One of the most acquisitive marijuana companies on the scene is multi-state operator (MSO) Curaleaf Holdings (CURLF 7.60%). True to its nature, Curaleaf announced in mid-May it had struck a deal to purchase Colorado weed grower Los Suenos.
In this segment from Motley Fool Live, recorded on May 21, longtime Fool contributor Eric Volkman discusses the acquisition with healthcare and cannabis bureau chief Corinne Cardina.
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Corinne Cardina: Curaleaf is buying Los Suenos, a Colorado-based outdoor Cannabis cultivation facility. This allows Curaleaf to expand in Colorado and actually vertically integrate there.
What should investors know, and can you also touch on how competitive the cannabis market is in Colorado?
Eric Volkman: Yeah. Colorado was one of the first states to open its marijuana market. It's pretty well established but it's very competitive, and there's a lot of fairly small operations.
And I think that's where Curaleaf sees an opportunity. They come in as a larger producer, make an acquisition like this. Los Suenos, which means "the dreams," -- which I think is really nice and appropriate for a marijuana operation. They say it's the largest outdoor grow operation. It's considerable, and it will give Curaleaf some quite nice production capacity.
Los Suenos has three growth facilities, these comprise 66 acres. There's also one indoor facility should that be needed. The deal also includes two recreational dispensaries and, like you say, this gives at a stroke Curaleaf a presence in Colorado, Not a huge presence in terms of the retail, but I think they look at it more like a good opportunity to nail down some growth in supply, from which they can supply that region.
They also have aims to push more heavily into the wholesale market and, like I said before, the West has a bunch of states that established marijuana markets years ago. So as a wholesaler, there's some opportunity there.
[Colorado is] certainly competitive, but clearly on the retail side, they're used to competing. It's not going to be, I think, a big challenge for them. It's also going to bring their own price of their own weed down. Their goals to cultivate at under $100 per pound. I'm not sure what Los Suenos is producing at now, I don't know what the level is. Curaleaf didn't reveal that. But this is part of that aim, too, to bring down their own costs.
Because like every other marijuana company, especially on the retail side, they are dealing with some price erosion. You still have black market stuff out there, which oftentimes can be cheaper because of course it's not taxed and there's no licensing, whatever whatever whatever. This exerts some downward pressure on prices.
That's something that the Curaleafs of this world always have to contend with, so that should help, that should give them some nicer profit margin, too.