In this clip from Motley Fool Live, recorded on Dec. 9, Motley Fool contributors Matt Frankel, Jason Hall, and Marc Rapport analyze how the brick-and-mortar, experiential element of one cannabis company gives it a massive edge.
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Matt Frankel: The hogfather says on Planet 13 (PLNH.F 1.35%), "do you think it's a real advantage to having the superstore?" I'd love to get your perspective on this as well. Both of you. "I would see it as a liability to have such a large location with high overhead and reinvestment requirements when you can instead sell in-store a ton of pot in tiny stores," his words not mine, "widely distributed." We say cannabis on this show. I would say that I think the superstore could be a liability except for two things. One, it's a tourist attraction based on where it's located. It's in Las Vegas. It's very close to the strip. People aren't going to get into a cab and go to a tiny neighborhood store to get marijuana in Las Vegas. They'll just buy from whomever is selling it on the strip. It's a tourist attraction, one. Two, it gives them space to actually make their product. They actually make their products in the facility. In that way, it doubles as a warehouse/production facility in addition to a dispensary.
Jason Hall: This is not an industry you can centralize your growth and distribution necessarily. If you grow in California, you don't want to be shipping to Florida through states where it's illegal, right?
Frankel: Right.
Hall: There are federal restrictions. You have to decentralize these operations.
Marc Rapport: That's a real issue. Not to be flippant but I have a son-in-law who is a police officer in a state where it's not legal. He's in a big university town. He's had to confiscate just small amounts then run them off to jail. He had to explain to them it's not legal here. There is a misunderstanding. A familiarity with a big facility like that would add to the familiarity factor a lot.
Hall: Yeah.
Rapport: One thing about that Planet 13, I don't think they would be affected quite so much like my big favorite Innovative Industrial Properties (NYSE:IIPR) if and when it's legalized federally because they're already doing retail. Their business model doesn't seem to be focused on providing growers and distributors with buildings and capital. They're doing it themselves. Am I correct on that, Matt?
Frankel: It's like their model is to have a superstore and then a network of smaller stores around them but in each state where it's legalized.
Hall: True.
Frankel: Like Jason just mentioned, you can't even transport it through a state where it's illegal. That gives them a production facility and then they can have a network of neighborhood stores, but those superstores do add value to the business I believe.
Hall: I promise you there are millions of people, millions of Americans, who would never go in their local dispensary. But they will absolutely see a Planet 13 and it's this big and the lights are bright and it's well-lit inside and it's well-displayed and, they look over at their spouse and say, "Let's go check it out." I'm telling you it normalizes things and it makes it a lot more comfortable. I think there's a lot of value to what they're doing.
Rapport: Yeah. Is that their business model going forward in Florida. Do you know, Matt?
Frankel: Well, they have the unlimited license in Florida but they really want to lean into these neighborhood markets. They want a superstore, as I said, in any city that could support a professional sports team. In Florida, there's quite a few of those. You have Miami. You have Orlando. You have Tampa. You have Jacksonville. They would put superstores theoretically in those areas and then smaller stores scattered throughout the state in markets that aren't quite as big for people who know the brand through their superstores but want somewhere local to go. As Jason said, people wouldn't walk to just XYZ dispensary but they will at Planet 13 because it makes it an experience.
