CBD OIL

New York legalized medical cannabis in 2014 and started its formal marketplace with only five licensed operators in the state.

The limitation on the number of licensed operators made it difficult for medical cannabis to make a notable impact in the state.

 

“As the author of the original Compassionate Care Act, which is the medical program, I’m not surprised that it hasn’t had that great of an economic impact, simply because the governor at the time was not a big fan,” New York State Sen. Diane Savino said of Gov. Andrew Cuomo, who has been in his executive role since 2011. “He was very skeptical about legalizing cannabis for medical purposes and he was greatly concerned that the program could lead to all sorts of problems, but he’s obviously changed his position since then.”

Savino said that the program’s original limitations created restrictions on a whole host of things—most importantly, patient access.

With only 20 operating medical dispensaries in a state with over 19 million people, it is no surprise that there was limited patient access at first. Since 2016, it has been expanded to 10 license holders, with 40 dispensaries statewide, she said.

According to the legislation, medical cannabis businesses must be vertically integrated. The thinking is that vertical integration allows one to have tighter control over regulatory compliance, but it also drives up the cost of running a cannabis operation, making it far more difficult for small businesses and entrepreneurs to get into the cannabis business, she said.

“

More importantly, it’s an expensive business to stay in,” Savino said. “You have to have a lot of liquidity, you have to have access to capital, you have to have the ability to sustain yourself, and you can’t turn to traditional lending sources. So, when you have a vertically integrated market, it seriously narrows the group of people who can participate.”

The medical program sunsets this year, which means the law expires. Savino expressed that it is a common technique in legislatures where a bill will expire at a particular time requiring it to be renewed, expanded, amended, or it ends because the program is no longer necessary.

“That was another requirement that the governor felt very strongly about back when he didn’t believe in cannabis,” she said. “He was worried that if we had to have a tightly controlled program and things got out of the way, we should be able to shut it down. In this instance, we will extend it, and that is going to give us the chance to really improve the medical program in a way that will be far more meaningful than the original program.”

Savino said the New York state legislature plans to remove the vertical integration requirement when they do the extension of the law, which will open it up to all types of licenses.

This is all happening on a parallel track to the discussions about the adult-use market in New York, she said.

In early January, Cuomo called for the legalization of adult-use cannabis in the state, leaving some wondering what the timeline will be.

Since New Jersey is in the process of implementing adult-use cannabis sales (legalized by voters in November 2020), Joshua Horn, co-chair of Fox Rothchild’s Cannabis Law practice and a leading lawyer in cannabis law, thinks New York has no choice but to press forward with an adult-use program.

“If you think about New Jersey or New York City, in particular, there are almost 20 million people in a very concise area,” he said. “People can just drive over the George Washington Bridge and go to a dispensary on the other side and drive back. So, I think New York will need to address that.”

Horn suspects that the legislation will keep moving forward this year; however, even if New York legalizes adult-use cannabis soon, it could take two to three years before dispensaries open and the product is available for sale.

“Right off the bat, the only people who could participate would be the medical growers, who, if they’re allowed to participate, the governor’s bill allows for the medical license holders to have some role in the adult-use market, but not to dominate it,” Savino said.

She said that several activists believe that medical dispensaries shouldn’t be given any role in recreational cannabis. If New York plans to address that, it could take longer before legal products go on the market.

“The governor has his proposal, and the legislature has theirs,” she said. “So, they’re going to have to negotiate, and if they can’t come to an agreement, it could fall off the table again the way it did last year or the year before.”

If the bill passes, changes will have to be made for adult-use cannabis to impact the New York economy significantly.

“If New York says the existing 10 [businesses] are the only ones who can implement adult-use, then I think it will really have no economic benefit,” Horn said. “New York is going to need to issue a fair number of permits. If it’s a robust program with over 100 permits, they have a greater likelihood of serving a greater population. It can also be taxed, just like gambling or alcohol, and then the state should do very well, but the program can’t be so constrained and limited; otherwise, it’s not going to work.”

Savino says it is hard to predict the type of economic impact that legalization will have on the state, as it could take a while to get it up and running.

“Even the most conservative projections are about a full year or two years from now,” she said. “Projections are about $350 million, and to the extent that more states come on board with adult-use marijuana, it cuts into your own state’s profit margin. And what I say over and over is if we continue to look at marijuana as a cash crop, we’re missing the boat.”

Today’s technology makes it very easy and convenient to purchase cannabis and get it directly delivered to one’s house, without consumers having to worry about data privacy issues. That is what New York is up against, Savino said.

“So, we have to keep that in mind, that it’s not about the money,” she said. “If we make it about the money, then we’re never going to make any.”

Any brewmaster from the more than 7,000 U.S. craft breweries will tell you one of two things: That their art is a science, or that their science is an art. The answer might depend upon the brewer’s individual approach, but a combination of experience, process, precise measurement and intuition is exactly what’s required to create great beer. In a very similar way, the cannabis industry has its own version of the brewmaster: Extraction technicians.

A cannabis extraction technician deploys knowledge from multiple science disciplines to apply industrial solvents, heat and pressure to plant matter through a variety of methods with the aim to chemically extract pure compounds. Extraction techs use their passion for the cannabis and hemp plants, combined with chemistry, physics, phytobiology and chemical engineering to help create a result that’s not quite art, but not quite completely science. By manipulating plant materials, pressure, heat and other variables, the extraction technician crafts the building block for what will become an edible, tincture or extract.

Similarly, brewmasters use their knowledge of multiple science disciplines like chemistry and microbiology, as well as different brewing processes and a variety of ingredients to develop creative recipes that result in consistent, interesting beers. The brewmaster’s work is both science and art, as well. And they also manipulate plant materials, pressure, heat and other variables to achieve their desired results.

“I would certainly consider brewing to be an art and a science, but it takes a very disciplined approach to create consistent, yet ever evolving beers for today’s craft market,” says Marshall Ligare, PhD. Research Scientist at John I. Haas, a leading supplier of hops, hop products and brewing innovations. “We work to ensure brewers can create something different with every new beer, as well as something that helps create an experience as well as a feeling.”

In both brewing and extraction, the art comes in the subjective experience of the craftsman and his or her ability to curate the infinite possibilities inherent in each process. However, both are a science in their requirement of establishing production methodologies that guarantee a consistent, reliable product experience every time to win customer loyalty (and regulatory compliance). In the same way hops determine recipes for beer flavors, the cannabis plant determines extraction recipes, especially considering the role that terpenoids play in the quality, flavor and effects of the end product.

The development of new and appealing cannabis products is beginning to mimic the vast variety of craft beers now found all over the world. In the same way beer connoisseurs seek out the perfect stout, lager or IPA, discriminating cannabis consumers now search for that gem of a single-origin, specialty-strain vaporizer oil or irresistible dab extract.

“I see an exciting new day for quality-focused, craft extraction that tells a story, not only of where the cannabis plant might have been grown and how, but also the care that was taken in the processing of that strain into smokable or edible oil,” says John Lynch, Founder of TradeCraft. “Imagine the impact in the marketplace when product-makers figure out how to do seasonal one-offs where engaged connoisseurs are willing to pay a premium for the art behind limited releases.”

In either process, you’re essentially creating art with science. Each process works with different strains. Each is concerned with chemical and flavor profiles. Each has its own challenges. In both worlds, quality depends upon consistency. You’re creating art, but you need to replicate that art over and over – which can only occur with strict control of the process. Brewmasters seek control of things like yeast quantity and health, oxygen input, wort nutritional status and temperature, among other things. In their pursuit, extraction technicians seek to control temperature, pressure and flow rate–as well as all the ways these variables interact with each other. What enables this control in both efforts is the equipment used to achieve results.

“A modern brewhouse is very much like a scientific laboratory,” Ligare says. “Brewers treat their setup with the same care and attention a scientist gives to their lab equipment, and are equally concerned with precision, cleanliness and the purity of the result. With each new beer, they want to develop a process that can be controlled and replicated.”

The key to creating a precise process is to use instrument-grade machinery that performs to specifications – and allows you to repeat the process again and again. The value of using high-quality instrumentation to manage and monitor either the brewing or extraction process cannot be overstated. Although it seems counterintuitive, this is where the “craft” comes into play for both brewing and cannabis extraction. Precise instrumentation is what allows the brewer or extraction “artist” to manipulate and monitor the conditions required to meet recipe standards. Along with the quality of the ingredients (hops, cannabis, hemp, etc.), the quality of the equipment utilized to create the product is one critical element impacting the end result. “Imagine the impact in the marketplace when product-makers figure out how to do seasonal one-offs where engaged connoisseurs are willing to pay a premium for the art behind limited releases.”

In cannabis extraction, a second crucial decision is determining which solvent is the best solution for the recipe you’re using and the end result you’re hoping to achieve. This decision is a part of the “craft” of extraction, and determined according to a combination of criteria. There’s no question that each solvent has a business case it serves best, and there is ongoing debate about which approach is best. But overwhelmingly, the solvent that best serves the most business needs is CO₂ due to its inherent versatility and ability to have its density tuned to target specific compounds.

“Control is what makes or breaks any craft product,” says Karen Devereux, Vice President of Northeast Kingdom Hemp. “We’re based in Vermont and love how Vermont is known for its quality craft beer, cheese and maple syrup. We wanted to bring that craft approach to hemp extraction, and everyone knows that any craft endeavor is focused on the details and getting them right again and again. You can’t do that without controlling every aspect of the process.”

Greater control of the process can also open up worlds of discovery. The inherent “tunability” of CO₂ enables the extraction technician to target specific compounds, enhancing the potential for experimentation and even whimsy. This can lead to entirely new products much in the way a brewer can control his process to create new, interesting beers.

American portrait photographer Richard Avedon famously declared that art is “about control,” describing the artistic process as “the encounter between control and the uncontrollable.” The same can be said for beer making and cannabis extraction. The more precisely you can control variables, the more options you’ll have for yourself and your customers. The more choices you’ll have with regard to different recipes and products. And the more loyalty you’ll ultimately generate among fans of your products.

New York legalized medical cannabis in 2014 and started its formal marketplace with only five licensed operators in the state.

The limitation on the number of licensed operators made it difficult for medical cannabis to make a notable impact in the state.

 

“As the author of the original Compassionate Care Act, which is the medical program, I’m not surprised that it hasn’t had that great of an economic impact, simply because the governor at the time was not a big fan,” New York State Sen. Diane Savino said of Gov. Andrew Cuomo, who has been in his executive role since 2011. “He was very skeptical about legalizing cannabis for medical purposes and he was greatly concerned that the program could lead to all sorts of problems, but he’s obviously changed his position since then.”

Savino said that the program’s original limitations created restrictions on a whole host of things—most importantly, patient access.

With only 20 operating medical dispensaries in a state with over 19 million people, it is no surprise that there was limited patient access at first. Since 2016, it has been expanded to 10 license holders, with 40 dispensaries statewide, she said.

According to the legislation, medical cannabis businesses must be vertically integrated. The thinking is that vertical integration allows one to have tighter control over regulatory compliance, but it also drives up the cost of running a cannabis operation, making it far more difficult for small businesses and entrepreneurs to get into the cannabis business, she said.

“

More importantly, it’s an expensive business to stay in,” Savino said. “You have to have a lot of liquidity, you have to have access to capital, you have to have the ability to sustain yourself, and you can’t turn to traditional lending sources. So, when you have a vertically integrated market, it seriously narrows the group of people who can participate.”

The medical program sunsets this year, which means the law expires. Savino expressed that it is a common technique in legislatures where a bill will expire at a particular time requiring it to be renewed, expanded, amended, or it ends because the program is no longer necessary.

“That was another requirement that the governor felt very strongly about back when he didn’t believe in cannabis,” she said. “He was worried that if we had to have a tightly controlled program and things got out of the way, we should be able to shut it down. In this instance, we will extend it, and that is going to give us the chance to really improve the medical program in a way that will be far more meaningful than the original program.”

Savino said the New York state legislature plans to remove the vertical integration requirement when they do the extension of the law, which will open it up to all types of licenses.

This is all happening on a parallel track to the discussions about the adult-use market in New York, she said.

In early January, Cuomo called for the legalization of adult-use cannabis in the state, leaving some wondering what the timeline will be.

Since New Jersey is in the process of implementing adult-use cannabis sales (legalized by voters in November 2020), Joshua Horn, co-chair of Fox Rothchild’s Cannabis Law practice and a leading lawyer in cannabis law, thinks New York has no choice but to press forward with an adult-use program.

“If you think about New Jersey or New York City, in particular, there are almost 20 million people in a very concise area,” he said. “People can just drive over the George Washington Bridge and go to a dispensary on the other side and drive back. So, I think New York will need to address that.”

Horn suspects that the legislation will keep moving forward this year; however, even if New York legalizes adult-use cannabis soon, it could take two to three years before dispensaries open and the product is available for sale.

“Right off the bat, the only people who could participate would be the medical growers, who, if they’re allowed to participate, the governor’s bill allows for the medical license holders to have some role in the adult-use market, but not to dominate it,” Savino said.

She said that several activists believe that medical dispensaries shouldn’t be given any role in recreational cannabis. If New York plans to address that, it could take longer before legal products go on the market.

“The governor has his proposal, and the legislature has theirs,” she said. “So, they’re going to have to negotiate, and if they can’t come to an agreement, it could fall off the table again the way it did last year or the year before.”

If the bill passes, changes will have to be made for adult-use cannabis to impact the New York economy significantly.

“If New York says the existing 10 [businesses] are the only ones who can implement adult-use, then I think it will really have no economic benefit,” Horn said. “New York is going to need to issue a fair number of permits. If it’s a robust program with over 100 permits, they have a greater likelihood of serving a greater population. It can also be taxed, just like gambling or alcohol, and then the state should do very well, but the program can’t be so constrained and limited; otherwise, it’s not going to work.”

Savino says it is hard to predict the type of economic impact that legalization will have on the state, as it could take a while to get it up and running.

“Even the most conservative projections are about a full year or two years from now,” she said. “Projections are about $350 million, and to the extent that more states come on board with adult-use marijuana, it cuts into your own state’s profit margin. And what I say over and over is if we continue to look at marijuana as a cash crop, we’re missing the boat.”

Today’s technology makes it very easy and convenient to purchase cannabis and get it directly delivered to one’s house, without consumers having to worry about data privacy issues. That is what New York is up against, Savino said.

“So, we have to keep that in mind, that it’s not about the money,” she said. “If we make it about the money, then we’re never going to make any.”

Curaleaf | curaleaf.com

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.

This past July, Curaleaf closed on an approximately $700-million deal to acquire Grassroots Cannabis, making it the largest cannabis company in the world, based on its anticipated $1 billion annual revenue at the time. 

Curaleaf | curaleaf.com

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.

In 2013, then-Deputy Attorney General James M. Cole issued guidance on cannabis enforcement, directing the DOJ not to prosecute any state-legal cannabis businesses – taking a hands-off approach. In 2018, then-Attorney General Jeff Sessions issued a memorandum that rescinded Cole’s directive. It has remained a gray area ever since.

“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.”

 

Curaleaf | curaleaf.com

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.

This past July, Curaleaf closed on an approximately $700-million deal to acquire Grassroots Cannabis, making it the largest cannabis company in the world, based on its anticipated $1 billion annual revenue at the time. 

Curaleaf | curaleaf.com

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.

In 2013, then-Deputy Attorney General James M. Cole issued guidance on cannabis enforcement, directing the DOJ not to prosecute any state-legal cannabis businesses – taking a hands-off approach. In 2018, then-Attorney General Jeff Sessions issued a memorandum that rescinded Cole’s directive. It has remained a gray area ever since.

“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.”

 

Curaleaf | curaleaf.com

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.

This past July, Curaleaf closed on an approximately $700-million deal to acquire Grassroots Cannabis, making it the largest cannabis company in the world, based on its anticipated $1 billion annual revenue at the time. 

Curaleaf | curaleaf.com

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.

In 2013, then-Deputy Attorney General James M. Cole issued guidance on cannabis enforcement, directing the DOJ not to prosecute any state-legal cannabis businesses – taking a hands-off approach. In 2018, then-Attorney General Jeff Sessions issued a memorandum that rescinded Cole’s directive. It has remained a gray area ever since.

“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.”

According to the Press Herald, the city of Portland, Maine shut down ProVerde Laboratories, prohibiting them from conducting business in their Maine location and forcing them to remove cannabis products from the premises. However, the lab was shut down for a seemingly innocuous reason: city permits.

The city issued citations for operating without a permit or a business license back in December, hence why the city shut down the laboratory this month, pending a reinspection in February. ProVerde has already applied for a change-of-use permit, but that process was still in review when the lab was shut down.

The Press Herald says that because of the still pending review process, ProVerde does not have approval from Portland to operate. Citing a violation notice, they say that ProVerde had not applied for a cannabis testing facility license.

However, things get a little murky because Chris Hudalla, founder and CSO of ProVerde, told the Press Herald that he thought Maine only requires testing licenses for adult-use labs, not medical testing labs. He is asking for clarification from regulators.

The Maine regulatory agency in charge of the state’s cannabis industry does not, in fact, require testing for medical cannabis products, thus explaining why ProVerde wouldn’t need a testing facility license.

Until the reinspection next month, Proverde’s expansion strategy in Maine looks like it is currently on hold.

Editor’s Note: This piece is an excerpt from Marguerite Arnold’s Green II: Spreading Like Kudzu. Click here to buy the book.

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THC as of February of 2019, certainly in the recreational sense, was not much seen in either Switzerland or much of Europe. Even in Holland, the coffee shops were getting more regulated along with the supply chain for them. In Spain, the cannabis clubs thrived in a grey area. But outside of these two very narrow exceptions, the biggest, most valuable part of the cannabis market (medical and THC) was just as fraught with similar kinds of issues. And those were occurring not in Spain, Holland or even Switzerland, but just across the border, in Germany.

In fact, the real news on the industry side in Europe, as it had been for the past few years, was not the consumer CBD market, however intriguing and potentially valuable it was in the foreseeable future, but the medical, and “other” cannabinoid universe that included THC. And the real triggering event for the beginning of the European march towards reform was certainly influenced by what happened both in the United States and Canada as much as Israel. Where it landed first and most definitively was not Holland, circa 2014, or even Switzerland or Spain soon thereafter, but rather Deutschland.

The Canadian market without a doubt, also created an impetus for European reform to begin to roll right as German legislators changed the laws about medical cannabis in 2017. But even this was a cannabis industry looking to foreign markets that they presumably knew were developing (if not had a direct hand in doing so, including in Berlin, come tender-writing time).

Divorced from inside knowledge about moving international affairs, why did Germany – certainly as opposed to its certainly more “liberal” DACH trading partner Switzerland- suddenly turn up in the summer of 2016 as the “next” hot thing for Canadian cannabis companies?

The answer is in part political, certainly economic, and absolutely strategic.

Germany is in the EU, unlike Switzerland, and is a G7 country.6  It also was, by 2016, certainly much closer to legalizing federally authorized and insurer-reimbursed medical use cannabis. This was because sick patients had by this time successfully sued the government for access (including home grow). And the government, citing concerns about the black market and unregulated cannabis production (see Canada) wanted another option.

Not to mention was a market, certainly in 2016, helped with a little CETA inspired “juice.”

The international trade treaty between Canada and the EU (if not the other big treaty, the pharmaceutically focused Mutual Recognition Agreement (MRA) with the U.S.) has been in the back of the room throughout the entire cannabis discussion during the expansion of the Canadian industry across Europe.  It is still unclear at this writing if the juxtaposition of CETA and the start of the Canadian cannabis trade had anything to do with lengthening the process of the German cultivation bid – but given how political the plant had also become, this was at this point more than a reasonable assumption to make.

As a result so far at least, since the beginning of the real German cannabis market in 2016 (namely the beginning of an import market from not just Holland but Canada) and Europe beyond that, Canadian companies have played an outsize role (starting with bankrolling operations in the first place). The growth of the Canadian market as well as developments within it absolutely spawned if not sparked the change if not beginning of the changeover within Europe by starting, of all places, with Germany.

But again, why Germany? And why the coalescence of the industry as well as other Euro hot spots outside its borders since then?

There are several explanations for this.

One is absolutely timing and strategic positioning.

Germany had, since 2015, begun the slow process of dealing with the medical cannabis issue on a federal basis, informed if not greatly influenced not only by what was happening in events abroad in Canada and the U.S. but also Israel. At home, there was also pressure to begin to address the issue. Albeit highly uncomfortably and at least in the eyes of the majority of centrist legislators, as far at a distance as possible.

Namely, patient lawsuits against insurers began to turn in favor of patients. Technically, between the turn of the century and 2016, patients could buy cannabis in pharmacies with a doctor’s prescription in Germany. But it was hugely expensive and beyond that a cumbersome process. Only 800 patients in fact, by 2017 had both managed to find doctors willing to prescribe the drug and could afford the €1,500  (about $1,700) a month to pay for it.

Everyone else, despite nobody’s willingness to admit it, found their supplies in the grey (non-profit patient collective) or black (street and largely criminally connected) market.

Günther Weiglein, a patient from Wurzburg, a small town in Bavaria, changed all of that.

In 2015, he won his court case against his insurer, claiming that even though he qualified as a patient, he could not afford the cannabis for sale in pharmacies. With that, he and a few patients temporarily won the right to grow their own (with permission).

Weiglein is the epitome of the German “everyman.” Blond, stocky and in his fifties, he has suffered chronic pain since a devastating motorcycle crash more than two decades ago. He has also taken to the cannabis cause with a dedication and singularity of purpose that sets him apart even from most other patient activists (in Germany or elsewhere). He is fiercely independent. And not afraid of expressing his desire for a “freedom” that has not yet come.

However, in 2015, there seemed to be several intriguing possibilities.

Indeed, at the time, it seemed possible, in fact, that Germany seemed poised to tilt in the direction of Canada – namely that patient home grow would be enshrined as a kind of constitutional right.

However, it did not turn out that way. Desperate to stem the pan European black market, which is far more directly connected to terrorism of the religious extremist and Mafia kind in these waters and to avoid a situation where Berlin became the next Amsterdam, the German parliament decided on a strange compromise.

On one level, it seems so predictably orderly and German. If cannabis is a medicine, then Germans should be able to access the same through national health insurance.

In fact, however, the process has been one that is tortured and has been ever since, not to mention compounded the difficulties of just about everyone connected to the market. From patients to producers.

“In practice it has so far not evolved quite so smoothly.”Here is why. The government decided that, as of passage of a new law which took effect in March 2017, the German government would regulate the industry via BfArM, the German equivalent of the American Food and Drug Administration (FDA), and issue formal federal cultivation licenses.

This makes sense from a regulatory perspective too. Cannabis can be used as a medical drug. Even if its definition as a “narcotic” – even on the medical side – leaves a lot to be desired.

This is especially true on the CBD part of the equation. It is even more particularly relevant for those who use THC regularly for not only chronic pain, but as an anti-convulsive or anti-inflammatory agent.

However unlike Canada, the German federal government also chose to revoke patient grow rights while mandating that insurers cover the cost of the drug if prescribed by a doctor. In practice also spawning a specialty distributor market that is still forming.

All very nice in theory. In this abstract world, these rules make sense for a pharmacized plant if not drug beyond that. This is the route all other medicines in Germany take to get into the market if not prescribed in the first place.

In practice it has so far not evolved quite so smoothly. Indeed, while understandable for many reasons from stemming the black market to setting standards, this rapid switch from patient or collective grown cannabis to requiring patients to interact with both a doctor and a pharmacy (beyond the insurer) with no other alternative also creates its own serious problems. For everyone along the supply chain. But most seriously and problematically for both patients and doctors.

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Support Margeurite Arnold’s work by buying your copy of Green II: Spreading Like Kudzu from us! 

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.

RELATED: Wanda’s Way

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

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.”

As a whole, Colorado’s total retail cannabis sales totaled $1.7 million in 2019, and $2 million between January and November of 2020, according to the state’s Department of Revenue.

Photo courtesy of Simply Pure

Political and Financial Developments

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.”