Curio Wellness is a leading Maryland-based vertical cannabis company co-founded in 2014 by CEO Michael Bronfein and his daughter, Wendy, currently the Chief Brand Officer and Director of Public Policy.…
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Curio Wellness is a leading Maryland-based vertical cannabis company co-founded in 2014 by CEO Michael Bronfein and his daughter, Wendy, currently the Chief Brand Officer and Director of Public Policy. Another daughter and a son also work in crucial roles at the company. CBE profiled Curio in 2017 when the company was building the foundation of what it is today, a dominant player in Maryland’s medical cannabis industry with plans underway to expand nationwide. With a lot in play, including an adult-use ballot measure before Maryland voters this November that, if passed and acted upon quickly, will provide a much-needed boost to the state’s legal cannabis market, CBE sat down recently with Michael and Wendy Bronfein to discuss Curio Wellness’ role as a provider of quality medicine and an active voice for Maryland’s cannabis industry and patients.
Ironically, it turned out that Michael Bronfein had to talk from home where he was recuperating from an injury. He’d hurt himself “literally getting out of my car,” he told me as we settled into the call. “In fact, my physicians, who I called in extreme pain yesterday, said, ‘You’re not going to believe it, but this same exact thing happened to me about four weeks ago.’ I said, ‘Lou, what do you do about it?’ He goes, ‘A muscle relaxer and time is about all you can do.’”
What about some Curio CBD for the inflammation, I asked, half-joking. “The truth is, we have a new product that’s launching later this month called Move,” he said. He wasn’t kidding. “It’s a transdermal topical pain product, and it actually helped a lot. When I got up this morning, I put it on, and I started feeling a lot less of the pulsating pain. There’s still a kind of a gnaw there because it’s a pinched nerve, but it dramatically reduced the discomfort.”
It sounded like the product had its first testimonial. “It’ll actually be the second testimonial for a new product,” he corrected me. “I was the guinea pig for our Comfort GI tablets because of a GI issue that I have, and that product has changed my life, literally. It’s that good.”
I asked if his condition, Crohn’s Disease, which he inherited from his mother, had inspired the development of Move. “The product was a direct response,” said Bronfein. “Looking at how cannabinoid medicine could be used to treat significant problems in human physiology in a way that was safe, effective, reliable, and, frankly, less costly than traditional pharmaceuticals, and less evasive or less toxic relative to drug interactions. 80 percent of the people who have what I have are encouraged by their GI doctor to go on a biologic – Remicade or Entyvio – those are the ways that traditional pharma is addressing them. But when you look at any of those products, they come with significant potential negative interactions, and frankly, some very bad things. Our science team did extensive safety studies and studies of my physiology prior to starting this experiment, and I, frankly, was the canary in the coal mine for this. I didn’t have any concerns about it because I believe that based on 5000 years of use, cannabis has some negative attributes, but it is nontoxic to the human, and it can’t kill you. So, I wasn’t really worried about that.
“Long story short,” he added, “I had a series of significant blood work and other studies done including a colonoscopy prior to starting the experimentation of new products. My Crohn’s Index (CDAI), which is a measure of the inflammation in your colon, was 290; a normal person is 20 to 50; 50 being maximum, and when mild irritation begins. Eight weeks later, my Crohn’s Index was 20. It has been measured every eight to 12 weeks ever since over almost a two-year period now, and it’s never gone above 30. It really has changed my life in the sense that I don’t have any of the fears of that kind of disease, which are many and often. I eat pretty much anything I want now, and I find that the only thing that really impacts the treatment is if I have an excessive amount of alcohol, like I go to a wedding or a Bar Mitzvah or some event, and everybody’s drinking it up, and instead of having one drink, I have four or five over the course of the night. That’s when the next day, I feel it, but other than that, there is no issue at all.”
Is that an example of how they approach the development of new products? “If you read our 2015 business plan, from which we did our initial capital raise and launched the company,” he said, “from the beginning, we’ve been focused on really two things: bringing science to this plant and bringing scale to this business. I come from the pharmaceutical distribution industry, and I’ve been in it for many, many, many years, at scale in two different tours of duty. And so, I have a perspective on both pharma as well as what it takes to be able to bring a product to market that is both safe, effective, reliable, but more importantly, cost-effective on a relative basis. I personally believe that U.S. pharma has gotten off the rails and has lost their way a little bit, and it’s given us an opportunity to first convince ourselves, then our investors, and now the world – the patients – that there are much more cost-effective alternatives that have way less toxicity in the human body because they are simple plant-based products.
“We’ve invested heavily from day one in a scientific advisory board,” he added. “If you go onto our website, you can see all the different scientists. This is not an optical presentation. These people had been working for a year before we won the license, working on literature research, literature review, and then the ideation that comes from our product innovation team. We have a team of product innovation run by a woman named Sandra Hutson who’s got a great track record in product innovation and other areas of health care and beauty. She leads a pretty fulsome team of people that are doing everything from research into what consumers-patients want, need, and why, to coordinating that with our product innovation team, whether it’s our director, who is a formulation expert, or our scientific officer, who leads the SAP process.
“In all cases, it starts with a problem that we think a cannabinoid-based solution can address effectively,” he continued. “What’s the target market? What would be the delivery model? Why would that delivery model be optimized, and so forth. That has led us to inventing three new delivery models for cannabinoid-based medicine. The first came with our sleep product, Good Night. That patent is pending, and we’re cautiously optimistic it’s going to get granted in the relatively near future based on conversations with the patent office. But we have eight more patents following that on various products, and I can’t talk about it because of the nature of the patent process, but we’re equally as optimistic about those. Obviously, when you could put a patent around a product, it makes it much more difficult for a competitor to even think about copying it, because in patenting delivery mechanisms, it’s not about the active ingredient but getting them to the optimal place in the body in the optimal amount, and that’s where we’re focusing on differentiating our capability viz-a-viz the drug-discovery method.”
I noted that the 2017 CBE article had chronicled Curio’s long onramp to a license and beyond, but it sounded like the onramp was an essential period when the company honed its long-term strategy. “I think so, and one of the things I’m most pleased with is the discipline and the rigor with which we have pursued our vision,” said Bronfein. “We haven’t veered off one degree. And when I look at virtually every competitor in Maryland who wrote an application and tried to convince the regulators or whoever scored them that they were going to be a medically oriented company that would bring the science and the benefits of cannabis to patients, I think it’s fair to say that we are the only one that’s actually lived up to it without any equivocation. We don’t have to qualify our activities. We focus on doing research, on understanding patients’ needs, and on combining those two in a very methodical and frankly pharma-like way, meaning that because a number of our scientists come from pharma or are still actively working for pharma, all those methods have been honed. We didn’t have to invent the methods for drug discovery or for manufacturability except as it related to the unique properties of cannabis and cannabis oil and how molecularly that has to be addressed versus some other plant compounds.”
Doesn’t big pharma have the resources, knowledge, and wherewithal to correct their mistakes and catch up quickly? “I don’t think quickly would be the right word,” said Bronfein. “They have the resources, the knowledge, and the capability to catch up, but if you look at big pharma as I do – and I’ve studied them for over 30 years, because it’s critical to my distribution businesses – they tend to invent less and less. Big companies tend to be more about either funding trials for smaller companies or buying brands or products to become the manufacturer and the distributor. I think that as this industry evolves and pharma companies see us getting patents and beginning to not really make a dent in their business as much as open the eyes of the public to a new and better way, that will eventually affect their business. Then yes, I think they’re going to either buy or emulate and start their own. But there’s no question that, for example, our sleep product and our GI product are cutting into somebody’s purchases, because we are doing very, very well in terms of sales of those products relative to our initial expectation.
“And remember that you have to have a [medical] card to buy our products in Maryland,” he added. “We’re already selling a very material amount of these products each week at wholesale to the 90 or so dispensaries across the state. Think about the opportunity when we can advertise to the general public who could walk into an adult-use store. And because of the formulations, these
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Maryland will soon face its own adult-use referendum. I asked Wendy Bronfein about its likelihood of passage, and what to expect if it does.
“Where we stand today,” she said, “and just for background, I’m on the steering committee of what’s referred to as MD-CANN 2022; that’s the campaign for the ballot initiative. There are a couple of aspects that need to be honed-in over the coming weeks and months to ensure swift passage. Overall, it’s not a ballot measure that Marylanders at large are aware of, so the primary purpose of the campaign is education. It’s also a big election year, with federal, state, and local officials on the ballot, so it’s about keeping voters moving down the ballot into the questions, knowing it’s Question Four, and voting yes.
“With that accomplished,” she added, “particularly if it passes with over 60 percent, it sets up the leadership of our general assembly to move swiftly in the upcoming session and hold fast to their July 1 date of activation. Of course, to ensure that the state is able to, one, activate a program, and two, avoid any creation of illicit or gray markets – as we’ve seen in loopholes in other states – the existing operators would turn on at that date to be able to operationalize a new program. I think there are a lot of people who are hopeful and feel that it can and ideally will pass, but in order for that to happen, Marylanders at large need to know that it’s out there and they need to know to stay on that ballot and vote for it.”
Is the legislature under less pressure if Question Four passes with under 60 percent of the vote? “Because the Maryland session runs from January until April,” said Wendy, “passing it at over 60 percent allows leadership to potentially use the emergency legislation tool, which would get the bill done faster and signed earlier rather than slogging through the entire session and have it finish at the end, leaving what would be maybe 90 days or less until the start date. And I think the goal of leadership is to see an overwhelming majority of Marylanders approve this so that they have the runway to push through legislation early and swiftly in the session and get things going in terms of what is needed to stand up the program outside of the legislature.”
Are Marylanders truly unaware of the ballot measure’s existence? “There are two measures of polling,” she explained. “There has been polling out there that speaks to a likelihood of passage, but that is speaking to gen-pop, as I’ll refer to it, not to likely voters or to the population that shows up to vote. So, it’s not a true measure of its likelihood or the margin by which it would pass. And then yes, on the other side, there is polling that shows it is not an initiative that the majority of Maryland voters know is even on the ballot.” She added that the campaign will track the results with its own polling.
“One of the things that I think is very instructive has been the New York experience, because they have misaligned the legalization with the start of their program,” added her father. “Now you have chaos and lawlessness in the streets, and there are many people in New York who are very distraught. I think it’s a good example of where this industry needs to be more strategic and thoughtful about working with policymakers to say, if you’re going to start this on a certain date, you need to have the market open on that date. Because otherwise, you are promoting lawlessness, which I don’t think any of you intended; it’s an inadvertent byproduct, but nonetheless, that’s what happens.
“And I think that since we had such a successful medical program in Maryland,” he added, “it’s going to be very easy to take existing laws and regs and polish them up. I do think there are things in the Maryland program that need to be materially improved from an administrative standpoint, but I’m confident that this new body that will be responsible for oversight is much more aware of that and will be much more responsive to it. In addition, I think our new governor, who I think will be Wes Moore, cares about the program being efficient and effective for the citizens of the state. Our current governor has taken a very hands-off approach for whatever reasons, so I think it’s actually an opportunity to improve the medical program, launch a very thoughtful and rational adult-use program, and have leadership at the top that makes sure that both of those occur.”
Considering the undetermined nature of Maryland’s near-term cannabis industry, how is Curio Wellness preparing for the future? “Wendy is taking a leadership role at the state level working with the referendum committee,” said the elder Bronfein. “She can talk about that herself, and I think there’s a lot of thoughtful work being done right now to help create the necessary guideposts and guiding principles that a thoughtful and rational and well-constructed program would evolve. Equilibrium in the market is critically important, and we don’t have that today in almost every state. I think Charlie Bachtell (CEO of Cresco) said this very eloquently in Politico last week. Many of us ramped up for increased capacity, and then a combination of the inflationary effects on the consumer, as well as the lack of progress in Washington have stifled that growth. I don’t think there’s any question that that’s what most people believe today.
“For a company like ours,” he added, “we completed 150,000 square foot capacity expansion last year, and so we have the ability to participate in either a larger medical program or a smaller medical program and adult-use program, and I fully expect that we and others will [participate] because it’s the rational thing to do. Frankly, if the state wants to avoid lawlessness and achieve the revenues from taxes that it seems to have an eye for, then it makes absolute logical sense to just put together something that is evolving, where you don’t make the perfect enemy of the good, but you craft legislation that sets all the contours; all of the product tracking is done, all of the material-handling regulations are done, so it’s really just a question of what you want to do to differentiate the two programs and how you’re going to administer that differentiation. And then, there’ll be the constant back and forth over should we expand capacity, and if so, where, when, and how? Our view is that we need more dispensaries in the state but we have way to much in the way of production.”
Does Curio Wellness want to add stores to the Timonium, Maryland dispensary it currently operates, and if so, how many? “I think it should be based on data, not on opinions,” said Michael. “If you were to geo-map the state of Maryland and say, we don’t want anyone to have to drive more than 20 minutes to get to a dispensary anywhere in the state for medical or adult use, software does that today. We looked at it about a year ago, and it suggested somewhere between 45 and 60 locations in the state of Maryland where you would not have to drive more than 20 minutes. We want to make sure that the existing people that invested in and took the risk, that their locations are maintained without adding new competition, because there are plenty of places where there isn’t anybody and there isn’t any competition. Further, we did an analysis that showed when you open a new dispensary in an area that didn’t have one within 20 minutes, there was a 92 percent correlation between growth in that area and the addition of that dispensary.”
To be clear, the state will need to add about 60 dispensaries to reach that density goal? “Correct, but that’s a lot of stores,” said Michael. “And let’s be candid, there is no capital for this industry right now. Unless you are a proven, high-quality, profitable company, you cannot raise capital in cannabis because of no commercial banking, no investment banking in capital markets, and most importantly, 280E. We are very strong advocates for increasing the diversity in this industry, particularly in the dispensary world, and that’s why in our Far & Dotter franchise program, we have a separate financing vehicle called the WMBE Fund, which provides 92 percent of capital to women and minority candidates who otherwise are qualified franchisees but don’t have that amount of capital available.
“To my knowledge,” he added, “we’re the only company in the United States that has taken that initiative, because we like to put our money where our mouth is, and really we’re just an action-oriented company. The returns for investors will be good, but they’re counting on us to make good choices in terms of franchisees, and then to manage those processes. So, we help people be successful, and if you didn’t have that intermediary, it’s very hard for some investor to say, ‘Yes, I’m going to bet on this particular dispensary or that particular dispensary.’ They’re getting a portfolio of 40 to 50 dispensaries, which both mitigates risks and improves probability of good returns.
“But that could all go away and be superfluous if we eliminated 280E and opened up the capital markets,” he emphasized. “That is what Wendy is also spending an enormous amount of time on as the chairwoman of the National Medical Cannabis Coalition, which is a very interesting group of investment banks, commercial banks, plant-touching companies, and service companies in the industry, all focused on those things. We’re not interested in boiling the ocean, and social justice issues are important, but I ran the board of the Baltimore Symphony Orchestra for six years, and the one thing I learned is no margin, no mission. So, we have to get margin to people so we can fulfill mission, but without the margins that eliminating 280E and providing access to capital on a broader base provide, we’re just kidding ourselves, because we’re stuck in a no man’s land and nothing’s going to happen. And particularly now that the industry has seen its first recessionary period – and I do believe we’re in a recession – that has even chilled, if you will, investors to a greater degree. So, the federal government could take a huge leap to unlock a lot of value and a lot of minority participation by fixing those problems.”
We keep hearing snippets that something might happen at the federal level. Did Wendy have any whisperings of good news? “I think what is being referred to now as ‘SAFE Plus’ is tracking and is probably the key piece that we need,” she said. “The elements that are in there today are the original piece of SAFE banking plus medical cannabis research, veterans’ access, the opening of Small Business Administration loans, and expungement and incentives for states. So, relative to what Michael said, the two missing pieces are capital markets and 280E, and I think that the hustle right now has been to get the 280E part in. If you have to pick which one to go with, if you can push one more piece, it’s really 280E, and we’ve been having a lot of those discussions. I think the leadership is motivated to get this done for a number of reasons, but it seems most likely to occur in the lame duck [session], and I know that conversations are happening now.
“It’s all happening behind the scenes,” she added. “There is a concerted effort between key Democrats and Republicans to be able to move this at the end of the year inside a larger piece of legislation. And to be honest, our angle at the National Medicinal Cannabis Coalition, from the beginning has always been that it was unlikely that we could go to Washington and ask for everything and get it. So, what we need to do is pick the right incremental pieces that begin to move the needle and create greater comfort in the conversation, and then kind of chip away at the problems that remain after you cross your first few items off the list.
“So, dealing with SAFE banking, dealing with 280E, dealing with even having Small Business Administration loans and veterans’ access, they all speak to answering diversity issues in the industry. and they give us really good data as well as the medical cannabis research that allows us to debunk a lot of the myths. So, if they can get this over the line that’s going to be a huge piece for this industry and a good signal of what’s to come and then it gives us more facts and data to come back in the following sessions and push for the next pieces of this puzzle. But full legalization is never going to happen in one fell swoop. You have to have the right cadence to move it faster rather than pushing for all of it all at once.”
The real problem goes deeper, said her father. “One of the things that I find curious is that we’re talking about the money for a tax that should have never been put in place,” he said. “Cannabis was operating legally in all these states, and this is about illegal operations, so the states ought to be standing up and saying, ‘Wait a second, whatever money you got from 28OE was a gift. Why don’t you eliminate the carried interest tax benefit for hedge funds that don’t earn that. That money would have more than paid for this?’ Frankly, I feel like Congress has avoided Main Street for the benefit of Wall Street in this case, and it’s time that there’s some courage on the part of our elected officials to say, ‘Wait a second, we can help many, many, many small businesses by eliminating this and having access to capital through investment banking and commercial banking.’ And if you want to pay for it, just eliminate the carried interest.
“We had the Arizona senator [Sinema] who held up the bill because that industry got to her and said, ‘We need your help here, and we’ve helped you,’” he added. “I get all that, but the reality is that the money is inconsequential, and there are many other places where there is unfair taxation that is hurting this industry and helping an industry that doesn’t need it. How many billionaires do we have in the hedge fund and private equity world; way more than we have in the cannabis world? We have none in the cannabis world! The problem is, we need more intellectual honesty in the conversation, because when you get to the facts, it’s very compelling in terms of the change that is so obvious but is so politically charged that it’s impeding what should otherwise be a no-brainer for capital formation, particularly for women and minorities that are being held back by this.”
Why is it so politically charged when a majority of Americans support legalization? “I think there are still biases and the government spent 75 or 80 years lying about the plant and its effects on society,” said Michael. “The fact of the matter is that alcohol has done a lot more damage to our society than cannabis will ever do just because of the difference in the experience. In addition, there’s no question that cannabis has been proven to have true medicinal value and improved quality of life, in epilepsy and pain, inflammation. Alcohol has never done that, but tradition runs hard, and tradition runs deep. And frankly, it’s a matter of getting a fading generation that has a lot of control to recognize that they’re wrong, there isn’t any basis for their prohibition and their behavior, and that it’s time to stop criminalizing people who shouldn’t be, expunging people who have been, and normalizing this so we can get on with creating real industry, real jobs, and real opportunities for improving people’s quality of life medicinally and otherwise.”
What about if they just rescheduled it? That could be the catalyst that breaks down the entire edifice. “I think that given facts and a more fulsome explanation and education,” said Michael, “President Biden can be persuaded that he needs to change his policies, because they’re out of touch with reality, and they’re out of touch with this current trend. I knew him very well when he was a senator. He’s a very reasonable man, and I just don’t think people have educated him properly at this point. In addition, he’s had a family member who’s had some issues with drug use, and those families tend to always look to marijuana as the evil empire even though it’s not or wasn’t. But I understand that and it’s not an inhumane reaction.”
Does he have the president on speed-dial, I asked, because if so, Michael Bronfein could be the answer. “I do not,” he said. “I have Wendy on speed-dial.”
“I think there’s been a sort of a mental breakthrough on the congressional side in terms of the players realizing that they’re getting nowhere having those who are the farthest to the left and those who more moderate at odds with themselves, and then having a whole different group which is against it,” added Wendy. “If those who are more liberal and moderate on the topic can align, they’ll be able to move forward, and that’s the big breakthrough they have acknowledged in the past 90 days, and that’s where the hope comes in, that they realize we are stronger together, and we’ve just got to get done what we can get done that is the most beneficial at this time, and hope that it can be the most beneficial.”
“I also think that there are a lot of social issues going on in our world today, and this is just one of many,” added her father. “As much as it’s important to us and we are living it every day, there are other important issues out there. We have to be mindful of the protocols and the processes in Washington and figure out how to integrate ourselves into the conversation in a way that isn’t viewed as selfish, but rather is viewed as something that will improve society over time and give us the ability to focus on other things that frankly I think are not more important but will have a bigger impact on some of the issues of the day.
“To some degree, we’ve been impatient in a way that has not played well in Washington,” he added, “and I think people are starting to realize that, but when you look at where we are, almost every state started out with medical as its rationale for legalization. Why can’t we do that in Washington? Why not deschedule medical cannabis, provide banking for companies that provide medical benefits, eliminate 280E for medical cannabis, and move forward? That would allow for research that would assuage some of the naysayers, it would also allow for time to deal with things like workman’s comp and impaired driving, operational issues, because you could do research out in the open in a big way, and then in another year or two, we take the same move with adult-use. From an inconvenience standpoint, you’d have to track your adult-use revenues separate from your medical revenues and pay whatever penalty 280E provides until it’s eliminated for adult use but eliminate it for medical right away. There are lots of ways we can think of things; it’s a question of, do we have the will to achieve them?”
A Fetish for Franchise
As Curio Wellness expands its Far & Dotter franchise stores to other states, consummating its ambitions, is the government’s inability to act an impediment to its plans? “Yes,” said Michael. “Think about if you’re trying to raise a hot air balloon. What you do is you cut off the sandbags that are holding it down. then it rises very rapidly, With each 100 or 200 pounds that you eliminate, the balloon starts to slowly rise, and then when you eliminate all of the sandbags or weights, it rises very quickly. Well, 280E, lack of banking, investment banking, capital markets, those are all sandbags that are holding down the rise of this industry and the opportunity for much greater inclusion and much greater economic opportunity. When we do get Congress to eliminate those weights, this balloon is going to soar, and I think that when you look at the investing public, they have become disappointed because, by and large, most of them felt that by 2022, with Biden and the Democrats controlling Washington, this issue would have been adjudicated, and I think the disappointment shows itself in the valuation numbers.”
Once those sandbags are released, is the franchise model still a great one for cannabis? After interviewing Far & Dotter president Greg Miller recently, I was beginning to be sold but still wondered what would happen once capital is freed-up following federal legalization or de-scheduling.
“The franchise model for cannabis is, in my view, exactly what the industry needs today, and will need until there is a much longer history of retailing,” replied Michael. “As the largest wholesaler in Maryland, we have the privilege and the honor of serving every single dispensary in the state. When you look across it, about 20 percent of them are extremely well-run retail operations. The other 80 percent are finding their way, some more slowly and more quickly than others. But very few of them come to the table with a strong retailing background. How do you differentiate your retail operations, what are your customer-engagement issues, how do you manage regulatory affairs, and how do you manage financial analysis and financial management?
“All these things are why people buy a franchise,” he continued, “and people choose franchises because they’re buying a business system that enables them to spend all of their time and energy focused on the customer. Having grown up in a retail business and as a very successful retailer on my own with my partner, the one thing that we learned from a very young age was, delight the customer and everything else will take care of itself.
“So,” he added, “we’ve built an operating model that trains the franchisee on how to run the business very efficiently with metrics and programs and merchandising, supply-chain marketing, training, and regulatory affairs, but it unleashes them so they can be an active member of their community, and not only provide services to their patients or their customers, but also give back and be something that the people in their community want to frequent. Because it’s a partnership. In our pharmacy business that we ran for many, many years, we were very active in philanthropy and in supporting community affairs in all the communities we were in, and as a result, it created tremendous goodwill and a very successful business. We believe in that model. At Curio, we are very much involved in philanthropy in the markets we’re in and in the markets we’re going to go into, we’ll do the same, because we think it’s a responsibility of business, it’s the right thing to do, and it pays great dividends. I actually believe that eliminating all of the economic barriers are going to accelerate the franchise business, and not slow it down.”
Far & Dotter stores also mark Curio Wellness’ growth. Are they the flip-side benefit of this model and your strategy for the expansion of Curio Wellness, simply put?
“That is correct,” said Michael. “But we are also on the verge of announcing a number of expansions into other states with our wholesale model, where we are either applying for or have applied for and waiting to hear, or we are purchasing cultivation and manufacturing licenses and building our unique model of lean manufacturing and GMP-certified production in those states. I think we’re going to have a couple of announcements coming up in the next month or so.”
Will they produce Curio-branded and third-party products in these and other states? “I don’t see a time when we won’t be both, he said. “Some of those brands may be Curio Wellness, or we may create new names or brand identities because of market situations. We have a great partnership with BellRock Brands, which is Dixie and Mary’s Medicinals, a great partnership with Kaviar, and we just announced a partnership with The Parent Company for their Monogram line and some other lines. We’re always looking for best-in-breed products, where we can take our scale and our expertise in growing, in manufacturing, and bring that to someone else’s product, as long as the returns are appropriate to our thresholds.”
As Curio expands its footprint, its focus is squarely on the people entering its stores and using its products. “I care about the consumer,” said Michael. “My day begins and revolves and ends with only one thing, thinking about how I can drive my organization to delight the customer more than the competitor, with our products, with our services, with our information. With every tool that we have in our toolkit, we ask ourselves every day, are we improving our relationship with the consumer in whatever way they want it improved?”
As far as bringing other brands under its product umbrella, “We have discussions about it all the time,” said Michael. “Our product innovation team is not only looking at proprietary products we’re creating, but there are products we’re not going to create and we’re not going to focus our scientifically oriented and expensive assets on, things that we view as more consumer-product oriented. If somebody could bring us a product that has either good growing or manufacturing capability to it, and we believe we can turn it into a seven-figure stream of revenue in that market, then we’re very interested. We’re not interested in products that sell $1,000 or $2,000 at wholesale a week, because there’s no scale. Everything we do has to be evaluated against how it is affecting scale, because I believe as an industry matures, scale becomes a much more important factor in terms of one of your corporate capabilities.”
What else is Curio Wellness looking for? “We’re actively talking to single-state operators who have concluded that they could create more value for their shareholders by hooking themselves on to, if you will, a train that has a specific strategy for both consumer delight and operational excellence,” he said. “They can bring their license and facilities, and we can bring our operating model, and together we can get to that public offering that we would like to pursue in 2025, and maybe sooner. Obviously, the federal-state conflict has to go away first, because we’re not interested in a Canadian offering. We’re only interested in a U.S. exchange, either the New York Stock Exchange or the NASDAQ, but we are reasonably confident that rational heads will prevail and between now and 2025.
“But from day one, we have constructed our business model and our governance model as if we are a public company,” he added. “We have audited financial statements, quarterly investor communications, annual meetings, an independent board of directors, all those things are in place, and we don’t have to do anything. In addition, because we built our business on an FDA-compliant model, if the FDA ends up becoming the regulatory body, particularly as relates to the medicinal side, we don’t have to do anything. We have no investment, we have no training, we have no nothing. We just continue operating like we’re operating. So, we think that’s going to give us an accelerating competitive advantage as the federal-state conflict gets resolved.”
Nothing If Not Predictable
Curio Wellness is for now a private company, however, and does not have to reveal revenue, but what metrics can we use to talk about progress? How does it evaluate how well it is doing and where it needs to pay more attention? “We focus first and foremost on the customer, and that’s best measured by market share and other metrics satisfaction for which we have independent studies done,” said Michael. “But Maryland publishes their numbers every month, and we’ve been the number one market-share leader in the state for a very long time. And since BDSA has been publishing data, we can see very specifically where we sit in every category in terms of market share.
“We’re literally 50 percent bigger than our next closest competitor at the wholesale level today, and that’s even after a dramatic drop in the market demand in Maryland,” he added. “So, we’re never pleased, but sometimes we’re satisfied, and we’re satisfied with where we are today. But we’re not pleased that we’re not bigger, so I challenge my team to figure out how we can own more of the shelf-space in the dispensaries, how we can have more of the share of the customers, and how we can be more intimate with both the dispensary owners and the patients so that over time we can use that intimacy to continue to drive our success.”
Still, as margins tighten, does Curio pay more attention to operational efficiencies? “Yes, we do, but our business model has always been built on that,” said Michael. “We’re not changing who we are or adding anything. From the time we started the business, we installed an ERP and cost accounting system, so we’ve had the privilege of knowing every single component of our costs since day one, and we look at everything on a 13-month trailing basis. So, whatever our cost-per-unit is – whether it’s for raw materials, labor, packaging, energy, testing, whatever it is – it better be lower today than it was 13 months ago. And we’re constantly focused on using Kaizen events and other lean management tools to evaluate cost and quality, and how do we maximize quality while minimizing costs. The Danaher Corporation was probably the best in the U.S. in deploying this methodology, and we were fortunate to be able to utilize some of their former senior executives to help us put this program in place. And so, we’re nothing if not predictable. We know our numbers very well, and we know what we want to achieve. Sometimes we don’t know how we’re going to get there, but these tools and methods allow us to do that, and to at least have an approach that is a good starting point.”
Are inflation pressures on the consumer impacting business? “Well, for the consumer – which includes myself and my family – none of us are immune to the inflation that we’re dealing with for gas and food and other things,” said Michael. “There are things that are sacred that you have to spend money for, like food and rent and, frankly, gasoline. There may be alternatives where you could switch to a lower cost, but you’re still not immune. And so, the psychology of inflation is having, in my view, a very significant impact on our industry. I certainly can say that I never thought about hyperinflation as an enemy of cannabis, particularly medical cannabis, because I never saw it coming, and I’d have probably been wrong if I had a predicted its impact, but it’s clearly having a significant impact.
“That said,” he added, “people are still buying specific products in greater numbers every month. What it’s telling me is when you have a product that is differentiated, and has a specific benefit to the user, that it becomes a part of their required purchase. Where you have things like flower, which doesn’t have a specific use but has a general use which is enjoyed and desired, you can begin to see reductions there. We see tremendous price compression in flower due to an over-supply and less-than-strategic pricing strategies from our competitors, and then even less-than-strategic pricing from the retailers. So, between certain competitors and certain retailers, they just created a needless race to the bottom. The consumer doesn’t need to be given cheaper product because they have less money to spend. They’re going to spend what they’re going to spend; they’re just going to get less of it, and they’ll live with it.
“That’s truthfully what happens in food and price elasticity doesn’t change because it’s the cannabis industry,” he continued. “If the consumer has $1 to spend, they’re not going to spend $2 because the product’s price has been cut in half. They’re going to buy their same dollars’ worth, and it’s been frustrating to watch some irrational and less than strategic behavior demonstrated by a number of our competitors, by retailers, and what’s going to happen is what happens whenever this occurs. People are going to find that it’s becoming increasingly difficult for them to get returns on capital, and ultimately, it’s going to either drive them to sell or go out of business, or they’re going to have to raise their prices to sustain themselves. I’ve seen this cycle twice in pharmaceuticals in the last 30 years, so it’s very predictable.”
What about the smaller cultivators, the legacy operators who are still out there trying to survive, even back East. “I think the smaller growers are like craft beer companies,” said Michael. “When you have a really good product that fulfills a niche demand, you can flourish, but if you don’t find that, you’ll perish. You see a lot of brands in the craft beer world come and go, and with the ones that resonate with the consumer, very few make it nationally but regionally they have a following, and they can create a nice business. I don’t see it being any different here. What’s unfortunate is that our policy makers are holding out that it’s going to be a route to generational wealth, and I am skeptical of that given what I’ve seen and given the fact that what consumers say they want is variety, quality, abundance, and accessibility, but they don’t want to pay the kind of prices that they did when the industry started. Like every industry, as consumers become more knowledgeable, they segment and that’s what we’re seeing now. We’re seeing very strong segmentation, with the premium products untouched in terms of price pressure, the value brand selling like crazy, and the stuff in the middle being challenged by the current economics.”
What about limited drops? Producers like Cookies and others are having success with limited runs of various products. “We’ve been doing that for a while,” said Wendy, “and not limited to flower, but also on the manufacturing side. We refer to it as LTO – limited time offer. Whether flower or manufactured goods, whether it’s the intention of the product or the seasonality, we have things that we bring out for a brief period of time. Our chews in particular have their core line but then every quarter we have a specialty flavor that we release. We keep that flavor alive for two seasonal runs. So, if it’s spring 2022 and then spring 2023, come 2024, we’ll update it to keep things fresh. We also find ways to play with holiday seasons, whether of our industry – like 420 and 710 – or mainstream, like Christmas, New Year’s, and things like that. We’ve been playing in that space for a while in our Maryland market using the hype of things that come and go.”
We had gone far over our allotted time, but I had to ask this formidable father and daughter team about the pros and cons of working together so closely. Dad got the last, admittedly poignant word. “Wendy was the visionary who got the family involved and I brought my executive leadership skills,” he said. “She’s been the creator of the brands, and now is really driving policy, because she has a vision for it that’s consistent with good business practices, and frankly, good social justice issues. But my middle daughter is our Chief Revenue Officer, and my son is our General Counsel, so we now have the entire adult Bronfein sibling suite, if you will, and I think they would all tell you that it was a lot easier when they worked for their other employers.
‘The standards are higher for them than for anyone else, and if you’re going to have the privilege of doing this, then you’ve got to demonstrate your worthiness every day, and I’m very proud to say they do,” added the patriarch. “It’s so much fun for me as a parent, to be honest with you, not just the pride and the joy, but to be able to spend literally seven days a week with your three adult children and then by default, their spouses, and my grandchildren. It’s just an amazing life experience that you can’t even describe unless you’re having it. And so, I feel very blessed and very fortunate, and I think for my shareholders and their colleagues, they’re also very lucky to have three extremely competent people who get up every day wanting to assure the success in the organization, a lot of time at their own personal sacrifice.”
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