Since the earliest stages of the legalization movement, cannabis entrepreneurs have been apprehensive about the “big players” entering the market. But in light of the $4 billion Constellation Brands invested in Canopy Growth in August, it’s clear that the big players have already arrived and the explosive growth of the cannabis retail sector is a siren’s call for many investors.
As hundreds of businesses jockey for position in this emerging industry, it seems as if cannabis retail and dispensary chains like MedMen, Columbia Care, Rise and Harvest of Arizona have been built overnight. But that is far from true. Each company has followed a strategic path to expansion and raising capital to set them apart from the smaller players in the space.
Ultimately, only time will tell who will become the largest retailer in North America, but these four companies — plus LivWell International, an intriguing upstart with connections to one of Colorado’s largest chains — are early frontrunners in the race.
LivWell International
Over the past 10 years, LivWell has emerged as one of the dominant cannabis retail chains in Colorado. Now, the vertically integrated business has partnered with 51st Parallel, a licensed producer in Alberta, to create LivWell International.
Sonny Mottahed, the co-founder, president and CEO of 51st Parallel/LivWell International, says the partnership is the culmination of a two-year relationship between the two companies. LivWell International expects to open approximately 50 stores in Canada that will be supplied by a 203,500-square-foot production facility in Lethbridge, Alberta.
“LivWell is one of the largest, if not the largest, player in the cannabis space anywhere and certainly the largest in Colorado,” Mottahed says. “We have designed a facility around their best practices.”
Mottahed says five LivWell-branded retail stores will be open by the end of the year, including some that should be ready for Oct. 17, the first day the nation’s legalization measure takes effect.
Capital Raised
Through a single round of fundraising, 51st Parallel raised $23 million from friends, family and associates, “the majority of whom are located in the 10-square blocks that make up downtown Calgary,” Mottahed says. The capital entrusted to the group came from the company’s simple, earnest business plan to open a vertically integrated, Alberta-based cannabis company, Mottahed says.
“In Canada we’ve seen the advent of very large cannabis companies, but there’s also been a lot of noise in the marketplace from people with incredibly large, highly ambitious and potentially unrealistic business plans,” Mottahed says. “From an investors’ standpoint, although it can be very big and ambitious on its own, (our plan) was achievable and the plan could be executed in a relatively short period of time.”
A mockup of LivWell International’s 203,500-squarefoot production facility under construction in Lethbridge, Alberta.
Capital Invested
The exclusive Canadian licensing rights to Willie’s Reserve and Willie’s Remedy — the brands inspired by country music legend Willie Nelson — were granted to 51st Parallel after the company made a $20 million investment in the parent company, GCH. The investment also grants 51st Parallel first option to future brands developed by GCH. Mottahed will also join GCH’s board of directors.
International Origins
Mottahed and co-founder Jason Kujath started 51st Parallel in early 2016. The two made road trips to Washington, Oregon and Colorado to experience adult-use cannabis sales firsthand.
“That’s when we decided that there was really something happening here that we could sink our teeth into,” Mottahed says.
Mottahed and Kujath followed up the road trips with cold calls to hundreds of retail stores and chains to gather information and make connections. One of those stores was LivWell in Colorado.
“They viewed that the business plan itself was something that would match their skillsets,” Mottahed says. “They could relate to it and could see a line of sight to it getting executed.”
Dean Heizer, chief legal strategist for LivWell in Colorado, issued a statement saying the company is “continuing to develop our growth plans in Canada given the emerging regulatory situation in the provinces,” but declined to comment further.
Coming Milestones
LivWell International expects to hit some huge milestones within the next six months, including a listing on the Canadian Stock Exchange and the construction of a 103,500-square-foot cultivation, extraction and production facility in Lethbridge in early 2019. The company also has 15 applications pending for retail stores.
“We will have retail stores open well in advance of our cultivation facility,” Mottahed says. “We expect up to five to be open by the end of the year and we’ll be phasing them in, as practical, thereafter.”