THE ADVICE AND INSIGHTS BUSINESS OF CANNABIS: GROWTH OPPORTUNITIES

From Major Players

“The increasing demand for cannabis is likely to propel the entry of new companies in the future, fueled by increasing awareness and acceptance regarding cannabis use for medical purposes,” Nova One Advisor noted in a June 2022 market report.

What’s more, during the most recent U.S. midterm elections, voters in two states—Maryland and Missouri—joined the growing list of other states that have already legalized recreational marijuana. In fact, the list of states where marijuana is illegal is now much shorter than those where its use is fully legal, or where some mixed use is allowed.

In late November in New York state, the Office of Cannabis Management awarded its first 36 retail licenses for selling recreational pot, with the dispensaries expected to open their doors by December/January. The first licenses were approved for individuals or their relatives with prior marijuana convictions now starting businesses and some nonprofit organizations that serve the incarcerated. With that came a lot of controversy as well as red tape.

For anyone thinking of getting into the cannabis business—whether at the seed or sale stage of the supply chain, or somewhere in between—the bureaucratic maze can be daunting. There is a lot to learn—and knowledgeable advisors can help. A consultant can make the difference

California-based Andrew DeAngelo works as a consultant and strategic advisor to the global cannabis industry. He co-founded Harborside Inc., a publicly traded cannabis company, is the co-founder and current chair of the board of directors for the non-profit, Last Prisoner Project, and the co-founder of the California Cannabis Industry Association trade organization.

In short, DeAngelo is one of the few people to have owned and operated cannabis companies in the legacy, medical, and adult-use markets on both coasts of the United States. As an activist for the last 35 years, Andrew helped legalize medical and adult-use cannabis in California and

Washington, D.C.

He told Advisors Magazine in a recent interview that he collaborates with clients to build their businesses ‘from seed to sale’.

“Where you decide to start and operate your business is critical because every state has a different framework,” he said. “You have to do your due diligence. Because in every state where it’s either legal for medical or adult use, or both, there are different rules of the road.”

DeAngelo emphasized that depending on the state, there are unique tax structures and various other compliance complexities.

“You have to know all of that before you start spending money on building your business,” he said. “And I also recommend that people know something about the history of cannabis, prohibition, and the product itself. This doesn’t necessarily mean you have to start smoking a bunch of weed, but you should understand what weed does to people and why people are so drawn to it.”

Other than alcohol, DeAngelo says weed is the most popular intoxicant on earth. “Understanding why that is will help you sell more weed,” he laughed.

And whether one decides to grow it, distribute, manufacture, package or sell it—all those supply chain links are people-driven businesses. “Organize your business plan accordingly so that you can attract really good talent, because there are a lot of people who don’t know how to do this,” DeAngelo said.

For the most part, DeAngelo and his group of associated consultants offer soup-to-nuts solutions to aspiring cannabis business owners once they’ve received their license. “That’s our specialty zone right there,” he said, “from the moment you get your license to the opening day ribbon cutting. Now, I can also help you get the license; I do that too. And I also help coach people after they’ve opened their dispensary or their business.”

DeAngelo noted that a license is given to someone who already has other licenses or to a new entrepreneur just getting started. He works with both, and the common denominator is opening the business as quickly as possible.

“The period where you get bogged down the most is the time between getting the license and opening the business,” he explained. “It’s about managing all the external factors that are beyond our control. There are all these inspections you must pass — there’s a local community and the state, and both have different inspection requirements at various times.”

Before an ounce can be sold legally, all the inspections must be passed with flying colors. “And if you don’t pass them, then you are forced to do a whole bunch of corrections and it can be really costly and enormously time consuming,” DeAngelo said. “But I’ve done this so many times that it’s pretty streamlined for us now—that’s my sweet spot.”

From license to startup, a dispensary typically can open in about a year, depending on the state it’s operating in and the specific framework, according to DeAngelo. “If someone is building a cultivation facility, it’s about the same time; a manufacturing facility can probably be up and running in about six months,” he added.

There are auxiliary business opportunities as well, such as a packaging company, or a PR firm that can be up and running in as quickly as 90 days.

As noted, DeAngelo founded, owned and operated Harborside — a major cannabis company — for nearly 15 years. He led the design and development of gold-standard cannabis retail by innovating many firsts for the industry.

These included introducing CBD medicines to heal severely epileptic children as documented in Discovery Channel’s Weed Wars, implementing the first lab-testing program in the history of cannabis dispensing, creating child-resistant packaging for edibles, standardizing inventory tracking, initiating senior outreach, and successfully preventing the federal government from seizing Harborside in forfeiture actions against the company in 2012. Today Harborside is one of the largest vertically integrated cannabis companies in California.

“The cannabis industry is a lot harder than people think,” DeAngelo said. “Nowadays, I like building things and I like helping people with their own business strategy.”

His extensive record allows DeAngelo to negotiate substantial consulting contracts that are usually paid monthly and can include a bonus after the business opens.

“I’m not cheap because I’ve been doing this a long time,” DeAngelo smiled. “It’s a little bit more money than maybe some others, but even in the short-term the possible delays I mentioned can cost huge amounts of money.”

He tells clients: “Every day you’re not open while holding a license is costing you money.”

The power of branding –and celebrity

DeAngelo emphasizes that effective branding is as critical as ever across today’s cannabis landscape. “The most successful companies have very strong branding that separates them from the noise,” he said. Celebrity status can also help — and many have gotten into the cannabis trade, leveraging their already-existing brands.

What began with just 48 plants during Oregon’s medical marijuana program in 2015, today Belushi’s Farm encompasses a sprawling and spiritual 93 acres with 1,800 feet of Rogue River riverfront in Southern Oregon’s Banana Belt where the sun, water and air make the perfect combination to sustain naturally powerful and beautiful cannabis.

Second City and Saturday Night Live alumnus Jim Belushi, also star of the sitcom According to Jim, is the founder of Belushi’s Farm, home to a range of offerings: from Belushi’s Chasing Magic, to The Blues Brothers, to Captain Jack’s Gulzar Afghanica, a rare strain from the Hindu Kush region that became known in the ‘70s as “The

Smell of SNL.”

Growing Belushi, a series on Discovery, is an inside look at Jim’s world and shows the incredible effort it takes to build a legal cannabis operation. Having suffered the loss of his brother John to an overdose and embarking on his own journey — learning and healing through cultivating cannabis — Jim’s an enthusiastic proponent of the plant’s beneficial properties across a spectrum of uses.

“I love the magic of acting on stage, singing in front of an audience with The Blues Brothers, movies, television, directing,” Belushi told Discovery in advance of the series premiere. “And I enjoy the magic of agriculture on Belushi’s Farm. We always bring forward all our knowledge into each thing we do, so it was natural for me to bring a camera to the farm and discover a show around it,” he added, “a show that will help educate, inform, delight, and heal. It was a natural blend of two different worlds for me.”

When it comes to social activism, the cannabis business community is tightly knit. Belushi, for example, is a strong supporter of the Last Prisoner Project co-founded by brothers Andrew and Steve DeAngelo.

“Steve DeAngelo, Andrew DeAngelo and Mary Bailey are great visionaries, and are the leaders of this organization that aims to release all individuals who are incarcerated for nonviolent cannabis offenses,” Belushi has noted in interviews. “Why? It’s just so obvious that there have been millions of dollars made on the backs of nonviolent cannabis prisoners--they are the pioneers of our industry,” he added.

Recently, one of New York’s state’s first licenses went to a company part-owned by a franchise of Belushi’s Farm. It is operating a dispensary on Northern New York’s Saint Regis (Akwesasne) Mohawk Tribe territory in Franklin County near the U.S.-Canadian border. Belushi’s Farm also has affiliated outlets in Colorado, Oklahoma, Illinois and Massachusetts.

Another actor with a burgeoning cannabis empire is Seth Rogen who, along with writing partner Evan Goldberg and others, offers the Houseplant™ brand of pre- rolled joints, whole flower cannabis and more. The plant.houseplant.com website has a shop locator — by zip code — which currently lists about 40 outlets in California that carry Houseplant.

Rogen is quick to leverage Twitter to announce Houseplant developments and products to his more than 9.3 million followers. He has also spun off a smoking accessories, ceramics and home goods website displaying an array of items designed by Rogen and crafted to his specifications.

Founded by Rogen, Goldberg, Michael Mohr, James Weaver and Alex McAtee in Toronto in 2019, Houseplant’s growth has been rapid.

“Houseplant is a lifestyle company rooted in cannabis that creates and curates thoughtful design-led and innovative products,” say its owners. “The company unifies the worlds of “House” and “Plant” to offer a top-tier cannabis experience through one-of-a-kind expert insights paired perfectly with well-designed, premium home goods.”

As with Belushi’s Farm, Rogen’s Houseplant also puts much emphasis on social impact. For example, the company offers an in-house mentorship program to assist underinvested-in entrepreneurs build successful and sustainable cannabis industry businesses. Another company program focuses on supplier diversity in order to connect more BIPOC-, women-, LGBTQ-, disability- and veteran-owned businesses to the Houseplant ecosystem. Fact is, cannabis-related businesses have been an attractive investment for a sizeable number of celebrities ranging from ones you might expect (Snoop Dogg and Willie Nelson) to some that might surprise (Gwyneth Paltrow and Martha Stewart).

Think value, craft, premium

As with almost any other business, new players in the cannabis arena should consider where they can add the most value. That’s a key point made by Jesce Horton, CEO at Portland-based LOWD™, an award-winning cannabis company that embodies the art of urban craft cultivation.

“First and foremost, find a place where you can truly add value to the market,” Horton told Advisors Magazine in a recent interview. “There are so many new solutions, so many services, so many products that are needed by consumers from other related businesses,” he added, “There really is a wealth of opportunity if people really look and look as deeply as possible into that place of value.”

For example, Horton recently entered an exclusive partnership with owtlet.com (971-Dat-Plug), an Uber Eats- or DoorDash-like service that provides on-demand delivery of LOWD products.

“I think this delivery model is certainly an innovation in the industry,” Horton said. “We’ve opened up our curing room to Owtlet™ for them to make on-demand deliveries directly from our precision, temperature-controlled curing room, which guarantees that customers get the freshest flower and most premium buds directly from us.”

Horton has built his multi-million-dollar business for the premium market. By employing innovative processes aimed at peak plant performance, he says that LOWD’s flower is aimed at impressing even the most discerning of smokers.

The company prides itself on taking superior quality to another level. For instance, its Smoke Like A Grower a/k/a SLAG jars, contain intentionally selected buds that are stick trimmed straight into LOWD’s one-ounce, half-ounce, and quarter-ounce collectible, ultraviolet resistant glass, providing the best slow cure. LOWD fans are literally the first to ever touch these buds.

Horton’s background is in engineering and energy management. Such expertise has allowed him to refine LOWD’s systems and processes and align them with the company’s premium craft ethos. Environmental controls, curing, trimming, and packaging processes all synergize to maximize freshness, shelf appeal and customer satisfaction.

More recently, Horton has delved into the consulting and advice world. He has also developed curriculum and is instructing at the first college in

New York (LIM College) to offer a cannabis business major, as well as doing similar work at HBCU Medgar Evers College.

“We have a growing list of clients across the U.S.,” Horton said. “We’re working with them actively to build their facilities, design their standards, implement operating practices and help hire talent.”

“As a consultant, I’m able to find a lot of opportunities for these clients—not just in building their facilities,” Horton explained. “I’ll serve as an interface between the architects, the engineers, construction, the permitting and regulatory steps that are required,” he added, “and I’ll also help to develop cultivation processes and facilities that can allow them to produce premium cannabis at lower costs.”

For now, LOWD cannabis products are available only in Oregon. Horton said, however, that through his consulting work some licensing deals are in the works that could bring LOWD to a few east coast states in 2023.

Current legal sales of cannabis are projected to be $29.3 billion by 2022, according to Portland-based Whitney Economics and are forecasted to be $81.6 billion by 2030.

“There will be more legal supply than illicit cannabis supply in the U.S. beginning in 2026,” according to the now-available 2022 Whitney Economics U.S. Cannabis Supply Report.

The firm has calculated the total cultivated output of cannabis in the United States in 2022 to be in excess of 48.8 million pounds — including both legal and illicit cannabis supply for all delivery methods, such as flower, edibles, concentrates, and more.