Dominate one state at a time strategy Many cannabis companies are attempting to build a national brand by following a multi-state expansion strategy. While this approach attracts a lot of attention it may not always be the best long-term strategy. Fabian Monaco the CEO of Gage Cannabis Company (publicly trading under symbol GAGE) joins Dan Humiston to explain their company's 'one-state-at-a-time' strategy. He explains how by focusing all their expansion energy into Michigan and partnering with the best brands like Cookies and Wiz Khalifa they are creating a dominate position within the state. Produce by PodCONX https://podconx.com/guests/fabian-monaco https://gageusa.com/
Dominate one state at a time strategy
Many cannabis companies are attempting to build a national brand by following a multi-state expansion strategy. While this approach attracts a lot of attention it may not always be the best long-term strategy. Fabian Monaco the CEO of Gage Cannabis Company (publicly trading under symbol GAGE) joins Dan Humiston to explain their company's 'one-state-at-a-time' strategy. He explains how by focusing all their expansion energy into Michigan and partnering with the best brands like Cookies and Wiz Khalifa they are creating a dominate position within the state.
https://podconx.com/guests/fabian-monaco
RC Gage
[00:00:00] Dan Humiston: Today on raising cannabis capital, we are joined by Fabian Monaco, the CEO of gage cannabis, Fabian, welcome to the show.
Fabian Monaco: Thank you very much for having me appreciate it.
Dan Humiston: Well, I appreciate you dropping in today. Gosh, every time I turn around you're in the news, whether it's a big gauge announcement, whether it's a high-profile player, joining your team or you're going public or signing a huge partnership deal. If I didn't know better, I think you, you were a global cannabis company, but you're actually just in Michigan, which is where I want to start today.
Can you explain why. Dominate one straight strategy has been so successful.
Fabian Monaco: Yeah.
no, for sure. I think when you take a look at how some of the more successful cannabis companies, at least from a capital market standpoint have gone about their business, they've really focused on one or two states and excelled within those states. They use those states as a platform and frankly, a springboard , to, go into other states.
They [00:01:00] excelled at home, did extremely well with their brand, grew their brand, and then use that experience to go and delve into one, two or three other states. And so we're following a very similar model. I think if you look at some of the top performers as well, majority of , their financials are coming from only a couple of states.
And so we think that's pretty important. No need to stretch ourselves too thin here and try to be, the Jack of all trades enter into a whole variety of states where we know we can be a dominant player in. One particular state, but it's actually a pretty key state as well. Michigan's the third largest cannabis state right now from a run rate standpoint, only behind California and in Colorado.
And so not a lot of people know that. And so I think it's a pretty important part of our story where we're saying, look, there really isn't a dominant player in California is not a dominant player in Colorado, but there's going to be a dominant player in Michigan. And we hope to be That dominant. Wow.
Dan Humiston: is so cool. I didn't realize that it was the third largest. That's really cool. I mentioned [00:02:00] that you've assembled a team of heavy hitters. Do you feel at this stage in cannabis that having that kind of horsepower under the hood is necessary to get to the next one?
Fabian Monaco: For sure. It's not an easy business, right? It's you're dealing with, obviously the regulatory constraints that are, imposed on us cannabis companies and frankly, it's a new industry from a legal standpoint for most of the companies out there. And so if we can.
Let's call it borrow, people's experience or previous experience, historical experience, and use that to our benefit in learning from, those potential mistakes or learning from those successes and bringing them to gauge and trying to, make gauge even better than it could be.
I think it's a pretty key strategy. And so we've tried to surround ourselves with good brand partners, good operators and obviously good capital markets advisors to really be, the best that we.
Dan Humiston: Well, it's obviously paying off for you and speaking of heavy hitters, I know you have a relationship with Bruce Linton. You've worked with Bruce Linton and now he's part of your team. How has it been having him part of your team?
Fabian Monaco: Look, [00:03:00] for Bruce, he was the godfather of this space from a capital market standpoint. He brought, one of the first few companies that had got a license in Canada, public. He was the face of cannabis frankly on a global stage, everybody knew who Bruce Linton was.
Everybody knew who canopy growth was. was lucky enough to be part of the team. I joined the team that had brought Tweed public which obviously became canopy growth, but five or six months after they had done that. And so it got to work on a lot of the, the first couple of deals that Bruce had done with Tweed and then obviously then canopy growth.
And so really saw him grow a company. Let's be honest, relatively nothing to a multi-billion dollar enterprise that got a $4 billion injection from one of the best alcohol companies out there. So I think overall Bruce is experiencing. Taking a company from very small and humble beginnings into, again, a multi-billion dollar enterprise is very valuable.
The connections he has from an investor standpoint, capital markets standpoint, or even some [00:04:00] of the mistakes that he'll readily admit, that he, did while he was at his previous post, trying to guard ourselves against that and learn from them. Again invaluable opportunity to have them on our team.
And I've known him for quite some time. And it's just, again, great to have a supporter that's been there from the beginning of our growth as well.
Dan Humiston: You mentioned that because this is all new. , I wouldn't even call the things that he did incorrectly mistakes, because who knew there's no roadmap, there's no game plan that tell you should have filed this. There was nothing, he was a trailblazer just as Europe trailblazer and in Michigan.
And I am sure it's comforting knowing that you have. A team surrounding you. That's been through this already. And I think that's really important. Jumping ahead. I, another thing that you do really well, which seems like a no brainer is you're bringing in the best of the best from other states into Michigan, through partnerships.
What are some of the deals that you've done?
Fabian Monaco: I think, our biggest deal that we completed a couple of years ago was partnering with the cookies brand [00:05:00] out of California burner. Who's obviously , one of the founders. Yeah.
Just just an exceptional individual and really grew one of the best brains in the space today.
When you take a look at cookies is, the Ferrari of the space. They're the Nike of the space, the red bull of the space. They continue to Excel, in their home base and across north America and now even globally. So we got to learn so much from that particular company and brand.
It was a blessing. We were there. Partner outside of California. Actually, we were the very first partner and brought the brand to Michigan on an exclusive basis, really, put ourselves alongside their brand in Michigan, which. In return helped elevate our brand. I would say, we've been in operations a little over 18 months, 18 months ago.
Maybe not as many people knew, the gauge brand, but again, partnering with cookies and having that connection to such an illustrious and top-notch brand really helped accelerate our brand awareness and really helped accelerate a lot of facets of our company, mainly because we got to learn from the best we got [00:06:00] to see what the best was doing, brought that to Michigan, and obviously try to mimic that same story.
Dan Humiston: I saw it a press release, I think just the other day that you signed another big partnership. Maybe tell us about that.
Fabian Monaco: Yeah, we partnered with with Wiz and his, phenomenal blueprint that he has there in a couple of markets Arizona. And I believe Utah's the third one. And this is going to be their fourth state that they're entering into, great group there. Wiz, I think is a phenomenal artists and extremely well followed.
And I think everybody, and their mother knows he's a. Big fan of cannabis. And so for us, again, trying to partner with best-in-class brands outside of the state of Michigan that are experiencing tremendous success in the markets that they're currently in, and then bringing those brands to Michigan on an exclusive basis to try to be really the one-stop shop.
When you think about cannabis, you think about Michigan and you think about going to dispense. Re really want to be just top of mind and the only place people want to go to, because you're basically going to get the best brands, not only in the state, [00:07:00] but across, the U S.
Dan Humiston: Building that moat and around the thumb that's a pretty good strategy. don't see too many flaws with that right now in your website, I see that you currently have three cultivation processing centers, 13 provisioning centers, which most of us were referred to as dispensary's correct.
Fabian Monaco: Yeah, exactly.
Dan Humiston: Okay. What are your plans for expansion over say the next 12 to 18 months?
Fabian Monaco: So we've been expanding our cultivation pretty aggressively a lot of it through contract manufacturing agreements. And so the three operating facilities that we have, we're expanding the larger one essentially tripling our production in should have that expansion completed by the end of this year.
In addition, we've actually brought on 10 different contract rowers of which six are in operation today. These are essentially.Phenomenal indoor growers in the state of Michigan that we've partnered with that came to us and said, look, I want to grow for gage cookies. And now obviously, more and more of our brands that we're bringing on on an exclusive [00:08:00] basis.
I, I certainly want to grow for you guys because you're the best. And that was obviously very humbling and, felt great as a company. And so the arrangement we've entered into with them is obviously . Gave them our genetics. They grow the product for us. It allows us to expand our flower offering in an exponential way.
We had about 15 or so flavors in the mix in Q1 of this year and jumped to 30 in Q2. And the financial aspect of these relationships are also very good. We share in 50%. Of the retail price with these contract manufacturers, meaning, we're protected from any potential price reduction at retail.
And then more importantly, we didn't pay for the CapEx of these facilities. We don't pay for the OPEX of these facilities. So essentially for $0, I'm putting product on my shelf and achieving 50 plus percent gross margins at face value. So a great arrangement for us and a massive expansion. And we had.
Let's call it 200 or so 300 or so pounds and [00:09:00] Q3 of last year and nights. In July, August we will average 2000 pounds per month through all our production and our, relationships with the contract growers and dedicated wholesalers. So massive jump in cultivation and then retail, I'll quickly get to that, expanding that exponentially as well.
We actually have 14 in our portfolio, so you gotta be sure to update our website after this interview We want to actually bring that to, 20 to 25 locations in Michigan over the next little while. Our goal is to have 20 operational locations by the end of this year, and still pretty confident that we'll be able to hit that as we have a lot of M and a just reaching, the finish line from a retail standpoint and really excited to have those up and running here in Q3.
So that's where a lot of our growth is gonna be. A, on the cultivation in a big way, especially from a year over year standpoint, and same with retail and also funny enough processing it. We're about to have our lab open and operational this quarter going to bring great margin expansion for us as well as we solely focused on the flower market in Michigan, up until [00:10:00] now, but really want to branch out to the extract based categories in the near future. Yeah.
Dan Humiston: okay. Well, I know for our listeners who are interested in investing. Gage cannabis is publicly traded. It's on the Canadian stock exchange and it's on the OTC in the United States. So we'll have links to. Gage financial Fabian's information. We'll also have the symbols. So if you're interested in participating in their growth and it sounds like it's a massive growth coming up please check out theirinformation.
They also have an investor link on their website where you can check that out as well. A lot going on in Michigan. The third biggest, I didn't know that Fabian. Thanks again for being on the show today, that was.
Fabian Monaco: Yeah, no it's my pleasure, Dan. And obviously, if anyone has any questions for us as well feel free to email us and we'll obviously be happy to answer any questions.