Is this the best, under-valued multi-state cannabis stock? Multi-State cannabis companies (MSO's) are leveraging their size and experience to their advantage. Andrew Thut the Chief Investment Officer at 4 Front Ventures (FFNTF) joins Dan Humiston to talk about using the technology that they developed in open markets to drive down their costs and gain a competitive advantage in their limited license states. Produce by PodCONX https://podconx.com/guests/andrew-thut https://4frontventures.com/ https://missiondispensaries.com/ https://pureratioscbd.com/
Is this the best, undervalued multi-state cannabis stock?
Multi-State cannabis companies (MSO's) are leveraging their size and experience to their advantage. Andrew Thut the Chief Investment Officer at 4 Front Ventures (FFNTF) joins Dan Humiston to talk about using the technology that they developed in open markets to drive down their costs and gain a competitive advantage in their limited license states.
https://podconx.com/guests/andrew-thut
https://missiondispensaries.com/
Dan Humiston: [00:00:00] Today and raising cannabis capital. We are joined by Andrew toot, the chief investment officer at forefront ventures. Andrew, welcome to the show.
Andrew Thut: thank you, Dan. Great to be here.
Dan Humiston: It's great to have forefront back on the show. We had Chris crane on about three years ago, but so much has happened since then for our new listeners. Forefront ventures is a publicly traded multi-state operation with facilities in five. And I believe soon to be six states,
I guess that's a good place for us to jump in today and to get things started. Let's talk about the challenges of running a national cannabis company. National cannabis chains. Don't realize a lot of the traditional economy of scale benefits because cannabis is still federally illegal.
So for instance, you can't have one centralized cultivation facility because you can't cross state lines.
Andrew Thut: that's right.
Dan Humiston: Give us some other examples of challenges that cannabis MSLs have to deal with that other industries don't.
Andrew Thut: Every [00:01:00] aspect of this business is harder than you think it's going to be from.Going into a town where you think you're going to open a retail store education that zoned properly for cannabis. And you're going to see all sorts of pushback from the town planning boards.
And you have to go to town planning meetings where there's going to be a lot of opposition. Banking has been a huge problem in this industry. you can generally find a bank in any given state who will give you business banking services, but not a lot of banks would give you equipment financing loans, . , you go from there too personal stories of officers, of some of these companies like myself, I've been a fidelity brokerage client for over 20 years and I was buying some of our stock in my own portfolio, in the open market a year or so.
And they figured out I was a cannabis executive and they shut down my account. And the stories go on. Our chief operating officer, he's applying for a mortgage, he gotrejected. So [00:02:00] there's friction in every single point in this industry. And while it's frustrating andwe all bemoan the struggle.
It really is what has created the opportunity as well. There is a silver lining.
Dan Humiston: Well, I was just going to say those added burdens make things difficult, but they also create, as we talked about before a moat, around successful MSL is the barrier to entry is so great for new companies. And, as an established MSO, you have a huge advantage. Do you think there's still opportunities for new MSLs or is it just too late?
Andrew Thut: No, , I don't think so. First off, there are a lot of states thathave started their medical programs, but they're still gonna wait into flip wreck.
So you have states that are still left to come, and thenthe cream needs to rise to the top. So you can have an operator that, was doing a really nice job in Colorado or Washington state or California, who knows how to really operate these businesses who has worked in a competitive environment, figured out how to.
Produce products [00:03:00] at a great price that people like, and they can go into states like Massachusetts or Pennsylvania. So it's not over for them. Three years ago, med men and I ant this for the two of the bellwethers in this space and the equity holders basically got wiped out.
And new leadership has fallen in behind it. So it's going to continue to be dynamic. , one of my old bosses used to say, the pioneers get all the arrows and we've taken our fair share of arrows.
But our market position in a lot of the states that we're in we've been able to solidify. And I think that we have a pretty good head start on things.
Dan Humiston: And you also have an advantage because you guys are experts at getting licenses. You're experts at regulations . You've dealt with different municipalities, having different rules and adjusting your team in your operations, within those municipalities.
And also with dialing down your costs and your facilities. And I think that's one advantage that you do have is that you can transfer some of that tax. Throughout your organizations, have [00:04:00] you been able to apply some of your say successful cultivation processes from one state to another.
Andrew Thut: Absolutely. Sothe thesis of, for front is, we're in five states, hoping to be six here shortly. But our facilities in Washington state, which is a very competitive market, that was not limited license, basically.
Anyone who applied for a license when that state went recreational got one.
And so there was a lot of supply that came in. To that market and pricing got hammered. It got very competitive, very quickly andour facilities in Washington are the number two flower producer in that state.
The number one producer of edibles, we have 25 different brands and I believe we're top 10 in every single category in Washington. . And so in a state like that, . You have to figure out how you're going to make money and compete
and over the six years in Washington, we've Honed our cultivation methodology, such that, we're yielding in our facilities close to 400 grams, a square foot in our [00:05:00] cultivation facilities. We think that's about double the MSO average. We have all of these great products which have demonstrable market share in Washington.
And so the thesis has been, yeah. Wow. Let's replicate what we've done in Washington into these less competitive limited license states. And we have tried and true SLPs and brands. Let's take this on the road. And so the first proof of concept that those SLPs and brands would travel was our entrance into Massachusetts, forefront ha.
To grow and production facilities there along with two dispensary's a third open in the summer. And we introduced all of the brands, the Massachusetts about eight months ago. All of our grow methodologies were introduced to Massachusetts about 15 months ago and the reception to the products and brands has been fantastic.
And then you look at what's happened to. Our yields in the [00:06:00] facilities in terms of how much production we can get per square foot. We took our yield for in our Georgetown, Massachusetts facility for about 150 grants per square foot up near 400. So we actually exceeded what we did in Washington. So it gives us a lot of confidence as a management team and in a business that, what our facilities were able to do in Washington is replicatable.
Very excited to have more assets to sprinkle that pixie dust over
Dan Humiston: , it's got to give you a lot of confidence, especially when you look at your peers, your margins are probably a lot better
Andrew Thut: Yes, we grow for about 65 cents a gram in water. A gram of cannabis as wholesale, Massachusetts for, I dunno, $7. So, we have a lot of wiggle room to not only have great margins, but to also lead on price. And if you lead on price in this industry, there's a lot of price elasticity, which is a fancy way for saying, if you can give people a great product at a [00:07:00] fantastic price, you're going to take a lot of market share.
And you look around the Massachusetts market. We will sell an eighth of flour for anywhere from,$30. But we tend to be in that 40 to $45 range in Massachusetts. You look at the competition they're 55 60. So we just continue to take, share because this is a market that it has an 80 20 rule where 80% of the product is consumed by 20% of the country.
And that 20% is very price sensitive. And if you can give them a great product at a terrific price it really puts you in a good position to take share.
Dan Humiston: Yeah. , there's a couple other examples of a couple of companies. We may have all heard of like Walmart or Amazon, , they have driven the prices down and they seem to be doing Okay.
So I think you're on the right track. But anyhow,
let's talk about expansion.You're close to getting the next license in New Jersey. Now, will, most of your expansion be done organically, or will you work look at maybe acquisitions or maybe [00:08:00] partnering with companies and others.
Andrew Thut: we're hopeful on how things go and in New Jersey which would be our sixth state and we have a pretty clear path to value creation, just growing our business organically within those states. Whether it's. Opening new stores expanding our processing and cultivation capacities.
So we can be a wholesaler.But two parts of that question, I guess, where do we stand on M and a we have said to the market that we think that we have a really unique skill set. And we have products that have been tried and true and have resonated with consumers.
And one of the most competitive markets in the country in Washington. And we think that we can go into most states and take our fair share of the market. And so we've told folks that we want to be bigger than whether that means bolting on additional assets within our core states or. Taking incremental states in a measured growth strategy as we expand outside of our core six, or we think that we would be a very good fit within a large [00:09:00] organization as well.
There are companies out there that have gone on. roll up sprees getting assets in, as many states as they could, but they don't have consolidated growing methodologies. They don't have product portfolio that sort of unified a car across a platform.
And so we think that, a lot of our expertise could be applied to a larger portfolio and we can create a lot of value in that way.
Dan Humiston: , I know from an investor standpoint, that kind of talk is very attractive because there's so much opportunity and especially for your company being publicly traded a retail investor, looking into this opportunities as well, they're priced at today's price, but geez, look down the road with all these states coming on. And, I think the opportunity is pretty good at this.
Andrew Thut: People look at this a hundred billion dollar cannabis market and they say, geez, okay, we've got GTI, we've got cure leaf.
Then we've got true leaf.. Who else in this group has
great growth dynamics has a lot of [00:10:00] runway in front of us and our proven operators. I think that we fit that bill to a T put it on your investment hat.
You look at this industry and, trading it, low to mid-teens EBITDA multiples of next year for, 50 to a hundred percent top line growth. There's a real disconnect in this industry. So I think not only does forefront have a chance to close the gap of the discount, where we trade to some of the bigger guys, but I think the whole industry is potentially undervalued.
And as legalization and banking and those things continue to push down the tracks. I think this industry has a whole lot room for multiple expansion as well.
Dan Humiston: Well, that's really exciting. And I know you got everyone's attention and I'm going to have Andrews information and forefronts information in the show notes, including their stock symbol information. So if anybody wants to pursue this further. I go to their website. There's a lot of information for investors on their website.
And also check out their products. This is . One stop shop, Andrew. Thanks for being on the show today. [00:11:00]