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The Great Green North - By zruskin - August 10, 2017 - SF Weekly
SF Weekly

The Great Green North

Some people call him “the Godfather of Canadian weed.”

Chuck Rifici has earned the title. In 2013, Tweed — a company he co-founded — received one of the first medical marijuana licenses issued by Canada. Tweed (now known as Canopy Growth Corp.) also achieved “unicorn” status when it was valued at $1 billion. While Rifici left the company in 2014, he certainly didn’t leave the cannabis space.

Along with three other partners, Rifici then founded Nesta Holding Co., a company he describes as “a cannabis private-equity firm.” The company began with the acquisition of WikiLeaf, a price exploration tool for cannabis dispensaries and an indirect competitor to the popular site Leafly. Earlier this year, Nesta launched Cannabis Wheaton — “the world’s first cannabis streaming company” — which Rifici directly oversees.

“Cannabis Wheaton is really building a team of industry experts in Canada,” Rifici explains. “The president there — my partner Hugo Alves — really provides the regulatory, legal expertise to essentially fund expansion of cultivation and fund additional supply. With our streaming model, we essentially take a percentage of that supply as a stream — you could think of it as a royalty — for our capital and our expertise.”

In essence, Cannabis Wheaton “streams” capital into licensed cannabis producers in exchange for minority holdings in the companies and a percentage of the producer’s yield (at a predetermined price point). With national recreational use set to go into effect in Canada on July 1, 2018, the company’s timing couldn’t be better.

While the country’s current medical marijuana program is far more rigorous than its U.S. counterpart — “It’s not a Venice Beach doctor situation,” Rifici jokes — Canadians still consume 100,000 pounds of product a year, a number that has grown 10 percent a month for several years. According to Rifici, reports indicate that the demand for legal cannabis will increase by a factor of 20 or 30 once recreation goes live, meaning the need for more cannabis producers is at an all-time high.

“Today, our producers have a hard time just keeping up with the medical demand,” Rifici says, “so we think we will run out of legal product, almost certainly, with legalization.”

At present, the Canadian market is roughly equal to California’smarket, with one huge exception: While Rifici estimates there are around 3,000 different cannabis producers in California, he says there are about 50 in Canada.

“All of the Canadian companies are really scaling up,” he says. “The top ones are getting quite large. We have a couple of producers building out almost a million square feet of cultivation. There’s some real nice scale coming to the industry, and we’re going to need it.”

As Canada navigates its current green rush, Rifici and his partners at Nesta are focused on developing brands for the new market and helping existing U.S. brands make the transition north of the border. While Canada has had a federal medical-marijuana program since 2001, the move to recreational widens the horizons substantially. Info on what precisely will be legal on Day One of recreational sales remains unclear, but Rifici believes the country will ultimately incorporate all forms of cannabis into its regulations.

Thus, Nesta is looking to help companies be the first in the door as dispensary shelf space is unlocked.

“At one point, for example, they’re going to allow brownies,” Rifici says. “Each dispensary is going to have some extra shelf space for brownies, so you want to make sure you’re one of the first products, because you don’t have to fight for market share if you’re there first. That’s what we’re trying to bring to these U.S. brands, is to make sure that they’re first in line to grab market share if and when their products become legal to manufacture and sell in Canada.”

As the story of Canada’s move to legalize cannabis on a national scale unfolds, it stands to reason that the country will have the opportunity to lay blueprints for future nations that may ultimately follow suit, including the U.S.

“The prohibition for the U.S. is in some ways a gift for the Canadian market,” Rifici says, “because it allows us to continue to scale. In many industries, U.S. competition is always fierce, and there are some great entrepreneurs in the U.S., and so I think in some ways the U.S. industry has a hand tied behind their back because of the federal illegality.”

While Rifici believes that national cannabis laws in the U.S. will one day change, he doesn’t deny that the current situation means Canada has a golden opportunity to help lead the charge in defining the global cannabis industry.

“As I read the polls, like most Americans, most Canadians view the drug wars as a failed war. I think I’m preaching to the choir when I say the biggest harm from drugs is usually drug policy,” he says. As a society, Canadians have certainly moved past that. We elected a government that wants to legalize, so, at least very recently, I think we’ve moved ahead, moved further towards a better view on cannabis than south of the border.”