Exclusive Interview with C3 Industries Co-Founder and CEO Ankur Rungta
C3 Industries is a private MSO with vertically integrated operations in Oregon, Michigan, Missouri and Massachusetts. The company has a history of organic growth, but M&A could soon become a part of its story. Co-Founder and CEO Ankur Rungta spoke with New Cannabis Ventures about the company’s current footprint, its growth prospects and developing direct relationships with investors. The audio of the entire conversation is available at the end of this written summary.
Rungta launched C3 Industries with his brother Vishal Rungta and childhood friend Joel Ruggiero. The three co-founders grew up together outside of Buffalo, New York. Rungta started his career as a corporate lawyer and investment banker. Vishal Rungta, who serves as the company’s President and CFO, worked in the private equity space prior to entering the cannabis business. Ruggiero, the company’s Chief Horticulture Officer, brings previous experience in the cannabis industry to the team. He ran cultivation operations for The Green Solution in Colorado, which is now part of Columbia Care.
In addition to the company’s founding members, the executive team includes important leaders like COO Samip Shah and General Counsel Ian Gross.
In 2018, C3 Industries brought its first operating facility online in Oregon. The company entered the market at a time of significant oversupply. While it was a difficult process, the company was able to establish itself, proving its thesis that there is always a demand for high-quality flower even in an oversaturated marketplace, according to Rungta.
Today, the company has products in almost 200 stores in Oregon. C3 Industries was able to build a profitable business in the state, and the team is not afraid to pursue opportunities in other open, competitive markets.
The company launched its Michigan operations around the same time as its Oregon operations. C3 Industries has a 40,000-square-foot cultivation and processing facility in Webberville, Michigan where it produces its Cloud Cover products. The company is also in the process of building a 90,000-square-foot expansion adjacent to its Webberville facility. The expansion will increase its flower production volume by five times.
Currently, C3 Industries has products in about 125 retail stores throughout the state. The company also has five open retail locations in the state with six more coming online over the remainder of the year. Eventually, it is aiming to have 15 retail locations in Michigan.
Massachusetts and Missouri
In Massachusetts, C3 Industries has a 40,000-square-foot cultivation and processing facility ready to go live; the company is waiting on its final license from the state. Rungta expects to have wholesale products in the marketplace early next year. The company also has three retail locations in Boston through a social equity partnership. The first store is expected to open by the end of this year, and the other two are expected to open early next year.
In Missouri, the company won a manufacturing license and five retail licenses. It also partnered with another group to acquire a cultivation license. Currently, four of the five stores are operating, and the fifth location is slated to open within the next month. Its manufacturing facility is expected to open next month, and its cultivation facility will open next spring. Momentum for a recreational ballot initiative could mean adult-use sales in Missouri in 2023, according to Rungta.
Applying for Licenses in New Markets
As the company’s platform in its current states is coming fully online, the C3 Industries team is considering new markets and projects. It has been applying for licenses in Ohio and contemplating the application process in New Jersey. The team is also keeping an eye on New York, where all three co-founders grew up.
C3 Industries is investing in building out state-level infrastructures that will make sense in the medium and long-term, according to Rungta. While federal legalization is on the horizon, Rungta expects the process to be incremental and slow; he does not expect states to stop operating independently of one another anytime soon.
Historically, the company has been focused on step-by-step organic growth. Now, with a team of about 350 people and strong support from capital partners, the team is more seriously considering M&A opportunities, according to Rungta. But, he expects that the company will be a conservative buyer.
High Profile is the company’s retail brand, and Cloud Cover is its product brand. C3 Industries built its foundation on high-quality indoor flower. The company focuses on appealing to cannabis connoisseurs. In addition to flower, it has begun to produce high-quality concentrates derived from its internal biomass. C3 Industries recently took home a number of awards from the High Times Cannabis Cup Michigan for both its flower and concentrates, according to Rungta.
Funding and Investor Relationships
This summer, C3 Industries completed a $25 million equity raise. The company is fully funded for all of the assets and projects it has in the pipeline for its four-state footprint. To date, the company has raised approximately $65 million of corporate capital in the form and debt and equity. It has also raised another $30 to $40 million in the form of sale-leaseback deals.
The company has never used an investment bank or broker to raise capital, according to Rungta. Instead, the C3 Industries team has focused on raising capital through direct relationships with individuals, family offices and private equity funds. Madison Square Park Capital, Welcan Capital and Navy Capital are among the company’s key investors. The team has built relationships with those groups over the course of several years, according to Rungta.
C3 Industries is open to the idea of going public, but it is a matter of timing and opportunity. Currently, the company does not feel any pressure to go to the public markets, according to Rungta. Ideally, he envisions listing C3 Industries in the U.S.
The company is expected to do $60 to $70 million in revenue with substantial EBITDA in 2021, according to Rungta. The company is cash flow-positive and profitable, despite the fact it is in a growth-heavy year. The company’s assets in Missouri will all come online in the second half of this year, and its Massachusetts platform is also in the process of coming online. Additionally, the company is opening new retail doors in Michigan. This will help to drive strong growth into 2022.
C3 Industries is very margin-focused and has always operated with the intention of being a cash flow-positive business. In quarters at the end of last year and the beginning of this year, the company was producing EBITDA margins in excess of 40 percent, according to Rungta. In more recent quarters, the company has been opening more retail doors and EBITDA margins have dipped into the mid to high 20s. Rungta anticipates EBITDA margins will return to the high 30 to 40 percent range as the company continues to scale.
In the current environment, construction and development are costly pursuits. Additionally, permit delays are common due to the COVID-19 pandemic and staffing challenges. Doors might open a month or two later than expected and costs might be 10 percent higher than anticipated, according to Rungta. While this is a near-term challenge, he does not think it will have a long-term impact on the company.
In addition to turning on more assets, C3 Industries is focused on its brands and marketing as it pursues the long-term goal of being a leading branded CPG company in the cannabis space.