Next Green Wave CEO Mike Jennings outlines the company’s business model and long-term plans in the California cannabis space.
In the interview below, Jennings provided insight into the legalized cannabis market and the trends he’s seeing in the space. He also talked about the company’s brand development strategy.
Below is a transcript of our interview with Next Green Wave CEO Mike Jennings. It has been edited for clarity and brevity.
Investing News Network: Please give our investor audience an overview of Next Green Wave and seed-to-consumer cannabis operations in California.
Next Green Wave CEO Mike Jennings: From the beginning, we decided to use a seed-to-consumer business plan. We picked the top four verticals in California based on the short-, medium- and long-term projections for the market — nursery and flower cultivation, extraction, distribution and retail — and acquired licenses for the first three.
The only vertical we left on the table was direct retail in the short-term because it operates on a low-margin, high-volume and high-labor model. From our perspective, the low hanging fruit were nursery cultivation, extraction and distribution, and these would help us access the entire market in California.
In California’s cannabis market, to be able to sell products in the wholesale or retail markets, a company needs a distribution license. You cannot be a stand-alone licensed producer like in Canada, where a production license also grants you access to the market. In California, a cultivator that doesn’t have a distribution license will have to go through a distributor to access the wholesale and retail markets.
INN: How has this first year of legalization in California impacted the state’s cannabis market?
MJ: I’ve been involved in the California cannabis space for over 20 years. In 1996, Proposition 215 passed and I grew my first indoor crop. When legalization passed in January 2018, many insiders believed that there was going to be a line at the door. We believed that all the people in the gray market were going to immediately transition over to the legal market. It felt like we were going to be able to pick up where we left off. There were 3,000 dispensaries spread throughout the state as well as multiple extraction and wholesale companies that made up a robust billion dollar economy across the medical and gray markets, and we believed that the size of the market would stay the same.
Well, that didn’t happen. The transition decimated the retail market and most of the production market. There were very few companies that were ready to transition on day one. The number of dispensaries went from 3,000 to under 300, a reduction of 90 percent. According to the California state website, the situation has recovered and 450 dispensaries have come back online. Now, the market is ramping back up and Next Green Wave has been fortunate enough to be a part of the development of the California market as we build, grow and develop our operations. Companies that had their licenses and funding ready for day one of the transition got hurt when the market got decimated.
Canada is facing something similar to this right now. On October 17, many gray market retailers that were operating and ready to transition actually had to shut down. In British Columbia alone, there are 700 dispensaries operating in the grey zone, and only one licensed dispensary for the province.
INN: What are the company’s plans for Phase 1 of the Coalinga cannabis production facility now nearing completion?
MJ: Coalinga is our flagship premium indoor flower production and nursery facility. Our Phase 1 facility will represent our entrance into the premium cannabis market. This is where my experience with cultivation will help us develop an artisanal product. We will produce high-quality end products with high-quality genetics and inputs. We plan to use that same mentality across each step of our supply chain; from our pre-flowering preparation to our feeding systems. We will also apply it to our fertigation strategy during the flowering cycle and then to post-harvest production, including processing, drying, trimming, curing and packaging.
Our Phase 1 facility will represent our artisanal, high-quality, premium cannabis model. It will allow us to launch our initial brand and product lines so that we can compete in the premium cannabis market. That’s where Next Green Wave wants to be.
INN: Please tell us about the pending acquisition of Loud Seeds. How does that fit into the company’s business model?
MJ: Our pending acquisition of Loud Seeds fits perfectly into our vertically-integrated business model. Loud Seeds is an established premium-quality seed and flower product brand that has a long legacy in California.
Most of the companies coming online now are creating their own stories from scratch. They have to create a history and legacy as they’re establishing their brands and who they’re going to represent. Loud Seeds can give us a tangible legacy brand to start with in the space that aligns with my history in the space. Some of us take offense at the new companies that are trying to dominate the market and create the narrative, because they are not true grassroots cannabis companies. The acquisition gives us the opportunity to take the narrative back, keep to our roots and to put our focus to moving the market forward.
On the genetics side of things, Loud Seeds has a track record of creating award-winning genetics and they have an extensive genetic library which will help us achieve our main goals and set us up as a premium nursery supplier.
Overall, our acquisition represents our strategy and how we want to maintain our grassroots legacy. It’ll help us survive the onslaught of big corporate dollars that are coming into the space.
INN: What is next for Next Green Wave and how does that fit into the company’s long-term plans?
MJ: We have a multi-prong strategy. We’re staying true to our roots as flower cultivators. Our next step will be focused on branding, which everyone in the space is talking about, and we’ve kicked this off through our LOI to acquire Loud Seeds. We’ll also be partnering with other grassroots companies and brands to bring them under the Next Green Wave umbrella, much like the Procter and Gamble model. Eventually, these brands will be integrated with our verticals while utilizing our infrastructure and access to capital, and we will facilitate their growth and essentially create a grassroots conglomerate in California.
We have no debt on all the land we own. Our Phase 1 facility will encompass 35,000 square feet when it’s finished and that’s only one-tenth of what our ultimate build-out will be. When we’re fully built out, we’ll have approximately 370,000 square feet. As we grow our internal production infrastructure, we want to also grow our grassroots brand presence. We want to be a driving force behind the promotion, cultivation and product development of all those brands.
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