When massive amounts of capital were being poured into greenhouse construction a few years ago during the heyday of Canada’s cannabis stock mania, the chief executive of Toronto-based Sensi Brands made a decision.
CEO Tony Giorgi put his capital behind sales channels and brands instead of mass-scale greenhouse investments.
Giorgi utilized a “capital-light model” – the opposite of his largest competitors.
It paid off.
Sensi, privately owned, opened its books to MJBizDaily to confirm last year’s profit but declined to release the specific amount.
“We do not issue products into the marketplace at negative margin. It’s part of our mantra. We’re not in business to lose money,” Giorgi said.
“We focused on innovating highly desirable brands, creating distribution channels and then working with LPs to get their craft products to market.
“We did not come out in 2019 with the intent of being the largest cultivator or extractor in the country.”
Sensi has a small cultivation facility and farm-gate store in St. Thomas, Ontario, and typically focuses on specialized strains.
The business also has a medical channel, called Sensi Medical, with approximately 4,000 active patients.
Positive cash flow notwithstanding, Sensi says the company, some 100 employees, stands out in a number of ways.
Management consumes cannabis daily (after workdays), and workers are invited to consume at monthly teembuilding meetings.
MJBizDaily spoke with Giorgi about his company and the outlook for the industry.
What did competitors, who destroyed millions of grams of cannabis and lost billions of dollars, get wrong in the years after legalization?
Between 2016 and 2019, you had a lot of companies with a flawed business model.
The entire business models were getting great genetics and growing great weed at scale.
Everyone was mass-scale.
They grew all that weed, and they all looked at each other and said, “Hey, do you want to buy it?”
Nobody focused on the distribution paths, and that’s how our business model is different.
What are other key details about your business model?
It’s a capital-light model focused on building channels. It’s not about focusing on growing commodity weed.
We built an ecosystem to rationalize quality weed versus undesirable weed but also to work with all the craft growers, who aren’t brand experts, in getting their product to market and underpinning our brands with that product.
We have five lines of business. We have a wholesale distribution line of business, where we’ve worked hard to sign supply agreements for spot buy, contract grow and joint ventures.
The wholesale distribution business is valuable to the company and the LPs that are part of the ecosystem, because it’s a distribution path for them.
The core line of business, which is our CPG brands business, is where we focus a lot of our efforts.
We invest a lot of money in the education, triaging and fulfillment of our medical patients through our fourth line of business, which is the medical marketplace (Sensi Medical).
We launched the medical marketplace last year with the intent of curating one of the best medical marketplaces in the country, by going to all the LPs and selecting all of their best medical products to have a one-stop shop.
As a patient of that clinic, why would I want to be committed to one LP when I could have all the best products in one marketplace? That was the vision behind the marketplace.
The farm-gate store is the fifth line of business.
Every line of business is capital-light and cash-flow positive.
You’re either the only standard licensed producer to turn an annual profit or you’re one of a small number. What are you doing differently?
We’re relentless about innovation, optimization and execution.
Those sound like fancy words, but the reality is this is my sixth startup company over the last 30 years.
We have one of the most experienced leadership teams.
We have a very disciplined approach to how we build companies.
We’re cannabis sommeliers by trade, so we’ve invested in learning everything about the plant.
We’re daily, experienced consumers, so we intimately have the academic and experiential knowledge to successfully navigate and launch highly desirable brands.
How do your employees factor into your success?
The one thing that I unequivocally would never lose sight of is the culture of the company and the employees.
We have gone above and beyond to create a culture and environment here that bleeds family and community.
We pay very competitive compensation, offer career growth and training and have a weekly 4/20 meeting, where the company shuts down at the end of the day and there’s a presentation in an educational component.
The staff is permitted to consume their cannabis of choice during that meeting. When the meeting is over, that transcends into a social time, or they wrap up for the day.
We’re trying to create an environment that’s transparent and promotes from within.
Culture and employees are the No. 1 priority for me and the management team.
You were involved in tech during the dot-com boom and bust, in your roles at Q9 Networks and others. What parallel, if any, do you see with cannabis, and how do you see it playing out?
There are a lot of parallels with the legalization of cannabis and the internet boom.
The years 1995 and 2000 in tech are very similar to 2015 to 2019 in cannabis.
By 2000, all the early e-commerce prospectors were a little premature, and therefore we had the big dot-com crash, which is effectively what we had in (cannabis) in 2021.
By 2003 and 2004, the real businesses – not the pump-and-dumps – the people building real cash-flow earning companies started to emerge.
We started seeing the likes of Amazon Web Services, Microsoft Azure, Google and Shopify emerge.
I kind of see the same parallel in cannabis.
I think the next three to five years will be very exciting for the cannabis space. The dust is settling.
The fly-by-nights are on their way out, and now, real companies are emerging that are building solid businesses and gaining market share on business fundamentals and profitable revenue.
I’m very optimistic that the next three to five years are going to be an exciting time in the cannabis space.
(This interview was edited for length and clarity.)
Matt Lamers can be reached at firstname.lastname@example.org.