As individual states across the US begin to embrace legal cannabis sales, companies like Grown Rogue (CSE:GRIN) continue to make their move by targeting new markets.
According to Grown Rogue CEO Obie Strickler, the company has been using Oregon’s mature cannabis marketplace as a testing ground for further research and development. The company is targeting an expansion into Michigan following the commencement of legal cannabis sales in 2020, with the expectation that the market could grow as large as $1.4 billion by 2022.
According to Strickler, the California cannabis cultivation industry is extremely competitive, leading companies like Grown Rogue to target downstream opportunities in the state. The company’s facility in Eureka, California, is compatible with four different licenses, including distribution, retail and manufacturing.
Below is a transcript of our interview with Grown Rogue CEO Obie Strickler. It has been edited for clarity and brevity.
Investing News Network: Please give our investor audience an overview of Grown Rogue.
Grown Rogue CEO Obie Strickler: Grown Rogue is a multi-state operator that is focused on vertical integration in the different markets that we approach, as well as the brand. We believe that the future of our industry is going to rely upon the consumer appetite, the transparency and the loyalty that we create through branded products.
Grown Rogue started in Oregon. We really look at Oregon as an R&D state to create efficiencies and optimization around how to operate a successful cannabis business in the recreational markets. Based on the innovative products that we’re producing here on the West Coast, we’re way ahead of a lot of the states you’ll see in the Midwest and the Eastern Seaboard in terms of product innovation and quality.
The consumers here are experienced; there are a lot of connoisseurs, and it really forces us to build and deliver best in class products. We also use it as an opportunity to try out different seed-to-sale software, as well as METRC and the compliance requirements. We looked at Oregon as that foundation to train a team, to develop a process, to understand the consumer and to bring that platform into these new states we’re going into.
So we expanded into California with a Micro Tier business down there in Eureka. We’ve got a 16,000 square foot facility. Then we’ve also recently expanded into the Michigan market — which I’m sure we’ll get to a little bit later — which is one the most exciting large markets in the US. We took the company public late in 2018 and we trade on the Canadian Securities Exchange under the ticker “GRIN.”
INN: Are there any executives you would like to highlight on your board and management team?
OS: Yes, absolutely. One of the things that has always been a challenge in the cannabis markets is attracting and retaining top tier talents. With all the stigma that has existed over the last 15, 20, 50 years, bringing really A-grade talent into the cannabis sector was notoriously challenging. With the shift in perspective from the consumer and the public, that’s changed a lot for companies like Grown Rogue. We’ve been able to start bringing in some top tier talents. We recently made hires of Adam August, who is our vice president of finance. He was the former financial vice president for Harry and David, which is a large multinational corporation that does a lot of fruits shipping.
We hired Adam Wolf, who’s our COO, recently. Adam has got experience in large corporations, including 1-800-FLOWERS, which is one the largest flower goods providers in the world. He was the COO for MJ Packaging, which at one point was the largest privately held marijuana packaging company. We’ve got existing team members like Jacques Habra, who is our chief strategy officer. Jacques joined our team very early in our development. He’s got an extremely productive background. He started his first company as a young man at the University of Michigan in the website development space back when e-commerce and the whole web was coming into the consumer’s vision.
Our board is also very good. Abhilash Patel is a seasoned marketing and agency executive. He built a company that he successfully sold several years ago, and he’s doing a lot of different things now both in cannabis and other industries. I could go on and on about our team as we have one of the best teams in the industry. I think, generally, the industry is maturing to a point where companies like Grown Rogue and our rivals or peers are able to attract the right talent to really build a business. Not just cannabis, but real businesses, and it’s been extremely exciting for everyone in the industry to see.
INN: What makes Michigan such an exciting opportunity in American cannabis?
OS: Well, there’s a number of reasons for that. It’s the first Midwest state to legalize, which is exciting as you start to see that perception across the US change. Up until Michigan, most of the legalization was on the West Coast, with a few on the East Coast. They have a very entrenched and large medical market. I believe they are the first in terms of total number of patients per capita in the US. I think they’re second as a total number behind California. By volume, they have the second-largest number of patients behind only California. So they come with an entrenched, large market. To put that in perspective, Michigan has 10 million people and Canada has 40 million. They have more medical patients in Michigan than they do in the entire country of Canada.
It’s a big market and a huge opportunity because Grown Rogue has identified the inflection point of transition from medical to recreational licensing. When the real market opens up, you go from these smaller medical licenses with fewer patients to full recreational adult use cannabis consumption.
The size of the medical market is a good proxy for the size of a recreational market. So we expect Michigan to be a $1.4 billion dollar market by 2022. We like the Midwest expansion, the footprint market size and the opportunity to bring the future of cannabis that we have here in Oregon into the present in the states like Michigan.
INN: What has Grown Rogue learned in Oregon and how will you be applying that knowledge in other states?
OS: Through necessity Oregon has trained up business units here that understand all of the different components of building a successful cannabis enterprise. This goes into the regulatory tracking requirements and the compliance, which becomes intimately important with regard to maintaining licensing status and ensuring that your testing procedures are correct. All the standard operating procedures have to be put in place to make sure that we’re following guidelines, understanding the licensing and staying on the right side with the agencies.
From a compliance perspective it’s been important to understand how that works. For instance, we use METRC in Oregon, and a lot of the states that we’re entering, California and Michigan included, both use METRC as their compliance software. It allows us to trial different solutions with regards to scaled agriculture. How do we build up different processes and controls to make sure we are scaling our cultivation methodology the way it has to be done?
Cultivation of scale in cannabis is a new challenge that a lot of people are facing. You hear the stories about Canada and how they’re trying to accomplish some of those things. It’s a new thing for the industry that’s never been done before. I think the most important thing we’ve seen is the understanding of the innovative products that we’re bringing to the market, because the brands and really the future of the industry are going to be built on the West Coast.
Learning and understanding what the consumer wants and placement in these new states is going to give us a huge advantage when it comes to our competitors. That really lies in the branding, the marketing, the quality of the products we’re making. We continue to trial new products in Oregon because the consumer is so experienced and advanced. We look forward to taking all those lessons into the new states that we are targeting for a part of our expansion.
INN: Moving on to another state, what is Grown Rogue’s strategy for success in California?
OS: California is going to be an interesting market. It’s big. It’s going to be the largest market in the US by far, in our opinion. Because it’s on the West Coast, we believe that California will suffer some of the same challenges as Oregon with regard to oversupply. You’re seeing a lot of cultivation capacity moving into the Eureka and Humboldt area. Humboldt is world renowned for the quality of its cannabis like we are here in Southern Oregon. You’re seeing a lot of development in Santa Barbara and those coastal communities, where there’s big agricultural and infrastructure setup for production in greenhouses.
With what we see in California, it’s not worth trying to be a grower. There’s a lot of good producers down there. We’re going to focus on our branded products and our distribution model inside of that state. The facility that we’ve secured in Eureka can have up to four different licenses. We’re probably going to deploy three of them, which will be a distribution license, a retail license at that facility and then a manufacturing license. Our goal there is to source and purchase with our partner farms inside of the areas where they meet our quality. Then we create the branded products. We do the packaging, labeling, the compliance and then, ultimately, create the sales relationships with the dispensaries in order to create traction inside of California.
This interview is sponsored by Grown Rogue (CSE:GRIN). This interview provides information which was sourced by the Investing News Network (INN) and approved by Grown Rogue, in order to help investors learn more about the company. Grown Rogue is a client of INN. The company’s campaign fees pay for INN to create and update this interview.
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