Marijuana Is 'The Wrong Industry To Invest Blindly In,' Companies Must Stand Out To Succeed
 
 

August 21, 2018
Jayson Derrick

The cannabis industry's growing competitive landscape means companies must stand out in some way to succeed.

At a Benzinga Cannabis Capital Conference panel hosted by Grant Thornton's Shaila Mehta, Cresco Labs CEO Charlie Bachtell said one of his company's keys to success is focusing on states with limited licenses that are more regulated than others.

To succeed in a state with more government scrutiny, a marijuana company needs to make sure all aspects of their business are top quality to gain full trust and cooperation, Bachtell said.

Success in any industry is often reserved for forward-thinking companies that are able to predict the direction in which a market is heading, said Dooma Wendschuh, CEO of cannabis beer producer Province Brands.

The direction of the cannabis industry was unclear five years ago, with multiple potential products, including vape pens and edibles, Wendschuh said. Based on Constellation Brands, Inc. STZ 1.73%'s multibillion-dollar investment in cannabis company Canopy Growth Corp CGC 3.7%, it's clear adult beverages are the direction the market is heading, he said.

What Investors Need To Know

Investors should evaluate cannabis companies in similar ways they would any other sector, said Medicine Man Technologies MDCL 6.35% CEO Brett Roper.

Possible red flags include unaudited financial results and a business plan which lacks a path toward profitability, Roper said.

The sentiment is somewhat shared by I-5 Holdings CEO John MacPhail, who said the initial rush has passed and investors should make use of traditional metrics and analysis as they would in any other industry.

Cresco's Bachtell said the cannabis space is "the wrong industry to invest blindly in."

The World Watches Canada

Recreational cannabis will become legal in Canada on October 17 and the executives offered the following thoughts:

  • MacPhail: After an initial rush of curious customers, the industry is likely to settle down and shift to a health and wellness focus.
  • Wendschuh: Regulation needs to evolve to prevent legal cannabis being used in the black market and vice versa.
  • Roper: Investors across the world will be examining the "bones of those that came before you."
  • Bachtell: The second six-month period after legalization will look a lot better than the first six months.