For Illinois-based cannabis company Green Thumb Industries, the early bird gets the worm ー or in this case, a first stab at a still-young market. It's a business strategy that has reaped some real results for Green Thumb Industries, and one that CEO Ben Kovler says informed its recent step into New York state.
"New York is one of the most important states in the country, 20 million people, and the program is early. We're OK being early. We've done that in markets like Illinois and Ohio that have been slower out of the gate and then mature over time," Kovler told Cheddar on Thursday. "We think being one of only 10 licensed operators in the state of New York to cultivate, manufacture, and retail the product legally, under the current medical program is an unbelievable privilege and an important step for us. And that gives us a foothold position in the tri-state area: New York, New Jersey, and Connecticut."
His comments come on the heels of second quarter earnings for GTI, and an announcement the company would acquire New York-based Fiorello Pharmaceuticals for close to $60 million. New York has a notoriously restrictive medical cannabis market that served 106,050 registered patients as of August. Only 10 licensed cannabis producers are permitted in the state, and they are required to be vertically integrated and to stick to a limited variety of cannabis form factors, excluding flower.
Despite the restrictions, New York legislators have been pushing to legalize adult-use cannabis for quite some time. Two legalization efforts failed earlier this year, but many experts anticipate the state will go recreational in 2020. Just like in its home state of Illinois, where GTI has been operating since 2015 and is well-positioned for January 1 when recreational sales go online, in New York and elsewhere it's all about the long game.
"Overall, broadly, on this product, we see a tidal wave of demand. It starts in the medical world, it moves onto wellness ー and this is a consumer-packaged goods product. So being early, ahead of that curve in order to create the product, grow the brands, and educate the consumers is something we are really focused on," Kovler said.
Central to GTI's charge to gain brand recognition with consumers nationwide and deepen its push into wellness-focused consumer packaged goods, is the spread of its Rise-branded dispensaries. Kovler said the company has opened about 13 stores this year, and plans for a total of 15 to 20 by year's end.
"We've opened in Florida, Ohio, Pennsylvania. These are brand new experiences for, often, medical patients who have never been to a store to buy and educate themselves on cannabis. We are trying to create a welcome environment, that's connected to the community and that elevates the retail experience of shopping for cannabis," he said.
For the second quarter of fiscal 2019, GTI reported a widening net loss of $22.2 million on $44.7 million in revenue ー that's 228 percent higher than the $13.6 million GTI reported last year. Despite its losses, GTI did report positive adjusted operating EBITDA of $5 million. GTI, which trades over the counter in the U.S., surged more than 1 percent on Thursday after reporting earnings.