In the headquarters of Supreme Cannabis Company in the trendy Dundas-Ossington area of west Toronto sits a vaporizer, a gift from the bank that partnered on a deal. On it is written the value of the transaction: $100-million. Fowler, a former Bay Street lawyer, opts not to use the vaporizer and instead rolls a gram of his company’s Jean Guy strain into a joint for our interview.
Supreme has invested in KKE oils, PAX vaporizers, Blissco CBD products, and, in June, launched an investment hub in London, England called Supreme Heights. In July, Supreme made a $20-million deal to acquire Truverra, which makes cannabis extracts and vaping liquids, and the company recently posted net revenue of $19-million in its fourth quarter. For fiscal 2020, Supreme is forecasting revenue between $150-million and $180-million. In the wake of recent revelations at CannTrust, the departure of well-known CEOs and founders like Bruce Linton at Canopy and Adam Miron at Hexo, and the upcoming “Cannabis 2.0” featuring edibles, Fowler got high – and talked about the weed biz.
“I totally spaced on the fact that we were sold out in downtown Toronto, and we were running around today trying to get fresh jars,” Fowler said. “It’s funny – I’m the guy who can’t get anything.”
Ben Kaplan: Does that freak you out that you can’t buy your stuff, or is that a good thing – high demand?
John Fowler: We don’t want to be selling out. Last year, only 20 per cent of our flower made it to consumers and the rest we sold through B2B with deals with LPs like Aurora and Tilray. This year, we’re going to grow more cannabis totally, but also get a lot more of our product on the shelves.
BK: Can you describe the weed we’re about to smoke?
JF: It has a light look and a bit squishy. Unique to 7 Acres, we trim it down, no stem or leaf. I was told you can’t brand flower, but people on Twitter have recognized our bud out of the jar.
BK: That looks like a lot of weed for one joint.
JF: Someone joked that you can tell we’re a different kind of cannabis company by the rolling papers we put out, because to me and my team and I think our consumer, this is a normal joint. A lot of Canadians look at this and think this is gigantic. For me, this is the ideal size of a joint.
BK: What are we smoking, what’s Jean Guy?
JF: A sativa-dominant hybrid. A little uplifting – strong, but not super strong – and very pleasant. It’s not the kind of smoke where you want to close the curtains and sit on the couch and hope that nobody sees what you’re doing.
BK: Are you an ace roller?
JF: I do OK. And see, with our papers come these little filters. Gone are the days of ripping up business cards. Do you want to spark it?
BK: You better do it for the photographs, but I appreciate your manners.
JF: [inhale; big laugh; cough]. It’s good.
BK: I’ve smoked a lot of joints, but this is very good.
JF: A lot of people around the office roll and smoke like I do, some even better. We’ve had competitions. It’s not enough just to have good flower – you have to roll it with the right tightness. Cannabis hits its peak curve within the first 10 to 15 minutes, and then ebbs over the next hour or two, depending on how sensitive you are to the comedown.
BK: Great, so this interview is going to be conducted at the peak of my high?
JF: Good thing you’re recording.
BK: I better start with the hard stuff. CannTrust allegedly put up fake walls to hide unlicensed growing of cannabis, the market is down for weed stocks, and banks are walking away from deals. What gives?
JF: Before there was legal cannabis there were bad actors, but there were a lot of good people that didn’t have a way to do things legally, so they did things the way they could. Technically speaking, 100 per cent of these people operating illegally, but very few of these people I met had bad motives. You trusted them, you had them over to your house. Because cannabis is such an exciting economic opportunity – to raise and spend capital and create wealth – it’s a magnet for entrepreneurs, both good and bad and, unfortunately, we’re seeing some of the bad.
Because cannabis is such an exciting economic opportunity...it’s a magnet for entrepreneurs, both good and bad and, unfortunately, we’re seeing some of the bad.
BK: What should happen to licensed producers who game the system?
JF: We’re seeing people not satisfied with a great opportunity. They want to make it even better, faster – and thought they were smarter than the regulators. You’re seeing thousands of retail shareholders trusting the system, whether that’s cannabis regulators or securities regulators, and the system is not helping them. It’s not just a single company, because all companies struggle when there’s bad headwinds in the space.
BK: How bad are the headwinds?
JF: It might be a company fully breaking the rules, or companies promising way more than they can deliver who convince investors to go along with them. What we’re starting to see is a three or four-year bull market where everyone was making money, but now people are starting to ask questions. It’s healthy for our industry.
BK: That’s a lot to digest. I better put the joint out.
JF: Cannabis isn’t all fun and games.
BK: One more tiny drag.
JF: We shouldn’t let a few bad stories ruin the fact that cannabis has been one of the greatest entrepreneurial stories this country has had in the last few decades. Cannabis has created real wealth for hundreds if not thousands of people across this country. That’s a beautiful story that should not be tarnished by a little smidge in the corner.
BK: What should we do with the smidge?
JF: Come down like a ton of bricks.
BK: Will this hurt our reputation abroad, where every company including yours wants to grow?
JF: Canadian companies have a chance to navigate globally, whether legalization happens next in the United States or Europe or Asia, because we’re compliant and can sell cannabis in a highly-restricted environment. We’re recognized globally for operating in the most highly-regulated cannabis market in the world.
BK: I’m feeling prickly euphoria – up and engaged, but kind of skittish. Can you navigate us through the high?
JF: That’s why we chose Jean Guy. Sensi Star is heavy with myrcene – that’s the most common cannabis terpene – and it’s a downer. It gives you a relaxing feeling, but it can give you couch-lock. Jean Guy has limonene, and can be more uplifting and keep you sharp, while also being relaxing. It encourages you to be a bit more social. There’s that old image of the really euphoric hippie frollicking through the meadow and doing art – the strains we had back then were sativa-leaning. The cannabis now is higher in myrcene, and its sedatives can have a narcotic effect. There are now a lot of different strains that can literally be something different to every single person in the world. You can hear it in the music being created.
BK: Feels tingly.
JF: The fact that cannabis can also be a medicine shouldn’t take away from the fact that it can be a great social substance. This is not that dissimilar to sitting down and having a beer: It helps get the conversation going. It’s pleasant. You feel good. Maybe your back was hurting a little from the day, you feel more relaxed. The difference for me between cannabis and alcohol is if I have to go back to work in a few hours I’m much more likely to be clear-headed. And, when I wake up in the morning, I feel significantly better. We’re using a product that is engaging with cannabinoid receptors located across our organs and turning those receptors on rather than alcohol molecules which, overly simplified, turn everything off.
BK: I don’t know. I’d still kill for a beer.
JF: I don’t drink much anymore and I’ve enjoyed that transition. I’m no longer embarrassed to say, ‘You know what guys? I’m going to step outside and have a joint, you guys enjoy what you’re doing.’
BK: With legalization 2.0 set to take effect October 17, you could drink your weed instead of beer.
JF: We think vapes are the single most disruptive category, in terms of disrupting alcohol and tobacco.
BK: If vapes are going to be bigger than edibles, why are weed brands partnering with booze?
JF: If you’re trying to replicate the drinking ritual – going to a bar, having a beer and you want to do that with an alternative to alcohol – vape is that product, not the edible. It’s easy to think people like to drink drinks, so people want to drink drinks, but that’s over simplifying it. People like to consume something over a long period of time, maybe do some things you might not have done, and go home and sleep it off and do it again the next day. Joints can do that, but smoking isn’t for everybody.
The product that really would transition people from alcohol to cannabis, it’s not the drink ... the data in the U.S. shows that drinks are only 1- to 2-per cent of most markets for edibles, which might be 8- to 10-per-cent of the cannabis market.
If I think of the product that really would transition people from alcohol to cannabis, it’s not the drink. The drink takes you ten minutes to consume and eight hours to go away. Some people are trying to reengineer the cannabis experience to mimic the alcohol experience and they may or may not succeed, but the data in the U.S. shows that drinks are only 1- to 2-per cent of most markets for edibles, which might be 8- to 10-per-cent of the cannabis market. It’s a totally different experience – a beer you’re sipping the whole time and incrementally increasing your dose. It’s the same idea with cannabis: You take a little more and a little more. An edible is in you – there’s no turning back. I’m not a fan of edibles.
JF: I don’t think it’s a bad thing. A lot of these businesses are becoming so successful that the growth of the business is outpacing the founders. These companies with massive market caps, eight- or nine-figure quarterly revenue numbers, and thousands of employees need seasoned executives that have experience in other industries. It’s healthy and good.
BK: Until someone knocks on your door.
JF: I brought in a CEO who I thought was better suited on the capital market side. You can say it’s self-preservation, but I came off of our board of directors and I’m now our chief advocacy officer. That opens up space for people with more grey hair than I have and more expertise managing bigger companies and, for me personally, it’s an opportunity to learn.
BK: What does the roll-out of legalization 2.0 look like?
JF: New legislation comes into effect in October and then there’s a licensing transition, theoretically the first day of sales for the new products would be December 17.
BK: Do we need new products?
JF: Look at the U.S., where flower has a declining market share but it has a stable dollar spend in most states. Price on average has come down, so the volume of consumption is going up. But the pie is growing so fast that the slice for flower is shrinking. Other products aren’t replacing flower; the other things are additional purchases or purchases made by people who weren’t purchasing flower, finding a new way to engage with the plant. Speaking of, we’re about a half hour in – feeling good?
BK: Good. Sort of dreamy. Pretty stoned.
BK: It’s going to be funny to listen back and try and edit this down. You give long answers.
JF: I get a little stoned ... and I get going.
BK: The photographer is keen for more pictures: Would it kill you to smoke again?
JF: No, not at all. [smokes again]
BK: Look down the road. What does our industry need now and in three, or even five years?
JF: New Brunswick has a government that’s more progressive than Ontario. I was at a cannabis conference there with people from all over the world, and the organizers worked with the province so there was a pop-up store inside the conference, and people would come in and you talk about your brand and then you can walk to the store, show it to them and, if they want to try, they could buy some.
BK: Seems logical.
JF: The problem is we all grew up with a stigma around cannabis, and we’re erring on the side of caution rather than being laissez-faire.
BK: Is Health Canada too laissez-faire sometimes?
JF: They’re the world’s strictest cannabis regulator. The recent issues [at CannTrust] don’t reveal a problem in the regulatory system. The regulations seem to have caught up with them over time. Health Canada didn’t catch them on day one, but the system is reasonable. If other companies take advantage of it, that’s unfortunate. ... Now I’m pretty high.
BK: Let’s go frolic through the meadow. But before we do that, one last question: how does the industry emerge from this moment?
JF: The silver lining of what’s come to light is that if there’s a stern penalty attached to it, and the last couple of companies that willfully violated the Cannabis Act had very stern penalties applied to them, then I think others are going to realize there is a benefit to following the rules – and that’s called staying in business.
BK: It’s cool to do a weed interview with a weed executive who isn’t afraid to actually smoke weed. Thank you for doing this.
JF: Someone has to.