Manning.
What that means for small players trying to enter the market is a matter of perspective.
But it’s not solely the government Helius needs to convince. Clark’s medicinal marijuana bill empowers healthcare professionals to prescribe medicinal cannabis on a case-by-case basis. Companies then need to persuade GPs and patients that their products are comparable and even preferable to existing medications. That’s where the battle will be won or lost.
A common misconception in most emerging markets is that medical marijuana means getting high. But cannabidiol (CBD), the cannabinoid most in demand for its medicinal uses, is predominantly non-psychoactive. Commonly consumed as an oil, CBD can be combined with any number of tinctures, balms, capsules and food. David Clark’s bill would see CBD become a prescription medicine rather than a controlled drug.
“The World Health Organisation late last year, about the time we announced our intention to legislate, noted that cannabidiol could have therapeutic value and did not carry any addiction risks,” he said.
‘Good manufacturing practice’ is a key part of Helius’ business plan, and a major talking point for Manning. The GMP is the gold standard for therapeutic products worldwide, and is essential to entering export markets like Germany, which is suffering severe shortages since legalisation occurred last year.
That level of plant, staff and equipment isn’t cheap, however. Helius raised its $15 million through a funding round with Deloitte, sourcing capital from New Zealand investors.
“We could’ve probably funded our business several times over with North American money but we chose not to because we wanted to keep it here in New Zealand; to keep it funded and owned by New Zealanders.”
All this has lent Helius the legitimacy and slickness of a modern corporate, and if it becomes standard could create a steep legal and financial barrier to entry for competition. But it’s not the only approach being trialled in New Zealand.
On the East Coast, grassroots operation Hikurangi Cannabis Company recently raised capital from New Zealand investors of a different stripe, crashing the PledgeMe crowdfunding site en route to smashing their $2 million funding goal, with a further $1.7 million of registered interest.
In February, Hikurangi Cannabis signed a $160m conditional export deal with Rhizo Sciences, a US company who were attracted by Hikurangi’s proven capacity to produce high quality hemp, and their embodiment of the clean, green New Zealand brand.
“The East Coast is well-known as a premium location for cannabis cultivation and offers ideal climate conditions for growing the plant,” the company said at the time.
“This unique opportunity has huge transformational potential by backing a whole a whole community to lead a new, high value, export industry.”
And crucially, the people who Hikurangi seek to support are the ones most affected by cannabis’ legal status up until now. A social enterprise, Hikurangi have aggressively lobbied to be allowed to employ workers with previous convictions for cultivation, arguing it empowers the mana whenua in the Waipua Valley who have been thus far disenfranchised.
Helius by contrast are training for specialism, estimating requirements of around 100 staff by 2020 with broad biomedical, agricultural and horticultural experience. Though Manning maintains Māori are important to the company, and a large part of the community in which Helius exists, diversity and cultural empowerment are not explicitly part of any manifesto.
“We are fundamentally a Kiwi business. Māori culture is really ingrained in New Zealand culture, and for us I certainly believe that we’ll have plenty of opportunity for Māori to work inside Helius.
“[But] we don’t know where the government is going to sit on things like people with past cannabis convictions, we’ll have to see really where the government lands on that. Our focus is on training and recruiting out of a New Zealand market across a whole range.”
Manning anticipates Helius will focus primarily on R&D for the next 12 to 24 months, changing pace depending on the regulatory environment and signalling from government. But with a government increasingly desperate for a big political win in the face of teething problems and widespread industrial action, Helius is betting big on very near-term change.
“Realistically we think that these products will be in market and available to New Zealanders before the next election. That would make logical sense for obvious political reasons, and I don’t think it will take any longer than that. It’s an exciting time for New Zealand – we’re finally on the precipice of some major change.”
Major change – and incredible riches. Whoever wins the upcoming green rush has the chance to dominate the medicinal and possibly recreational markets in New Zealand, and firmly position themselves to capitalise on that reputation abroad. The stakes are high: legal spending on marijuana worldwide is set to reach upwards of $80 billion in the next decade, and New Zealand Inc is a branding titan in any market.
The Bulletin is The Spinoff’s acclaimed, free daily curated digest of all the most important stories from around New Zealand delivered directly to your inbox each morning.