With cannabis sales in Nevada continuing to rise, the market for state-licensed producers and manufacturers is becoming increasingly more competitive, driving companies to be innovative and efficient and align themselves with the top consumer-facing brands.
Since taking over the role of 1933 Industries CEO in June 2019, Chris Rebentisch has guided the company through a period of rapid expansion for its Nevada-based subsidiary, Alternative Medicine Association, and its national CBD brand, Canna Hemp. The company generated $18.2 million in 2019, growing from $12.6 million in 2018 and $1 million in 2017.
In addition to its distribution network of Nevada, Colorado and California dispensaries, the company is also on the leading edge of the booming CBD industry, having signed a licensing deal with legendary skateboarder Tony Hawk to sell Birdhouse-branded CBD products.
Although 2019 was nearly catastrophic for many publicly traded cannabis companies, Rebentisch believes 1933 Industries (CSE: TGIF) is well-positioned to remain a market leader in the coming year.
1933 Industries CEO Chris Rebentisch says quality and culture are the primary components he looks for when he’s considering brands to license.
Marijuana Venture: What are your plans and goals for 1933 Industries in 2020?
Chris Rebentisch: Well, in 2018 we developed a few strong brands and distribution through Nevada, and then in 2019 we really built a house of brands, with 12 different brands operating under the 1933 umbrella. We have the largest distribution in Nevada for third-party branded goods, and we’ve got an incredible presence on the shelves. In the second half of 2019, we built out bigger facilities to meet demand, so in 2020 you’re going to see our facilities coming online and reaching capacity.
We’re super excited to offer a portfolio of products to our retail partners, especially here in Nevada. We’ve brought in premier brands like DNA Genetics, Jack Herer, Pantry, Blonde and PLUGPlay. We’re also in talks with additional brands to bring into our portfolio, so in 2020, for us, you’re really going to see what we built come to fruition.
MV: Why was it important for you to accumulate that house of brands?
CR: Brands are the future of the industry. That’s it. We know that the industry is starting to shift toward that direct-to-consumer, delivery approach as people become more comfortable and more educated with the products they consume in mature markets. I think in 2020 we’re going to see a lot more brand loyalty.
We anticipate that in the next three or four years, we’re going to see federal legalization or at least decriminalization to the point that other states want to participate more and more in recreational sales. So we sell our products into Colorado through our partner, Denver DabCo. And we just got licenses in Los Angeles for manufacturing and selling our products into California, and we’re working on a couple other deals in states like Arizona, which is a prime target for us, as well as Washington and Oregon.
MV: What do you look for in a brand when you’re setting up these licensing agreements?
CR: Two things: quality and culture. This industry was built by culture before it was an actual industry and so we align ourselves with individuals who maintain that culture and the integrity of the health-and-wellness and the compassionate care side of this industry.
And quality goes with the quality of the people that we work with, their quality as partners and their quality as the human beings behind the brands that we like. In this industry it’s tough to find really good people who are honest, who know what they’re doing and want to help build something together. When we find those people, we hold onto them tightly.
In mature markets, it’s all about quality; in newer markets, you can put a marijuana leaf on the packaging and sell just about anything. But that changes and evolves as consumers become more educated.
While 2019 was a devastating year for many public cannabis companies, 1933 Industries grew its revenue by $5.6 million.
MV: What were some of the company’s most important accomplishments in 2019?
CR: Bringing on our cultivation facility. We went from about 4,000 square feet of cultivation into 67,000 square feet of cultivation, a purpose-built building from the ground up. Getting that built, up and running, populated and staffed was a huge accomplishment for us.
We also found the right partners in California to launch our brand, so we went in and built out that facility and got it up and running, and then getting logistics and distribution channels that we developed for our CBD products and for our cannabis products. We own that — we don’t use any distributors — and so that distribution channel for us is a huge asset.
MV: What has been your main focus since taking over the reins as CEO in June 2019?
CR: I’ve been focusing on commercializing health and wellness. I came from the legacy side of this market. I’ve been in it for about 10 years. I fell in love with being able to walk into an individual’s home and see the pain and anguish in their eyes and then offer them products and watch as that pain and that anxiety is replaced with hope and relief, and they’re smiling, laughing and having fun again. My focus is doing that on a commercial scale and not losing sight of what we’re here for.
I have a mantra that I tell all my people all the time: if we help other people get what they need in life, we will be taken care of. If we can provide our consumers with the best experience and the most consistent experience, on a large scale, then the rest of it will come.
MV: What were the lessons you learned in the process of scaling up from 4,000 square feet to 67,000 square feet?
CR: Failures are a part of growth. We learn by failing. Failures are a manifestation of progress. In this industry where we’re pioneering new things every month, new ways of doing things, new markets, new brands, new ways to sell, we understand that we’re going to encounter failures. One of the biggest things that was eye opening to me this year was that a problem is just a problem, and it’s resolvable, and you can’t get to where you want to be without going through those failures. Communication is everything and being able to be open and talk about our shortcomings, our mistakes and what we need to correct them has been a great lesson for me and my team this year.
MV: Can you give an example of a problem or a failure you’ve had and how the company went about resolving it?
CR: When I took over management, there were individuals in place that were great and have the right skill set when you’re small. But as you commercialize, sometimes those individuals don’t have the skill sets to move to the next level.
Because of that, when they try to take on something larger than they had either the training or expertise to do, then we run into leadership, communication and workflow issues. So it’s really been about us going out and finding the right people. We brought in new directors of operations. We brought in an amazing CFO and new board members, really upgrading to help us reach the next level.
Rebentisch says the cannabis bubble has burst and investors are now looking for real companies with realistic projections.
MV: A lot of publicly traded cannabis companies have really struggled in the past year as stock prices have fallen and they’ve gone through financial turmoil. How has 1933 Industries weathered that storm and what are your thoughts on the market moving forward?
CR: This industry was overvalued for the purposes of raising money and expanding and growing. It was being directed by individuals who don’t necessarily know the industry on the ground — it was directed by bankers and investors and funds.
We saw these over-valuations, and we saw people taking more money than was necessary to grow, spending excessive amounts of money on facilities or management or whatever, and that has never been sustainable in business. No business or industry runs that way. So we had a bubble burst. It’s resetting everybody’s expectations. It’s a resetting of realism for our industry. It’s almost a purge; those who shouldn’t have been in the industry, trying to build brands and companies, they’re no longer here and that’s not a bad thing. You almost needed it to happen.
Marijuana stocks have always been considered extremely high risk. You can make double your money, or you can lose it all in 30 days. I think people’s expectations are being reset that this is not a stock play anymore. You actually have to go out and build a real company with assets, to have a good balance sheet, to be profitable and not buy excessive, inflated assets. That’s where I think we’re going to see some real educated investors come in, maybe not necessarily the big gamblers that love the high-risk stocks. You will see a little bit more conservative money come into the space.
From the beginning at 1933 Industries, we said, ‘Let’s build a real company. Let’s let the balance sheet dictate our stock price.’ That’s how we’ve weathered it. We’ve got money in the bank. I don’t need to raise money. I’m not hurting. I’ve got a good runway and we’re just turning the corner to profitability. All of our projects are paid for because we focused on doing it the right way, not through excessive spending. It’s building the company the right way and then going out and selling who we are.
The industry is in a really tough spot, and assets will come up for sale at discounted rates because they’re distressed, and it’s going to provide opportunities for companies like us.
This interview has been edited for length and clarity.