This week, lawmakers in New Mexico, Virginia and Connecticut set to work considering adult-use cannabis legalization proposals, while a Nebraska lawmaker introduced legislation to legalize medical cannabis. Elsewhere, in Massachusetts, a group of dispensaries has sued the state over its new delivery regulations.
Here, we’ve rounded up the top 10 headlines you need to know before this week is over.
Federal: A diverse group of North America’s cannabis cultivation and manufacturing experts has announced that they have come together to form the Sustainable Cannabis Coalition (SCC). The SCC will work proactively with industry cultivation and manufacturing peers and vendors to promote proven sustainability best practices that can be implemented at scale across the cannabis market. Read more
Nebraska: Sen. Anna Wishart has introduced legislation to legalize medical cannabis in the state after supporting a medical cannabis ballot initiative that was ultimately rejected by the Nebraska Supreme Court for violating the state’s single subject rule. Wishart has also introduced a constitutional amendment to clarify the single subject rule and help eliminate uncertainty for future ballot initiative campaigns. Read more
New Mexico: Democrats in the state legislature are planning an adult-use cannabis legalization proposal as the state’s 60-day legislative session kicks off. Although the legislature has failed to pass adult-use legalization bills the past two years, voters did not reelect some more conservative Democrats who opposed the issue in the 2020 election, and lawmakers now see a path forward for policy reform efforts. Read more
California: Vertically integrated cannabis operator Harborside has announced the departure of Chief Operating Officer Greg Sutton, effective Jan. 15. Peter Bilodeau is now the company’s interim CEO. Read more
The California Cannabis Industry Association (CCIA), a statewide nonprofit that promotes the growth of a responsible and legitimate cannabis industry, is offering its members exclusive access to banking through the North Bay Credit Union (NBCU). CCIA’s 400 cannabis industry members will qualify for membership in the credit union and access to banking services such as checking accounts, online bill payment, wire transfers and ACH processing, and employees of CCIA members are also welcome to join as individual members of the credit union. Read more
Arizona: Beginning Jan. 21, the Arizona Marijuana Industry Trade Association (MITA) will offer a free, weekly, virtual course for prospective social equity applicants looking to enter the state’s forthcoming adult-use cannabis industry. MITA’s course will focus on specific aspects of Arizona’s medical cannabis program and the cannabis industry more broadly, while welcoming speakers from in and around the industry. Read more
Colorado: Colorado-based, cannabis-focused payroll and HR solutions company Wurk has announced the passing of its founder and CEO, Keegan Peterson. “Keegan will be remembered for his fierce advocacy in the cannabis space and the company he built to support the industry that he cared about deeply,” the company’s executive chairman, Scott Kenyon, wrote in a letter announcing Peterson’s death. Read more
Massachusetts: A group of cannabis dispensaries is suing the Massachusetts Cannabis Control Commission (CCC) over the state’s new delivery rules, arguing that the regulations, which allow only social equity applicants to receive cannabis delivery licenses for the first three years, violate state law. The Commonwealth Dispensary Association filed the lawsuit in Suffolk Superior Court Jan. 13 to ask the court to declare the regulations invalid. Read more
Virginia: The Senate Rehabilitation and Social Services Subcommittee voted this week to approve an adult-use legalization bill, advancing it to the nest committee for consideration. The legislation is sponsored by Sen. Adam Ebbin and Senate President Pro Tempore Louise Lucas, and backed by Gov. Ralph Northam. Read more
Connecticut: Gov. Ned Lamont has introduced a draft bill to legalize adult-use cannabis in the state, following an announcement in his Jan. 6 State of the State address that he is making legalization a priority this year. Lamont’s administration is currently seeking feedback on the legislation, and it remains to be seen whether Lamont will incorporate the proposal into his state budget, which is due to lawmakers next month. Read more
MSO Curaleaf Banks $300 Million of Capital
‘Green wave of acceptance’ in cannabis industry and potential for federal legalization puts new CEO Joe Bayern’s focus on leveraging rapidly expanding market in U.S.
Curaleaf CEO Joe Bayern puts focus on opportunities in growing marketplace.
To have the biggest footprint, one must lace up the biggest shoe.
In the cannabis industry, multistate operator Curaleaf spent the past five years building itself a massive network with a 23-state foundation, and has no plans on slowing down as it continues to acquire licenses and increase capacity. Based out of Wakefield, Mass., the vertically integrated company’s operation includes 96 dispensaries, 23 cultivation sites and more than 30 processing sites.
Based out of Wakefield, Mass., Curaleaf operates in 23 states with 96 dispensaries, 23 cultivation sites and more than 30 processing sites.
With that groundwork established, Curaleaf is now gearing for its next wave of growth by putting focus toward executing on that platform, said new CEO Joe Bayern, who started his role Jan. 1.
“One of the things that’s tied to my transition into the new role is going and looking at what we’re calling Curaleaf 2.0, which is really the next growth spurt for Curaleaf,” he said.
Curaleaf executives put a lot of attention on trying to understand what they want the company to look like in the next three to five years, what the industry might look like during the next three to five years, and then what capability and capacity are needed, to help establish company goals, Bayern said.
Knowing where the cannabis industry is headed provides a strategic roadmap to follow, he said.
“Listen, we think it’s an incredibly compelling opportunity in the marketplace,” Bayern said. “We think [the U.S.] marketplace could be a $100-billion market at some point. So, we want to be the leading industry player in cannabis, and we think certainly by 2025 there’s no reason why we can’t get the industry to about a $50-billion market size. And we want to take a dominant share of that market size.”
While Curaleaf built momentum heading into 2021, implications for an accelerated pro-cannabis landscape sparked when the U.S. Senate runoffs in Georgia went democratic on Jan. 6, swinging the majority of the upper chamber.
Prepared to take advantage of the potential of those election results, Curaleaf executives pulled the trigger to raise more than U.S. $200 million through an overnight marketed offering on the Canadian Securities Exchange (CSE). Oversubscribed, Curaleaf ended up raising C$316,882,500 of capital, or about U.S. $251 million, before deducting the underwriters’ fees and estimated offering expenses.
“I think everybody was pleasantly surprised, at least from the cannabis industry, that both of those seats went democratic,” Bayern said. “As early as the week before, we were hearing it was going to be split, so I think we were obviously prepared to do something in case of a swing to a democratic Senate. Even before the Georgia race, we had filed a shelf prospectus back in November to be able to raise capital if the markets were moving in our favor, and they were.”
The underwriters exercised their over-allotment option in full, and, as a result, 18,975,000 subordinate voting shares of the company were issued, Curaleaf announced in a press release Jan. 12. Bayern said since Curaleaf oversubscribed – its original intent was to raise closer to $200 million – it allowed the company to get some institutional investors into its stock.
“I think people are now saying it’s time to jump in,” he said. “We think the Senate race was a catalyst for the industry, and it was just the first step of what we think is going to be a pretty exciting 2021 as far as positive legislation for the cannabis sector.”
In addition to the roughly $251 million raised on the CSE, Curaleaf announced Jan. 11 that it completed a new $50 million, three-year secured revolving credit facility. The loan is “expected to be used to fund capital expenditures to support future growth initiatives, potential acquisitions, and for general corporate purposes,” the company said in a press release.
An extension of a previous deal, Curaleaf lowered its cost of capital, from 13% on the original note to 10.25% on the new three-year secured revolving credit facility, Bayern said.
“It’s just another indicator that we think that the capital markets are loosening up a little bit for our space,” he said. “And then I think if there is change in the [Secure and Fair Enforcement (SAFE)] Banking Act … that there’s going to be a new round of capital coming into our industry. And I think that’s going to be important for us to be able to scale up and grow and continue to expand, if we are going to be able to supply the deeds of a $50-billion market over the next couple of years.”
In addition to potential advantages the cannabis industry might experience from the results of the Georgia Senate runoffs, there’s a lot of opportunity for non-legislative changes to help accelerate momentum in the marketplace, Bayern said. One of those changes could come in the form of a revised memorandum from the Department of Justice (DOJ), he said.
“I think guidance around the criminal aspects of cannabis and where [the DOJ] should be focusing their time [would help momentum in the marketplace],” Bayern said. “And I think guidance coming out of the U.S. Treasury would be helpful to provide some kind of confidence and security to U.S. investors and banking organizations to be able to, again, participate in the U.S. banking landscape.”
Banking roughly $300 million, through its overnight marketed offering on the CSE and through the three-year secured revolving credit facility, to kick off 2021, Curaleaf’s growth is capitalized for the remainder for the year, and most of 2022, so the company doesn’t have current plans to go out and raise additional capital, Bayern said.
Instead, Curaleaf wants to speed up some of its projects scheduled for the back half of 2021 and the beginning of 2022, in anticipation of accelerated market growth, he said.
“As you know, if you follow the industry, the constraining item for the last couple years has really been about building enough capacity to meet the demand of the marketplace,” Bayern said. “We think as we continue to see what we’re calling a ‘green wave of acceptance,’ of consumers accepting cannabis as more mainstream products, we’re going to continue to see increased demand. We want to be prepared to be able to meet that demand.”
In its current footprints, Curaleaf is considering extending its capacity through targeted bolt-on acquisitions in the marketplace, as well as investing in the next wave of growth, which Bayern said is predicated on innovation and developing standout products backed by science.
To do that, Curaleaf wants to put money toward research and development and clinical studies, in an effort to gain exposure to a broader segment of the U.S. marketplace with products that are suitable for those consumers whom the company hopes to bring into its category, Bayern said.
“Why we’re optimistic about that is, in many cases, those consumers are already consuming other products today,” he said. “So, the consumption is there. It’s just that we can provide a better alternative to what’s in the market today, whether it’s alcohol, or whether it’s prescription drugs for need-states like sleep or chronic pain, you know, cannabis really is a better alternative to those products.”
Behind a balanced portfolio across the U.S., Curaleaf is optimistic about growing, not only in its current footprint, but also as it moves toward building an omnichannel consumer product company, Bayern said.
Curaleaf has exposure to developed West Coast markets, like California and Oregon. It has exposure to up-and-coming markets, such as Arizona and New Jersey, which passed adult-use legalizations measures in the November election. And it has exposure throughout most the Northeast, where Curaleaf is headquartered.
With populated states like New York and Pennsylvania having yet to pass legislation that fully legalizes cannabis, Bayern said Curaleaf is most excited about the future marketplace in and around that region of the U.S.
“We think New York could be one of the most attractive markets, not only in the U.S., but in the whole world,” Bayern said. “If you look at the disposable income, you look at the density of population, you look at the per-capita consumption today, it could easily be a $4-[billion] or $5-billion market over the next couple of years.
“What’s important, though, is that New York learns from some of the predecessors about how to roll out an effective program, and they do it in a way that’s responsible and really manages across all of the constituents. Whether it’s existing patients and consumers, it’s being able to generate tax revenue for the state, it’s creating jobs in New York state, and it’s addressing the many issues of the social equity and balance that’s happening in cannabis and across other parts of society.”
Wanda James
Photo courtesy of Simply Pure
Simply Pure Developing Franchise Model, Cause-Based Brand
The company plans to partner with social equity licensees to establish firm footholds in the industry and obtain generational wealth.
Purpose underlies Simply Pure’s expansion into the business model that is synonymous with company names like McDonald’s and Taco Bell.
“Simply Pure will continue as being a dispensary model that we’ll be looking at franchising across the U.S. and working with social equity partners to be able to give them a turnkey operation,” said Wanda James, Simply Pure’s CEO and owner.
It’s all part of an effort to welcome people of color, women and veterans into the industry as owners and support their success, said James, who herself is Black, a woman and a former Naval Intelligence officer. More than 10 years ago, James founded the Denver-based cannabusiness with her husband, chef and restaurateur Scott Durrah. It has since grown into a formidable operation with cultivation, dispensary and manufacturing verticals.
Just as McDonald’s has been able to provide an existing business structure, products and brands that franchisees use for their stores—and in turn, create generational wealth—James said the goal with Simply Pure’s franchise model is the same.
Tentative locations include California, Illinois, Massachusetts and Texas, she said.
James is focused on making Simply Pure a valuable resource for its franchisees, not one that will tell them to sink or swim.
“I’m using the phrase that we want to be the ‘dolphins’ in every deal out there with our partners,” James said. “For so many years, people have talked about [how] they're ‘sharks.’ … It always kind of works out negatively. I've sat down with my team, and I said, 'I want us to go out there and find deals and partnerships in which we are the best possible partners, and we’re going to give everybody the opportunity that’s working with us the best opportunity to succeed.’”
Photo courtesy of Simply Pure
Simply Pure’s Denver dispensary
A Brand Supporting Causes
In another effort to address social justice, Simply Pure will also launch a cannabis brand, BCause. Five percent of funds raised from the brand will go toward Black causes, such as helping people of color attend law school and assisting with the release of inmates who have been imprisoned for nonviolent drug offenses.
The “B” in the name calls attention to Black causes, James said, stating, “BCause is about putting Black before causes.”
“Hopefully, with BCause, as we go into different states, we’ll be using growers of color, manufacturing facilities of people who meet the DEI standards,” James said. “In some places, we may do it ourselves.”
Business’ diversity, equity and inclusion (DEI) practices that Simply Pure will evaluate include the composition of their boards and the clients with whom they work. “I believe it is becoming very clear what companies are focused on ensuring DEI,” James said. “Sadly, the ones that are not are also easily recognized. The change to focus on DEI usually happens after an embarrassing call out on social media or losing a large client.”
She points out how companies that focus on DEI often have higher profitability, adding, “It is nice seeing Black talent in demand.”
As a sign of its recent success, James said Simply Pure’s dispensary will log a 50% increase in sales for 2020 compared to 2019.
“The reason for that—and I had asked my staff [to ask] anyone that's had a chance to come to Simply Pure … ‘How did you find us? What brought you in today?'” James said. “Overwhelmingly, the response has been that 'We want to support a Black-owned business that’s doing good while doing well.’ We’re thrilled to see people coming back around to support us because we’re Black-owned. But then people are staying with us because we run a great business.”
Over the years, James has drawn upon experiences she’s had in politics to legalize and regulate cannabis and support social justice in and around the space.
She served on Colorado’s Amendment 64 adult-use legalization campaign committee about a decade ago. “After legalization, I worked on several of [Former] Gov. [John] Hickenlooper’s cannabis workgroups for edibles, packaging, dispensary operations, and communications within Colorado. I’ve also worked on reform, regulation, and policy in Jamaica, Maryland, and California.”
Furthermore, Simply Pure supports National Expungement Week and has been working with Colorado Gov. Jared Polis on social equity. “He just announced that Colorado will [request] $5 million to fund the program,” James said, “That is something we are very proud of.”
Nationally, she said she sees hope for legalization under the Biden-Harris administration.
On the finance side, Simply Pure is working on an equity raise with Arcview Capital and Spur Bridges to support its growth. “We've just put out our raise right now, so we’re looking forward to moving forward with that,” James said last week.
She said the franchise model is needed because people looking to enter the industry require support.
“One of the things that I spoke about with our team is, when we started this 10 years ago, or more than a decade ago, my husband and I, Scott, believed that running a good business is all that you needed to do,” James said.
“But now what we're finding is that it takes so much more in the cannabis space to be successful. That’s why this is needed at this time, because jumping into this industry is amazingly difficult, not just for social equity folks or first-time business owners, but seasoned entrepreneurs such as myself and my husband.”
Stephen Canino | Adobe Stock
Connecticut Governor Introduces Draft Bill to Legalize Adult-Use Cannabis
Gov. Ned Lamont announced during his Jan. 6 State of the State address that legalization is a priority this year.
Connecticut Gov. Ned Lamont has introduced a draft bill to legalize adult-use cannabis in the state, according to The CT Mirror.
Lamont announced during his Jan. 6 State of the State address that legalization is a priority this year, and his administration is currently seeking feedback on the draft legislation, although it remains to be seen whether Lamont will incorporate the proposal into his state budget, which is due to lawmakers next month, The CT Mirror reported.
Lamont’s proposal would tax dry cannabis at $1.25 per gram, trimmed cannabis plants at $0.50 per gram and wet cannabis at $0.28 per gram, according to the news outlet, and would also levy a 6.35% sales tax on adult-use sales. A 3% surcharge would also be added, with part of these funds going to local municipalities.
The draft bill also includes expungement provisions, The CT Mirror reported, which would automatically clear convictions for the possession of less than 4 ounces of cannabis that occurred before Oct. 1, 2015, as well as allow those convicted after that date to petition the state for expungement.
The legislation also includes marketing limitations to ensure youth are not targeted in cannabis advertising, as well as increases the number of trained drug recognition experts in state and municipal police departments, according to The CT Mirror. The draft bill would also update Connecticut’s Clean Air Act to include cannabis and vaping within the state's existing restrictions on secondhand smoke, the news outlet reported.
Lamont outlined adult-use cannabis legalization as a priority in his 2020 State of the State address, as well, and worked alongside the chairmen of key legislative committees last year to draft a comprehensive legalization bill before much of the 2020 legislative session was derailed in the wake of the COVID-19 pandemic.
Noel | Adobe Stock
Virginia Senate Panel Advances Adult-Use Cannabis Legalization Bill
The Senate Rehabilitation and Social Services Subcommittee voted 4-3 to approve a legalization measure backed by Gov. Ralph Northam.
A Virginia Senate panel approved an adult-use cannabis legalization bill Jan. 20, advancing it to the next committee for consideration, according to a local WRIC report.
The Senate Rehabilitation and Social Services Subcommittee voted 4-3 to approve the legalization measure, which is sponsored by Sen. Adam Ebbin (D-Alexandria) and Senate President Pro Tempore Louise Lucas (D-Portsmouth), and backed by Gov. Ralph Northam.
The legislation, as proposed by Northam, would allow adults 21 and older to legally purchase cannabis starting in 2023, and would establish a regulatory framework overseen by the Virginia Alcoholic Beverage Control Authority and a seven-member Cannabis Control Advisory Board, WRIC reported.
At an initial hearing Jan. 19, the Senate Rehabilitation and Social Services Subcommittee recommended creating a new, independent agency to oversee an adult-use cannabis market in the state, according to the news outlet, and recommended delaying the proposed 2023 launch six months to a year to allow more time to establish regulatory oversight.
The bill now advances to the Senate Rehabilitation and Social Services Committee for consideration, WRIC reported.
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