#HashtagFinance, Podcasts

Emma Andrews on Bringing a Cannabis Beverage Brand to Life

Audio

Emma Andrews, Chief Commercial Officer at BevCanna Enterprises Inc. (CSE:BEV), sat down with Grace Pedota to share her thoughts on the type of beverages we should expect when infused cannabis beverages go legal in Canada this October (2:13), how she applies her background as a nutritionist into the cannabis industry (6:26), her experience with cannabis as an endurance runner (8:14), and her perspective on plant-based food in the fast food industry (10:44). Listen until the end to hear her thoughts on cannabis consumption as an expecting mother, and her outlook for cannabis in health and wellness products over the next 20 to 30 years.

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#HashtagFinance, Podcasts

Alex Freedman on the Critical Role of Social Equity in Cannabis

Audio

Alex Freedman from the LA Department of Cannabis Regulation joins Barrington Miller for the inaugural #HashtagFinance Skype interview. This educational discussion focuses on the topic of ‘social equity’, including a definition of the term as it relates to the cannabis sector (2:00), how social equity works to have a positive impact on those negatively impacted by the “War on Drugs” (4:50), and the differences and similarities between social equity programs in Northern and Southern California (11:35). Listen until the end to learn about the challenges and opportunities facing community reinvestment from successful investee companies, navigating the long-term impact of social equity, and the growing demand for social equity mandates from cannabis investors!

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CSE Issuer Stories, Magazine

SLANG Worldwide: Brands at core of efficient business model that naturally scales with cannabis industry growth

The power of a brand is an amazing thing. A good brand touches our heart, gets people to buy more, to pay more, and the best of them can even become everyday words that transcend the boundaries of the company that created them. SLANG Worldwide Inc. (CSE:SLNG) is well aware of this potential and that’s why brands are its thing…lots of brands. Some, such as O.penVAPE, District Edibles, and Firefly rank among the top-performing brands in the entire cannabis industry.

Public Entrepreneur spoke recently with Peter Miller, SLANG’s co-founder and Chief Executive Officer, to explore this fascinating side of the cannabis market. From developing strategies to suit specific jurisdictions to the wisdom of pursuing growth through acquisitions, Miller speaks with the experience of an executive who has been there from the beginning, yet in terms of the potential to take SLANG to new heights is perhaps only just getting started.

Give us a brief introduction to SLANG.  How did you and your partner build the company into such a force in the cannabis consumer packaged goods space?

SLANG Worldwide is a consumer packaged goods company that owns, licenses, and markets 11 cannabis brands serving the flower, concentrates, edibles, and beverage categories. Our portfolio is one of the highest selling of all time, as tracked by a third party, with over $250 million in sales at retail. SLANG is a multistate and multinational operator, with brands and products available in over 2,600 retail stores – one of the largest distribution footprints in the cannabis industry. Our brands are more widely distributed than any portfolio I’m aware of. We source biomass, extract it and manufacture it into finished goods with our brands and formulations, then wholesale and distribute to retail accounts. That focus has allowed us to scale quickly and grow to where SLANG is today.

My co-founder Billy Levy and I previously founded a vertically integrated limited-licenses cannabis business in Canada. We came from the tech world and didn’t have a lot of experience in cannabis, so we spent a lot of time visiting markets that were maturing. We got to watch cannabis retail go from unbranded jars of bud to more sophisticated form factors like edibles and vaporizers, which really excited us. Our licensed producer was sold to Canopy Growth and we thought about where we wanted to be, so we started making investments and formalizing partnerships in the US.

SLANG recently launched a CBD-focused health and wellness division. How does this fit within your strategy going forward? Is it better to acquire brands or build them up on your own?

SLANG’s goal is to offer cannabis products to a wide variety of consumers. CBD products have proven to be extremely compelling and popular to consumers, but just producing CBD products doesn’t necessarily guarantee success at the cash register. CBD products require a different set of skills and relationships than THC. We identified a powerful opportunity with Greenlane to distribute our products into retail environments that aren’t your core cannabis retail environments. Greenlane is the largest online and smoke shop distributor in the industry. It represents an exciting go-to-market strategy for us. SLANG will continue to round out the products that we offer within the health and wellness verticals, initially on the inhalable side, and in the near term moving to the edibles side as well.

A number of SLANG products are best sellers. How do you develop these brands into winners? What lessons can be learned from your experience?

No two markets are the same. Canada has strict rules on promotion and advertising, but brands aren’t built solely through promotion and advertising. Brands benefit most from being trusted by customers, and you establish that trust over time. SLANG products have been leading in the most competitive and oldest legal markets in the US. How do we do that? SLANG establishes trust with our retail customers by consistently delivering them exactly what we say we will, which makes them inclined to continue carrying our products on their shelves. You start developing a subconscious attachment between your brand and the consumer. That’s when you really form that close relationship.

SLANG’s head of sales likes to say that the best ability to create a brand is to make it as broadly available as possible. Making our products widely available and then ensuring that our customers are aware of that availability are the keys to developing these brands.

When it comes to the question of organic growth versus acquisitions, which approach do you prefer?

The US is really a series of markets within a market. Each state is at a different point in its market maturity, so you have to use a tailored approach. In the more mature states like Washington or Colorado, we can look at acquiring brands that are proven winners that have been operating at scale for years in competitive environments. In new markets, it’s difficult to say who’s going to win it all. The deal SLANG announced with Arbor Pacific in Washington and Oregon was a situation where we were picking winners.

When we looked at other exciting markets like Florida, which is a limited-license market, it wasn’t as simple as picking a winner, so we decided to grow organically through a partnership with Trulieve, the largest retailer in the state.

Trulieve is an example of how we go about buying into a market. Instead of acquiring a Florida operator, we partnered with one who would help us get our brands on the shelf in the near term.  SLANG can help drive more customers to their stores to buy our brands, but we could also help support and share our product knowledge with them. We’ve been extracting cannabis for many years and can help them avoid some of the pitfalls of starting an extraction unit. We saw that as the best way to address new markets that are limited license.

What do you think makes the most sense for shareholders in the current environment?

As this market continues moving toward a consumer packaged goods framework, investors will pay close attention to branded unit sales. It is the most apples-to-apples way to understand the competitive landscape. How are consumers voting with their dollars and whose brands are driving the most sales? Consumers spent $32 million on SLANG branded products in the quarter.

Another key metric for investors is branded servings, which measures the number of experiences consumers have with cannabis brands. Quantified by 5mg servings, 52 million SLANG branded servings were purchased by customers in Q1. By branded servings sold, SLANG is one of the largest cannabis companies in the world.

How can investors make sense of the frenetic pace of M&A activity that’s going on in the sector right now?

There’s always going to be the temptation of the new shiny object and the trend of the moment. I think investors need to look at the kinds of assets people are putting together and support a cohesive thesis and strategy, rather than just looking at revenue figures or exciting markets and thinking it will be better together. In fact, it’s rarely the case if you look at M&A across other industries historically. It’s easy to get distracted. I think it’s important to make sure that there’s a central mission or strategy around all the M&A.

What are a few upcoming catalysts for SLANG shareholders?

I’m incredibly encouraged by the macro tailwinds we see in our industry, generally, but as each state-level market matures, we’re seeing validation of the SLANG business model. From the manufacturing process through the marketing of finished goods, SLANG’s business is scalable, capital efficient, and its success is repeatable in new markets. In fact, our business model improves with more competition, meaning the more retailers that open their doors, the more points of sale for our brands. Our business model lends itself to growing with the industry and we’re doing everything possible to grow more quickly than the broader industry. All the catalysts we have a line of sight on right now provide net benefits to our business model and our strategy.

Is there anything you’d like to add?

SLANG’s business model is simple and focused on sourcing biomass. We’re extracting and formulating it into finished goods and distributing our brands to as many stores as possible. It’s the same business model that has allowed some of the biggest consumer package goods companies in the world to scale up operations. A level playing field, in terms of regulation and unit economics, will only highlight our approach and the value of our brand portfolio.

This story was originally published at www.proactiveinvestors.com on June 19, 2019 and featured in the Public Entrepreneur magazine.

Learn more about SLANG Worldwide at https://www.slangww.com/.

CSE Issuer Stories, Magazine

Cresco’s acquisition of Origin House accelerates its advance toward 100% market penetration

Cresco Labs (CSE:CL) is one of the leading cannabis growers and retailers in the US, marketing several well-known brands across multiple states. The Chicago-headquartered company’s 2018 results showed increasing production and distribution, along with a near 300% increase in revenue compared to the previous year.

In April, Cresco announced plans to acquire California-focused Origin House for CDN$1.1 billion in what would be one of the largest public company acquisitions ever in the US cannabis space.  It would come on the heels of last year’s acquisition of Florida-focused Vidacann by Cresco for $120 million.

Proactive caught up with Chief Executive Officer Charles Bachtell recently to get his thoughts on the Origin House transaction and what lies ahead for Cresco and the cannabis sector in general.

Cresco has really gone from strength to strength over the past year. Let’s begin by having you tell us about your corporate strategy and what some of your advantages are compared to industry peers.

Cresco is one of the larger multistate operators in the US. We participate in all main verticals of the supply and value chain – from cultivation and extraction to the creation of branded products, carrying on into distribution of those branded products to stores we don’t own and then also bricks-and-mortar retail. Including pending acquisitions, we’re in 11 states and those states are arguably the most strategic footprint.

Some of our peers have more states in their portfolio but our 11 states – seven of the 10 most populated states in the US and four that aren’t in the top 10 – they all have very key strategic rationale behind them, like Nevada with Las Vegas and Massachusetts with adult use. We focus on the regulated market.  We have compliance backgrounds. The founders of this company come from the banking industry and a lot of the lessons we learned on the operations side, the legal side and the compliance side of banking have helped us create an operation in cannabis that is very focused on regulation and doing cannabis the right way.

Those are some very strong pillars. It seems that many companies in this industry are pursuing similar goals, but it’s the ones executing consistently on their growth plans that separate themselves.

The strategy behind our growth has not been just about trying to make as big a footprint as possible.  It was making sure that we were thoughtful in the states we launched in. We pride ourselves on execution and if you’re looking for maybe points of distinction between us and our peers, because to a certain extent you could say we look alike – we’re all trying to create multistate national platforms, we all want to create brands, and now we all have access to capital – I think this is what has always resonated with the investor community.

It comes down to three things with Cresco. The strength of management has always been commented on by investors. It is a unique background to have, specifically mortgage banking experience and what it was like to go through the economic downturn and not only survive, but we thrived in our prior lives when regulation came to mortgage banking.

Then we’ve built out the team with some phenomenal professionals with a ton of experience in big international CPG (consumer packaged goods), so the strength of management has always stood out. The level of execution – our ability to win these very competitive, merit-based application processes is second to none.  And then the ability to execute on M&A. We call it the ‘gets’ – we get access to the markets, we get operational, we get products to market and then we get disproportionate market share.

In Pennsylvania, for example, we all received licenses on the same day. We were able to go through all the things to operationalize and bring product to market 45 days faster than the second group that came to market, and 70 days faster than the third.

We execute at a different level and then we focus on market penetration and market share, which are fundamental ways of evaluating your success. But a lot of our peers were focused on the landgrab aspect and maybe a little less on operations.  But we’re operations guys.

We like the story of highest market share in Illinois, highest market share in Pennsylvania, largest distribution footprint in California. That’s how we judge ourselves and we like telling that story.

The third point of distinction is our focus on the creation of branded products more so than how many bricks-and-mortar retail stores we own. We like vertical integration. We think it’s important in some markets, but our goal is not to own more bricks-and-mortar retail than anyone else. Our goal is to make sure our products are on the shelves of every dispensary in a state and that’s a little different from our peers.

Tell me more about the acquisition of Origin House. How did you go about that and what was the rationale for the deal?

It came on the heels of another big announcement we made, which was the Florida acquisition. In order to create a national brand, you have to have that strategic geographic footprint.  You only want to be in the states that really matter. So, Florida, being the third most populated state in the US, of course really mattered. We were able to check that box and it really is the last of the tier-one states we needed. So, you create the geographic footprint that matters but then you have to get a meaningful position in those markets.

Our story is 100% market penetration – getting on the shelves in every dispensary and then having the most market share of any group. And so that’s where Origin House fits into the narrative. We were already in California – we already had operations. We closed that transaction last year and we were starting to produce, but how do we create a meaningful position in the most important, largest cannabis market in the world? That’s where Origin House really spoke to us as a transaction. They’re the largest distribution company in the largest cannabis market in the world. That in and of itself is a reason to do the deal.

The best part about the Origin House acquisition has actually been everything that came after it. They really do distribution because they’re fundamentally focused on finding and identifying brands that matter. They wanted to be in the branding space too so that was very aligned with us.

And now that we’re a publicly traded company, granted this has always been our mindset anyway, who we can and who we can’t do business with, we have to ensure that our standards are met when it comes to corporate governance and adherence with strict compliance with state regulations. With Origin House, you had a company that was publicly traded for over two years now and compared to its peers out there they’ve been held to a higher level, a higher standard of compliance and corporate governance.

Then you start looking at the human capital side of the space.  They’ve got a very astute corporate development department over there. Over 20 lawyers and analysts that have been working on cannabis M&A deals for the last couple of years. That was great and then the icing on the cake is their founder and CEO Marc Lustig. His capital markets experience is unique for cannabis. His understanding of the way that capital markets and Canadian capital markets work. The relationships he has, the reputation he has. You start layering all of those assets on top of each other and you can see why it was a very enticing transaction for us to want to complete.

Merger activity has really picked up in the US cannabis space. Why is this and do you see the trend continuing?

This goes back to the experience we had in mortgage banking. I think any time you have emerging industry meets high regulation you’re going to have consolidation. It’s going to get to a point where people are going to struggle to reach where they thought they would be able to get. Maybe it’s less realistic – whether timing, whether infrastructure, whatever it is, access to capital that’s going to limit them, that’s going to create great opportunities for consolidation by the companies that have built out the infrastructure, that have the experience, that have been able to get out in front. I think that’s what you’re seeing and are going to continue to see in the cannabis space.

Consolidation is a part of this next phase of growth in the industry for a lot of reasons. When you can find some of that bandwidth, when you can find that experience, when you don’t have to create it all from scratch, that becomes a faster, less risky way to expand than building from scratch every time.

How do you see the US federal landscape for cannabis in terms of legislation changing?

I think everybody is more bullish on this than we would have been a year ago.  You’re seeing the SAFE Act with a lot of support. You’re seeing the STATES Act with a lot of support. The feedback and the chatter out of DC seems very positive on both of those fronts. People are handicapping SAFE to potentially be a 2019 passage, but they are also looking at the STATES Act as likely getting figured out before the 2020 election cycle. It’s moving in the right direction, I’ll tell you that.

What are your plans for the rest of 2019 and beyond?

We feel like we’ve created that geographic footprint of substance and now it’s making sure we go as deep in those programs as we can. That we do accomplish that market penetration and market share that has become our calling card. I think you’ll see us focus on implementation and integration with Origin House and with Florida. And we’re opportunistic, so if there’s another state that comes up that fits into our thesis and growth strategy, we’ll evaluate it. But I think for the next quarter or two, any M&A would be focused on deals that help us go deeper in states that we’re already in. Acquiring another operator in a state that we’re already in to increase our position in that state is the likely future of M&A for us.

This story was originally published at www.proactiveinvestors.com on June 20, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Cresco Labs at https://www.crescolabs.com/.

#HashtagFinance, Podcasts

JB and Bear on Navigating the Travel Dining Scene and Business Lunches

Audio

In this special “all killer, no filler” edition of #HashtagFinance, Barrington Miller (2X Ontario Chili Cook-Off Champ) joins James Black (habitual eater, and sometimes host) to discuss their eating experiences as frequent business travellers and share some “pro tips” for dining on the road. A full plate is served on this episode including:

– Barrington’s recent food experience in Colombia, the 60-year-old food stand, and the world’s best fruit (NOT apples)
– Where the world’s best shawarma is located (hint – not in Canada!)
– James’ warning about very late-night eating situations
– How to navigate the dicey food scene at Miami International Airport
– Bear’s discovery (and description) of grits in Charleston South Carolina
– Where the best fried chicken can be located in North Carolina
– Special feature – “Where’s Lunch??” in Calgary, Vancouver, and Toronto
– Barrington and James’ thoughts on when you can/should eat breakfast
– A special plea for the restaurant community in Toronto

Listen until the end to get pro tips, including:

1. What to do when you don’t see anyone in a restaurant
2. Why you need to fly into, or out of LaGuardia, and NOT Newark Liberty International
3. How to beat long line-ups for good food

Bon appetit!

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#HashtagFinance, Podcasts

Margot Micallef on Building a Wellness Brand Through Passion and Experience

Audio

Margot Micallef sat down with Barrington Miller to discuss her company, Gabriella’s Kitchen, including what she did when she was fired from her high profile communications job (2:00), how cannabis become a key ingredient at Gabriella’s Kitchen (6:43), and why they are applying a consumer packaged goods business model (14:08). Listen until the end to hear about Margot’s favourite product, the company’s recent (and over-subscribed) financing, and the five-year outlook for the company!

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#HashtagFinance, Podcasts

Andrew Berman on What Quality, Trust, and Choice Mean in Cannabis

Audio

Harborside CEO Andrew Berman sat down with James Black to share the origins of the company and its founder Steve DeAngelo (1:12), his thoughts on the importance of “clean cannabis” (6:45), and the traits of a premium cannabis product (9:30). Listen until the end to learn more about Andrew’s brief life in politics, Harborside’s success in fighting federal government over civil forfeiture, and his predictions around relaxing cannabis advertising standards.

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CSE Issuer Stories, Magazine

Harvest Health & Recreation turns modest investment into largest cannabis footprint in US

It isn’t often that one looks at a company and it’s as though they have thought of everything, with no obvious gaps to fill, no apparent weaknesses. That’s the impression one gets speaking with Steve White, Chief Executive Officer of Harvest Health & Recreation (CSE:HARV). A lawyer before making the leap into running a cannabis company some eight years ago, White is adept at navigating challenging regulatory environments, and communicates with the tone of a professional who knows he’s at the top of his game.

A commitment from a single investor last month to fund the company with up to US$500 million is just the latest sign that Harvest has not only a great track record, but also the vision and ability to execute that separates winners from also-rans in any industry. Public Entrepreneur spoke with White recently about his philosophy on building a successful business in the cannabis sector, and a recent acquisition that will give Harvest the largest presence in the United States cannabis industry.

We’ll get into your recently announced acquisition of Verano Holdings with our second question, but so we have some context, tell us how Harvest got started and some of the key milestones in your development to date.  And where do you stand now in the industry vis-à-vis other companies with similar business models?

We started in Arizona in 2011, so we were really early in the cannabis industry compared to many others in the space today. In terms of key milestones, in 2012 we won two licenses in Arizona.  Those were vertically integrated licenses. What’s important here is Arizona became a helpful training ground for us. We had to get good at cultivating, manufacturing and retailing cannabis – seed to sale. It was completely by happenstance that it was a teaching moment for the future of our growth and ability to master the various aspects of the industry.

Some of the bigger milestones have to do with expansion, and there have been so many that it is hard to isolate any. But one to note is on July 1 of 2017, we merged with a company called Modern Flower, led by a gentleman named Jason Vedadi. That was a moment that really helped to accelerate our growth as an organization.

From there I would have to say the next big milestone was the announcement of our agreement to acquire Verano Holdings, headquartered out of Illinois. That acquisition made us the largest cannabis company in the United States by ability to open revenue-generating facilities, subject to regulatory approval. We’ll have more licenses and licenses to open more facilities than any other cannabis company in the country.

That helps to answer your second question, which is what makes us different relative to our peers. Beyond the ability to win licenses organically and make strategic and accretive acquisitions, I would say the second thing is we have been consistently profitable as a company for many years. The only other multistate operator I knew of that was also consistently profitable happened to be Verano.

The Verano transaction brings two very successful companies together to make you the biggest multistate operator in the US.  Why is Verano such a good strategic fit for Harvest’s existing assets?

It was a perfect fit on three fronts. First, the Verano leadership team and their employees are people who are very easy to integrate into Harvest’s culture because they are a lot like us. And I think most importantly, we like them and vice versa. They are just great human beings with mindsets and focuses that are very similar to ours. So, the human capital in that acquisition was really important.

Second, the assets that we acquired pair perfectly with what we were hoping to put together in the near future. The acquisition has brought us into Illinois, Nevada and New Jersey in a very meaningful way. That represented our list of markets that we really wanted to enter in the near term.

And lastly, they have some great brands that do not overlap with some of the brands we are already producing. For example, in Illinois they represent about a quarter of the wholesale business, and their emphasis is in areas that we don’t have a big emphasis in yet, like edibles.

There is a “landgrab” taking place in the US cannabis industry, playing out partly in a large number of acquisitions. Harvest is growing both organically and through acquisitions. What is your competitive edge versus other well-funded companies in the space?

First, I would say that we can acquire market access organically, meaning we can win licenses when states issue them. Second, we have found that people we look to acquire are believers in Harvest’s stock. With a lot of these acquisitions, the sellers have to decide whose stock they want to hold, and we have a reputation in the industry that allows us, in some instances, to acquire people for less than what they would charge other potential acquirers. And we have seen that in a couple of instances, so that is very helpful for us.

It is difficult to say when federal legalization might take place in the US, but what is Harvest’s industry outlook?  You must have some vision of the industry of the future as you formulate corporate strategy.

Long term, you are going to see a shift away from cultivation.  Phase 2 will be about retail, and Phase 3 will be about brand development. We are planning in everything we do to take advantage of, and create, the infrastructure necessary to capitalize on that evolution of the market.

It’s really interesting in that each individual market evolves separately. So, while you might have a very mature market like California that is, in our minds, almost purely a brand game, there will be other states that just recently came online, and new states where you can see tremendous returns in cultivation. But those new states will eventually become mature states, and so we gear our business to take advantage of cultivation opportunities when we are early and one of few. But generally speaking, our emphasis is on developing a large wholesale and retail footprint.

Harvest recently announced completion of the first tranche of a US$500 million convertible debenture financing. Can you talk about two things: first, the use of proceeds, and second, what convinced the investor to back Harvest to the magnitude, potentially, of half a billion dollars?

First, that half a billion dollars is solely dedicated to growth.  That is acquisition capital and rocket fuel. It allows us, in conversations with acquisition targets, to use more cash. In times when we don’t think our stock is trading appropriately, we can add more cash, so we can keep more of the stock if we think it’s too cheap.

The reason that financier was interested in Harvest was because they are a believer in the long-term outlook of the company. They saw that as an easy transaction for them, and one where they did it on terms that they haven’t done for other people previously.

On a personal level, you are one of the more experienced executives in the industry, and as Harvest’s leader you are pushing the company to grow faster than everyone else. Talk a bit about your background and how that has positioned you to drive the company’s success.

It’s been helpful to be a lawyer in my previous life. The way you plan a case in the law is you evaluate the facts available to you early on, and then you plan a strategy, or a path, to victory. In this case with cannabis, what we were doing is we were evaluating an ever-changing landscape and we were developing a path toward long-term significant profitability.

Your biggest obstacles are regulatory in nature, and as a result the ability to navigate regulatory hurdles – laws, in other words – is really helpful, because you can interpret things in a creative way to give you advantages over competitors, when appropriate, and you are looking toward the end goal, which is long-term, sustainable, and significant profitability.

Any student of markets will know that inefficiency is often a good place to search for opportunity. Given how the federal laws in the US differ with those of the states, and then from state to state, does this fragmented regulatory environment present opportunity?

It presents obstacles, and with any obstacle there is opportunity.  It presents obstacles to people who are not well-capitalized and who don’t have the experience to overcome those obstacles. But for those who are determined and well-capitalized, it presents opportunities to reap benefits that are sometimes better than a normal market would yield, particularly in limited-license markets.

Is it fair to assume that being one of the more high-profile companies in the cannabis industry, opportunities often find their way to you?

Unfortunately, we are constantly scanning for them. The great opportunities don’t find you; you have to find the great opportunities. The opportunities that find you are the opportunities that find everybody, and we pride ourselves on finding opportunities that others don’t. And that requires just good old-fashioned hard work and thinking outside the box.

Is there anything we have missed – any important points to get across that we have not touched on?

One of the things that’s most significant about Harvest is that at the time we went public we had very little access to capital. We developed one of the largest footprints in the country by deploying less than $18 million in total invested capital. So, at that time we were a $1.5 billion company with that small of an investment. We have a history of doing a lot with less, and the lessons we have learned that have allowed us to do that are things we deploy each and every day.

A big part of that is a demonstrated ability to execute. Whether that is winning a license or creating a profitable business with very little capital, we have demonstrated time and time again that we are able to do that, and there are not a lot of people who can say the same thing.

This story was originally published at www.proactiveinvestors.com on June 24, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Harvest Health & Recreation at https://www.harvestinc.com/.

#HashtagFinance, Podcasts

Mark Bunting on the Constant Evolution of Financial News Media

Audio

Mark Bunting, President of Capital Ideas, dropped into the #HashtagFinance studio to chat with Grace Pedota and share his favourite podcasts and thoughts on the format for financial interviews (1:15), observations on what’s next in financial news media (5:12), and play a game of financial “word blurt” (a #HashtagFinance first at 10:43). Listen until the end to learn about his most interesting interviews, his thoughts on the Beyond Meat IPO, the cannabis sector, and blockchain stocks!

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CSE Issuer Stories, Magazine

After winning Florida, Trulieve Cannabis is taking its business model multistate

According to Trulieve Cannabis (CSE:TRUL) Chief Executive Officer Kim Rivers, cannabis is emotional.

“In many contexts, either you or your loved one has felt relief from a medical condition using cannabis,” Rivers says. “It makes it an interesting business space because folks are predisposed to feel something towards what you’re selling. Understanding and embracing that is part of the brand strategy.”

Trulieve built its brand selling medicinal cannabis to over 158,000 customers in Florida, the fastest-growing cannabis market in the United States. The company is the dominant player in the state, with a network of 28 retail locations and a statewide delivery program. Now, Rivers and her team are turning their attention to the rest of the US, confident that their vertically integrated business model is repeatable in other states.

Founded in 2014, Trulieve was one of the initial applicants and license winners in Florida.  According to Rivers, the company’s impetus was to build a “true brand” that could penetrate the Florida market, a 21 million-strong population of socially and economically diverse inhabitants.  This diversity makes it an ideal testing ground for franchise-building, which is what Rivers and her team set out to accomplish.

According to Rivers, if you build scale, you build a brand.  Trulieve’s team did this by creating a “seed-to-sale” operation that produces nearly 35,000 kilograms of private label medical grade cannabis products, representing over 195 SKUs marketed at Trulieve-branded dispensaries.

The company went public on the Canadian Securities Exchange in 2018 when it felt that it had become the dominant player in Florida. The decision was also driven by management’s sense that the time had come to move into new markets.

“We’re ready to take the show on the road and prove out the next stage of growth by building a true multistate operational footprint,” Rivers says.

Multistate expansion
In the fourth quarter of 2018, Trulieve announced acquisitions in Massachusetts and California, two very different markets.

In Massachusetts, where Trulieve acquired Life Essence Inc., the state’s regulatory system is similar to Florida’s, making it a natural fit.  Currently, Trulieve is applying for licenses to build and operate three medical dispensaries, three recreational licenses, and permitting for a 140,000 square foot cultivation facility it would like to begin operating in the fourth quarter of 2019.

In California, the world’s single largest cannabis market, Trulieve is using a somewhat different approach.  Here, the company acquired a controlling interest in Leef Industries LLC, a licensed medical and adult-use dispensary in Palm Springs. Rivers is conscious that saturation of the California cannabis market could pose a challenge for new operators to build up in the state, which is why the team is adopting a more patient approach to grow the brand. The retail location in California will serve as a research base for Trulieve to learn about what people are buying.

While having a presence in California will be great for brand recognition, Rivers is particularly excited about the opportunity to grow in the northeast United States.

“Massachusetts is a catalyst win for us because we can build synergies around that hub in the northeast,” explains Rivers.

More recently, Trulieve completed its acquisition of The Healing Corner, a dispensary located in Bristol, Connecticut.  The state is an important market for Trulieve, as it is located in the Northeast where the company is focused and is home to more than 34,000 patients and 1,100 consulting physicians.

“The Healing Corner also shares our philosophy of growing a business profitably and has generated consistent profits.  The acquisition was based on trailing EBITDA and we anticipate it will be accretive.”

Coast-to-coast brand building
Building a brand on both coasts is not as simple as having a presence, however. Rivers sees what she calls an “east coast, west coast philosophy” in the cannabis market that can make expansion even more challenging.

“How can we create a company and a consumer experience that bridges this cultural gap?” she asks. “We try to be cognizant that we want to create connectivity to local markets. One way we do this is to invite local providers onto shelves.”

According to Rivers, the company could speed up its retail lease in Massachusetts, but the team needs to be confident that they can deliver the Trulieve experience, which hinges on whether they can get the growing facility built in the face of significant supply constraints in the state.

It’s one of the lessons that they learned by watching other companies who stumbled in Florida. “Some of our competitors rushed to open retail with only two or three SKUs, and it does irreparable damage to the brand,” Rivers says.

For Trulieve, the challenge is to be able to replicate its Florida success in new states with different market dynamics.

“When moving into other markets, it’s important to be confident in what differentiates you from your competitors,” Rivers points out. “For us, it’s having pipeline management and the ability to offer superior customer service and competitive pricing.”

Trulieve chose early on to set a national pricing strategy that is competitive in mature medical markets so that every customer can have a similar, state-agnostic retail experience. “If we want to compete nationally then we have to have prices that can translate,” says Rivers.

Strategy pays off
If early revenues are any indication, the brand strategy is paying off. In May, Trulieve reported revenue of US $44.5 million for the first quarter of 2019, up from $15.2 million during the year-ago quarter. 2018 full year revenues were around $103 million, up almost 420%.

Income was also up exponentially from the same period a year earlier, at $43 million compared to $3.8 million.

Of course, these reported numbers don’t include any ramp-up in Massachusetts or the recent acquisition in Connecticut, and only a low single-digit percentage from California. In the current business year, Rivers and her team anticipate revenue topping $220 million.

There are a few external factors that could influence that revenue figure. Two bills in the US House of Representatives are expected to be tabled this year that could open new financing streams and fast-track the cannabis company’s ability to move operations forward.

The STATES Act would allow states to craft their own policies on cannabis. While it wouldn’t legalize the drug nationally, it would largely resolve conflicts between state and federal law.

Meanwhile, the Secure and Fair Enforcement banking act, or SAFE Act, would allow banks to service cannabis companies that comply with state laws, enabling them to access new streams of capital south of the border.

Both bills have a significant amount of bipartisan support, but Rivers and Trulieve are not relying on legislation to take the business to the next level.

“With respect to stability from a banking standpoint, the SAFE Act is not necessary, but is needed,” Rivers explains. “Larger institutions are charging absurd fees, especially for a business like ours that is driven by fundamentals. Typical debt structures are not available in the cannabis industry. If I want to raise debt, I have to talk to a fund that is cannabis-specific.”

Unlike other merchandisers, a retail license for a cannabis company is tied to the location specified on the license application. If a landlord raises the rent for that building, for example, the company has very few options to consider if it wants to keep the business open.

Emotional journey
What both bills signify is that the cannabis mindset in the US is changing from stigmatization to acceptance. A large part of that shift is thanks to the industry itself, and players like Trulieve.

In Florida, the company supports the advocate community through sponsorships and outreach efforts. It recently sponsored the “silver tour” in Florida led by cannabis pioneer Robert Platshorn, AKA Bobby Tuna, who spent some 30 years in federal prison on marijuana charges and now travels to senior citizen facilities to educate residents on the benefits of medical cannabis.

It all circles back to Rivers’ observation that led to the company’s founding and informs its strategy – that marijuana is emotional, and consumers form an almost personal attachment to brands. For Trulieve, that attachment is the driving force behind its growth and profitability.

“We’ve built Trulieve into a customer-first company with a focus on profitable growth,” Rivers concludes. “I believe strongly that you can be successful in this industry and build long-term value for shareholders by being a true operator.”

This story was originally published at www.proactiveinvestors.com on June 21, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Trulieve Cannabis at https://www.trulieve.com/.