Goodness Growth Goes Rogue
An Interview with Obie Strickler on the Goodness/Grown Rogue Partnership
Warning: The following column is about microcap companies. Microcaps by definition can be illiquid and experience wild gyrations. It is important to do your own due diligence, rely on your own research and understand that microcaps can be very volatile. Please proceed reading using your highest levels of caution. That being said…
Goodness Growth (OTC: GDNSF) took a major step in its turnaround last week and few seemed to notice. Like many other cannabis multi-state operators (MSOs) which have focused on limited license markets, Goodness has struggled operationally to grow high-quality cannabis and to do it at the right cost structure. As competition has increased, along with rising costs and interest rates, companies like Goodness have been squeezed.
When Verano (OTC: VRNOF) left Goodness at the altar last year after breaking its merger agreement, Goodness looked like it was dead. But maybe the company isn’t dead just yet. After installing Josh Rosen as its new CEO and elevating Amber Shimpa to senior leadership, the company has taken the bull by the horns to turn the business around including adding additional capital runway and announcing a sales process for their New York assets. Goodness has the good fortune of making these moves right as Maryland transitions to adult use sales on July 1 and Minnesota follows in a year or so.
But the company took the biggest step yet by inking a strategic partnership with Grown Rogue (OTC: GRUSF) to take their cultivation to a whole other level.
According to my research, Grown Rogue is the most efficient craft indoor producer in the world. They are the #1 flower cultivator in Oregon, which is one of the most competitive markets and a top 5 flower in Michigan and they accomplish this with an efficiency that allows them to produce the rarest of things in cannabis: free cash flow.
The press release was vague on the details, so I wanted to go to the source and find out what exactly is going on with this partnership by interviewing Obie Strickler, the CEO of Grown Rogue. I’ve interviewed him before, and he is one of my favorite executives in cannabis.
Here is what I learned from the conversation:
1. This partnership didn’t just start. Grown Rogue has been helping Goodness since January/February. And Obie says that the improvement in quality is really starting to hit, and investors should see the results quite quickly. I was really surprised by how jazzed Obie was over Goodness and the improvements he is seeing. At the end of this post you can see the reviews pulled from Reddit on how consumers are starting to notice in Minnesota.
2. Grown Rogue is getting a percentage of the improvement and Obie thinks it could add more than $1 million a year in royalty income to the company. And that is before the benefit of Minnesota going adult use.
3. A merger between the two companies is on the table and this is possibly a date before you get marry kind of relationship. This makes a ton of sense if you consider the possibilities of a best-in-class operator with best-in-class assets.
4. Grown Rogue saw prices pop in Oregon and Michigan in the month of May, up 15-20% each. This is consistent with what I’m hearing and follows California’s lead. Prices cannot remain below the marginal cost of production for very long.
5. Grown Rogue is not stopping with Goodness but is in talks of entering two more limited license states as well, on its way to 12 states.
I hope you enjoy the entire interview, but it is very clear that Grown Rogue is stepping on the gas at a time when most of the cannabis industry is pulling back. This is an exciting time for a cannabis investor to go Rogue.
Here is the interview:
Spotify Link for Audio Version of Interview
Consumers on Reddit are starting to notice that Goodness Growth’s quality is getting much better in Minnesota:
