A homegrown success story

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This article was published 04/10/2018 (2760 days ago), so information in it may no longer be current.

It started with spitballing an idea to his dad five years ago as a way to avoid getting “a real job.”

Five years later, that straight-laced, clean-cut business school dropout is at the helm of a multimillion-dollar cannabis production company that is the envy of many across the country.

Now 27, John Arbuthnot, the young co-founder and CEO of Delta 9 Cannabis, is one of the brightest, most serious guys in a business populated by all sorts of opportunistic and oddball characters.

“This was my master plan to not have to get a real job… how wrong was I?” John said.

“I ended up working harder than I ever thought possible to make that happen. Perhaps it was not the best plan.”

 

It’s a remarkable story, but in some ways, it took root many years earlier when Arbuthnot was a rising star on the squash court.

His father, Bill — formerly an independent IT professional — was John’s coach throughout his career as an elite squash player during his youth. The ease in which they have become business partners was marinated in the sweat of the Winnipeg Squash Racquet Club courts where they now compete as doubles partners.

“When he was a top-level player, he was training 30 hours per week,” Bill said.

“We were together almost all the time.”

Their professional partnership works very well, with John, the CEO, handling all the growth aspects of the company and managing the ongoing process of raising capital, and Bill, as chairman and president, taking responsibility for designing the technical side of things.

It sort of makes sense that in the “green rush” exuberance of the soon-to-be-legalized cannabis market, the predominant Manitoba player in the industry, Delta 9 Cannabis, would be the steady, focused, gradual-growth one of the group.

Formed in 2013 by John and Bill, Delta 9 Cannabis was the fourth company in the country to be issued the coveted Health Canada licensed producer sales status for which more than 1,700 have applied and only 120 have so far been granted.

Now in the frenzied lead up in the lead-up to the Oct. 17 legalization date, with some companies doubling and tripling their share price, Delta 9’s has continued to track steadily.

At 27, John is wise beyond his years.

The former business school student — who’s still a couple of credits short of graduation — had a hand in everything in the early days, from operations, security, IT, infrastructure, raising money, basically operating a business for which there were no case studies or templates to follow.

From the beginning, the younger Arbuthnot was capable. Following a long tradition of Manitoba companies far from the Bay Street catchment area, the Arbuthnots had to learn to run things on a low budget and pace themselves.

“That was always one of Bill and my pitches,” John said.

“We are doing it the Winnipeg way. We are incredibly lean.”

Since Delta 9 went public last November, the Arbuthnots continue to own 46 per cent of the company, but do not show any sign of spending investors’ money on lavish creature comforts. Bill’s desk is effectively in a hallway on the concrete floor in between production areas.

Though John jokingly says “Bill is chairman and president of the company, but his hardest job is being my father,” that is mostly something to say to those who may not be able to appreciate how excellent the partnership actually is.

The capital-raising activity started — and continues to happen occasionally — at the Winnipeg Squash Club, whose members and those connected to members make up at least 80 per cent of the original investors in the company.

One of them, Ken Munroe, said, “I knew Johnny since he was a little boy. I watched him grow up learning how to play squash. Now, he is a really nice, smart, young man. He speaks like he is 50 years old. He’s sharp. He has it all there. He’s prime ministerial.”

In an interview before he died unexpectedly, Brent Bottomley, then chief financial officer, said he always enjoyed going with John to meetings with Bay Street hedge fund and portfolio managers.

“John comes into the meetings — he’s 27, but he looks 17 — and you can see they are wondering who this young guy is,” Bottomley said.

“I sit back, and in two minutes, John has them eating out of his hands. It is amazing to see.”

(Bottomley died suddenly a week after that interview, during a biking trip in Wisconsin. It has been a big blow to the company. John said he and the team at Delta 9 were “devastated” at the news.)

Bill has obviously had more than enough experience to know how exceptional his son is.

“I know there are people thinking, ‘What’s with the snotty-nosed kid?’” Bill said.

“Then, they hear him talk, and after, they tell me what an awesome representative of the company he is. I just explode with pride.”

Five years in, after devising a business plan, successfully winning their application to be a licensed producer, building the original modest medical marijuana production facility, constantly raising money from private sources, eventually going public and raising enough money so that it now has the funds to keep building out production, only now is John able to take a day off.

In fact, in the early days of Delta 9, he literally lived at work. For eight months, he set up a bed and was at the facility 24-7 in what had to be a pretty spooky arrangement, as the warehouse complex that Delta 9 now owns, as well as 47 contiguous acres, is in a secluded industrial district of Transcona.

He eventually got an apartment with a roommate and went on his first vacation in five years with his mother, Debbie Metcalfe, and her family to an all-inclusive resort in Mexico for a week this February. (Arbuthnot’s parents separated when he was young, but all have remained close. Metcalfe, who is on the board of the Manitoba Securities Commission, is now a regulator of her son and ex-husband’s business now that Delta 9 is publicly listed.)

Arbuthnot’s family connections have also led to its first acquisition, a 50 per cent stake in Calgary-based WestLeaf Cannabis Inc. One of the founders of that company is former Winnipegger Taylor Ethans, who was a few years ahead of Arbuthnot at St. John’s Ravenscourt School.

“To be honest, I didn’t know him at SJR, but we met through mutual family friends,” Ethans said.

“Our partnership with Delta 9 has brought a lot of credibility for us. John is very much a visionary in the space. Regardless of his age, he has brought a very sophisticated and professional approach to the industry that a lot of other companies don’t have.”

He’s single (“between disasters,” he jokes), and in the past few weeks, made an offer on a River Heights home, returning to the neighbourhood where he grew up.

“I’m getting my life back to where I can take a day off and go grocery shopping, so I don’t have the horrifically sad bachelor fridge where all there is is leftovers and beer,” he said.

It’s not hard to imagine John’s serious, informed, authoritative approach went over well with Health Canada officials in the early days of the medical marijuana era. And John says despite the legalization of recreational use, Delta 9 remains committed to serving the patients who rely on the product.

John has been a medical marijuana patient himself for a number of years.

“I do not use it before or during the workday, but after work, a few hours before bed, I can turn off the brain a little,” he said.

“Like a lot of people… it’s a sleep aid for me. I think it works much better than sleeping pills or anything like that.”

martin.cash@freepress.mb.ca