Welcome And Panel Introductions

SPEAKER_02 0:11

Welcome everybody to this week in Cannabis Live. We have some fresh faces and a lot of faces. This way, next to me is Ben Larson from High Spirits. Over on the other side, a new guest this week sitting in for Jeremy is Brian Fields from the Dime. Oh down here is Mark Hauser from Cannabis Measings. And furtherover is Anna Ray Grabstein also from High Spirits. Hello, everybody. Hello, hello.

SPEAKER_01 0:33

Good morning.

Earnings Headlines And Creative Writing

SPEAKER_02 0:34

Another week in cannabis here. Um and uh Mark, I want to start with you because you uh before we went live had a bit of uh concern, let's say, with what publicly traded companies say and their earnings reports, which we saw a lot of this week. I don't think we're gonna go earnings by earnings, but on the whole, what is your what is your beef? You want to talk about it?

SPEAKER_01 0:59

You know what really grinds my gears is um beef is no you know, I I've I've complained about this before, um, and it's that there is a tendency in this industry for press releases to sort of hide the ball with um with create not creative accounting, because it's all you know, they're not accusing anybody of lying, that is for sure. But just sort of using creative language to to sort of on the headlines in order to sort of um bury the actual truth is to performance, you know, and that comes in the terms of limiting, you know, the press, the the statement being about continued operations or adjusted EBITDA and things like that. And you know, it's it's frustrating because that's people just read the headlines, but it goes beyond the you know, you rather rather than getting into the discipline of learning how and understanding how to read the press release, but also read the financials and understand what is really happening here. You know, it's it's important not as an in not just as an investor, this is not investment advice, but just generally to understand the health and or the lack of health in this industry.

SPEAKER_02 2:17

So it's not creative accounting, it's creative writing.

SPEAKER_01 2:20

No, yeah, yeah, no, no. I again, this is not me saying, suggesting, you know, that there's you know, that there's any sort of real, you know, there is a little bit of wiggle room in what you adjust on e on EBITDAP for adjusted Ebita, but again, that's not a gap measure. So on the actual financial statements, I mean, you know, these are audited financials. So yeah.

SPEAKER_02 2:42

Well, uh, with that caveat in mind, um, or that, or that be, yeah, go ahead.

Ben Larson 2:47

If it's like uh, yeah, I'm this has always been the case in the cannabis industry. I mean, like when I first came in the cannabis industry, I mean every press release every week from every you know, Canadian publicly traded company. I just remember like you know, coming out of the tech industry, I'm like, what is this? This isn't news, and it's just kind of evolved and persisted. And like, does anyone ever or really care anymore? I mean, I I just I don't pay attention to this. I I I know I'm not a banker or that kind of stuff. Anna Ray, you pay a lot more attention to this.

AnnaRae Grabstein 3:18

Um I've stopped though, because there aren't retail investors investing in these companies. Generally, sure, the press release doesn't tell a great story, but the financial reports when you read them don't either. And the most interesting companies in cannabis are not being covered um in earnings reports. They're private companies that are putting up really awesome results that we don't get to talk about unless you get the inside scoop. Uh so that's that's what's much more interesting to me is the the companies that aren't releasing earnings.

SPEAKER_03 3:48

Why do they put them out then? Well, why why do why do private companies put out press releases? No, why do the public companies put them out? And because I agree, Mark, right? Like it's not really saying anything. Do they feel like they have to put that out?

SPEAKER_01 4:00

Well, into a I mean, they are required by law. I mean, there is, you know, they're because a lot of even you know, the ones that are SEC filers, but also the ones that are um you know, Canadian filers, I mean, they are required to put out quarterly reporting and then report it on an AK. But yes, I mean that but they they're not we're there's not a specific format that they're required to put in the press release in bold in italics in the headline.

Ben Larson 4:23

But it but if they don't create the narrative, someone else will and it will be truthful.

SPEAKER_02 4:28

Right, right. No, I think I think this this has been an ongoing issue in the cannabis industry for sure. And actually, I I I don't need to announce an novel at our newsletter, but we actually have a partnership uh blossoming with the Canadian Security Change where some of these companies are traded to talk about this exact issue, but also focused on the companies uh that are publicly traded. Yeah, go ahead.

SPEAKER_01 4:47

I just want to throw in one last thing. Is I think you know, for anybody from any of the companies that that are that do this, you know, this is all this is all I think coming from it's constructive criticism. We all all everybody on this call wants this industry to be better. We want it to do better, we want it to succeed. And in one of those ways is by is is by doing, you know, is by following the herd of how how what do investors expect to be to be disclosed in a press release and what do they expect from the way this stuff is reported?

AnnaRae Grabstein 5:22

Like the way that I try to use the earnings reports or have historically is to understand kind of also operating benchmarks across the industry. And because these companies have such different profiles, like you look at TrueLeave and they put up a very high gross margin, um, often in the 60%. And that seems insanely high compared to a lot of the private companies that I see the inside of their financials that are not vertically integrated in Florida who are still profitable. And so then you have to ask yourself, like, well, what is the difference between a healthy, profitable company that has a 25% or 35% gross margin and a company like TrueLeave that puts up a 60% gross margin and is losing hundreds of millions of dollars? It's just very confusing of what's going on. And so it's it's helpful to understand these benchmarks more to also poke holes in the narrative of how different all these markets are. Like TrueLeave is only able to put up a gross margin like that because they are cultivating, producing, manufacturing 100% of what they sell in Florida. And when you're in a situation like that, you're gonna have a consolidated margin across the supply chain. Um, whereas if you are more focused in one area of the supply chain, there's just no way that you'll ever reach a margin above 50%. And so just to be able to like understand what are these underlying benchmarks helps, I think, people to tell if their company is doing the right thing or not. But to compare on just something like gross margin, it's just also not enough. So I look at it as like a little bit of theater, a little bit of benchmarking, and um, and a helpful way to understand all the differences between the portfolios that these companies have.

Ben Larson 7:03

Perfect. Just so we're not picking on on on public companies purely. This goes for all companies in in this cannabis space. The the one thing that always triggers me is adjusted EBITDA. Like I just like just tell me the EBITDA. Like, I I'll I'll adjust things out when I evaluate it. Because like I see adjusted on something, and I'm like, they're hiding something. And I'm like, I start digging in. And indeed, they're hiding. It's like those legal bills, you don't get to deduct those out because you have them every year.

unknown 7:33

Yeah.

SPEAKER_03 7:34

I would love to see those press releases like slightly different, maybe taking a different approach of saying, okay, here's some of the investments we made from operational standpoint, here's some of the tools that we're trying to separate ourselves, here's some of the restructuring we're doing, here's some of the AI stuff. Something that says, hey, we understand we're not doing great today, but we're making investments internally. And that's kind of like the story that they can tell. Instead of saying, hey, we lost money, we can say, hey, we invested money, and here's how we positioned it going forward.

Legalization Setbacks Across Key States

SPEAKER_02 7:59

Yeah. We actually, we actually had on MerriMed this week, and they're pretty blunt if they moved out of Missouri for a whole variety of reasons that they, you know, they're they're they've there, and I know Brian, you've talked to Ryan Crandall about sort of how they build brand, and he was quite specific about how they do it, and they do have some leading brands, and I think they sort of lean into that. Can I can I move around to something else that is um I'm gonna I called it messy on this graphic. Um, and it is messy because we actually had a bunch of news or at least conversations this past, I would say, 10 days. One about Florida not making the ballot. And I don't know if we talked about that last week. Another about the governor of Pennsylvania continues to say the same thing year after year about how he wants this, how people are moving, you know. If you want legal cannabis in Pennsylvania, you're most likely to go to a surrounding state to get it and more every day. Um, New Hampshire again, sort of broken record. The Senate in New Hampshire killed uh a legalization measure. So there's a lot happening, but generally it has not been typically positive. We haven't had a ton of positive new news on new markets entering the fray. And Mark, is this we'll go to Mark first. Mark, is this like more of sort of a pushback what you talked about last week? Like there is more of a concerned organized effort to push back on this, or is each one of these things sort of its own sort of unique sort of situation?

SPEAKER_01 9:13

I mean, you know, I to me it's it's probably a little of both. Um, you know, there is definitely there there does seem to be a lot more noise uh overall about uh about legalization or you know, from the anti-legalization folks, um, you know, and it which has it seemed to also be um, you know, trending with with just the way you know social issues are talked about in this, you know, positioned in this country over the past, you know, 18 months or so. And um, you know, so there's probably there's probably some sort of uh you know correlation there. Uh but it yeah, and but yeah, I think there is definitely, you really do have to look state by state. But I, you know, I think Anna Ray probably knows a lot more about this than I do.

SPEAKER_02 10:01

As Tip O'Neill said, all politics is local, and there are very specific local reasons in Pennsylvania and New Hampshire and Florida, while these things are not happening. But in aggregate, it doesn't equal great opening up of new markets, especially Florida and Pennsylvania, which would be big. Anna Ray.

AnnaRae Grabstein 10:16

Can we rant on Pennsylvania though for a minute? So back to the last uh presidential run-up. And when Biden dropped out, there was a lot of discussion around Governor Shapiro in Pennsylvania as a contender. And what is going on that someone that had presidential aspirations or was even considered cannot move something that he just needs to get the legislature on Pennsylvania on board for to move this forward? It's like, come on, man, this four years and you keep losing with this seemingly like pretty popular policy. So I'd like to see I'd like to see Governor Shapiro really flex and show that he can be an actual leader here and get this across the board because it's like enough already. It's it seems like it should be a done deal by now.

SPEAKER_02 11:03

Yeah, there's a Republican state senate, is my understanding in Pennsylvania, which does make a big difference, but also much to the benefit of uh New Jersey and New York and and uh Delaware and Maryland, like it's it's a pretty good jam and Ohio. Um it's good that Pennsylvania doesn't go legal, at least not soon. But I think I I also think, and I want to out this if anybody wants to talk about it, that some of the big players, some of who we've named in Florida, I don't think mind staying um a medical state only because they do boku business. Mark, you don't think that's true?

SPEAKER_01 11:37

Well, I mean, Troy has dropped 200 million dollars to get uh to get uh you know, to get uh adult use on the ballot. So you know, I so I mean real estate too.

Ben Larson 11:48

They uh yeah they have like a bunch of like like 70 locations that are ready to be licensed or something like that.

SPEAKER_02 11:54

Yeah, but they can yes, but they also have uh I don't know 160, 150 something. I think where they just opened their their next uh dispensary in I don't even know the place in Florida, but they're pretty big footprint.

SPEAKER_03 12:06

Haven't they also invested into like big infrastructure down there for the expansion of adult use, right? There's anticipation of when this happens, but they had to put that uh CapEx in a while back. So for them, you know, 200 million for what the market could be with adult use, it's worth the investment, I think.

SPEAKER_02 12:21

Yeah, I mean I I don't know. I mean, it she's also uh she uh CEO Kim Rivers appears also close with the president of the United States. I mean, I'm not I think the the whispers are that she's the one whispering in the president's ear from time to time, uh, from Mar-a-Lago about cannabis, maybe I don't know. Anna Ray?

Ben Larson 12:38

I I'm I'm I mean I I'm just thinking about this from the bigger picture. Like, you know, we're we're talking about like the the trend with legalization or lack thereof, but zooming out even a little further, like this has actually been the year of the prohibitionist. Like this, you know, we we we see you know states trying to to repeal their their uh their legal markets. I know here in California we have a bill that's trying to make uh the cannabis market more restrictive than it already is. Um and you know, uh the the general trend with like the the Gallup polls are are kind of receding. So it's it's not like very rosy right now. And we have this really big federal discussion that that that's going on. And I I think that's the the major focal point right now. It's like we need uh federal clarity this year. Like we need something to happen with schedule three. We need clarity, whatever direction it is, with with what hemp is gonna do. Um, and I think that just all needs to get figured out so we can actually refocus on on the state level stuff.

SPEAKER_02 13:42

But yeah, well, it it actually one of the markets that sort of is on the screen now, and we talked about I think it was in today's newsletter, is Oklahoma, where the governor looks like he wants to upend their medical market um and hates cannabis. Probably the smell of it too. That's how that usually goes, right? Starts at the smell and goes to full uh prohibitionist mode. Um, but this is this is one that I did want to bring up because it is uh it was in the news this week and the governor there uh seems ready to sort of under underwrite uh under uh not license uh would be operators, I think is what it actually is. There are there are operators that are in that need to get their facilities re-licensed in some way, and the governor's telling them no. Um we have a comment. Oh, here you go. This is for you, Catherine Sidman. Uh war against hemp, yes. Uh we need to make hemp great again. Is that right, Ben?

Ben Larson 14:33

Well, so Oklahoma is an interesting state, right? Like, do you need a license to operate in Oklahoma? I don't even know because it's been one of the like the wildest of West, you know, states for a long time now. So if I'm a regulator or someone that's just somewhat anti-cannabis or hemp or whatever, I would want to repeal it too because it's been a shit show there, uh, from a control perspective. Um, so it it's kind of a it's a it's a rough example, like it they didn't really do a good job, right?

AnnaRae Grabstein 15:04

They also made that bed, and so then they're pissed off as they're trying to lay in it. I mean, they they rolled out their legal program with like basically anybody who could go down and fill out a form and I think pay like fifty dollars or two hundred dollars and get a get a license to cultivate. So there were 9,000 cultivators, and that's absurd, and it created like the the new emerald triangle of of illicit production for the entire United States and uh yeah, created some problems, but we couldn't driven to Oklahoma, there's nothing emerald about it. Wow, yeah, it's it's like the it's the dry, the dry yellow dry yellow triangle. The dry yellow triangle. Um so I mean, I think that that there is there's an element that the industry needs to take responsibility for um being highly irresponsible. And there's also a lot of responsibility that the regulators are trying to bears.

SPEAKER_02 16:06

Can we shift gears? This is me shifting gears for all you youngins out there. This is how I used to have to shift gears. Um I want to talk about um price compression. We talked about this a lot, I feel like, but there was actually some big data points this week that I think will underscore this. One, uh Michigan hit the$3 billion mark as a market in 2015. So big numbers. And there were some interesting numbers about border states and what's driving some of these sales, of course. Um, Colorado hit an all-time low, uh$608 per pound. And Massachusetts grams are hovering around$4. Um, so there's severe price compression in these markets. We already know about Michigan, but the other ones do. Uh, we actually have a webinar coming up uh next week about how to sort of combat this in the New York market if you are a brand or retailer or both or a producer. Um I I don't uh and Ray, you you talked about this before. Like this is not ideal from a market perspective. And I I I know because we mentioned it before, what does it mean for premiumization of the product?

unknown 17:04

I'm sorry.

SPEAKER_02 17:05

It's a lot wrapped into a question.

AnnaRae Grabstein 17:07

Um Well, I I think that you're alluding to the fact that um Ben and I participated in an event last night that Buddhist hosted that was about premiumization of cannabis. And and I think that we both left slightly skeptical. And the real stoned. Yes, yes, and and also very impressed with the quality of some incredibly premium products that are selling for incredibly cheap. And that was really the case in point, is that I think that cannabis has gotten very good and very high quality. Um, and yet there is so much cannabis in the market, so much oversupply that it's very challenging to create sort of any premium position from a price perspective because there's just so much competition and we get in our own way. Um producers, operators get in their own way and are driving the prices down to compete because there's no other differentiation really. Um, so I think that this is challenging. I have some philosophies about ways to create alignment sort of across the supply chain or in the way that we compensate salespeople and their commissions that that I think can make slight differences and improvements ultimately to get to get salespeople aligned more closely with incentives based on margins as opposed to top line revenue, so that they're aligned with a company's actual profitability. Uh, but it that takes actually a lot of um finesse financially. And a lot of startup cannabis companies aren't prepared to implement something like that.

SPEAKER_02 18:37

Yeah. Brian, you talked to a lot of folks. What what what what do you mean, what are what do folks say about this? Certainly across brand or manufacturing, like this is a real problem.

SPEAKER_03 18:46

I think this is where you know brands can be that extra differentiator, exactly like Anna Ray said, right? With the quality becoming really, really high for most of the teams, you need to understand internally what are our cogs, how does that look? How do we squeeze out extra margin? And I think that means like a really internal audit on what we do well and what we don't do well. And I think you need to really understand your numbers and then going on top, you know, what is your separator, what is your USP, and how do you differentiate amongst your peers? Because if people are selecting based on price, it's gonna be really difficult to see. Okay, my brand is this. Well, why do you command that margin? There has to be something special about it. And I think it's gonna have to take a really tough look in the mirror and say, you know, you know, maybe we don't deserve that price. And if we're not operating underneath that, we got to figure out something else.

SPEAKER_02 19:28

Yeah. I did a little um uh AI research about this, um, which is bad, but I'll tell you what it said. I asked if the same similar thing happened after alcohol prohibition, if there was like this massive price compression, and it wasn't immediate, um, but it did happen over time and why and we do have premiumization, certainly 100 years later, around alcohol, right? So it it it could be there's this there's a there's a wave. Um it's just how long that wave happens, what triggers it, and is it even possible within one state environment where people are producing and and the competition is so fierce among where to actually buy it?

Ben Larson 20:03

Like I I'm not an economist, but like you know, I can see trends, right? And you know, in the cannabis industry, we spend so much time trying to control the economies through through regulations, through coalitions, and I think we're fooling ourselves. Like, first, we see the same like cycle in every regulated state, and people always seem surprised when it happens to them. Um, it's it's ridiculous. Like, we we we have like you know, 40 examples of of like what is going to happen to you, and so it's like there's that, but like you can look at any market, and whether it's controlled or an open free market, it goes through these cycles where prices get compressed, people become uninterested in operating it because it's so compressed. And so if you're in coffee, you're drinking Folgers for decades, if you're in beer, you're drinking Budweiser for decades, if you're in chocolate, you're eating Hershey's for decades, and then people stop trying to enter until they want something premium. And so, like, I think we're, I mean, this is a little contrarian, but I think we're kind of fooling ourselves in cannabis to think that we're gonna somehow organize and structure and avoid this. I think it's inevitable. Like, people are just gonna want to stop competing, and then that's when like a true free market starts to begin, right? And yeah, I don't know. I love premium cannabis products. I you know, I'm in the business of trying to create uh well both both sides, commoditized and premium products, but uh it's not beyond me that like 98% of what we sell is like flavorless, like THC seltzers, right? Like, I mean, I love a live rosin infused like cola, like that's an amazing product, but it's not what's gonna sell to the masses yet.

SPEAKER_02 21:45

Yeah. Well, it's uh the great I you're not an economist yet, Ben, but it sounds like you're well on your way to being there, or at least talking like one. But the only thing you didn't say was like, on the one hand, and on the other hand, that is like what you learn in economics. Just to say those two phrases uh in close close comparison. But um we actually released uh or little it's released on our platform uh the East Coast Eighth Index this week. And I'm gonna show you what it looks like. I'm gonna take this down. Um and and it it almost is exactly sort of what you said, Ben, and that history does repeat itself. Um Massachusetts being the oldest market here, where their eighth is at 2389. The others are sort of bunched together between New Jersey, New York, Connecticut, Maryland, all relatively the same uh age markets. Um but the trend line I think has got to head towards Massachusetts uh as we go. Um and this is the way it's repeated in almost every market that has launched. Um and I I don't know, I don't know how you stem it other than making your operations better or um or what. I don't know, Anna Ray.

AnnaRae Grabstein 22:52

Yeah, I will say, and this is an interesting chart because these top four markets, New Jersey, New York, Connecticut, and Maryland, have much less cultivation production um per capita than Massachusetts. And when you say you don't know how you stem it, I think that the way that you stem it is by trying to stave off overproduction. And New York has a policy that they basically release or license cultivation based on their projections of what the market needs, um, different from the states that have had the most extreme price compression, like California or Colorado, where there is no limit to the amount of cultivation licenses that the state will issue as long as you check the boxes that you are eligible for the for the license from a compliance perspective. So there is some element of hope or an opportunity to see what it's like in a market like New York. I think that we're going through a compression cycle right now that's almost just like a leveling because operators are becoming more efficient as they learn their businesses better. But it's possible that New York won't go to Massachusetts because um, because there just inherently is less production. And so it's possible that cultivation cultivators and producers might hold on to a little bit more power in the relationship, whereas in Massachusetts, they've lost all control.

SPEAKER_03 24:19

Umry, if you were advising a New York company, would you stress test them to try to evaluate how they could play it out like a scenario in case that happened, or you just say, hey, don't think this is a real scenario?

AnnaRae Grabstein 24:31

I mean, I think that the point is just to be the very best at what you do and to understand the fundamentals that drive your company, like getting too overly concerned of like, am I going to be like Massachusetts or Michigan? It's really about like how are you gonna be the very best that you possibly can? And if you understand your company, then you understand how low you can go and you understand what a healthy margin can be. Um, so I think that's that's what's ultimately more important than trying to predict something that is unpredictable.

The Three-Tier THC Beverage Debate

SPEAKER_02 25:01

Um, can we shift gears again? This is me shifting gears. I'm gonna go, I'm gonna downshift from third to second to try to slow down. Uh and I chose second in particular because Mark, you wrote this week. Um staying a bargain uh again. Um talk about what you wrote, uh why you wrote it, and then we can have Ben counteract you.

SPEAKER_01 25:20

Well, you know, yeah, exactly. No, I I I enjoy the this is this I this is why I love this conversation. Is um look, is is you know, I I I I did not attend the the the the beverage conference from two weeks ago two, three weeks ago, but I heard it a lot, you know, from a lot of different people about the um about you know embrace or fitting within the the alcohol three-tier system of distribution and sales as a way towards, you know, as a way towards partnering with um alcohol distributors and big retailers to get the support that the industry needs to get, you know, to get Congress across the finish line, which, you know, it the makes, and I think I said, you know, it's it may not be a it it may not be a bad idea, maybe the the deal that the industry has to make. But you know, but the three-tier system is um, you know, it is it's it's it's you know, it's a beast, and it's um, you know, it's an oligopoly. Uh, and it is um, you know, you ask any smaller mid-sized alcohol producer in this country, and it's um, you know, it's the cause of everybody's problems. And so, you know, it is it was more just a clarion call of this may still be a good idea, but I, you know, when I hear everybody talking about it, it makes me think, well, wait a minute, does do people really know what they're getting into? And so, you know, so that's why it's sort of a Faustian bargain in my mind, which I realize is slightly intentionally a um trying to poke the bear a little bit, not bear Ben the bear, you know, just generally, like, you know, like I'm trying to cause a little bit of ruckus. But you know, again, this is all out of love, you know, because I want to see this all succeed, but you know, but it's just it's it's eyes wide open.

SPEAKER_02 27:12

But yeah, Ben, Ben and Anna Ray, you were at the conference and our eyes wide open, that this is be careful what you wish for.

Ben Larson 27:20

Anna Ray, why don't you go ahead and start?

AnnaRae Grabstein 27:22

Oh man. Um I think it it it doesn't none of this matters. It all that matters is like what is what is realistic of of a path forward. And um and something is better than nothing. So that's that's where I look at this is that progress is is better than nothing. We can build on it as as a as a former student of prohibition and again trying to learn about what happened with alcohol prohibition. We were reminded by a historian who was at that conference about the way that we came out of alcohol prohibition, which was very incremental in terms of what was allowed. And um, so if if the three-tier system is is the place to go, then I think that that will be an ultimate positive in terms of clarity.

Ben Larson 28:16

So it's brilliant. I I think what I would add is that no one is designing for optimal right now, no one is trying to create a sustainable industry. We are trying to get a form of THC into the mainstream shelves, and the depending on who you ask, the only acceptable version of that is a low-dose beverage. And even the beverage, this is more I wrote a long post about this. This is more restrictive than even beverage companies want, even the what alcohol companies want. There's a lot of alcohol companies that don't like the three-tier system, but they all agree that this is the only way like we we get this through, right? And here's the thing to Anna Ray's point something or nothing, like we could say we don't want three-tier system, then we'll enjoy a mid-November shutdown, and it will come back through the three-tier system because those oligopolies control everything. So, like, do you want it now or not? Yeah, and and even that, even if we all agreed, even if we got all of hemp to agree that they're got not getting shit and they're only getting low-dose beverage, even if they all got behind it, it would still be a coin flip as to whether there was continuity coming in November. And that's what people need to realize. Like, I see so much banter online, and it's just baseless. It's like people that spend 90% of their time on LinkedIn, not in DC, not talking to regulators, and I am tired of it. So, like, that's my place, and also to the three-tier system point, like, let me tell you what's happening without the three-tier system. You have certain retailers in certain cities be like, Oh, do you want to keep your products on the shelf till November? Pay me ten thousand dollars right now. That doesn't happen in the three-tier system because it can't, or else you get sued, like Southern Glazer is right now.

SPEAKER_01 30:09

Yeah, I was gonna say you you get you get indicted for bribery.

Ben Larson 30:12

Yeah.

SPEAKER_01 30:13

Um that is a very that is a very fair point. You and I I you know this is why I I appreciate your your you know your your perspective on this.

Ben Larson 30:25

Yeah, and look, look, my my my general perspective is like we all of us here would benefit from some form of THC being in the hands of people legally on store shelves.

Leaf’s Multi-State Manufacturing Play

SPEAKER_02 30:38

Yeah. Um and and I did not this is not the segue that indicted for bribery got brought me to. But but Ryan, you had on the folks from Leaf this week. Um uh give us I swear it wasn't a give us a rundown of um uh of the conversation and uh we'll direct people to it uh afterwards in the show notes.

SPEAKER_03 30:57

Um always fascinated by the company that powers a lot of the brands. They're massive out in California and they've kind of gotten pulled out to the East Coast by a lot of those brands are saying, hey, we need a reliable manufacturing partner. And I think it's an interesting way to expand. We've seen it a little differently with some of the MSOs who are like, hey, we want to go out to this state, we're gonna have to build up the infrastructure. Where here Leaf kind of got pulled out by its customers, which I think kind of like de-risks that from their standpoint. Another aspect that I think is really fascinating about Leaf is the big farm that they are kind of growing into. It kind of gives them that protectionism that they didn't have, where they don't have biomass, they can't extract. And that's kind of like a defense mechanism that they have. Now they've got that lifeline in that can help them set up some of their partners and help them expand out what they want to do in the future, give them a lot of optionality.

SPEAKER_02 31:41

I saw a lot of heads nodding from Ben and NRA. California guys.

AnnaRae Grabstein 31:45

Well, going back to our um earlier discussion about price compression uh and lack of regulatory constraint on licensing. You know, this is a 180-acre farm in um Santa Barbara Mountains in California. It's that's massive. And uh, you know, price compression will continue, folks. That's that's the headline. Um driven by leaf and and others. Uh, once you start scaling to that level, it becomes very challenging. Like then you look at a county like Mendocino and the Emerald Triangle, and there's a 10,000 square foot cap on cultivation, and you wonder why the farmers in the Emerald Triangle are struggling. Uh, just so people know there's 44,000 acres, uh, 44,000 square feet in an acre. So um, it's about a quarter of an acre that's allowed in Mendocino. And in Santa Barbara, they have 180 um under cultivation. So it's it's inherently impossible to compete with that.

SPEAKER_01 32:43

And I I will add, it's uh they they're they're they're they're smart in they did what glasshouse did, which was bringing the money. This latest round is preferred, uh 10% preferred. So they don't have to put it on their balance sheet or on their on their um income savings uh or no uh yeah, income savings debt. Uh they get to sort of like you know slot it in between, even though it's a 10% coupon. Um so they get to, you know, it doesn't it doesn't look like that.

Ben Larson 33:09

So I I I I just I I I love the concept of a role player going multi-state, right? Like, you know, that's what we've done with our business. We operated across about 16 states last year. And if we can have people that just do what they do really well doing that, then that makes our job a lot easier. We get to rely on them, you know. Same with labs, right? There's there's uh labs like you know uh KSA that you know operate across many different states, and it's like you know what you're gonna get when you work with them. So um I think it's a maturation of the industry and and people that can figure out how to do that with the the state-by-state fragmentation. I I I you know I I like it. It's a good it's a good uh good signal.

unknown 33:49

Good.

Closing Notes And Community Invitation

SPEAKER_02 33:50

We could we can end with people agreeing as opposed to yelling at each other, Mark, then uh just kidding. Um uh and then Mark and all the people who read the press releases. Um uh just kidding. I'm just kidding. I'm just kidding. Well, I I appreciate all of your time today uh for this week in Cannabis Live. Brian, thank you for joining the program. It's the first time, it's not the last time. Thanks for having me. And Ben and Ray and Mark, uh also great to see you on this Friday. Have a good weekend, everybody. If anybody is in Toronto and wants to come to synagogue with me, there was a big, big, big synagogue day tomorrow because uh we're showing solidarity for obviously our Jewish community, uh, because we've been shot at this week, which is less than ideal. Um uh so we are all going to shul if anybody wants to come. You guys are all welcome uh to to join me tomorrow. If you can get here by uh 10 a.m. tomorrow, uh you can come with us to shul uh right after hockey, which is how we do it here in Canada. Shul starts after morning hockey. That's what we're gonna do.

SPEAKER_01 34:43

It's a good way, it's a good way for shop, yeah, play hockey on Shabbos. I like it.

SPEAKER_02 34:46

Well, uh so my son plays on a team, his team plays on Shoppice, but there's two teams in the league that do not. So the schedule around those Friday and Saturdays that they do not play, and the Jewish holidays in the fall, it's a those two very those teams are very difficult to get within the fall, but uh we do play them. The Avenue Road Ducks. Yeah, the Avenue Road Ducks and the JCC Warriors. I will just say that the Parkdale Flames beat them both four times this year, so that's all I'm gonna say. It's not Brad.

SPEAKER_03 35:10

Good plug, good plug.

SPEAKER_02 35:11

Yes, there's exactly 20 people who care, and none of them watch the show. So um so uh Anna Ray, Mark, Ben, and Brian, thanks so much for being here today. We will see everybody next Friday, noon Eastern, uh, 9 a.m. Pacific on this week in Canvas Live. Thanks, everybody.

Ben Larson 35:26

Bye bye.