Ascend Wellness Holdings, Inc. (AAWHU) Earnings Call Transcript & Summary

Thank you, and good morning. On behalf of ATB Capital Markets, it is my pleasure to welcome both participants, conference attendees and management participants to our brand building and leadership panel. I'd like to thank you for your time and attention this morning. Panel participants this morning include Jennifer Drake, Co-Chief Operating Officer at Ayr Wellness; and Greg Butler, Co-Chief Operating Officer, Cresco Labs; and Jim Cacioppo, the Co-Founder, Chairman and CEO of Jushi Holdings. I'm Kenric Tyghe, Managing Director and U.S. MSO analyst with ATB Capital Markets, and I will be moderating this morning's panel. With that, I think, as well to jump right in, and thank you all again for your time.

Folks let's start off with -- in the last 6 months, both Ayr and Jushi had made some meaningful changes in your brand positioning. Can you speak to how the resets, repositionings and extensions in key markets are resonating with your customers? And then secondly, could you also sort of speak to the -- how you expect this to impact your competitive positioning through 2022 and perhaps even into 2023 as key markets translate into adult-use? Jennifer, we could kick off with you and then move to Jim, please.

Sure. First, thanks very much for having Ayr on the panel. We appreciate the opportunity to talk about our brands. We spent a lot of 2021 developing our brand architecture, which we introduced to the market in November of last year. So we appreciate the chance to talk a little bit more about them. We did introduce those late last year, and we'll roll them out to consumers during the first 2 quarters of this year. And our brand architecture is really -- was really designed to resonate with customers and build, in particular, trust and loyalty with our customer base, specifically not one size fits all. We really believe that when you try to speak to everyone, you end up speaking to no one. And that the cannabis consumer really isn't just one person across form factors, occasions, need states and price points and level of expertise. So it's really important to have a brand portfolio that resonates with consumers across those different categories. What we found in the research that we did building our portfolio is that half of consumers strongly prefer a cannabis brand that focuses on a specific product or category rather than one brand that tries to do it all. And we really reflected a lot of that in our brand architecture. So our portfolio spans all the major product categories to address 80% of the cannabis market with our power brands and expanding to the rest of the cannabis market with our -- when including our core brands. And they've really, as I said, been built so that they can resonate with consumers and drive engagement across all of our different channels and really engage with customers no matter where they are in their journey with cannabis, whether they're an entry, just starting in their cannabis journey or they're an expert and whether they're more value-focused or more premium.

Thank you, Jen. We appreciate that. Jim, your thoughts?

Thanks for having us, Kenric, appreciate it. Yes, so we've rolled out 4 major brand categories throughout the last couple of years, dialing in different packaging, and the way we present these brands, market them or promote them over the course of the past 12 months. And of course, we're rolling them out into -- as we build up our grower processors and acquire new assets in different states like Massachusetts, for example, rolling our brands into that state as we speak. And Virginia, we're growing our grower processor and adding new form factors as the regulators permit us to. So the lab is our extraction product, Tasteology's edibles, Bank and Seche flower. We have premium category of The Bank and the more normal category. And the Seche is sort of a fine grind sort of value product. So we try to hit what the consumers want in terms of price points, and it's been a real fun part of the job to sort of focus on this and trying to figure out different ways to attach ourselves to what the consumer is interested in and using the sort of all the different techniques and data to sort of figure that out. In terms of what that means to us in terms of 2022 and 2023, we started out a few years ago as a retail-oriented company, and then backward integrated the grower processors in the last couple of years. So that's going to mean a lot to our gross profits as we roll out our own products both in the wholesale market and through our substantial retail system. So this could be very, very important to us. And we're really, for the first time, seeing big effect of that, I think, in 2022, where it becomes a very significant part of the business. So for us, even if these markets are large markets in Virginia and then Pennsylvania staying medical throughout the year, and one of them may change, it will really cause us to have our substantial margin uptick in 2022. As these markets in Virginia, Pennsylvania go into adult use, and you're going to see an even larger uptick in sales and margins as our brands pay a very important role in our company's profitability. So, yes, it's a very important part of our strategy. We're excited about rolling them out in Massachusetts. We have existing big grower processor there that we're just taking the old brands of the legacy company and rolling them into the new brands. So that's kind of how we roll and how we do it.

Thank you, both, some really good color there to kick us off this morning. Greg, good morning, I'd like to switch to you on -- for the next question. Cresco in a pretty enviable position through 2021, a top 5 rated brand across a number of those form factors and markets. Can you speak to Cresco's path to the podium and what you believe were the key differentiators of your product offering and experience? And then secondly, what do you believe it will take to remain one of the leading brands in the face of sort of increase, not just brand recognition, but perhaps also an increased focus from key competitors on building out their brand and brand portfolios?

For sure. And good morning, Kenric. Thanks for having us in the panel. And also thanks, everyone, for accepting me being a little bit late, as we're dealing with COVID, like I know all of us are dealing with store staffing and what's going on out there. There's always first thing meeting morning. So hopefully, everyone is staying safe, your team is staying safe, your teams are safe as we get through it. We're very pleased with 2021 on how our brands performed. I think we have a very strong rivalry right now between us and GTI with a rhythm of who's #1 or #2 in wholesale, and it flips by just a tiny little margin. It feels like every time BDSA publishes a report. But ultimately, what we are just thrilled is that we continue to be the largest wholesale brands out there. And that's just a testament to a quality team on our end, really tapping into consumer demand, which some of the other guests that Jennifer and Jim were talking about, and also great retail partners like Jushi that help us get there -- anywhere to like help us get to that status. So our view, it's not going to be that different from what Jim was talking about, right, which is our -- and it's not different from, I think, any consumer brand out there thinks about it, which is we have to delight our customers every single day. And one of the things that's also very top of mind for us is cannabis is expensive, right? As a consumer good and a high-frequency purchase consumer good, it's expensive, right? In Illinois [indiscernible] like you're spending $58 to $60. Like that's -- and if you think about any other category that has the trip frequency that cannabis does of how frequently people are buying it, but that's a luxury purchase for a lot of our consumers and households, as defined by kind of the syndicates out there. So for us at Cresco, we kind of put that front and center, which is the consumers have choice. The days where consumers didn't have choice are somewhat behind us now, as supply has come online. And for the most of part, consumers are paying quite a bit of money to participate in cannabis. And so continuing to put them at the forefront and understanding consumers and patients, what they need, and I think Jennifer hit it too, like we look at it the same ways, like one -- we don't believe a one brand fits all consumer needs. We also know that in different categories, whether it's flower or manufactured goods, and even in manufactured goods that's kind of a broad statement because in edibles, like in subsegment edibles, it's lots of different occasions that consumers are looking at. So what we think is a secret of our success today is a really, really strong team behind us that's creating quality products. And then also understanding what are the occasions, in which consumers or patients are looking for a product, what are those needs, understanding that, and then building our brands against it. And we don't look at a brand -- and I know this is one of your questions coming up, so I'll pause on this. We don't look at a brand as just the packaging, right? The brand is what price you're charging, what the product is behind it, how consistent it is, is it offered, available, is it available whenever the consumer wants to buy it. Coke has a great expression, as I want to be within 3 seconds of a demand moment from where the consumer wants it, right? That is important to a brand. So I think getting all of those pieces is so critical to build a really quality brand in the space, which we're at the very beginning of the journey here. And -- but at the forefront, it's a real appreciation for your consumers and patients and understanding how much they're giving you their hard-earned money and working really hard every day to like create the value they need to justify that.

Really insightful comment there, Greg. Thank you. Just if we could sort of -- good, better, best has always been compelling within sort of more mature CPG categories by both retailers and manufacturers. I'd love to hear your perspectives on kind of the nuances and key differentiators between your sort of power or premium brands, Jen, and your's -- and then looking beyond that, how you think about focus brands, how you think about the relative product attributes, collateral distribution? And then, Jim, maybe if you could also tie in on that when Jen has completed her comments on. We really interest to hear the different views on that, good, better, best, and how that plays. Jen, if I could hand to you.

Sure, sure. It was -- it's really important to us that our power brands, which are our premium brands, really cover the majority of purchases in cannabis. That's why our Kynd, premium flower, our origin extract, which focuses on control spectrum, premium concentrates, our Levia-infused cannabis seltzer and our STiX Prerolls really formed the 4 important key power brands for Ayr. Those categories do address 80% of the market. And the brands were very much built on the back of sort of our data-driven, survey-driven, consumer-driven research throughout 2021 and had -- really finalizing on that core and power architecture. They're premium by nature, and they really have been created to really showcase or they -- to showcase Ayr's emphasis on the quality of what is inside the box to follow the quality of our cultivation, the quality of our product development, and to offer that quality consistently across our footprint and at a price point that is accessible to the consumer. Our core brands are really kind of additive to those premium power brands. They give a lot -- they give more variety in terms of form factor, in terms of dosage, in terms of experience, and they're really meant to address an even larger part of the market, designed to have a broader appeal and designed to have flexibility for a more accessible price point because as Greg said, we're really looking at our consumers across a spectrum of price points and value propositions and need space. And that's -- we think it's really important to have a brand architecture that can address all of those.

Thank you. And Jim, your thoughts there in terms of good, better, best, its effectiveness, and how that sort of manifests in the market?

Yes. I mean they really have to do it. It's pretty obvious. Greg talked about how the products are expensive in the store. So you need to offer a premium product. The patients and customers tend to focus on potency. Flowers over half of it all the -- of our sales approaching 60% in a lot of markets, including the pre-rolls. And so if you look at just the potency, very, very important on the premium segment, the terpene content, and just bringing out newer varieties, sort of simulating, sort of demand by having new strains. And so that's a very important aspect of it. And the quality has to be there. So when you go -- you enter into a new market, it might take you a few months or better part of a year to sort of get to the quality level you want to get to. You inherit often in these acquisitions, a facility that's below your standards, which you get good value for when you buy, but then you have to sort of fix the gaps in the system, whether it's the humidity control or the way it was constructed or the way the trimming is done and to get to that quality content so you can offer it. So a very, very important segment. And then the value segment is extremely important. I mean, it's an expensive products, so you need to be able to offer different people. They're walking in with their paycheck for consumable, something that they're using within a few days, and they can only afford a certain amount. So you need to have that. When we look on Reddit on our products, people a lot more forgiving of the value products for sure. They appreciate the price and they know it's not going to be as good. So the consumer tends to be very forgiving in the cannabis sector still because they know all of -- when we get into markets, I mean, Cresco, you've seen their product in Illinois just keep improving over a long period of time, and they know that it takes the grower processors a long time to do this for a few months at a minimum when they get into a market. So the consumer tends to be looking to try new things, and offering the good, better and best and putting varieties in there is great. And of course, on the vape side, the other big segment, we do that with our hydrocarbon products, the fresh frozen on the high end and the CO2 at the lower end. They're all very good products. We tend to be very good at that segment, historically in our DNA and -- but the CO2 is much more of a value product. So yes, you're constantly looking at different ways to approach the consumer, and data plays an important role, and mixing up plays an important role as well.

Thank you. And if we could let the a little here. Consumer and brand insights, a very different points on the journey here in terms of your data, data availability, data usage. In hindsight, what would each of you have done differently in terms of this journey? What do you think were the potentially missed opportunities both for the broader industry and perhaps for your specific companies on the scramble to ramp footprints, brand awareness and drive consumer loyalty, just given how quickly this industry has come up and how rapid the growth remains? And Jim, do you want to hold the mic for a second? Then we can move to Jen and then Greg.

Yes. So -- I'm sorry, Kenric, can you just repeat the meat of the question? I didn't follow.

Yes. So just brand and brand insights, you have a much better data position, you have far better data insights than you did 6 months or a year ago. And with that data, looking back, what would you have done differently, if you had the data a year or 2 ago that you now have now? How that data informed your decisions going forward? And what is it highlights that you perhaps could have done differently had you known?

Yes. So Jushi, we're approaching our fourth year anniversary. We're in the top 10 companies, but we probably, by market cap, we're the 10th largest, not the sixth largest. And so we've been a fast follower. So we've been able to learn a lot from -- as a retail focused company in the beginning from our position as a retailer and from the marketplace. So we were able to see what's going on, and we've been very focused as a company. We raised over $450 million and spent -- at the end of the year, we had $100 million on the balance sheet. So we had spent about $350 million and buying licenses and building facilities and opening stores. And so when you look at that large spend, branding has a sort of a very small segment of that. So we took in the beginning, strategic position of learning in the marketplace what's out there, kind of being the fast follower and saved a lot of money. We looked at the branding as an area where we think the great brands will be built in the next decade, not necessarily in the past decade. So to say it another way, we think there's a lot of ways to go. I don't know that people talk about which spirits brands were around post-prohibition. To us, I never -- I was thinking of this last time in preparation for this. Can I think of one -- I mean, you think of segments, whiskey and gin and -- but you don't think of -- so I think it's kind of like that. And I think the brands will evolve. I think -- for us, I think our approach was right, really kind of not spending a lot of money on brands, kind of do it in a very, very sort of value-driven way for our shareholders. And that's been our primary focus. We have a great team -- a great creative team led by Dre Neumann. We do a ton of our own research and polls and all these types of things. We follow very intensely what goes on in the market. And -- but we've done it in a very much value-driven way. We really haven't acquired. We brought brands in as part of asset acquisitions, not -- or talent acquisitions. We haven't actually acquired any brands. So for us, it's been something where we want to get our quality to the highest level. We want to get a bigger footprint throughout the country. We want to keep learning. And then our big spend will happen in the future. We could be a $5 billion company and acquire a company for $100 million or $200 million to $300 million and not suffer very much shareholder dilution and acquire a great suite of well-known brands that came out of, let's say, California or something like that. So that could be on the horizon for Jushi 2, 3 years out. So we think of it very, very long term and very, very much in the stack of expenses we spend and assets and licenses and building facilities and getting the quality is much more important to us than -- and I think it's most important to the customer. They're focused on potency. They're focused on price. And so it's just a value segment for us in our spend.

Jen, your thoughts on the journey here and what could have been done differently at the time with respect to brand and brand building?

Yes. I mean I would say an important part of us as a company is that we're always learning and we're always looking at kind of we're always learning from the past to be better in the future. That goes -- it's true for branding, it's true for cultivation, it's true for retail experience, it's for product development. It's true for everything. We're very data focused. We're very analytical, and we're very humbly learning to be better every day in everything we do. I would say for brands, I agree with Jim that we're at the very beginning of the brand-building journey for this industry, and brands relationship with the consumer and their relationship with cannabis will consistently be evolving. I mean it's always evolving for brands, right, of course. And so it's super important to always be learning and always be evolving your brand and always be -- have a 2-way relationship with your customer, which is why we love having our retail stores because that's in real life kind of real-time experience and data that you get from those customer interactions. But if there's one thing that I would say that we would do differently, I think, we just try to do everything faster. I think we're really, really pleased with where we are today. I think if we could snap our fingers and be where we are today 2 years ago, we would be. But things take time, and it's important to spend the right amount of time on something as important as your brand.

Thanks, Jen, appreciate it. Greg?

Yes. So I think the only thing that I would add is I think, Jen, was hitting on it too, which I agree, I don't think any brand -- you have to always consistently earn your place. I don't know if it's -- as you said Jim, pre-prohibition, like I was watching something last night about BlackBerry, and it's just amazing how that brand at one point was like the pinnacle of success and is now the joke on Apple's stage. And it hasn't been that long. And even Apple is saying like, hey, it is some stuff this brand did, that's great, we're now putting into our platform. So I think this is a reminder to all of us that like no one just gets a free pass. And so you've got to hustle that position you have, and no brand can just survive forever without it. And I think we're all in that, right? We all got to fight to continue to deserve this brand. I think the other piece for it too, I think Jen was hitting on it, is I think on average, excluding maybe some of the California brands, I think most of us are spending less than 2% of SG&A on marketing. Just I think that's roughly kind of if you look at the financials, we look at 2%. If I think of [indiscernible] days or any -- or Pfizer days like a cash cow brand sitting at like 20% and most insurgent startup brands are 100% of revenue. So I think to Jen and Jim's point, like, we actually really haven't begun what I think most people on the outside think of brand building. At 2%, we're really just doing in-store collateral and material, and as Jen was saying using the best of our ability on research. So I think the day will come where we're going to have to spend to fight with each other to get those customers, but I don't think we're anywhere near traditional CPG, and Kenric, you know this better than I do. I think we're near traditional CPG levels. But there is, as what Jim is sitting on, we're all investing to buy facilities. We're all putting our capital into building facilities and improving facilities and doing M&A. And I think most of our spend is going towards SG&A and capital that's going to build, and we're all doing the same thing. So I do think -- and I look at it as an excitement because I'm a little bit of a competitive person like that does mean all of us are going to have the supply. And then now we're going to have to find ways to convince consumers to why buy from us versus each other. And that's the fun part of being in this business on the consumer side. But I don't think we're there yet, quite frankly. And you're not -- I know we're not there because we're not even seeing in our P&Ls, but that day will come, where we'll have to invest more to win over customers. But to what everyone is saying, you don't need to do it right now. So that's why no one's really investing it right now. We will when we have to. I think as I look at what I would do differently, and it's fun to have everyone on this panel to have this conversation is the 2 things is, one, building the right data platform early on to better collect this data, like we are a modern retail, but I don't think any of us had the cash to build kind of the tech backbone and we were rapidly scaling to have like perfect access to data. I know all of us are trying to now quickly how are you collect -- because we get a lot, whether it's through the states or our customers. And so getting an infrastructure that allows us to do more, it's amazing. I think Jen said it, like owning retail and owning -- and having CPG is wonderful because I can test and learn every single day with consumers, figure out what's working, what's not working, and then try to sell it into Jim or Jushi on his retail, but do it in my retail first so I can figure out if it works. And so that and just getting how to harness that data more efficiently and effectively is I think a challenge that if I go back in time maybe spending a bit more to build those data systems, but we're getting there. And then the second is for all of us -- as an understanding, we all have to, we're all in a unique situation, right, because we are both competitors and customers to each other. And that is unlike any other real CPG industry. And I think as we are all ramping up, it's -- we're all competitive. We're all thinking of ourselves. But getting into that like win-win mindset earlier on of like, wait, I have to not only win with my brands, but I have to convince Jen and Jim to take my brands and grow my brands in their stores and vice versa. And I think figuring out how we partner to grow the category is unfortunately -- it's like everyone is supposed to be doing that in every category, but it's even more important than ours where we are both competitors and partners and figuring out how do we continue to bring new patients and customers into the segment is what we have to do and probably we should have been doing it better. But I'm -- look, I'm really pleased on how 2021 is netting out with our top to tops, how we're having more honest conversations on how do we grow our businesses together and what's right for both of our businesses, how do we think of things like reciprocity, how much do you buy from me and how much do I buy from you, like all of these things are good business. And then ultimately, if we do it right together and figure out we can grow this category. And I think we all have to do that now as we face -- the early days of growth that comes to us easy is probably slowing, and we're going to have to get out there and start getting more patients and consumers to enter this category together.

Thank you. And to the comments around the alcohol business. I mean I think we need to look no further than tequila and gin in the last 1, 3 or 5 years and what's happened with brand and dislocation there and how certain companies come from absolutely nowhere to be category leaders and gin and tequila as examples, never mind post-prohibition, and the 1-, 3- and 5-year view is pretty telling in terms of how that landscape has been turned on its head in very short order. So some great, great insights there from everybody. Just keep going down that data-driven and data-driven decision-making road, we touched on a good amount of the brand discussion. I just get into consumer data analytics, consumer loyalty. How that is continuing to inform your promotional decisions, target your promotional decisions, where you are on that consumer analytics journey, recognizing it's obviously very early stage? But how important is that to you today? How important do you think that becomes in terms of both the insights you're able to glean from your data, but also utilization of that data over the next year to 2 years? And perhaps Jen, I'd love to hear from you first, and we can then switch to Jim and then Greg.

Sure. Sure. As I touched on a little bit ago, we're just a very data-oriented and analytically-oriented company. We think of data as a key foundation of our business. Our goal as a business is to be the highest quality producer of flower at scale in the country. That's the way -- kind of how we think about our mission because of the importance of every -- of what's inside the box for all of our brands and all of our customer experiences. But we think of our data infrastructure very much as part of that foundation and the key driver of that foundation. So that reason, we developed -- we started developing our data lake and business intelligence tools very early. We've used those as well as kind of externally facing surveys, et cetera, to build our brand architecture. And as we move forward to support everything we do around customer engagement, we're developing proprietary e-commerce sites and proprietary loyalty apps that will help keep providing that really rich information to drive very customized, very bespoke interactions digitally with our consumers and to help support that in real-life experience in our retail stores. We think using data and the digital channels as much as we can is super important. It's the way we all -- it's a key part -- it's a key leg to the stool of how we as human beings interact today, and it's especially hard in cannabis because we're not allowed to use a lot of the tools that are just off the shelf for other types of businesses. So we really recognize that super early and built the foundation of it early, and now we're kind of building the next levels of the building, so to speak, now that the strong foundations are in the ground. But we think that knowledge and insight that we get from that interaction can be really, really powerful.

Yes. And I think to build on that, I think if we look at it, one of the metrics we -- all of us, and we at Cresco Labs look at as return on invested capital for our shareholders. And so if you take that and break it down like what data has to give you is you have to be able to test -- you have the benefit of testing and learning faster and really getting smart on driving that return. So I think that's -- yes, it's hard. Jen mentioned early, and I'm not going to -- for the sake of airtime, I won't agree with everything she is saying, but just using channels, but it is that like -- if anything, it should enable us to be faster, more efficient and make smarter decisions without wasting a lot of capital. So that's how we think about it. And then I think on the loyalty front, I worked for [indiscernible] President of PepsiCo North America. And her comment to me early on, I remember that she's like, if you want loyalty and brands -- if you want loyalty, get a dog. And I was thinking at the time, here's the head of Pepsi, like one of the most like beloved brands in America. And even her recognition is like, look, we've got -- there's no such thing as consumer loyalty. There's consumer preference, which means you will be always in the consideration set, but you got to believe you're going to that jump ball every time you're at point of purchase. And...

You got to give them a reason to engage.

Yes. So like you've got -- you're in the decision set. It's 1 of these 3 brands, but you're still fighting it out for who's going to win. And even when I was on Miller Lite, it was $3 billion in sales, I would tell you, our most loyal customers, one still had like It's Miller Time tattooed on their body. We were a pretty small share of their total consumption. But in their mind, that was the high loyalty. And so I think that's for all of us in this category is you're never going to get, consumers are not loyal. They will jump around. You will -- you get the benefit of being -- if you're good and you deserve it, you're in their consideration set, but we are fighting it out every single purchase to win that jump ball. And so it goes back to where we started this conversation, which is putting the consumer first and saying, how am I everyday earning the value for that purchase. If they come to my store, the loyalty program, and when we launched Balance Rewards at Walgreens, the real benefit for us was the amount of customer behavior data we got, which would enable us to make smarter price promo decisions, right, versus the 60% of the entire store, which is just you know you're wasting money there somewhere. It allows you to get a lot more surgical on either when to get dollars off, helping customers send in to a basket builder. So if you come in and buy flower, we're going to try to give you the right price to convince you to buy an edible or trying to like grow you or know when your birthday is and do that delights you likely, but then also back channel another promo in to get you to come in, like we ran something over the holidays off of our program, which is really successful for us. We're pleased, but it was only driven by the fact that we could subsegment a segment of customers and give them the right targeted offer to motivate their behavior differently, to get us to win that 1 more trip, which was so much more efficient than doing a total store. Now all of us do them occasionally, we all have to, but that is like -- I think that's where Jim or Jen were talking about is like when you harness data the right way, we can just get smarter and just do better return on price promo. But, yes, I love the quote, if you want loyalty, get a dog. I thought that was -- it's just so true, and it's resonating me since I was like 22.

Jim?

Yes, listen, I think a lot has been said. The way we do it at Jushi with data is very, very important. And precisely for what Greg was talking about in terms of driving your return invested capital prevents you from the waste money. We use it very much in the branding process before we roll out brands and design brands and spend all that money on brands. And then we use all that data as well to drive our promotions as Greg is -- and Jen are suggesting. So we sort of customize our promotions. One of our tools -- we created a tool that we think is very good. I think others have done this. It's shocking when you do acquisitions, how others -- they're not doing it in state -- the single-state operators. We have The Hello Club, which is our loyalty club, and we drive a lot of data from there, and they get discounts for joining, and we can target them. And so that tends to be our own private source of data that we really like, and we can experiment around with that. And I would just lastly say for us it's been an area where it's probably our most entrepreneurial group in the company, and we're a very entrepreneurial company. The industry is very entrepreneurial, but of all the groups in our country, this is -- in our company, excuse me, it's the one that is -- the one where this is housed is the most entrepreneurial, it's been a remote workforce from the beginning, not due to COVID, people from all over the country. And the way they go about things is there's so many different ways to get data now, whether it's through Google or through different sources that you might have or through whatever it might be. So it's the perspective that they bring, and they're one of the most hard working groups because they just love it. And so I think there's a lot more to go there, and we're just going to continue as an industry and as a company to gain so much out of what's there because we really don't know in this industry because it's so early on still.

And perhaps continuing from there, and Greg, you could lead us all. If we look at the broader market, and without perhaps naming names, what do you believe were some of the biggest marketing or branding missteps we've seen in the market today? And how are the learnings from those lessons, be it your own lessons or lessons of competitors, in forms of the evolution of your brand strategy and positioning? I mean, clearly, not all of the leaders out the gate are leaders even today. Certain brands have struggled more than others, and then there have been some surprises. So perhaps sort of speak to the missteps and the learnings from them would be really nice to hear?

Yes. So prep for that since it's nice to have the questions beforehand. So -- but I'm also going to let -- I think Jim is also starting to tag into there. So I'll just add mine because I think it was what he was mentioning earlier, which is I think very early on innings, it's actually very -- it's very connected as a conversation we're having right now. I think we -- most companies' top branding was nice packaging. And that was at billboards in California, right? And I think there is a lot of that. And it wasn't like what was in the box. I think Jennifer was talking like all of us have done our own whether good, better, best, occasion-based segmentation, live resin versus distillate versus you name it, right? And I think that sophistication of these are the things that matter, low potency, high potency, terpene profiles, rosin and where rosin plays in the category. That level of sophistication is core to brand building in addition to smart pricing in addition to consistent distribution and availability in addition to like standing for something that addresses a need or a meaning. And I think that -- building brand is complex. Like it's not just an ad agency creative solution. It's so much more it requires. We talk about all the time at Cresco Labs. It requires all of the teams, sales, quality, brand, finance, like everyone is connected to building these brands. It's not marketing's job. And I think early, early on, a lot of companies were like, hey, buy flower from someone, put it in a really pretty box and put it out there. And I think -- and we kind of led the -- maybe the investor community to be frank, but that was what brands were in cannabis, and that's just not true. And so -- and I think you're also seeing that in some of the earlier deals. I think -- actually, I think it's you, Kenric, who asked me this question on every earnings call, which is, is there any brands you want to buy. And I think the answer to that is there's been a lot of deals that you just look at and you are like I think you are just buying a pretty box, but what you really want to buy is a capability, like a really strong capability that Jim was saying that you can scale across your footprint. So -- if anything, I think where we've evolved to, which is really nice, is a more sophisticated and more true understanding of how you build brands. That's way more than just a pretty picture or a pretty package or a display. And where I was going to tee Jim up, not to take over your job as a moderator, Kenric, it's like it's that question of California brands. Some will not fly, like you've seen it, like trying to take a brand out of California across the country, digital resonate, right? The packaging is not working. Others do, and others might. And I think that's -- that is the mistake. And I think the future is how do we get more sophisticated on how we evaluate what is a strong quality brand that has staying power. And I think that's also going to drive where the valuations are going to net out on what people are willing to buy to try to scale versus maybe what we were doing, which doesn't seem that long ago, but like 2 or 3 years ago.

Yes. I mean I would sort of echo that. I mean I think the biggest mistakes have been in acquisitions. I think people have been paying a lot for brands. I mean, if you just look at public -- if you just go back and go through all the acquisitions and go through what the companies who have acquired them talk about, they're often not talking about what they acquired. And so I think that there's been, from a shareholder perspective, a diminution of value in sort of brands acquisitions. I think the market wanted to focus on it too early, both the stock market, the M&A market and sort of the pressure of investors. They want to focus on it in 2020 and 2019. And it's just like, okay, that story is going to be written in 2027 or '30 or something like that, it's not going to be written. So any kind of -- the big dollars spent on that really were not the best return for the shareholders and may have caused shareholder values to deplete. It's really about driving the quality. I think what drives Cresco and GTI's battle really is the quality of their product, not the name or anything else, and the breadth of their offerings in terms of across states and the availability of the product. They will be available. I mean they're consistent producers. One of the reasons why we buy their product so much is that it's month in, month out, the quality is there, and the product is there. It's not like, well, it's not their -- and then from our perspective, they work -- they understand what the customer wants. We can work together to drive certain kinds of product, certain kinds of promotions or whatever we're doing to drive demand to sell their product. Illinois, we're only retail. So it really gives us that point of view of how do we drive sales through our stores. We don't have our house product to rely on. So that gives us sort of a unique perspective. And by the way, it's almost $80 million of sales at 4 stores. So it's very powerful. It's not a small amount of sales. So I do think you have to be careful. I know your background, Kenric, and I think I have to be careful of what you wish for in branding, don't go out there and spend too many shareholder dollars. You haven't seen any of these independent brand companies that were public really do much. I think it's another testimony to it. It's really hard for them to come in and say, well, I want to cut this deal to get in. You guys just spent all this money and time building 18 stores and 140,000 square feet in Pennsylvania. Now I want to latch onto that, and I want to get X percent of sales. We're like we can do what you have. I mean, it's not hard. I can hire somebody at your company, if I need big. I mean that's not hard to do. I mean, like -- so like there's almost no value to us. But there will be some select ones that build up brand portfolios. I don't think they're public, but I haven't really schooled myself for preparing for this call in that way. But I don't think they're public, but there are some brands coming out of California that -- whether it's Kiva, it tends to be the edibles and -- or there's other ones as well that are private that will do well. Cookies is kind of a brand. I think genetics and cultivars is more important than the brand itself to be quite honest. So when we're going to spend dollars, I'm more interested in the expertise, in the cultivars that I might be purchasing than what they call it in the packaging and sort of -- maybe their early momentum in a given state or 2 states or whatever it might be.

Jen?

I think Greg and Jim have covered it pretty well. I think I would maybe just add kind of 2 things. Well, 1 thing I said already, which is I think people when you speak to everyone, you're speaking to no one. And so making sure that you're really speaking to the consumer that you think you're speaking to and taking the time to develop those brands appropriately. Also, I think Greg probably touched on this a little bit in the context of like a brand that's more than a pretty box. You got to be focused on authenticity, and you can't be trying to be cool. Because if you're trying to be cool by definition, you are not, and that focus on authenticity and that authentic interaction with the consumer, really classic proper brand building and proper building of consumer engagement, which -- this industry didn't really do that much at the beginning, but I think is really starting to and really starting to focus on. And clearly, the focus on what is inside the box, the quality of product. Those are the real tenets of building a great brand and not paying attention to those is not going to lead to success.

And just pointing out the companies I mentioned in California have had some success like Kiva and Cookies in their markets where they come out of, they control the assets. And if you talk to them in other markets where they don't control the assets and they don't control the quality, they haven't had the ability to sort of repeat that very easily, and they're very hesitant to enter into new deals in some cases. So again, looking at MSOs, I think that's the way to go. I mean it's controlling the assets, controlling the quality, it's a vertical business, and so that's -- the brand is tied into the operations. And there's been no -- I don't know if there's been any brand-specific companies that haven't controlled the assets that have been extremely successful compared to where sort of look at the market caps of any of the MSOs that have been successful.

I think -- and to build on that is we have a Kiva relationship in Illinois, and it goes back to what Jen was talking about, and everyone asked us like, why you've got Mindy's, you've got Good News, you've got a pretty strong position in edible space. And to Jennifer's point, we were like -- we looked at like vivid consumers, specifically in edible. It's a confectionery good, like spice is the light of life in that category. And so giving them different choices and Kiva got some interesting stuff for their lost firm and whatnot, we can bring it to market as a portfolio because at the end of the day, what I am trying to win is I want to win every one of those shopping occasions. And if variety is a key need in edibles, and they're going to want to shop around, and we see it in our own retail data, I don't lose a Mindy's consumer when they buy Kiva. I'm actually picking up an incremental purchase or I'm keeping them because they were going to buy a competitor brand in that second cycle. So all of us, and I think what we're all talking about too, is putting that consumer first, understanding their needs and asking yourself, I think Jim said this, do you want to build it to go after it. In some cases, you might want a partner to go after it. And in the future, I agree with Jim, particularly in genetics or a unique capability that we can scale, you want to buy it. But right now, there's just not a ton that you'd say you want to buy that you can scale easily. But for sure, that's coming.

Thank you all so much. That's time on the session. I had some great discussion. Really, really, really value both for time and insights. Jen, Jim, Greg, thank you once again. Looking forward to a good day of meetings here beyond the session. And all the best, we'll chat soon. Thank you again.

Thank you.

Thank you.