In 2020, there’s no shortage of contentious debates leading up to Election Day. Aside from the five legalization initiative votes happening this November (see sidebar, "5 States Voting on Cannabis Legalization this November"), several races have caught cannabis activists’ attention.
Cannabis Business Times spoke with representatives from the Marijuana Policy Project (MPP) about major Election Day races taking place Nov. 3.
Don Murphy, director of federal policies at MPP and a former member of the Maryland House of Delegates in the 1990s and early 2000s, told C-SPAN that when he was in office, he “was voting to lock up everybody.” That was until he was approached by a veteran who was using cannabis with his doctor’s approval. The veteran asked Murphy if he thought he was a criminal.
“I said, ‘No,’” Murphy says as he retells the story to CBT. “He said, ‘Well, you’re an elected official. Unless you do something to change the law, you really do think I'm a criminal.’ So, I hold incumbents responsible for patients who get caught up in the system because they haven’t done anything to fix it.”
Murphy illustrates that actions on cannabis speak louder than words. “It's no longer good enough to say, ‘Yes, I support that,’” he says. “Really, how would I know? I don't see your name on the sponsor line.”
GUBERNATORIAL RACES
Vermont Governorship
As of mid-September, whether Vermont Gov. Phil Scott (R) would sign the bill that passed the Vermont General Assembly to tax and regulate cannabis sales remained in question.
Matt Simon, MPP’s New England political director, puts the situation simply: “If he vetoes it, he’s public enemy No. 1 for the cannabis industry, I would say. If not, he takes a weapon off the table from his general election opponent.”
That opponent, Lt. Gov. David Zuckerman (D), is a vocally progressive candidate. “David Zuckerman has been a pro-cannabis politician since the first time he ran for [state] House when he was a student at the University of Vermont back in the ’90s,” Simon says. “He didn't win the first time, but he has been in the [Vermont] House and the Senate for a long time before lieutenant governor. He was the sponsor of Vermont's medical cannabis bill that passed back in 2004.”
Before COVID-19 began spreading across the U.S., Scott said he wanted a roadside saliva test for cannabis, but Simon says Scott has not spoken on the issue more recently. Simon adds that the S.54 bill to come across Scott’s desk would allow saliva testing if passed, but officers would have to perform the test through a warrant, not on the roadside.
If Scott signs the bill, Simon says, “Who is governor will matter on the decisions that get made about licensing fees, taxes, any number of issues—roadway safety—all of the above will be up for consideration. I think there are some differences between how Gov. Scott would handle those issues and how a Gov. Zuckerman might handle those issues.”
New Hampshire Governorship
Despite his anti-legalization stance, New Hampshire Gov. Chris Sununu (R) signed several pro-cannabis bills in 2017, his first year in office, Simon says.
One of those bills added post-traumatic stress disorder and chronic pain to the state’s qualifying conditions list. Sununu also signed a decriminalization bill that made possession of up to three quarters of an ounce a civil violation on first offense. And in 2019, according to the Associated Press, Sununu signed a bill to establish a process for people who were arrested for those smaller possession offenses, prior to the bill’s passage, to annul their criminal records.
“New Hampshire took a big leap forward on cannabis policy out of the dark ages in Sununu’s first year,” Simon says. “Since then, he's been able to go around and say that he’s the most progressive governor in New Hampshire history on cannabis—and he’s technically 100% correct. That being said, he has been very vocally opposed to legalization, and that doesn't really fly in New Hampshire.”
State Sen. Dan Feltes (D) is challenging Sununu for his seat. In September, Feltes adopted the cannabis legalization plan of his primary race opponent, Andru Volinsky, Simon says. The plan outlines permission for home grows and for the sale of cannabis at liquor stores, according to WMUR-9.
“He's got a tall task ahead of him to beat a very popular New Hampshire governor,” Simon says.
U.S. SENATE RACES
Colorado Senate Seat
In Colorado, incumbent Cory Gardner (R) will face off against former Gov. John Hickenlooper (D). Neither candidate supported MPP’s ballot initiative in 2012, Murphy says. But more recently, Gardner has pushed for passage of the SAFE Banking Act, and Hickenlooper has shifted from what Murphy calls a “mixed record” on cannabis to pushing for federal decriminalization and states' permission to legalize.
“It remains to be seen if first term incumbent Cory Gardner will be able to deliver the SAFE Banking Act to the president’s desk, but whether or not he is successful, you can’t say he hasn’t tried,” Murphy says.
Minnesota Senate Seat
In Minnesota, both incumbent Sen. Tina Smith (D) and candidate Jason Lewis (R), a former U.S. Representative for the state’s 2nd Congressional District, have outlined pro-cannabis stances.
In July, Smith introduced the Substance Regulation and Safety Act to decriminalize and deschedule cannabis and have the Food and Drug Administration (FDA) regulate it similarly to tobacco. She also signed onto the Marijuana Opportunity Reinvestment and Expungement (MORE) Act as a cosponsor in September of this year.
Lewis has spoken about wanting to protect state cannabis programs from federal interference, according to Patch.com. In 2017, he co-sponsored the Compassionate Access Act, which would have rescheduled cannabis and allowed for research into medical uses.
Like Ed Markey (D), the incumbent who defeated Joe Kennedy III (D) in the Massachusetts U.S. Senate Democratic primary, Murphy says Smith has recently become more vocal on cannabis. “Here's a state that is blowing up over criminal justice reform, police reform—indirectly, marijuana policy reform—that all should be part of it,” Murphy says of Minnesota. “I think if you do police reform without drug policy reform, that's not really scratching the itch.”
South Carolina Senate Seat
Murphy points out that South Carolina Sen. Lindsey Graham (R) is undergoing a tough competition against Jaime Harrison (D) to hold on for a fourth term. “If he were to lose, it would likely pad the Democrat’s majority in the Senate, as there are other Republicans in tighter races that would have fallen first,” Murphy says.
Graham’s challenger supports cannabis legalization. In an interview with CNBC, Harrison, who is Black, noted the issue of racial disparities in possession arrests. “Across the country, we are finding that states are legalizing marijuana and medical marijuana, and it’s just time for South Carolina to lead on this issue,” Harrison told the news outlet.
Graham signed onto the CARERS Act in 2016 and held a Senate Judiciary subcommittee hearing on medical marijuana that same year. Since then, he has not signed back onto newer versions of the act, including since he became Senate Judiciary chair in 2019.
“He's been sort of good and bad on this,” Murphy says. “I think, ideologically, he's there, but he just doesn't even know how to make this work with his conservative base; his law and order bona fides are in question, and his cops are all a big 'no.' Well, here you are in the race of your life, and maybe if you were on the right side of this, it wouldn't be a problem.”
U.S. HOUSE RACES
Florida District 1 House Seat
In Florida’s 1st Congressional District, cannabis proponent Rep. Matt Gaetz (R) seeks reelection. He’s the only Republican in Congress to cosponsor the MORE Act. His challenger, retired U.S. Navy flight officer Phil Ehr (D), wants to look into rehabilitation instead of mandatory minimum prison sentences for drug offenders, according to NORML.
“The upside here is Matt Gaetz is in a position of power, he has the ear of the president and he's actually using his power to speak up, when too many folks here [on Capitol Hill] don't,” Murphy says.
Texas District 17 House Seat
In Texas’ 17th Congressional District, Pete Sessions (R) and Rick Kennedy (D) are vying for the seat Bill Flores (R) is retiring from.
Sessions has been a thorn in the side of cannabis activists, Murphy says. “He's the former chair of the Rules Committee, and every time marijuana-related legislation, amendments, would be offered, the Rules Committee would rule them out of order,” he says.
When Sessions lost the 32nd district seat to Colin Allred in 2018, Murphy says, “We were happy to see him go. And now he’s going to come back because he moved 80 miles away into a district where the incumbent Republican was leaving office.”
A Bright Future
Murphy conveys optimism about the future of legal cannabis in the U.S. when he says, “I don't think we're going back. To use an old line, the toothpaste is out of the tube—and it’s brushing teeth already. You just can't go back, … the politics are on our side, policy is on our side. I don't think the industry has anything to worry about, regardless of what happens in November.”
Patrick Williams is senior editor of Cannabis Business Times, Cannabis Dispensary and Hemp Grower.
WeedMD's Bold Pivot in Canada's Evolving Market
Features - Cover Story
Canadian LP WeedMD diversifies into the adult-use segment while staying true to its medical roots.
From left: Stephen Ng, chief commercial officer, Lincoln Greenidge, CFO, Deborah Sikkema, chief people officer, Angelo Tsebelis, CEO
Portraits by Amer Nabulsi
Changing direction is, in theory, a good thing for a business. But pivots can easily fail if they’re done with haste and a disregard for the past.
Consider the “Shiny Object Syndrome,” a condition many entrepreneurs know painfully well. It’s when business leaders get so enamored with new opportunities, new technologies, and new markets that they neglect their time-honored businesses. They reject the old. Instead of using their core assets to gain a strategic advantage, they drain them for cash or retreat from them outright. They rush to the future, introducing new products and services often before their industries—and consumers—are ready. Then, when their shiny new venture sputters, they’re left with nothing.
This is exactly the kind of scenario that the leadership team at WeedMD Inc. has been trying to avoid as the company orchestrates its bold pivot to the adult-use cannabis market in Canada.
“We have taken a pragmatic and thoughtful approach to how we are going to expand our presence in this marketplace,” WeedMD CEO Angelo Tsebelis told Cannabis Business Times. “We wanted to ensure that anything we were committing to our customers in the marketplace was something that we could ultimately stand by. So, up until the end of 2019, the company was still very much in the ramp-up phase.”
Market growth and the future of medical cannabis in question
WeedMD, headquartered in Toronto, entered Canada’s cannabis scene in 2014, not long after the Government of Canada opened the door to licensed producers (LPs) in a regulated industry under the Marihuana for Medical Purposes Regulations (MMPR) in June 2013. Since then, the Toronto-based company developed a reputation for growing high-quality but cost-efficient cannabis, selling both directly to patients and wholesale to other federal license holders. WeedMD was one of the first Canadian LPs to grow outdoors, which it continues to do, in addition to growing in a greenhouse and operating two facilities in Ontario for extraction, processing, research and fulfillment.
But as medical-cannabis LPs proliferated across Canada’s provinces during the past seven years, so too did business models and competition. Margins became tighter. When Canada legalized cannabis for adult use in 2018, the future looked even murkier for WeedMD. Would the introduction of a legal adult-use market give patients an alternative and a more convenient way to procure cannabis for self-directed therapeutic use? Would there even be a need for a medical cannabis market at all? WeedMD found itself getting squeezed on both ends.
What was needed was a strategic reorientation—a bold yet carefully choreographed one. The temptation to move quickly into the adult-use market was all-consuming. But WeedMD took another tack: The company decided to double-down on the medical-cannabis business, with a keen eye toward an adult-use future.
In late 2019, WeedMD acquired Starseed Holdings Inc., a medically focused LP that provides cannabis as a fully covered drug benefit for members of trade unions and their dependents—a large, captive, covered customer base of about 350,000. One of Starseed’s partnerships is with Canada’s largest construction union, the Laborers’ International Union of North America, which has more than 100,000 members and retirees. At the time of the C$25-million deal’s announcement about a year ago, Starseed was selling cannabis through these exclusive channels at about C$9 per gram—and at usage rates twice the industry average. Prior to the Starseed deal, WeedMD had relied heavily on wholesale product distribution to federal license holders, which generally carried a lower margin.
“As a result of our reputation and dried flower product, we also sold to the wholesale market; however, that was never our main business goal and was a side effect of having product to sell that we couldn’t package quickly enough,” says Lincoln Greenidge, WeedMD chief financial officer. “Now that we’ve optimized our operations, our strategy is to primarily sell direct to consumer and patients.”
Starseed offered a strategic growth asset: An adult-use cannabis brand called Saturday. Building on Starseed’s market reputation as a provider of cannabis for medicinal and wellness purposes, the Saturday brand advocates responsible cannabis consumption, segmenting products based on the time of day they should be consumed according to cannabinoid content (Saturday morning, Saturday afternoon, or Saturday night). While Starseed’s direct-to-patient cannabis business may have been the key driver of the acquisition, Saturday positions WeedMD to be a formidable player in the faster-growing recreational cannabis market in Canada. And WeedMD already has a premium adult-use brand, Color Cannabis, which launched in 2019 to specialize in dried flower.
Will this pivot-by-acquisition prove successful for WeedMD? Time will tell. But the deal underscores a two-pronged calculus:
WeedMD operates a 220,000 sq. ft. hybrid greenhouse for cultivation and processing, and can expand up to 550,000 sq. ft.
Photo provided by WeedMD
Prong 1: The medical-cannabis market is big and growing, but will soon plateau and even shrink.
Canada has permitted home growing of cannabis for medical use since 2001. After the MMPR was enacted in 2013, LPs cultivated crops for sale to those with valid prescriptions. The market grew steadily. However, that all changed in 2018. Once Canada legalized cannabis for adult use under the Cannabis Act, projections for the medical market’s future growth dimmed.
Statista estimates the total size of Canada’s medical marijuana market will be C$2.31 billion in 2021, a sharp rise from what it was in 2016 (C$600 million). In 2022, that market will grow to C$2.38 billion, according to the market and consumer data provider. But soon after that the market will begin to retract, according to the predictions—to C$2.37 billion in 2023, C$2.36 billion in 2024, and C$2.35 billion in 2025.
“The entire Canadian cannabis market was medically focused, pre-recreation legalization; we had to be,” says Tsebelis, former Starseed president who replaced Keith Merker as WeedMD’s CEO in February 2020. “But after legalization, there was really not a lot of incentive or rationale to continue through that medical channel unless you went down the path of reimbursement and coverage through private payers, which is what we did at Starseed.”
Portrait by Amer Nabulsi
Put another way: If most Canadians will soon be able to walk into their corner store and buy a pre-rolled joint to alleviate arthritis just as they would a bottle of aspirin, the demarcation line between the medical and adult-use cannabis markets might blur, if not disappear. But what if an insurance company foots the bill for that cannabis? What if federal lawmakers see the value in protecting the medical-cannabis market and create incentives for patients to procure cannabis through physicians rather than through adult-use channels, perhaps with lower taxes, favorable insurance coverage and reimbursement options, and no possession limits? Then the division of markets, at least for WeedMD’s business strategy, starts to make more sense.
That’s why Starseed was so attractive to WeedMD as a take-over target: The company has direct channels to a patient base with insurance coverage for medical cannabis. These patients have all the incentive in the world to consume medical cannabis. And for Starseed, the company gains access to WeedMD’s low-cost cannabis production—a win-win.
This fall, the WeedMD and Starseed medical businesses will begin to be marketed only under the Starseed name. Behind the scenes, WeedMD will still produce and cultivate the cannabis, and Starseed will continue to be the official sales platform. But to the market, the companies’ medical businesses will be branded Starseed. The rationale is to give patients equal access to the companies’ product lines through one unified platform and achieve economies of scale, according to a company spokeswoman.
Prong 2: The legal adult-use market is projected to grow at a much faster rate, but will take time to develop.
Two years after Canada legalized recreational cannabis, the market has yet to fully take off.
Because each Canadian province is responsible for its own retail rules and taxes, store openings have been inconsistent across the country. Alberta, for example, has looser regulations than the rest of the country, and has seen more store openings, while the more highly populated provinces of Ontario and Quebec have lagged behind, according to Health Canada.
Then there is the illicit-market problem. According to the Canadian Government’s Canadian Cannabis Survey 2019, almost 20% of cannabis consumers acknowledged their “usual” source for acquiring cannabis was an illegal source, while 24% said they usually obtain cannabis from a legal storefront and 14% indicate they usually shop for cannabis at a legal online retailer.
These forces have allowed WeedMD to take a slower, more thoughtful approach to its market entry.
Photo by Amer Nabulsi
"There is a third segment of the cannabis market—and that’s the wellness market.” – Stephen Ng, chief commercial officer
“We needed to build out our entire cultivation and production platform to get to full runway capacity, so we entered the beginning of this year in a position where all the operational investments were put in place,” Tsebelis says.
The slow and steady approach has paid off. Though profitability is still just out of reach, the company has made progress this year at increasing net revenue while putting itself in a position to turn a profit in 2021 and beyond, Greenidge says. A big part of that is because of the recreational market. Financial disclosures show a massive sales lift thanks in part to the recent shift in focus.
“The push into the adult-use market is absolutely on-strategy for us, and we know it can be done profitably,” Greenidge says. “Our plans for the adult-use segment are designed to expand the appeal and distribution of our Color and Saturday Cannabis brands, delivering our products into more market segments.”
WeedMD is doing this through the introduction of new genetics and formats, Greenidge says.
In September, the company announced a new indica-dominant hybrid for the adult-use market—Black Sugar Rose. The new cultivar, which will be available this fall, is a cross between Critical Mass and Black Domina with a cannabinoid profile expected to be between 18% and 23% THC. In addition to launching the new cultivar, WeedMD also announced new thread vape products, pre-rolls, and nitrogen-flushed flower packaging.
The new product launch comes with a big push by WeedMD into “Cannabis 2.0” products. Canada legalized cannabis edibles for the adult-use market on Oct. 17, 2019, exactly one year after the country first legalized recreational cannabis consumption. With Cannabis 2.0, WeedMD sees even greater opportunity to expand into the adult-use market.
WeedMD takes a medical-grade approach with all its cannabis products.
Photo provided by WeedMD
In August, the company closed a deal with MM Technology Holdings LLC, the owner of Mary’s Brands, to produce Mary’s Medicinals products, including transdermal gels and patches, as well as topicals. As part of the deal, WeedMD will market, sell, and distribute Mary’s Medicinals products in Canada.
“There is a third segment of the cannabis market—and that’s the wellness market,” says Stephen Ng, chief commercial officer for WeedMD. “This wellness market straddles medical and recreational channels, and that’s effectively the CBD market.”
Increasingly, Canadians are consuming cannabis for medicinal or wellness reasons without a medical prescription (sometimes CBD products, notes Ng), and that has forced WeedMD to rethink its entire product and marketing strategy.
“Not everybody using cannabis is looking to get high,” Tsebelis says. “Some people are treating ailments. And if people are treating ailments without going to a doctor, cannabis almost starts to take the shape of an over-the-counter wellness drug. And now cannabis is less like a pharmaceutical and more like a CPG [consumer packaged good] or wellness product.”
The data bears this out. As of the second quarter of 2020, about 24% of Canadian cannabis consumers identified as registered medical cannabis users, compared with 76% that did not, according to a Brightfield Group study. Yet the same survey sample of 3,000 people revealed a phenomenon in the growing fully legal cannabis market: Though less than a quarter of Canadian cannabis consumers are registered medical cannabis patients, 45% of survey respondents say they are using cannabis to treat anxiety—that means there is a roughly 21 percentage point gap between registered medical patients and those consumers using cannabis to treat medical conditions. These consumers are turning to either the more easily accessible recreational market or even the illicit market.
Portrait by Amer Nabulsi
"The push into the adult-use market is absolutely on-strategy for us, and we know it can be done profitably.” – Lincoln Greenidge, CFO
Despite the blurring lines, the WeedMD team still sees the wisdom in taking a channeled approach. The company has divided its sales and marketing function into teams—one for adult-use and one for medical.
But Tsebelis also sees value in one channel learning from the other. For example, WeedMD has been leveraging insights derived from data on medical patients to help the company understand what adult-use customers might want and need.
“What our experience in medical has taught us is the importance of listening to the customer, understanding what they’re looking for and then validating that in the adult-use section,” Tsebelis says. “We’re always asking, ‘Does this apply?’”
The channeled strategy also applies to WeedMD’s cultivation, but in a different way. The company has three locations in Ontario—one in Strathroy (a greenhouse and outdoor facility for cultivation), one in Aylmer (an indoor extraction and processing facility), and one in Bowmanville (for product research, processing, and fulfillment). It also has a satellite office in London, Ontario.
WeedMD's Strathroy location includes 27 acres of active outdoor production.
Photo provided by WeedMD
Curtis Wallace, head of cultivation at WeedMD, says the company’s expansion into new cannabis markets creates the flexibility to change directions based on market fluctuations.
“The advantage to having these different brands is that you can pivot more easily,” says Wallace. “A batch [of cannabis] that was destined for one avenue could be redirected down another avenue that wasn’t thought about three months ago.”
But the transition to the adult-use market has not changed how he approaches his job as a grower.
With the deal between WeedMD and Starseed, much work remains to not only integrate the two companies’ cultures, but also ensure the combined workforce of 300 is aligned with new business priorities.
Photo provided by WeedMD
Without a healthy and happy employee base working toward a set of common goals, any business transformation—however carefully designed—will fail.
Photo provided by WeedMD
“You still want the highest quality,” Wallace says. “You still want the cleanest product.”
One of Wallace’s guiding principles is consistent quality.
“As a grower, I love having new strains,” he says. “But patients want consistency in strains. The [recreational] market wants consistency. We’re at the mercy of the market to make sure we’re providing as much consistency as possible.”
Portrait by Amer Nabulsi
"For myself, being the only female in the C-suite at WeedMD, I really want to make sure that we are doing our job in terms of promoting women in the workforce, women at a higher level.” – Deborah Sikkema, chief people officer
Integrating teams
One of the biggest challenges companies face when undertaking a pivot is managing the workforce. Without a healthy and happy employee base working toward a set of common goals, any business transformation—however carefully designed—will fail.
With the deal between WeedMD and Starseed, much work remains to not only integrate the two companies’ cultures, but also ensure the combined workforce of 300 is aligned with new business priorities.
That job has fallen to Deborah Sikkema, WeedMD’s new chief people officer, who must do this work against the backdrop of COVID-19.
“For me, it really comes down to understanding what’s important to our employees, who they are, who they want us to be, and making these values come to life,” Sikkema says.
Sikkema, who has two decades of HR experience, including at companies such as Shoppers Drug Mart and Canadian Tire Corp., is rolling out a series of companywide efforts aimed at developing talent, striking a work-life balance for employees, and increasing the diversity of the employee base. The latter of which is especially critical and personal to Sikkema.
“For myself, being the only female in the C-suite at WeedMD, I really want to make sure that we are doing our job in terms of promoting women in the workforce, women at a higher level,” Sikkema says. “Unfortunately, during COVID-19, women have had to take a step back—they’ve had to quit their jobs, reduce their roles in the workforce because of childcare issues.”
To Sikkema, the last few months have underscored the importance of focusing on people. “Everybody has a stake in the company—it’s important we recognize that,” she says. “I don’t want to over-engineer any of the HR programs or initiatives based on some of the corporate environments I’ve been in, because that wouldn’t suit this culture.”
Curtis Wallace, head of cultivation, balances his interest in working with new strains with the market's demand for product consistency. Portrait courtesy of WeedMD
What’s in a name?
When asked if WeedMD made sense anymore as a corporate name, given the recent changes, Tsebelis laughed and said, “now you’re opening up a can of worms.”
The topic is a thorny one: “Weed” has become an unpopular term among those seeking to shed stoner stereotypes, and “MD” only tells part of the company’s story.
“Part of the evolution over the last couple of months has been the migration from WeedMD as a ‘direct consumer brand’ to WeedMD as the ‘corporate entity’ and ‘parent company’ of a number of brands that are underneath it now,” Ng says. “Starseed is the medical channel, and Color Cannabis and Saturday are the recreational channels. The top name may evolve accordingly as well.”
At their core, WeedMD’s leadership remains confident with both their past and their future. Because their core competency and market priority remain the same.
“We’ve always looked at this business from the perspective that you grow the best quality-grade cannabis you can—for a long time we’d just called it medical grade,” Tsebelis says. “But the demand doesn’t change whether it’s medical or recreational.”
Paul Barbagallo is a Boston-based writer and a former senior editor for Bloomberg News and beat reporter for Bloomberg BNA.
Meet the New Curaleaf, the Largest Cannabis Company in the World, Following the Acquisition of Grassroots Cannabis
Departments - Upfront | M&A Monthly
After its acquisition of Grassroots Cannabis, Curaleaf is now positioned in 23 U.S. states. That’s just the beginning.
With its acquisition of Grassroots, Curaleaf now operates 88 dispensaries and 22 grows across 23 states.
Image courtesy of Curaleaf
In late July, Curaleaf closed an approximately $700-million deal to acquire Grassroots Cannabis. The move places Curaleaf boots on the ground in 23 U.S. states with a footprint that includes 88 operational dispensaries and 22 cultivation sites with 1.6 million square feet of current cultivation capacity.
The acquisition makes Curaleaf the largest cannabis company in the world, based on its anticipated $1 billion in annual revenue, a stat touted by the company's executive chairman on CNN Business in July.
And, yes, it’s a big deal on face value, but Curaleaf CEO Joe Lusardi says that the transaction represents a pivot toward the longer-term direction of the legal cannabis marketplace.
For instance, the acquisition provides Curaleaf a sturdy, scaled-up position in quickly growing markets like Illinois and Pennsylvania. Not only are those states rolling in cannabis revenue right now (Illinois saw more than $300 million in adult-use cannabis sales through July this year, according to the Illinois Department of Financial and Professional Regulation), but customers in those markets will be a driving force behind shifts in product category demand and connoisseurship.
Lusardi argues that companies will need to be agile and well capitalized to meet that nuanced demand as different states’ customer bases find their footing. Flower sales dominate in the early days of adult-use legalization, he says, but that market mainstay is often supplanted with rising concentrates sales as consumers learn more about cannabis—which in turn prompts more in-depth concentrates R&D back in the lab.
“Everybody's talking about how Illinois is a great market, but if you don't actually have the capacity to capitalize on it, then it really doesn't matter,” Lusardi says. “And I think what's important about Grassroots is that it was a developed business. It wasn't just a collection of licenses. It was assets that these guys have been working on for half a decade.”
Lusardi and the Curaleaf team homed in on Grassroots because they saw a cultural match that could deliver long-term on the companies’ visions for the industry.
A good understanding of your own company’s values is key to productive M&A.
“The culture of a business is a big factor in how successful you’re going to be with integration and how well the transaction ultimately works out,” Lusardi says. “We really loved the Grassroots team, and they were built really much like Curaleaf—as a vertical business, very entrepreneurial.”
That’s important—not only for the short-term health of the business and its employees, but for the long-term strategy that all M&A deals involve. Curaleaf, intent on developing “the first national cannabis brands” (Curaleaf itself and Select, an earlier acquisition), is building out a coast-to-coast presence to do just that.
“Many of the MSOs have … retrenched into markets where they were performing well or where they have capital to build out, whereas Curaleaf has really continued to keep our foot on the accelerator and expand into more markets—given where we have a strong balance sheet and we can actually take on those projects,” Lusardi says. “And I think that's going to pay for itself—maybe not this quarter, but in the next couple of quarters, you're really going to see that separation as a result of all the work we're doing to put assets online and then invest into developing markets.”
Eric Sandy is digital editor for Cannabis Business Times, Cannabis Dispensary and Hemp Grower.
COVID-19 Derails Cannabis Companies’ Hiring Plans
Departments - Upfront | Fast Stats
According to a survey from Vangst, the pandemic paused expansion at both plant-touching and vertically integrated businesses.
Source: Vangst survey of 39 U.S. cannabis companies between March 26 and April 24, 2020.
kolonko | Adobe Stock
Cannabis Research Focuses on Investigating 'Harms' of Plant
Departments - Upfront | Fast Stats
According to an article published in Science magazine, the U.S., Canada and the U.K. spent a significant portion of research dollars studying the negative side effects rather than the potential benefits.
A new analysis of cannabis research spending in the U.S., Canada and the United Kingdom published in Science magazine found that half of the money spent on research goes toward investigating the potential negative side effects and ramifications of misuse of the plant.
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