The exciting part about being a new company in a new industry is the chance to do everything for the first time. The challenging part about being a new company in a new industry is that you have to do everything for the first time. That was the dilemma facing Westleaf Inc. when it launched its strategy of becoming a truly vertically integrated cannabis company. That vertical model is one where the company plans to grow and produce cannabis, process and formulate cannabis into value-added products, and then sell cannabis products in its own retail stores.
In fact, Westleaf is one of the few truly vertically integrated companies in the cannabis industry, which means the company is often breaking new ground. “We own and are developing assets across the entire cannabis value chain,” says Westleaf’s co-founder, President and CEO, Scott Hurd.. “From production to extraction to product branding and wholly owned retail, Westleaf is uniquely positioned in the marketplace.”
But even for companies at the forefront of the industry, being in this fledgling market involves overcoming some key challenges. One of the key limitations here involves the highly regulated nature of cannabis sales in Canada. Because Health Canada regulations only allow for very limited branding on plain packaging, much of which must be taken up by health warnings and product information, there’s very little room for brands to promote their product and showcase what sets it apart from others. In other words, for those selling cannabis, differentiation in the market is a key concern.
“Our thesis has been that it’s through owning retail distribution that we get the best opportunity to control the consumer shopping experience,” Hurd said.
The company aims to do this through its retail concept, Prairie Records, which leverages the inherent tie between music and cannabis. The in-store design replicates a record store but is infused with sophisticated, modern and approachable features. Where consumers would normally find record sleeves with their favourite artists or track list, they’ll find information about that specific strain, consumption formats and the level of THC/CBD. The sleeves are organized under specific music genres such as ‘Dreams’ and ‘Just Dance’. Having tangible items to pick up provides consumers with an engaging and stimulating in-store experience. Keeping in line with the regulations of having the product behind lock and key, once consumers have chosen their ‘record’ of choice, they can head to the point-of-purchase and the staff will unlock their product for them.
Down the road, it is anticipated that some of the products will come from Westleaf’s Thunderchild indoor cultivation facility near Battleford, Saskatchewan. This facility is being built in two stages, Phase 1, an 80,000 square foot operation projected to produce 7,300 kg of dried flower per year, which is intended to be followed up by Phase 2, which will bring the facility up to around 130,000 square feet and double production to about 14,600 kg per year.
The completed flower and trim will then be processed at “The Plant,” which is currently under construction in Calgary. Phase 1 is designed to be a 15,000 square-foot facility that will extract cannabinoids from source plants for products like oils and gel caps, and later for products like vape cartridges, edibles and topicals, which are expected to become legal later this year, subject to provincial and federal regulations. The Plant contains an additional 45,000 square feet which is intended to be used to produce some of the additional approved products.
There is, of course, still much to do. This is a company that’s still developing. But one thing Westleaf has on its side, Hurd says, is a very strong management team.
“We’ve really been able to bring together a nucleus of experience and expertise that’s hard to find in the cannabis sector,” Hurd said. “And having a team behind us that have had a demonstrated track record of designing, operating and scaling multiple vertically integrated cannabis platforms has really positioned us to compete.”
Together the cultivation and extraction operations team – comprised of Ben Kaanta, Shon Williams and Matt Marshall – have built or operated a total of 24 cannabis facilities, most of them in the very first North American jurisdiction to legalize recreational and medicinal cannabis, their home state of Colorado.
The Calgary-based company also boasts an Alberta advantage.
“Western Canada, specifically Saskatchewan and Alberta, are the provinces that have the regulatory structure to allow us to truly be vertically integrated. And that’s why we’ve focused our business in the Prairies,” Hurd said, adding the company has plans for other parts of the country as well.
And, while Westleaf is likely to face many new challenges in this new market, it started strong in 2019, securing supplementary retail locations, announcing an exclusive Canadian partnership with Xabis, a leader in derivative product and research production, and acquiring Canndara, a cannabis retail company. The company plans to have 30 to 50 retail locations up and running by end of 2020. Currently the company has three Prairie Records stores operating in Saskatchewan and is selling province wide online through www.prairierecords.ca.
“What we’re building here in Canada is really the intellectual capital on how to cultivate, refine and distribute cannabis in a highly regulated environment,” Hurd said. “The companies that are operating in the Canadian market are uniquely positioned to grow globally as the broader globalization and legalization of cannabis occurs.”
What the Canadian market will hold and whether cannabis legalization unfolds south of the border remains unknown, but Westleaf looks to be well poised to take advantage of new opportunities and, as it has done, continue to break new ground.