The ‘Costco of Cannabis’? This Company Is Already Active in Canada, and Hungrily Eyeing the U.S. Next

Costco, the member-based, big-box retailer, is a familiar sight on the outskirts of American cities (and cities in 10 other countries, as well). That’s no surprise: The Washington State-based retailer is wildly successful due to its steep discounts and bulk sales, spread across warehouse-size stores – and patronized by the chain’s 47 million U.S. club members.

Clearly, those customers love Costco’s low prices on prime steak and rotisserie chicken, toilet paper (sold by the truckload), alcohol, name-brand fashions and electronics – all available to members only.

Soon, cannabis will join that product list nationwide, pending federal legalization. By the year’s end, Costco plans to sell THC products in the already fully legal states of Colorado and California. But federal legalization? That might be months or years from now.

Meanwhile, a kind of mirror-image of the warehouse retailer’s membership/discount model is being set up by Canadian cannabis company High Tide. Already, the company has been dubbed by industry sources “the Costco of cannabis” as it prepares for a U.S. push, invigorated by last week’s announcement of a partnership with U.S.-based NuLeaf Naturals, an “organic hemp” company selling CBD, CBG, CBC and CBN.

“Since we started this innovative [membership] concept October 20, over 90 percent of our transactions are now being conducted by club members, versus 50 percent previously,” High Tide President and CEO Raj Grover said in an interview this week. “So [when] you see a vaporizer being sold for $200 in the market, we’re selling it for $50 to our members.”

Because THC products can’t cross state borders, much less the Canadian one, Calgary-based High Tide’s “Cabana Club” is limited to Canadian customers only. Likewise, the club’s 104 brick-and-mortar stores are based exclusively within that northern neighbor, as well. The company claims to have 270,000 Canadian club members.

But that doesn’t mean High Tide isn’t already active in the United States: It has two CBD platforms here, and one in the United Kingdom. (The deal with NuLeaf Naturals will add to the number of U.S.-based platforms.

And that vaporizer Grover mentioned? It’s already sold in the U.S. because High Tide has five U.S. platforms (and two more overseas). Four sell “cannabis-consumption accessories” – vape pens, pipes, rolling papers and the like, the CEO said. Prices are low, Grover added, because High Tide manufactures fully 70 percent of those 5,000 accessory sku’s.

Nor is the bulk-buying Costco emphasizes required in the much smaller Cabana Club stores. Membership fees like Costco’s have also been waived for several months, Grover said, to build loyalty.

His company, which has been public since 2018 (NASDAQ ticker HIIT), got its 2009 start as the Smoker’s Corner store chain. Today, across its six ecommerce platforms, High Tide claims a total 2.5 million “lifetime customers.” In 2020 it had approximately 100 million site (not unique) visits.

And there’s more to come. High Tide is talking to farmers, Grover said, about partnerships for a private (white label) branded THC product.

Then there’s the NuLeaf Naturals acquisition. “We are growing by 15,000 to 20,000 members a quarter,” Grover said. “Since we announced this concept, we are now growing at over 90,000 a quarter. So: a massive jump; you can see how loyalty works.”

NuLeaf, with its 285 stores, will expand High Tide’s CBD foot hold in the U.S., where CBD products have been legal since the 2018 Farm Bill green-lighted hemp.

The acquisition also allows the company the ability to sell these products under its own brand for the first time beside the other CBD products under its ecommerce umbrella. “We’re super-excited to get into the U.S. upon legalization,” Grover said, “but I believe we are already very well placed to get into the U.S. With [the NuLeaf] announcement, we have six-plus e-commerce platforms; [and] 80 percent of our customers live in the U.S.

“So, upon legalization, we can convert many of these customers and sell them THC products online.”