Growth Spurt: How San Jose’s Caliva Grew 300 Percent in One Year

CALIVA is much more than a typical dispensary. The San Jose, California, shop, ranked the number-one dispensary in the nation by Business Insider, embraces a progressive business model: vertical integration. From the beginning, Chief Executive Officer Dennis O’Malley and the management team foresaw not only a retail operation, but also cultivating raw materials and producing innovative products. The executives reasoned the system would allow them “to serve our customers in a much more reliable and cost-effective manner,” O’Malley said.

The dispensary, launched three years ago, is a clean, well-lit space dominated by wood and glass—Starbucks Reserve meets surf shop—with “wellness consultants” roaming the spacious floor. The gargantuan on-site cultivation facility occupies 100,000 square feet, containing thirteen grow rooms the size of football fields. The grow allows Caliva to keep a consistent supply of quality flower, like top sellers Alien OG and Blackjack, on hand. Although managing the facility is a daunting task, O’Malley said the arrangement allows the company to be in total control of its supply chain.

Having the grow close at hand also allows the company to experiment with new products like Toasties, which has become the company’s signature product. O’Malley said the proprietary blend of low-dose cannabis in a straight-wall pre-roll with a hemp filter is a perennial favorite with customers. “We can’t keep them in stock,” he said.

The company also has dedicated significant resources to refining and formulating oils. A team of formulation chemists uses multiple in-house extraction methods and a pharmaceutical-grade refinement system to tinker with viscosity, terpene profiles, and cannabinoid ratios in search of perfect products. According to O’Malley, the team is a competitive advantage. “Given that most of our sales are from raw materials produced on-site, we have some of the freshest flower, cleanest oil, and [best-]quality pre-rolls on the market available in-store,” he said.

Flower sales are supplemented by a robust vape section and top-shelf pre-rolls Headset ranked among the five best-selling in California. But the item Caliva can’t keep on the shelves is Reef Leaf—a quarter ounce of pre-ground flower wrapped in cool, hip packaging and priced less than $30. “The reception has been just nuts from both retail and wholesale customers,” said O’Malley. “Everyone is looking for that perfect combination of value and quality.”

Before joining Caliva, O’Malley built an enterprise software company that helped some of the world’s largest brands create word-of-mouth buzz. The shift to cannabis was abrupt, he said, consisting of accompanying a sales representative on dispensary calls. At each stop, the sales rep wheeled in a suitcase containing $10,000-worth of flower. “Thank goodness we have progressed from that,” O’Malley said, chuckling.

Progressed they have. The company employs 300 people and plans to hire another fifty before end of the year. O’Malley noted he’d put their leadership team up against any other company’s, including those outside the cannabis industry. “We have a diverse group of successful executives who lead by example, are passionate about the industry and mission, and are able to recruit more great talent,” he said. “They keep the bar high; they really set a great tone for the culture of our company.”

In fact, all aspects of the business are flourishing, according to O’Malley. The retail shop serves an average of 600 customers on weekends; 50 percent of them are monthly regulars, and the rest are new. Both understand one thing, he said: Every time they buy Caliva products, they will have a consistent experience.

Since July 1, retail revenue has doubled, but O’Malley pointed out most of the company’s revenue comes from wholesaling its branded products. “Caliva products are in more than 100 dispensaries,” he said. That explains why the overall revenue has increased a whopping 300 percent over 2017’s levels. Why the huge growth? O’Malley has noticed two trends: group buying and consumers spending three times longer with wellness consultants to learn about the more than thirty Caliva Collection products. He also gives credit to the company’s compliance and the lab teams’ preparedness for the new testing regulations that went into effect July 1. “Without that preparation, we might have lost out on some sales. We know it pays to make compliance a top priority,” he said.

The company is expanding into new partnerships. Recently, the company secured a deal to provide the oil for Grenco’s G-Pen. O’Malley said he was impressed with the feel, shape, and utility of the device. “Consumers are switching from the old-school 510-threaded cartridges and other proprietary form factors rapidly,” he said. “Grenco really ensures the filler partner is successful. Not all proprietary systems do that.”

They don’t host events or vendor days. According to O’Malley, “They don’t drive more traffic to our store and at times confuse our customers.” Instead, the company has created a robust marketing strategy across a variety of channels. “Inbound marketing is huge for us,” he said. “We get dozens of dispensaries reaching out to our website weekly, and we receive thousands of new consumer sign-ups through the menu monthly. The basis of our marketing strategy is to show all the ways Caliva equals trust.”

Caliva
1695 7th St, San Jose, Calif. 95112
(408) 297-2615
GoCaliva.com