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It is almost an understatement to say that a lot has happened to New York-based Columbia Care Inc. (NEO: CCHW) (OTCQX: CCHWF) (FSE: 3LP) since Cannabis Business Executive last profiled the company in November 2021. Four months after that story was published, the company announced plans to merge with Chicago-based MSO Cresco Labs in a $2 billion deal touted by Bloomberg at the time as “one of the largest cannabis industry mergers yet.” But fate had other plans for the two companies. The ambitious transaction veered off-track in line with tightening cannabis and credit markets that created a perfect storm at just the wrong time. Following an interminable engagement during which the wedding was postponed at least once, the betrothed released a joint announcement on July 31 stating that the union had been “amicably terminated” as of July 30, 2023.
“The plan for Chicago-based Cresco to buy New York-headquartered Columbia Care in an all-stock transaction began to unravel when the companies failed to divest enough assets necessary for regulatory approvals by a June 30 deadline,” CNBC reported following the announcement.
Cresco Labs CEO and co-founder Charles Bachtell pointed to “the evolving landscape in the cannabis industry” and “this tough economic time” in a press release issued jointly with Columbia Care CEO and co-founder Nicholas Vita, who stated, “After careful consideration, we are confident in the mutual decision to move forward as separate, standalone companies.”
CNBC used hard numbers to suggest why the deal was scuttled. “Cresco’s market capitalization is about $700 million, down from about $2.7 billion when the deal was announced,” it reported. “Columbia Care has a market cap of about $200 million.”
In the immediate wake of the termination of the merger, Columbia Care also announced that “it will voluntarily delist its common shares from the facilities of the Canadian Securities Exchange (‘CSE’), effective as of market close on August 2, 2023…Columbia Care will continue trading on the Cboe Canada, the new business name of the NEO Exchange. Cboe Canada will remain the Company’s primary securities exchange, as it has been since the Company’s initial public listing.”
But while the news that the Cresco/Columbia Care deal was kaput garnered a lot of headlines and was largely interpreted as a sign of the bad times – which it was – the current footprint that Columbia Care has to work with is largely the same as it was before the deal was struck. With operations in 16 states and the District of Columbia – accounting for over 90 dispensaries and more than 30 cultivation and manufacturing facilities in operation or under development, per the company – a plausible argument could be made that the year of seeming paralysis for Columbia Care, when deals were put on hold in anticipation of the merger, was a blessing in disguise for the company during a time when competing MSOs have been forced to tighten their belts and narrow their focus to less-risky markets.
That at least is the hope for a company that is apparently in the process of “reintroducing” itself to the marketplace, per its CEO. To better understand what that process looks like, CBE spoke recently with Jesse Channon, who, as one of two senior leadership changes announced earlier this month, was appointed Chief Commercial Officer effective July 31. “Mr. Channon, formerly Chief Growth Officer, will oversee retail, wholesale, technology innovation, marketing, and communications,” said the company. According to Channon, his new role dovetails with the company’s strategic marching orders post-Cresco.
“Coming out of the potential acquisition of Cresco, we were able to assess the business as a whole and make some pretty big changes that we had wanted to or at least had the concept of doing for quite a while but wouldn’t have been appropriate during a period when we were focusing on the most efficient and seamless integration of two businesses,” he explained when asked what his new role entails. “We knew that one of the things that we really wanted to focus on while separating was what we refer to internally as the front and back of house.
“That was one of the big focuses,” he continued. “Our operation’s organization historically had overseen both retail and back of house, and we wanted to separate those things to create centers of excellence with people that had aligned passions and talents and subject-matter expertise and would be able to really focus on those things. So, in separating retail and back of house operations, in my role now I oversee all of the marketing, technology, and communications, which is what I did as Chief Growth Officer, but I now also oversee all of our retail, as well as all of our wholesale.”
Colombia Care offers a slew of its own products, including flower, edibles, oils, and tablets, and manufactures brands such as Seed & Strain, Triple Seven, Hedy, gLeaf, Classix, Press, and Amber. I asked Channon where cultivation and manufacturing fall in this grouping. “Cultivation and manufacturing, which historically we refer to as back of house operations, are now separate and are run under our President and Chief Operating Officer, David Hart,” he said. “They report directly to him through our new VP of Operations, John Gilbert. I oversee all of our retail and all of our wholesale. We have a new wholesale organization that we’ve built and are in the process of continuing to build. I also oversee our technology, so all of our engineering and innovation on the technology side, and I oversee our marketing and our communications.”
Were retail and back of house each responsible for revenue generation? “The revenue rests with me,” clarified Channon. “Retail and wholesale are the two mechanisms by which we create revenue in the organization, so all revenue-generating streams roll into our retail and our wholesale org now.”
Regarding Vita’s remarks about “reintroducing” Columbia Care, which already has a significant footprint throughout the nation, I wondered how that will be accomplished. “There will be some announcements over the coming months with regard to some of the changes that we’re making as an organization to the brand and how we present ourselves to the market,” said Channon “Also, internally, a lot of very talented individuals have been promoted into new or expanded roles. We are an organization focused on excellence in cultivation, manufacturing, and everything that comes along with that.
“We now have leadership across the country that is part of that national footprint that is directly aligned to those initiatives, and it’s the same thing on the retail side,” he added. “We have a number of people who have been promoted into strategic roles to oversee this new national retail organization, the goal of which is to continue to invest in and spread the word about our award-winning cannabis platform that has received so much positive feedback and has seen incredible performance with regards to METRC in the markets where it’s been launched. That’s something that we’re incredibly excited to continue to bring across the country.”
Managing Markets and Messaging
An important component of the mission for Columbia Care going forward would seem to involve coordination of operations at a very high level. I asked Channon how they will manage individual markets and integrate that work into the retail and back of house structure?
“My background comes from startups in technology, so I bring a slightly different perspective to a number of these initiatives that we’ve kicked off as an organization,” he explained. “I believe there are lowest common denominators, or universal truths, that exist in the way that people leverage certain things or have certain expectations about services or whatever it may be. Apple is a huge proponent of this. The iPhone doesn’t change in design whether it’s sold to a brain surgeon or a 15-year-old – it’s the same iPhone. There may be nuances with regard to how it is customized, but for the most part they’re used the same way by everyone. We have retail all over the country, with full exposure to first-party data and feedback as well as larger datasets with purchasing intent and consumer profiles and things like that. When you look at, say, California versus an emerging and exciting adult-use market like New Jersey, there are lowest common denominator expectations about services, technologies, and experiences that you can offer across that platform that will be applicable to everyone.
“Will there be some regional nuances with the way that certain products or merchandise or certain form factors are presented,” he asked rhetorically. “Of course, but you can still find cornerstones of that retail experience that you truly believe are universal. Empathetic education is one for us. Regardless of how educated a consumer is, or how uneducated they are, we believe that when you come into a cannabis dispensary it should be the most comfortable and least intimidating experience possible. The way that you are greeted, the way that we discuss the product, the way that we ask for feedback, like if you’ve ever used certain things before and how did that affect you, what does that mean to you, and what are you trying to accomplish. Those things are universal and universally appreciated. Of course, some people walk in, and they just want to buy. We see that all the time in California, where people know exactly what they want, and that’s great. But there are people that want to shop, and our goal is to provide an experience that caters to both of those consumers.”
That goal extends the length and breadth of the operation. “We focus on the root ideas of lowest common denominator for building that national platform, and then we empower the local team to change that programming and to customize that programming at a local level, depending on where their market is either in that growth maturity curve or if there are just some really interesting local nuances to a product that people enjoy, the regulatory frameworks,” said Channon. “There is an art and science to that, but I do think there is a need and a strength to having a national language when it comes to these experiences that will ultimately prove to be very valuable for us.”
Columbia Care’s name for its retail outlets is The Cannabist, but it also operates stores with their original names still intact. “I think it probably will be advantageous to us to have a single banner to operate under,” replied Channon when asked if they will be renamed. “It removes complexity from everything from shared services to marketing and advertising spending. For overall brand equity and recognition within a market, it’s advantageous to have a national banner for sure. But we’re confident that it’s something we can take our time with over the next few years to do in a very responsible way.
“This could be one of those strategies if 280E went away and companies were in a very different position from a cash point of view,” he added. The news had just broken that HHS had officially recommended the rescheduling of cannabis. “What are some of the things that may accelerate? One could be deploying capex into rebranding dispensaries across the country in order to gain efficiencies of scale as well as those cost savings that take time to recoup. That’s something that you could be accelerated with the availability of more cash, but I think that our position on this right now is we have certain markets and certain dispensaries that we think could benefit greatly from moving to that platform as sort of a fresh start, or a completely reinvigorated energy with regards to the way that we deliver services to those communities.
“There are other markets where the brand on the door is totally fine, if it’s a strong brand, it has ties in with the community, and it has some equity,” he added. “Those are the ones we will probably be slower to change moving forward, but at the end of the day, if you’re looking five years down the road at how many banners we operate nationally, it’s one. We need to have one identity for the consumer that they can get comfortable with so that when they travel from state to state, it feels familiar, and they know what to expect.”
Channon is one part of the machinery that opens new markets for Columbia Care. “I am but a participant in a larger initiative that takes place here,” he explained. “We have teams that work on vetting and finding locations, teams that work on the actual infrastructure and design and build out of those spaces, which I’m a part of, and then teams that are working on opportunities to expand, whether it comes through M&A, partnerships, or other things. I’m part of all of those conversations, but there are many, many people who contribute to them.”
As far as creating new efficiencies with the organization, Channon said it is one priority among many. “Gaining efficiency is something that we should always strive for,” he said. “Coming out of the period when a lot of initiatives were on pause during the potential integration with Cresco, the number one priority for us now is getting back to doing the things that we were passionate about doing prior to that pause. We still believe and probably have become even more reinforced in our belief through being able to step back and say, ‘Wow, the world really is moving in this direction.’
“And we feel really good about the markets that we’re in, and the services and technologies that we were investing in that we were building,” he continued. “I think we were ahead of our time, but now it’s about getting back to work, reprioritizing the things we believe will be sustainable, strategic advantages for us in these markets, and then constantly reassessing where we can gain scale and efficiency. I think that both of those are available to us right now as a platform. There’s plenty of roads to hoe on both scale and efficiency. But we can always be better, and I think that we recognize some areas where early investments can be incredibly fruitful for us, and those are the areas that we’re pursuing right now.”
It occurred to me that coming out of that waiting period could be a wonderful time of enthusiasm for operations people chomping at the bit to put plans into action. “It is,” insisted Channon. “We are very fortunate to have daily low attrition. It’s almost bizarre when you think about the length of time. And I have nothing but good things to say about the Cresco team and the people we have had the opportunity to work with in order to push that acquisition and integration forward. But I’m sure they have the same frustration, that feeling that we were constantly taking waves over the bow, everything from a regulatory to a macroeconomic point of view. It was a trying time, and for the team members who were responsible for executing many of these tactical initiatives, we put them through a whole lot over an 18-month period, and we are very fortunate as an organization that we have incredibly low attrition, especially at the leadership level.”
It has also been a boon to morale. “Those individuals now are very passionate and very enthusiastic,” noted Channon. “They feel like they’ve gotten a second lease on something that they were very excited to be working on in the first place. So, there’s a lot of energy, there’s a lot of excitement, there’s a lot of creativity that’s flying around right now, which I think is great. And there’s so much to do in the industry. Every day, there’s something new. Just today, we learned we could go Schedule 3, which would kick off a flurry of activities internally at every MSO in the country, where the timeline for lots of strategic initiatives may have just been moved up.”
Columbia Care is hiring in fact, with 157 job listings on its site the day we spoke. I asked Channon if he expected that hiring pace to continue. “I think so,” he replied. “If you look at the breakdown of what those jobs are, there are a number that are open because we shifted things around through this reorganization to open up roles that are specialized in very specific areas of contribution for shared services. In retail, in operations, human capital, finance, we are looking for very specific talent in order to lean in on a number of activities moving forward. But we’re also continuing to open source, and we’re continuing to put more plants into facilities moving forward as we see markets grow to maturity, so there is always going to be that ebb and flow of jobs that are open. I mean, we employ a large amount of people, so we do see some attrition, especially on the front line in cultivation and retail.”
A Nationwide Footprint
Columbia Care has a presence in a lot of states even if its presence in each state is not large. A look at the map shows a concentration in the northeast (minus northern New England), a healthy presence in the southwest and Midwest, no presence in the northwest, and a very nice footprint in Florida. Every MSO map is different, of course, and Channon considers Columbia Care’s to be particularly distinctive in a very good way.
“The first thing I would say is that we are not a huge footprint in Florida,” he noted. “One of the things that makes Columbia Care really unique as a platform is if you look at our concentration outside of the state of Florida, we are one of two, maybe three companies in Florida that has 70 or more retail outside the state. Most of the large MSOs have concentrations of 35 to 50 percent of their retail locations inside of the state of Florida, and I think one of the things that makes our footprint very unique is how scaled we are outside of the state of Florida.
“What does that look like every day,” he asked. “We have teams that are dedicated to a market, that live and breathe an individual market, and then we have multiple levels above them that span to a regional purview, and then span from regional to half the country, and then from half the country to a national perspective. And there are layers of strategic insight in all of those functions, whether it be on the operations or the retail side.
“We’re also structured like that from a marketing point of view,” he added. “We have marketing team members that are specifically focused on regional initiatives for retail – so just customer acquisition and experience management for retail – and then we have regional support focused on brands to move wholesale. We have a division of labor that gets specialized across pretty much every function as we operate from a revenue point of view, and ultimately they all roll up through those national organizations.”
I was also interested to know what states Columbia Care most wants to enter next, but Channon said he’s not the person to make that call. “You’re talking to the revenue guy,” he said. “What markets would I like to enter? All of them. I would love to reach as many consumers as possible because I believe we grow great plants and put them in the hands of people that need them, and there’s something so interesting about putting your feet on the ground in these new markets and visiting with patients and customers and seeing where they are in that journey, but the reality is that’s probably not a great strategy.
“We’re in a lot of markets right now as it is, and if you pick five of the most exciting growth markets in the country, we’re probably in all of them,” he added. “So, we’ve got our hands full executing against one of the two highest upside portfolios in the country right now for an MSO. With regard to M&A and entering new markets through that, when the deal broke, I’m sure there was a flurry of activity from people reaching out saying, ‘Do you want to look at this? Would you like to have this conversation?’
“I don’t want to speak for anyone else,” he continued, “but I think we’re pretty happy with the hand we’re sitting with at the table right now. I think we’ve got plenty of cards to play and plenty of work to do, but that being said, historically we’ve always been opportunistic, we’re always open to listening, and we’re always hyper-aware of where those opportunities may live from an M&A point of view. And we’ve shown a pretty strong track record of being able to get those deals across the finish line, so could that be in the future? Sure. But is it something that is keeping me up at night right now? It is not.”
What does keep him up at night? Is revenue generation on the list? “Revenue generation is definitely one of them,” said Channon, “because at the end of the day it’s a pretty clean scorecard to understand whether or not the strategies you’re implementing are working right. Customers vote with their wallet, and if we’re not doing the right thing to put the right product on the shelf, to provide the right services, to build the right technology to increase that accessibility, we’re going to pay for that in revenue.
“So, revenue generation absolutely, and doing it in a way that continues to trend towards a more profitable future for the company, and doing it responsibly,” he continued. “There was this mentality not long ago that was ‘buy the growth’; just get out there and advertise and give everybody a free iPod for taking a demo. Those things weren’t that long ago, and so now we’re trying to do it in a way that is responsible, and we’re very frugal when it comes to the ways that we think about investments from a growth point of view. So, profitable revenue generation is the thing that probably keeps me up the most.”
Could he speak to any revenue generating strategies under consideration? “More to come there,” said Channon. “I’m hoping to make some announcements between now and the end of the year that will make us want to talk again. There’s a lot to do from a technology and innovation point of view, and our industry still has incredibly nascent systems. Can we take all of these data points with these connections and create integrations to make real-time data-driven decisions instantly? Not really. We have a lot of work to do as an industry to get to a point where we can do that. But we have some exciting initiatives that we’re pursuing that will probably change the way that 
we think about our supply chain, the way that we think about engaging with our partners, and the way that we think about engaging directly with consumers.”
A peek at past innovations might provide an idea of what’s to come. “When we launched our loyalty applications, Stash Cash, I think we reached number five within the first 30 days in the healthcare space as far as downloads on the Apple store. So, we saw enormous adoption with Stash Cash, and we continue to see an incredible opportunity to use platforms like that for engagement. We collect an enormous amount of contextual data through Forage, a great product recommendation exploration tool that will now see investment. It was on pause for the last year and a half. We also see opportunities to build proprietary technologies and or partner with world-class providers that maybe haven’t entered the cannabis space yet, to start to build some of these technologies that will be game changers for us in the way that we think about garden planning and the way that we think about wholesale and connecting with retail on-prem and off-prem. How do we find ways to expand our opportunity to engage with consumers in their home?
“These are all things that we’re exploring, that we’re passionate about, and that we may or may not already have some things in the works on,” he added. “We’re excited to get out there and tell people that the future of Columbia Care is not just being an MSO with one of the best footprints. The future of Columbia Care is being an MSO with a great footprint that is not going to rest on its laurels but is going to do everything that it can to innovate and potentially even disrupt the way that things are being done today to create the most scaled and efficient platform moving forward, and technology will be a huge part of it.”
Future Columbia Care
I was curious if Columbia Care is looking for any partnerships or relationships brand-wise or retail-wise that fit into tits new strategy and narrative. “100 percent,” responded Channon. “A couple of years ago, everybody was telling me that celebrity partnership and celebrity endorsed brands all fail in cannabis, and then we launched Tyson 2.0, and it became the fastest growing brand in cannabis. Now, they are in 20-something states with unbelievable sales and brand loyalty. They’ve since signed Ric Flair, Hulk Hogan, and I think Future, the rapper, is on that platform now. So, Carma HoldCo has a really impressive strategy with these authentic, very approachable brands that people get excited about, and we are always open to conversations about partnerships with regards to finding ways to create mutual benefit. My charge to the team is to take yourself and your ego out of the conversation, put the customer in the middle of the decision, and go from there.
“When we launched Tyson in Colorado,” he recalled, “every time we would show up and he would come to a store, there would be lines around the corner. I would personally bring posters and stuff out to people, telling them, ‘I’m so sorry he’s not going to be able to stay that long.’ I was just trying to give people something to thank them for coming out, and we would have these incredible sales days at the dispensary where people would be buying products and hats and t-shirts. It was unbelievable, and clearly shows you that customers want to have fun with it. I mean, we’re selling weed. Our consumers want to be able to enjoy some fun activations and products that they feel speak to their lifestyle. If we continue to put that in the middle of decisions we make, are we going to make every decision correctly? Nope, that is statistically impossible. But will we make most of them correctly and will we miss smaller when we miss? Absolutely, no question. So yes, we are wide open to partnerships, and wide open to launching brands with people who are passionate about cannabis. There is so much growth to be had here.”
Do local brands and cultivators as well fit into that vision? “Absolutely,” he insisted. “About two months ago, we launched in Delaware with ButACake, a small team from the legacy market that had gone through all the processes to become a legal operator. We launched some products with them, and we’re expanding them into two or three more states over the coming months. I love the small players, the local businesses, and the local cultivators. A huge part of the technology we’re investing in moving forward is to empower that ecosystem of smaller social equity businesses and licensed small operators to be a huge part of our industry.
Along those lines, I noted that the Brooklyn Cannabist menu had 19 products listed in the flower category as of that day. Was that enough of a selection? “No, it’s ridiculous,” replied a clearly peeved Channon. “We are a medical operator in a legacy infrastructure in New York, that has been in the best position to be the most scaled basic provider of products in New York. The Riverhead facility that is sitting out there on Long Island, ready to go with 800,000-square-feet under glass, could be putting out incredible high quality diverse products that are safe and tested and fully compliant. Instead, we are still a medical provider in Brooklyn growing a small subset of what we could be because we can’t participate in the wholesale market yet by regulation. And in New York City, you’ve got a couple handfuls of real dispensaries and over a thousand fake ones.
“This is what crushes me right now because I am from New York,” he continued. “My wife and I relocated about three years ago from New York City down to where we live now, just outside of Atlanta, Georgia, and when I get asked by friends where they should go shopping, I’m like, ‘Here are five places that they can go shop. Everywhere else, don’t touch it. You don’t know what that product is.’ I love New York City, there’s no better city, but we have done a massive disservice to the residents of New York for not making state compliant products available. We’ve done it all for the sake of politics, and it’s just really tough to see.”
In light of these New York headwinds, what is Columbia Care’s retail strategy in the state? “Just continue to do the best job that we can to service the patients, and make sure that they don’t feel like they’re taking a backseat to the craziness that exists outside of those four walls,” said Channon. “From there, be prepared for whatever comes next from a regulatory point of view. The most immediate opportunity is getting Riverhead planted and starting to get products into the New York market. I believe we’re all expecting wholesale participation to come by the end of this year.”
Channon added that he wanted readers to take away a very specific message from the Columbia Care of today. “We’re excited,” he said. “There’s still so much negativity around our industry right now from an investor point of view, but this is an industry that is going to conservatively triple in size over the next three to five years. I don’t see a whole lot of other things outside of AI that are going to have that sort of continued expansion at scale for an industry that’s already 20-plus billion dollars. I don’t see there being a whole lot of other things out there that you can look at and say, ‘Wow, I am watching something get invented in front of me.’”
It reminded him of the very early days of social media when he was part of a startup team that wrote the first real time API for the back end of Facebook’s newsfeed. “We saw the world changing in front of us literally. And then I spent the better part of a decade on Madison Avenue, building big data systems, working with every big brand and agency you can imagine helping them embed advertising money. It was eye-opening because we saw a shift in advertising, and a shift in human communication when Facebook went from moms looking at pictures of their kids to then being the largest display network on the planet.
“So, when I look at cannabis, where else other than an Apple Store can you walk in and see a grandma and a young 20s and a 35-year-old working individual waiting in line,” he added. “You see all walks of life, and everybody’s in there because they’re excited to try something new. It’s an opportunity to be a part of that sort of change, and I think we lose sight of that sometimes in this industry. In a sense, we’re competing against ourselves, but there’s so much to be creative about and there’s still so much opportunity.”
And who knows, dispensaries as we know them may have a shelf life that gives way to new retail paradigms one day. “When you go to Brooklyn for the first time to check out our store,” said Channon, “ask yourself, ‘Does this feel like a dispensary or does this feel like a space that would be easily converted into a normal retail experience with the movement of a couple of things but without any major investment in the infrastructure?’”
Even assuming that is so, why should someone travel to Columbia Care’s shop when many of the same basic products may be available at a store closer to them? “I think there has to be something that you connect with in the platform, and that may be a little bit different for everybody,” responded Channon. “I’m not trying to cheat my way out of this, but I think there has to be something that you connect with in that retail platform that makes you feel comfortable, and that makes you feel like there is a connection to that space beyond just the product. Because, to your point, a lot of the products are very similar, and in a mature market we retail third party products, so you can also get the same thing in a lot of places. What makes those spaces different is the authentic connection that you have with the people working there, with the technology and the systems that empower education, and product selection and discovery, and it’s the same with any of the other architectures that we put in place that ultimately try to help make buying easier.
“That’s it,” he added. “Why would you go to one liquor store versus another? Why would you go to Publix versus Kroger? Why would you go out of your way to go anywhere? It has something to do with what I call the Cheers factor, which is where everybody knows your name. Sometimes you just want to go somewhere where you know the bartender, and he’s like, ‘What’s up, man? How have you been? You want to try that thing you had last time?’ There’s something to be said for that. And sometimes you just want to go somewhere where they make it easy for you to get in and out, you know where things are, and you feel comfortable with that. However you want to look at it, you’ve got to go above and beyond to create those moments that are differentiated, because in our industry you will be able to buy weed just about anywhere. That’s the truth.”
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