CEO says winners in the space will not emerge until market reaches "a size that matters"
The real winners in the marijuana industry won’t be clear until it reaches a size that matters, according to an industry insider.
As the build-up continues to October 17, when recreational cannabis will become legal in Canada, weed companies’ stocks have been on a typical thrill ride. Tilray made the headlines by hitting US$300 last week before retreating dramatically; at 2pm yesterday it was trading at about $104 on the NASDAQ.
For Peter Horvath, CEO of Green Growth Brands, which focuses on the medicinal and recreational use of Cannabis and CBD in the US and Canada, the firms that survive commoditization will be the ones that can scale, with the quality of product they are able to put on the shelves also a big factor.
He said his company is well positioned but needs more assets before it can join the top table.
He said: “In terms of everyone else, could I tell you who will win in terms of cultivators? I don’t know; we’ll see who can actually grow because we don’t know yet.
“Are they growing Budweiser or are they growing top shelf? And what is the demand in the market also? That’s going to be interesting. There might be price resistance – we won’t know until it gets to a size that matters.”
Horvath, a former Victoria’s Secret COO, said investors have a choice about how they choose to play the weed market. The first option is to focus short term and pick whichever company they think is about to dominate the news cycle. “That’s one way to trade,” he said, “and is pretty much how the market is working.”
The second element is more in line with what Horvath has been pitching as he travels around raising capital for GGB – and that’s playing the long game.
He said: “It’s the way I feel committed to, especially if you go out and raise capital with high-net-worth individuals you’re making a promise to them that you’re going to grow and operate and dominate the industry. It can’t be [a case] of whatever story you make to get them excited and then figure out how to do it later.”
He added GGB is confident in its ability to grow, operate and scale, especially when competing for customers. Given his retail background, it’s little wonder Horvath backs his team to excel in that department.
“We feel very confident looking at our competition that while some of them are looking to hire people that could help them with that, none of them have teams that end to end, cross functionally, can do it. That’s what we have and what we’re going to continue to do.”
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