New Leaders of the Cannabis Industry
GTEC Holdings Ltd. is a Canadian cannabis company with a focus on growing and marketing premium-quality craft cannabis. The company was incorporated in June 2017, with its head office based in Kelowna, British Columbia and various growing facilities throughout Alberta and Ontario. Though only a year into its existence, it has already accrued impressive partnerships and agreements, as it looks to assert itself as a leader in the cannabis industry.
GTEC currently sports eight chief holdings, which include its original five growing facilities, as well as relatively newer additions. The initial five – GreenTec Bio-Pharmaceuticals Corp, Falcon Ridge Naturals Ltd., Tumbleweed Farms Corp., Alberta Craft Cannabis In., and Grey Bruce Farms Inc. – operate as its primary facilities for growing the cannabis crops.
The company has added Zenalytic Laboratories Ltd. and Spectre Labs Inc. to its roster. These two specialize in analytics and testing, as well as extracting cannabinoids for use in oils. The Zenalytic acquisition grants it access to a cannabis dealer’s license, adding to its cultivation license secured through Alberta Craft. GTEC is also expanding into retail opportunities, as it has a minority stake in Alberta-based Cannabis Cowboy, as well as a majority stake in a retail initiative that includes an exclusive store in Nipawin, Alberta and an e-commerce fulfillment centre in Saskatoon.
GTEC’s business model also relies heavily on vertical integration which has meant pursuing retail business as part of its plan. Initially, it was more focused on business in Western Canada but has recently made a move toward Central Canada as well with its ventures in Ontario. Through vertical integration, the company hopes to have retail spaces as well as laboratory and growth facilities to control much more of the supply chain.
By the end of October 2018, Bill C-45 will be passed federally in Canada, allowing for the selling of cannabis for recreational purposes. GTEC Chief Operating Officer David Lynn says that, while laws and regulations surrounding cannabis can be a moving target regarding what is allowed or restricted at certain times, the new bill provides clarification and has made cannabis laws in Canada much less restrictive. For example, Lynn says that a cannabis company is no longer required to own an in-house bank vault in its facilities thanks to the bill, and access to genetics for cannabis growth is much easier as well.
Before the bill’s inception, companies like GTEC were bound to Health Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR), which Lynn says was much more restrictive and conservative in comparison to the Cannabis Act that effectively replaces the ACMPR. In previously being restricted to the medical field, cannabis companies had access to attractive margins, but would not see a great deal of capital compared to what is anticipated under the new regulations.
Lynn says that recreational legalization has led to more capital coming into cannabis-based operations, as well as a great deal of excitement in the field; however, the laws around the selling of recreational cannabis will still be somewhat touch-and-go, as Canadian provinces will be responsible for sales and distribution, leading to regional variances in laws that GTEC must work around.
For a young company, GTEC has seen its share of successes but also faces challenges. The company is currently going through a period in which facilities are being built and licenses pursued, but cash flow is not being generated at the level it needs to be. Lynn says that the company has been successful in raising capital for its various investments thus far, and its stock has ridden a positive wave of growth.
Given changes in the market, GTEC looks to continue to build a solid team and develop good relationships to see it through to its next phases. As it grows and takes on more opportunities in many areas, Lynn says that its focus will need to be refined, based on its size as a company. It has been an exciting year, but Lynn feels that eventually settling on the right focus and resources is important for a company as young as this.
Another challenge is that, while the cannabis market is relatively new, Lynn says the market is already crowded. He says it is hard for cannabis companies to stand out, and they tend to blur together because companies focus on establishing attributes that are not unique. GTEC seeks to buck this trend by accentuating its points of difference and through good old-fashioned methods as well.
Lynn says that conducting oneself with honesty and integrity is what really resonates with people over time, and if you treat people fairly and with respect, you can expect to foster a good relationship, be it with a supplier, investor, or customer. The market itself has changed a great deal in less than a year. Up to the end of 2017, there was much hype around companies with non-traditional metrics for business, and you could market a company on hype alone, says Lynn. Now, in 2018 and beyond, you need sales and hard data to succeed. Potential customers and investors are bargain-hunting as the market becomes more intelligent, and if a business cannot keep up with concrete sales and earnings data, it must work on securing licenses and agreements that shows it can get those numbers going forward. The cannabis market may be in its infancy, but it is no place to slouch business-wise.
To take advantage of a new venture like the cannabis market, a company on the rise must possess employees with passion and the business acumen to elevate their company’s above the crowd. Lynn notes that many of GTEC’s employees come from varied backgrounds, ranging from pharmaceutical sectors to alcohol and tobacco. Lynn himself originally began in the food and beverage field. These various disciplines all contribute to a better understanding of the cannabis market; as Lynn notes, they are not all that different from each other in a general sense.
GTEC’s employees have many roles to fulfill, from general management and marketing to sales, finance, and accounting, and even growing and harvesting. Traditional business roles are appearing in an industry that is only newly opened, which allows for exciting new opportunities for knowledgeable employees to shine, and Lynn credits staff with rising to the challenge.
Another advantage pushing GTEC forward is that it, as David Lynn says, is much more flexible than larger licenced producers (LPs) in the cannabis sector. Large operations have bigger market caps and are less willing to be flexible in partnerships, which is the inverse of a relatively smaller company like this. GTEC has pursued many partnerships, including ones with other licensed producers and has developed a strong portfolio of brands because of its ability to bend to its partner’s needs and a nimble way of dealing with them.
Lynn also feels that the marketing of its brands is more effective than that of bigger companies, which may not take the time to brand the right way, resulting in poor-quality advertising or product. Bigger brands can come across as homogenous, says Lynn, with a lack of brand distinction or just an inferior approach. Lynn notes GTEC’s branding as very visual and distinctive, noting that people tend to react better to a visual aspect of a company’s identity. Lynn says that not only must a product deliver on its premium quality tag, but it must stand out to be considered, and he is confident that the company will continue to do so.
As GTEC looks to the future, much of what must be done is quite concrete. The company recently gained permits to upgrade to a 240,000-square-foot facility in Vernon, British Columbia via a joint venture, netting it more production capacity. Another turning point is the goal of securing a sales license for the Edmonton facility. This fall, it will meet with Health Canada to review its facility and initial cannabis crops after the harvest, which will be a key milestone in the company’s development and will hopefully lead to securing a sales license and, in turn, a positive incoming cash flow.
As Lynn notes, this is an exciting time in the nascent cannabis industry, with around 115 licensed producers on the market representing about seventy-five companies and much consolidation and acquisition to continue as the market grows. There is an air of excitement as GTEC Holdings enters its second year of business, and begins to secure its footing in its field.