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🍃 Curaleaf Enters The Arena 🍃

🍃 Curaleaf Enters The Arena 🍃

Anthony Varrell
June 21, 2024

GM Everyone,

The week has come and gone and was filled with headlines. We might finally be getting adult use over the line in Pennsylvania, as a bipartisan bill to get it done is currently gaining traction in the state legislature. We just need Governor Shapiro to get loud and whip it into place, and we have seen some steps in the right direction regarding that this week as well. We will keep a close eye on this matter and are feeling increasingly positive it actually gets done this time around.

Today’s letter can be read in 9 minutes and 35 seconds.

What's Driving the Market Today?

Stock futures are slightly down, here is what traders are focused on today:

Nvidia slips 3.5%, Nasdaq ends record streak, S&P 500 dips.
US Dollar gains broadly, hitting near two-month highs.
Foreign money exits China, yuan at its weakest this year.
Japan's yen falls on weak inflation, BoJ tightening doubts.
Euro, sterling drop on European political and economic concerns.

💸 High Impact

Curaleaf Are In The Beverage Game

The What - Yesterday, the head brass over at Curaleaf (Mr. Jordan and Mr. Darin) posted a video of their new Select hemp-derived beverages coming off the line. This did not come as a surprise, as it was announced a few weeks back, but it reinvigorated the conversation around Select and how, from a brand perspective, the handcuffs are now off and the brand has escaped the dispensary. In a good way.

The current beverage trend has been quite polarizing, as the product category has been validated by its growing sales and increasing access to big-box liquor retailers across the U.S. This is something I thought would happen eventually, but the speed at which this has opened up has been quite astounding. I can go to my local Total Wine in Fort Lauderdale and pick up a six-pack of THC beverages with ease. This isn't necessarily a good thing for the state-licensed MSO model, but it does allow easy access to THC products, which could lead people who would have never ventured into a dispensary to do so.

Curaleaf is the first MSO to roll out a full-scale line of hemp beverages under one of their marquee brands. This doesn't really surprise me, as the management team has ventured into other arenas outside of the core MSO thesis, such as building out a formidable footprint in the EU. The peanut gallery had plenty to say about the matter on both ends of the spectrum. For the record, I think this is a masterstroke in strategy by Boris, and with the right distribution and rollout, Select could become a national CPG brand.

The Why? - There is one glaring issue here that I can’t seem to wrap my head around, and that is the near-term curtailing of the intoxicating hemp market and shutting down the loophole in the Farm Bill. Select is not the only household brand in the cannabis space to jump into this category. We also saw Wana announce a partnership last week to jump into the hemp-derived gummy space.

This leads me to believe that these companies have intel that the intoxicating hemp market is not going away anytime soon, or this would be a huge mistake to invest in these product categories. If that holds true, then that is also a net negative for the state-licensed operators due to a myriad of hemp companies selling “hot flower” and essentially being able to compete unencumbered.

My .02 - I applaud the Curaleaf team for venturing into the beverage space, and I think it's going to be an interesting experiment to see unfold. Will Boris and the team be able to leverage their resources to ensure solid distribution? TBD. Will the products be any good? I will be ordering them as soon as they are available to find out. Will they be able to leverage the brand power of Select and the resources of Curaleaf to begin to take market share away from the established startups in the space? I think so.

This is something the entire industry will be watching closely, and I wouldn't be surprised to see another major MSO throw their hat in the ring here soon to add to the category. There is also one thing I can’t stop going back to, and it's the ineptitude of Tilray to enter the category first, as they have their beer assets in the U.S., and Sweetwater 420 in a hemp-derived form factor seems like a no-brainer.

May the best beverage win.

📈 Dog Walkers

Ascend Wellness Expands

This week, Ascend Wellness (OTC: AAWH) announced it was expanding in two of its key markets, New Jersey and Pennsylvania. The location in New Jersey is not an incremental store; they elected to move their Montclair location to Wharton to better serve both adult use and medical patients more conveniently. The Pennsylvania location is their fourth in the state and will service the greater Pittsburgh area. The incremental Pennsylvania store is good news following the momentum we have seen on the regulatory side as it relates to adult use.

Verano Beefs Up Florida

Verano Holdings announced two new retail locations to fortify their Florida footprint with the addition of stores in Naranja and Port Richey. Truth be told, I had never heard of Naranja until this morning, and I've lived in Florida my entire life. But it does exist, and it does mean “orange” in Spanish. It passed the vibe check. This brings their footprint to a grand total of 77 locations in what could be the biggest adult use market in the country come November.

Aurora Sobers Up On Germany

On their latest earnings call, Aurora Cannabis’s CEO pumped the brakes on speculation that the German market could potentially double this year via the Pillar 1 framework that was rolled out. He stated that it's more like a 20% - 30% step in incremental growth and cited reasons that make a ton of sense. In Germany, you don't just get your medical card and be set free in the dispensary to purchase as you please. In Germany, you are given a precise prescription by your physician and must adhere to that. That's what an actual medical program looks like, differing from the adult use market predominantly disguised as a medical program in the States.

🔢 Number O.T.D.

24,147

That is the number of comments that have been submitted via the public comment period so far. As of yesterday, the request for a hearing related to the rule has elapsed, and we are about a month away from the comment period ending. Let's. Go.