Deal-Hungry Schwazze Is On The Hunt For Solid Leadership And 'Building Muscle'
Schwazze (OTC:SHWZ) is on a buying spree.
The Denver-based company, formerly known as Medicine Man Technologies Inc., recently took over 14 Star Buds locations in Colorado. Schwazze CEO Justin Dye gave us a heads up that the deal was in the works during a fireside chat at Benzinga's Cannabis Capital Conference on June 1.
Dye, a retail expert with a penchant for M&A, as also noted that Schwazze had a total of 11 deals in its pipeline.
We followed up with the former Albertsons LLC executive to learn more about Schwazze's strategy and what the future holds:
Schwazze just bought a ton of Star Bud stores. What made the purchase worthwhile?
JD: We are pleased to have entered into definitive agreements to purchase 14 Star Buds locations in Colorado — 13 dispensaries and one cultivation — at the beginning of June. Star Buds is a cornerstone acquisition for us as we build our vertically integrated platform. Star Buds has built a respected, innovative, and trusted business and as one of the most recognized and successful retail cannabis operators in North America, we are excited to add the Colorado locations of Star Buds to the Schwazze family. In addition to the definitive agreements, we have also submitted the change of ownership applications to the Marijuana Enforcement Division through the State of Colorado and are eagerly awaiting their approval. We anticipate closing these transactions in the third quarter of 2020.
Per our conversation at the virtual Benzinga Cannabis Convention, more M&A deals are on the horizon. When evaluating a potential target, what are you looking for?
When it comes to our merger & acquisition strategy, we are focused on acquiring high quality businesses that are differentiated with great management and employees. Schwazze is in the people business and our strategy is to build a great business in Colorado.
Well as the first state to legalize recreational cannabis, Colorado is an attractive geography to build our platform, with the opportunity to acquire sophisticated and profitable companies that have weathered the early boom and bust cycle. We like businesses that have solid leadership, growth, differentiated products and services, and unique capabilities that help us build "muscle". And while we have our initial targets, we are always looking to the next phase of acquisition partners within Colorado.
Schwazze didn't let the COVID-19 crisis slow its growth. How did Schwaaze handle it?
The global pandemic has been a tragedy across the country and our thoughts are with those impacted. When the pandemic began, we swiftly put safety measures in place such as stringent cleaning measures, remote working, and more to ensure we were able to operate and meet the needs of our customers while also keeping our employees safe. While the cannabis industry was deemed essential at the onset, emergency rules and regulations continued to change as we were all navigating these unprecedented times. Throughout all of this we were collaborating not only with the Marijuana Enforcement Division, who was creating these rules, but also with our merger partners to ensure they were able to safely take care of their employees while continuing to take care of our customers.
One of the first things we stood up was an online marketplace to support our strategic dispensary partners in getting the word out of how consumers can place cannabis orders during this time. In April, during the global pandemic, we were the first publicly traded company in Colorado to acquire a plant-touching business with our acquisition of Mesa Organics and its manufacturing business, Purplebee's. This not only expanded our reach to consumers, but more than doubled our employee base. As states began to reopen, we continue to put safety at the forefront of how we would do business. Our team heightened our cleaning protocols and implemented flexible scheduling and on-site personnel limits. Our comprehensive Company Emergency Response Plan outlined procedures if an employee becomes ill or displays symptoms common for the virus. Schwazze remains committed to taking care of our employees, our consumers, and our communities.
Is Schwazze hiring?
Cannabis has been a huge growth driver for jobs in America. With the impact of COVID-19, we believe that more people will look to cannabis jobs as an opportunity to join an emerging industry. And at Schwazze, it is no different. We are building a platform of vertical integration with opportunities for in the field positions such as budtenders and manufacturing roles to support functions such as HR and finance. We need passionate, innovative people to help us accomplish our vision to become the most admired cannabis company in the world. I recommend those that are interested to check out our open roles on our website. This is hard work, but we are having so much fun helping shape an industry and building a customer-centric company.
Are there any lessons you learned from your time with the supermarket industry that are applicable to dispensaries?
For nearly 10 years I served in a number of executive roles at Albertsons Companies. During my time there I led the organization through a period of profitable growth from approximately $10 billion to over $60 billion in sales with over 2,300 stores and 285,000 employees, creating one of the largest privately held companies in the U.S. I'm proud to say that this work set Albertsons Companies up for its initial public offering just last week. I recognize cannabis is different than food retail but many of the same operational principles can be applied. In grocery we talked about being farm to table; at Schwazze, we view ourselves as "seed to sale" with everything in between – growing, manufacturing, distribution, and retail operations. There are many similarities such as real estate, merchandising, pricing, point of sale, loyalty programs, and ecommerce to name just a few.
However, there are differences and nuances with our cannabis business, which requires listening, finding the best ideas, and implementing them in our dispensaries, manufacturing sites and cultivation operations. In such a relatively new industry, we have to ensure that we are nimble and adaptable to the changing needs of our customers. In grocery, we saw massive amounts of change in how customers wanted to pre-shop, shop and buy products based on occasion, time available, geography, budget, experience, and convenience. At Schwazze, our aspirational hope is to build a culture where every one of our team members, and I mean everyone of us, is obsessed with providing world-class service to our customers and deliver beyond their expectations. Our customers deserve it. If we are successful, I am going to be very proud of our team and what we are building.
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