Cannabis Companies Need To Distinguish Themselves To Grow in a Crowded Industry

August 07, 2019 -

Despite being so new, the cannabis industry is already crowded. An incredible amount of hype surrounding legalization led dozens, if not hundreds, of companies to enter the cannabis space hoping for a big enough share of the market to stay afloat. In order to appeal to consumers, a modern cannabis company has to find bold and exciting ways to distinguish itself and to make its product widely available. Companies that have thus far done a tremendous job of accomplishing this include High Tide Inc. (CSE:HITI) (OTCQB:HITIF) and its contemporaries like National Access Cannabis (TSXV:META) (OTC:NACNF), Choom Holdings (CSE:CHOO) (OTCQB:CHOOF), SugarBud Craft Growers Corp. (TSXV:SUGR) (OTC:RLLRF), and Harvest Health & Recreation (CSE:HARV) (OTCQX:HRVSF).

The Alberta-based, retail-focused cannabis accessories company High Tide (CSE:HITI) (OTCQB:HITIF) has continued to grow its brand presence across Canada and strengthen its integrated value chain for a decade. On Tuesday, the company announced the opening of its 15th Canna Cabana location in Canada and 11th in the province of Alberta. High Tide also expects another nine Canna Cabana stores and the first KushBar location to gain their licenses in August, bringing its total to 24 stores.

Over a Decade of Cannabis Retail Experience

One of the reasons High Tide (CSE:HITI) (OTCQB:HITIF) stands out from its peers is its long history in the cannabis space. The company’s founder Raj Grover opened the first Smoker’s Corner store in 2009, a smoke shop chain that has organically grown to 14 locations, eight of which are now franchises.

According to Canaccord Genuity, the company’s organic growth prior to going public showcases its management team’s focus on profitable operations.

Since Mr. Grover’s start in 2009 with Smoker’s Corner, High Tide’s founder also established RGR Canada, a factory-to-retail cannabis accessories manufacturer and distributor and Canna Cabana, a branded retail cannabis chain.

He is also the co-founder of Famous Brandz, a manufacturer and distributor of licenses smoking accessories. Since opening in 2016, Famous Brandz has inked nine celebrity partnerships that include Snoop Dogg Pounds, Cheech & Chong’s Up in Smoke, Kevin Smith’s movie characters, Trailer Park Boys, Guns N’ Roses, Sublime, Hellboy, The Beach Bum, and Radio Days.

Apart from its own branded retail stores, High Tide accessories can also be found in 3,000 stores in more than 20 countries across the globe.

High Tide’s Contemporaries

Though High Tide Inc. (CSE:HITI) (OTCQB:HITIF) has had an incomparable path in the cannabis space thus far, some of its peers have also been able to distinguish themselves through rapid growth and market-targeted expansion.

National Access Cannabis (TSXV:META) (OTC:NACNF) opened two new retail stores in Alberta, bringing the company’s total number of shops to 32. Shortly after, the company announced that it generated a revenue of $16.8 million in Q3 2019. This represents 5.5 percent growth compared to its previous quarter and positions the National Access as a major cannabis company on the rise.

Similarly, Choom Holdings (CSE:CHOO) (OTCQB:CHOOF) has been finding its niche lately through an e-commerce platform, which it launched in February. The online storefront can provide customers with a unique retail experience that is integrated with Choom’s physical locations. The platform can also be annually scaled to $500 million or more for both business-to-consumer and businesses-to-businesses sales.

SugarBud Craft Growers Corp. (TSXV:SUGR) (OTC:RLLRF) announced a major rebranding to coincide with the launch of its new website. The company plans to eventually add a retail element to the site once it receives a sales license from Health Canada.

Not to be outdone, Harvest Health & Recreation (CSE:HARV) (OTCQX:HRVSF) has been deepening its footprint, just not in Canada. Harvest targets the medicinal marijuana market in Florida and is licensed to open up to 35 retail locations in the state. Like High Tide, Harvest is a vertically integrated company, meaning it can maximize the value of its supply chain and continue its expansion.

High Tide’s Winning Wholesale Strategy

As mentioned before, vertically integrated cannabis companies can significantly reduce costs and increase efficiency along the supply chain.

High Tide (CSE:HITI) (OTCQB:HITIF) has gone above and beyond by establishing six vertically integrated subsidiaries, establishing itself in all downstream markets from wholesale to e-commerce.

It’s wholesale subsidiary RGR Canada manufactures more than 70 percent of the High Tide’s product catalogue, which now includes over 4,300 SKUs of smoking accessories and lifestyle products.

What’s more, over the past three years, High Tide’s (CSE:HITI) (OTCQB:HITIF) other wholesale subsidiary Famous Brandz’ presence has grown exponentially with large retailers, distributors, and retail chains across Canada, the US, and in Europe.

The company’s ability to expand internationally increased drastically when it acquired Grasscity in December 2018. The Amsterdam-based online accessory retailer has been operating for more than 20 years, has over 5.8 million site visits annually, and 65,000 orders per year.

Even the most influential and well-known Canadian cannabis players are doing business with High Tide. Not only did Aurora Cannabis Inc. invest $10 million into the company in 2018—and follow that up with another $1 million in 2019 — it also provided High Tide with its largest wholesale accessories purchase order to date.

On top of that, in April Aphria Inc anchored High Tide’s non-brokered private placement with a $4.5 million order, while FSD Pharma Inc has invested roughly $3 million to date.

A Distinct Path to Revenue

Thanks to High Tide’s (CSE:HITI) (OTCQB:HITIF) relationships with Aurora, Aphria, and FSD Pharma, the company has the ability to contract out the production of branded products to capture incremental revenue. The company will also be expanding its retail presence, with additional stores already under construction.

Other companies expanding right along with it include National Access Cannabis (TSXV:META) (OTC:NACNF), which has opened an impressive 32 licensed retail stores. Meanwhile, Choom Holdings (CSE:CHOO) (OTCQB:CHOOF) has expanded into the digital cannabis space to distinguish itself from its peers, and will soon after be followed by SugarBud Craft Growers Corp. (TSXV:SUGR) (OTC:RLLRF) as soon as it is licensed. Notably, Harvest Health & Recreation (CSE:HARV) (OTCQX:HRVSF) is distinguishing itself by taking a dominant command of the medical marijuana market in Florida.

All of these companies stand to make sizeable profits from their long-term branding and expansion strategies. In its Q2 2019 results, High Tide revealed a revenue increase of 325% for the same period in 2019. What’s more, the company is currently assessing a number of potential acquisitions in the manufacturing, wholesale, and retail sectors that are accretive and can expand its reach even further.

Through rapid, market-targeted expansion, valuable vertical integration, and sublime branding, High Tide has been staking its claim in the cannabis space. While many of its contemporaries will languish and eventually fold, High Tide (CSE:HITI) (OTCQB:HITIF) will have captured the attention of industry insiders and consumers alike. This is a cannabis company you can expect to continue hearing about for a long time to come.

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