Cresco Labs and the state of institutional cannabis investing Fewer than 95% of investors today are able to invest in the cannabis industry. Cresco Lab's SVP of Investor Relations, Megan Kulick, sees this as one of the most exciting opportunities for the cannabis sector. Megan joins Vangst CEO Karson Humiston to discuss the state of institutional cannabis investing over the past five years as well as offer predictions going forward. Megan discusses her own career path and how she ended up being an executive at some of the largest multistate operators in the country. Produced by PodConx Proud To Work In Cannabis - https://podconx.com/podcasts/proud-to-work-in-cannabis Karson Humiston - https://podconx.com/guests/karson-humiston Vangst - https://vangst.com/ Cresco Labs - https://www.crescolabs.com/ Megan Kulick - https://podconx.com/guests/megan-kulick
Cresco Labs and the state of institutional cannabis investing
Fewer than 95% of investors today are able to invest in the cannabis industry. Cresco Lab's SVP of Investor Relations, Megan Kulick, sees this as one of the most exciting opportunities for the cannabis sector. Megan joins Vangst CEO Karson Humiston to discuss the state of institutional cannabis investing over the past five years as well as offer predictions going forward. Megan discusses her own career path and how she ended up being an executive at some of the largest multistate operators in the country.
Proud To Work In Cannabis - https://podconx.com/podcasts/proud-to-work-in-cannabis
Karson Humiston - https://podconx.com/guests/karson-humiston
Vangst - https://vangst.com/
Cresco Labs - https://www.crescolabs.com/
Megan Kulick - https://podconx.com/guests/megan-kulick
Megan Kulick: [00:00:00] Hi I'm Megan ick, and I'm the senior vice president of investor relations at Cresco labs. And I am proud to be working in cannabis because I strongly believe in the health and wellness benefits of cannabis. And I believe legalization is long overdue. And importantly, I love the idea that this new legal industry is developing.
Upon a foundation of values that I really believe in like social justice, diversity and inclusion. And I think this is really unique to cannabis. And while it's really challenging in many ways, it's a hundred percent worth the effort and I'm just really excited to be here and be part of getting it right.
Karson Humiston: Hey everybody. And welcome to the proud to work in cannabis podcast. I'm your host Carson. Humiston the founder of angst. And today we are so excited to welcome Megan CUIC who is the senior vice president of investor relations at Cresco labs. And this is definitely not Megan's first rodeo in terms of IR or even IR in cannabis.
She's been with some of the leading [00:01:00] cannabis multi-state operators in investor relations, and we are all so excited to have her here today and to learn a little bit about her background and get an update on the state of the industry and investing in the industry. So, Megan, thanks so much for being with us today.
Welcome.
Megan Kulick: for having me. I'm excited to be here.
Karson Humiston: Great. Well, let's jump right in Megan. Why don't you tell us a little bit about your background pre cannabis, and then we can transition into how you decided to move into.
Megan Kulick: Great. Well, , I spent many, many years, too many to count over 25 25 years on wall street in sort of the traditional wall street roles of analyst, portfolio manager, et cetera. And after two and a half decades of doing that decided that I was really ready for something new and wanted to kind of move on to my second act.
At that point I had been. Sort of watching the cannabis industry from the outside. My husband had entered the [00:02:00] in industry a a couple years prior. We had been making some personal investments in the space and I just thought it was a really exciting and fun unique industry. At that time, this was 2018, very, very early on in the institutional investment cycle for cannabis.
So I thought, wow, I can bring something to this industry. I've been on the other side of the table for a long time, talking with companies, talking with investor relations. And I really felt that with the amount of institutional capital. What I thought was getting ready to flow into this, into the sector in 2018 that I could bring something to the industry in terms of trying to professionalize and really up the The game for investor relations in in cannabis.
And so I said, oh, this is the time. I, it really kind of kicked off, I think when constellation made their initial investment in canopy growth. And I, I thought that was a, a, a sign that the industry was as was really maturing [00:03:00] enough for me to kind of make that leap and, and start phase two of my career in an industry that I really loved.
Karson Humiston: And so at that time, talk to us about how you went about the process. , you haven't been with Cresco for that long. So talk to us about the first company you joined and then , how you've moved , up to Cresco throughout your journey.
Megan Kulick: It's been an interesting journey. At the time, obviously there was a lot of smaller companies that were just in the process of starting to go public. In 2018 at, I'm based in New York. So I kind of wanted to look for a company that was that was based in New York as I was, getting myself into the investor relations space for the first time and trying to dig really deeply into an operating business.
I met the team at IUs around that time. I'd gone out to the MJ biz con convention. That fall to really kind of dig in and meet some people. And I, and I met them there at the time they were getting ready to to close on a really big transaction. The in largest at that time, public to public merger , in the space where [00:04:00] they were buying MPX.
And I'd met the team there and thought it was a really great opportunity for a number of different friends first to get involved in a, in a. Pretty significant merger from the very beginning, but also to meet some really great operators in the industry , with the team, from MPX coming in some really strong women in the industry
and I was really excited to work with that group. And they were based in New York, so it kind of checked all the boxes. So I was really excited , to take that role
Karson Humiston: For viewers that might not know 20 18, 20 19, we saw a lot of companies that were going public. Can you talk to us a little bit about , why it wasn't as straightforward because of the cannabis industry or why it isn't just as straightforward as going public and how these companies.
All went about doing it in the 20 18 20 19 period, because , one thing that we've realized in doing this podcast is a lot of people are so new to joining the industry that 20 18, 20 19, when this was all happening. And , it was really the, a big deal at that time.
People are very unfamiliar with how it all went down.
Megan Kulick: There were several catalysts during that [00:05:00] timeframe. I think that really attracted a lot of capital to the space. I mean, I think the most important thing at the time was, really Canada in Becoming the first, major country to allow cannabis legally and that really brought on, companies like canopy growth and Tilray and all of the Canadian companies that attracted.
Institutional capital in the us because those companies were allowed for the first time to list their shares on the us exchanges. So institutional capital in the United States for the first time had an opportunity to invest , in cannabis companies.
And while they were Canadian companies , it really brought a lot of attention to the industry. And what the us operators realized at the time was that while they couldn't list and raised money in the us, because it was still federally illegal in the us, and it still is that the Canadian markets.
, because it was legal in Canada, that the Canadian markets would allow listing and [00:06:00] capital raising within their borders. So a lot of the us companies were able to go up and list , and raise money on the CSE and this allowed for. A, a lot of companies in the sector to raise capital and start to buy up licenses at the same time.
When, if you think about it in 2018, there was a huge wave , of states that were basically allowing both medical and recreational use for the first time in issuing licenses. And so. Companies needed to raise money, to build out those operations. And it was very difficult to do that in the us.
So we had to turn to the Canadian markets to do that. And this was all happening around that sort of late 20, 20 18 timeframe. And when constellation brands made their big investment in in canopy growth, Really drew a lot of attention to the sector
Karson Humiston: if you remember, back to that time, it was like , a green rush at [00:07:00] the end of 2018, beginning 2019. And , there was so much interest. So for you to be able to be. part of that. And then I think it would be great if you could share with the audience around what happened next in the late 20, 19, like a year later, I remember walking around MJ Bisk and people were calling it the can session.
Megan Kulick: everything takes longer than you think it's going to take. From the standpoint of regulatory changes from both at the federal level and state by state everything just takes longer just because the appetite is there from the consumer and the patients, and even the, from the investor's standpoint, just because the appetite is there and every, people want.
Industry to work and want this industry to be successful. You're still dealing with regulators in every state that you're participating, and you're still dealing with regulators at the federal level that that make it very difficult for this industry to move forward in a timely manner.
So I think what happened was there's time. And the delay , in moving forward on a lot [00:08:00] of fronts, including at the federal level, in terms of the changes in the federal regulations that would allow Institutions and banks to really start to commit capital into the sector, which forced companies like IUs and other players to rely on capital.
That was very, very, very expensive capital. You, couldn't go to regular banks and just get, small business loans, et cetera. You were dealing with very high interest rate debt. longer. The process took to turn those businesses into real operating businesses.
And , you were burdened with the cost of that debt. For a lot of the smaller operators it became highly burdensome and. A difficult situation, particularly toward the end of 2019. When some of those debt holders you know, took control of some of the assets.
Karson Humiston: . So you were with IIS through a turbulent cycle, right? From the boom at the end of [00:09:00] 2018 into beginning of 2019 into the can session. And then , we go straight into March 20, 20 C, where the entire world was rocked. At banks, we were always saying, we're really getting hit with a, , a double storm with the can session. And now COVID walk us through, , how you and the industry were impacted , during March,
Megan Kulick: , March of 2020 was a challenging time. When I left Diane, this one thing I did know. Was that I wanted to stay in cannabis.
cannabis.
despite the roller coaster that was IUs, I met some wonderful people. I loved the industry and I knew that , I was not ready to leave the industry, that there was just too much going on. And, and then to see how the industry survive, not only survive, but thrived during COVID in, in terms of, the way that people realized that this was , a product that was here to stay and
, it was a necessary product in so many ways during COVID. And the boom that we [00:10:00] saw , in terms of uses in co during COVID, I really felt like, okay, now we're in the cycle where people realize. That this is a great industry and we're gonna come out of , , this cannabis recession and the industry is gonna finally take off. So I was really excited to stay in it. I knew I wanted to stay in it. I met the team at air. I was really excited to join them. So I started there in August of 2020 after basically stayed at home for three or four months , and not doing anything during COVID I got the job.
I was so excited and I jumped back on the train. It was me and like two other people commuting to the city every day. And I was so excited to be back at work. So it was great. And I really enjoyed my time at air. I think the reason, I moved on from air was. I had an opportunity to join Cresco and, Cresco is a company that I have admired in the industry for a long time.
And when the opportunity came to join them, I just felt like , I had to take that opportunity. You know, I was looking for, for sort of the next bigger [00:11:00] and better opportunities, both professionally And also to join a platform where I really think that the company, truly lives up to the promises that they make in the industry in terms of, both professionalizing the industry, it's commitment to leadership.
But also in the areas of social justice, diversity, and inclusion, where I think that Cresco labs has really set a standard. So when I had the opportunity to join them, , I just jumped on it.
Karson Humiston: Both incredible multi-state operators, both have been great to work with from banks' perspective. And particularly at Cresco, I remember meeting Charlie when, K Cresco was just kicking off and to, so to see where it is today, you can only imagine where they'll be five years from now. So super, super exciting journey.
, we touched on what happened in 20 18, 20 19. Then we touched on what happened in 2020 cannabis goes from in, in some places illegitimate and illegal to essential. And , from a lot of our perspective, okay. Cannabis is [00:12:00] here to stay. Now is the moment to, to get in and double down in this industry.
Can you walk us through from an investment perspective, particularly with theos, what has happened in 2021? Because we've. Stock prices come down so materially and for a lot of folks, it's like, doesn't make sense, right? There's consumers using cannabis, more people are coming into the market.
The economics of these businesses are strong and yet it's not performing well. In the public markets. , can you give us your perspective on that?
Megan Kulick: Yeah. I mean, it's a question, obviously that in my role, I get every day and, I understand the frustration of the investors when you see. What I would consider to be sort of good news from a fundamental standpoint across this sector in terms of usage patterns and, and growth.
And then all of this, the stocks just don't reflect that. So, the, the biggest issue really in this sector is, again, going back to my earlier comments, just, just that things take longer from a regulatory standpoint to change. . and what we need in this industry [00:13:00] is real regulatory change at the federal level.
Because that is what is going to allow real institutional money and institutional capital to flow into the sector that we haven't been able to see. up to this day. So we need the ability to get regular banking services. We need to be able to get , cost of funding and cost of capital.
That is that's reasonable. We need to be able to have institutional investors enter into the sector. And that includes across all aspects of institutional invest, pension funds, mutual funds, et cetera, , not just the very limited pool of capital that supported the industry to date, which has been just a lot of high net worth individuals, family offices, some very dedicated hedge funds, which have been fantastic supporters of the industry, but it's a very small limited pool of capital.
And then also retail investors who have also been very supportive of the sector. But we need real institutional support. And in order to do that, we need uplifting. We need to be able to list on the NASDAQ or the New York stock exchange and to get off of [00:14:00] some of the smaller exchanges, like the CSE that we're on, where we have, liquidity issues, there's custody issues, a lot of the Prime brokers will not custody these stocks because of the federal illegality.
So all of these things will change. If we can get safe banking or something like safe banking to pass through in DC. And this has been going on now for. Two plus years and investors are tired. They're fatigued. Those that are already invested in this space they've made money and they've lost money and
they're tired of waiting. I think they've just decided they'd rather sit on the sidelines and know for certain that the next time they come into the sector that change has happened. And I think , from the standpoint of the, the retail investors, it's the same thing. It's fatigue.
It's kind of chasing that last data point that they see in the market. And the last data point is things are slow. We've seen delays, delays, delays, delays, and there's just, no real catalyst [00:15:00] from the standpoint of regulatory. Change that has people rushing back in to the sector,
Karson Humiston: I think people are rightfully so frustrated in including even operators, like, you know, Charlie know, Charlie
and I went to. DC in March. And we were going around and lobbying and speaking to various representatives about safe banking and you answered the same couple questions. And one, one thing that I found to be a little bit discouraging was that you'd speak to somebody and they would say, well, safe banking only will help the big banks.
And it's like, well, actually, no safe banking is a public safety measure. Right? You have businesses that are operating in all cash, which is dangerous to employees. So you have that, you have maybe someone that's a small business owner that doesn't have access to the pool of capital that you were just describing such as a select group of hedge funds or wealthy individuals that can't get a small business loan.
And so in addition to safe banking, helping everybody. I, I think , it's wild , that there's [00:16:00] still any pushback that in states where cannabis is legal, there should be bank accounts for the safety of the industry. So what , I would say, and I'd, see if you agree, Megan, but anybody that's listening right now, what, what you can do is you can help encourage your local politicians to help get safe banking through, to help cannabis business, be able to operate more successfully.
Megan Kulick: 100%. It's a safety issue from a cash standpoint. It's a people are so focused on, social justice and reform in this industry. But you can't write the wrongs of the past. , if. People
can't
open up their businesses and get loans , and open up their stores.
And, without proper funding and proper access to loans. That's never gonna happen. So all of this is all intertwined and I think that the politicians in DC need to recognize this and access to capital is hugely important to everybody in this industry.
And I think that , once we have that, you [00:17:00] will see a very different cannabis sector in a very. Cannabis market. But I think the most important thing for people to realize is that this isn't about the fundamental demand for cannabis products and cannabis goods.
Demand is there and we're seeing more and more regulators realize that this is what their constituents want. The train is left the station. We are moving toward legalization faster and faster every single day in this country.
So the regulators at the federal level need to catch up and they need to catch up with But, and things like banking and tax treatment and everything else, because this is an industry that's not going away. And it is despite all the hurdles that we've had to deal with in terms of tax treatment and financing costs, et cetera, an industry that is so much stronger today than it was two years ago.
And so much more in the mainstream than it was two to three years ago. And [00:18:00] it's so exciting and so important of as an industry and the regulators need to realize that. And I think that , they are getting there. We're starting to see obviously more and more talk about it on both sides of the aisle.
I think we're closer to reform than we ever have been. It didn't happen as fast as anybody wanted it to. And I'm sure that there's a lot of frustrated investors out there saying, well, we've been hearing this now for two years. I get it. But we are closer today, I think, than we ever have been. And more importantly, we have a stronger industry today than we've ever had.
Karson Humiston: sounds to me. Like it's a great time to get into the industry if you're not already. I mean, one thing we always say to it to potential. people that are joining the industry as employees, is that the industry is as small today as it's ever going to be. And so if you join a company, whether you're joining a company as.
Head of investor relations or you're joining a company as a dispensary store manager. You work in [00:19:00] the industry , for two years, and there's gonna be so many things that happen from two years from today. That E even people that are as, as entry level, as entry level growers, we've seen people that have joined the industry at $15 per hour.
They work hard for a year and they're promoted to lead grower from there they're promoted to head grower. And from there they're getting an opportunity. Relocate across the country to a brand new licensed business and run the whole facility like that just doesn't happen in any other industry. And I think
you can take that same statement and apply it to in investing as well. Like the industry's never gonna be as small as it is today. And so common sense tells you that this industry is going the right way, the demands there , and there's great people con continuing to join. So my, my last question for you is just looking forward to the.
Five years. What are you most looking forward to for both your career as well as the industry at large?
Megan Kulick: What I'm looking forward to my career is just being part of this great industry and being part of this great company. There's [00:20:00] so much excitement ahead. And. I really love the idea that we are essentially building an industry from the ground up and we're still in the very early innings of it.
And I love being a part of that. I love introducing investors to this industry for the first time. , 95% of investors can't even touch this industry and haven't even looked at it yet. And when I take new investors on tours of our facilities and see the, just the awe in their eyes, when they see what's behind this sector in terms of the science and the investment and the scale and the automation and the human talent
that's behind growing this wonderful plant. It's incredible. And then you take them to the retail store and they see just the incredible diverse flow of customers and patients that walk through our doors. And you realize that this is a plant. This is a product that can touch everybody. And , it's an incredible opportunity both from the standpoint [00:21:00] of the patients, the consumers, the employees, and also the investors.
And I think when people see that with their eyes , and I love to be a part of that, it's it's just really exciting.
Karson Humiston: That's awesome. I just got inspired hearing you say that, and I can only imagine walking a. Potential investor through the Cresco facility in Illinois. , it's completely unbelievable. And like you said, 95 of percent of investors can't touch the space, , and are, are largely unaware.
If that doesn't get you excited about the potential investment opportunity, I mean, we, we've only tapped 5% of potential investors, so super excited for you, Megan. I think you are gonna get much, much busier as more investors move into the space, and we really appreciate you being here today with us.
So thanks.
Megan Kulick: Great. Thanks for having me.