Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

Most large publicly traded U.S. cannabis companies spent the past few years trying to lock up as many licenses in as many states as possible. That strategy, however, has stalled in recent months, as capital markets have dried up and takeover bids have foundered.

Flower One Holdings never went down the multi-state operator (MSO) path. The Toronto-based, Nevada-oriented company focused on building out large-scale cultivation, processing and packaging capacity near Las Vegas. And rather than trying to own every segment of the value chain, the company focused in on white-label manufacturing.

Its pitch: If you want to launch a cannabis brand into the lucrative Las Vegas market, it’s easier to get Flower One to grow the product, do the packaging and ship it to dispensaries; you can focus on developing your brand and getting sales reps into stores.

Story continues below advertisement

Cannabis Professional spoke with Flower One CEO Ken Villazor about white-label manufacturing in the U.S. and how the Canadian market compares to what’s happening south of the border. The conversation has been edited for length and clarity.

Cannabis Professional: Why did you focus on contract growing and manufacturing?

Ken Villazor: One of the great anomalies of the U.S. cannabis market that is vastly different from the Canadian landscape is that it’s a state-by-state play. Let’s say you’ve had success in California, and you say, 'Ok, I want to create a national presence or build national brand equity, so I’m going to choose to go into Nevada, Florida, maybe Colorado.’ You now have one of two pathways: you can get into that market by investing a significant amount of capital to acquire licences and build out your cultivation and production; or you can try to marry up with someone who is in that market.

We said, look, brands are not going to be able to get into every market, particularly Las Vegas, where you’re dealing with a very unique addressable market. That market is defined largely by the 55 million tourists that come each year. Every brand will want shelf presence in Las Vegas, because you have a consumer who is motivated to purchase cannabis, and they’re going to be exposed to your brand, and then they’re going to go back to their home market. So if you want to build brand equity, we believe that the value proposition is there to say to brands: one market you definitely want to be in is Vegas.

Flower One's production facility in Nevada (Company handout)

CP: This model differs from other MSOs. How has it been received?

KV: I remember raising capital in big markets like Toronto and New York and I was telling people, ‘we’re going to be a U.S.-only cannabis company, we’re not going to look at Canada or Europe or Central America or South America. We’ll stay focused on U.S., we’re going to enter one state market, and we’re not going to be vertically integrated.’

I can tell you in the early days, two-and-a-half years ago, that didn’t sit well with guys on the other side of table. But we said, 'look, while the temptation is there to chase every opportunity, you have to execute before you can scale.’ I think that is what has happened with the MSOs. Some of them have done reasonably well, but many of them are struggling, and that’s very apparent from this latest round of quarterly reports. Most of them have gone the opposite way where they scaled first and are now trying to figure out execution.

Story continues below advertisement

CP: The MSOs are certainly getting hit by the poor capital market environment. How about the smaller companies and single-state brands? Are they still looking to expand into new states?

KV: It really depends on your critical mass as a brand. If you’re a market leader in your respective SKU category, you’re really trying to find the fastest and most efficient – including capital efficient – way to get into other markets. I think our value proposition is even more attractive for those companies, because they want to accelerate their plans. But if you don’t have that critical mass, your ability to grow is a little bit more stunted in the short term here and you may not be able to execute beyond your current market.

CP: Flower One announced plans in early November to expand into California. Less than a month later the company said it was pausing those plans, at least until the new year. Why?

For us it really just comes down to recognizing that the capital markets are where they are at, and we need to always be mindful of preserving and growing shareholder equity as a public company. As much as we would like to be in California and we certainly intend to eventually be in California, sometimes there’s other factors beyond the company’s control, where you have to kind of be a little bit more flexible in how you navigate and manoeuvre.

CP: I understand white-label manufacturing is already fairly widespread in California. How would your model differ?

KV: In California, companies that are doing white-label or brand fulfillment are not necessarily doing it at our scale, where you’ve got an extensive portfolio of brands. We have 15 brands already today. For many of the brand fulfillment partners in California, it’s also not core to their business: they’ve got their own brand line, and they have sort of extended out their production capacity to serve those third-party brands.

Story continues below advertisement

It becomes a challenge because your brand partners will never have full confidence in your ability give them priority. By not having brands – other than one brand we acquired through acquisition – customers feel confident we are going to represent them well in the market.

CP: White-label manufacturing has been relatively slow to take off in Canada. Why is that?

KV: Part of it is inherent in the Canadian regulatory framework for cannabis. With the restrictions on packaging and branding, you’ve created a fairly blunt and sterile environment for the consumer when they go into retail.

You contrast that to California, which has a very mature shelf space, or even Nevada’s shelf space. We’re only a little over two years into full legalization in Nevada, but already in that time you’re seeing a dramatic transformation in terms of the types of products and SKUs and consumer options that are available at retail. You’re seeing consumers asking for certain brands. There’s a little bit more brand stickiness, and you’re also seeing consumers moving from simple, flower-based products to more advanced concentrates or delivery methods.

I think that brand equity and brand stickiness is going to take an extremely long time to build in Canada because of the labelling restrictions that exists today. It will be difficult for the Canadian LPs as a result.

CP: You have experience launching new products into the Las Vegas market. Is there any advice you could offer to Canadian LPs launching new Cannabis 2.0 products in the coming months?

Story continues below advertisement

KV: I think some of the brands have taken the approach that you have to be a premium brand. While there’s a market clearly for premium brands, I think a lot of brands have ignored the fact that there really is a cannabis consumer here that covers the entire pricing spectrum. If you look at the average income of the U.S. cannabis consumer, I think you’ll quickly see that a lot of them have incomes below $30,000.

One analogy I give here in Vegas is that if you look at the properties along the Las Vegas Strip, there’s a property for every price point. You have high-end five-star properties, and you have lower, two-, three-star properties. They all do very well here in the market, and that should be reflected in the shelf space of the dispensaries here.

Follow related topics

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies