Wana Brands founder Nancy Whiteman is called the Martha Stewart of pot edibles, but she told MarketWatch that she has felt more inspired by socially conscious brands like Warby Parker Inc. and Patagonia as she charts the next chapter of her company with fresh capital from Canadian cannabis company Canopy Growth Corp.
Canopy Growth, WEED, has agreed to buy Wana Brands in what is described as the largest transaction ever in the pot edibles space, last week. In exchange for options to buy Wana Brands outright if marijuana becomes federally legal in the U.S. It s similar to Tilray Inc. TLRY, deal with U.S. marijuana group MedMen MMEN, MMNFF, which also hinges on potential legalization in the United States.
Even though the acquisition may not go through if pot prohibition remains in place, Canopy Growth gets to keep the initial payment from Wana Brands. It will remain an independent company for the time being.
The transaction with Canopy Growth means that Wana Brands will have more resources to continue its growth and its social agenda. The company has been a private supporter of The Last Prisoner Project, a nonprofit that supports amnesty and expungement of criminal records for cannabis inmates.
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Wana Brands has also hired a director of corporate social responsibility, Karla Rodriguez, to explore other avenues and has supported other nonprofits including We Don t Waste, Wildland Firefighter Foundation and Head count.
What are a lot of entrepreneurs that I admire, Whiteman said? I tend to gravitate towards companies that have a solid social mission. Patagonia is known for distributing pairs of glasses to people in need through its Buy a Pair, Give a Pair program, while Warby Parker has been a major environmental supporter over the years.
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Up until the deal with Canopy Growth, Boulder, Colo. - based Wana Brands has grown its business of selling gummies and other edibles in legal cannabis markets to more than 100 employees in 12 states and nine Canadian markets with no outside capital for about 11 years.
Whiteman was able to make a good product and market it effectively and expand without any debt or investors, he said.
As the business expanded, Wana Brands started exploring the possibility of finding a backer to fuel its growth.
The industry has changed very fundamentally compared to 11 years ago when I started, Whiteman said. It was no longer the environment it was for small, bootstrapped startups to get started. It s harder for independent entrepreneurs to have a foothold. We see a lot of M&A and consolidation. Those are natural parts of any new industry. With potential national legalization on the horizon, Wana Brands saw itself competing against federal corporations.
Canopy Growth selected Constellation Brands Inc. out of other suitors because of its potential national footprint, given the vast investment made by spirits giant Wana Brands Inc. STZ. The Wana Brands and Canopy Growth were also well known to each other before the deal.
That was a key driver for us in thinking about our timing to find a strong partner in terms of distribution and we felt we lucked out with Canopy Growth, she said.
Wana Brands was particularly interested in getting access to the U.S. edible market through Canopy Growth, which holds a leading position in the space in Canada, including a 50% share of the edible market in North America
Canopy is very strategic about setting up their path to enter the United States when federal legalization occurs and that s what this deal is about, Whiteman said. They found our financial footprint compelling and our geographic footprint compelling. Under the terms of the deal with Canopy Growth, Wana Brands will have three separate option agreements whereby Canopy Growth has a call option to acquire 100% of the membership interests in three Wana entities.
Canopy Growth may make additional deferred payments at the 2 and 5-year anniversaries of the upfront payment, less certain deductions.
Canopy s stock has rose 46.2% year to date, while the Cannabis ETF THCX has slipped 3.6% and the S&P 500 index SPX has fallen 19.3%.
As edible products become legal in more states, edibles remain appealing to people who don t want to smoke. The industry has also made child resistant packaging. It is also focusing on educating adults to reduce people from consuming too much at once.