The Canadian cannabis industry has seen a recent spate of mergers and acquisitions, but there’s one producer that says it won’t sell, now or in the foreseeable future: MTL Cannabis.
In a landscape dominated by a few big firms and swathes of smaller companies who see sale as a viable exit strategy, MTL Cannabis is among a select few that rules out being acquired altogether.
Recent big-ticket acquisitions include Canopy Growth Corp. buying Ace Valley in April; Sundial Growers Inc. announcing buying Inner Spirit Holdings Ltd. for $131 million in May; as well as Hexo Corp. purchasing 48North Cannabis Corp. in a $50 million deal last week and said Friday it’s acquiring Redecan, Canada’s largest privately-owned licensed producer, for the astronomical sum of $925 million.
As virtually all of these behemoths have struggled to make a profit, industry onlookers have called out these buys as shallow attempts to gain market share and brand loyalty.
Read more: Can you buy brand loyalty? Canopy thinks so
Read more: Hexo to buy 48North Cannabis for $50M
While these public companies will make a lot of money, they don’t really care about the product for the most part, says Rich Clement, MTL Cannabis co-founder and CEO.
“It was never really our intention to build it out just to be bought out,” he says. “We built into producing high-quality flower.”
Instead of developing a large portfolio, MTL Cannabis has doubled down on a product that’s unique to them, their sativa-dominant, high CBG, Sage n’ Sour, a mix between Sour Diesel and S.A.G.E. Their dedication shows. That single SKU is currently first and second in sales in three provinces.
MTL Cannabis is selling in B.C., Alberta, Saskatchewan, Manitoba, New Brunswick and Newfoundland with Ontario as its biggest buyer.
The company’s integrity comes at a bit of a cost, as they’re entirely self-financed through smaller private loans, Clement says: “The banks aren’t willing to give anything even though we’re profitable.” Still, MTL Cannabis says it survives and thrives largely based on what its consumers want, which is good weed.
Part of the reason for MTL Cannabis’s not-for-sale philosophy is that the business is largely a family affair. The company was founded by Clement and his brother Mitch, and they’ve since brought on Clement’s wife, his brother-in-law and his ex-sister-in-law. The brothers Clement even share an office.
Clement hasn’t ruled out an exit strategy decades down the line, but his company has no plans to be bought regardless of whether or not he’s still there.
MTL Cannabis’s future may not include acquisition, but Clement is considering other possibilities like expanding to Europe or even making its own strategic purchases. He has plans to add four more grow rooms, and possibly two or three more cultivars in the short term.
Prioritizing internal growth
A big part of building a profitable company means bringing on people with business expertise.
So, Clement brought Jenn Larry on as a strategic consultant last October before hiring her as chief commercial officer in January 2021.
At the time, MTL Cannabis was three grow rooms and 20 staff. Seven months later, it grew to 14 rooms and 100 employees.
Larry took a winding path to get to MTL Cannabis, starting first in the music business before working in tobacco, oil, pharmaceuticals and gambling before eventually making her way to cannabis.
Part of her role is to think about MTL Cannabis’s place in what she calls “a trillion-dollar start-up industry.” That means everything from planning the next 12–18 months of what comes after Sage n’ Sour, to thinking of ways to maximize sales, “getting the customer to get that second or third jar.”
For Larry, the not-for-sale aspect of MTL Cannabis is simply one that is built into its role as a “flower- first company for the modern street.” In other words, these two concepts are inextricably linked. She mentioned that during her time running a consulting firm, many of her cannabis clients had never even walked into a facility or smoked a joint.
“When you’re feeling that the level of industry requires architecting supply chains with people who maybe haven’t had as much experience,” said Larry. “It is more important than ever to have a company that stands for something more than just being bought out.”
At the end of the day, Larry echoes her business partner Clement in keeping an open mind to possibilities — other than acquisition, of course.
“I think all of us are trying to figure out… what’s the perfect model? There isn’t one, I think ours isn’t serving us poorly,” Larry says. “But of course, we’ll continue to evolve and live in the reality of what it means to become a commercial business.”
Correction (2021-6-4 9:25 a.m.): A number of corrections have been made since the first version of this article was published, including: incorrect statements that said MTL Cannabis products were being sold in Washington State as well as in the Canadian territories, and that Jenn Larry was hired as chief commercial officer last October. Other minor revisions to fix grammar and to better reflect speakers’ intent have been made.