Cannabis Operator Trulieve Adapts to Challenging Operating Environment and Capital Markets from Position of Strength

Credit: Kira Derryberry Photography

Exclusive Interview with Trulieve CEO Kim Rivers

When New Cannabis Ventures last spoke with CEO Kim Rivers in November 2018, Trulieve (CSE: TRUL) (OTCQX: TCNNF) was just beginning its national expansion plans. Now, the company is continuing to dominate in Florida, and its footprint includes California, Connecticut and Massachusetts. Rivers checked in to discuss what is driving success in Florida and doing business in today’s challenging environment. The audio of the entire conversation is available at the end of this written summary.

Promoting from Within and Outside Talent

Over the past two years, Trulieve has aimed to strike a balance between promoting leaders within the company and augmenting its team with outside talent. Kyle Landrum began by overseeing Trulieve’s cultivation assets, and he is now Chief Production Officer, overseeing the company’s supply chain.

A Group Photo of Trulieve Team Members

Trulieve has also brought in Chief Sales Officer Tim Morey and Chief Marketing Officer Valda Coryat. Morey has extensive retail experience–he oversaw more than 900 stores in his position at Finish Line. Coryat has deep experience in B2B and consumer packaged goods.

The Florida Market

Trulieve has 45 locations across Florida. To support the increased store count, the company has expanded its cultivation footprint in the state to 1.7 million square feet. Additionally, it has grown its product mix to offer more than 300 different SKUs in Florida.

The Interior of a Trulieve Dispensary

The company’s leading position in Florida is being driven by its commitment to customer experience, according to Rivers. The company’s call center receives 3,000 calls per day across the state, and it participates in community events. Trulieve strives to listen to its customers to bring them the types of products they want at the price points they want.

California, Connecticut and Massachusetts

Beyond Florida, Trulieve is actively building a presence in California, Connecticut and Massachusetts. The company looks at its California dispensary as a window to the west coast, according to Rivers. It has been running some different product mixes to learn about consumer preference. California is also an important market for learning lessons on wholesaling.

Trulieve Has 47 Retail Locations Across Florida, California and Connecticut.

Trulieve is also operating a dispensary in Connecticut. The state’s medical market requires a pharmacist to be present in dispensaries. Here, Trulieve’s team handles a large amount of call-ahead and pick-up orders. The dispensary has done well, and Trulieve is increasing its customer market share, according to Rivers. The company will be closely watching the news to see if the state will allow the establishment of recreational regulations.

In Massachusetts, Trulieve is in the process of building out its cultivation and manufacturing facility in Holyoke. The first phase of construction is expected to be complete soon, to be followed by a second and third phase. The company is also building a dispensary location in Northampton and planning to launch wholesale operations in the state. Wholesale in Massachusetts will serve as a pilot program for the company’s wholesale expansion plans.

Director of Wholesale Chris Kelly brings two decades worth of B2B experience to the team, and he is spending a lot of time building relationships in the Massachusetts market. Trulieve is looking to bring its wholesale operations online in 2020 and 2021.

Growth Opportunities

While the capital markets have led to many distressed asset opportunities, Trulieve continues to take a careful, holistic approach to its M&A strategy. The company looks at management teams, potential synergies, discounted cash flow models and underlying asset values. A deal has to make sense from a fundamentals perspective. Last year, the company looked at more than 40 deals and none were a fit, according to Rivers. The company will continue to take this approach as it evaluates future opportunities.

When it comes to growth outside of its current footprint, Trulieve sees the U.S. cannabis market evolving into five different hubs: the southeast, northeast, central, northwest and southwest. With Connecticut and Massachusetts, the northeast is an important market for Trulieve. The company’s applications team is also looking for organic growth opportunities in other markets, while Trulieve continues to consider opportunistic M&A.

Brand Partnerships

Brands are a significant piece of Trulieve’s go-to-market strategy. The company has its house brand, which will likely grow to have additional segmentation. That house brand will be important as the company focuses on wholesaling.

Trulieve is also focused on cultivating relationships with other strong brands that resonate with different customer segments. It has formed relationships with brands like SLANG, working together to bring the RESERVE line to Florida. Other brand partners include Binske, which has high-end concentrate and edibles lines, and solventless technology company Blue River. Building these kinds of relationships helps attract customers and patients who may not have otherwise come to a Trulieve store, according to Rivers.

Response to the Pandemic

The ongoing COVID-19 pandemic has affected every industry and the daily lives of consumers. Trulieve, like many other cannabis companies, has seen an increase in demand. It has activated an internal emergency response team to help keep both employees and customers safe.

The company is scanning temperatures when employees come into work and sending anyone who does not feel well home. It has also taken out a short-term disability policy to help ensure its team members are compensated if they cannot work. A cleaning service provider is helping to supported increased protocols around sanitation.

For customers, Trulieve is rolling out a number of different initiatives. Trulieve is increasing its delivery fleet, and patients over the age of 65 can receive their products via free delivery.  The company is also piloting a mobile drive-up program, which allows people to pick up products without getting out of their car. It is also staggering orders to cut down on the number of patients gathering to pick-up products.

Debt Offerings and Sale-Leasebacks

Trulieve is cash flow-positive and has capital on hand, which has allowed it to service debt, according to Rivers. Last year, the company completed a debt financing at 9.75 percent. Rivers acknowledges the rate would be lower, particularly given the strength of Trulieve’s business, outside of the cannabis industry. But, there is an opportunity to begin refinancing after two years. Rivers expects that measures like SAFE Banking will roll out over the next five years, giving cannabis companies access to more traditional lending tools. She is hoping this will mean refinancing options at more normalized rates.

In addition to debt financing, Trulieve has also done sale-leaseback transactions on two of its cultivation assets (one in Florida and one in Massachusetts). Non-dilutive approaches to raising capital are preferred, according to Rivers.

The company is currently in a strong cash position, with the capital to meet growth needs and prospects, according to Rivers. Additionally, the company is generating cash from its operations.

2020 Guidance and Beyond

Trulieve has released guidance for 2020, expecting revenue to be between $380 million and $400 million. EBITDA is expected to be between $140 and $160 million. Rivers recommends investors watch EBITDA, as well as traditional retail metrics like same-store growth. She expects the company to be able to share some additional metrics soon.

While many cannabis companies are experiencing a capital crunch, Rivers is confident in Trulieve’s ability to support continued growth. This position will allow the company to carefully consider M&A options. The potential for edibles to come online in Florida this year, building out operations in Massachusetts and launching wholesaling are all exciting prospects ahead for Trulieve.

To learn more, visit the Trulieve website. Listen to the entire interview:

Exclusive article by Carrie Pallardy
Carrie Pallardy, a Chicago-based writer and editor, began her career covering the healthcare industry and now writes, edits and interviews subject matter experts across multiple industries. As a published writer, Carrie continues to tell compelling, undiscovered stories to her network of readers. For more information contact us.

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