5 Thoughts on GTI and Verano's Minnesota Entrance
Yesterday, Verano announced its acquisition of Minnesota-based Goodness Growth Holdings. With almost a half-billion, all stock, acquisition, Verano will acquire licenses in New York, New Mexico, and notably Minnesota. Similarly, GTI announced last month its acquisition of Leafline Labs—the other Minnesota operator. These acquisitions, and the Minnesota entrance specifically is interesting for a number of reasons. Here are 5 thoughts on the Minnesota entrance.
1). Minnesota is a duopoly. There are only two, vertically integrated licenses in the state. There is no other duopoly in the country. A similar example of this type of super-limited-license is Virginia, which GTI paid to enter in 2021. So MSOs, especially sophisticated ones, like limited license markets.
2). Minnesota will not be issuing new licenses any time soon. While Minnesota is a progressive state, it has been cold on cannabis.
Minnesota has one of the most expensive and restrictive medical program in the country. The legislature just allowed flower to be available to patients—sales can begin in March 2022. The GOP controlled senate leadership is anti-cannabis. Former Senate Majority Leader Paul Gazelka was the major block previously, and now that he has resigned from leadership to run for governor, Ways and Means Chair Julie Rosen will stop any pro-cannabis legislation from passing.
3). Cannabis is no longer local for Minnesota. The medical legalization policy conversation was about Minnesota business helping Minnesotans. Now, no operators are local.
Leafline Labs was controlled by the Bachman family, who are legacy botanists with retail locations across Minnesota. Goodness Growth was led by Dr. Kyle Kingsley, a physician trained and practiced in Minnesota.
Like many states, Minnesota is tribalistic. The paper-of-record in Minnesota, the Star Tribune, referred to Verano as a "consolidator" in its article about the acquisition. Not as a company, an industry leader, or a large scale employer. GTI and Verano must invest in state and local political engagement in Minnesota for their efforts to be successful.
4). A battle of congressional districts. When Minnesota licenses were first issued, the state gave the two operators a choice of even or odd congressional districts among its eight CDs.
Goodness Growth had the first pick and smartly chose the odds.
Verano now holds the more appealing locations than GTI. Verano has Minneapolis, the affluent Minneapolis western suburbs, and Rochester—which is home to the Mayo Clinic. GTI has St. Paul, St. Cloud, and Duluth as its flagship cities.
The legislature has authorized the licensees to have 2 retail locations in each CD, and so it will be interesting to see how they navigate site selection.
5). Excellence in operations has come to Minnesota. If you were to ask an industry expert to list the best cannabis companies in America, Leafline and Goodness Growth would not come up. From the quality of their product, to their retail experience, to their operational expenses, these companies are not remarkable.
GTI and Verano, on the other hand, are tier-1 and will bring excellence in operations to Minnesota.
While the North Star State will have sacrifice its "one-of-us" creed for cannabis, the end result will benefit patients, employees, and the industry within the state.
