MariMed (CSE:MRMD) has captured opportunities across the cannabis value chain with its “seed-to-sale” approach, encompassing flower cultivation, product development, marketing and distribution, and retail operations in key cannabis growth markets in the U.S.
Importantly, the company chose a deliberate and evenly paced approach over the lure of rapid expansion to reach this point. The resulting financial and operational stability positions MariMed to take full advantage of the expected reclassification of cannabis under the Controlled Substances Act to Schedule III from Schedule I following a related submission by the U.S. Drug Enforcement Administration in mid-May.
The Norwood, Massachusetts-based company was co-founded by Chief Executive Officer Jon Levine and the late Robert Fireman in 2011 with an initial focus on the medical segment to help people improve their everyday lives. It began as an advisory company to cannabis licence holders, and subsequently transitioned to a plant-touching operation that has since built out its business to six states: Illinois, Massachusetts, Maryland, Delaware, Ohio and Missouri, with plans to enter additional markets.
Levine told Canadian Securities Exchange Magazine that MariMed has taken a conservative approach to operations and acquisitions to ensure it did not overextend itself operationally or financially as so many cannabis companies have done.
“We had a vision of growing this business profitably to multiple states, and that’s where we have been very successful,” Levine says.
“We grew the company slower than most of our multi-state operator (MSO) competitors, focusing on fundamentals and profitability versus rapid, unprofitable growth just to say you are the biggest. We have one of the strongest balance sheets in the industry as a result,” he explains, highlighting that the company has very little debt, nearly all of which has a 10-year maturity, versus maturities of three to five years for most of their larger MSO peers.
MariMed focuses primarily on limited-licence cannabis markets in the U.S. All states in this category issue a predetermined number of licences to cannabis businesses. The high barrier to entry balances patient and consumer access to cannabis products, bringing price stability and other benefits.
But that doesn’t mean the company has seen less success in states that don’t adhere to the limited-licence approach, such as its home state of Massachusetts. Here, Levine says the company’s high-quality products, with their all-natural ingredients and precision dosing, have allowed it to remain competitive without being forced to drop prices nearly as much as the competition.
Under its portfolio are multiple award-winning cannabis products and brands, including Betty’s Eddies fruit chews, Nature’s Heritage flower and concentrates, a full line of InHouse value-priced products, Bubby’s Baked brownies and other confections, and Vibations, a hydrating powder drink mix.
“The winners in cannabis will be the companies with the strongest brands. We’ve believed that right from the start,” Levine explains. “People will trust and pay higher prices for consistent, high-quality brands. Similar to traditional consumer products, customers want to know that they will get the exact same Betty’s Eddies every time they purchase it and no matter the market. It sounds simple but not many cannabis operators deliver on that promise like we do.”
MariMed’s ultimate goal is to grow deeper in the states where it is currently operating until it is fully vertical and has maxed out its licences and then do the same in additional states. The company has applied for cannabis licences in Virginia, New York and Texas, which Levine says present significant growth opportunities in their respective medical markets. The company also intends to apply for licences in Kentucky, which recently approved a medical cannabis program.
In addition to its commitment to high-quality products, MariMed takes its position as an industry leader very seriously. Its advocacy on behalf of others has focused on the removal of U.S. tax code 280E, a provision that results in cannabis companies paying higher taxes than most other U.S. businesses due to marijuana’s status as a Schedule I controlled substance. The company last year held a 280E protest event where executives and team members tossed cargo chests emblazoned – but not actually filled – with “weed” into the Boston Harbor, taking inspiration from the famous Boston Tea Party tax protest of 1773 during its 250th anniversary.
The Drug Enforcement Administration is expected to formally approve the rescheduling of cannabis as a lower-risk, Schedule III drug in the coming months, meaning cannabis companies will no longer be burdened by 280E.
Levine hails the move as “historic” and a big win for the industry and the consumers it serves. “Among the most important benefits of rescheduling is that more credible research will be implemented to show the benefits of cannabis. We should ultimately see an exponential increase in the number of people who embrace cannabis as part of their health and wellness lifestyle.”
It will also result in industry-wide savings for cannabis companies, with MariMed expecting millions of dollars in tax reduction annually from the removal of 280E. Levine says these cost savings will free up funds for MariMed to accelerate growth, including expansion into new markets and investment in product innovation. The company is also adding new stock-keeping units, or SKUs, to its product lineup.
“We’re going to see improvement to our financials in revenue, margins and earnings before interest, taxes, depreciation and amortization (EBITDA) as we grow toward the end of the year,” Levine explains.
The company expects to see revenue growth in the range of 5% to 7% and adjusted EBITDA growth of up to 2% for 2024.
For the first quarter, MariMed reported a 10% year-over-year increase in revenue, led by significant growth in its wholesale division and solid performance at retail. The strong revenue expansion led to the company achieving its 17th consecutive quarter of positive adjusted EBITDA.
“We’re heading in the right direction,” Levine says of MariMed’s financial performance. He spotlights that the company outperformed its competition in every market it operates in during the first quarter, including Illinois, where it began selling products through its new wholesale business in January. MariMed expects margins and revenue in Illinois to grow throughout 2024 as it bolsters operations, including opening its first cultivation facility.
“We are battling additional competition, economic factors and seasonality, but long-term the future is bright for MariMed and the industry,” the CEO explains. “We’re very excited, for example, to continue ramping our Illinois production and cultivation and watch our revenue and margins increase along with that.”
The company also expects to have its third adult-use dispensary up and running in Massachusetts very soon, which Levine said will drive MariMed’s margins and revenue higher for that state. It aims to open a new processing centre in Missouri as well and to expand the size of its Maryland cultivation facility to meet the growing demand for its products in that high-growth state.
With Ohio recently becoming the 24th state to legalize recreational cannabis use, the company plans to open a second dispensary there. It’s also evaluating opportunities to purchase a processing or cultivation facility and additional dispensaries to maximize its Ohio footprint.
“Those are things we expect to come that will bring more revenue and better margins in the second half of the year,” Levine notes.
MariMed’s momentum has carried into the second quarter. The Illinois brand rollout continues with its products available in over 130 dispensaries. In Massachusetts, the company recently announced a partnership with two iconic Boston music venues, MGM Music Hall at Fenway and Citizens House of Blues Boston. Positioned as each venue’s exclusive cannabis category sponsor, the partnership is generating enormous visibility and goodwill for its Nature’s Heritage brand.
“We’re very excited that MariMed’s best days are still ahead,” says Levine.
This story was featured in Canadian Securities Exchange Magazine.
Learn more about MariMed at https://marimedinc.com/.