Verano’s Strategic Position in Florida that Could Lead it to the Top

Verano Holdings, LLC got its humble start in Illinois, privately funded with $120 million and poised to strategically consolidate operating cannabis facilities in what will help it to become one of the US’s leading multi-state operators (MSOs). Verano was co-founded in September 2017 by George Archos, owner of eight successful restaurants including Wildberry Pancakes & Café, Westwood Tavern & Tap, and the Scout Waterhouse & Kitchen. So, where did Archos’ interest in cannabis come from? 

Archos reveals in an interview, “I had an uncle that had multiple sclerosis and I think that he could have benefited from [cannabis] when he was suffering.” Over the last decade, countless anecdotes from seizure and Parkinson’s sufferers have shown overt therapeutic benefits of cannabis treatments. Patent applications have been filed for treating many diseases including MS with cannabinoids. Seeing the impact cannabis could make, Archos decided to enter the industry with the formation of Verano in Illinois.  

Verano was initially formed in September 2017 to consolidate cannabis facilities operating in Illinois and had intentions to exit soon itself. Verano was on track to exit through a merger with Harvest Health & Recreation in March 2019, but delays due to local and state requirements tainted that deal. Subsequently, Verano embarked on its own acquisition spree and in just a few years, Verano grew to become the third largest MSO in the US as of 2021. Verano’s secret to success? Tightly-regulated markets with limited license distribution. 

The states that Verano has interest in all share a tightly-regulated market including the third most important state, Florida, which has recently garnered tremendous attention due to certain market positions. Verano even states in SEC Form 20-F filed September 20, 2021 that these are the markets it seeks – ones that are easily controlled. One company, Trulieve, has been able to secure over 50% of the medical marijuana (MMJ) market in Florida, owning 91 dispensaries as of September 2021. In comparison, Verano owns 38 dispensaries in Florida through its subsidiaries AltMed and MÜV. The MMJ market in Florida is quickly becoming controlled by Trulieve and other MSOs. The reason – in order to obtain a license to cultivate in Florida, a company needs at least 30 years of prior plant cultivation licensure with a minimum of 400,000 plants in production along with a $5 million performance bond. Additionally, distributors have to cultivate their own products.  

The costs of getting started in Florida, alone, have led many nurseries to shy away, beginning with a non-refundable application fee north of $60,000. With such regulation over the market, small dispensaries that had enough capital to get started have no choice but to exit and merge with these MSOs who have access to much deeper pockets. That’s how Verano got its foot in the door in Florida – through the acquisition of Alternative Medical Enterprises (AltMed) in November 2020. AltMed was a strategic choice for Verano for a few reasons, but to realize this, we have to travel all the way back to the vines of the Ruskin tomato located in the sunshine state. 

Plants of Ruskin became well-known, some would say practically famous, in Florida communities and around the US for its Ruskin tomato. Experienced and established in annual plant cultivation operations for over 35 years, Plants of Ruskin had just what it took to get started cultivating cannabis upon legalization in the state. AltMed, a fully integrated medical cannabis company formed in 2014, did not have the requirements for licensure to cultivate MMJ in Florida and partnered with Plants of Ruskin in August 2017 to meet regulations. As soon as November 2017, Plants of Ruskin (d.b.a. AltMed Florida) was granted a licence to cultivate MMJ in Florida and began selling under the AltMed brand MÜV in 2018. MÜV is owned by AltMed subsidiary NuTrae, a product developer of cannabis delivery systems who also develops and licenses intellectual property to other parties. As of November 2021, NuTrae owns two patents and has two pending patent applications for encapsulated cannabinoid formulations it has developed. The products offered under the MÜV brand utilize this patented technology. Not only does AltMed have a license to cultivate and distribute cannabis with 38 dispensaries in Florida, but it also owns patent assets to protect its MÜV products, making it an attractive target for Verano to enter the Florida MMJ market.

While IP hasn’t always been the focus of cannabis companies, for reasons that will be discussed in a future insight, it is a business asset that provides value to its company through exclusion, royalties, and litigation. NuTrae’s two granted patents have open continuation applications filed to expand the claimed invention. This can create a family of valuable assets that could be enforced and most certainly was a deciding factor of Verano’s in the acquisition of AltMed to secure its Florida presence. Now that Verano is in Florida, how can it expand?   

Cannabis cultivators and retailers looking to expand previously had just one option. That was, to purchase a license from an already operating and licensed company, since Florida had delayed its licensing applications for MMJ since 2018. In addition, the license received dictates the number of dispensaries the licensee may open. Inevitably, the smaller companies will diminish as they struggle to match the efficiencies of large MSOs. In May 2021, Florida announced it is planning to award 15 more licenses but without a timeframe. Those with a presence in Florida already are undoubtedly rushing to submit their applications to secure the ability to expand further and open more MMJ dispensaries. 

The state of Florida’s MMJ market allowed Trulieve to grow into a cannabis behemoth capable of acquiring, and becoming, its own MSO – Harvest Health and Recreation – which it closed in October 2021 for $2.2 billion. Trulieve now has similar national standing as its competitor MSOs. Competition is just getting started in Florida. 

We’re likely to see MSOs merging to create industry giants if they want to have a chance at Trulieve who controls over half of the predicted to be third largest cannabis market in the US. Beyond reducing costs and expanding footprint, MSOs will have to build a community which is likely why Verano has been successful. 

Ask anyone, running a restaurant isn’t a walk in the park and to have three successful restaurant establishments that continue to grow says that customer satisfaction and experience is a focus of Archos. Harnessing this knowledge in an industry focused on community and experience could lead Verano to the top. 

Florida is a top cannabis market for those in the industry. Prepare for many more acquisitions as MSOs like Verano try to secure their share of the market and become leaders in the industry. For more updates on cannabis patent and market activity, sign up for the Cannabis Patent Forecast®.