A few years ago, Steve White was risking his money and his freedom in a new and barely legal industry.
“You have to remember the context in which we opened our business here in 2013,” said White, an Arizona attorney and the CEO of Harvest of Arizona. “You had a local prosecutor promising if we opened our doors we’d go to jail.”
The chain of medical marijuana companies he and two partners started is now on track to become the country’s largest cannabis company.
How did he do it? The old-fashioned way — by selecting solid partners, making strategic investments, and employing consistent business practices. And, because it’s marijuana, by being as careful as possible to adhere to government regulations.
“Every day, I wake up and commit countless federal crimes throughout the day,” White said.
In Arizona, a dispensary license allows the holder to open one dispensary as a nonprofit run by a board of directors. Usually, the person with the license is the president of that board. Those licenses are nontransferable.
Most dispensaries only open locations allowed by licenses obtained in a 2011 lottery after voters passed the 2010 Arizona Medical Marijuana Act. Some of those dispensaries won a second license in 2016 and opened second locations.
Harvest of Arizona won two licenses in the first round under different company names, and opened Harvest of Tempe in 2013, then Harvest of Scottsdale in 2015. Back then, it was just White and his two business partners (one a friend since high school and the other an industry expert) running the show.
“It was kind of lucky, but we chose to do this together because we enjoyed working with those guys. [We] laughed our asses off,” White said.
He had a feeling the business was going to be stressful, so he consciously chose partners that he thought could weather the coming challenges.
As one of the initial cannabis companies in Arizona, Harvest has cleared numerous hurdles, from former Governor Jan Brewer’s lawsuit following voter approval of the AMMA, to Maricopa County Attorney Bill Montgomery’s crusade against the industry, to the commotion over concentrates this summer.
“When everything looks bleak and you just want to throw up your hands and say, ‘This isn’t meant to be,’ then you get to look at one of [the partners] and they say, ‘uh-uh, not today,’ and that’s critical,” White said.
Harvest contracts with other licenseholders who don’t have the expertise or motivation to run a hectic business, negotiating to control the license and the boards that operate under those licenses.
In Arizona, Harvest controls 10 dispensary licenses.
This type of pseudo-acquisition is becoming more common in the industry. A number of dispensaries in Arizona outsource day-to-day operations to management companies. The license-holders collect a cut of the profits. Typically, the dispensary will maintain its brand separate from the management company. But Harvest flips that relationship.
Instead of operating dispensaries under its own trade name, Harvest brands each dispensary as its own and has wide latitude over business decisions.
The strategy also allows Harvest to expand its brand across the country, even if the main product itself can’t legally cross state lines. Harvest is the third-largest cannabis company in the country, White said, with licenses to operate in 10 states and plans to grow even larger. The company now has stakes in dispensaries and cultivation sites in Arkansas, California, Illinois, Maryland, Massachusetts, Michigan, Nevada, Ohio, and Pennsylvania.
Harvest prefers to open in states with emerging markets, which the company sees as more ripe for business opportunities. But ultimately, success comes down to taking care of the patients, White said.
“There’s a quote we’ve been talking about recently in Arizona,” White said. “You better take care of your customers, or somebody else will.”
Read this on the Phoenix New Times here.