Jushi Holdings is out to be a world leader in the cannabis industry. They’re off to quite a start in the U.S. with operations in Virginia, Pennsylvania, Massachusetts, Nevada, Illinois, California, and Ohio that include 37 retail stores, along with associated cultivation and product manufacturing operations. Trent Woloveck, pictured below, is the company’s Chief Strategy Director with responsibilities spanning retail, pricing, operations, and overall business strategy. He’s been in the legal cannabis industry for over 10 years, starting with an initial small investment in a Colorado business. Now he runs the nuts and bolts of one of the most prominent cannabis firms in the country.
Cannabis Benchmarks spoke to Woloveck to learn his take on the overall U.S. cannabis market, state-level specifics, and particular aspects of Jushi’s business philosophy. Jushi is a multi-state operator with vertically integrated supply chains in most states in which it operates.
Perhaps the most pressing issue in cannabis markets is price and Woloveck has a distinct perspective. He doesn’t view his competition as other licensed cannabis businesses; rather, his competition is the illegal market. Woloveck said, “we have to break even with the illicit market,”
meaning legal market prices have to move toward those of unlicensed sellers It’s a 10,000 foot view one doesn’t typically hear in the cannabis industry. Woloveck is convinced prices will continue to fall, but unlike many he’s not at all skeptical about the prospects for legal cannabis markets. Woloveck said, “there will always be demand at the local level for small batch craft cannabis and run of the mill distillates.”
As far as overall strategy, “Jushi leads with retail distribution” with their Commercial Retail vertical “managing pricing on the state level.” This is accomplished through retail data analysis and comes down to inventory management based on demand, which informs supply, according to Woloveck. He said his firm doesn’t “front run the market with supply.” In short, retail demand analysis feeds back to cultivation, keeping the firm’s stores well-supplied, but not oversupplied.
Within that overarching approach, Woloveck sees state markets as individual entities with different pricing, regulatory regimes, and consumer demand. Production in each state is run through Jushi Production Systems, but the company also “has national goals and targets.” In addition, Woloveck said the company’s infrastructure is scalable, allowing the firm to get quickly up to speed when adult use markets open in states where the firm has a presence.
Regarding state-specific goals, Woloveck is very enthusiastic about Virginia and Pennsylvania, where the company has medical cannabis operations. He sees Northern Virginia as the cannabis retail mecca for Washington, D.C., which “has no infrastructure and lacks solid planning [for legal adult use] going forward.” Virginia’s adult use legalization law is already in place and the market is scheduled to open next year.
The statistics on the firm suggest they are fully prepared to serve the Virginia market, with five dispensaries open now and a sixth opening soon. The breakdown on the company’s 93,000 square foot production facility includes five flower rooms with 13,000 square feet of canopy producing 8,600 pounds of biomass per year, along with 6,000 pounds of extraction capacity. Their flower-trim ratio is 71%-29% as measured in November 2022. They’ve nearly tripled their patient count from 2022 to 2023 and see strong medical patient growth in the next 12 months. In addition, they are expanding capacity in anticipation of legal adult use sales come January 2024.
Pennsylvania will be a huge adult use market and Woloveck believes adult use legalization will come to pass soon in the Keystone State. Similar to Virginia, the firm already has a heavy presence in the Pennsylvania medical market with 18 dispensaries, 32,000 square feet of canopy, a 123,000 foot scalable facility, and a flower to trim ratio of 74%-26%.
Some mature markets Jushi operates in are also showing promising signals. Regarding Nevada, Woloveck sees prices rising in the months ahead. He noted, “Flower One [Nevada’s largest cultivator] is not planting for the next 60 to 90 days,” indicating Nevada’s largest grower is shrinking production. As well, Woloveck cited “the Solaris products recall,” another choke point in supply. He also pointed out that “cannabis tends to dry out in the desert,” alluding to the fact that Nevada cannabis growing and storage conditions are less than ideal.
On the regulatory front, Woloveck sees some prospect for a cut in Nevada cannabis taxes under the new Governor, Joe Lombardo. Jushi has worked with the state’s Cannabis Compliance Board to help address the state’s Fair Market Value calculation, upon which wholesale tax assessments are based. Jushi and other Nevada operators have for some time now called attention to the fact that the state’s wholesale tax is onerous and not representative of actual market rates, and it seems that regulators are willing to work with industry to find a more amenable solution. Overall, Woloveck is confident about Jushi’s Nevada operations and about cannabis prices rising in the state.
In Massachusetts, on the other hand, it’s all “about keeping the lights on” amid a historic price rout and “very high electricity costs,” said Woloveck. As margins have been squeezed across the cannabis industry, firms are focusing on reducing production costs. Woloveck said Jushi’s cost of production is running in the $400 to $600 per pound range, with variations across states.
Cannabis Benchmarks asked Woloveck if Jushi would ever enter at just one point in the supply chain. Woloveck responded the company would “only enter the market as a standalone retailer” and never as a standalone cultivator or manufacturer. However, he doesn’t see entering a market as just a retailer “as a sound strategy right now” and emphasized Jushi’s market approach: “We didn’t overbuild, we know what sells, we are tightening retail, and pricing is the level we can use.”
In a circle back to the importance of retail and Jushi’s consumers, Woloveck pointed out that “only 3% of the people that walk into our store buy the max,” something he’s looking to change using the “Costco model.” In short, the firm’s data analysis indicates customers can buy more product and Jushi will likely offer larger size packages alongside their other products.
At the end of the day, Woloveck said legal commercial cannabis is “not competing against other [licensed] businesses but against cartels and organized crime, those guys are smart.” He’s suggesting the prompt price drops noted in contiguous states that recently opened adult use markets may be due, at least in part, to illicit operators immediately undermining prices in those states. When asked about a regulated futures market for offsetting wholesale price risk, Woloveck said, “I have a local pseudo-market now that we trade in,” indicating his preference for continuing the status quo.
Woloveck’s years of experience in the cannabis business have landed him at an ambitious firm with plans to enter medical markets, make the means of production scalable, and transition into adult use markets fully prepared to meet the demand of a new rush of customers. Jushi has a “highly concentrated position in markets with favorable regulatory developments.” The firm is entering markets with a clear strategy and a data-driven approach that lets consumer demand determine production. Even in a tough market, Jushi looks well-prepared entering 2023 to capitalize on the intention of growing the firm in both medical and adult use markets this year and beyond.