By John Schroyer
What a difference seven months makes.
Since discussing plans last August to expand into nearly every market in the western United States, Steve and Andrew DeAngelo of Harborside Health Center have pulled a 180-degree-turn and decided to focus solely on solidifying and growing their foothold in California.
Along these lines, the brothers told Marijuana Business Daily that they have sold the Harborside-branded dispensary they opened last October in Portland, Oregon, which wasn’t performing as well as they had hoped.
“For us, we’d never been able to get that shop up to break even,” said Steve DeAngelo, the chief executive officer of Harborside, one of the most well-known dispensaries in the country. “And there are a lot of shops in the Portland area in the same situation, that are just barely making money or not making money at all.”
DeAngelo said he and his brother had to make a decision to put more resources into the Oregon market or cut bait and move its workers in Portland to California.
Harborside invested roughly a few hundred thousand dollars into the Portland operation and sold it for enough to essentially break even on the deal, DeAngelo said.
The decision was made easier by some promising changes to California’s medical marijuana industry – most notably the move to develop statewide regulations on MMJ businesses, which will create new opportunities and eventually stabilize the climate.
Add in the possibility that voters could legalize recreational marijuana this November, and the California market is looking quite attractive.
As a result, Harborside wants to fully tap the California market before expanding elsewhere.
“That’s really the primary driving factor” behind selling the Portland dispensary, DeAngelo said. “The range of opportunity and the competitive intensity in the California market is going to ramp up incredibly. It’s going to be like something nobody has ever seen. And we see that happening now.”
California industry consultant Zeta Ceti said Harborside’s decision to pull back to its home turf is “a really smart strategic business decision.”
Solidifying a business’s original market in a “highly turbulent” setting is perhaps the most fundamental and important thing a company can do to ensure its future, Ceti said.
He advises California clients to focus on their home state before expanding into other markets.
“They’re already (realizing) that, if they have good business sense,” Ceti said.
Harborside also has been seeing immense growth in the California market.
“Our stores in Oakland and San Jose have just been blowing up,” DeAngelo said. “We’ve seen like 40% year-over-year growth in San Jose. We just did our first $3 million month ever in Oakland. And we’ve got a third shop that’s opening in San Leandro… hopefully within the next three or four months.”
In addition, DeAngelo said, Harborside has big plans for the new statewide MMJ rules, which will allow – for the first time – for-profit cannabis companies instead of only non-profit.
He’s already compiled a team for and founded a new for-profit venture called Flrish, which will include cultivation, manufacturing and retail all in one. The company even recently completed a round of fundraising, though DeAngelo didn’t disclose how much was raised.
“We are focusing on California, developing a manufacturing and cultivation capacity along with our retail capacity. So this re-focusing is really part of a much larger plan,” DeAngelo said. “All of our shops will be linked into an integrated supply chain, once this plan is fully executed, say a year from now.”
Harborside also may still continue expanding, just in California instead of other states. DeAngelo said a Harborside deal in Illinois has basically also been put on hold.
“That was really more of a licensing deal than a company-owned store,” DeAngelo said. “We had a minority interest there. And it’s unclear at this stage what’s going on. That place hasn’t gone through the licensing process entirely yet. But we made a decision, subsequent to the time that we decided to go do the deal in Chicago, that we wanted to refocus in California.”
But Harborside may expand, for example, to southern California, if the right opportunity presents itself.
“We’re eager for an opportunity like that,” DeAngelo said.
John Schroyer can be reached at [email protected]