Although the leaves are changing and the summer heat is fading into fall, the cannabis retail market remains hot with new locations continuing to pop up across the country.
The Source+ held a grand opening celebration for its new North Las Vegas location, its fourth in Nevada. The ribbon cutting was attended by Mayor John J. Lee, Clark County Commissioner Tick Segerblom, Assemblywoman Clara Thomas and Councilman Richard Cherchio.
Also in Nevada, Deep Roots Harvest opened its large new Reno shop on July 30. The 6,300-square-foot store, one of the largest in Northern Nevada, was built from the ground up and will employ 40 people.
Stability Cannabis opened its medical dispensary in Oklahoma City on August 15. The vertically integrated business will remain open 24 hours a day, seven days a week and will feature 40 strains at the 4,000-square-foot location.
In Vista, California, The Cake House opened the first of its five Southern California retail locations on August 13.
Meanwhile, in Missouri, the retail chain Swade opened its fifth retail location. The new store is the third dispensary the chain has opened in St. Louis.
Out-of-state ownership still banned in Washington
A Washington state judge ruled that an out-of-state resident did not have standing to bring a case against the Washington State Liquor and Cannabis Board in a suit that many believed would lead to a change in the Evergreen State’s out-of-state ownership restriction.
Idaho businessman Todd Brinkmeyer sued the state in 2020 claiming that Washington’s residency requirement was unconstitutional and overstepped the Liquor and Cannabis Board’s authority. Thurston County Superior Court Judge Mary Sue Wilson presided over the hearing on July 23, during which she focused mainly on the concept of “justiciability,” or whether the court could rule, and the standing of the plaintiff to bring the suit.
According to notes posted at the Cannabis Observer, which secured approval of the court to record the proceedings, Wilson found the case proved justiciable because Brinkmeyer’s inability to receive equity compensation from his investments in Washington cannabis satisfied that test. However, she cited three prior cases as “indications and holdings that our appellate courts indicate that the state constitution Privileges and Immunities Clause applies to Washington citizens” in ruling that Brinkmeyer did not have standing to bring the case.
Because of the lack of standing, Wilson did not address any other points raised by the suit, including those related to the federal Commerce Clause, though that could be addressed in a federal court.
Both the Liquor and Cannabis Board and attorneys for Brinkmeyer declined to comment on the case.
Meanwhile, a federal court in August sided with an out-of-state company in a similar case brought against the state of Maine. In that case, U.S. District Court Judge Nancy Torresen ruled in favor of Wellness Connection of Maine and its Delaware-based parent company, High Street Capital Partners, in their suit to overturn Maine’s residency requirement.
In that case, the state argued that the federal Commerce Clause did not apply because regulations created an intrastate market that did not cross borders and therefore did not qualify for interstate commerce protections. In her ruling, Torresen said the argument was “not without logic,” but she ruled that because non-residents can purchase products to take home with them, the concept that the industry is “wholly intrastate does not square with reality.”
— Brian Beckley
Scotts Miracle-Gro invests big in cannabis
Gardening giant Scotts Miracle-Gro is continuing its push into the cannabis space with the creation of a new subsidiary and a series of investments in the cannabis industry.
The Hawthorne Collective, which will focus on strategic minority investments in areas of the cannabis industry not currently pursued by The Hawthorne Gardening Company (another wholly owned Scotts subsidiary), was created in early August and immediately invested $150 million in RIV Capital, a Toronto-based cannabis investment and acquisition firm currently listed on the Toronto Stock Exchange.
The investment in RIV Capital comes in the form of a six-year convertible note. The note accrues interest at 2.03% percent annually for the first two years and includes additional follow-on investment rights. Upon conversion, The Collective, and therefore Scotts Miracle-Gro, would own approximately 42% of RIV Capital.
The following week, the Ohio-based company announced the acquisition of Rhizoflora’s leading nutrients business including its Terpinator and Purpinator brands, further bolstering The Hawthorne Gardening Company product portfolio. Under the terms of the Rhizoflora deal, the company will acquire substantially all the assets of Rhizoflora for $33.5 million, adding approximately $8 million in annualized sales and will become the primary provider in the United States of the Terpinator and Purpinator lines.
“This acquisition reflects our broader strategy to build the most comprehensive portfolio of products and solutions to serve growers at an unparalleled scale,” Chris Hagedorn, Hawthorne Gardening division president, said in a press release.
Separately, The Hawthorne Collective purchased a warrant to buy equity in Washington’s Dewey Scientific for $3.2 million. Founded in 2018, Dewey Scientific is a research facility that uses genomics, data science and classical breeding methods to improve the quality and genetic diversity of cannabis crops and produces proprietary cannabis genetics with leaps in standardization, quality and resiliency for cultivators.
The investment from Hawthorne is aimed at helping advance Dewey’s industry-leading cannabis genomics and cultivation.
— Brian Beckley
Delivery giant captures Green Dragon
California-based Eaze, the nation’s largest cannabis delivery marketplace, announced in August plans to acquire multi-state retailer Green Dragon in a deal that will expand the company to 42 delivery and storefront retail operations in California, Colorado, Florida and Michigan.
According to a press release, the combined company will be the largest multi-state operator in the delivery space, setting it up for “extensive expansion” over the next 18 months in Colorado and Florida.
“Green Dragon’s airtight operations in Colorado and expansion into Florida’s booming market adds key operational capabilities to our national footprint and cements our leadership as California’s largest MSO,” Eaze CEO Rogelio Choy said in a press release. “Together, we are well-positioned to leverage the market’s explosive growth now and into the future.”
“Together, Eaze and Green Dragon will be able to expand access to even more patients and customers via an ever-expanding delivery network as well as physical storefronts across the country,” added Green Dragon co-founder and chief development officer Alex Levine.
To date, Eaze has completed more than 7.6 million deliveries and has 2 million registered users. Green Dragon is based in Colorado, where its operations saw a 39% growth in revenue in 2020. In July, the company opened its first two dispensaries in Florida, with plans for at least 20 more by the end of the year.
The transaction is pending local and state regulatory approval.
— Brian Beckley