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Q&A with Steve Clark: Founder of cannabis distribution channel, CCX

GO: Steve, how did you get started with CCX?

SC: I transitioned over from the oil and gas space. I was a former oil trader, and I took a lot of the knowledge of an emerging market and a commodity-based market from that over to cannabis.

My first entry into cannabis was founder of a Canadian LP based in Crossfield, Alberta, called 314 Pure Cannabis. It was a 42,000 sq ft new build for cultivation and processing, and I helped bring that company from a greenfield plot of land, to raising money, establishing the company, helping commence operations and achieving its cultivation and sale licenses.

It was a great entry into the cannabis space, but it really did identify the distribution and supply chain issues that every Canadian LP was experiencing. There are very few roads to market and there really wasn’t an established distribution channel.

That’s when I founded the Canadian Cannabis Exchange, and the premise behind that was to bring transparency to contracts, to bring liquidity to the market, and to add another distribution channel for Canadian LPs.

GO: When did you start the company?

SC: We founded in April 2019, and we did our first trades in 2020.

We are a bilateral exchange, meaning we never take possession of the products. We introduce buyers and sellers, and our platforms are anonymous; we bring parties together to buy and sell commercial or wholesale volumes of cannabis.

Our average transaction size is probably 50 all the way up to 500 kilograms. We’re doing between 100-200 trades or transactions per month, and obviously that’s slowly grown over the last few years.

We touch on all different parts of the cannabis space: dried flower, trim, hemp, extracts, distillate, isolates, genetics, new and used equipment, facilities for sale. And we’re trying to become that ecosystem where an LP can connect with us, and we can help them move their product and get a fair price for it.

Since we’ve started, we’ve moved 59,000 kilograms, which is about $56 million in wholesale value worth of product.

GO: Are there others with similar business models?

SC: We definitely have some competitors who have similar but slightly different business models. Maybe more on the consulting side where they are becoming more of an in-house sales team for a select group of LPs.

But to me, competition is good because it really shows that B2B or wholesale distribution is meaningful. There’s a path forward and there’s a place for it in the market.

GO: How many producers are you working with?

SC: We have over 500 licensed producers who’ve joined our platform. And for us, that’s amazing. What we try to do is bring standardization. They’ve all signed on to our standard client agreement and then have access to a live online trading platform where both sides can execute a deal independent of our brokers, or through broker negotiation.

GO: How are you addressing oversupply in Canada?

SC: Everybody knows there’s oversupply. But when I look at what oversupply means, to me, it’s of certain products and certain product categories. I don’t think we’re over supplied with high quality craft cannabis that has THC levels above 30 per cent.

GO: What’s your definition of craft?

SC: Hang-dried, hand-trimmed, and cold-cured – so I don’t think we’re over supplied in certain categories.

I do think that it’s regulatory, and how Health Canada has organized the cannabis industry, that’s made it difficult for these craft or micro producers to get their product to market. That’s why I think the B2B platform that helps the distribution channels connect supply chains is so important for people like micros to get their product to the right processor or packager.

We’re still seeing more companies come online, so how do we alleviate the oversupply?

That’s where we’re looking to international and we’re looking to streamline supply chains. Not only with regulatory boards as we’ve seen B.C. and Ontario do through direct to retail, farmgate, and the new click-and-collect – where governments are trying to streamline from the retail side by removing some of those obstacles – but I also think that you need the international portion.

Canada still has the first mover advantage throughout the world, especially with the U.S. and the Safe Banking Act not passing. We still have that chance to continue to provide a lot of these medical markets in Europe, Australia, South Africa.

I think we just have to find a way to make it easier for LPs to get those international certifications.

It’s costly to get your EU GMP, your GMP, your GACP certifications. If the government helped facilitate making that easier for a number of LPs, that could also help alleviate the oversupply.

GO: Are you connecting people internationally?

SC: We’re actually registered in Malta. We’ve incorporated our international arm of our company where we’re launching the Global Cannabis Exchange. That will be not a country-specific, but a global exchange. One that will have product coming out of Canada that is EU GMP certified, GACP certified, and is available for export.

We have a number of Canadian partners who have those abilities to export outside of Canada and who can offer and show this product to international buyers. Right now we’re working with buyers in Czech Republic, Portugal, and Israel. Germany is a little bit further behind, but we’re starting some discussions there. Also Australia and South Africa.

I really do you think this is something that you need to take global to balance our Canadian market, but also bring our quality cannabis to other international markets.

GO: What do you recommend to LPs in 2023?

SC: Something that is going to be really important in 2023 is specialization.

If you’re a grower, be the best grower out there. If you’re a processor, packager, hone in on that, because the industry is starting to segment itself into specialized companies.

GO: What does it mean for pricing?

SC: I’d like to think that we’ve hit some bottom pricing and price segments. Our indices that zero to 15 per cent THC is essentially trim that’s trading anywhere from five cents to 25 cents per gram; it can’t go much lower in that circumstance.

But I do think that we’re seeing a little bit of a rebound in pricing, in the 22 per cent THC range and above, as people are looking to lock up supply longer term.

Some recommendations would be to consider B2B and wholesale distribution as part of your marketing mix. It doesn’t need to be 100 per cent of it, but again, when that province turns back, cancels, or discontinues the SKU – or it doesn’t sell through like it used to – you at least have some other options for your product and have already established some supply chains.