Business

a California cannabis success story

Published

4 months ago

August 16, 2024

California is full of cannabis companies that have flamed out, but edibles company Kahna is on fire.

Launched in 2015, Kahna is a top three brand for edibles and a top 15 brand overall in the state, according to cannabis analytics firm Headset.

But the company’s success isn’t limited to California. According to Cameron Clarke, co-founder and CEO of Sunderstorm, Kahna’s parent company, the company is the fourth-largest edible brand in the country and can be found in four states: California, Illinois, Massachusetts and Nevada.

And the company continues to eye expansion in the U.S., with sights on Michigan and Missouri.

What’s behind the success? A big part of it, according to Clarke, is that he was able to use his science background with a dash of molecular biology to build the company on rigorous quality. Kahna self-tests all its products so that its consumers can trust they are clean, safe and have reliable potency labels.

Clarke wanted consumers to have access to a consistent experience over many months.

While Kahna is primarily known for its gummies, the company recently introduced a vape product and a chocolate edible product called Minis, which received the same attention to science as the company’s other products. Clarke said it took two years of research and development to achieve the right product, which is a candy-coated chocolate that resembles an M&M.

Thailand

On top of that, Cameron tapped into his international trading experience – particularly in Asia – to expand internationally. Kahna opened in Thailand three months ago and owns its manufacturing facility with a Thai partner.

“We are currently selling all over Thailand, which is going very well. We have announced our first distribution deal from Thailand to Japan, which will launch in the coming months,” Clarke said. “So we have gone from being a California-only brand in 2019 to being a national brand by launching our MSO strategy. And now we are a global brand.”

A key benefit of creating a business in Thailand is the ability to manufacture in one place and then sell all over the entire globe.

“That is something that we cannot do in the U.S. We have to set up separate manufacturing facilities with separate licenses in every state, which means that the cost of setting all that up must be recouped by the sales in that particular state,” Clarke said.

In Thailand, it’s a different landscape. The country is a low-cost producer and exporter of all kinds of food products and nutraceuticals and has all of the infrastructure to manage that exportation.

Clarke said that the company just announced its first deal to export hemp-related products from Thailand to Japan, but the company plans to also export cannabis or THC-type products to other markets in the coming years. It also plans licenses through the joint ventures.

Key to success

The science and focus on quality may have been one step to success, but Clarke said, “I think our success is based on a few different things. Number one, we invested heavily in technology, infrastructure and systems in the very beginning.”

He said he knew that the industry would go through some kind of bust at some point and wanted the company to weather such a storm.

“We’ve invested heavily in (infrastructure systems technology) to keep our cost structure low, because we knew from the very beginning that it was going to be very competitive, very difficult to navigate, and we absolutely had to be able to have a low-cost infrastructure to be able and to understand that cost structure in order to make money and be successful,” he said.

He added, “(It’s) a system that we know the cost of every single product, every step of the way through the entire process with full cost accounting, which I don’t think anybody I’ve seen in this industry, even the MSOs don’t have. So we’re very proud of that.

“Another leg of the stool is just rigorous attention to quality and quality control and consistency. If we make sure that wherever we manufacture, wherever we sell, we also manufacture. We do fall under other people’s licenses and we do partner, but we do the manufacturing.” Clarke said it’s hard enough to make perfect products themselves much less rely on a third party.

That’s not to say that Kahna has been immune to the issues facing other operators, notably the widespread challenge of getting paid by vendors in California. However, Clarke said, their success secures their payments. If consumers specifically ask for their products in a dispensary, then that owner will make sure the bill is paid in order to continue placing those orders.

Despite the challenges, Clarke said he got into this industry because he wanted to help people heal. “You cannot help people heal and manage their conditions if you poison them with toxic chemicals.”

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Author: mscannabiz.com

MScannaBIZ for all you Mississippi Cannabis News and Information.

Business

Cannabis companies, big and small, collapsed in 2024

Published

1 hour ago

December 23, 2024

mscannabiz.com

As 2024 winds to a close, the year may well be remembered as one in which the U.S. marijuana industry got a serious wakeup call, with several big-name companies flaming out in spectacular fashion, while plenty of smaller operators also quietly closed up shop.

Even as more state marijuana markets continued their new rollouts – from New York to Ohio to Missouri – the sun set for the last time on several big marijuana names, including MedMen Enterprises, High Times, StateHouse Holdings and Slang Worldwide, all of which just a few years ago seemed poised to become national cannabis brands with impressive portfolios.

Instead, this year the bill came due for a lot of the industry. A few big-name cannabis failures kicked off the reckoning in 2023, such as the major distributor Herbl in California, which had such a web of connections and so much outstanding debt that its ripple effects went on for months. And when those bills arrived, a number of cannabis companies found they were unable to pay.

However, the big players were far from the only casualties this past year; there were also plenty of smaller businesses that went bankrupt or into court-appointed receiverships for various reasons, including Unrivaled Brands, Irwin Naturals, Delta 9 Cannabis and Revolutionary Clinics.

But it wasn’t all bad news for the industry. It’s also worth highlighting the high-profile turnaround of California-based cannabis delivery operator Eaze, which took a wealthy patron to save the business from its troubles.

Eaze even told shareholders in the fall that it was prepping to lay off all employees and close down by the end of the year, before its new owner, billionaire James Henry Clark, resuscitated the company with $10 million of his own money in November after buying the business at auction in August.

Here’s a rundown of some of the high-profile cannabis collapses of 2024 and how they went bust.

MedMen Enterprises

MedMen was by far the highest-profile washout of the year. Originally a darling of the California medical marijuana boom prior to going public in 2018 (CSE: MMEN), the former unicorn formally filed for bankruptcy in Canada and a court-appointed receiver in the U.S. in April, after the company ran up nearly $600 million in debts during a multiyear expansion push that ultimately proved fatal.

Warning signs existed for years before MedMen’s collapse. Founding CEO Adam Bierman suddenly relinquished control of the struggling business in 2020, amid mass layoffs at the multistate operator and ongoing sale of assets in a desperate attempt to right the financial ship. Co-founder Andrew Modlin also resigned at the time.

Even so, four years of a revolving C-suite and new corporate strategies came to naught, and MedMen’s former national empire – which spanned seven states and more than two dozen retail dispensaries – has been resigned to the auction block.

High Times

High Times’ foray into the actual marijuana plant-touching business came to a ruinous conclusion this year when its assets went up for auction after it couldn’t repay a $29 million loan.

The original stoner magazine, which dates back to 1974, pivoted from cannabis media directly into selling marijuana in 2020 with the purchase of 10 California dispensaries from Harvest Health and Recreation for $80 million in a combination cash-and-stock deal.

The parent company, Hightimes Holding Corp., never truly found its footing in the tough California market and endured critical press for years as it struggled. Hightimes Holding Corp. tried to go public in 2023 via a complex intellectual property deal with Lucy Scientific (Nasdaq: LSDI), but that fell apart after a lawsuit from U.S. securities regulators alleged fraud and illegal stock promotion by CEO Adam Levin, which resulted in a settlement of more than $500,000.

High Times was ultimately forced to begin selling off dispensaries and assets this year to settle a $29 million debt to ExWorks, under the management of a court-appointed receiver.

StateHouse Holdings

Originally known as Harborside – a major part of cannabis activism in Northern California during the height of dispensary raids in the Bush and Obama years – StateHouse earlier this year was relegated to bankruptcy in Canada and a court-appointed receiver in the U.S., driven by a lawsuit over $116 million in debt owed to one of its creditors.

Harborside was rebranded as StateHouse in 2022, three years after it was taken public in 2019 by brothers Steve and Andrew DeAngelo, who said later they were forced out by what they described as a hostile takeover. After the DeAngelos were removed, new company leadership went on an acquisition spree, purchasing three companies in the span of a year and rebranding in a bid to become a more powerful overall California brand.

But the move backfired, and it proved too much too quick. StateHouse found itself unable to repay loans from creditor Pelorus Fund, and Pelorus filed suit in September to force StateHouse’s hand.

StateHouse has since been put up for sale, and the receiver in charge is taking bids for assets until Jan. 15, 2025.

Slang Worldwide

At its height, Toronto-based Slang Worldwide distributed cannabis goods to 2,600 dispensaries in 15 states. But in November, the company declared bankruptcy in Canada and entered a receivership in the U.S., after seven years in the marijuana trade, and reported pared-down operations in only Colorado and Vermont.

Slang drew far less media attention than MedMen and High Times, and its quiet path to insolvency arguably more reflects the broader troubles of the U.S. and Canadian cannabis industries in general. After ambitious expansion for several years, Slang was forced to pull out of several key markets, including California, Oklahoma and Oregon, in 2023 as conditions worsened for it and other operators.

More trouble appeared on the horizon as recently as fall 2023, when Slang essentially put itself up for sale when it retained PGP Capital Advisors to evaluate its options.

The bottom line was the company didn’t have $17 million with which to repay creditors when at least one loan comes due in 2025. Slang formally entered bankruptcy in Canada on Nov. 26, according to receiver B. Riley Farber’s website, and a meeting of creditors was scheduled for Monday this week.

In a trustee report, Farber wrote that Slang had just $107,325 in total assets, including $52,529 in cash, against $27.2 million in debts to various creditors.

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