The CPA who helped build Canada’s cannabis industry 

Chuck Rifici, a 45-year-old CPA, is the co-founder of Tweed, one of Canada’s first legal cannabis companies. Today, Rifici no longer works at Tweed: he was kicked out before it became Canopy Growth, now the largest cannabis company in the world. Instead, he is chairman and CEO of Nesta Holding Co., a private equity firm he founded to invest in the global cannabis industry. (Photos by Guillaume Simoneau)

In 2013, Chuck Rifici bought a chocolate factory. The building—a half-million-square-foot facility in Smiths Falls, Ont.—had been sitting vacant since Hershey left town five years earlier. There were still remnants of its glory days: a faded marquee inviting visitors into the “chocolate shoppe”; a lone factory manager who strolled the premises twice a day, keeping the place in working order should another chocolatier come along. But Rifici didn’t want to make chocolate. He wanted to grow marijuana.

Rifici, a 45-year-old CPA, is the co-founder of Tweed, one of Canada’s first legal cannabis companies. He envisioned the factory as ground zero not just for his business, but for an industry on the brink of the big time. So, he and his co-founder, Bruce Linton, paid $5 million for the property, plus millions more to turn it into a weed wonderland, complete with climate-controlled growing rooms and pristine storage vaults. When press toured the operation, they couldn’t resist dubbing Rifici the Willy Wonka of Weed.

Today, Rifici no longer works at Tweed: he was kicked out before it became Canopy Growth, now the largest cannabis company in the world. Instead, he is chairman and CEO of Nesta Holding Co., a private equity firm he founded to invest in the global cannabis industry. Still, seven years after the fact, his decision to buy the factory seems prescient, because the plant is making chocolate again—this time, infused with tetrahydrocannabinol (or THC, a natural compound found in cannabis that causes the high) and cannabidiol (or CBD, which has a calming, non-psychoactive effect). 

On Oct. 17, 2019—exactly a year after the federal government legalized recreational marijuana—Canada lifted prohibition on a raft of alternative cannabis products: edibles, beverages, concentrates, topicals, tinctures and more. In addition to smoking dried flower, Canadians can now legally eat cannabis in a gummy, drink it in a tea, ingest it in a capsule or rub it on their ailing muscles in the form of a lotion—uses that are more discreet and carry less stigma than, say, smoking a joint. Canadians can now vape cannabis, too, though restrictions may be imminent; following a staggering number of deaths and hospitalizations linked largely to black-market vape cartridges, some provinces have banned certain vaping products and advertising, and Health Canada is monitoring the situation.

Canadians can now legally eat cannabis in a gummy, drink it in a tea, ingest it in a capsule or rub it on their ailing muscles in the form of a lotion—uses that are more discreet and carry less stigma than, say, smoking a joint

The arrival of these products, known in the industry as Cannabis 2.0, represents an even bigger business opportunity than the first wave of legalization. People like Rifici are betting that 2.0 products will appeal not only to those who already use cannabis, but to the 83 per cent of Canadians who don’t. If they’re right, they’ll have millions of new customers, many drawn to cannabis as a wellness product rather than a way to get high. According to EY, 2.0 products will account for more than half of Canadian cannabis consumption by 2025, and Deloitte estimates 2.0 sales will total $2.7 billion annually.

Cannabis entrepreneurs eyeing that prize face a dizzying array of obstacles, including strict regulation, fierce competition and an unenthused investor landscape. But Rifici bets he can hit the jackpot again, this time with Nesta, through which he owns, influences or otherwise has his hands in every aspect of the cannabis value chain: cultivation, extraction, research, development, retail and beyond. The companies under the Nesta umbrella may not be behemoths—the largest, Auxly, has a market cap of about $375 million, small fry next to Canopy Growth (more than $8 billion) or Edmonton’s Aurora Cannabis (more than $3 billion). But for many of Rifici’s brands—vape pen companies, edible manufacturers and other businesses designed to compete in the 2.0 world—it’s finally show time. “That’s what I’m excited about: being able to wake up knowing we’ve created a lasting brand,” he says. “It would be nice to see one of them become the Johnnie Walker of cannabis.” It doesn’t have quite the same ring as the Willy Wonka of Weed, but it’ll do.

The first thing you notice about Chuck Rifici is his bushy copper-and-grey beard. He’s a father of two who favours inconspicuous clothing—jeans, T-shirts, hoodies—and cars that are anything but: this past June, he drove his Ferrari in the Gumball 3000, an extravagant motor rally from Greece to Spain. On a brisk October afternoon, it’s his other ride, a black Lamborghini, that’s parked outside the Nesta office in Ottawa. The space is startup chic: glass walls, whiteboards, 20 youthful employees hunched over laptops. Inside Rifici’s office, a tongue-in-cheek poster warning of the hazards of “reefer madness” is the lone giveaway that you’re at a cannabis company.

Rifici never thought this is where he’d end up. Growing up in Ottawa, he watched Cheech and Chong movies—Up in Smoke, The Corsican Brothers—but didn’t actually smoke pot, put off by stigma and stoner stereotypes. In the 2000s, he earned a computer engineering degree at the University of Ottawa and an MBA from Queen’s. Ian McKay—a Queen’s classmate who is now CEO of Invest in Canada, an agency that solicits international investment—remembers Rifici, who earned his professional accounting designation in 2008, as an especially gifted student. “Not only was Chuck the smartest guy in the room, he was really good with understanding numbers and how they led to business planning,” he says. “He was generous with his time and proactive in demystifying accounting to those who had challenges with it.”

Rifici favours inconspicuous clothing—jeans, T-shirts, hoodies—and cars that are anything but: he parks his black Lamborghini outside the Nesta office in Ottawa

Rifici worked a string of CFO jobs at Canadian tech firms, including the internet service provider TekSavvy and the mobile company Select Start Studios, which was acquired by Shopify in 2012. “I always joke that I was a terrible CFO,” says Rifici. “In retrospect, I wasn’t risk-averse enough. I had a taste for volatility.” On weekends, he played poker—he loved the thrill of betting with imprecise information. “I’m an optimist, but you usually want your CFO to be the least optimistic person in the company.”

That appetite for risk made Rifici the perfect candidate to become a pot trailblazer. In 2011, McKay, then the CEO of the Liberal Party of Canada, asked Rifici to volunteer as his CFO, in large part to overhaul the financial management of the party. The unpaid gig put Rifici in the right place at the right time: the following year, the party voted to endorse federal cannabis legalization.

By then, Rifici had come around to cannabis. In 2011, while reaching for something across a counter, he pulled a muscle in his back, collapsed and passed out in pain. Doctors prescribed hydromorphone, an opioid more than twice as powerful as oxycodone, and he found himself counting pills. He says the incident helped him realized how addictive opioids were, and how cannabis could be a viable alternative for pain relief. “It was the event that made me a little less judgmental,” he says. From then on, “I told myself if I could legally get into the weed industry, I would.”

“I want one of our brands to become the Johnnie Walker of cannabis”

So, Rifici educated himself about the nascent industry. He researched Canada’s medical marijuana regulations, attended events, visited medical grow ops in Colorado, and met with investors and experts. Soon, he was an expert himself. “He had the vision before anybody else,” says McKay, one of Tweed’s founding shareholders. “He attracted smart people because he did a lot of the lonely research and homework.”

One of those people was Tweed’s co-founder, Bruce Linton. Neither Rifici nor Linton work at the company they built together anymore. Tweed’s board kicked Rifici out in August 2014, alleging he had missed key deadlines in growing the business. Rifici sued for wrongful dismissal, and the company countersued; both suits have since been dropped. Rifici is diplomatic about the turbulent saga. “Ultimately, it came to a point where Bruce and I were not going to be working together,” he says. “Bruce did a great job building value in the company.” In 2019, however, the alcohol giant Constellation Brands, which obtained a controlling stake in Canopy Growth through a $5-billion investment, gave Linton the boot, too.

Ousted from his own company, Rifici was nevertheless bullish on the cannabis industry. “He could have gone into a corner and disappeared,” says McKay. “But he still had the skill, the knowledge, the reputation, the experience. He knew the sector was bigger and broader than just Tweed or Canopy.”

The Nesta office space is startup chic: glass walls, whiteboards, 20 youthful employees hunched over laptops. Inside Rifici’s office, a tongue-in-cheek poster warning of the hazards of “reefer madness” is the lone giveaway that you’re at a cannabis company

Today, Rifici lives in a very different cannabis industry. In 2013, the year he cofounded Tweed, you could count the number of legally licensed cannabis producers in Canada on your fingers. Now, there are more than 200. Rifici may face stiffer competition, but he also has more horses in the race. After Tweed, Rifici sold his remaining stake in Canopy Growth and used the windfall to found Nesta (Nesta is Bob Marley’s middle name), which owns or has a stake in five distinct cannabis companies. Its portfolio includes Wikileaf, a leading cannabis price-comparison website based in Seattle (“every industry has an Expedia,” he says); Feather, a vape pen company that he founded; Burb, a B.C.-based retailer that sells cannabis products, apparel and accessories; as well as Dixie Brands, an American business that already sells chocolates, gummies, mints, topicals and other cannabis-infused products in the U.S. Nesta’s crown jewel is Auxly Cannabis Group, itself a sprawling family of cannabis brands that grow, sell, research and develop products including edibles, beverages, gel capsules, vape cartridges and old-fashioned flower. Auxly’s network of cultivation facilities, which the firm either owns outright or has partnered with, has the capacity to produce 100,000 kilograms of marijuana every year—that’s about 2.5 grams for every Canadian.

In 2018, pot stocks like Auxly soared. “If you had the word cannabis in your company title, people were throwing money at you. It was investing in a dream,” says Trisha LeBlanc, a CPA who leads Grant Thornton’s national cannabis practice. But since the summer of 2019, cannabis stocks have tumbled—the largest ETF in the cannabis sector, for instance, lost half its value in the year after legalization.

Industry watchers are unperturbed. They say volatility is only natural in cannabis, a sector dominated by skittish retail investors who pounced when the stocks were hot and retreated when they were not. Such investors balk at bad news, such as a company posting poor quarterly results or running afoul of regulations. “News like that comes out and the whole market goes down,” says LeBlanc. “Investors are now at a stage where they’ve lost patience. They’re saying, ‘When am I going to see the return on my money?’ ”

It’s a valid question. Cannabis companies were supposed to win big in the post-legalization era. Instead, the first year was an onslaught of failures and fumbles. Provinces rolled out wildly divergent retail models, customers waited weeks for their orders because of marijuana shortages, and many existing cannabis users opted to stick with the black or grey markets. Most provinces and territories have failed to turn a profit selling marijuana; the Ontario Cannabis Store, for one, posted a $42-million loss for the fiscal year ending March 31, 2019. Cannabis companies have also reported consistently underwhelming performance—despite the hype, few of them have actually made any money. To make matters worse, institutional investors seem utterly uninterested in giving them any. Though Canadian banks have begun lending money and raising capital in the cannabis sector, mutual funds and pension funds have so far steered clear of investing in the space. “Institutions like stable cash flow, profitability and proper governance,” says Mitchell Osak, the leader of MNP’s national cannabis consulting practice. “We don’t have that yet in an industry that’s a year old.”

Standing out in the 2.0 market is crucial, yet incredibly difficult

Rifici, like the rest of the industry, is hoping that Cannabis 2.0 will help him out of this rut. The second wave of legalization promises new customers and fresh sales—in fact, according to research by EY and the cannabis data insights company Lift & Co., Canadian customers were asking budtenders for edibles on a daily basis long before they were legal. 

Cannabis 2.0 is also helping cannabis companies access something they desperately need: cash. In the past two years, alcohol, tobacco and pharmaceutical giants—including Molson and the cigarette maker Altria—have invested billions in Canadian cannabis companies like Hexo and Cronos. The majority of these partnerships have focused on developing 2.0 products, such as vaporizers and cannabis beers and sports drinks. “These big companies want to be invested because they understand these products have the potential to replace them on the shelf,” says LeBlanc. “It’s a bit of hedging strategy.” Auxly, one of Rifici’s companies, received $123 million from Imperial Brands in July 2019, a move that will grant the family of cannabis brands access to the British tobacco company’s proprietary vaping technology. “It helps you stand out from the noise,” says Rifici. “Auxly can no longer be overlooked as perhaps it once was. Now, I think a lot of people and industry observers have to ask, ‘What did Imperial see?’ ”

Standing out in the crowded 2.0 market is crucial, yet incredibly difficult. Health Canada strictly regulates how cannabis companies advertise their products and requires standardized packaging, so consumers have few ways to tell one company’s gummy from another’s. According to Deloitte, only 13 per cent of Canadian consumers surveyed look for familiar brands when purchasing cannabis products. In other words, brand loyalty doesn’t exist yet. The early days of Cannabis 2.0 will be a period of trial and error, in which consumers slowly figure out which products, sizes and flavours they like. “Everybody has their own view as to how that market segments, which products they think will be in the best position to serve consumer needs,” says Rifici. “But until we actually see those products on the shelves and see consumers vote with their dollars, we don’t know.”

For cannabis companies lucky enough to create a popular product, the key will be keeping it in stock. Staying on shelves comes down to business fundamentals: developing sufficient cultivation capacity, perfecting the supply chain and establishing the manufacturing muscle to make sure your product is always available.

Osak offers another piece of advice for cannabis companies: stay agile. “This industry has not had a very good line of sight in advance to what regulations will be,” he says. “The regulations are evolving and subject to change without much notice.” For example, in 2019, Health Canada made significant changes to its licensing application process and amended rules around 2.0 products. In such an unpredictable landscape, says Osak, “you can’t be rigid in your strategy. What you can be is adaptable and reactive.”

Beyond regulation, Rifici—and every other Canadian cannabis entrepreneur—faces a greater existential threat: international competitors. As the first major country to legalize cannabis, Canada has a first-mover advantage, but that won’t last forever. “There’s a sentiment that it’s a matter of when, not if, cannabis is going to be federally legal in the U.S.,” says LeBlanc. The American cannabis market is more likely to take a free-market approach with fewer regulations, where ads, flashy packaging and celebrity endorsements will be fair game, allowing companies to differentiate themselves. “Depending on the state, they’re going to be able to experiment a lot more than we are as the industry matures,” says CPA Luke Biles, a former financial controller and operations manager for a cannabis company who now leads MNP’s cannabis practice on Vancouver Island. He adds that American companies will likely suck up the capital and market share that Canadian companies once enjoyed.

That will spell disaster for some homegrown cannabis businesses. “If U.S. federal cannabis legalization happens, Canadian companies who have not secured a strong, sustainable competitive position by that time risk being overwhelmed,” says a May 2019 Deloitte report, which predicts that half of Canadian cannabis firms will eventually fail. “Without a doubt, a lot of Canadian companies are going to face major difficulties,” says Osak. “But could we develop companies in this space that compete on the world stage? Absolutely. They already exist.”

Rifici wants to lead one of them. Ever the optimist, he sees the glass as half full. He expects at least 50 countries will legalize by 2025. Sure, that will mean more competitors, but it will also mean a much larger market. He’s already preparing for it: Auxly has an outdoor hemp cultivation facility in Uruguay, and Rifici plans to sell his brands’ products in Europe. “There’s a lot of capital left in the U.K. and Europe,” he says. “Over the next three to five years, there will be a lot of value and opportunities there.”

If and when that global market arrives, Rifici’s experience, reputation and Rolodex of cannabis connections will be priceless assets. Osak says that if Canada’s cannabis pioneers can develop global partnerships, “they will be valued all over the world.” It’s not hard to imagine, years from today, international entrepreneurs calling the man who bought a chocolate factory, hoping he can be their golden ticket into the world of weed.