Since the earliest stages of the legalization movement, cannabis entrepreneurs have been apprehensive about the “big players” entering the market. But in light of the $4 billion Constellation Brands invested in Canopy Growth in August, it’s clear that the big players have already arrived and the explosive growth of the cannabis retail sector is a siren’s call for many investors.
As hundreds of businesses jockey for position in this emerging industry, it seems as if cannabis retail and dispensary chains like MedMen, Columbia Care, Rise and Harvest of Arizona have been built overnight. But that is far from true. Each company has followed a strategic path to expansion and raising capital to set them apart from the smaller players in the space.
Ultimately, only time will tell who will become the largest retailer in North America, but these four companies — plus LivWell International, an intriguing upstart with connections to one of Colorado’s largest chains — are early frontrunners in the race.
Harvest built a name for itself by creating retail atmospheres in line with what customers expect from a commercial retailer and not from a cannabis dispensary.
“When we built our first store in 2013 we had never seen a cannabis store that was built like a typical retail store,” CEO Steve White says. “To us it was a realization that the world of cannabis needed to take another step in the design of these facilities.”
Years of winning licenses in competitive application processes has fed “an insatiable appetite for growth,” White says, and an array of indoor, outdoor and greenhouse cultivation facilities fuel the dispensary operations.
White expects to have operations running in 12 states in 2019.
“I cannot count the number of irons in the fire we have across the country,” he says.
When White and his fellow co-founders started Harvest in 2011, the goal was to receive a single license in Arizona. Always an overachiever, the company received two.
Harvest opened its first dispensary in 2013 in Tempe. In 2017, Harvest merged with Modern Flower, an Arizona-based cultivation company, making it the largest cannabis operator in the state.
“That injected us with renewed energy toward expansion,” White says.
Appetite for Expansion
Harvest already has seven dispensaries in Arizona, one in Pennsylvania, another in Maryland and licenses in Nevada, Illinois, Ohio and Arkansas.
But White says the company hasn’t just gone east from its headquarters in Arizona — it’s gone everywhere. Harvest also has more than 20 applications in process in California, real estate currently in development in Michigan and Massachusetts and more applications underway in Florida, Nevada, North Dakota and New Jersey.
“And we are about to open two more (dispensaries) shortly in Arizona,” White adds. “There’s going to be a lot more than that in the near future. We have a lot of things that are close to popping.”
An obvious highlight in the company’s portfolio is Harvest’s striking retail design. Drawing from a limited palette of colors and materials and incorporating interactive displays, Harvest’s design sets it apart as one of the few retail chains that, while immediately distinct, also affords customers time to browse without pressure from salespeople or others waiting behind them in a line.
After traveling to visit dispensaries in nearby medical states, the founders decided the first Harvest should reflect traditional retail outlets where products are displayed openly on the sales floor and customers have ample time to interact with the merchandise at their leisure.
“We had not seen a store with a display where patients could interact with products,” White says. “If a patient — and at that time there were no recreational stores — wanted to spend some time interacting with the product, that would be done in front of a cash register.”
Harvest has approximately 250 employees. The majority reside in Arizona, but White says several have “made incredible sacrifices” to help the company expand into new states.
“We have people all over,” White says. “One of our principals just moved to California to make sure that’s accelerated. One of our top real estate guys just moved to Massachusetts a few months back.”
White says all 250 employees have been key to the company’s success. Among them he gives personal accolades to his two fellow co-founders (who were not named due to projects not associated with cannabis) and Jason Vedadi.
White says Vedadi “really leads our mergers and acquisitions. He’s working on ways to grow the company 18 to 20 hours a day, seven days a week.”
From its unassuming Arizona origins in 2011, Harvest has built a national footprint in the cannabis industry with very little investment capital.
“We did an $11 million PPM (private placement memorandum) raise to build out two facilities in one state,” White says. “But otherwise we have had to leverage profitable operations in order to execute our expansion plans.”
Now, having proven its model can be profitable, White says he expects a different path to further expansion.
“One of the things that makes Harvest so unique is that we have developed a very large footprint with a very limited amount of capital,” he says. “But now we are at an organizational inflection point where we are going to have to access outside capital in order to do what we want to do in cannabis.”