Marijuana Business Magazine November December 2018

“That was part of our strategic deci- sion to take the company public,”Kova- cevich said. “The whole idea was: How can we raise enough money to execute on the whole growth vision for this company? At the time, that couldn’t be done through the private markets.That’s changed, but at the time, the public mar- kets were the only way.We took that risk, we put ourselves in a position to raise capital and make acquisitions using our stock as currency, and that has proven to be an extremely successful strategy.” Diversification While KushCo may still be thought of as a packaging company, its other business lines also figure prominently in its multistate plans. “We wanted to diversify our business offerings because that makes our busi- ness much more defensible and sound, because we’re not overleveraged on any one class or category,” Kovacevich said. The company also wanted to be able to “sell something to anyone,” and hav- ing different types of product lines gave the company different tools with which to pry open a market. For example, the company acquired CMP Wellness, which makes vapor- izers, cartridges and accessories, in 2017. In May, it bought Summit Innovations, which specializes in hydrocarbon gases that are used by extraction businesses and other industrial processes. That product diversity is important in a state such as Washington, where packaging rules aren’t as stringent as those in some other states, so marijuana businesses can go with traditional, less expensive packaging options, leaving KushCo with fewer packaging custom- ers, Kovacevich said. But Washington is also a state where vaping is more popular than in many other markets. And because of its many extraction and manufacturing busi- nesses, there is a healthy market for the company's vape-related products and hydrocarbon gases used for extraction. Massachusetts, by contrast, permits only CO 2 extraction, so KushCo’s hydrocarbon gas offerings aren’t a big seller. But the state also has stringent packaging rules, so KushCo's packaging solutions are needed. “The idea is that diversifying this platform gives a route to market in any state,” Kovacevich said. “We get in the door any way we can and then sell across the platform – and, by diversifica- tion, make ourselves stickier with the customers.” The Ground Game Kovacevich believes personal con- nections are still key in the marijuana industry, and ideally, he would like to have sales staff in every legal cannabis state. But that would be too expensive, so the company puts its entire sales staff in recreational states and serves medical markets from there. For example, KushCo staffers serve Arizona from Nevada, New Mexico from Colorado and the Northeast from Massachusetts. “We focus on putting people in the rec markets, because those markets can sustain them. And then anything that comes from the adjacent medical markets is gravy,” Kovacevich said. “The markets are still relatively young, so you have to be local, because you have to be able to react to local needs.” More than 50 of the company's 170 employees are sales staff, Kovacevich said. One of their aims, he said, is to connect with other multistate players. “If we want exposure in Maryland, we don’t go knocking on doors in Maryland if GTI (Green Thumb Industries), who is our client, is also going to Maryland. We go right with them. We actively seek these multistate guys because we can go into all the states they are in,” Kovacevich said. Future Now that KushCo products are available in marijuana markets across the United States and will likely end up in new marijuana markets that come online, Kovacevich’s goal for the company is to cement its position in the states it’s already in. “Our plan today is focused on: How do we get as much market share as we can? How do we entrench ourselves in the clients we work with? How do we build out a more diverse offering? It’s less about cost-cutting and cost savings today. We know that’s going to change, probably when this market matures,” Kovacevich said. “We’re going to have to redo things a little bit, but that’s OK, because the best way to execute on our strategy of getting market share and building strong relationships with our clients is to be in those markets. Even if it costs, we’re willing to make that investment.” ◆ KushCo Holdings is based in Garden Grove, California. Photo courtesy of KushCo 64 • Marijuana Business Magazine • November/December 2018