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🌿Industry

Ro Choy Leads a Do-or-Die Effort to Transform Eaze’s Business Model. Choy believes Eaze has a distinct advantage over competitors in its deep understanding of its customer base in California—insights the company has mined from mountains of data collected over the past six years. To date, Eaze has facilitated more than five million legal deliveries, has 600,000 registered customers, and features more than 100 licensed brands through its network of retail partners.

“We have a great foundation to understand the customer as well as the things they like to buy and the price points they like to buy at,” he said. “We also measure everything from sell-through to retention and loyalty, so I think we have a very defined and detailed understanding of what the customer wants. Ultimately, we use that data to make sure we only present the very best products.”

Jason Wild’s path to Cannabis / becoming Chairman of TerrAscend. Wild was one of the first U.S. institutional investors in legal cannabis companies, and he also assembled a specialty pharmaceutical business that the fund sold for a huge profit. Now, he’s building the Canada-listed cannabis company TerrAscend (ticker: TER.Canada). Wild also invests in health-care companies, as he explains in this edited and condensed interview.

After he got his pharmacy degree in 1997 and making $65,000 a year, he put every other paycheck into his brokerage account and bought on margin (because he didn’t know better). At the end of a year, he made more than $500,000 from a start of ~$30,000 in his investment portfolio
For the first couple of years, he moonlighted as a pharmacist at the ShopRite supermarket in Paramus, N.J. His fund put up some pretty good numbers. From 1998 to 2010, the fund was up 22% on an annualized basis, net of fees. Growing assets from $89,000 to $25.5M. Their wheelhouse was the specialty pharmaceutical sector, based on his pharmacy experience, he knew almost all the products on the market. When a company did a deal, he could quickly figure out whether it was good
A consultant introduced his fund to Arbor Pharmaceuticals (3 years old, ~$2M in sales, and not making money). They bought it for $2.5M in cash and put another $3M on the balance sheet. Arbor did three deals in that first year (2010). By the next year, it had $127M in sales and $55M in EBITDA. The fund ended up selling a third of the company in 2014 to KKR at a $1.1B valuation, about 155x the initial investment. It ballooned the size of their fund, which owned about half of Arbor
From there, they got into Cannabis — investing in about five companies, all private at that point. All but one went public. They became a top 10 shareholder in Canopy Growth, Cronos Group, and others. they continued to invest through 2017. Then they thought, “We can do Arbor 2.0 in the cannabis space”
His fund was ~$700M. TerrAscend was a Canadian company that he had invested $250,000 in. They had a market cap of 40-something million Canadian dollars. In November 2017, he convinced them to take a C$52.5M private placement from him and Canopy Growth. (doing 60% of the deal; Canopy Growth did 20%; and its venture arm, Canopy Rivers, did 20%), becoming chairman

Pabst’s entry into cannabis-infused drinks might untap interest in the category.

Timeline showing mainstream brands entering the infused beverage market

PBR launched its first infused beverage last week through a licensing deal with Pabst Labs, a new California cannabis company founded by former Pabst employees and industry experts. Currently, infused beverages account for only a sliver of the overall market for cannabis-infused products. Sales of adult-use infused beverages in California brought in $3.4M in September, for example. That compares to $40M for edibles for the same month, according to data provided by Headset. But infused beverage sales in California in September nearly doubled from a year earlier, whereas edibles grew by a smaller though respectable 53%. The combined adult-use infused beverage market for California, Colorado, Nevada, Oregon and Washington state were $7.9M in August, with California accounting for the bulk of sales. That is up from $2.3M in August 2017, when major beverage companies started to make the leap into cannabis.

Uninsured marijuana industry battles looters and flames. Tyson Haworth's Portland, Ore., dispensary was looted in May, costing him thousands of dollars worth of cannabis products. After a second break-in in July, Haworth found out his insurance company wouldn't cover the claim on his liability policy. When wildfires swept dangerously close to his farm in Canby, Ore., in August, Haworth was confronted with another insurance problem: His 8-year-old cannabis farm has no crop insurance. “Crop insurance for weed is just ridiculous,” Haworth said. “It just seems like a waste of money.” Many of the nation’s largest insurance providers will not work with the weed industry because marijuana is illegal under federal law. The few liability, property and crop insurance providers who do offer policies typically charge untenable rates.

A Deep Dive on Cannabis with Karan Wadhera of Casa Verde. Karan joins Erik Torenberg (Village Global) on this episode to discuss: (1) The evolution of the space and how it has changed over the last several years (2) The different types of companies in the space and who they have been investing in (3) Who the winners might be in the delivery space (4) The biggest companies that have emerged over the last few years (5) His requests for startups in the space (6) How the perception of cannabis is changing in culture and the impacts of that change on investing (7) Global and geographic differences in space within the US and around the world.

Other highlights:

A Look At How MSOs Navigate A Ballooning Cannabis Market, Set To Reach $80B By 2030

Cambridge, MA ordinance limiting recreational permits to economic empowerment applicants for next two years upheld

Canopy Growth CEO on building the U.S. pipeline for cannabis-infused drinks

The Buzz-Making, Hangover-Free Promise of Weed Drinks

Why The Drinks Market Will Be The Next Big Sector In Cannabis And CBD

Marijuana ads are here and largely unregulated, as the industry acts to set own guidelines

Colorado marijuana sales eclipse $200M (again) in August

There Is No McDonald’s Of Marijuana: Why Cannabis Companies Get This Wrong, And What Might Actually Work

Mainers spent over $250,000 on cannabis during first weekend of retail sales

Sacramento adding 10 storefront dispensaries for first time in 11 years

NCV interview w/ Trulieve CEO Kim Rivers

Canaccord: Aphria Estimated To Post 16% Increase In Recreational Sales In Q1 2021

💵Deals

BioSteel (Canopy Growth) signs exclusive distribution with Reyes Beer Division and Manhattan Beer. Manhattan Beer’s leading distribution channels will bring BioSteel to the 14 counties of Metro New York, and Reyes Beer Division, known for its early adoption of emerging consumer trends, will cover key markets including California and Florida. These two distribution deals come alongside several other partnerships through Constellation Brands’ distribution network, that will bring BioSteel’s new ready-to-drink sports beverages to customers across the U.S.

Aurora lists some Uruguay assets for sale as regional CEO departs. Alejandro Antalich, a former CEO of ICC Labs, departed the firm, an Aurora spokeswoman told Marijuana Business Daily. Aurora also removed any mention of ICC Labs from its latest investor presentation, dated September 2020. The Canadian company acquired ICC Labs in late 2018 for ~C$300M ($226M). Aurora boasted of the deal at the time that “the acquisition … will establish Aurora as the industry leader in South America.” However, in a recent regulatory filing, Aurora acknowledged it “listed for sale two properties in Uruguay which had a total carrying value of $2M.”

Alcanna — 8 Stores on Vancouver Island sold for $21.1M. Alcanna has agreed to sell eight convenience-format liquor stores on Vancouver Island, British Columbia to Mid-Island Co-op. Alcannas dispensaries will also stop selling cannabis products made by Canopy Growth amid the Company’s rapid retail expansion into Western Canada (10% of Alcanna’s revenue ~$1.5M quarterly). Canopy said in August it plans to open 10 new stores in Alberta under its Tweed and Tokyo Smoke banners.

Baker Mayfield Becomes First NFL Player To Invest In CBD Company Beam. Beam has an interesting approach to things and their product. Most CBD products have very small amounts of THC in them. Beam finds a way to get those small amounts out and make it just a CBD product. Beam is aiming for the CBD to be used by athletes to live healthy lifestyles. The products are focused on performance, balance, sleep and recovery.

Happy Cabbage (Cannabis Data Analytics) — $1.5M Series Seed. Delta Emerald Ventures led, with co-investments from Silverleaf Venture Partners, Yaax Capital, and West Creek Investments.

📄Earnings

Indus Holdings— Q3 2020 (pre-announces)

Expected Revenue: ~$14.1M (40-42% GM compared to (9%) in Q2 ), up 42% from Q2
EBITDA: $2.1—$2.3M compared to ($3.3M) in Q2
Operating Income, before net change in fair value of biological assets: ~$1.0M compared to operating loss of ($5.2M) in Q2

Harborside — Q3 2020 (pre-announces)

Expected Gross Revenue: $18.5M+ (excluding any previously unaccounted for adjustments for reserves). Growth in the quarter continues to be driven by improved harvest yields and production of premium flower varieties combined with higher sales volumes and higher average prices per pound of the Company's farm operation in Salinas, California combined with the strength of the Company's retail operations, where enhanced merchandising and pricing initiatives have resulted in, amongst other things, improved product mix, selected pricing changes and higher sell-through of internally produced products
In addition, the Company expects to continue to report positive adjusted EBITDA, due largely to the strategic initiatives implemented earlier this year, which resulted in improved operating efficiencies and headcount reductions

Flower One — Q3 2020 (pre-announces)

Preliminary Gross Revenue: ~$11.5M
Initial launch of Cookies and 22 Red further demonstrating the Company's ability and ongoing priority to transition its product revenue mix towards premium quality and higher gross margin sales and initial launch of Kiva's Blackberry Blitz Game On Camino gummies, a nod to the Las Vegas Raider's inaugural season in Nevada

Valens Company — Q3 2020

Net Revenue: $18.1M (39.5% GM) down from 77.8% Y/Y, up 10% Y/Y. Reduction in gross profit can be attributed to the continued pullback in toll extraction volumes, as the Company shifts its focus toward driving greater white label and custom manufacturing product volumes and sales
Product sales (bulk winterized and distillate oil, and white label and customized product sales) made up 83% of net revenue at $15.1M, up 52% from Q2
Adjusted EBITDA: $1.4M (7.8%, compared to 59.4% Y/Y). Impacted by reduction in gross profit discussed above and an increase in operating expenses as the Company continues to scale its operations and build out its manufacturing platform
Cash: $30.3M in cash (net working capital position of $83.5M as of 8/31/20)

🧔People

HEXO — Trent MacDonald as CFO. Most recently served as CFO for Rx Drug Mart, a private pharmacy ‎operator/consolidator. Prior to that, he served as VP Finance of Indigo (TSX: IDG) and VP Finance for some of Sobeys’ (TSX: EMP.A) largest ‎divisions and regions.

🏬New Store Openings / New Product Launches

BEYOND / HELLO (Jushi) — Santa Barbara (11th Dispensary)

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LEMONNADE (2nd Cannabis Retail Store from the creator of COOKIES)

Trulieve — Palm Harbor (62 dispensaries in FL)

Curaleaf - Pensacola, FL and Panama City, FL (33 dispensaries in FL)

Harvest — Camp Hill, PA (7th in PA)

Columbia Care — Seed & Strain (MA, IL, DE), first internally developed brand

Lord Jones kicks off Happy Dance, targeting millennial moms with Kristen Bell

💻Hiring

Raw Garden — Director, Corporate FP&A, Santa Barbara, CA

LeafLink — Director, Revenue Planning and Operations, New York, NY

Pharmacann — Chief Human Resource Officer (CHRO), Chicago, IL

🤷‍♂️Somewhat Relevant

Dollar General targets a higher-end shopper in the suburbs with new store, Popshelf

CALPICO, a Popular Non-Carbonated Beverage in Japan, Launches U.S. Amazon Store

Who writes this newsletter? ➡️ Dai Truong

Highly Objective

📢Cannabis Companies starting to pre-announce…