For many cannabis executives, the pull of becoming a multi-state operator and developing a national brand is a prospect too enticing to pass up.
At Copperstate Farms, one of Arizona’s largest vertically integrated cannabis companies, CEO Pankaj Talwar felt that draw, but recognized the pitfalls of growing too fast, stretching a management team too thin and trying to maintain a level of quality and efficiency in multiple, disparate markets spread across the United States.
“I don’t think I can take advantage of synergies by having people on a plane all the time,” he says.
The decision to forego the land-grab strategy of many multi-state operators has allowed Copperstate Farms to focus its energy and become cash-flow positive and EBITDA positive, while growing revenue by 260% from 2019 to 2020.
And now, with Arizona transitioning to an adult-use market, opportunity for growth, even within the confines of the Grand Canyon State, are wide open.
Countdown to New Customers
Perhaps more than any other company in Arizona, Copperstate Farms is well-situated to flip the switch from medical to recreational. The company has four dispensaries in the Phoenix metro area, the infrastructure to ramp up production and the cash-flow needed to capitalize on expansion opportunities.
“I kind of have this philosophy of sleeping in our running shoes (on election night),” marketing director Allie Marconi says, “because we’re going to be hitting the ground running.”
With 40 acres under glass, Copperstate Farms has one of the largest cannabis greenhouses in North America. Recent renovations have tripled its production capacity, making Copperstate Farms one of the top wholesalers in the state, in addition to supplying its own Sol Flower-branded storefronts.
One day after the November election, in which Arizona voters overwhelmingly passed legalization measure Proposition 207, Copperstate Farms completed the acquisition of two Level Up dispensaries, giving the company a total of four retail stores. The Level Up shops in Tempe and Scottsdale — which were founded under the Level Up brand, then sold to MedMen, then reclaimed by Level Up, before being sold again in an online auction — will now operate under the Sol Flower banner, complementing the company’s original dispensaries in Tempe and Sun City.
Talwar says Sol Flower was designed with an adult-use market in mind. Each location brings something different to the company’s portfolio.
With two stores in Tempe, Sol Flower is conveniently located near Arizona State University — one of the largest colleges in the U.S. with nearly 100,000 students, staff and faculty. An expansion project had been started at the former Level Up store in Tempe, that will now be built out into a 5,000-square-foot flagship store for Sol Flower.
The Sol Flower dispensary in Sun City, a community with a large population of retirees, is a multiuse facility that includes a café and educational spaces that are open to the public. A glass wall separates the dispensary from the public spaces to eliminate some of the intimidation of cannabis retail.
“We believe we’re creating a safe way for the cannabis-curious to learn more about cannabis,” Talwar says.
The Scottsdale store is one of the more iconic dispensaries in the region. With its stylish interior and repurposed airplane parts that pay homage to the nearby Scottsdale Airport, the former Level Up location pioneered the jewelry store/cannabis shop style that is now more common in recreational markets. But it remains to be seen whether the shop retains its high-end, original design under the Sol Flower brand.
“The finishings are so well-done, and to get it to the Sol Flower look and feel would be quite a bit of money,” Talwar says, adding that he’s not convinced that’s the best use of the company’s capital right now. So it’s a decision that is being put off for now, while the company focuses on the Tempe upgrade and overhaul.
Marconi says it will be interesting to see how traffic changes once adult-use sales begin, which could happen as early as March, though Q2 seems a safer bet. Sol Flower’s first Tempe store had been averaging about 1,000 patients every Friday before the election.
“What is a Friday going to look like when everything is up and running on all cylinders? For us, know that customer service is such a priority, we need to make sure that if we do have double the people coming through the door, that we don’t sacrifice that hospitable, great experience,” she says.
And for the company’s resident chef, Aaron Chamberlain, the recreational market opens up a whole new world of possibilities for infused products.
“We’re just barely scratching the surface as far as where we want to go,” he says.
With more than three decades of experience in the food industry, Chamberlain took somewhat of a backwards approach to creating cannabis edibles. Chamberlain is the CEO of Good Things Coming, the in-house edibles brand for Copperstate Farms. Because he didn’t come from the cannabis world, he inadvertently created a recreational product for a medical market — a lower potency edible that focused on high-quality ingredients, like real chocolate, organic honey and locally sourced lavender.
Now that recreational sales are fast approaching, the company is ready to launch its adult-use products aimed at the broader market, while Chamberlain develops higher potency products for medical patients.
Chamberlain says he ate his first cannabis-infused brownie about four years ago and the experience left a bad taste in his mouth, literally.
“It was just horrible,” he says. “I was shocked that people would use corn syrup or brown rice syrup to make these edibles. It doesn’t taste good because it’s made with garbage.”
At the time he owned a bakery inside a restaurant and began thinking there was an opportunity to take what he’d learned working in high-end restaurants across the country and meld that into the growing cannabis market. While there were some high-end, culinary edibles in more established markets, like California, Colorado and Washington, he didn’t see anything like that in Arizona.
“I decided that I wanted to apply the same top-notch ingredients that I was using in my restaurant,” he says.
While Arizona’s legalization bill includes a provision to expunge criminal convictions related to marijuana possession, Copperstate Farms wanted to do more to bring justice to the thousands of people across the country serving prison sentences for cannabis-related crimes.
Marconi says the company wanted to align itself “with a strategic partner where you can really wrap your arms around it and work together to make a difference.”
The company looked into several charities before selecting the Last Prisoner Project, a nonprofit dedicated to releasing cannabis prisoners and helping them rebuild their lives.
“For us it was like, wow, this is the right cause. This is the right organization,” Marconi says.
Copperstate Farms made a commitment to donate $100,000 over a 10-month stretch to the Last Prisoner Project through a variety of fundraising campaigns, including donating $1 per vape cartridge sold in September and October of 2020.
Talwar says it was important for the company to find a mission that resonated with employees, from the budtenders up through the executive team. For those who work in the cannabis industry, and for people who live in legal states, it can be easy to overlook the fact that about 40,000 people are still currently incarcerated due to cannabis. Even with 15 states having legalized recreational marijuana, there are more arrests for cannabis possession each year than for all violent crimes combined.
“And I don’t think there is an appreciation for how long some of the sentences are,” Talwar says. There’s something inherently unfair about thousands of people being locked up for the same activity that Copperstate Farms does on a massive scale day in and day out, he says.
Partnering with the Last Prisoner Project “fits our mission,” he says. “It fits our ethos as a company, and it felt like the right thing to do.”
Foundation for Growth
While Copperstate Farms has the retail footprint, the brands and the workforce to be successful in Arizona’s adult-use market, its centerpiece is the 1.7-million-square-foot greenhouse in Snowflake.
As legend would have it, the company’s grow facility originally belonged to a Canadian lottery winner who hired a group of university researchers to find the best environment for him to build a hydroponic tomato greenhouse. The research brought him to Snowflake, a town of fewer than 10,000 residents northeast of Phoenix. The area is blessed with 300 days of sunshine, a 5,000-foot elevation and plentiful access to clean well water.
“It’s just a recipe for a fantastic location,” says Talwar, who joined Copperstate Farms in 2019, about three years after the founders and owners, Fife Symington and Scott Barker, launched the company and acquired the massive greenhouse.
The company has seen incredible growth, particularly in the past year, going from 175 employees in July 2019 to 475 in October 2020.
Arizona is a tourism hot-spot in the winter, as people escape the colder climates and come to the booming metropolitan area for Major League Baseball’s Spring Training, the Phoenix Open professional golf tournament and other activities. But while many cannabis companies see a 10-15% dip in the summer as visitors and snowbirds flee from the desert heat, Copperstate Farms has enjoyed constant growth.
“We’ve only seen month-over-month increases in revenue and patient counts,” Talwar says.
And yeah, with legalization spreading across the United States, Talwar and Copperstate Farms have a distant eye on expanding out of state. But for now, at least, when those plans are put in motion, Talwar says he sees future growth staying in the Southwest region, with neighboring markets like Nevada and New Mexico.
“I don’t want to try to make Arizona and Massachusetts work,” he says. “We have so much opportunity just in Arizona.”