IS ‘STONER’ STILL A DIRTY WORD?

For years, much of the industry has been preoccupied with promoting cannabis as a health and wellness product. In pot marketing circles, words like ‘stoner’ and even ‘high’ are taboo. Now that we have so much time on our hands, some folks have reminded us that cannabis can also be a not especially productive way to pass the hours. And that’s OK.

  • In the absence of the NCAA March Madness basketball tournament, Leafly hosted Stoner Madness. It brackets determined — once and for all — the best way to get high.
  • Over at Weedmaps, they’re giving the bracket treatment to 32 favorite strains. It’s down to the dank sixteen and they’ll announce the winner on Wednesday.

Actor and pot pitchman Seth Rogen got high and live-tweeted the new Cats movie:
Jezebel

Quick Hit

  1. The NBA said it would suspend random drug testing during the league’s hiatus.
    CBS Sports

POWER PLAYERS: KUSHCO CEO NICK KOVACEVICH

For this week’s Power Players interview, I spoke to Nick Kovacevich, CEO of the multi-faceted ancillary company KushCo, (formerly Kush Bottles.)

KushCo was an early entrant to the public markets. And it’s been a bumpy ride. For the quarter ending November 30, the company reported a net loss of $12.5M on net revenue of $35M, and investors have not been forgiving. With the capital markets drying up, CEO Nick Kovacevich says KushCo and other companies need to focus on profitability.

A few highlights from the interview:

On the illegal market:

I think the coronavirus is actually more of a threat to the legal market, than it is to the illegal market. The illegal market continues to produce and sell product. They have no rules and regulations. There’s zero liability. Legal businesses are taking a lot of caution right now. Some of them are even voluntarily closing. You won’t see that with the black market.

On tilting away from California:

We’ve traditionally served as a lot of companies in the state, and we’ve given a lot of credit to them, and right now we’re having a tough time getting companies to pay us. And that’s across the board.

On developments in Washington D.C.:

I think whoever the President is, whether it’s Trump or Biden or Sanders, they will ultimately sign some sort of cannabis legislation if it comes to their desk. So I think the big question about November is the Senate. A Democratic Senate is more likely to also pass cannabis bills and send them to the President. That’s going to determine how likely or how quickly we are to get some real progress at the federal level.

Read the whole thing.

EXCLUSIVE: RETAILERS SCRAMBLE

WeedWeek’s new business columnist Dan Mitchell talked to Bay Area retailers who have scrambled their businesses to operate on something like wartime footing:

When the shelter-in-place order was announced on Monday, Airfield Supply, a large San Jose retailer, immediately shut down, though the order wouldn’t take effect until Tuesday morning. “We did that to give our staff the opportunity to make decisions” about things like whether to come to work, Chris Lane, Airfield’s chief marketing officer said.

When the shop re-opened Tuesday, it was under the assumption that cannabis would be considered “essential.” But the 5,000 square-foot store closed to customers and converted itself into a fulfillment center for the shop’s delivery and pickup service.

A big looming question: Will supply hold up?

  • Shareef El-Sissi, CEO of Hayward dispensary Garden of Eden said cannabis could be “the new toilet paper.”

Read the story.

MED IS NOT THE CURE

Oregon Attorney General Ellen Rosenblum forced a Portland CBD shop to remove claims that CBD can boost Covid-19 immunity.
NBC (Local)

Similar rumors seem to have proliferated on social media. In his newsletter, Boston Globe reporter Daniel Adams is fed up:

“Marijuana doesn’t cure coronavirus, and it doesn’t protect against infection. Ditto for CBD or any other cannabis-derived compounds. It might help you relax, but that’s it. There’s also no reason for anyone to be hawking infused hand-sanitizer (there aren’t enough eye-roll emojis in the world), nor to send me pitches about your client’s “signature strain” pre-rolls that are “perfect for this time spent at home.” On all accounts: No. Just stop.”

Rolling Stone has a post on how to get high safely and San Francisco tech company Meadow released a set of sanitation protocols for the industry.

Quick Hit

  1. After years of inaction, the DEA chose this week to expand MED research.
    Marijuana Moment

CRISIS AND OPPORTUNITY

As much of the American economy ground to a halt, many cannabis businesses reported surging sales. While some businesses may benefit from higher demand, the coronavirus crisis appears certain to exacerbate the industry’s structural and financial woes.

  • The crisis is likely to have “dire” consequences for the industry, Business Insider reports. Observers say it’s likely to disrupt supply chains and accelerate a “months-long shakeout period,” that has pushed underfunded start ups to the brink of collapse.
  • “Private cannabis companies who are in the process of fundraising or had plans to do so in 2020 will likely struggle to raise capital,” said Pete Karabas, founding partner of Key Investment said.
  • Companies that survive may be best positioned to capitalize on coming industry consolidation.
  • “We believe focus among cannabis investors has shifted to minimizing downside; in other words, evaluating cannabis stocks from a liquidation perspective, simply comparing market capitalization to net cash balances,” CIBC analyst John Zamparo wrote in a March 11 note.
    Bloomberg
  • It was a rare week when pot stocks outperformed mainstream companies. The New Cannabis Ventures Global Cannabis Stock Index fell a mere 8.5% as the S&P 500 plunged a gut wrenching 15%.

One of the big early questions is whether consumption will climb during the crisis or consumers have been hoarding product out of fear.

  • Dispensary software company Dutchie said Monday was a record day for sales. The platform then broke those records on Tuesday and again on Wednesday.

Kris Krane, president of MSO 4Front writes, cannabis businesses may need a bailout.
Forbes

  • Cannabis businesses will not be eligible for the $50B in low-interest loans to be distributed by the Small Business Administration.
    Cannabis Business Times

Quick Hits

  1. Canna Law Blog‘s John Rapp dives into the issue of force majeure — Act of God — clauses in cannabis contracts. “Who can, legally, refuse to refund a deposit? To refuse a payment? Who will lose any claim for breach? As with many legal issues, the answers depend on both contractual and factual circumstances.”
  2. Earlier this month, software company Green Bits laid off 40 employees.
    Business Insider

CANNABIS IS “ESSENTIAL” (IN SOME PLACES)

Numerous jurisdictions have deemed cannabis businesses “essential” during the current crisis, or given other signals of support. Together they may be read as an indication that legal weed is here to stay, even if some businesses are not.

Quick Hit

  1. The virus has reduced the chances of a pot banking bill passing the U.S. Senate this year, American Banker reports.

POT WORKERS OF THE WORLD, DISUNITE

The anti-union National Right to Work Legal Defense Foundation called on the U.S. National Labor Relations Board to protect cannabis workers’ right to not form a union.

It concludes:

“Absent swift action from the NLRB to challenge these state laws that fly in the face of the National Labor Relations Act, you can be certain that Big Labor allied politicians across the country will soon seek to force workers in other states or industries into union forced dues ranks under the auspices of occupational licensing.”

POWER PLAYERS: 4FRONT PRESIDENT KRIS KRANE

For this week’s exclusive Power Players interview I spoke with Kris Krane, president and founder of MSO 4Front.

Krane has been involved in cannabis advocacy since he was a student at American University in Washington D.C. He spent the aughts at NORML and then led Students for Sensible Drug Policy, before Steve DeAngelo recruited him to help recreate dispensaries like Harborside across California. It was too early for that business to work, but it led to the formation of consultancy 4Front, which has evolved into a vertically integrated company with operations in eight states.

Here are a few highlights:

On the Massachusetts REC market:

“It’s outrageous that there’s one REC store in Boston three and a half years after we got that ballot initiative. Boston has changed its process for getting hosting agreements three times. Meanwhile all these applicants have been pending, that are now on their third different application process.”

On “real world” cannabis equity:

A brand licensing agreement can be real way in. There’s a reason why most people don’t open Bob’s hotel, they’ll license the Hilton brand. Because people are familiar with the Hilton brand, they have operating protocols, they can come in and manage it for them, and the owners still get a nice payment, and they have a nice job, and they manage staff day to day but they’re in the Hilton system. And that may be enticing to an equity licensee.

On keeping shelves stocked in less mature markets:

So Michigan, Illinois, Massachusetts’s, pricing is all around $4,000 a pound. And you’re lucky if you can get it. We have a retail store open in Ann Arbor Michigan, we rarely have any flower on the shelf. It’s just not there. It will be, there’s been a bunch of cultivation licenses awarded in the last six months but none of it is up and running.

Read the whole thing.

 

Who should we speak to for future Power Players interviews? Reply to this email with suggestions.

QUESTION OF THE WEEK: SELF-DESTRUCT MODE

Last week we asked, “What common industry practices are most self-defeating?” Here are two interesting responses:

The most self-defeating behavior I have personally witnessed is big cannabis companies spending to keep local regulations as restrictive as possible to artificially limit their competition and boost their profits. It comes at the expense of patients and customers who need safe access. If a company needs to rely on an artificially created oligopoly to stay in business, they need to seriously evaluate the deficiencies in their business model and find ways to appeal to customers by offering quality products at fair prices.

Mitchell Colbert, Oakland CA

CEO and Founder, Full Spectrum Strategy

For me, its the general failure of the industry to realize that the business economics of cannabis are no different than any other industry. Big or small, a focused strategy and strong operational/financial control environments are requisites for success. Ultimately, not even strong consumer demand and resolution of the obvious regulatory/compliance issues will mask the inefficiencies of a poorly run business operation.

Dave Hickok, Los Angeles CA

Principal, Hiccox Consulting

Submitted via Leafwire

 

This week, we’ll ask the big, obvious question: How is your business adapting to Covid-19?

To tell us, Reply to this email, or write to us hello@weedweek.net. Please include your name, location and affiliation. We’ll honor requests for anonymity. Responses may be edited for length and clarity.