Revolutionizing the pot retail experience is the core mission of Canada’s newest public cannabis company.
Following a reverse takeover of Xanthic Biopharma, Green Growth Brands will commence trading on the Canadian Securities Exchange under the ticker “GGB” when markets open Tuesday morning. Armed with $140-million in funding, support from the billionaire Schottenstein family and a management roster of retail and marketing veterans, the company is seeking to dominate a space that is still in the process of being formed, making experts and others in the place skeptical of its lofty growth plans.
“The whole [cannabis] industry is focused on product and the technical part of growing the product and what it does,” said Peter Horvath, Green Growth Brands’ CEO, who previously held executive roles at retail giants such as American Eagle and Victoria’s Secret. “We have a team that is completely attuned to the emotional response that takes place when you decide to buy something.”
Other players such as California-based MedMen, which went public on the CSE in May, are also seeking to refine the cannabis retail experience. MedMen’s stores have been likened to Apple Stores given their sleek layouts and tech-savvy staff, but Mr. Horvath argues Green Growth Brands is going a step further by launching several different brands of stores with the specific goal of attracting the all-important 20-to-35-year-old female demographic.
“If you can nail millennials, in particular female millennials, then all the other groups will follow [because] we all want to think we are 26 years old,” Mr. Horvath said. “Our ‘CAMP’ brand is Abercrombie circa 2006 with weed, ‘Meri + Jayne’ is our fun surf brand that would probably be Hollister circa 2008, but with weed, and our ‘Green Lily’ brand is for women and wellness and yoga and that would be Lululemon, but with weed.”
The company only has one physical location so far, The+Source dispensary in Las Vegas, which it acquired as part of a US$56-million transaction with Nevada Organic Remedies in September. That location is producing US$17-million in annual trailing revenue, according to the company’s investor presentation. Green Growth has an aggressive expansion plan that would see the company under its various brands open 100 stores over the next three years with each location generating between US$10-million and US$20-million in revenue per year, Mr. Horvath said.
While Mr. Horvath has opened hundreds of retail locations over the course of his career, Hadley Ford believes cannabis retail is unique.
“For that to be a valuable, nationwide strategy where you say ‘wow that guy is great at retail’ first you need the retail licenses, and those are expensive, and you have to go buy them and they are different for every state and they are not even available in every state,” said Mr. Ford, co-founder and CEO of iAnthus Capital, which operates cannabis storefronts in four American states, arguing significant retail experience may not allow for more rapid expansion strategies since cannabis retail regulations are still largely in the process of being developed.
“It is like saying you’ve got a Maserati and it is the fastest car on Third Avenue, but who cares if there is block to block traffic where you’re never going to get out of first gear?” Mr. Ford said. “Sure, your car is going to look pretty, but you’ll be going the same exact speed as that old yellow taxi and we are all going to get there at the same time.”
That is a good analogy, said David Soberman, a marketing professor at the University of Toronto’s Rotman School of Management and Canadian National chair of strategic marketing.
“These [Green Growth Brands] guys are making a bit of a leap in terms of what they’re going to be able to do [since] the benefit of professional retailing is directly a function of the flexibility you have in terms of display, branding, promotions and so on,” Soberman said. “Theoretically this looks like a good idea, but whether it is actually going to create a huge payoff is entirely a function of the regulatory environment.”
To hedge its bet on retail, Green Growth Brands is also rolling out a line of CBD-based wellness products under its “Seventh Sense Botanical Therapy” banner that will serve as a loss leader to attract more customers to its stores. Those products, such as body washes, lotions and bath salts, are expected to benefit directly from the company’s connection to the billionaire Schottenstein family.
“Because the Schottensteins have a significant interest in the grocery chain Albertsons, we… are proceeding with them [and] plan to be in over 200 stores by March of 2019,” Mr. Horvath said.
“I have never had access to an expanding market like this with the skills I have and the people I can attract to the business,” he said. “We just have to do this.”