Jon Levine, president of Marimed Inc., Brett Novey, CEO of Pharmacann and Andrew Thut, CIO of 4Front Ventures, operators in the Midwest and across the country, joined Barbara Webb, partner of MGO, and Steve Miles, CEO of Sharp Capital Advisors in a panel at Benzinga’s Cannabis Capital Conference in Chicago to discuss strategies for growing in the emergent state markets of the midwest.
4Front Ventures in Illinois: An Opportunity To Grow
Thut explained that the operating thesis of 4Front remains focused on low-cost scale production. He explained how the company built its business by becoming the number one edible producer in WA, thanks to its "low-cost production SOPs" (Standard Operational Procedures).
Recently, 4Front opened the largest cannabis processing facility in California (175,000 sq. feet) and will open a similar facility in Illinois in H12023.
“We think the sweet spot in the value chain is being a wholesaler of products. We are building 40,000 sq. feet of a canopy, (...) we are excited to take brand market share leaders in other states and bring them to Illinois. With the new facilities and retail, we think we have the opportunity to go up six-fold in the state. In terms of competition price compression is just a fact of life and the quality of your product has to increase,” Thut said in reference to the cannabis prices.
Marimed Will Bring East Coast Brands To Illinois
Marimed is another company disembarking in Illinois. Levine explained the multistate operator is doing business in Massachusetts, Illinois, Delaware, Maryland, and Ohio; and, just bought cultivation and craft grow in Illinois.
In addition, Marimed plans to “bring the brand back,” via an agreement with an established distributor in Michigan. “We signed a licensing agreement in Michigan with a partner that is going to launch our branded products,” Levin said.
He explained the firm plans to diversify its offer. “We are going to bring them to a market saturated with flowers and unlimited licenses,” Levin continued.
When Steve Miles asked him if east coast brands will be coming to Illinois all of a sudden, he said Marimed had been adapting price points to meet the consumers' needs.
“If you have high-quality flowers you can get to the price points you are looking for. We have been adapting entry-level prices and top-level prices, and our line has been successful in maintaining its price in Massachusetts. It is all due to the fact that we followed our SOPs, we make a high-quality product, that is consistent with what consumers want, same quality every single time,” Levine said.
Pharmacann Anticipates Market Maturity
Pharmacann, an Illinois original, is now the largest private multi-state operator in the country, with an 8-state footprint focused in the midwest and the northeast, and the largest wholeseller in the state of Michigan.
Brett Novey, CEO explained that with significant price compression, Pharmacann is looking to add retail around production facilities to “push products through retail channels.”
“Michigan is hyper-local everything is regulated at the city municipality level. Brands feel the risk is lower and can get things running faster because it is easy to get something up and running with a relatively low level of capital infusion. The price crash brought “second movers” with a practical view of the industry and they see a solid market,” explained Webb from MGO.
“Michigan is a state that could use more regulation on seed-to-sale tracking. It's a market that is growing and it will be a great market,” added Novey, who anticipated that the Illinois market will follow a similar path as Colorado, where the company is currently making a margin, despite the lower cannabis prices.
For Novey the key to conquering the Midwest is to maintain costs low, keep segmentation sharp and quality consistent.
Photo by Meredith Petrick on Unsplash.
