As the Canadian cannabis industry takes shape, small growers are struggling to survive and many have lacked the means to even enter the market. Vancouver Island-based Sitka Legends wants to change that. The micro-park leases cultivation spaces on its 55-acre industrial parcel to micro-cultivators. Growers can then sell high-quality wholesale flower back to Sitka where it is processed, packaged, and sold in Sitka retail stores in a relationship that both parties have found successful.
The brand’s Bruce Banner is one of the longest-running SKUs on the market. They accomplished that without any marketing or data agreements, their sole focus has been on operations. Sitka CEO Michael Forbes told Ganjapreneur that the model is working, but “You have to have all the stars align for this.” To pull off the micro-park, Forbes needed the capital to build out the units without traditional financing, zoned industrial land which is in short supply, and local access to an abundance of legacy growers.
Forbes applied for an LP license as soon as he was able to under the new law, but his application took a long time and during the waiting process, the laws changed. When micro-cultivation regulations were added, he already owned industrially zoned land (which is expensive to hold and hard to come by) so he decided to re-zone the parcel as a cannabis micro-park. Once they were approved, Sitka interviewed more than 100 cultivators prioritizing those who could grow high-quality cannabis and from that pool of applicants, they chose the ten micro-license holders who are currently operating at the park today.
At the time, Carl Ketch, CEO of Sitka micro-cultivator Quadessence, was navigating his entry into the adult-use market after six years of growing medically. He searched for a municipality that would allow micro cultivators but after finding one, he learned that building the operation out and finding industrial zoned land would require a multi-million dollar investment. Eventually, they were selected to partner with Sitka, which brought down their required investment from over $3 million to $1.2 million. Ketch said that at the time, it was the only way he could make Quadessence happen. “If we didn’t partner with Sitka we wouldn’t be in the legal industry, I can tell you right now that there’s a lot of people in Canada that wish they were in our shoes.”
Quadessence is currently producing about 110 lbs of high-quality wholesale flower every 37 days. They grow a few signature strains and are always testing new phenotypes to isolate genetics with high cannabinoid content that produce large quantities of flower. About 80% of their wholesale flower is sold to Sitka and the rest is sold independently, and they’ve yet to be challenged to move product. All cannabis sold to Sitka is packaged and branded as Greenade or Sitka, featuring a photo and small bio of the grower on the back of each package.
Sitka takes a passenger seat in managing individual micro-cultivations, recognizing that every grower uses their unique methods. They simply provide the space outfitted with electricity and a roof rain catchment system that covers their water usage for most of the year – in dryer months, Sitka trucks in water for the growers. Some of the most essential support comes through processing, packaging, and sales. “This is a very complex business to get off the ground if you are a small entrepreneur. The Sitka model splits it up into two so the grower does what they do best which is growing, then Sitka does the packaging, processing, and sales,” Forbes said.
Ketch expresses that their success is only possible because they dialed in their growing methods and came into the space with cannabis cultivation knowledge. “The thing about growing cannabis is that it’s literally feast or famine,” he said. “If you’re not growing a product that is high enough quality to get the bigger dollar, your business can go under really fast. Same thing if you’re not getting the yields. It’s a lot harder to do than it is to put on paper.”
After speaking with Forbes and Ketch, it’s clear that this partnership is working well for both parties but it has yet to be duplicated in Canada or the United States. Even so, Forbes is convinced that craft growers will soon take up a large market share, much like the beer industry when craft brewers could legally enter the space. “With time, as the laws and the rules and the market shakes out, I think you’re going to see a shift to smaller, craft batch cannabis in the marketplace. I think Sitka is at the front of that charge.”
This year, Sitka is looking forward to Farmgate sales which would allow licensed producers to sell directly to consumers, and when permitting goes through, they will start the process of expanding to build out more cultivation facilities.
At the end of our conversation, I had to ask Ketch: if he could go back, would he take on this partnership with Sitka again? “There wouldn’t have been a different path,” he said. “I would have done it every time, and I’m glad that we did for sure.”