While 2022 has been a challenging year for the cannabis industry, a company has grown exponentially despite the market challenges.
Founded in 2009, High Tide is headquartered in Alberta, Canada. The Company is a retail-focused cannabis company with brick-and-mortar and global e-commerce assets.
The Company is a leading player in the Canadian retail cannabis market through its flagship retail brand, Canna Cabana, which has 141 locations in Ontario, Alberta, British Columbia, Manitoba and Saskatchewan. High Tide also serves the US and Europe through consumables and CBD-focused e-commerce platforms.
High Tide is known for its discount club retail model at its Canna Cabana locations, modeled after Costco’s membership-based program. Some have even dubbed the company the “Costco of Cannabis.”
High Tide’s differentiated approach to retail has contributed to its success. In the third quarter of 2022, High Tide’s revenue increased to $95.4 million — a 98% increase compared to the third quarter of last year ($48.1 million).
With its differentiated discount club approach, how has the company continued to position itself as a leader in the Canadian cannabis retail space?
Become the Costco of cannabis
High Tide knew it had to differentiate itself in order to stand out and thrive in the Canadian cannabis market, says Raj Grover, High Tide’s founder, president and CEO.
“We’ve always been innovative and differentiated in our approach and ideas,” he says. “We’ve always thought, ‘If I’m selling the exact same product as the next company, what makes us different?’ And Canada is a very mature market, so you need to develop strategies that diversify [you] and differentiate your company from others.”
Canna Cabana offers two consumer product prices: Market Price and Member Price. Canna Cabana loyalty members have access to member pricing — similar to how Costco advertises its Kirkland Signature brand, Grover says.
On Canna Cabana’s website, market and member prices usually vary within a $10 range. For example, this 0.5 gram vape cartridge sells for $43.99 at market price and $32.34 at member price.
Now, High Tide is trying to improve its loyalty program and monetize its member base, Grover says.
“Again, [we are] We’re following in Costco’s footsteps,” says Grover. “As you have your executive membership, we’re in the process of launching Cabana Elite, the paid version of our cabana club.”
While the company is still finalizing the details of the Cabana Elite program, Grover expects membership will cost $5 per month or $60 per year.
Despite the introduction of the Cabana Elite program, individuals continue to have the opportunity to join the unpaid Cabana Club loyalty program.
“We don’t take anything away from non-paying members,” says Grover. “So our … Cabana Club members are currently retaining all of their existing benefits, but we’re making paid membership such a compelling offer that we think they’re going to have a very hard time turning down.”
Since High Tide launched the Cabana Club loyalty program last October, it has attracted over 825,000 members, who account for over 90% of Canna Cabana’s daily transactions, according to Grover.
“Here, that loyalty is really strong in our company, which is again modeled after Costco,” he says. “We’re constantly building that brand loyalty and customer loyalty in the country.”
Aside from its discount club business model, Grover says what sets the company apart is its deep understanding and knowledge of its customer base and forward-thinking approach.
“Since 2009, of course, we’ve been in the legal cannabis industry, in [the] only room for consumables,” he says. “We supply the same customer who is mature and heavy [consumer] of cannabis. … Knowing our customer really well helped us develop this concept.”
In the third quarter of 2022, High Tide reported a 98% increase in revenue compared to the third quarter of the previous year. Last quarter’s results also showed a 10th consecutive quarter of Adjusted positive EBITDA and a 77% sequential increase. The company has also reported a three-year growth rate of 1,970% and recently became the top-grossing cannabis company in Canada, overtaking Canopy Growth, SNDL Inc., Nova Cannabis, Aurora Cannabis, and others.
“Achieving this kind of aggressive revenue growth while maintaining EBITDA growth is an extreme rarity among Canadian cannabis companies,” he says. “This is achieved because we are thought leaders; we are innovators. As the industry matured and the competition was just beginning, we knew what was in store.”
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According to Grover, the company is focused on continuous execution, basing its business plan and next steps on where the market is and where it could be in two to three years.
“We have already started planning trains. [We think about] “How do we differentiate ourselves, not only in [the] Canadian cannabis retailer [market]but even if things get very tough in Canada, what else can we do to continue generating revenue, to continue to be profitable at an EBITDA level, while growing aggressively?’” he says.
According to Grover, the company plans to expand its canna cabana retail operations to the United States when cannabis is phased out or legalized federally. After Biden announced his three-stage cannabis policy reform plan on Oct. 6, which includes a call for a review of cannabis planning under the Controlled Substances Act, that could become a reality sooner or later.
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Currently, it’s difficult for public companies like High Tide that are listed on the Nasdaq (or any other US exchange) to enter the US cannabis market without fear of being delisted.
High Tide currently operates in the U.S. through CBD-related e-commerce platforms and consumer accessories platforms, and Grover says the company is well-positioned to enter the U.S. retail cannabis market when it can.
“Between all these e-commerce platforms and companies, we already have 3 million international customers in our database who have bought from us, whether they bought a… smoking accessory of any kind or a CBD product,” he says. “And 80% of that customer base actually lives in the United States.
“Given our e-commerce expertise…we feel like we’re being offered a rescheduling event that could become a reality with the Nasdaq allowing companies to connect with plant-touching businesses in the United States.” We’re very well established right now and really well positioned to start selling cannabis online when federal legalization happens, or [a] De-Scheduling Event occurs.”
According to Grover, Europe is also an important market for High Tide. Like the US, the company is active in the European market through CBD e-commerce and consumable accessory brands. The company acquired 80% of Blessed CBD, an online CBD retailer in the UK, in October 2021, and the company expanded the brand into Germany this year.
The company also has a sales office for consumables in Amsterdam.
“We are very active in the European market and believe that European cannabis legalization or German cannabis legalization could come before US federal legalization,” he says. “We believe that Germany is heading in the right direction and German legalization could become a reality in the last quarter of 2023 or in the first quarter of 2024. We are in active discussions with several parties in Germany about possible ways we can enter Germany with our Canna Cabana brand.”
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Additionally, High Tide will focus on Canna Cabana’s retail business for 2023, and the company hopes to expand to 200 storefronts by the end of 2023 and 250 by the end of 2024, Grover says.
“Customers love our concept and I’m looking forward to introducing it to Germany as well. We know that when [we] can do so well in a smaller market like Canada, the Germans will really appreciate this model, and then, [we] I look forward to bringing it to the United States.”