🎙️ Curio Wellness: Wendy, Rebecca, & David Bronfein
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🎙️ Curio Wellness: Wendy, Rebecca, & David Bronfein
Curio Wellness is the leader in Maryland. We catch up with siblings/colleagues (Wendy, Rebecca, & David) on adult-use launch in Maryland, what sets the company apart, expansion plans, and challenges.
Company Overview. Founded in 2014 in Baltimore, Maryland, Curio Wellness is a cGMP certified, vertically integrated medical cannabis company and trusted healthcare partner. Recognized as the leading wellness brand in cannabis by BDS Analytics, Curio is committed to serving patients with targeted, effective and reliable cannabis- based medicine. In 2018, Curio’s flower and topical balm were named Best Flower and Topical in Maryland by Leafly.
Wendy Bronfein is Co-Founder, Chief Brand Officer and Director of Public Policy at Curio Wellness. Wendy drives the company’s legislative agenda across multiple states, oversees the Curio brand, and all corporate communications.
Rebecca (Bronfein) Raphael serves as Chief Revenue Officer. Prior to Curio, she was in the art world and non-profit sectors. Most recently, she was the Director of Collector Relations at Artsy, a technology and arts startup with a mission to make art accessible online.
David Bronfein serves as General Counsel. Prior to joining in November 2021, David spent time in real estate development and investment and as a practicing attorney.
Funding. $22M in equity raised in 2021, $26M mortgage with Severn Bank (lead finance partner).
Brand Licensing partners include BellRock Brands (Dixie, Mary’s Medicinals), FUZED, Kaviar, and Smokiez Edibles. The company seeks to work with partners to offer a broad portfolio to be able to increase its appeal as a wholesaler in Maryland (and beyond).
Differentiation. Curio looks at Cannabis as an ingredient within the larger Wellness category and seeks to better serve patients with safe, effective and reliable cannabis-based medicine. The company takes a scientifically driven approach, utilizing state-of-the-art technology and cutting-edge plant science. Their medical cannabis facility in meets cGMP standards (the only one so far in Maryland to do so), the same quality standard set by the FDA for pharmaceutical companies to ensure that consumer products meet the most stringent quality and efficacy guidelines.
Maryland. The Maryland Cannabis Administration (MCA) has issued cannabis Dispensary licenses to 101 entities. There’s a cap of 4 dispensary per operator. Curio Wellness is Maryland’s largest cultivator and has products in 98%+ of dispensaries.
Curio WMBE Fund is a $25M+ Fund that seeks to invest in women, minority and disabled veterans seeking to operate a Curio Wellness franchise under the Far + Dotter retail banner. The company expects to enter the New Jersey and Mississippi market with local partners. The fund provides a a path to 100% ownership (franchisee will purchase the fund’s ownership over time) in 3–7 years for partners and act as a capital light way for Curio to enter a State.
Summary
Early days of Curio Wellness, their journey into the cannabis industry, and expansion plans
Focus on being Cash Flow Positive and focusing on developing their brands and products in Maryland. Plans to enter the Missouri market and their approach to running the business with a strong emphasis on brand and product quality
Successful launch of adult use in Maryland, with focus on strong sales and inventory planning. Challenges in advertising and limited product offerings
Partnerships with other brands to offer a wider range of products and meet customer demand for variety and convenience
Updates on the Curio WMBE Fund, the challenges faced in the cannabis industry, and the difficulties in hiring employees
Curio’s efforts made to attract and retain employees
Transcript (lightly edited)
0:18 - Dai Truong (Arlington Capital Advisors)
Okay, so today we have the siblings from Curio Wellness, Wendy, and David. So let's start off Wendy giving us a story in the background of Curio Wellness in the early days.
0:47 - Wendy Bronfein (Curio Wellness)
Hi, thank you for having us today. So we started off back in around 2014, really kind of got into the meat of this. The Maryland process was an application that was coming out for the medical program. And we had kind of had a nights and weekends group putting this business plan together and pre-approvals for licenses came out in 2016 and we were fortunate enough to win. And at which point, our father and I kind of took this on as our day jobs, along with probably a handful of other people. And we had secured the cultivation processing and dispensary license in Maryland. And it was about a year and a half later that my sister joined in a Sales role with the company. And then two years ago, my brother David joined us. So now we all officially work together, which has been very fun.
1:43 - Dai Truong (Arlington Capital Advisors)
And back in 2014, what prompted you to get into the industry? I mean, you have a background in entertainment. I think your father has a background in pharmacy. What prompted you nine years ago to enter this industry?
2:00 - Wendy Bronfein (Curio Wellness)
So it sort of was an unintentional place, I guess. I had seen Maryland had passed a law for a medical program. I think that was in 2013 and sent that news blip over to Michael as like “this looks interesting,” not really expecting it to turn into something. And it just sort of started to take shape. In May of 2014, my sister, parents, myself and two family friends, we went on a trip to Colorado, which was just as they had brought on their adult use program and really had an able, we're able to see things up close and personal because with adult use, obviously we can access the dispensers and see what was going on versus the medical program. And that really kind of flipped the switch, I think in a more fulsome way. The following month, I returned to Colorado. Brought up for the NCIA Convention there and was sent to do due diligence and learn as much as I can and then came back, literally to our kitchen table where I downloaded everyone on what I had learned. I think between my interest in the space and coming from like a branding, marketing perspective, and then Michael coming from regulated pharmaceutical industry. It was, you know, that was felt like a great mix to go after this. And we knew that Maryland was soon to release or at least at that point we thought it was soon to release applications. And so we just kind of organically began working on this business and we sort of kept going to different resources and looking at the research and talking to professionals and there was never anything that sort of turned us away. And so it just kept pushing forward until we reached application day.
3:55 - Dai Truong (Arlington Capital Advisors)
Got it. No, that's a very interesting history. And then, Becca, you joined the company. as the second sibling to do so with a background in art. So sort of when did it make sense for you to join the company?
4:03 - Rebecca Raphael (Curio Wellness)
So in May of 2018, our dad approached us and said, “I know you can sell million dollar paintings, but can you sell $25 eighths?" And we were joking about it, because when I was on maternity leave earlier that year with my third child, I was kind of Wendy's intern. I was doing some graphic design and helping her with an in store emergency during the day. And then when I went back to work for the internet startup where I was based, I was doing artsy.net by day. And then in my free time from nine p.m. to one a.m. I was Wendy's intern and I loved it. It was amazing to work with both of them. It was exhilarating to be at the forefront of a new industry. And in May, the MCC, which is now the MCA, was doing kind of rolling admissions for new dispensaries. Overnight, we were going to go from 35 to approximately 70 dispensaries. So there was this business development need to bring on another salesperson. So I jumped at the opportunity. And it's incredibly fulfilling and challenging and stressful and fun. And you kind of feel like you're in a game of Mario Kart, because all of these things can come at you at the same time in this industry. I'm not. It's rewarding to work with your siblings. But we also have a lot of people at Curio who have worked with us since 2014, 2015. So there's this kind of larger, not the family you're born with, but the family you choose sentiment about the continuity of working with these folks across the cultivation manufacturing and retail divisions that has also made it a really smart choice in the long run.
5:58 - Dai Truong (Arlington Capital Advisors)
Yeah, I should also announce your title is at the company. So Wendy, Chief Brand Officer and Director of Public Policy. Becca, you are the Chief Revenue Officer. And that's a good segway to jumping over to David, who joined as General Counsel two years ago., David?
6:14 - David Bronfein (Curio Wellness)
Yeah, just under, I joined in November of 2021. And prior to that, I've been practicing corporate and securities and M&A law at a mid-size firm here in Maryland. And I had also represented Curio on both the development of the affiliated Curio WMB fund that was established to invest alongside eligible franchisees who are women minority or veteran franchisees along with our franchise program. And then in the spring of 2021, we restructured the company as a part of our. Growth plan for raising capital and expansion purposes at that time, we had really validated people, processes, brands and products, and other systems over the past three and a half years. And we were ready to take the curio show on the road, so to speak, given my background and the growth of the company, there was really a need to bring legal services in house to partner with our different functions, as well as to take a more aggressive approach in our expansion through M&A, which is, you know, my background. And so that was the impetus really in deciding to join Michael and Rebecca. And Wendy is saying, I think this would be a great time for you to join and really have a place here at the company, as you can kind of tell just by these skill sets that compliment one another, but don't, you know, holy crossover. And so I kind of brought my back on real estate and, and law and finance to the team as well to kind of fill in the last gap, so to speak. And so November will be two years for me.
8:19 - Dai Truong (Arlington Capital Advisors)
Great. And let's get into Curio Wellness as a company, tell us sort of where the footprint is today, how much has been raised to date. And what the growth plans are from here.
8:33 - David Bronfein (Curio Wellness)
It's so today. Curio is operational in Maryland with an opportunity to expand into Missouri, which we plan to do in the fourth quarter of this year with the launch of a manufacturing facility. We plan to launch in 24, our cultivation operation in Missouri. by kind of Q two. We do, if next year, we'll both have a foothold in both Maryland and Missouri. by my understanding, we'll be the only U.S. cannabis company to be operational in both Maryland and Missouri. You know, two states that basically launched their adult use or goal programs almost at the same time. To date, we originally funded the company with a $30 million equity raise. And the restructuring I referenced in spring of 2021, part of that was due to a desire to raise additional expansion capital for our operation in Maryland, where we raised $22 million to expand our operations in Maryland. We now are the latter half of a raise for $15 million, which we’ll use for our expansion into Missouri and based on our forecasts and understanding the markets for entering and desire to enter, this will likely be the last capital raise in the company's history. So hopefully that's the case. These capital raises that I'm sure you've been a part of and take a lot of effort and participation from the team and others. It'll be nice to get all the capital raised behind us and focus on continuing to expand into our markets and develop our brands.
10:42 - Dai Truong (Arlington Capital Advisors)
Yeah, and with that, let's talk a bit more about sort of EBITDA margins and potential to be cash flow positive so you don't have to raise anymore. What is Curio doing that's allowing such a high margin or is it kind of what you mentioned operating in two states Maryland and soon Missouri. They have launched very good programs for adult use.
11:05 - David Bronfein (Curio Wellness)
Yeah, we're a cash flow positive company to date and have been for a long time. And part of that was being very focused on not just planting flags in a whole bunch of states and having that accolades, which is certainly nice and hard to do. And so there's a lot of credit to those who've done it successfully. But we were really took a strong focus on developing our company and our brands and products here in Maryland and really validating the model, which we did over, you know, we've done over the past four and a half years, which is why we felt very comfortable that this was the right time to seek an additional market. Frankly, we were lucky enough to almost stumble upon Missouri through conversations and meeting new people and are very excited about entering that market. But because we did that validation exercise, if you will, it really allowed us to hone in on the financial model of the business, different drivers of the business, different market dynamics, and how to address those in the most cost effective way. And so that's been a large part of our success to date. I think we really, we all believe that we've created a really great model for the industry and that we can now take it to other states and feel comfortable that it will have success pretty quickly, both financially and through brand awareness, shortly thereafter.
12:54 - Rebecca Raphael (Curio Wellness)
And I would add to David's comments that while we're a privately held company, We've always operated as if we were a public company. So we have a board of directors who are industry leaders and very well respected professionals across major CPG backgrounds, financial services, healthcare, of all the industries that we seek to emulate their best practices. Our board members bring that expertise. And I think being CGMP certified, for example, is something that we did because we believe that when the federal state conflict goes away and cannabis is under the FDA's guidelines, they will mirror their regulations to cannabis that they do with other food safety laws, for example. So if we make choices about how we run our business for the future and to assure that we can, we can always put out safe, effective and reliable products, but that we're constantly working to deliver. To deliver value to our investors and our shareholders. And frankly, we're accountable to an independent board to make sure that the decisions that we're making are sound of mind and in the best interest of the business. And that always comes down to cash flow and your EBITDA.
14:20 - Dai Truong (Arlington Capital Advisors)
And so you guys are vertically integrated, but is it right to kind of say you're posting more on sort of the product and brand side of things? You know, certainly there's Far & Dotter, which is sort of your retail banner. There's one location in Maryland and let's get more into later, the franchise opportunity with Far & Dotter, but do you see yourself, you know, you're vertically integrated as more of a product and brand company first?
15:21 - Wendy Bronfein (Curio Wellness)
So no, the, yeah, so the way that I traditionally express it is, I think it does lead. I think it overall just leads with brand. There is a different brand name for retail than for wholesale. But as Rebecca was saying, the retail is the physical experience of our mission and values. And obviously it's a place that is the home of all of our products, but we're fortunate that Maryland and Missouri are both wholesale markets. So you can experience our products in any dispensary, whether we own it or not. But I think it's all about defining the category. For us, we're really connected to the idea of delivering quality premium products that have been produced using scientific methods, whether that's literally the best texture and formulation for something like a chew, or some people call them gummies, or condition specific products where we want to try and target something. But the same holds for like if you're going into the store and you're going to experience it, it's what is the ideal way to experience this, to legitimize it, to break down stigmas, to give people therapeutics or recreational products that they're looking for in an ideal setting.
16:43 - Dai Truong (Arlington Capital Advisors)
Yeah, I guess I say that to also mean, you know, the % of revenue, let's say, from your different segments, business segments,.
16:56 - Wendy Bronfein (Curio Wellness)
I think obviously that does come at the limitations of any state's program. For example, obviously the wholesale does dominate in Maryland because we distribute to over 90 dispensaries in the state, which is basically like 98% of the market. And we hold two dispensary licenses. And in that state, you're capped to four. So even in that realm, you probably would still kind of have your wholesale business dominate because you can serve so many more people as the state has so many dispensaries and will continue to add them as it expands. But I think to minor Rebecca's point, we see it all as a connected business.
17:43 - Dai Truong (Arlington Capital Advisors)
But why not like max out in the cap of Maryland, like some of your MSO competitors have done?
17:49 - Wendy Bronfein (Curio Wellness)
We're seeking.
17:50 - Rebecca Raphael (Curio Wellness)
Oh, we are actively looking for two additional stores that could be corporate owned stores, but because we have the Far & Dotter as a franchise option for them as well.
18:16 - Wendy Bronfein (Curio Wellness)
And I would further kind of just as a background, the policy element has impacted what was our strategy. So, by that 1. In converting to Adult-Use, Maryland, to the position of anyone who was existing when they transferred their business from the existing medical to the new program, which is Adult-Use and Medical, your license is locked up for five years. It cannot be sold or transferred. So any licenses, any dispensaries that operate today that have opted into this new program are not eligible to be sold at this time. So all ownership is sort of stagnant and existing operators for the next five years. Additionally, at this time, the law has been written in a way that is unfavorable to franchising. So where our outlook was to franchise the model and to take what we've learned and create an ease for those who want to enter the industry, whether through our fund or as a traditional franchise, at this juncture until, and unless we can have the law corrected as we would see it. Franchises are not necessarily a viable option in Maryland.
19:33 - Dai Truong (Arlington Capital Advisors)
Yeah, I would think at least from a franchise standpoint, if it's like a MSA, it may be allowed, it seems like Maryland doesn't even even allow that.
19:43 - Wendy Bronfein (Curio Wellness)
Yeah, the law is pretty tight in how they define not just ownership, but operational control. And so that management services [agreement] (MSA), it'll be interesting to see if that can be achieved in this window. Because the law speaks to things like general operations, finance, marketing decisions. you know, a lot of that would be covered in management service agreements.
20:12 - David Bronfein (Curio Wellness)
The lawyer on the phone would like to make the distinction between an MSA and a Franchise Offering, I mean, as a Franchise or a Franchise, you're getting the tools and guidance on how to run your own business. It's the toolkit per se, whereas the MSA operates differently where the service provider is really, it's a high touch service offering where you're in the business and working in the business and very closely with the owner operator of that business. The owner may not even be there. And so there is this distinction of what we are providing for people to create under our brains. And the success of that in order to their benefit largely versus ours as a traditional franchise model.
21:10 - Dai Truong (Arlington Capital Advisors)
Got it. Thank you for that distinction. So since we're on the topic of Maryland and Adult-use and, you know, licenses, can you guys talk about, you know, what went right in the launch of Adult-use? $84.7M in July sales. So it's a billion dollar run-rate already. Obviously, I think some of this may dip over time given the excitement for July. But already a pretty sizable market. What did the State get right? Went wrong? Tell us about, you know, that the months or the days leading up to opening the doors for Adult-use.
21:38 - Rebecca Raphael (Curio Wellness)
What we did right, I'll let Wendy talk to the state because that’s her wheelhouse, but on the wholesale side, we took an approach that started basically at the beginning of the year where we modeled out what we expected the sales to be and the demand to be. And we use that to inform our production planning. And so around May, I already had about 3x worth of inventory in our vault. Then we normally would have to support the medical market. We increased it by a multiple that was kind of consistent with what we saw happening in Missouri. That was the most recent state to go medical to adult use. And it shared many characteristics with Maryland. So that was our kind of safe proxy. And so we used the data from Missouri. We increased our production. And we also started to communicate with dispensaries about things that we had learned from other states about how to prepare. We had to prepare for the influx of new patients, new consumers, how to prepare for the increase in the volume of inventory you were going to receive and how to use the opportunity to reassess your pricing and promotions to better align with the medical plus adult-use market. And so everything that we planned for and predicted we've been very happy with it coming to fruition in July. The sales have been robust and our ability to meet our customers needs have not wavered. So we've continued on our promise of being a reliable partner. And. Frankly, the biggest challenge we have is communicating to new audiences. We don't have the ability to advertise in adult use the way we could when it was a medical only market. And it is. Quite hard to help people understand the benefits of cannabis when you can't speak to them on the channels that they use most frequently. And so I'll let Wendy speak to some of the regulatory changes, but as a wholesale provider. I'm very proud of our team and I think our dispensary partner. partners have, we still all have work to do, but I think they've been very committed to working with us to make sure that both their medical patients and their new adult use consumers are having the best possible reception at their stores and the best product available.
24:18 - Wendy Bronfein (Curio Wellness)
As Rebecca had mentioned, Missouri has been this touch point because we've been running this parallel path, right? We had, we had equally strong. Medical programs and went for this transition around the same time. So, with this launch of adult-use and then looking at the first month's revenue, we were inclined to immediately compare that to what we saw happened, because we were using that as a proxy. So, we are about $20K short of what Missouri did here in Maryland, and I think some of that can be attributed to the differences in our programs and maybe what are some of the shortcomings. One is that change in our ability to advertise while we do have abilities to advertise. We had changes and things taken away that we had during medical. it's important to understand that that really went on without incident or obscenity for five years. So I think for the industry, that's a hard pill for us to swallow. But I think it's also translating to a lack of awareness. I think there's an assumption that this topic is so sexy that everyone knows, but they really don't. The others are that we don't have all of the dosage forms that we had in medical, certain dosage forms did not move over to adult use. There were certain dosage forms that were held back and only left for medical. And interestingly, some of those dosage forms like infused pre rolls or concentrates in mature markets are much more aligned with the adult use side than the Medical because that was the one program we had. But when you're looking at states that have had programs much longer for those two product categories, trend much higher on adult use than they do medical. So it was interesting for us to find them being left only on the medical side. And then we kind of had a late in the game, being the industry, learning where curbside, which I think is pretty much ubiquitous to retail and restaurants and the stay and age post pandemic. It has been relegated only to medical, It's unclear to us why the adult-use consumers being discriminated against in that service offering. But obviously that really kind of increases your transactions in a day and can improve the experience, particularly at the launch of something when things are busy. Just to have shorter lines and a more seamless experience for people.
27:00 - David Bronfein (Curio Wellness)
Just to clarify, I think Wendy said $20K, you meant $20M
27:07 - Wendy Bronfein (Curio Wellness)
Sorry, yes. I'm sorry about that. I meant $20 million.
27:11 - Dai Truong (Arlington Capital Advisors)
I figured that maybe the case, So thanks for catching up.
So let's talk a bit more about wholesale in the state. Give us an overview of the number of products in categories you play in. If I just take a quick look at your menu or what's a level for sale of Curio Wellness [products] at a competitor, so let's say Curaleaf, it's really just the gummies and the tablets that are available. So it's not even your whole robust portfolio offering. So help us understand sort of how big is the product portfolio at other retailers, where are they often carrying?
27:53 - Rebecca Raphael (Curio Wellness)
So we have the largest product portfolio in the state and we've been the market share leader by a considerable amount for five years, with the transition to adult use, all of our products are permissible, except for the Dixie elixirs. Those are, we make them on behalf of Dixie Brands, which is one of our licensed partners. And then our Good Day and Good Night tablets in their current packaging are not permissible, but the product themselves would be allowed in adult use markets. So we're going to be bringing that to Maryland by the end of this month. But in terms of where we are, where we shine, if you will, we have the state's best flower. We have some of the highest testing flowers in the state, both for the THCA results and the terpenes. We were first to market with edibles at 10 milligrams, 25 and 40 milligrams per piece, and have repeatedly won. I'm the best at the bowl in the state from the Baltimore Sun for our Black Cherry Vanilla flavor. And we also offer pre rolls CO2 distillate cartridges. We only use CO2 extraction because time back to the common I made earlier about CGMP CO2 extraction is an FDA approved form of extraction because it leaves no solvents in the residual oil. And so we chose to use that extraction form because of the FDA guidelines. And we also infuse our cartridges with terpenes that are extracted from our very own flour. don't use botanical terpenes like some of our competitors to kind of spike your terpenes results and flavors. But we really focus on scientifically based products and our condition specific lines. Good day for anti anxiety and stress relief. Good night, which is a cannabis line of cannabis sleep aid products and our good night pulse release tablet. Let's hold the only US patent for a cannabis sleep aid, as well as GI bicario, which is a suite of gastrointestinal health products, and Move by Curio, which are topicals for arthritis joint pain or your weekend warriors like muscle muscle aches. But all of those four brands were developed in partnership with our scientific advisory board. So renowned scientists pharmacologist physicians, who are all interested in harnessing the medicinal qualities of cannabis and understanding how you can create a formula with THC or minor cannabinoids as it's active ingredient, and being very focused on the dosage form to make sure that you're increasing the efficacy of the cannabinoids as it relates to that condition. So the post release tab is an excellent example of that, because the technology allows it to give you a burst of medication at the onset, and then another burst of approximately three hours. Later has to be harnessed in a tab-limited form. If you put it into a gummy, for example, it would be like, I like it to like eating a tuna sandwich on the beach. Like there's gonna be granular stuff in there. And so we work with these incredibly smart individuals who also have taught us how to essentially make a clinically trialed product like you would have in a pharmaceutical company under the limitations that we experience as Canada. So we can't get an independent review board, for example. We can't get FDA approval for our trials. However, we can do about 98% of the things that those same types of trials would go through. It is very expensive. It is very time-consuming. But it is part of our DNA because it is what gives a product integrity. And we're not going to commercialize something that we want to be able to advertise as helping gut health, if we don't have any statistically significant data that it actually does help your gut. And that, you know, it reinforces what Wendy was talking about as it relates to the brand. Everything ties back to the brand. And on our product mix side, we are committed to offering safe, effective, and reliable products, because that is what we tell all of our customers, our dispensary partners, and what we tell all the consumers of the states that we're in, and that is what we're going to do. And we won't bring anything to market that would negatively impact that promise to the customer or own reputation.
32:39 - Dai Truong (Arlington Capital Advisors)
And has that resonated with the adult-use customers? So again, just referencing the product on Curaleaf’s site, it’s you know, all the things you mentioned in terms of, what could this help with in terms of condition. Oil extracted exclusively from Curio Wellness flower, manufacturing from the seed. GMP Facility. And then if I just scroll down and they advertise similar products, it's the Select Bites, which then if I click into that, it's just talking about it as a next level classic edible and like a two sentence description. That's it. So, has that resonated with the adult use market?
33:14 - Rebecca Raphael (Curio Wellness)
I think it is because we see it in our wholesale sales, but then we also see it in our market share. in Joe, I think it was June's numbers, our market share had skyrocketed to like 22% in Maryland. So, there's clearly an affinity for and a desire for cannabis products that aren't BS. One of the challenges that we have is that all of our competitors will market effects, for example, that's kind of the universal language of hybrid, get the sativa, know, focus, uplifting, mellow. But there's no data to support that experience. Everybody's end up now going to exist in this differently. how I digest mercine and could be completely different, how you digest mercine. Therefore, an Indica for me is a Sativa for you. We purposely take the time and go through the rigor to make sure that how we describe our products is indicative of how a statistically significant amount of people experience them. And then we go out and we educate the budtenders so that they know how to talk about how we got to that characteristic or why we put it under this brand name. And the best tool I can measure, to that effectiveness, is our product adoption and our self-through at dispensaries, which continue to meet or exceed our expectations. And so we continue to invest in the science and continue to invest in the marketing, on the channels that we can, to make sure that new consumers, especially understand that we are a trusted brand and a resource because they're There are a lot of questions that new cannabis users have.
35:04 - Dai Truong (Arlington Capital Advisors)
And do you work with other brands that you're co-manufacturing for other than Smokies and Dixie?
35:10 - Rebecca Raphael (Curio Wellness)
We do. work with Dixies and we work with Mary's Medicinals. Smokies edibles as well as Fuse, which is a disposable vape. Their leaders are out of California. And we're also bringing to market in Maryland and Missouri, Flower by Edie Parker, which is a female-owned line of flower pre-rolls and vapes, as well as a new line of flower and pre-rolls that haven't been announced yet, but it is by a local Maryland television personality. So we've got a lot of hometown pride for that launch.
35:53 - Dai Truong (Arlington Capital Advisors)
That's a pretty local celebrity, I guess, product.
35:58 - Wendy Bronfein (Curio Wellness)
It's a national local.
36:00 - Rebecca Raphael (Curio Wellness)
I'll call it. It's a national celebrity who's locally-based.
36:04 - Dai Truong (Arlington Capital Advisors)
Got it.
36:04 - Rebecca Raphael (Curio Wellness)
Okay. And Kaviar, I don't know if you might be Yeah, and Kaviar, which are infused pre-rolls with Curio Flower, Keef and distillate.
36:18 - Dai Truong (Arlington Capital Advisors)
But there aren't some of these products competitive to your own. So like looking at Smokies, like you guys competitive?
36:24 - Rebecca Raphael (Curio Wellness)
They're like, How do you think about that relationship? So in the beginning, they find it. Five years ago, we've had an amazing partnership with the Dixie team from day one. And part of our strategy was we want to come to market with multiple dosage forms, but we don't know how to make tablets. Yeah, we don't know how to make beverages. And here's this fabulous brand who's mastered the art of these product lines. So let's bring them to Maryland so that we can have the fullest assortment of products for our customers. And that has proven to be a winning strategy because then and now. What dispensaries want is variety on their shelf, and they want business to be done more easily for them. They want fewer receipts, fewer deliveries, they want one customer service rep. So we've brought on more and more brands that have the same ethos of maintaining the high quality of their products. So that we can be a one stop shop for our dispensaries. But if you went into a dispensary today in Maryland, we would see seven product lines. You would not know that they all came on one truck. And so it affords the dispensary the ability to offer their customers different packaging, different products, different price points, different dosage forms. But it gives them the benefit of an ideal with one carry on as customer service representative ideal with one carry on as delivery. And that's a way of making their life easier, which is a part of our promise to our dispensary partners.
38:01 - Dai Truong (Arlington Capital Advisors)
That makes sense and that's how it's done in traditional CPG. Let me ask you this on distribution. So it sounds like you self distribute because you guys have the #1 market share being a wholesaler. How does distribution work in Maryland for some of your other competitors?
38:17 - Rebecca Raphael (Curio Wellness)
Oh, yeah. Go on, Wendy.
38:19 - Wendy Bronfein (Curio Wellness)
We're not a state where you have a distributor license. Everything is done through the licensee themselves. So if you're the producer, you are also the distributor of your product in Maryland.
38:35 - Dai Truong (Arlington Capital Advisors)
Got it. So is that limit a lot of the smaller operators from getting into the wholesale business? So it's pretty much MSOs and bigger Single State Operators (SSOs).
38:46 - Wendy Bronfein (Curio Wellness)
No, I mean, everyone, everyone, if you're a cultivator or a processor or you hold both licenses, then the dispensaries are your customers and any of them are eligible to go to any of them. And I think kind of like what Rebecca was speaking about, when the program began, everyone was taking everything. And most of the stores do still remain carrying most of the licensees products who are available. But I think what has happened is they take larger orders from some versus others based on the quality of the products available, the desire of their customers to purchase the products. And the ease and consistency with which they can work with that brand to secure the inventory they need. And I think that's part of also why our licensing partners have increased because we've enjoyed such a strong reputation for being a good bearer of your brand, right, internally in terms of how we respect it and maintain your IP and produce your product to your standards. But then also we have that proliferation of distribution that is attractive. And we have great. We are with our customers because we see them all as small business owners who, you know, their success is our success and where we have the means potentially to offer more supporting materials and swag and education and consistent inventory. You know, they might not be able to do all the things to support the marketing and selling of the products at the store levels. So we want to be the best partner we can be.
40:28 - Rebecca Raphael (Curio Wellness)
I'd add to that as well, because we have a dedicated product innovation team, a hallmark of being a licensee or a partner with us is that if we find ways to help scale the production of your product or ways to lower the cost of making your product, we share all of that learning with our partners. And so they have improved their operating expenses or improved their operating leverage in some cases in the other markets where we're not even making their product. But we've determined ways to do it either faster, cheaper, the quality, improve the stability of the product, and they get the benefit of that learning.
41:13 - Dai Truong (Arlington Capital Advisors)
Aren’t you helping a competitor by doing that though? So let's say you do that for a brand that's a partner of yours in Maryland, you enter New Jersey and now you're competing with someone that you've helped to optimize.
41:26 - Rebecca Raphael (Curio Wellness)
I mean, we are, but like, that just comes down to being a decent person in my opinion. Like we have, at the end of the day, we have partnership agreements, but we also are dealing with the individuals who run those companies and we're all in this new industry where nobody really has the total right answer. Nobody's cracked the code. What we know is that Free Cash Flow is how our success is measured by the investment companies. You have got to start with the capital markets. That's how we're all equally measured. That's the only stick that we all can be measured against simultaneously. So beyond that, let's just be nice to each other and play in the sandbox. I'm going to go to Missouri and have to compete against Dixie and have to compete against Smokies Edibles. I know they have fabulous products. I know they're run by fabulous people. So it's my responsibility to make sure that I can effectively communicate the benefits of trying a curiolowness product. And it's not going to be in a malicious way against those other brands. It's a challenge for us to force ourselves to be more creative and better at what we do, frankly, in terms of marketing, than anything else. So we don't really have any qualms about helping out our friends.
42:49 - Dai Truong (Arlington Capital Advisors)
Right. I figured you kind of took a view that it's a rising tide, right? So it's going to lift all boats.
42:55 - Wendy Bronfein (Curio Wellness)
Yeah, I think overall we operate from the position of the greater good, particularly where we all exist today in a world of federal, state conflicts. While we live in legal state programs, we still live with stigma and discomfort over our own existence. it's just always better to be kind of setting the best examples and working so that everyone is successful together because that's the only way we're all going to get to the next chapter.
43:30 - Dai Truong (Arlington Capital Advisors)
So you're entering Missouri at the end of year. What other markets are on the horizon?
43:39 - Wendy Bronfein (Curio Wellness)
I think so we continue. I mean, we keep our eyes set on what I, this isn't really a technicality. I am familiar with the geography of the United States, but I think you could loosely call it like east of the Mississippi, you know, knowing there are some places somewhat west of there. But I think in this side of the country, we tend And to start from the perspective of states that do have medical programs, good medical programs, limited license states, you know, where, where I think a decent amount of the Kings have already been worked out back to David's comment about that flag in the map. You know, when a state has a program or a law, but it just kind of doesn't have the makings of success at this juncture. That's not necessarily a point of interest for us. You know, we've closely watched Pennsylvania. We watched Florida, Ohio. actually applied in New Jersey in the 2019 round and had the highest technically scoring application in the state and did not win and actually had some litigation there just to correct this matter. But I, you know, I think basically you're talking about more eastbound agendas and then. And simultaneously, Rebecca can speak further to this, where we believe an opportunity could be a good fit. We are open to the idea of licensing our products in markets where we are unlikely to go.
45:12 - Rebecca Raphael (Curio Wellness)
Absolutely. And that's also another benefit of having the breadth of licensing partners that we have in Maryland and Missouri is that we've developed trusting relationships with these folks so if they're in markets where we don't intend to go but they're already offering. They would, in many respects, be the first point of contact for an external licensing deal where curio products are being brought to a new market, not under our own manufacturing license.
45:42 - Dai Truong (Arlington Capital Advisors)
That makes sense. And I assume another factor is probably just the cost, right? So if you're going to enter in Ohio, Pennsylvania, Florida, certainly those are expected to be a big market when they flip to adult- use. But there's probably some consideration for, you know, how much is it going to cost to build out facilities in those states? And what's your ROI?
46:00 - Rebecca Raphael (Curio Wellness)
Absolutely. I mean, we have to weigh that decision against the cost of product innovation. And that's, frankly, there have been years where we have focused on growth. And there have been years when we've focused on developing the product portfolio. But it's challenging when your ability to raise capital is so strained. Those are the tough decisions you have to make to make sure that we're staying cash flow positive. And profitable. I'd love to be able to do everything, but we have to be responsible stewards of our license and our shareholders' investment, frankly, all the time.
46:42 - Wendy Bronfein (Curio Wellness)
Yeah. to just jump on, Becca said, to give you kind of an understanding of that capital perspective and how policy plays into that, you know, in the past year, we've seen two events on the federal and on the state level impact investors' attitudes. So when SAFE didn't move last year, we heard from a lot of investors in this space who really felt like the industry does not have the ear of Congress and does not have leverage with them. Where they was thought that this would be dealt with and more so that 280E would have been off the table by now. People weren't really as interested in stepping into the sector or increasing what they'd already committed. And then additionally in Maryland, that nuance I shared about the five-year lockup of licenses also impacted investors' opinions because it doesn't allow the business to exit at a time that's best for its investors or the business itself, but for extreme, extenuating circumstances like bankruptcy or debt.
47:51 - Dai Truong (Arlington Capital Advisors)
That's like the unfortunate thing about being public, which I'm sure you guys are happy. It's going private right now where really the thing that impacts stock prices more than naming is just any sort of legislative change or safe banking or some of the headlines that seem to be a bit more slow moving. It doesn't really matter. You know, you have great numbers in Maryland and you've done well. Like it doesn't move the stock as much as some of the larger agendas.
48:23 - Rebecca Raphael (Curio Wellness)
Yeah, I think we're just not immune to it though. We, like I said before, we might not be listed on the Canadian exchange, but we operate as if we're listed on the Nasdaq or the New York Stock Exchange. So we hold ourselves to the same standards. We look to our MSO competitors, frankly, as our benchmark of our own performance. And we seek to learn from those who report higher earnings, better cost control, try and understand, well, what's driving that decision? How are they potentially changing their business model? How will that impact both the retail sales and the states where we compete against each other for shelf space? And if they're learning in it for our wholesale division in the states where we don't compete with people. against each other, but they're clearly making this decision for a reason. the fact that we are private is insignificant or it doesn't really matter in some ways, because we're still a cannabis company and we still can't get money for the same reason that they can't get money. But the investor opinion is the same regardless of your private or public stance status.
49:59 - Dai Truong (Arlington Capital Advisors)
Yeah, I agree with that. Is that more of an industry thing versus a specific company?
So on that point of looking and comparing yourselves to, let's say, the larger MSOs, publicly traded MSOs, from our conversation and what I know about the company, the biggest differentiator for me seems to be that Curio takes a very science-led approach to product innovation, product development. And what other differentiations would you point out?
50:30 - Rebecca Raphael (Curio Wellness)
In addition to being focused on safe, effective, and reliable products, and like you said, the condition-specific products, we are very invested in our operating leverage. We are squarely focused on the health of the business and making sure that we don't make any decisions that could put Maryland, Missouri, and future licenses in a precarious place from a A liquidity standpoint, but also from a compliance standpoint, we're incredibly invested in quality control and compliance. We have dedicated teams that make sure that our CGMP status is not only upheld, but that we pass with, you know, glowing accolades and glowing grades every time you get offered an annually for your CGMP certification. But I also think that we want to be an employer of choice, whether it's at the corporate, factory or retail level. When Wendy and Michael were conceptualizing the business, we kept joking about the fact that you go to a Trader Joe's and everybody who works at Trader Joe's. They’re So happy. Like, what are they pumping in the air there? And so we thought a lot about how do you, how do you help people who work an hourly job and who are potentially packaging a $15 item? For hours and hours and hours, how do they have job satisfaction? How do you help them have development, career development opportunities? And how do you help them make a very, excellent living for their family? And that has been kind of a hallmark of as we've grown, we've introduced things like 401k matching. We are the, I believe we offer the highest hourly wage of any Maryland cannabis company. We do traditional things like employee of the month. We subsidize snacks in the cafeteria. We make sure our team members get special swag that's their own brand to make them feel good. They get an industry discount at our stores. And so we are, we're very mindful of the happiness and the growth potential of the people who work for us. And so I'm, I'm Not familiar with others, HR policies, but I know that we prioritize that as far as brands growth and who we are as a company.
53:10 - Dai Truong (Arlington Capital Advisors)
So it seems like you sort of passively alluded to some of the unions versus MSOs that are in the headlines.
53:19 - Rebecca Raphael (Curio Wellness)
I unintentionally. I will comment because I'm not close enough to those PNC policies, those people in culture policies, but I will say that we have. Open lines of communication between all levels of the organization from the C suite down to the janitorial staff and the hourly worker who just joined us out of college with all hands meetings and. Bailey Huddles and different forms of visual communications throughout our facilities. So we certainly strive to have a very like full. Also, Team, and just, again, keeping lines of communication open is very important to us.
54:09 - Dai Truong (Arlington Capital Advisors)
Let's get an update on the Curio WMBE Fund. So this was a $30 million fund that was launched at the end of November 2020. It was looking to invest in up to 50 women, minority and disabled veterans who were looking to open and operate a KIRA Wellness franchise with a path to 100% ownership in three years. So if it's an update now that we're coming up on three years of that fund.
54:35 - Wendy Bronfein (Curio Wellness)
Yes, so we've received well over a thousand applicants across a number of states. We have an individual in Mississippi who is actively working towards the opening of her store. We have another franchise that we are working with in New Jersey. In New Jersey, the nature of Sure of the law is such that the fund dollars could only be attributed to one person. We were successfully able to work with the New Jersey legislature to pass the law that is on deck to be signed by the governor that will allow us to support up to seven franchisees in that state. So we're excited to expand the opportunity because we had a lot of people from New Jersey interested, but previous to this moment the law wouldn't allow us to support more than one. And the I think the challenge that we've seen that I think was unforeseen for us because we come to these things from such an entrepreneurial perspective was where policy and individual states would be at odds with the ability to not often as much the franchise, but the funds to support. For example, like for example, with New Jersey where we could initially be Bring funds, but we could only do it to one person because of those rules around the control of investors. But we were able to work with them to understand that this is an entity, not an individual, and that it's a transitional form of funding in terms of the fact that we're here to help them start. And they are exiting from our support in as little as three, but as many as seven years.
56:30 - Dai Truong (Arlington Capital Advisors)
And what other states work well for that? let's say Alabama is going to open up licenses, guess next week, though, re-announce the winners. Is that an interesting state or what makes an interesting state for that fund?
56:47 - Wendy Bronfein (Curio Wellness)
Yeah, so the states we had originally identified, I think there were about 10 of them, fell back into what I was discussing before relative to our own expansion, right? Most of them are on the The side of the country, they tend to be more limited, licensed. They were through the lens of strong medical programs, which really speaks to kind of what is the product mix with the ease of access, the ease of participation. And then, you know, in more, I would say in the last 18 months, the adult use factor has come more into play because that conversation has started to occur more and more. And those who are flirting with the transition and those who have done it. But it really started through where we were in this medical state, looking at other states that were medical and the strength of their programs relative to the fit of executing our brand.
57:48 - Dai Truong (Arlington Capital Advisors)
Is that $30 million dollar target fully funded as of today?
57:55 - Wendy Bronfein (Curio Wellness)
I believe it is in the mid $20s. think they, I think they. And I think it's nearly part of creation of the fund. We were trying to solve a lot, have an active solution for a lot of topics that are within our industry. So in this idea of expanding diversity, the fund is fund, obviously through who it is available to is addressing that. But there was also a different conversation about just being an active investor in the industry. So that fund itself is, I believe, nearly 40% of the makeup are diverse investors. So there you're, you're addressing diversity investing in diversity. And then on top of that, kind of being the active retailer, plus the wholesaler, we had a keen perspective on what And so we felt like in the spirit of trying to broaden the independent ownership, it could be useful to package what we've done, which has been successful and to give it to other people as a toolkit for them to focus on being that great entrepreneur and that owner and operator, but not having to solve every problem day one. Using the toolkit to get themselves off the ground and run their business day to day.
59:37 - Dai Truong (Arlington Capital Advisors)
Great. And then last question for both of you, give more of the companies today. What are some of the other challenges that we may not have discussed that you're dealing with or seeing line of sight to deal with?
59:54 - Wendy Bronfein (Curio Wellness)
So I think that the Federal is like the big outlier, right? That's part of my day job. And I think, you know, we are not proponents, we're not like out there proposing that we just need to legalize. I don't think we think that's realistic. Relative to where hearts and minds are right now. But I think that there are a lot of financial constraints that we have that can be fixed, and that will help legitimize our industry. It'll help us function at a higher level. It'll improve the diverse participation. It will surely put some fire behind state-based social equity programs by removing these constraints. Namely, there's a lot of talk around SAFE, is, you know, just depository banking, which is useful. 280E is the biggest problem. The opening of capital markets is needed. And obviously, then that would allow us to also improve transportation. Transactions on the right. Retail level with the use of credit cards, and we heard last week about MasterCard and the debit dramas. So I think if we can normalize all of our financial business practices, that's the major hurdle that we need to cross, more than we need to fight to be legal federally at this time. And I think that is probably an easier pill to swallow and for us to go after incremental wins as an industry.
1:01:26 - Rebecca Raphael (Curio Wellness)
And I would add to Wendy's commentary that our other big challenge is hiring. That cannabis is not immune to the problems that any other industries have about recruiting and retaining people right now. And what we make still requires a person. I can find ways to automate as much as possible, but at the end of the day, humans need to throw plants. And so finding people who are both. Both have specialty skills in terms of horticulture, in terms of analytical lab workers, and chemists for the products that we develop. We have, I think we have about 30 open positions right now. I'm looking to hire sales representatives and field marketers in both Maryland and Missouri so that we can grow our brand awareness teams. And it is definitely a challenge to find, to find willing and able people who want to work.
1:02:33 - Dai Truong (Arlington Capital Advisors)
And on that point, what's been effective then to find employees for the company?
1:02:40 - Rebecca Raphael (Curio Wellness)
We've changed some of our benefits. So like, for example, we introduced a 401k match because we found that many of our employees as they kind of grew up in some respects, like came into another phase of life being educated about planning for their retirement. Or it was something. That was attracted to older applicants and would kind of steal the deal for recruiting them and transitioning them into a whole time higher. So we're constantly looking at what is most attractive in CPG and healthcare. And do we have either the bandwidth or the resources to mimic those benefits or those trends or those policies, because, well, we see ourselves as a wellness company, a healthcare company. So cannabis is our active ingredient. It's our widget, if you will. But we see no reason why we can't do something potentially that Procter and Gamble or McCormick could do. We can afford to do it, we can stay to do it. And frankly, if the people who work for us tell us, yeah, that would actually make my life easier and make me a happier employee.
🎙️ Curio Wellness: Wendy, Rebecca, & David Bronfein
Curio Wellness isn’t a real cGMP certified cultivation and manufacturing facility. They payed someone from Canadian to get their certification. It’s fake!