‘Let’s Go All In On Cannabis’ Grown Rogue’s Obie Strickler & Josh Rosen (undefined:GRUSF)

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CEO and founder of Grown Rogue (GRUSF), Obie Strickler and Chief Strategy Officer, Josh Rosen discuss their paths in cannabis and why operations matter more than scale (1:00) (metrics that matter most (12:30) Uplisting and public vs private (20:40) What should retail investors be paying attention to? (24:40) On the price of cannabis (34:40)

Transcript

Rena Sherbill: Hello, everyone, and welcome back to the Cannabis Investing Podcast. I don’t know if my guests know it, but we have been on a hiatus of sorts as we suss out the cannabis industry from the sidelines a bit in the past year.

But over the past few years, I have been really wanting to and I am very excited to speak to Obie Strickler today. He is the CEO and founder of Grown Rogue (GRUSF).

And Josh Rosen, who has been on before, I believe in our very last episode, actually, with Jerry Derevyanny. And he is the Chief Strategy Officer at Grown Rogue.

Gentlemen, welcome to the Cannabis Investing Podcast and Seeking Alpha. It’s great to have you.

Obie Strickler: Appreciate you taking this on and glad to be here.

Rena Sherbill: It’s great to have you. I thought a nice place to start since you both have had different routes and it’s been a eventful, non-eventful, I don’t know, interesting, not interesting, volatile for sure, somewhat confusing for sure time past few years in the industry.

Obie, perhaps we’ll start with you if you could tell us your journey here. And then maybe what you were thinking about the industry, let’s say a few years ago, and what you’re thinking about it now.

Obie Strickler: Born and raised in Southern Oregon, parents moved out of the big city down in LA up to kind of a northern tip of the Emerald Triangle. So cannabis has been in the fabric of my life and this area since I was born.

I just did an op-ed in High Times that really talked about that experience and how it was brought up, but got exposed to cannabis flower very, very early in my life. Biggest thing was always finding consistency and supply, right?

We were lucky to be where we were, and so generally we had good flower, borrowing from my brother, borrowing from my dad, borrowing quote unquote and then quickly realized the way to get consistent supply was you had to grow yourself. So started growing at a relatively young age, was still an athlete, I played college basketball, so it was these dual paths that we took.

Started the medical business officially in 2004 or five, I think our first year in the Oregon market and then was pursuing some of my natural resource kind of work. I have a geology degree, in mining project development and things like that. Traveling a bunch and then as legalization started to come through, call it 2014-15, a project I was working on was kind of coming to its conclusion where I could assist with it.

We still had our medical business going, my wife and I, and we said, let’s go all in on cannabis and so we went all in on Grown Rogue, I think started at late sixteen, early seventeen in Oregon and then it’s just been, I wouldn’t call it a roller coaster, but it’s been an effort since that point.

And a lot’s changed over the 20, 25 years we’ve been involved, and it’s accelerated over the last 10. And I think over the last couple of years as you asked, you’re seeing even more change as you get, medical is now schedule free, there’s work being done on getting rescheduled.

And so you just continue to see progress and it never goes as fast as you want inside the business as well.

But it’s been pretty amazing progress. So, long history in cannabis and just very happy with what we’re doing at Grown Rogue and kind of our discipline and approach for how we’re trying to build our business a little bit differently than many of the others in the space.

Rena Sherbill: Before I ask Josh the same question, what would you say your view is of the industry in like three lines, a brief word or two on on where we’re at as I guess we’re waiting for new legislation as it pertains to hemp, but in terms of what are your broad thoughts about the industry?

Obie Strickler: Still very early. as people are building their businesses, understanding regulatory environment, understanding branding, understanding where their fit is.

I think it’s still gonna be very volatile over the next few years as those kind of machinations come into play and then obviously very, very excited around, you know, where we sit and where the industry sits as a whole, the progress not only Grown Rogue is making, but the progress the industry is making in its entirety across just more and more consumers, more people being amenable to cannabis as a solution for recreational use or you know medical use.

So those would be the 3 areas I would comment on that.

Josh Rosen: Can I go in reverse?

Rena Sherbill: It’s funny, I was gonna say that you should go in reverse actually. Yes, go in reverse.

Josh Rosen: Immature which makes agility and competency more important.

And I think we we so frequently make comparisons to other industries and and try to accelerate ourselves to having like a mature supply chain in places and a mature inf a kind of ecosystem.

And just in so many ways it’s immature. And in particular, it’s still uncertain with respect to how legalization plays out.

And so to me, I kind of tie it back to competency and agility frequently and you know, having the right team.

So going back to the the starting point. My introduction to cannabis was two thousand ten when it was a ballot initiative. I’m in Scottsdale when it was a bad ballot initiative here in Arizona. And the family office that I was working for.

I’m a financial analyst by background, worked at Credit Suisse for a number of years as an equity analyst. And so that kind of bottoms up fundamental analysis is still the core rubric, which I tend to look at things. we began to look at the industry in two thousand ten and ultimately to accelerate this story, because I talk too much and going from 2010 to 2026 can take a long time. formed 4Front Advisors (FFNTF) with Chris Crane, formally started in early 2011, regulatory consultants, kind of going state to state, doing a lot of application work.

Chris had come out of students for sensible drug policy on the advocacy side originally. After that, he was HarborSide. So we had this kind of retail playbook from HarborSide didn’t have much competency nor our own skill set on the cultivation side of things, kind of in-house. and had a lot of success helping folks get licensed as the various jurisdictions came online.

And Chris was incredibly encyclopedic on which states to pay attention to and why. And we kind of marched forward with that advisory business model. Realized in in in part because of the family office that I was working for, we didn’t want to touch the plant, realized that that was a constraint for where we were trying to go and where that we thought the industry was going.

Chris, myself, and someone else acquired that business forefront advisors from the family office so that we could go and touch the plant. that was a kind of a risk constraint or risk constraint put on the business. And so 4Front Advisors ultimately turned into 4Front Ventures. I’ve always had a fairly operation centric view of the industry. And as we recognized the need to get smarter on cultivation, we eventually merged with one of the better operators on the manufactured good side and a number two flower producer in the state of Washington as well and that became 4Front Ventures, an amalgamation of partners.

I ended up resigning in early 2020 and went back to my investing roots. One of our investors was Bengal Capital. They were also seed investors at GTI (GTBIF) back in the day. They’ve been fairly aggressive in the space.

At Bengal, we ended up starting a small equity focused fund at really one of the exact wrong times in the industry. you’ve we’ve you’ve had Jerry on, my partner Jerry Derevyanny on the Bengal side of things.

We started the fund in June of 2021. I think (MSOS) just as a kind of a passive tracking, maybe not the best tracker in the world, but at least somewhat grabs industry sentiment. I think it’s down about eighty seven percent since we started our fund.

We’ve generated modestly positive returns in what’s historic level drawdown. And we’ve done it by this bottoms up fundamentals approach and largely with having I’ll call it discovered. you know, gone got Jerry and I went and visited Obie and Sarah in you know mid-late 2021. and it really spoke to kind of the core fundamental focus we take on on business on the at the Bengal side.

But really ties into this operating up operational integrity, kind of building culture, building teams, as opposed to just building assets. and really was excited that you know the kind of circuitous path that I ultimately took took me to joining more formally with Grown Rogue in February of last year, to kind of get back to the roots of just building something not ground up.

Obviously Grown Rogue has to scale at this point, but really building something that has a kind of really core culture ethos attached to it that can go you know attack what we see is a lot of growth still left in this industry. so in between that period, I was CEO at at Vireo (VREOF) for a couple of years and one of the other Bengal portfolio companies at the time a lot of in the weeds with the MSOS from a management standpoint, and then also a lot of time separate on the investing side. And now really enjoying my time with Obie and Grown Rogue.

Rena Sherbill: Let me ask you briefly, can you tell immediately and you’re both welcome to answer, but Josh, can you tell immediately the difference between asset building and culture building?

Josh Rosen: I think this industry, I go back, I’ll call it slow. I was slow to want to become publicly traded.

I was an analyst that covered publicly traded companies much larger than anything in the cannabis space years ago. Didn’t really think I wanted to be running a publicly traded company. That wasn’t the goal for me when we started 4Front and were building 4Front.

But when the access to capital opened up in Canada and GTI and MedMen were kind of the first to prove it at scale, it became a defensive move that that’s the only place that you can actually find equity capital that’s of meaningful scale.

Maybe that only maybe too strong a word, because there are some private codes that have done really good. They farms have done a very nice job of building their cap table privately and and expanding. But it was really the, you know, the path to access to capital to be publicly traded.

But the flip side of that became to me a little bit of a disservice relative to how the companies in the industry need to build themselves because what what ended up happening and you see it my and Obie gets this investor relations bias from me all the time, what you end up happening, wat what ends up happening frequently is the investor relations consultants and the investor relations professionals start to get up get control of the capital markets narrative.

And then you start to run your company for the capital markets narrative more than you start to run your company for the building the business side of it.

And the building the sustainable business side of it. And that is a really slippery slope from my vantage point in terms of what what your core ROIC is on your CapEx, and all those things when you’re trying to feed something that is externally focused as opposed to something that is internally focused, is this my long winded version of asset strategy, which is let me put something great in the press release because this is the asset that I need.

And the people strategy, which is let me make sure if I’ve got assets, let me make sure I’ve got the right weed hustle attached to that asset and I know that I’m gonna execute that asset in market. And not that both can’t be successful and yeah, they’re different different different versions or are have different levels of success, but that that operational piece, I’ve probably always been biased, probably maybe too much to the operational piece. and not as much to the let me just make sure we’ve got this scale for lack of a better term.

The scale is what matters. It’s like, no, the operations matter.

Rena Sherbill: Well, I think that’s also been proven out as the years have gone on, it seems. Obie, what would you say? We’ve talked a lot about Grown Rogue. We’ve also talked to Grown Rogue and the emphasis has been not on waiting for federal legalization.

Last time was a couple of years ago and the focus was on cash on cash returns. What would you say you’re mostly focused on now? What would you say, starting from where you sit and then over to Josh, what are the broad strokes that you’re focused on and then what are the more particular metrics that you’re focused on?

Obie Strickler: I think broad strokes, right? Continuing to manage discipline growth. you know, we find ourselves at I wouldn’t call it like an inflection point, but this opportunity set that sits in front of us from the foundation we built around what we really focus on, which is our customer and we’re a flower forward company and within that landscape you’re seeing just a tremendous amount of opportunity.

And so it’s taking advantage of those, like we are our recent announcement in New York, and being willing to stretch a little bit while we maintain kind of our, you know, our focus on team, bandwidth, not getting out in front of our skis. But also again, being aggressive when we need to be, because there is, you know, a lot of opportunity that still sits in front of us as we continue to expand.

I think more tactically, you know, it it’s maintaining that culture. And we talked about that a little bit. Everyone talks about having good culture. They talk about the importance of it, but who actually does it, you know, who is showing presence, who is being there with their teams, who’s empowering them.

I think that’s one of the things Grown Rogue has done a really, really good job of is ensuring that, you know, we put the right people in the right spots and make sure that they’re, you know, held accountable but empowered to go do their jobs and be excellent.

And then I think one of things that’s really missing from this space is the passion. Grown Rogue got stuck into this very early. We were chasing acquisition opportunities before we were ready. We were chasing products that we didn’t really care about, thinking about revenue and growth. And when we got back to our core of like, I grew up growing flower and smoking flower, that’s what we’re passionate about.

We still love that. And bringing that through kind of your business, I think, ensures you keep the right alignment with your team and kind of your business objectives.

Rena Sherbill: Josh, before you answer, if you wouldn’t mind, Obie, I read an article recently that you were saying that the industry got it wrong about flower. You describe yourself as a flower forward company.

A, if you wouldn’t mind reiterating your point, and what else would you add to that or note, or especially encourage consumers or industry observers to to note there?

Obie Strickler: I talked about in that article around the big aha moment for me. I think everyone when they started in cannabis and it was moving towards this legalized kind of framework, everyone was looking for the new consumer. And they were kind of ignoring the real existing consumer. And so you just heard from across the spectrum like flour was gonna go extinct, like no one was gonna like it, and part of that is true, these other form factors are gonna start, you know, competing with flour in terms of convenience.

We’re leaning into some of those with pre-rolls, and we have a small vape cart thing that we’re launching, but I don’t think they really quite appreciated the true kind of consumer in the industry, right?

My big aha moment was when I was you know touring with my sister-in-law up in a dispensary in Portland. She was talking about, we went to the shop, right? And she’s talking about the light fixtures and the cabinetry and the layout and the design and all these things where I’m like, my gosh, you’re perfect. This is exactly who I’m looking for, this new customer, right? Disposable income, that target demographic we all thought.

And I’m looking at the product going, like, God, it’s not very good. Like, this stuff’s awful. We can definitely compete. We’re gonna be great. Then I get out of there and we start talking about like consumption. She liked vape carts. And it’s like, okay, how many vape carts do you smoke? I don’t know, maybe one or two a year.

And so that that demographic, I’m not proposing like a high consumption rates or anything like that. But you’re just not really gonna build the business or an opportunity. You’re not really gonna relate to a customer that has that limited amount of kind of consumption of a product inside of the organization they’re trying to put forth and build. And so, we’ve just watched over the years. People say flower is gonna go down. I think between flower and pre-rolls across the market, it’s still well above fifty percent of total purchase.

And that’s right in our wheelhouse. And so we think it’s a big part of the market. We think that’s where you get the best expression, right? We hear a lot of comments around people trying beverages or edibles or vape carts. And a lot of them come back to flower because you get the full assets, right? You get the full terpene expression. so your experience in a full flower kind of format, from what we’ve heard and my own experience is it’s a much better experience that you can have when you consume cannabis.

Rena Sherbill: Josh, if you remember my last question, basically broad strokes, what you’re thinking about strategizing around Grown Rogue and then the particular metrics that you’re focused on.

Josh Rosen: I think I’m gonna build on Obie because to me, so I’m not a consumer. and the the passion and the culture is what attracts me to Grown Rogue regardless. And I think yeah, what I find so much personal satisfaction in is just bringing people onto the grown rogue team that then feel properly supported and they they come with that passion, even if I don’t necessarily have the product passion, I have the people passion.

So it’s really it’s it’s one of the things that I’ve really enjoyed, but I think that flower forward dynamic to me is, you know, it would be referenced New York. Like New York was stepping into a distressed opportunity. The ability to go where I think a lot of the industry doesn’t wanna go as much, this dynamic of the expensive infrastructure that’s been built.

I think we’ve described it in the past at Bengal as the hardest part of the industry, the consistent production of quality flower at reasonable scale is the hardest part of this industry and from an execution standpoint. And that dynamic is one that I think there are we’re not the only company that does it right.

There are we have peers. but that dynamic, I think, is playing out time and time again at various paces within these these state regulatory environments that we have probably what it’s in part what played out in Canada. A little bit of an overbuilding, a little bit of hype.

You gotta come bring it back to the fundamentals, and the fundamentals are quality production is the engine of the industry. And so to me, that concept of how do we apply this competency in the most successful in the places that we’re going to get kind of outsized gains for the capital that we have to invest.

So yes, simplistic going back to the cash on cash returns comment that you made about Grown Rogue’s legacy history. Very consistent approach to what type of returns can we generate from these collective opportunities.

And New York was a was one high on our list from when I stepped mentioned a few minutes ago. I stepped in February in a much greater capacity with Grown Rogue. And really when Obie and I were talking about what markets are attractive and what opportunities within this distressed landscape are are attractive, finding the right entree into New York was particularly attractive for Grown Rogue’s skill set competency.

And I think to wrap this part up. There is a tremendous amount of opportunity out there. There continues to be a tremendous amount of opportunity out there. This industry’s growing.

For Grown Rogue, and Obie referenced the bandwidth, we have a lot on our plate for the next six, twelve, eighteen months. I don’t think you’re gonna see grown rogue do something of New York size again in the next quarter or two. We got a lot of work to do, and that bandwidth and that ability to execute against it is is super, super important.

The benefit of of these additional assets that we map talent against is we’re we’re building the talent base as well. we’re building the network. And some of those dynamics have a flywheel dynamic attached to where you get people that enjoy working at Grown Rogue in reference, the next hire becomes easier. And that side of the equation I think is something that will allow us to map human capital against these these opportunities as we go.

But we’ve got a lot on our plate right now. Really excited about it.

Rena Sherbill: You talked earlier about your reluctance, or perhaps your aversion to going public or wanting to be at a company that was publicly traded. We’ve seen uplistings occur this past year, Trulieve (TRLV) among them.

What would you say kind of is an advantage of being publicly traded these days? What’s your view on uplisting? And what would you say is a disadvantage of being publicly traded these days?

Josh Rosen: I was a philosophy major in college. So I I like to take start at 10,000 feet. So at 10,000 feet, being public versus private is largely a function of, you know, do do you have better access to capital, cost of capital? Those types of dynamics come into play.

Now, the clear negative of being publicly traded that I don’t think anyone would argue with is it costs you money, right? There’s a there’s an inherent extra compliance cost, extra cost attached to running a PubCo a good chunk of the cannabis companies, particularly in the early days, if not for the fact that it was the place for access to capital, would not have chosen to come public because of those extra costs that come with with the security side of the equation and the listing side. I mean so I think that that’s one piece.

To me, once you’re public, uplisting, like being in a more liquid environment, you know, doing things that are f shareholder friendly, all for it. Like I think it’s a great catalyst that truly got up listed.

I think it’s great that GlassHouse (GLASF) got uplisted. Maybe Obie and I talk about this like we don’t need to be the first mover on those things. Like we don’t need to we don’t need to be the pioneer when it when it comes to those things. For us, we’re going to do the things that we think are supportive and conducive to uplisting ourselves at some point, should schedule three allow that for adult use touching companies.

But that’s not our highest priority. And this goes back to the comment about running it like a private company. I mean, to me, I think private companies and public companies should all have very similar mandates in terms of what they’re trying to do to drive shareholder value. and so I don’t have a huge distinction between whether we were private or public, we would have been chasing this New York deal. whether we were private or public, we’d be going into New York or excuse me, Minnesota and so the distinction I think is it’s a cost of the business.

If you get the cost of capital right, it can be particularly helpful. And I think the other last piece that I’d add where it where it could be particularly helpful, and we’re seeing it play out right now with with Curaleaf (CURLF) and Aurora (ACB), it’s a currency.

When you’re a listed currency, at least there’s a market value you can point at that’s third party derived, as opposed to when you’re a private company trying to buy companies, you’re always you know defending and trying to figure out what relative value is. We have, whether we agree with it or not, we have a value every day.

And it does provide a little bit more of a you know of a currency that’s that’s accepted for transactions in yeah, in the future.

Rena Sherbill: Obie, anything you would add to that? Or your view of up listing?

Obie Strickler: I think Josh said it really well. he’s very experienced and thoughtful around when it comes to these things. so I echo a lot of what he said. I mean we did not intend on going public, but that was the path that we saw that was access to capital, even though that was still fraught with challenge and difficulty. but I think the most important thing is, you know, you

it’s really nice to have liquidity and it gives shareholders a little bit different kind of opportunity and rather than being in a private company. But the business fundamentals should not change, right?

And that’s really what Grown Rogue’s been focused on from the very beginning. I mean we chased that a little bit in like 1920 and then realized like none of that matters if our business is not based right and you don’t get the foundation and don’t have the right KPIs and other kind of growth metrics inside of that.

And so we spend a lot more time focused on our customer and our business and internal business, but ultimately that’s working for the customer. Obviously prepared to take advantage of, uplisting potential and again it goes back to my earlier comment around it’s growth in the industry, it’s acceptance of this plant that we’re pushing out. And so all very positive things.

And you know, we don’t want to be the pioneers, we’d rather be the settlers when it comes to some of these pieces.

Rena Sherbill: Well, that first mover advantage, I’m not sure that that’s proven to be an advantage in the cannabis industry. I hear that big time. What would you what would you say to retail investors? What would you highlight for them, either specifically from Grown Rogue and or what would what metrics would you encourage them to be looking at at this point in time in the industry, investing in the industry?

Josh Rosen: I think first of all, I mean we we are really intentional about providing detail at the state level at Grown Rogue and our operating KPIs. Like hold us accountable to what we hold ourselves accountable to from an internal standpoint. And so you know that transparency we try to put out into the investment community so that they can figure out what’s going on inside the business, not just the things that we want, surface level want to tell you.

That dynamic mixed with you know looking for growth, where where is growth going to come from and how do you how do you generate growth to take take advantage of this opportunity? I mean, Obie was referencing his aha moment with respect to flower and the market dynamics. And I always go back to the fundamentals that we mapped back in 2010, 2011, 2012, which is, yep, there are going to be new cannabis consumers, but the disproportionate amount of the growth is just the illicit market coming online.

And doing the things that help make that happen had had been the the the biggest push for me personally in terms of where my cannabis career has gone and what we focused on. I think that dynamic is a big part of what’s behind the scenes here is just that that original flower customer is still a big part of the business and we’re mapped really well against it.

Rena Sherbill: When talking about valuation, like doing valuation, proper valuation on cannabis companies, that’s something you and Jerry were talking about last time that is so difficult to do. Would you say that that has improved in any way, shape, or form? And what would you again encourage retail investors to be thinking about when they’re approaching that valuation process?

Josh Rosen: Yeah, and I realize I didn’t answer your question, your last question all that spot on, with respect to retail investors specifically. And I think and this this one dovetails right into it.

So as someone who’s spent a significant amount of time and energy, excuse me, on valuation and both within and with outside of cannabis, I think one of the fundamental challenges is I get industry comp sheets from a couple of the investment banks in the industry.

And just looking at the bigger MSOs, what people like to refer to as the tier one MSOs, one of the inherent challenges is like this industry because of regulatory creates these big uncertainty cliffs. And so one of the big uncertainty cliffs is what happens with uplisting and 280E exposure.

And it’s somewhat of a binary thing. I’ve heard some people speculating that maybe it’s like a 50% write-off or they settled tax bills. I mean, I there’s there’s some hybrid solutions here, but if you looked at balance sheets and looked at GTI (GTBIF), which doesn’t have as big on a relative basis, it’s big a UTP balance. They paid taxes, I think, through 2024 at least, with respect to 280E. That balance sheet, if you include UTP taxes, UTP as part of a balance sheet.

When you’re doing an enterprise value calculation, it greatly influences what EBITDA multiple you’re actually placing on the business. And it’s a it this is a very complex regulatory issue, right? Like it it you’ve you you you see people speculate all the time about the different solutions that might come into play here with respect to how 2AD gets treated retroactively. Yeah. Should be clean on a go forward basis, which is nice. You can look at growth and you can say, okay, if schedule three on the medical side, we’ve we’re already there, schedule three on the adult use side.

Now that opens up that piece. So when you start thinking about if it happens this year, 2026 should be should be there, 2027, 2028 going forward. But when you look at the actual balance sheets themselves, which is a huge part of valuation, there’s uncertainty attached to it. So I think it’s really hard for a retail investor to to delineate between those those things. So what ends up happening is you just have to, I think on topics like that, you kind of make a bet.

Schedule 3 is coming, we think we’re gonna get part of some some version of partial or some handicapped version of what happens to legacy 280 liabilities. and you work from there. But that part, and you know, you referenced the conversation with Jerry in the past. That’s what we spend a lot of time on at Bengal is what what’s truly institutionally worthy from an investment standpoint and why, and what are what can we bank on? And going to what retail investors should be looking for, it’s yeah, and on the grown rogue side, we talk a lot about cannabis.

On the investing side least, cannabis being a widget in the sense that we’re just trying to be a great disciplined small cap growth company. We’re this size today. We think we live in an industry that provides tremendous growth opportunities, and we think we can build this to be a that size company in the future.

It doesn’t really matter if it’s cannabis or something else. Cannabis is providing a great playground for us, a great industry backdrop for us for our skill set. But we’re going from here to there in our minds. That dynamic, and we’re trying to give investors the playbook of how we’re going from here to there.

we don’t spend a lot of time talking about when adult use happens here, this is gonna be the catalyst for us to go from here to there. We spend a lot of time talking about this is what we need to do to execute in the markets that we’re in to get from here to there.

I think that dynamic, if you’re trying to be more fundamental as a retail investor to what what to pay attention to, it’s who’s got growth plans that you believe and believe are sustainable. And there, I mean, there are some great companies in our industry.

Rena Sherbill: Speaking of growth, what would you each say to the consolidation point or how you see it from a Grown Rogue perspective and maybe how you see it going in the industry? Is that something that you’re currently focused on? How do you see that for yourselves and how do you see that broadly speaking?

Obie Strickler: I don’t think we’re looking at it like particularly as like this consolidation objective in terms of like this big roll-up strategy or whatnot. I think we’re maintaining like does it fit our model, does it fit our practices? do we feel like we have the bandwidth and the you know the capacity to take something on?

I do think we’ll see globally more consolidation in the space. And you could argue that, Grown Rogue, we turned on Minnesota this year. That was a self kind of build.

But, through distress, the project in Illinois, you could call that a rollout now in New York. Like it’s so there is this consolidation that we’re looking at.

I think you’ll start seeing some bigger consolidation. I think the last really big one was probably Trulieve and Harvest, and that was four or five years ago. But when are some of the bigger groups? You’re now seeing Curaleaf go after Aurora. You’ll start seeing some of that.

I don’t know if it’s gonna be successful because what we’ve seen, and I mean, it’ll still play out, like scale is not always a competitive advantage in terms of how you participate in the markets. and so we’ve a very kind of specific path of how we want to go about it and maintaining focus around flower and getting back to the customer.

And if more acquisition supports that, we’re on board with it. But it’s not just consolidation for scale size, right? That’s not the objective of Grown Rogue.

Josh Rosen: Yeah, I think of it in in two buckets. To me, Obie, what you just described to me, the consolidation that we’re doing in terms of picking up some distressed assets and taking advantage of infrastructure that’s been paid for on someone else’s balance sheet.

That dynamic is different. And I think that consolidation we might press pause for a little while on, but that consolidation I think continues from here forever. And you saw it play out in Canada as well in a facility that they took over for much less than what was originally paid. And those dynamics I think are going to keep happening where the stronger operators are able to consolidate, intentionally consolidate what they want.

The other part of consolidation, which I think more people in the industry are talking about right now, particularly on the investing side, I think is a little bit more defensive than offensive. By and large, I think it’s going to get positioned as if it’s offensive, but it’s how are we going to get and maintain, you know, both the critical mass that we ha that we have, but also generate growth.

And consolidation is a way to generate growth when your core business, your core markets aren’t growing. And or you don’t have the you know the the growth curve to to to lean into. And I think you know this is one of the fundamental challenges of being publicly traded as a cannabis company. If you started east of the Mississippi, is you you grew up with high pricing. You grew up before pricing normalization happened. So it might be that your biggest market was the most profitable it will ever be two years ago.

From here on out, you could you could hit the cover off the ball from an execution standpoint and not grow and shrink and still be executing flawlessly because the market was paying too much for cannabis and yeah, enough supply came in and the illicit market started to move on as prices come down and you grab more yeah, there’s a lot more volume in the market now, but it’s at a much lower price with with quite a bit more competition. That dynamic plays out differently in each state.

Probably the best asset in the in the US at least is Trulieve’s Florida presence.

When you go on an individual state, like that’s an incredible machine they built in Florida. and you know, when you can go into places and build walls like that, that’s a pretty attractive business model. It’s not necessarily built on operating integrity.

Not saying they don’t have it, but it’s not that’s not the the core. The core was great government relations early on, great real estate hustle. Like it’s a it’s a different game that’s played. And I think that the next layer of mergers at scale are going to be more of the let me just see what pieces I have on the board.

And years ago, I think I used this analogy and I haven’t used it in quite a while, but actually Jerry brought it up the other day and reminded me of it. It’s like it’s it’s like the difference between playing the game of risk versus the game of Monopoly. Like this industry has been playing the game of Monopoly for a long time.

And, I’ve kind of always been a had a preference for the game of risk.

Rena Sherbill: In my family, we are a big risk family. We are a big monopoly family too, but we took we took risk very seriously. My brother bought an army uniform from Goodwill and showed up one day in full army uniform to the game. So I appreciate that very much. Hits home deeply.

What would you guys say about the price of cannabis these days? What would you find informative for investors to beware of when it comes to that?

Josh Rosen: We hope it goes up.

Rena Sherbill: Touche.

Obie Strickler: Of course, but the simple answer is in some markets it’s too low and some markets it’s too high. There’s not parity, right?

We’ve talked a lot about having parity. It’s one the things that I think regulatory descheduling will help create more parity across. That’s why I don’t think the necessarily re/descheduling doesn’t necessarily change the dynamic in a monsterly positive way based upon where you’re located, right?

There’s gonna be a lot of unintended consequences or things that you know people just don’t know quite yet, I think that’s the simple answer. Like we’re we expect it totally come up in some of the markets because like in Oregon it’s you know $700 a pound, right? Like that’s very, very inexpensive. New Jersey, it’s three thousand dollars a pound, right? So there’s just this big disparity across the same product.

And where do you get more parity and more consistency? and so I expect you know, like I said, some markets are gonna come down and hopefully some of the markets go up in terms of how this evolves. But there’s yeah, just a lot of discrepancy between pricing from market to market. And that’s really based upon supply-demand kind of dynamics and how those are set up in the beginning. And what we’ve seen in the markets we operate in is it’s a matter of when, not if, pricing starts to degrade.

And so take advantage of it while you can, but it’s simultaneously making sure you’re giving your customers good pricing, reasonable pricing, great product, which is really important.

Josh Rosen: Yeah, to make that to make that tangible, because I think it’s easy to talk about pricing and I think retail investors particularly probably like to make it tangible, I have two anecdotes that kind of come to mind.

One, when we first this is back in my forefront days, when we first were taking our Washington operation operational gurus and introducing them to the Illinois market, we had acquired a distress operator at not even an oper like they had just stood up a shipping container to have it grow to make sure they could keep the license alive. And they had like a garbage bag of old product in the shipping container.

And they didn’t have yet they didn’t have store open. There wasn’t a mechanism to really move it that that they were working through and we had just taken over. We were going through it. And I don’t remember which of the bigger companies in the sector was a little short supplies. I mean everybody was still building at that point. And we sold this bag of whatever was in it for more per pound than what the Washington operator was selling flour for.

Then using New Jersey as an example in Obie’s reference is like, we have a product that is ground flower that shows up on the East Coast doesn’t usually exist on the West Coast. I remember when we were yeah, at Vireo we introduced Grown Rogue to the concept of ground flower.

And you say ground flower to someone in Oregon, California, and they’re like, what’s that? What’s what’s that product? so in New Jersey, we sell a ground flower product. So consider that and it sells for comfortably more than our top shelf Oregon flower.

Obie Strickler: We’re more sophisticated. We call it ready to roll. It’s one of our Yeti products. I still cannot stand the whole ground flower concept. But really it’s around pricing and access and it’s still really good, right? Like it’s an opportunity for people to get product at maybe a less expensive price, but yeah, the disparity between pricing and across the US is stark.

Rena Sherbill: Obie, how’d you come up with the name Grown Rogue? It’s a great name.

Obie Strickler: Thank you. you know we went through a pretty you know wide process on that in terms of like where do we want to sit. And really it came down to a couple things, you know, grow, like grown, like we’re we knew we wanted to do flower, we were growers at core. and then rogue is the rogue valley is where we’re from. and then it was kind of a you know a little bit of a play on.

you know, being a little bit of an outlaw, right? In terms of like we’re stepping into this new industry, this new market. and so rogue kind of fit not only with our heritage, but also kind of that concept. And then I wish I could take credit for this other piece, which I didn’t learn until maybe, I don’t know, 18 months after we, you know, set the name and we’re operating. But it actually plays really well into grown rogue’s kind of philosophy. So the verb rogue is you rogue a crop.

And what that means is you’re removing all of the negative aspects, like you’re taking out the plants that aren’t performing as well, like you’re just you’re cleaning it up to get the best like crop out there.

And so it was a nice third addition to the other things we liked about it and maybe the most important for how Grown Rogue runs our business and with that quality kind of focus towards flower.

Rena Sherbill: I’m glad I asked. a great name works on so many levels. That’s how you know it’s a great name. Very cool. I have this Investing Experts podcast and at the end of that I’ve been asking people if they have a motto when it comes to investing or life. Do either, do both of you have one?

Obie Strickler: Can we can you use foul language on this podcast? We’ve got a new good company tagline, but I won’t pull that one out.

Josh Rosen: No Obie, you cannot use our company tagline. That is not acceptable here. This is PG.

Rena Sherbill: What’s the NSFW one?

Obie Strickler: Execute or get F’d, effectively.

Rena Sherbill: Love it. Love a binary option.

Obie Strickler: I think from an investing perspective, and I’m not like an investor, I play the market and like some stuff and then I just Grown Rogues the piece. But I think really critical in cannabis is know what you own.

And bet on management teams. The hype is really confusing. And so I think, finding the right management teams and then know what you own is going to be really, really critical. from a life lesson, I think it’s passion, right? Like life’s too short. Do something you really, really care about.

And in order to enjoy that every day, because life is hard, choose your hard is one of the things we talk about a lot. Business is hard. Showing up every day is hard. Like it’s gotta be something that you’re really passionate about.

And I think if more people chose to do that, some people don’t have the opportunity. but I can tell you, like, if we were in a distillate, and I’m not poo-pooing distillate, like it’s a good product, it’s a big part of the market, but I’d have a hard time feeling the same incentive and just joy to wake up every day if we were like a display card company.

But we just we love flower. And so doing something that you love every day, surrounding yourself with the people that you enjoyed working with are all kind of good life lessons and I think very consistent with how Grown Rogue operates and the things that we do every day.

Rena Sherbill: Is choose your hard is that yours or is that a common phrase? I’ve never heard it before.

Obie Strickler: My wife found this one day. it was an Instagram post or something. Talk about choose your hard, right? Like working out is hard, being obese is hard, like being married is hard, getting divorced is hard.

Choose your hard, where do you put your energy in and there’s a bunch of examples around that. And I think it’s just I mean it’s right. There is no just and we talk about it, you always want the easy button, but that really doesn’t exist except in that I think it’s a staples commercial or something. but yeah, choose your heart is a good one.

Josh Rosen: I mentioned before I’m a philosophy major, so of course I have life mottos. I have two. Action produces information. And actually pretty similar to choose your hard, which is just: you are what you pay attention to.

On the investing side, I’m gonna invert what Obie said because my mentor on the investing side hammered this point and I think it’s so true, is know what you don’t know.

Rena Sherbill: Sounds like a Yogi Berraism.

Josh Rosen: It’s a big part. But I think this to me is why when when we started our fund at Bengal even and we pretty quickly migrated away from a lot of the bigger MSOs is it was I don’t really know how much money they’re making in Illinois.

I don’t really know how much money they’re making in New Jersey. I know they do really well. Like I can see the aggregate, but I don’t really know. And it’s like so it doesn’t mean you can’t buy them in this c in this situation. To me, it’s just recognize that you don’t know.

Those are the things that I don’t know about those companies. And so I can still buy them, but that dynamic has always been really relevant. And as I said, I it got hammered into me by a a mentor that was a really he was evaluation guru and just incredible attention to detail in terms of what really mattered to driving financial performance. and so it was and and for him it it led to what what better questions can I ask? Because I’m recognizing what I don’t know.

Rena Sherbill: That’s good stuff. Appreciate you both coming on very much. The company is Grown Rogue (GRUSF).Thanks so much for coming on.

Josh Rosen: I really appreciate the time.

Obie Strickler: Rena, thank you very much. Really appreciate it.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.