I’ve been posting infrequently lately due to travel and life, but that’s gonna change. We’ll be back to our regular programming starting today.
Before we dive into another Structure – I wanted to lay out some of the things I picked up in New York – and share with you some takeaways. Our next podcast will , but I want to give you – valued subscriber – the most fulsome insights I can.
- Constellation Brands ($STZ) is widely (and almost unanimously) considered to be ‘fucked’. The Americans don’t believe they can run a business, let alone enter the US market as any kind of threat.
- Activism in the US is pleading, yet largely powerless. There’s a simmering resentment among them too – they disappeared when anything commercial came up as topic, as well as anytime a business sort showed up. They will need to rely on political will and politicians to install social equity.
- Yeah, I know what you’re thinking, and I agree……..I think social justice could be fucked.
- The US free market is a dynamic and innovative space. Regulations that centre around social equity will be worked around, and capital will do what capital does: which is to make more. Money is smart, and its’ got good lawyers.
- That said, N.Y.’s legislation – with retail caps and tiering – is ostensibly the best way I believe it can go. Funny enough – TheCannalysts have always been met with silence from sell-side regarding ‘tiering’ of the supply chain. In NY – it’s a given. Not a soul in that room – nor the broader networking – disavowed or ignored it. It’s simply reality. Which in my opinion is why more MSO’s weren’t there.
- NY is a dead zone go forward. The 24MM people who live there are expected to drive a $3B market. But the legislation will prevent any single outfit taking it over.
- Last February’s run was due to WSB effect. Last fall’s sector uptick was due to the prospect of Dem’s taking the White House. NY’s ‘legalization’ is the largest driver of the summer pullback. Profitability is uncertain in the state.
- I heard each and every one of those points said numerous times, and repeated by both business sorts and the hippies.
- Weed is absolutely everywhere on the streets. It’s easy to buy and easy to smoke. I saw many people firing up blunts and joints, and smelt it on virtually every block. Often, it was smoked within steps of police officers. Nobody gives a shit. Those ‘weed trucks’ are pervasive, and some are open 24/7. Illicit supply could be pervasive.
- And if legalization apes Canada’s experience, legal product will need to compete on price. Which, means lower margins.
- I have to give TILT Holdings ($TILT) CEO Gary Santo credit. The guy was straight up with me, and direct. He knew he was taking a tough job – right after the outfit burned $500MM in shareholder equity on Unicorn farts. I’m also convinced they don’t have a business model.
- I will readily compliment their deal with the Shinnecock Tribe. No other MSO gives a crap about social equity other than lip service. $TILT’s deal is – in my opinion – a great model for social justice. I also believe it’ll be an outlier.
- AYR Wellness’ ($AYR.A) COO Jen Drake is smooth, has class, and is a complete pro. She also didn’t really say anything, other than repeat the messaging they’ve been putting out in press releases. Standard for these types of conferences. AYR was gracious, and are fans of TheCannalysts. We have a good relationship with them, and did an AMA with them back in February. Criticism I heard about $AYR.A on the floor was that they’re ‘too optimistic’: implying that they’re overselling themselves…….and need to keep a foot on the ground. Just relating FWIW.
- Keep an eye out for the Capital Markets panel with Pablo Zuanic of Cantor. Business of Cannabis has committed to putting it up on You-Tube at some point. There were 4 panelists, 3 were hella good. The moderation sucked – and the conversation wandered around more than a soccer game being played by 5 year olds. That said, the panelists did end up covering almost all the bases. They hit it all: capital availability, cost of capital, near-mid-term catalysts, you name it. It’s non-linear, but had horsepower on the stage.
- A drier one on one session in the morning with the head of NY State’s growers association started slow, ended strong. Smart fella, and clear eyed. Unlike craft in Canada, I get the feeling that smaller growers in the US are more sophisticated, and more organized. Watch for this one too, it was a gem.
- Huge props to Jon Rubin of Cannabis Benchmarks. When I introduced myself, he said “we like you guys, you ‘get it'”. And I think the same of them. The organization tracks and publishes forward wholesale price curves by state, region, and nationally. I might be packing some bias from my commodity days – but these folks will be the hottest property in the sector in a few years. Price is where commodities live, and they count virtually every MSO as clients. They have 12 full time staff currently, and I wish they were public so I could buy in. I really enjoyed my conversations with Jon. As a sidebar – they have a strict no-hold policy for their organization and employees regarding cannabis stocks, and appear ethical as hell. A definite outlier in this space.
- Brands. Branding. Brand establishment. Brand concepts. Brand execution.
- ‘Branding’ and its’ importance was a strong undercurrent in the room. I sensed some snickering about how MSO’s have been utterly screwing it up. The formal CPG folks are waiting for some more regulatory certainty, and I am certain there will be ground wars of brand building all across the sector. My takeaway is that this industry hasn’t even begun to address nor hit the mass market slipstream.
As to the show itself – respect and props to Jay Rosenthal of Business of Cannabis and Prohibition Partners. The venue was exceptional, and the sold-out event was seamless. Look up Jay on social media. I compliment them sincerely on the breadth and quality of the content they produce
That’s all for now, I’m heading back into some financials.
The preceding is in the opinion of the author, and is not intended to be a recommendation to buy or sell any security or derivative.