In this edition of "Rising High," The Fly conducted an exclusive interview with Adam Coates, chief commercial officer of Westleaf (WSLFF), a Canadian cannabis company focused on brands, extraction and production of derivatives, retail and cultivation. Here are some of the highlights:
BUILDING BRANDS: Westleaf is a vertically-integrated Canadian cannabis company focused on building brands. “We see the biggest value in actually growing brands in the cannabis space and that’s what’s going to provide long-term value and success,” Coates said. “How we’re conceptualizing doing that and how we’re actually doing that is, first and foremost, retail. We view retail as an incredibly important part of cannabis and building brands and connecting with the consumer.” The CCO added the company’s retail business Prairie Records has three stores open in the province of Saskatchewan and plans to open another 20 to 30 across Western Canada and potentially Ontario in the next couple of years. “Further than that we’re also going to be producing products out of our extraction facility that is based in Calgary,” he said. “That’s where we’ll get into this Phase 2 products as well as some of the other formats that are legal today. Then we are also are building a cultivation asset in Battleford, Saskatchewan.”
COMPETITIVE EDGE: The CCO said he thinks Westleaf’s competitive edge lies in the company’s retail business. “We’ve got a very unique concept and brand in Prairie Records as well as a shopping experience that is very different than any other retailer,” he said. “While we think that’s going to be a very successful business, what owning retail actually does for us is understand the consumer better.” Coates said understanding what the consumer is buying, how they’re shopping and their preferences will factor in when producing and developing products that will sell through its retail channel and other retailers. “We really think that retail is a key differentiator for us and will lead to us to produce great products and customer experiences.” Prairie Records uses a music and record cover concept in order to merchandise products and SKUs which Coates said the company developed when thinking about the limited marketing and awareness due to regulations. “Packaging is a big issue in that on the package itself is a very small brand element with very little information and very little way to educate the consumer,” he said. “When we thought about Prairie Records really what was core to our strategy around Prairie Records is two things. One is focus on community, being very good neighbors in the actual geographic neighborhoods that we’re operating in. That is to ensure that we’re doing our part in the industry to get over the stigma that is associated with cannabis.” The CCO noted that that company’s tie-in to music was a way to become part of communities already friendly to cannabis to help amplify the firm’s message. “The other piece is ritual,” he said. “Cannabis is steeped in ritual and same with music. Creating a ritual in store that is familiar, that is comfortable and that is nostalgic is really a great benefit and creates an environment that not only will customers want to go to but will actually enjoy spending time at. This encourages the sense of discovery, the sense to understand a product a little bit more.”
LEGALIZATION: When asked about which country might be next to legalize cannabis on a federal level, Coates noted news that Luxembourg is looking to legalize recreationally and said he believes a lot of countries are looking towards Canada to see how successful it is. “What you’re seeing is a natural progression, much like Canada did, in terms of legalizing cannabis from a medical perspective first and then legalizing it federally from a recreational perspective,” he said. “Countries that are moving along the path of legalizing and creating a medical program will be the fast followers in terms of recreational programs,” The CCO added there are a number of countries in the EU and Australia as well as countries in South America, that have started to enact either medical programs or hinted at a recreational program in the future. When asked about his views on the U.S. legalizing federally, Coates he thinks it is a when, not an if. “You’re seeing more and more states starting to legalize but the timeframe of that, it could be five to ten years,” he said. “It could be further down the road but that is very contingent on the political climate and what happens in these next elections. It’s not going to happen in the next couple of years but in five to fifteen years it would not surprise me if the U.S. does legalize recreationally on a federal level.”
EXPANSION: The CCO said Westleaf will “absolutely” look to expand as more countries legalize and said the company is well-positioned to do that with assets under development and management team experience. ”We’ve got a huge depth of experience on both the financial M&A side of things, because that is going to be one of the ways to move into the global market, but also working in multiple jurisdictions and understanding the challenges of different regulatory environments,” he said. “We absolutely see a great opportunity and expect to expand globally in the future.”
CHALLENGES: When asked about the challenges facing the industry and the company, Coates said he views the biggest obstacles as the significant regulation and restriction on marketing and branding. “Canada is in the position that it’s the first G20/G7 nation that has legalized cannabis from a recreational perspective federally,” he said. “That lead could be reduced if we’re not able to do some of the things that other normal consumer packaged goods do. I would even kind of equate it to looking at what beverage and alcohol companies are able to do in terms of being able to grow a brand, grow awareness.” The CCO said the restrictions around marketing in packaging requirements creates challenges for the industry. “I understand that the point of bill C-45 was to get rid of the black market and reduce the impact or availability of cannabis to minors. but I believe that that can be done while still treating cannabis like alcohol.”
OPPORTUNITIES: Coates said he believes the biggest opportunities in the space are the next wave of products. He said that “As we get into this next phase of products that are going to become legal later on this year, vapes, concentrates, edibles, beverages, topicals, those are the products that are going to bring more consumers into the category.” The CCO added traditional formats like dried flower, pre-rolls, oils and tinctures could be intimidating for a consumer that has never used or has not used cannabis for a long period of time and that dosing can be difficult. “What gets me excited about being in the cannabis space is the opportunity to use cannabis in different ways for different types of experience,” he said. “It could act as a nutraceutical, a recreational product and can also play in health and wellness and beauty. These new formats will open up product modalities that will encourage consumers who are not currently consuming cannabis to try cannabis, get a better understanding of it, have some experience with it and see how they can incorporate into their lifestyle.”
OTHER CANNABIS STOCKS: Publicly-traded companies in the space include Aurora Cannabis (ACB), Aphria (APHA), CV Sciences (CVSI), Canopy Growth (CGC), CannTrust Holdings (CTST), Cronos Group (CRON), General Cannabis (CANN), Canopy Growth, Tilray (TLRY), Innovative Industrial Properties (IIPR), India Globalization Capital (IGC), ICC International Cannabis (KNHBF), Biome Grow (ORTFD), MediPharm Labs (MLCPF), Indiva (NDVAF), OrganiGram (OGRMF), KushCo (KSHB), MedMen Enterprises (MMNFF), Elixinol Global (ELLXF), Planet 13 Holdings (PLNHF), Wayland Group (MRRCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), Origin House (ORHOF), Sunniva (SNNVF), Sproutly (SRUTF), DionyMed Brands (HMDEF), GrowGeneration (GRWG), Harvest Health & Recreation (HRVSF), Trulieve (TCNNF), Zynerba (ZYNE), Greenlane (GNLN), Delta 9 (VRNDF) and Canopy Rivers (CNPOF).