High Tide: Building the Costco of Cannabis

The cannabis industry, once fragmented and chaotic, is now witnessing the emergence of a retail model that mirrors the disciplined, membership-driven strategies of Costco. High Tide Inc., a Canadian cannabis retailer, has positioned itself as a disruptive force through a combination of aggressive physical expansion, a loyalty-centric membership program, and a curated product portfolio. By adopting a Costco-like approach-emphasizing scale, operational efficiency, and customer retention-High Tide is not only reshaping the domestic Canadian market but also laying the groundwork for global dominance.

A Disruptive Retail Model: Membership, SKU Management, and Cost Leadership

High Tide's core strategy revolves around its Canna Cabana retail chain, which operates 200 locations across Canada as of 2025. The company's revenue from this segment reached $137.8 million in the second fiscal quarter of 2025, a 16% year-over-year increase, driven by a 6.2% rise in daily same-store sales. This growth is underpinned by its Cabana Club loyalty program, which has grown to 2.15 million members in Canada, with a 39% year-over-year increase in total members and a 102% surge in its elite tier. The program's success mirrors Costco's reliance on membership fees for stable revenue and customer loyalty, with High Tide's elite members contributing to 5.3% of total membership growth.

Like Costco, High Tide has adopted a lean SKU (stock-keeping unit) strategy to optimize inventory turnover and reduce operational complexity. While Costco maintains around 4,000 SKUs per warehouse to streamline operations, High Tide's curated selection of cannabis products-focusing on affordability and quality-enables it to compete effectively in a price-sensitive market. This approach has allowed the company to outpace smaller retailers and drive its market share in five Canadian provinces to 12%. The parallels are striking: both companies leverage scale to negotiate favorable supplier terms and pass cost savings to consumers, ensuring competitive pricing while maintaining profitability.

Private-Label Brands and Strategic Acquisitions

High Tide's private-label strategy further reinforces its Costco-like model. The company has expanded its portfolio to include brands such as Queen of Bud, a premium white-label cannabis line acquired in 2024. These products, akin to Costco's Kirkland Signature line, emphasize quality at a lower price point, appealing to both price-conscious and discerning consumers. By controlling its supply chain and leveraging economies of scale, High Tide has achieved gross margin improvements comparable to Costco's private-label success, which accounts for one-third of its revenue.

The company's acquisition of Remexian, a German medical cannabis importer, exemplifies its strategic expansion into international markets. Remexian's €70 million in annualized revenue and €15 million in Adjusted EBITDA for the six months ending March 2025 underscore High Tide's ability to replicate its domestic model abroad. This move aligns with Costco's global sourcing strategies, where localized production and bulk purchasing mitigate supply chain risks. By integrating Remexian's operations, High Tide aims to capitalize on Germany's growing medical cannabis market while leveraging its Canadian procurement expertise to reduce costs.

Strategic Expansion and Financial Discipline

High Tide's expansion is not without financial prudence. The company secured a $30 million convertible loan at a 4% interest rate, demonstrating its ability to fund growth without overleveraging. This disciplined capital approach mirrors Costco's focus on maintaining low debt levels while reinvesting in high-margin opportunities, such as its recent foray into "big and bulky" e-commerce items. High Tide's own e-commerce ambitions, including the global rollout of the Cabana Club, are expected to drive further revenue diversification.

The company's operational efficiency is evident in its financial metrics. Core brick-and-mortar operations account for 97% of total revenue, with a 18% year-over-year growth rate. Free cash flow of $4.9 million in Q2 2025 highlights its ability to balance expansion with profitability, a hallmark of Costco's long-term strategy.

Market Dominance and Future Prospects

High Tide's disruptive model has already disrupted the Canadian cannabis retail landscape. By offering lower prices through its membership tiers-market price and member price-it has attracted 825,000+ Cabana Club members, many of whom are price-sensitive consumers who previously shopped at smaller, less efficient retailers. This strategy mirrors Costco's ability to outcompete rivals through value and loyalty, a tactic that has driven High Tide's market share from under 5% to over 12% in three years.

Internationally, the company's German expansion positions it to capitalize on the European medical cannabis market, which is projected to grow significantly as regulatory barriers ease. By replicating its domestic playbook-combining membership incentives, private-label products, and operational efficiency-High Tide is well-positioned to become a global leader in cannabis retail.

Conclusion

High Tide's ascent as the "Costco of Cannabis" is not a coincidence but a calculated strategy rooted in operational discipline, customer-centric innovation, and strategic expansion. By leveraging a membership model to drive retention, optimizing SKU management to reduce costs, and expanding private-label offerings to enhance margins, the company has created a blueprint for sustainable growth. As it scales its international footprint and refines its e-commerce capabilities, High Tide is poised to redefine the cannabis retail industry, much as Costco has transformed wholesale retail. For investors, this represents a compelling opportunity to back a company that is not only adapting to market trends but actively shaping them.