Exclusive Interview with Copperstate Farms CEO Pankaj Talwar
Copperstate Farms in Arizona has 40 acres of greenhouse space under glass. The vertically integrated company is continuing to pursue opportunities in its home state while considering multi-state expansion in the long-term. CEO Pankaj Talwar spoke with New Cannabis Ventures about the company’s footprint and M&A plans. The audio of the entire conversation is available at the end of this written summary.
Experienced Leadership at Copperstate
Talwar has built his career in the B2C consumer packaged goods space. With his experience in building brands, he decided to seek out CEO opportunities in the cannabis space. During his search, he met Copperstate co-founders Fife Symington and Scott Barker. The three immediately clicked, according to Talwar.
Symington has deep experience in big agriculture, developing more than 850 acres of greenhouse space and working with a large vegetable distribution company over the course of his career. Barker spent time as an investment banker with Goldman Sachs and brings his experience in business development and transactions.
The Arizona Facility
Copperstate’s greenhouse facility is located in Snowflake, Arizona. The 40 acres are split into two main areas: 20 acres is used for perpetual harvest, including mother, propagation, veg and flowering rooms. The company just completed a 10-acre renovation to include the latest hybrid greenhouse technology around airflow, ventilation, temperature control and light deprivation. That renovation will help the company to be prepared with the necessary flower and biomass for an expected influx in demand as adult-use seems likely to move forward in Arizona.
The other 20 acres are used on a more seasonal basis and for extraction, according to Talwar. The company has an extraction lab and a commercial kitchen. Copperstate is the state’s largest producer of bulk distillates, accounting for approximately a third of the market share, according to Talwar. The commercial kitchen supports the company’s edibles line, and Copperstate plans to launch a hydrocarbon lab by September.
Sol Flower is the company’s retail dispensary brand. Copperstate has two licensed dispensaries, which are in the top 10 percent of all Arizona dispensaries by sales and volume, according to Talwar.
Copperstate’s flagship dispensary, located in Sun City, Arizona, is a multi-use facility. It includes not only the dispensary but also a café and a classroom. The classroom offers education on topics like mindfulness, meditation, yoga and cannabis. Those classes have shifted to a virtual model during the COVID-19 pandemic, but Talwar hopes to move back to in-person classes when it becomes possible. The Sol Flower brand is designed to offer an open experience to the community, demystifying cannabis, particularly for those who are curious about the industry.
In addition to its retail operations, Copperstate is a top wholesaler in the state of Arizona. Wholesale operations account for more than half of the company’s sales, and the company distributes to approximately two-thirds of dispensaries in the state, according to Talwar. This widespread distribution helps Copperstate to understand market trends and pursue new product innovation for its retail locations and wholesale customers.
Operational Changes for the Pandemic
Copperstate has shifted its farm and retail operations in response to the pandemic. At the farm, the workflow has been retooled to ensure as much social distancing as possible. In its dispensaries, everyone must wear facemasks. Across its entire team, the company is doing temperature checks.
The company has also instituted testing and quarantining policies. Dispensary employees are getting tested for antibodies every two weeks, and the company is planning to introduce a similar policy for its greenhouse team. Anyone who tests positive or has come into contact with someone who is sick is asked to quarantine. While the pandemic remains a major concern, the company’s response has helped reduce anxiety among its team members, according to Talwar.
Copperstate has a portfolio of branded products, including Good Things Coming edibles and Copperstate branded cartridges. The edibles are developed by chefs Aaron Chamberlin and Teresa Hansen. The Good Things Coming brand is designed to be an artisanal approach to edibles, without artificial flavors, according to Talwar.
The Copperstate cartridge brand is designed as an everyday value option: a high-quality product at a reasonable price. The company’s vertical integration allows it to price these products competitively while maintaining a high margin, according to Talwar.
As the company moved towards bringing its hydrocarbon lab online, it is planning to launch a new brand of concentrates. This brand will be positioned for cannabis connoisseurs.
Over the next 18 to 24 months, Copperstate will remain focused on expanding within Arizona. With adult-use legislation set to be on the ballot in November, there is significant growth opportunity ahead for operators like Copperstate.
The company is interested in growing its Arizona retail footprint through M&A. Talwar believes the company is in a strong financial position with the ability to invest in retail assets. Copperstate is open to structuring potential deals in different ways, whether all cash or cash and equity.
Over the long-term, Copperstate is open to exploring opportunities outside of Arizona and taking its greenhouse and retail operations expertise to other states.
The majority of the privately held company’s funding has come in the form of equity investments, though it does have a small debt facility in place, according to Talwar.
The company is cash flow and EBITDA-positive, which puts it in a strong position to consider other debt financing opportunities. For the right investor and situation, the company is also open to other equity investments. But, its need for capital is largely short-term and driven by its M&A plans. The cash the company is generating will also help drive some of its investments, according to Talwar.
Copperstate has doubled its revenue year over year. It has had its strongest Q2 in company history followed by further growth in July. The wholesale and retail business units are breaking records month after month, according to Talwar.
Revenue growth, cash flow and EBITDA are important metrics for the Copperstate team. It also tracks specific KPIs like pounds of sellable flower and price per pound. On the dispensary side, the company carefully tracks KPIs like the number of daily transactions and basket size. The company also considers patient wait times. It wants cannabis connoisseurs to be able to have a quick, efficient experience. On the other end, it wants curious consumers to have the time they need to learn about products and find what fits their needs.
A year ago, one of the biggest challenges for Copperstate was creating the right greenhouse infrastructure. Talwar feels the recent renovation has addressed that issue. Now, the challenge is hiring the right people to handle the company’s growth.
Last year, the company had 180 employees. Over the past 12 months, it has increased that number to 400. And, Copperstate will need another 100 people in the next few months to keep pace with the demands of its growth. The company’s greenhouses location a few hours outside of Phoenix presents a hurdle in the hiring process. The rural community has limited housing and daycare options, making it a challenge to find the talent the company needs.
While Copperstate continues to grow its team, it has a number of exciting opportunities ahead. Talwar is looking forward to the potential passage of adult-use legislation in the state and the company’s plans to expand its retail footprint.
To learn more, visit the Copperstate Farms website. Listen to the entire interview: