How Canadian firms and money are shaping US cannabis sector: Q&A with The Apothecarium’s Ryan Hudson

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Ryan Hudson co-founded The Apothecarium in San Francisco in 2011.

On Monday, he agreed to sell the retail company and its assets to a Canadian wellness firm for a cool $118 million to help fuel future growth.

Hudson – who will remain The Apothecarium’s CEO – is the latest in a slew of California marijuana executives who’ve sold out to Canadian companies or struck some form of partnership.

Others have listed their companies on the Canadian Securities Exchange to raise capital to fund expansion.

Marijuana Business Daily spoke with Hudson on Monday to discuss the sale of The Apothecarium to the Canadian marijuana firm TerrAscend.

In addition to its three San Francisco retail shops, The Apothecarium has a vertically integrated operation in Nevada as well as edibles manufacturing brand Valhalla Confections, which has a footprint in New Mexico’s medical marijuana market.

How does this acquisition play into your long-term plans for The Apothecarium?

We think it’s a great fit. TerrAscend is a wellness company at its core, and The Apothecarium is too.

They really appreciate what we do and how we do it: our in-depth consultations with our patients, the education we give the community and everything we do.

They’re excited about bringing The Apothecarium to more people in more cities and more states – and maybe even internationally.

You said in a news release about the deal that “no dramatic changes” are planned at the company, but there must be some things that will change because of this deal. For instance, you raised the possibility of an international play.

From a day-to-day perspective, nothing is really going to change at the stores, as far as the customer and employee experiences.

But what I’m excited about is this is an opportunity for The Apothecarium to imbue its ethos, its manner of doing business, all of our best practices into TerrAscend – pouring gasoline on the proverbial fire.

TerrAscend wants to bring this experience to more people, and now that we have a capital partner, we can execute on that strategy.

Are you and TerrAscend already looking at other U.S. markets you want to enter? Which ones, and when do you think that will happen?

First and foremost, there was a license that was just granted last month in New Jersey, so we’ll be turning our attention there.

I don’t want to speak too much for TerrAscend, but we want TerrAscend and The Apothecarium to be the biggest and most admired cannabis company in the world. (It’s) one foot in front of the other.

Talk about the entire deal, when it began, what your mindset was, what you were looking for in an acquisition.

What we do is pretty capital intensive, and it’s only become more so in recent years, with the new regulations, new laws, all the rigmarole now that cannabis businesses – rightly or wrongly – are forced to go through.

So we went to prospective capital partners for about 18 months, close to two years, and it took us a long time to find the right fit. But we’re really happy with the folks that we found at TerrAscend.

They’re good people, they share our values, and they want to help us help more people. What is there to not love about that?

What sold you on TerrAscend? Was it the price, or was it more than that?

It really did come down to, I’m a culture guy, and culture comes from the top down. It’s absolutely critical to us that we have people who share our values, who appreciate how we treat our customers and how we treat our employees.

That is absolutely paramount to us. Second, it’s a group of great people. We personally like these people.

What kind of impact on the California cannabis industry do you think the influx of Canadian money is going to have? And what impact do you want it to have?

One thing that should be made clear is that no ownership changes have actually taken place, and they won’t take place until they’re approved by the cities, the counties and the regulators under which we operate. That’s an important distinction.

We obviously want it to have an overall positive effect, and I think it will.

I don’t think it matters much that it’s capital coming from Canada. I think capital finds its lowest point and flows there. If this was money that was coming from Wall Street instead of Bay Street, I don’t think there’s going to be much of a difference.

Increased professionalism in the industry. With access to additional capital, we’ll see people meeting a higher standard of customer service.

We also see capital as helping to secure jobs. We have 200 employees, and this coming together with TerrAscend helps us to secure their jobs.

The influx of money will professionalize (much of the industry). You’ll see some consolidation. And I think you’ll see folks with winning business plans rising to the top.

What advice would you give other California companies that may be getting calls from Canadian firms? Any red flags you came across while evaluating potential partners such as TerrAscend?

In any industry, there’s going to be extensive due diligence done by the investor, and it’s important for the entrepreneur to do their own due diligence on their prospective investors and to find the skeletons in the closet if there are any.

There are a handful of companies out there that do not comport themselves in a professional manner, in a manner of integrity. Those are to be avoided.

This interview has been edited for length and clarity.

John Schroyer can be reached at johns@mjbizdaily.com