Tokyo Smoke goes public as cannabis companies eye retail

In six months, buying a gram of weed won’t be that much more difficult, for adults in some provinces at least, than picking up your morning cappuccino. What company becomes the Starbucks of the industry, however, remains to be seen.

Tokyo Smoke, owned by TS Brandco Holdings Inc., has been trying to manoeuvre into this position since 2015, carefully cultivating a hip, cannabis-centred lifestyle brand in the lead up to recreational legalization. On Monday, it merged with Kelowna, B.C.-based licensed producer, DOJA Cannabis Company Ltd., to create a new company, Hiku Brands Company Ltd., which listed on the Canadian Securities Exchange Wednesday.

“Someone is going to define the modern retail experience for Canadians, if not the world. Starbucks … essentially built a nomenclature for coffee in North America, and we think there’s the opportunity to do the same for cannabis,” said Alan Gertner, CEO of Tokyo Smoke.

Unlike many players in Canada’s emerging cannabis industry, Tokyo Smoke has largely ignored cannabis production, focusing instead on creating a recognizable brand and a network of retail stores that can be converted into dispensaries next summer in the provinces — B.C., Alberta, Manitoba, Saskatchewan and Newfoundland and Labrador — where private retail is expected to be legal. The company has seven coffee shops, in Toronto, Calgary and Kelowna, and expects to have many more leases signed in the coming months, Gertner said.

“Consumers choose brands and retail, that’s how they make buying decisions in other industries, and they’ll do the same in cannabis,” Gertner said.

This fact, which is quickly being grasped across the industry, means a huge shift in the way companies look at branding, said Matt Webb, co-founder of Vancouver design agency Webb Creative, which has worked on branding with companies like Doja and Broken Coast Cannabis.

“We’re going to be looking at something that’s much closer to what we would consider for an alcohol brand. And I say specifically alcohol and not tobacco, because I think there’s more of a lifestyle aspect to alcohol branding and marketing,” said Webb.

On the retail front, Tokyo Smoke isn’t the only company aiming to establish a national brand.

Canopy Growth Corp., the largest legal cannabis company in the country, is moving into the space with stores operating under the name Tweed Main Street.

Inner Spirit Holdings Inc., a Calgary-based company backed by cannabis industry financiers Cannabis Wheaton Income Corp., is building a chain of franchise stores using the brand SpiritLeaf. According to CEO Darren Bondar, the company has already signed franchise agreements with 100 entrepreneurs.

“It’s no different than coffee shops, juice places or liquor stores,” said Bondar. “By being part of a franchise system, it’s an opportunity for independent entrepreneurs to be involved in the space, which right now is pretty dominated by some large players.”

It already has franchise experience through subsidiary Watch IT!, which sells watches and sunglasses in malls across the country. It will be sourcing much of its supply from Wheaton Income, which has an exclusive right to supply up to 50 per cent of product sold in SpiritLeaf stores.

Right now, Alberta is looking like the most promising private retail market, said Bondar, followed by the other prairies provinces, Newfoundland and Labrador and B.C., which is expected to unveil a public-private retail model this coming month.

Ontario, Quebec and the Maritimes don’t look as promising in the short term. But Tokyo Smoke’s Gertner is optimistic over the longer term.

“We’re at the beginning of really what is both a social and economic revolution. I think our cannabis consumption habits will change over time, and the venues where we buy cannabis will change over time,” he said.