Do principles lead to profit? For North 40 Cannabis, a small cannabis producer in northeastern Saskatchewan, the answer is yes.
Gord Nichol, owner and president of North 40, said his privately held company is profitable – an uncommon (and some would say exceptionally rare) feat in Canada’s burgeoning cannabis industry.
The business also stands out in a sea of competitors by being largely family run, self-financed and focused successfully on premium-quality craft cannabis.
“Transparency, authenticity,” Nichol said when asked to describe his approach to business.
“When I got into this industry, every one of these damn companies was lying to everyone about everything. I thought, ‘All I need to do is tell the truth,’” he said.
Like any business, Nichol and his team had to overcome major hurdles.
The 57-year-old entrepreneur and his wife even mortgaged their home to finance the business.
And two years ago, North 40 made the hard decision to shutter, clean and then reopen its facility after it was stricken with powdery mildew.
“I refused to put that product out on the market for fear of wrecking my brand and potentially sending out contaminated products,” Nichol said.
“You can spray and get rid of it. … But I chose to fall on my sword on that one.
“Financially it damn near ruined us.”
MJBizDaily spoke with Nichol about overcoming obstacles and challenges in Canada’s cannabis industry.
You’re profitable where most competitors are not. How?
Working 14 hours a day, watching every penny, trying to be on the forefront of new products that are coming out and maintaining quality is probably our secret sauce. And customer service.
Put a product out that people want (that) passes my own level of acceptance. I am kind of a cannabis snob; I live and breathe it.
We got a few things we do that nobody else is doing. We do on-demand packaging for our retail outlets, which means product isn’t sitting and aging in Mylar pouches.
What is an example of an innovative way you save money?
We’re lean. We really focus on trying not to waste any money at all.
We look for innovative ways to cut costs anywhere we can.
I have a deal with Aurora Cannabis, (for) their genetics and breeding program. In exchange for “no-cost-to us” genetics, I promote their business when we grow new cultivars and launch them.
I always give them recognition as to where they came from.
That saves us a significant amount, up to $5,000 a month. It allows me to have unique genetics, which is always a struggle for a craft grower like me.
Are you craft, and can you define “craft?”
If anybody’s craft cannabis, we are.
I think if you’re a micro-producer, you’re three-quarters of the way there, because with your limited footprint/canopy, you can pay more attention to each individual plant.
That’s where it (craft) starts – not having more plants than you can pay individual attention to.
The second thing is post-harvest care and cure. Of course, we hang dry and hand-trim, like any other craft outfit.
We made a large investment in stainless-steel cure cans, and our storage area is temperature-controlled for optimal preservation.
We really pay attention to moisture levels at time of cure and time of packaging. There’s a lot more to it than whole-hanging plants.
Demand right now for our products is outstripping supply. So it’s not too hard of a sell.
How do you convince customers to pay more for a premium product?
We’ve been fairly fortunate so far that we’ve been able to deliver outstanding products.
I think it’s a natural progression, and I would say that sales based on THC would confirm that. There’s not many people looking for 17% (THC) products.
I think new smokers get a buzz on whatever they smoke. Once they start to develop a taste for different terpene combinations and stuff like that, they start to find their groove.
It’s also like wine aficionados, who are proud to show off their $80 bottle of wine and share it with friends.
As a consumer myself, I’ve always bought the best, most expensive cannabis I could get.
How do employees fit into your company’s success?
Key to our success has been having people show up to work every day, ready for work, and really dedicated to doing the best jobs they can. You don’t see that very often, in any industry.
We pay really well, and it’s resulted in basically zero turnover and highly trained, efficient staff.
My wife and I just pull a wage, and it’s not much.
What are your thoughts on the federal excise tax and unpaid excise levies?
First and foremost, I think it should be eliminated for medical cannabis.
I’m hearing there is a massive amount of unpaid excise tax out there (CA$52 million). I would like to see the government collect that tax aggressively.
If that sinks some companies, then so be it.
I know there are companies right now … accumulating a huge backlog of unpaid tax. I assume that will eventually bite them.
But as a (business) who does pay its taxes, I’m a little bit disturbed that people can just choose not to.
I would like to see the excise tax come down. But I’m not sure it’s going to have the desired effect.
There’s no guarantee that money would end up back in growers’ pockets.
I’m almost sure that the large companies will further reduce their selling price by whatever amount their excise was reduced and just try to capture more market share.
They’re already used to losing money. Somebody will do it.
But do you think it should still be amended in that case?
Absolutely. The government is hitting us way too much. Either way, I think we have to roll that dice.
The excise tax is too much, and we’re missing out on a lot of the black-market share I think we could get.
Excise taxes are out of line on extracts also.
It’s not allowing us to compete realistically with the black market.
This interview was edited for length and clarity.
Matt Lamers can be reached at matt.lamers@mjbizdaily.com.
