Multistate cannabis operator Cresco Labs announced Jan. 14 that it will acquire Bluma Wellness, a vertically integrated company with operations in Florida, in a transaction that company executives say combines two like-minded companies with similar business models.
For Cresco CEO Charlie Bachtell, the acquisition is “the culmination of a multi-year evaluation of how to get into the Florida market the right way.”
“We wanted to make sure we [entered the market] in a very thoughtful and appropriate way, and Bluma really presented that perfect opportunity for us, so we’re really happy with it,” Bachtell tells Cannabis Business Times and Cannabis Dispensary.
Bachtell describes Cresco as a more traditional, consumer packaged goods (CPG)-focused organization with a “product-first” approach that prioritizes the creation and distribution of branded products into as many retail stores as possible. This differs from other companies’ retail-first business models, he says, which prioritize the opening of as many dispensaries as possible.
“You look at Bluma, and Bluma is arguably the only operator in Florida that thinks about the industry similarly to how we do,” Bachtell says. “They focused on production first, and then they opened very strategic, very thoughtful retail locations as they had product to sell.”
As a single-state operator, Bluma has been looking for a multistate company to partner with in order to expand nationally, especially as cannabis policy reform efforts begin to take shape at the federal level after the 2020 election, according to Bluma CEO Brady Cobb.
“We’ve had a rapid expansion through Q2, Q3 and Q4 ,” Cobb says. “I’ve also been an advocate at the federal level, both congressionally and in the White House, for … four and a half to five years now. You see the winds changing. … With the presidential election results [and] the Senate races in Georgia, it was time for us to find an MSO and a partner to be able to expand and be able to take advantage of this opportunity at the federal level that we’re seeing.”
Cobb says Bluma had a lot of suitors looking to enter Florida’s market, but that Cresco emerged as the best partner.
“Ultimately, Cresco was the clear, correct partner to pick, based on their culture [and] their focus on having the best flower and best premium products in any market that they operate,” he says. “They invested like we did in building out cultivation and … manufacturing so that you could have quality product, and then [focused] on retail. … Once we had a chance to meet them and see how great of a cultural fit it was, too, it was a no-brainer and we can’t be more excited to go on this ride with them.”
Florida’s market requires all cannabis operators to be vertically integrated, and businesses cannot purchase product wholesale from each other. While this regulatory structure may be challenging for some, Bachtell says that Bluma has thrived within these regulations.
“Florida is a very difficult state and climate to grow consistent, high-quality cannabis in,” he says. “Bluma does it as well if not better than anybody down there. That’s the reputation they have, is … being the No. 1 producer of premium and ultra-premium cannabis in the state of Florida.”
Bluma currently operates seven dispensaries under the One Plant Florida brand, with eight more locations planned. The company also has 54,000 square feet of cultivation space, with a planned expansion of its cultivation capacity, processing lab and edibles kitchen.
The acquisition places Cresco in 10 total U.S. states and advances the company’s overall goal of developing a strategic geographic footprint based on desirable regulatory structures and population, Bachtell says. Cresco aims to operate in states with robust regulations that place clearly defined obligations on cannabis businesses, he says, and that also have large populations to support a strong patient and consumer base.
“The only [state] that’s in the top 10 nationally that has cannabis programs that we weren’t in was Florida,” he says. “It’s the third most populated state in the country and had the second highest amount of growth in 2020 from a population increase. It’s a well-structured program with a ton of population there to support it, so it’s key. For our stated goal of having the most strategic geographic footprint we can, you want Florida by all definitions.”
When expanding to new states, Bachtell says management and leadership teams are critical to success in markets outside of a company’s home state, and he describes Bluma as having “the strongest management team and the best operations” in Florida.
“As we add Florida to our portfolio, it comes with a solid base on the ground that’s already been doing it, as opposed to us having to figure that out remotely in a state that isn’t our home state,” he says. “We’re very fortunate that they have as strong of an operational team there as they do, and we look forward to having them be part of the Cresco family now.”
Employment contracts are underway, and Cobb says that it will be business as usual for Bluma following the acquisition, although the company has a lot of work ahead to expand its cultivation, manufacturing and retail footprint.
“For me, it’s getting the transaction closed, which we’re aiming [to do] by April 1, [and] I think we can get there,” Cobb says. “Then, it’s building the expansion of our cultivation facility. We’re looking at doing a large indoor facility at our existing farm, and then also building out a manufacturing house where we can do a full post-harvest process—dry, cure, trim, dry packaging, a full edibles kitchen, a full concentrates lab, full hydrocarbon lab, distillation lab. Getting all of those projects done in 2021 is a key goal, and getting us up to 15 stores is a key goal.”
Looking ahead, Bachtell says Cresco is also working to expand, increasing its depth in the markets where it currently has a presence.
“As we look at M&A going forward, … it’s about getting depth in all of the markets that we’re in, not just Illinois and Pennsylvania and California and Florida, but we have room to go in Massachusetts and Michigan and Arizona and even potentially more in California,” he says. “That’s where our focus will be for the remainder of this year. We’re opportunistic. We have our eyes open on everything, but that’s definitely the focus, is more depth in states we’re already in via M&A."