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Interview, Part 2: Cresco Founder Joe Caltabiano

July 7, 2020

In Part 2 of our interview with Joe Caltabiano, the Cresco Labs founder discusses the perils and opportunities of Covid-19 and how the current sociopolitical environment is shaping the future cannabis market.

SND: How do you see Covid-19 affecting the cannabis industry over the long term?

Caltabiano: The unfortunate scenarios that have unfolded have codified cannabis as an essential business, which is a very powerful term. Fitting into that category alongside doctors offices, and grocery stores and so forth recasts our place in society—casinos closed, cannabis stores stayed open. And this has helped drive awareness as well because, while I don’t know the exact statistics, it certainly got mentioned more in mainstream media in the last three months than it did the previous 12 months. So any news is good news, and it’s unfortunate to have a pandemic be the starting point for that, but really codifying this as an essential business is a phenomenal step forward.

SND: What do you expect the fallout to be for businesses in the industry?

Caltabiano: I think we’re going to see some significant changes in the very near term. Operationally, companies have had to advance their business models. Everybody who runs a small business—and make no mistake, most of the cannabis retail stores are owned by individuals, so they’re small businesses—knows it’s very hard to stop and reevaluate everything when you’re just focused on keeping the lights on. But now people are reinvesting in their businesses with online ordering systems and more advanced queuing systems so people aren’t standing in line, as well as ideas about how to increase their basket size through e-commerce. That has advanced the businesses three to five years compared to the status quo. So ultimately it’s been an opportunity, and a lot of player have taken advantage of that to push forward into the future.

SND: What’s going to determine which cannabis operators sink or swim in the new economy?

Caltabiano: For the public companies and those aspiring to be public, it still comes down to their ferocious need for capital. Companies need to have put themselves in a good position, and cleaned up any messes they may have made if they went too wide and tried to be too many things to too many people. Many of them have refined their vision to focus on execution within their core markets. From that standpoint, if revenues and EBITDAs do go up, there is access to capital. But unfortunately for the companies that haven’t done that, you’re going to see them starve for capital, which ultimately makes them a potential failure or an acquisition target. If the company is not refining itself quickly and showing Wall Street and investors that it’s on a pathway to profitability, the appetite for a risk-based investor is very small right now.

SND: Do you have any prediction when federal legalization could happen in the U.S.?

Caltabiano: I think ultimately this springboard of the last four months is going to put cannabis right on the front of people’s minds going into elections. Cannabis is going to be a phenomenal opportunity for challengers looking to unseat incumbents to move the needle for their campaigns, and all in a positive light. No one is saying it shouldn’t be an essential business. No one is saying, “Well, we really shouldn’t allow cannabis because it’s a ‘gateway drug.’” That has gone away. And then there’s also the opportunity through cannabis legalization to start correcting a lot of the wrongs that have been done in our criminal justice system as it relates to race and harsh penalties for minor offenses.

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