Still in its early stages, the corporate marijuana sector in the U.S. is famously unprofitable and frequently cash-starved. Despite this, many operators have managed to build up quite a bit of scale, and as such are poised to benefit as the current recreational cannabis legalization trend continues to spread.

Exhibit A: Columbia Care (CCHWF 1.12%), an ambitious multi-state operator (MSO) that despite its growing size is still landing in the red. Motley Fool contributor Eric Volkman had the chance to talk with Columbia Care CEO Nick Vita, who in this edited interview had a few thoughts on profitability, acquisitions, and other pressing matters for his company specifically and the wider cannabis industry in general.

Marijuana leaf atop a $100 bill.

Image source: Getty Images.

Eric Volkman: Earlier this year, you refreshed your retail brand; it is now Cannabist. Could you talk a bit about how the rebranding could positively affect your business? 

Nick Vita: As cannabis normalizes across the country and becomes more mainstream, consumers will have more options of where they can shop. Knowing the days of the traditional dispensary are waning, we saw the opportunity to get ahead of the curve and create a truly unique and exciting retail experience for our current and future customers and patients with Cannabist.

We're integrating technology including Forage, our proprietary online cannabis discovery tool, and our credit card into the retail experience, which sets us apart. Making cannabis more accessible for all -- for experienced or first-time users alike -- is our mission, and will ultimately positively impact our business by driving foot traffic and repeat customers.

Since launching Cannabist in select markets, we have already seen a lift in revenue and number of transactions at these locations.

The Cannabist rebrand is part of our overall branding initiative -- at both the storefront and product levels. As consumers learn more about cannabis and the options available to them, brand and quality will matter more. We are using a data-driven approach to ensure that we are providing the right products at the right prices to our customers and patients. Establishing in-demand brands will also benefit our wholesale business.

Volkman: You have always had an emphasis on cultivation assets. Does this make you vulnerable to price drops for wholesale cannabis? 

Vita: For the time being, within the current state of the cannabis industry, we believe it makes the most sense to be vertically integrated in every market. Markets are supply-constrained, with ever-increasing demand, so to control the quality and availability of product, we grow it ourselves.

We are building out our wholesale business, which now makes up 15% of total revenue -- but which we expect to exceed 50% in the future as we have more cultivation come online in some of our markets such as Pennsylvania and New Jersey. We've harmonized [standard operating procedures] across cultivation in our markets and saw record cultivation yields in seven markets last quarter.

Volkman: You are active in a wide range of states throughout the U.S. At the moment, which one or ones in particular do you feel have the most potential? 

Vita: Every new state that comes online has the advantage of being able to see and learn from the challenges and opportunities that other markets faced when going through the legalization process.

Right now, though, we are focused on building scale in those markets that are transitioning to adult use [i.e., recreational] to ensure that supply and the number of access points can serve the medical and new recreational communities.

The markets where we see outsized potential are those with large total addressable markets that are on the verge of transitioning medical programs to adult use, namely New Jersey, New York, and Virginia. That said, we are seeing growth in every single market, which is why you consistently see record results every quarter.

Volkman: You have been an active acquirer of a variety of cannabis assets, and just now you have plenty of cash on your books. Without getting too deep into specifics, what kind of acquisitions are you considering at the moment? 

Vita: It is no secret that the industry is seeing an increase in [mergers and acquisitions]. We're not acquiring just to add stores to our portfolio; we're thoughtful and strategic to ensure that we're maintaining the quality and consistency consumers have come to know us for -- that has always been the priority.

We are building scale in our existing markets to leverage the assets that we have to drive margin and shareholder value. We also see benefits of strategic flexibility to be able to act opportunistically for the right assets that will complement our portfolio and support our objectives.

Our acquisitions to date have been accretive to top and bottom line, and all at reasonable multiples. We have a methodical and very disciplined approach to M&A, which has served us well.

Volkman: The marijuana industry is still chronically unprofitable. When might we expect consistent bottom-line profits from Columbia Care, and how will this be achieved?

Vita: This is starting to change.

Columbia Care has been EBITDA-positive since the third quarter of 2020, and we are seeing improving trendlines for gross and EBITDA margins. Our EBITDA margin improved from 11% to 15% sequentially as of Q2. Out of the 15 markets that are currently operational, 12 generated positive EBITDA and 11 markets generated positive cash flow from operations in Q2, excluding contribution from [Green Leaf Medical].

This industry is in early innings, and we are just getting started.

We've been in a building period through strategic acquisitions and perfecting our vertical integration in our existing markets and are already starting to see the results of those initiatives in our bottom line.

Until [federal legalization] happens, the industry will continue to face challenges on the consumer side. Payment options are limited, which is why we introduced a credit card -- but until someone can open their wallet and pay with their preferred method, we feel the impact.

As we've experienced in many of our markets, making medical and recreational cannabis more accessible through the easing of state restrictions will help drive foot traffic and sales.