By Rob Meagher

CRESCOlabs™ arrived on the scene with a bang, winning three of the 21 Producer/Processor licenses issued in the great state of Illinois in 2015 with the highest scores of 158 applicants. And like the way three (3) of the founding partners succeeded at their previous company, Guaranteed Rate, a mortgage bank that grew from the ashes of the housing and mortgage meltdown 10 years ago before expanding rapidly to become a national force, they created a strategic plan to become a model in the rising Cannabis Industry.

When facing a tsunami of new regulation in the mortgage industry, Cresco Labs CEO Charles Bachtell, then General Counsel of Guaranteed Rate, and two of his founding partners, COO Rob Sampson and Director of Sales Joe Caltabiano took on that challenge and the new federal regulations they faced head on.  They looked at the new regulations as an opportunity – the new banking world was a highly regulated one and they had a choice, either figure out ways to effectively manage the constant flow of new regulations or go out of business. Many other lenders couldn’t manage and Guaranteed Rate grew from a mid-sized lender with 250 employees to over 3,500 doing $20B a year in volume by creating a borrower centric brand, serving the needs of the customer and managing ever-changing regulations better than their competitors.

As Illinois passed its Medical Marijuana Act in August of 2013, the three principals decided to consider the possibility of entering the industry and were encouraged by the state’s clear intention to attract people from the medical, legal and business communities to build its program. In addition to the obvious unique opportunity to provide suffering patients in Illinois with an effective alternative medicine (a concept that struck close to home for Joe, a cancer survivor himself) they found that the heavily regulated aspect of the Illinois program, which is something the three were very experienced and adept at navigating, gave them good reason to explore the opportunity. Charlie spent a couple of days reviewing the new law and quickly concluded that the developing medical cannabis industry was the most fascinating thing that he’d ever researched and an opportunity they couldn’t pass – how often will you come across an opportunity to impact the concept of medicine, change aspects of the criminal justice system, be part of cultural shift with regard to the “war on drugs” and that also presented an interesting business opportunity.  Within 3 days he’d put together a 30+ page business plan (quasi-manifesto) on how their group could develop the model for a compliance-focused and normalized cannabis industry based on traditional industry practices.

You have heard it many times before, but the CRESCO Lab’s team discovered a perfect storm that arrived in the form of the Governor’s signature, the Cole Memo protecting state approved medical marijuana programs being published a couple of weeks later, as well as Sanjay Gupta’s well publicized change of heart regarding medical marijuana which aired the following month. It also didn’t hurt that Illinois represented one of the first limited licensing structured programs in a heavily populated state and if they were successful in landing one of the state’s licenses, redefining the way people thought about medical cannabis operators could become a reality.

With this combination and their experience in an hyper-regulated industry—not to mention a strong belief that the War on Drugs had destroyed many undeserving lives—the team decided to pursue multiple Producer/Processor licenses (the state allowed for ownership of up to three).

So, with a network that helped the team establish a strong capital base, they began the search for an experienced and professional operations consulting team to put their best foot forward. While at an NCIA event in the summer of 2014, they met several operations experts who were impressed by the caliber of folks there, including Kayvan Khalatbari of Denver Relief Consulting (DRC) and his partners, Ean Seeb and Nick Hice, and decided to engage them. The three DRC partners brought Good Manufacturing Practices (GMPs), ancillary business/vendor relationships and cultivation expertise (as well as retail operator experience that they would need to target their channel) to round out the founders’ skill sets and the team set out to create a new Gold Standard for the industry.

The team had a desire to marry the skills of cannabis professionals with professionals from traditional industry, the new team brought in a former Big Agriculture GM from Archer Daniels Midland and set out to produce products that would provide the medical consumer with a consistent & repeatable experience. They soon realized that growing one cultivar of lettuce in 40 acre tracts didn’t really translate to 40,000 sf indoor cannabis grows with 20+ strains and quickly moved to find a solution that would better merge the two worlds. They found their solution in a master grower that had 10+ years of commercial cannabis growing experience built on top of degrees in agronomy and an M.S. in horticultural sciences.

On the extraction front, they hired a molecular bio-chemist from Colorado that had traditional experience from the bio-fuels industry but, again, also had 8+ years of experience in the Colorado and Washington cannabis industries.  The company continued to build out their leadership team with members from pioneering cannabis markets and professionals from the pharma, agriculture, consumer packaged goods and marketing/advertising industries.

With product development under way, the team crafted a strong marketing and branding plan with a bedrock foundation based on building public awareness and education about the state’s new medical marijuana program. Their website was designed specifically to drive a better understanding of why medical cannabis was important coupled with unique packaging and promotion with a new nomenclature for the plant’s benefits to patients and for the medical practitioners like Rise/Refresh/ & Rest instead of the industry standards of Sativa/Hybrid/& Indica.

Furthermore, Cresco Labs recognized that there are primarily two distinct patient groups within medical cannabis markets – patients that are already familiar with the use of cannabis for health and wellness purposes, and patients that may be trying cannabis for the first time after their oncologist advised that it can help manage some side effects from their chemotherapy.  Two types of patients looking for relief in the same store, from the same underlying substance but they want it to look and feel different – so they created a separate and distinct brand for each group: “Cresco by CRESCOlabs” for the smokable forms of THC-focused products and “REMEDi by CRESCOlabs” for the traditional pharmaceutical-formed products (pills, tinctures, topicals) that also focus on other cannabinoids like CBD, CBG and CBN.

CBE wanted to share Cresco Labs thorough, integrated media and promotion plan and specific executions, these best practices have led them to dominant market share in their first year of operation.

• Awareness/education video developed to educate patients on the process of registering for the program – designed to be posted and shared on social media by patients, dispensaries and patient advocates: https://drive.google.com/file/d/0B5UIo64TA2ClekhYYTZVYlBCSnc/view
• Awareness/education collateral that was placed on 30 billboards around Chicago, double-sided insert in Chicago Marathon participant bags, etc.:
• In-store product collateral recognizing that the wholesaler/retailer relationship is very like traditional wholesaler/retailer models,Cresco Labs provides an array of collateral, sales promotions, seasonal/holiday specials, etc. to their dispensary partners:
• Press– Cresco Labs primarily uses PR to help drive patient and physician participation and to further relationships with dispensaries – at the end of the day, new programs suffer from the public and physicians not knowing enough about it.

On the edibles side, Cresco Labs was determined to elevate the cannabis-infused edibles industry with a sense of consistent, adult-focused, expert-crafted excellence that tasted good. Consistent with their overall objective of marrying the cannabis industry with professionals from traditional industries to create the best possible products, they partnered with James Beard Award-Winning Pastry Chef Mindy Segal to make the great-tasting, consistently-dosed medicine. They have subsequently inked a cross-licensing deal to bring Kiva Chocolates to the Illinois and Mindy’s line to California. The team envisions their brand building will result in IP deals that will play a big role in future Cresco Labs revenues.

The team has set its sights on expanding their operational footprint into other markets in 2017 and beyond with a philosophy of seeking a balanced portfolio and approach of new medical markets, existing limited-license markets and adult-use markets.

Cresco Labs was awarded cultivation, manufacturing and dispensary licenses in Puerto Rico, recently submitted applications for licenses in Pennsylvania and will be producing/processing in the Washington market by Q3 of this year and are looking closely into entering the Nevada market as well.

Already having over 20% market share in Illinois, the team plans on increasing its revenues by 250% in 2017 based on 3 factors:

• Increased patient counts and market share in Illinois and Puerto Rico
• Market Footprint expansion into new states
• Licensing fees and line extensions

Oh and by the way, The A-Team just added more heavy-weights to their roster including a former CEO/Chairman of AT&T, a former Senior Partner at Bain & Company, and the CEO of the country’s largest futures clearing firm : CRESCO LABS ANNOUNCES NEW BOARD MEMBERS JOHN R. WALTER, PH.D, TOM MANNING, AND GERRY CORCORAN JOIN THIS MARKET-LEADING TEAM.

With access to capital, a lot of successful on the job training and roster of experienced outside industry and cannabis industry players, it’s no wonder that CBE sees The Big Boys bringing the A-Team and Game to a new level in coming years.

Background Information

Company Name: CRESCOlabs™ (Cresco Labs)

Year Founded: 2013

Ownership structure/operating entities: Holding Company for sub-entities operating in IL, PR and other states very soon

Management Team: Charles Bachtell – CEO, Rob Sampson – COO, Joe Caltabiano – Dir. of Sales, Ken Amann CFO

Headquarters: Chicago, Illinois

Website: www.crescolabs.com

Number of Locations:  4 currently (3 IL, 1 PR)

Number of Licenses by State:  IL = 3 cultivation and manufacturing; PR = 1 cultivation and 1 manufacturing

Industry Segment/Category: Cultivation and manufacturing

Current Markets/States Served: 2

Current Number of employees:  50+

Market Strategy/Goal:  Have national footprint with top 5 national revenue

2016 Revenues: N/A

2017 Projected Revenues:  +250%

Product/Revenue Mix:  Flower 60%; Concentrates 25%; Edibles 15%

Expansion Plans:   Currently in IL and PR.  Likely in WA, NV and MA in Q2 – discussing other markets as well.

Financing strategy: Private capital