Though it has only been eight months since Green Peak Innovations CEO Jeff Radway donned the cover of the June 2019 issue of Cannabis Business Times, the company has gone through significant changes. Michigan legalized adult-use cannabis this past summer, and sales started in December. While Green Peak’s dispensaries weren’t part of that first day of sales, it has since become a large-scale, vertically integrated producer of adult-use cannabis in the state. In this “Where Are They Now?” interview, Radway describes how the company scrambled to enter the adult-use market, how he balances inventory for two different segments and the lessons he’s learned navigating it all.
Cannabis Business Times: Can you give me an update on what's changed for the company since June?
Jeff Radway: Oh, wow. It feels like it was three lifetimes ago. Quite a bit has changed. We now have six stores open, and we have another five stores set to open over the next few months. Our main production facility where we cultivate and process is approved [for adult-use], so we're actually growing rec product as of early January—not yet harvested, but that's in the process. We have our first rec store open in Ann Arbor, which is phenomenal. And we are learning and navigating through the process of trying to maintain two different sets of inventory and trying to optimize both sides of the business in terms of medical and recreational and have the right product at the right place at the right time for the right consumers. All of that is on top of actively working on some acquisitions in some other states. So yeah, it's been busy. (Editor's Note: Interview took place Jan. 30. Radway said he could not yet elaborate on those acquisitions.)
CBT: How soon after adult-use sales started did you open the Ann Arbor store? How were sales that week, and how did it compare to when you were doing medical sales only?
JR: I think it was four or five weeks [later]. We've made up a lot of ground. Our store's incredibly busy. It's our top store among all of our stores, and it continues to ramp up in sales. … I can tell you we saw thousands of customers. It was about seven times the [normal] volume.
CBT: How did you go about preparing your supply for the adult-use market, and have you experienced any shortages on either side?
JR: Frankly, the state of Michigan opened up rather unannounced, and there wasn't much advanced warning. We actually thought it would happen 45 or 60 days later than it did. … This came very quickly and we had to sort of scramble—get our application in first, get our cultivation and processing facility licensed, and then go through all the local municipality steps for our stores. It's a bit of a learning curve, I'll be honest with you.
[The state] invoked a rule called Rule 40, which allows for up to 50% of your medical inventory to be transferred to adult-use. … We had a lot of inventory in our vault, and we had a lot of inventory at our stores, and to the extent that it met the criteria put out by the state, we were able to transfer that, so we started day one of being open for recreational having full shelves on both sides of the equation.
Because we are a vertical producer, in some cases we've had to reallocate between our wholesale and our retail division, but we are still very active on both sides of the distribution equation. As far as our third-party buys, approximately 20% of what we carry in our stores is purchased [from outside suppliers]. That has been limited. There's very little to choose from right now in the Michigan market in terms of vape, concentrates, edibles, so we're buying everything that we can that is from a quality producer with strong branding.
CBT: What's the ratio of what you're growing for medical versus rec?
JR: Some of that is confidential. What I will say is that the market for adult-use is far bigger than for medical. This state is already seeing a decline in the medical card patient base, which leads me to believe that it's just easier for certain consumers not to have to worry about seeing a doctor and renewing their cards. I think there is an economic [aspect] for the patient who needs a lot of medicine because it's still less expensive to buy using a medical card. I don't know how that plays out in the future, but I suspect the two will probably meet somewhere in the middle on price point. As a company, we charge medical customers less just because we feel an obligation to the patients who have serious medical conditions. We don't want them to be quite as exposed to the supply and demand types of pricing issues as an adult-use customer.
CBT: Will all your stores serve both medical and adult-use customers eventually?
JR: We have five [medical] stores that we are anticipating transitioning to the adult-use market over the next several months. In Michigan, it's a municipal-by-municipal process, so some of those municipalities have adopted an ordinance and have opened up licensing, and we're active in the license process. Others are still contemplating or writing their ordinances, and others aren't even to that point, so it's really a local ground game. In Michigan, it's not required that you actually have a separate sales floor or separate counters, so the store will actually work for both purposes without having different inventory.
CBT: What would you say has been the biggest lesson you've learned over the past year or two?
JR: I would say that first of all, operating inside of a federally illegal business is incredibly challenging for all the reasons we all deal with, from banking to insurance to working with suppliers. But I would say the thing that surprised me the most is that it is not normal or natural or easy to grow a highly regulated agricultural product indoors that has to meet very stringent levels of state regulations and testing. So, indoor farming is not easy.