🎙️ Podcast: Ayr Wellness — Chairman and CEO, Jonathan Sandelman
We talk through focusing on Core Competencies, THC Beverages, the LEVIA acquisition, Capital Allocation, Twitter, among other things
📢 I’m hoping to share some of the conversations I’ve been having privately over the past three years, publicly. Would welcome any feedback or thoughts on future guests/topics.
Highlights from my conversation with Jonathan Sandelman:
Focus on Core Competencies.
While Cannabis wasn’t a core competency for Sandelman, in 2017, he saw the disconnect between Cannabis Market Caps of ~$40B (Canadian LPs) and Alcohol, Beverage and Tobacco Market Caps of ~$1T, and felt there was a convergence trade where Cannabis Market Caps had to grow to somewhere in between. In addition, he looked at States where Cannabis was legal and saw that beers shares were trending down, signaling a shift in consumer preferences.
Interest in LEVIA was sparked by Jonathan’s son. Sandelman’s son is a co-founder of Cha Cha Mathcha. Ayr was interested and excited about LEVIA because of the company’s Science (bioavailability) and Quality (product). LEVIA represented another paradigm shift in consumer preferences—zero calories. This same mindset gave the company conviction for its acquisition of Liberty Health Sciences in February 2021. An asset that Sandelman believes will be bigger than Ayr is today.
THC Beverages set up well for Strategic Acquirers.
Sandelman is betting that when the Big Beverage companies come into Cannabis, they’ll be looking for a scaled Cannabis beverage company to acquire. It’s the easiest product for them to understand. They already understand the supply-chain, product and distribution.
Ayr is very careful about where and when to put money to work. The company is only starting to spend on marketing/branding and is choosing to do so with three core brands (Kynd, Origyn Extracts, LEVIA) from over 500 SKUs. The Company also left brands alone (Sira Naturals) that were strong with customers prior to being acquired. Another example of the compan’s prudent capital allocation strategy is that after the five qualifying transactions to form Ayr, the company waited 13 months before doing another transaction. Viewing the market as irrational at the time, Ayr waited (Sandelman being a disciplined investor) before jumping back in.
Sandelman joined twitter in June. Given that the majority of investors in publicly-traded Cannabis companies today are retail investors, Ayr felt Sandelman needed to at least have a presence on twitter. He’s not very active today, but the potential value of twitter (#MSOGang) for Cannabis Companies have certainly been something to at least consider.
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