Grown Rogue Launches in New Jersey

A Conversation With CEO Obie Strickler About NJ and Q2 earnings

There was disappointing news on Monday afternoon that the DEA was delaying the proposed rescheduling of cannabis by announcing a hearing on December 2nd, thus ensuring that rescheduling will not happen until 2025 (most likely not until Q2 of 2025 at the earliest).

I had hoped that the Biden Administration would push through rescheduling before the election, but alas I was wrong.

Having learned the hard way, I know never to bet on politicians. Instead my investments are on companies and their strategic advantages, but more specifically management teams.

All companies are just a collection of people, culture and process, and no company better exemplifies the power of people, culture and process than my largest investment, Grown Rogue (OTC: GRUSF).

It has been eight months since I interviewed Grown Rogue’s CEO Obie Strickler and frankly there was no better time to do it than after disappointing reform news, because Grown Rogue has been anything but disappointing.

This week they announced stellar earnings, in which despite competing in the most competitive cannabis markets with some of the lowest flower pricing, they reported 32.7% EBITDA margins and record sales and EBITDA. The company followed this news up with the official launch of planting in New Jersey.

Here is what I learned in the interview:

1. Sales in New Jersey should start in early December

2. There is shortage of premium flower and pricing is over $3000 a pound in New Jersey, compared to Oregon pricing of $850 a pound.

3. Illinois is launching in the second half of 2025, and there prices are over $2000 a pound.

4. The math is quite simple, the company will produce 12k to 14k pounds in New Jersey at a long-term cost structure that shouldn’t be materially higher than their current $600 a pound (assume $800 a pound to be conservative). Grown Rogue should receive 70% of the economics. Run that math and cash flow should easily triple or quadruple next year.

5. Their retail store, where they are a passive owner, should open by December as well.

One thing you will notice that is not in the interview: nothing about the DEA or rescheduling. Why? Because the company has their heads down focused on execution of what they can control and that is premium, craft cannabis, cultivated at an unbeatable cost.

I hope you enjoy the interview:

Click Here For the Spotify Link for Audio Only.