Matthew’s Exclusive Interview with CEO Bob Groesbeck of Planet 13

Transcript

Matthew: Cannabis.

Twenty years ago, no one could have ever imagined we’d be talking about this market, at least not legally.

Every election, more states join the growing number of marijuana legalizers.

As of November 2019, there are 33 states that have legalized medical marijuana and another 11 states that have legalized adult use or recreational use.

The projections are staggering.

In the US, we’re talking $80 billion by 2030. Globally, the forecast is for $200 billion over the next decade.

This industry is not to be ignored, especially by investors. Sales are in the billions and now is the time to get in.

At the moment, California is the largest legal weed market in the world. Sales here are projected to eventually top $11 billion.

Then we have Colorado, which is a $1.6 billion market.

Washington is worth more than $1 billion, as is Florida and Illinois, but there’s one market that’s going to dominate all the others and one company that is making strides ahead of its competitors.

The name is Planet 13.

It’s primed for success because it’s built on tourism. Here in Vegas, each year, more than 45 million people flock to Las Vegas. They come for conventions, vacations, bachelor and bachelorette parties, or just some plain old fun.

Las Vegas is built for the legal cannabis industry and that’s why so many companies like Planet 13 have moved into this market over the past several years.

Because while there’s regulation tie ups and slowdowns, licensing problems, shortages or oversupplies in other US markets, Nevada continues to top expectations month after month.

Hi, I’m Matthew Carr.

And for years I’ve been one of the first in the industry to cover marijuana companies.

For years, I’ve made it my mission to provide the best cannabis coverage, so investors could score big, and they did.

I’ve made sure that investors had access to the tools they needed to make the best decisions possible. And my goal was to ensure consumers and shareholders alike were educated from the most trusted sources.

I’ve interviewed dozens of CEOs, executives, marijuana advocates, medical professionals, hemp growers, dispensary operators and almost every other individual important in cannabis.

But today, I’m taking this a step further.

Planet 13 is poised to experience astronomical growth over the next several years. And today, you’re getting access to an exclusive one-on-one interview with CEO Bob Groesbeck.

This is one opportunity you do not want to let go up in smoke.

Bob: ​Matt, how are you?

Matthew: ​Bob, nice to see you.

Bob: ​Good to see you, man. Yeah, welcome.

Matthew: ​Thank you, it’s my favorite place.

Bob: Oh, I love to hear that. It’s mine too.

So, this is it. This is it, the world’s largest dispensary.

Matthew:​ Bob, I want to thank you for having us over to Planet 13. This is one of my favorite dispensaries in the country.

Bob:​ Oh, thanks, man. It’s great to have you.

Matthew: ​Thank you.

Bob: Appreciate it.

Matthew: ​Now, why Las Vegas? Why did Planet 13 choose this city as its launching pad?

Bob:​ Well, part of it had to do with the fact that I live here and I’m familiar with Vegas. Larry Scheffler, my co-CEO and partner, we’ve both been in Las Vegas for the better part of our lives, respectively.

And when cannabis was legalized in Nevada, initially it was medical, of course. Transitioning into adult-use in 2017, we decided we want to do something really Vegas-style, over the top.

You see these magnificent mega resorts up and down Las Vegas Boulevard. We thought, why not in cannabis? Let’s do something along those lines.

Matthew: ​Now, how big do you think the Nevada market is going to be?

Bob: ​Well, it’s going to be a multibillion-dollar market. I mean, I think this year it’s probably going to be in a $700 million range. So, it’s growing at a pretty nice clip and we think that growth is going to continue.

The reality is, we looked at some studies about a year ago and less than 3% of tourists coming into Las Vegas even knew that it was legal, cannabis use was legal. And that’s, you know, we have 50 million people a year coming to this town.

So there’s a lot of upside there, as more folks become educated and understand that these facilities exist and that in fact it is legal to buy.

We see a lot of upside.

Matthew: ​Excellent. Now you guys also have what I think is one of the more dominant positions in any sort of state market. So your superstore accounts for nearly 10% of all of Nevada’s cannabis revenue. How are you able to accomplish that?

Bob:​ Well, it’s really our core – our philosophy is pretty simple. Three components: great service, great  products, great facilities. And you have to have all three and that’s a recipe for success.
And when customers come here, we want them to have an experience. It’s more than just walking into a  store, buying product and leaving. It’s about having a great time while you’re here, making it memorable, something that you’re going to tell all your friends about on social media. That’s what it’s all about.

Matthew:​ Okay. Now you guys are also seeing about 2,000, more than 2,000 customers today and your average sales ticket continues to tick higher, it’s now over $90. What’s driving that growth?

Bob:​ Well again, it’s creating awareness. So, we’ve got a very comprehensive and active marketing program. From our rep cabs that meet you at the airport to our shuttles that run to and from various properties on  the strip, and the social media component, it’s really, it’s a mixed bag.

Traditional platforms like billboards, it’s comprehensive and it’s constantly evolving because our industry’s uniquely regulated and the advertising side of it can get a bit dicey and we’ve got very strict regulations in Nevada, both of the state and local level, so it’s a full-time job managing them.

Matthew: ​Now, one of the things I really like about Planet 13 is your transparency. You release traffic and sales data every month. It’s very similar to what the retail sector does. Why do you guys do that? What was the decision making process behind that?

Bob: ​Well, this was a new venture, obviously, at a much larger scale than we typically see for canvas retail operations. So we sat back as a board and decided, you know, for the first year, we’ll release those numbers, we’ll track it, we’ll give our investor community an opportunity to really see what we’re doing, how we’re progressing.

It’s, a lot of work goes into that. It’s really, it’s a two-edged sword because on the one hand, every 30 days you’re being evaluated and given the seasonality of the business, if your traffic counts are down, one month everybody’s panicked, the next month they’re up. And why, what do you attribute that to?

​So now we are reporting going forward on a quarterly basis. But we thought it was important to show folks particularly at the outset of the business, look, this is where we are, this is where we expect to be and we’ll show you every month how we’re getting there.

Matthew:​ And did you see a little less volatility in your shares because of that? Because you were giving investors a clear picture of what was taking place?

Bob:​ No, I really didn’t. It wasn’t something that that was meaningful from a stock movement standpoint. Again, our whole goal was to say, “Hey look, we’re doing something different.” And now that we’ve had a year under our belt to operate this facility, we’re actually cashflow positive.

Everything we’ve said, we’ve done. And we’re fairly conservative and unfortunately we’ve been painted with the same brush of the entire sector.
And I get it, investors are frustrated, a lot of promises have been made, lofty projections that were just simply not achievable. And of course, the market is responding and not in a very positive way.

Again, I think we’re grossly undervalued in light of our performance, but we’re part of the sector and it’s one of those things. I have no control over the stock on a daily basis, I don’t even watch it.
What I do have control over is how we run this company day-to-day and how we treat our customers and the types of products we get to them. So that’s important.

Matthew:​ Now, you talked about seasonality. What kind of seasonality do you actually see in the cannabis business?

Bob: ​Well, Las Vegas is a tourism town, and our economy’s driven primarily by tourism, but that’s just the nature of this town.

Matthew:​ And your busiest months are?

Bob: ​Well, like I said, we’ve only been here a year, so we don’t really, we haven’t figured that out completely. But I would say looking anecdotally over the past 12 months, April/May/June seem to be, the town’s full.

Matthew:​ Gotcha.

Bob:​ And as a result, we’re full too.

Matthew: ​Now, as you mentioned earlier, the superstore isn’t just a dispensary. What’s the next phase?

Bob:​ Well, we just opened phase two, which is our production facility, 3,500 feet of which are behind glass. So customers can actually watch products being manufactured now in front of them.
And the idea is to get them engaged and we’ve got kiosks conveniently placed throughout the hallway, where when a product is being manufactured, they can see what the constituent products are and at various … or that that run.

And we’re actually tuning it now within the, hopefully by the end of this month, the customer, if they like what they see, they can actually, press a button and order their product from the floor and pick it up in the dispensary when they leave.

But the other amenity, of course, is we brought in a full service restaurant and a coffee shop. And the whole idea is, we want you to come here and enjoy the facility and if you want to spend 10 minutes to get your product and get out, we’ll accommodate you.

But if you want to spend an hour or two or three or four, we want to accommodate you there as well.

Matthew:​ Now, consumption lounges, when are those opening up?

Bob: ​Well, we were optimistic that we would actually be building something now. Unfortunately, in the last legislative session here in Nevada, the legislature determined that we needed a study period for two years.

So basically, they imposed a moratorium, so we’re about 18 months left on that clock. And then, my guess is the newly constituted Cannabis Commission, that’ll be on their plate.

And for us, we’re still optimistic that it’ll happen, it really has to happen.

Nevada’s unique in the sense that we allow tourists to come into the market and legally purchase marijuana products, but we don’t give them a place, the tourist customer, a legal place to use it.

And it’s really just absurd.

Matthew:​ Yeah.

Bob: ​And we’re doing everything we can to change that. And again, we want to take care of the customer.

Matthew:​ Now, you guys are also looking to expand beyond Las Vegas, Nevada.

Bob: ​We are.

Matthew:​ You recently acquired a Newtonian Principles in California. What made that acquisition right for Planet 13?

Bob: ​Well, we haven’t actually closed that, but it’s very close. Things are moving according to plan there.

What made that site unique was size, rooftops, tourists coming into the area, proximity to major arterials and freeways, and as I think I said, parking.

Those are some of the components that are absolutely critical to us.

Because again, we’re building a superstore and we’re drawing from a wide, diverse range of customers or potential customers.

And it doesn’t hurt to have the beaches three minutes away to the west and you’ve got some of the largest theme parks in the United States, minutes to the north of us.

So, Orange County has a similar tourist draw to Las Vegas, they’re roughly 50 million people going through Orange County every year.

So it made a lot of sense. And we spent about a year looking at literally a hundred opportunities down there before we landed on this location.

Matthew:​ Now, is that your sort of path forward, that you’re going to be the superstore operator, that you’re going to open locations like this over and over again?

Bob: ​Well, that’s our primary focus.

So we’re not going to be the traditional MSO where we’re going to strive for a hundred licenses.

Our model doesn’t fit cities, communities like Fargo, North Dakota for instance. That’s just, that’s not what we’re geared toward.

You’ll probably see us in maybe eight to 12 major metropolitan areas for the superstore concept.

Now, whether we go back at some point and look at a smaller model like a medicine or original store, maybe we tuck a few of those in here and there, but really this is our play.

This is tourist centric and again, we’re really trying to create an experience. Our facilities are experiential.

Matthew:​ Now, you mentioned these other states. Are there other states besides California and Nevada that you’re looking at? Are we talking like Illinois, Florida?

Bob:​ Both. So pretty much any state that has adopted adult-use, we’re taking a hard look at. But Florida of course it’s still a medical market, but you know, I’m confident it’ll transition in adult-use.

It’s an amazing state for a number of reasons, climate, population base, got some major tourist cities in the state.

So it’s something that we’re taking a hard look at.

We’re very slow, we’re very deliberative. When we go into a market, we expect to make money and this is an interesting industry, as we all know it’s got a lot of challenges from a tax standpoint.

Paying taxes, the tax penalties associated with 280E, those are all issues that need to be addressed.

Matthew:​ Okay. Now, you talked about like this more conservative approach. Do you think that’s your strength compared to some of the other MSOs who’ve been kind of growing at any cost?

Bob:​ Yeah, I do because again, our philosophy is real. We’ve looked at a lot of opportunities and we passed on about 98% of them.

It really has to fit our core beliefs and our model, and if it takes us a little bit longer to get there, so be it.

Our goal is to reward our investors, we think if we run solid operations with a focus on creating profitability, I think there’ll be rewarded and that’s, every day we strive to do that.

Matthew: ​Now, when you look out to expand beyond just making sure that the opportunity is going to be right for you, that the space is going to be right for you.

Are there any states that you look at and you go, “Okay, company X is just too dominant of a player here, we’re not even going to bother?”

Bob: ​No, I’m never worried about that. I really don’t care.

We moved across the street from a large operator here and it’s all about business.

We’re pretty confident in what we do and how we do it and that’s never even been a remote issue in our radar screen.

Matthew:​ Excellent. So much projections have the US market being worth $80 billion by 2030, is that a forecast that you feel comfortable with?

Bob:​ I leave that to the prognosticators. That, I love that number, that sounds outstanding and I hope we get there, but I just don’t know.

What I do know is I’ve watched Nevada grow from zero dollars in sales to, like I said, it’d be roughly $700 million or so this fiscal year.

That’s a phenomenal rate of growth in a short period of time. So, there’s a lot of opportunity, a lot of upside.

There are some unique legal challenges, you’ve got the schedule one issue to deal with, the banking issues to 280E.

But again, I think those things will ultimately work out, but I’m still incredibly excited about the opportunities going forward.

Matthew:​ Well, let’s talk about those legislative issues.

What would you like to see happen in the US, or is something like the SAFE Banking Act passage, is that enough for you or are we talking like the MORE Act, the STATES Act?

Bob:​ Well, both. I think the SAFE Banking Act is critical. It’s unacceptable to have this amount of cash in the system through this current structure.

Banks are reticent to touch us as an industry because of the federal overhang.

It’s a real problem and it needs to be addressed and it’s for no other reason make it safer for the customer, for our employees and for the operations.

But there are a host of changes that need to occur, I’m a strong proponent of the States’ Rights Act.

I believe the schedule 1 thing is, just historically, it’s just unbelievable that it applies to marijuana, but it is what it is. The STATES Rights Act I think, will solve a lot of those issues and it should be treated like alcohol in that respect from a regulatory firm.

Let the states manage their programs as they deem fit, get it out of Washington. Nothing good in Washington happens, ever.

Matthew:​ Do you believe we’ll see a change at the federal level and maybe more importantly, is that something that you would like to see happen?

Bob: ​Well, I obviously want to see it happen. I’m confident it will happen, but I’m confident that as we transition into the election cycle 2020, something will happen either immediately before the election or shortly thereafter.

And the only reason I say that is, I’ve listened to the president talk about states’ rights and how important it is to him and some of the overtures he’s made that he would sign that act or sign that bill.

So that gives me some optimism, and some of the leading democratic candidates have also been strong supporters of cannabis.

So I feel comfortable we’re going to get there, it’s just a question of when. Of course, the House has been much more progressive recently on getting legislation through, it seems like everything dies in the Senate or it’s bottle necked, we need some changes there and they need to get serious and need to deal with this.

I deal with it every day, there are lots of people that just believe that cannabis is the worst substance known to man, and it’s usually through ignorance.

They just, they don’t have, and they’ve been fed this their entire lives, that needs to change.

And unfortunately a lot of those dinosaurs sit in Congress. But I’m confident, I’m confident things are going to move and they’re going to honor the will of the people.

I mean, the public has overwhelmingly come out in support of the industry and legal cannabis use. And it does a lot of good. I mean, tax and regulate an industry as opposed to dealing with the underground, it just makes sense.

Matthew: ​Now, what are your best-selling products here at Planet 13?

Bob:​ Well, vapes obviously are our big seller, notwithstanding all the issues that have been in the press recently. But the tourist customers looking for a discreet delivery device, so they seem to gravitate toward that.

But the edible side gummies are very popular in our store. People like chocolates, the infused products seemed to do really well.
Matthew: ​And so you just started making those yourselves, pretty recently.

Bob:​ We did, yeah. So we just released, I think yesterday was the first time we put our gummy line on the shelves and in our chocolate, I think five flavors of our Dreamland chocolate brand.

So, had phenomenal feedback so far. So, we’re really excited about that, both of those.

Matthew:​ Excellent. What do you see for cannabis in 2020?

Bob:​ Well again, I think we need… a lot of the auction is going to continue to be consumed at the federal level with the elections.

But my hope is right before, or again as I said earlier, right after the election, we’re going to actually see some bills move through that are going to be well received by the industry.

The other thing is we didn’t talk about, I alluded to it, 280E Congress has to do something about that.

That is just a massive penalty to the industry.

Matthew:​ Will you explain, real quickly, about 280E?

Bob: ​Well, 280E is basically a provision of the internal revenue code that says that if you’re going to run an illegal business, you’re limited to deductibility on cost of goods sold primarily, especially at the retail level.

So what that amounts to for us is, and everyone else in the industry, it’s an effective penalty about 20-21%, and it’s just outrageous.

And we as a business, a legal licensed business should have the ability to take deductibility in standard business expenses as permitted by every other business.

And it’s a huge issue and it needs to be addressed and again, but it’s out of my hands, it’s Congress.

Matthew:​ What would need to happen to have that be addressed?

Bob: ​Well again, the House is, I think the House has been pretty forward thinking in that respect, they’re looking to make some changes.

It’s getting the Senate to actually consider it and really think about doing what’s right. And it only benefits not just the industry but everyone.

It allows us to be competitive, it allows us to do a lot of things as a business. We’re very constrained in a lot of ways.

The tax burden is beyond oppressive, but the lack of an ability as an industry to go get traditional banking, to go out and borrow at rates that everyone else gets in business, you know.

You don’t realize how significant that is until you don’t have it.

And we’ve been dealing with that now for years, but we’re going to continue to operate and will work as nimbly as we can, but we need changes.

Matthew:​ What do you see for Planet 13 in 2020?

Bob:​ Well, I see us continuing to grow, continuing to create awareness, not only in Nevada and nationally, but internationally.

We’re very proud of what we do and we want to share this with the world this experience, these properties, and we’re going to continue to grow.

That’s what it’s all about. And again, as I said earlier, we’re going to grow responsibly.

Matthew: ​Bob, I know you’re a busy man, but thank you for taking the time to talk with me today.

Bob: ​My pleasure, Matt. Great to see you again and come back and see us next year. Phase three.

Matthew:​ I will.

Bob:​ Fantastic. Thank you.

Matthew:​ Thank you.

​I want to thank Bob Groesbeck and everyone at Planet 13 for allowing us such exclusive access to their facility.

And I want to thank you for watching.

Until next time, here’s to high returns.