The man dubbed “the Godfather of Canadian weed” figures he knows an up-and-coming medical marijuana venture when he sees one.
And Chuck Rifici clearly likes the look of Carleton Place’s RockGarden Medicinals, a new entry into the industry that just received its licence to grow medicinal pot in August.
The company Mr. Rifici now heads, Cannabis Wheaton Income Corp., announced late last week it has acquired RockGarden in an all-stock deal. Under the agreement, RockGarden’s shareholders will receive up to 27.5 million shares of Cannabis Wheaton (TSX: CBW).
OBJ360 (Sponsored)
The value of an Algonquin College degree: Experiential learning, taught by industry experts
Zaahra Mehsen was three years into a biology degree at a local university when she realized she wanted to take a different path. “I realized that it’s not my thing,”
How the uOttawa faculty of engineering instills an ‘entrepreneurial mindset’ in students
A decade ago, Terrafixing chief operating officer Vida Gabriel was a chemistry-loving student in high school with little to no interest in business or entrepreneurship. “I didn’t like the sales
A co-founder of Canada’s largest licensed medical marijuana producer, Smiths Falls-based Canopy Growth Corp., Mr. Rifici has deep roots in the industry. He said he’s known RockGarden’s founders, the mother-and-son team of Deborah Hanscomb and Andrew Rock, for years and believes they have the pedigree to become a successful player in an increasingly competitive sector.
“At the end of the day, like in any business, you’re really betting on teams before anything else,” he told OBJ. “Collectively, we know the industry. There are other companies that we could have looked to start a transaction with, but I this is a team we’re familiar with. We’re just really happy to have them on board.”
First harvest expected in January
Even though RockGarden has yet to produce a single gram of cannabis, Mr. Rock already has extensive experience on the production side of the business. He spent 2½ years working at Canopy’s Smiths Falls factory, learning the seeding, growing and harvesting process inside and out and rising to the rank of production manager.
“He and his team know what they’re getting into,” Mr. Rifici said, adding he’s been “quietly following” RockGarden’s progress since Mr. Rock and Ms. Hanscomb first filed an application with Health Canada to become medical marijuana growers in the spring of 2014.
The company received the agency’s permission to start cultivating cannabis in late August and is aiming to have a growing capacity of 20,000 square feet by the time marijuana is slated to be legalized for recreational use in July 2018. That’s enough space to produce about 1,300 kilograms of cannabis a year.
The company, which now has a workforce of about a dozen, expects to employ up to 40 people and hopes to harvest its first crop in January 2018.
‘Locking down supply’
It’s the first full-scale acquisition for Cannabis Wheaton, which provides seed investments to marijuana producers in exchange for a cut of future production at a fixed price. The company has so far invested in more than a dozen producers in six provinces since it was launched earlier this year.
“We’re essentially locking down supply going into a supply-constrained environment” once recreational marijuana is legal and licensed producers scramble to satisfy what is expected to be a flood of demand, Mr. Rifici explained.
The former Tweed executive said acquiring a company that already has its own growing licence will make it easier for other Cannabis Wheaton portfolio companies that don’t yet have licences to obtain them.
“I don’t believe it’s nearly enough to meet that demand … My view is we’re at least five years away from really hitting
“You’re already kind of in the club, so (Health Canada) will essentially will license you almost as fast as you can build your facilities,” he said. “By us having a licence, it helps our partners that do not have a licence get their licence faster.”
Canada is set to legalize marijuana for recreational use under certain circumstances next summer, but will develop more regulations for other pot products such as edibles later on.
Mr. Rifici said RockGarden’s Carleton Place facility gives the company a place to conduct research on new strains of marijuana and turn cannabis flowers into oil that can be used in pot-infused products such as edibles and vaporizable products – work that will benefit all its partners.
$85 million raised to date
Cannabis Wheaton recently closed a second financing round and has raised about $85 million in investment capital so far. Mr. Rifici said the company has begun providing funds to two of its partners and expects to make additional announcements soon.
“Things are progressing well,” Mr. Rifici said. “In 2019, when legalization is really hitting with additional products, we expect to be there to meet that demand.”
There are 69 producers now licensed to grow weed in Canada, but Mr. Rifici said he expects it will be years before there’s enough legal product to go around. A recent study by Mackie Research Capital pegged total demand for marijuana in 2018 at approximately 795,000 kilograms but forecast licensed producers will end 2017 with production capacity of just over 100,000 kilograms annually.
“Even with all the announced expansions to date, I don’t believe it’s nearly enough to meet that demand,” Mr. Rifici said. “When you put all that together, my view is we’re at least five years away from really hitting balance.”
