A longer version of this piece appeared earlier at MJBizDaily.
Only one large-scale marijuana producer in Canada has established a leading market position without accumulating steep losses: Pure Sunfarms.
The company has a hemp-related joint venture in the U.S., Village Fields Hemp, and recently acquired CBD maker Balanced Health Botanicals.
The Delta, British Columbia-based cannabis company is a subsidiary of Village Farms, a Florida-headquartered vegetable grower that trades on the Nasdaq as VFF.
Pure Sunfarms is profitable, if just barely, having earned net income of $20.2 million (25.6 million Canadian dollars) since 2018.
Its major competitors, however, have lost a lot of money, even after spending lavishly on acquisitions to try to fuel growth.
Pure Sunfarms holds a comfortable lead as the top seller of flower in Canada, the dominant category in the adult-use market.
Another striking difference between Pure Sunfarms and rival large-scale producers: Pure Sunfarms accomplished the feat largely through organic growth – not the acquisition-driven strategy, which dilutes shareholder value, utilized by other companies.
How did Pure Sunfarms do it?
Village Farms CEO Michael DeGiglio said it started with understanding the customer and agriculture.
“We said, ‘Let’s really understand the customer base to start with,’” DeGiglio told Hemp Industry Daily in a phone interview. “We have to be able to satisfy that customer, who is very educated and who has been buying it for a long time.
“We have to give them the texture, potency, strains, varieties. We have to give them all the attributes to compete with the underground, decade-long grower.”
DeGiglio said Pure Sunfarms is selling the “highest quality at an everyday price. That was able to resonate very well with the consumer, and we have never changed our strategy.”
Hemp Industry Daily spoke with DeGiglio about how Pure Sunfarms has succeeded thus far, what it did differently and how it envisions international expansion playing out.
Pure Sunfarms succeeded in scaling its massive greenhouse where other mass producers stumbled. What did you do differently?
We started doing it 35 years ago, and that’s really important because, when you talk about scale, it took us two decades to be able to build the massive greenhouses properly, understand the technology, be able to know that these large-scale facilities in agriculture can take five years to ramp up to full efficiency.
We’re not smarter than anyone else. We just made those mistakes over three decades.
Today, when you see someone say, “We’re going to start out tomorrow with 3 million square feet,” it’s bizarre. They have no background in agriculture, and no understanding of it.
Some of them have so much money they don’t care about shareholder dilution or prudent capital spending and built stuff that is so futuristic, you might see it on Mars in 20 years.
But as an efficient business, it didn’t work.
Then you look at where these folks built the greenhouses. It’s insanity. So, people were just building wherever, and it didn’t make a lot of sense. They made very classic amateur type of mistakes. I’m not being derogatory, but it’s true.
What’s your entry point to the U.S. marijuana industry?
When you look at the U.S., it could be a very different dynamic on federal legalization than it is now.
Proving out in Canada (means) it’s a lot less risky for us to ramp that up in Texas.
One thing we try to do is be very prudent and patient. Pushing it when it’s not ready to be pushed is a waste of money and time.
If Texas is not there – and Texas will either get there through legalization by the state or federally – and Nasdaq allows us to participate, we will then look at an entry point.
Our acquisition of Balanced Health Botanicals, which is a CBD type of company. … That can be one of the entry points, looking at Colorado.
Matt Lamers is MJBizDaily’s international editor, based near Toronto. He can be reached at [email protected].
