High Tide, a Canadian e-commerce retailer operating a large portfolio of cannabis businesses and manufacturing and distributing consumption accessories like bongs and ashtrays, acquired Daily High Club Q2 2021.
Based in California, Daily High Club is a one-stop shop for all things cannabis. The company provides its customers the option of purchasing one-off, high-quality products such as glass water pipes, vaporizers, and other in demand consumption accessories, or subscribing to a monthly box.
High Tide’s acquisition of Daily High Club is “in alignment with our intention to become a dominant player in the U.S. e-commerce marketplace through a combination of organic growth and accretive acquisitions, specifically targeting businesses with strong brand loyalty,” said Raj Grover, President and CEO of High Tide, in a press release.
Learn more about the $10 million acquisition and how this within-industry acquisition strategy and smart market predictions are setting up both businesses to stay ahead of competitors and expand nationally.
Cannabis Legalization in the United States
High Tide only operates in Canadian locations, including Ontario, Alberta, Manitoba and Saskatchewan. Its acquisition of Daily High Club is a stepping stone to expanding into the U.S. market. As of right now, cannabis is still illegal on a federal level in the U.S., preventing High Tide’s current ability to launch a cannabis-included subscription box.
Federal cannabis legalization is an uphill battle and has been for a long time. Since its first ban through the Marijuana Tax Act in 1937, and then The Controlled Substances Act, American citizens have been looking for ways to end the cannabis prohibition.
Almost 70% of U.S. citizens support the federal legalization of cannabis, according to a 2020 poll conducted by Gallup. In the last three years, most of the country is either in the process of making the use of cannabis legal or has already done so.
California was the first to approve medical use of cannabis in 1996, ending its 59 year suppression. In 2018, Michigan was the first state in the Midwest to legalize the recreational use of cannabis.
Canada, on the other hand, was the second nation in the world to federally legalize the recreational use of cannabis in 2018, with Uruguay being the first. While the U.S. is behind in getting rid of marijuana prohibition, High Tide anticipates the day it could potentially launch its very own cannabis subscription box, starting in the U.S.
Acquiring the Competition to Grow as an Industry Leader
Daily High Club isn’t the first business to be acquired by High Tide. The Canadian retailer has been seeking out U.S. cannabis companies that place it one step closer to dominating the American market. High Tide’s last acquisition was the hemp-derived CBD product manufacturer Fab Nutrition, LLC.
Before that, High Tide acquired Smoke Cartel — worth $8 million, its biggest purchase before Daily High Club. High Tide is the parent company of several other businesses, and is gradually growing its portfolio. The company now includes 3 out of 5 of the most popular e-commerce brands for cannabis consumption accessories worldwide.
All of these acquisitions are a part of High Tide’s strategy to “aggressively pursue M&A [mergers and acquisitions] targets that can be immediately accretive to shareholders,” said Grover, according to Benzinga. High Tide wants to use Daily High Club’s particular business model to offer subscription memberships across all of its e-commerce platforms.
A Cannabis Subscription Box to Dominate the US Market
High Tide and Daily High Club’s combination will provide both companies with enormous opportunities, like gaining access to each other’s large customer bases.
Daily High Club’s subscription box has 15,000 subscribers, which makes up 60% of its business, according to founder and CEO Harrison Baum in an interview with SUBTA. Its online presence is also steadily increasing with 800,000 Instagram followers and 75,000 TikTok followers. The business has sold over 1 million products to its customers since its conception in 2015.
High Tide’s acquisition of loyal brands has brought 91 million global site visits in 2020 and already 23 million from Daily High Club. The company just released its Q2 2021 financial results, reporting a 99% increase in revenue year-over-year.
Baum will step into the role of Director of Digital Marketing, overseeing all of High Tide’s global social initiatives. One of his first goals to successfully make this transition is to grow High Tide’s other brands similar to how his team grew Daily High Club’s social media presence, he told SUBTA.
“[Growing High Tide’s other brands] should be far easier with High Tide’s resources and the ability to cross promote social pages and email lists,” Baum told SUBTA.
Positioning Yourself Ahead of the Competition By Anticipating Market Changes
There are many signals giving the impression that the federal government is headed in the right direction. The most recent effort is the SAFE Banking Act of 2021 — passed through Congress in mid-April — and if passed in the Senate will allow federally insured banks to give loans to cannabis businesses.
High Tide’s acquisition efforts are a smart business move and not based solely on the current market opportunities but on the hope that U.S. federal legalization is on the horizon.
“Daily High Club stood out to us because it is an increasingly popular consumption accessories online retailer, with a rapidly growing subscription box model, which can easily be tailored to include cannabis products in the event of U.S. federal legalization,” said Grover in a statement.
If federal legalization does happen in the next few years, High Tide will be perfectly positioned to instantly expand into that market and stay ahead of any competition.
Certain regulation changes are necessary before High Tide can give the green light to a subscription box in the U.S. The details of a subscription box rollout are still a work in progress but the companies “would likely need the SAFE Banking Act to pass as a minimum,” Baum told SUBTA.
High Tide’s acquisitions of Smoke Cartel and Grasscity, among its other assets, stood out to Baum. “Joining forces with High Tide will be immediately accretive and we will be stronger together,” he told SUBTA. “We can cross market as well as expand our catalog faster than ever before.”
Another foreseen growth factor for Daily High Club is increased revenue.
“We can use High Tide’s drop shipping model to introduce a ton of new products to our already huge audience,” Baum told SUBTA. “We also will be able to manufacture more pieces with less delays, and plan our subscription box months in advance.”
Together, High Tide and Daily High Club gain an edge within the cannabis subscription market. Both companies will see overwhelming growth and expansion in the years to come.
Key Takeaways:
- High Tide acquired the subscription box Daily High Club for $10 million.
- Raj Grover, High Tide’s CEO, hopes to become a dominant player in the U.S. e-commerce marketplace for cannabis consumption accessories.
- Daily High Club’s subscription box has 15,000 subscribers — 60% of its business — and will provide High Tide with an additional customer base.
- High Tide is positioning itself ahead of its competitors by anticipating market changes and readying itself to take the leap.
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