Daily View: Westleaf Thrives Amidst Vaping Fears

This is the premiere episode of the Gordon Daily Retail View, which follows the people and companies making news, and covered in the Gordon Daily Retail Monitor. Go to https://gordonmag.com/retail-monitor/ to learn more and subscribe, free. Westleaf, Inc. is a fully integrated cannabis company based in Canada. You’d think that Weed would sell itself, but it’s an incredibly competitive business, where legal manufacturers compete with each other, and the black market. We follow up with Westleaf which just announced a major order for white-labeled vape pens… even as US consumers freak out over the safety of inhaled THC products.

David Zweifler, Gordon Magazine: [00:00:00] This is the premier edition of the Gordon Podcast Daily View — an in-depth look at the people and companies making news which are profiled in the Gordon Daily Global Retail Update. Click the link in the description if you’d like to subscribe.

[00:00:17] Westleaf is a fully integrated cannabis company based in Canada. You’d think that weed would sell itself. But Westleaf has invested in every aspect of cannabis delivery, including, of course, an innovative retail customer experience.

[00:00:33] Those investments seem to be paying off. Westleaf recently announced a major order for whitelabeled vape pens, even as US consumers were freaking out over the safety of inhaled THC products.

adam coates westleaf cannabis

[00:00:46] To get perspective on the deal and the state of the cannabis market from a more polite Canadian perspective, I’m speaking with Adam Coates, Chief commercial officer at Westleaf.

[00:00:57] Thanks for joining us today. Adam. Tell us a little bit more about your background and what Westleaf is offering.

Adam Coates, Westleaf: [00:01:04] My name is Adam Coates. I’m the chief commercial officer here at Westleaf. We’re a Canadian cannabis company focused on developing and producing high quality brands of cannabis products as well as innovative retail experiences. And, so, our business is really driven to create brands in this marketplace, which is very difficult to do, frankly, based on a lot of the marketing restrictions that are out there in the Canadian landscape.

[00:01:37] We have a retail business called Prairie Records, which we have four stores open, three in South Saskatchewan and one in Alberta and Calgary here, with plans to open another 10 to 15 over the next 12 to 18 months.

[00:01:53] Further upstream we’ve got an extraction facility. That is Health Canada licensed now that’s based in Calgary. And that’s really where we’re going to focus on all the derivative products. So everything from oils, like tinctures and gel caps, to vape pens, edibles, concentrates, topicals — and really what we’re calling cannabis 2.0, the next products that have become legalized, on October 17, 2019 and starting to be on-shelf and started going on-shelf in December of this year.

[00:02:27] What we also really like high-quality indoor cultivation and we’ve got a facility called Thunder Child cultivation, which is Battleford, Saskatchewan that is really designed and built for the ultra premium, high-quality cannabis cultivation.

[00:02:48] We want to participate in all three verticals of the cannabis industry and we’re not trying to be the biggest in each we’re just trying to be the best and do you know something really really, well not necessarily trying to go for mass.

[00:03:04] So our cultivation strategy is really about craft at scale. We’ve got smaller grow rooms in all kind of really designed to to create high quality premium cannabis.

[00:03:13] Our extraction facility is state-of-the-art with an amazing team behind it whose depth of experience (is) in legal cannabis extraction.

[00:03:23] We really like the retail business as well. We’ve taken a bit of a different spin on it with our concept called Prairie Records. Our stores are modeled after a record shop and you know, when you walk into those stores you actually feel like you walked into a record shop.

[00:03:37] We’ve got stacks and rows of records and you know instead of your next favorite band or artist where you actually find are all of our brands and strains of cannabis that we carry in the store, and it just really provides an opportunity for the consumer to have a unique shopping experience to be able to actually touch and feel something, as they’re shopping because you’re just you’re not able to do that with all the products being under lock and key and you really, you know, not much information on the actual packaging itself.

prairie records westleaf interior cannabis

[00:04:05] Bringing a heightened and kind of more immersive experience in retail we think is really important because that is the true connection point with consumers in Canada on cannabis. And and you know by owning retail you really have that feedback loop in terms of what’s being demanded, what types of products you may want to make in order to be you know, successful on the production side of things.

David Zweifler, Gordon Magazine: [00:04:24] That’s really cool. I was thinking to myself when you were saying innovative retail experiences. I was I was thinking like how darn reached innovative do you have to make the retail experience if you’re selling weed? But it actually sounds really cool. And it probably really differentiates you in that market.

[00:04:44]You don’t only sell to your own retail establishments, right? Because you just announced a deal to produce white labeled vape pens for another retail establishment. Is that correct?

Adam Coates, Westleaf: [00:04:58] Yeah, so Delta 9 is is also a vertically integrated cannabis business based out of Winnipeg. So they are one of the first licensed producers in Canada under the old AC MPR mmpr framework.

[00:05:13] So that’s the medical cannabis framework and they also have some retail stores in Manitoba. Um, and so, you know, they’re a cultivator of cannabis. And so what were what our that deal is that we’re producing, you know vape pens for them at our extraction facility to you know sell to the broader market as well as into their own retail store.

[00:05:35] So a mix of both not just for a retailer. They’re also a producer and sell products, you know across a number of different retail businesses.

David Zweifler, Gordon Magazine: [00:05:44] So are the recent concerns about the safety of vaping products in the US affecting your business in any way either negatively out of fears about vaping in general or positively in terms of a flight to quality towards regulated products or is it is what’s going on in the US market not really a factor for you guys.

Adam Coates, Westleaf: [00:06:13] I mean it is definitely a factor in a way that it just reinforces the need for these things to be regulated by a government body to ensure that the quality consistency and safety of products that are getting into consumers hands are going through a process to ensure that they actually are safe or a safe as possible when you’re talking about an inhaled product.

[00:06:39] And so what you’re seeing is a lot of these black market operators who don’t have any regulatory oversight. Who are not you know held to strict safety and quality requirements getting products into the market that are that are you know filled with things that you know are not safe. So whether it’s vitamin E acetate or you know different sorts of metals, you know within the actual vape hardware themselves.

[00:07:03] And so, you know, this this hasn’t really changed our strategy at Westleaf, because we’re really focused on you know producing only the highest quality, consistent, and safe products and I think this just reinforces the need for further regulation and oversight in places like the US, and legalization, which will allow for more regulation and come in to ensure that the black market is taken out of the hands of consumers, and that they actually have safe and tested products that that they’re consuming.

David Zweifler, Gordon Magazine: [00:07:36] I mean in a way it sounds like it would be a boon for a regulated company like yours because I mean right now there’s there’s a fair amount of competition in that market against the black market, which is probably selling at a lower price because it’s not regulated. Do is do I have that right?

Adam Coates, Westleaf: [00:07:55] For sure. Yeah. I mean the black market the challenge of the black market is that you know, they don’t have to pay taxes and you know, there’s a there’s a whole bunch of other things that they don’t have to do and and you know, they’re able to you know have a lower price point but you know, I think what you’re going to see is consumers are going to be looking for you know, something that has been tested something that is regulated. And our hope is that you’re actually able to convince consumers to come over into the legal market with our quality products.

[00:08:26] Now that being said I think there’s a case to be made, you know to the you know, the Canadian government to say: “Hey, we need to be able to speak about you know, the safety and quality of our products and you’re just not able to do that on a widespread basis based on the marketing regulations that are in place today.”

[00:08:42] So, you know, I would I would say that there’s there’s an opportunity, for better communication by easing up of some of the marketing restrictions that are out there, to enable to communicate to consumers, the safety and high-quality nature of a regulated product in the legal environment here in Canada.

David Zweifler, Gordon Magazine: [00:09:00] Yeah, I would it would suck that that Vinny the dealer has not only no taxes, but can market (the product) a lot more aggressively than your industry can, at least at the moment.

[00:09:14] Any final thoughts on the future of retail for cannabis? Sounds like you have a very innovative concept there in the you’re ahead of the curve. Where where do you see it going? And do you have any predictions on what’s next?

Adam Coates, Westleaf: [00:09:30] Yeah, I mean, I’m I’m really excited about the future, you know, if you’re you know with retail as well as as getting into the derivative products, you know, we’re calling it sort of cannabis 2.0, you know here these next wave of products are going to be legalized here in Canada.
[00:09:45] Because you know, I am a strong believer that is going to be a huge margin opportunity as the derivative products are you know more profitable than say selling flower or pre-rolls.

[00:09:57] But more than that, it’s going to help the industry grow as it’s going to bring new consumers into the category. Because you know flower and combusting flower is not you know, a format that I think is really comfortable especially for new or occasional users to introduce themselves into the category.

[00:10:14] I think things like beverages like edibles — topicals, vapes to some degree, are going to be an easier entry point into the category for consumers to experience a product for the first time in his safe and dosed you know way as well. I’m a big believer that you know, this next wave of product is not only going to be great for for producers but also for retailers, as you know, they do have that really, you know key connection with the end consumer and so for that reason really really excited about where you know the business and the industry is going in the future.

David Zweifler, Gordon Magazine: [00:10:48] Well, you guys represent the cool trifecta of cannabis, data, and innovative retail, so we’ll be keeping a close eye on you. Thank you very much for taking the time to talk to us today.

Adam Coates, Westleaf: [00:10:59] Thanks so much for your time. I appreciate it

David Zweifler, Gordon Magazine: [00:11:02] Gordon Magazine now offers global monitoring of all the top news in retail — every morning. Click on the link in the description to see how you can get a free subscription. This is David’s Zweifler for the Daily View edition of the Gordon Podcast.

 

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David Zweifler

David is the founder of Gordon Magazine. David's experience spans investment banking, journalism, marketing and technology.

David Zweifler

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