Legal U.S. cannabis sales will triple in the next decade: Green Thumb Industries CEO

Green Thumb Industries Founder & CEO Ben Kovler joins Yahoo Finance Live to discuss the company's second quarter earnings.

Video Transcript

AKIKO FUJITA: Well, the rapid legalization of cannabis in US states giving Green Thumb Industries a lift in the most recent quarter, with revenue increasing 85% year-on-year to $222 million, although we are seeing the stock under some pressure today, down about 1.3%. Let's bring in the CEO and founder of Green Thumb Industries. We've got Ben Kovler joining us today.

Ben, it's great to have you on today. Certainly a positive quarter here, really pointing to the expansion that we have seen in the cannabis market here in the US. You've got $360 million roughly in cash at the end of the quarter. How do you put that to use now?

BEN KOVLER: Yeah, thanks for having me. Pretty aggressively-- we see a lot of growth coming for US cannabis. And we're sitting inside a protected moat, given the regulatory structure. So there's a huge amount of growth ahead.

Just industry-wide, to put it on the map for you, currently US legal cannabis sales is a $24 billion industry. We believe that will triple in the next decade. So that's $50 billion of growth that we're going to be investing into.

BRIAN CHEUNG: Hey, it's Brian Cheung here. So I guess when it comes to your strategy here, we're talking obviously a lot about the distribution to these new markets, like New York and New Jersey. But how do you balance the retail presence that you have? You've got about 62 retail locations right now, in addition to distribution of your products to maybe other third-party store fronts. How are you kind of balancing that approach as you think about those new markets?

BEN KOVLER: Yeah, the way the market is regulated in the United States, it's state-to-state. And so what you produce in one state you cannot transport to another state. And so our strategy is to go into limited license markets and gain one of the licenses to produce our branded products, at the same time have retail locations for throughput.

However, over time, as you're seeing, say, in Illinois, for example, where we have 10 of the 110 stores today, fast forward two years, it'll be 300 or 400 stores, and we'll still have 10. So over time, our business will shift to the branded consumer products. The whole time this has been a branded consumer products play that we think the consumer will develop a relationship with. However, the retail strategy through RISE Cannabis really helps us get to know that consumer, serve the product, understand the brands, and stay on the cutting edge of what's happening in cannabis.

AKIKO FUJITA: Ben, the big question mark sort of clouding the industry has long been about federal legislation. You don't have that passed through yet, and yet you've got more than 20 states that have already legalized marijuana, both from a medicinal standpoint or from a recreational standpoint. At this point, how big of a lock would it be if you got the federal legislation? In other words, do you necessarily need that in order to keep this momentum going when you've got so many states that are opening up these markets to a brand like Green Thumb?

BEN KOVLER: Yeah, we do not need-- yeah, we do not need new federal legalization or federal regulation to continue to operate the business profitably with cash flow, hiring thousands of people and growing. You've seen just in 2021, despite no federal policy change, New York, New Jersey, Connecticut, and Virginia all legalized. That's more than 40 million Americans that are now going to have access to the product. Green Thumb has one of the limited licenses in each one of those states. And we're going to put our capital to work to execute for shareholders, to generate returns regardless of federal policy.

Now, we believe that anything that happens at the federal level is upside optionality. We're not dealing with a Jeff Sessions. We're dealing with a federal government that is thinking progressively on this product, that has indicated that this is going to be a state decision, which is usually a United States dilemma, federal versus state.

We see this going to the states. You're seeing happen now. And you're seeing unbelievable statewide economic momentum through taxes and jobs that is somewhat unstoppable.

BRIAN CHEUNG: Ben, as you mentioned, really it's going to differ maybe state to state. But what does the competition look like when you're marketing these types of products, right? A pre-roll used to just be a pre-roll, an edible used to just be an edible. It was wherever you could get it. But it seems like now there are all of these products at least where it's legalized where consumers do have a choice of where to go. So how important is branding, is execution in marketing when it comes to taking new products to market?

BEN KOVLER: It's incredibly important. It's a great day to be an American consumer of cannabis because you can go get this power of choice. And consumer dollars can drive the producers and innovators like us. So it's a great time. It's going to continue to improve. We see more opportunity and more optionality coming.

You're right, the product used to be 100% smoked. And now you're seeing innovation in edibles and consumables, in cape and concentrates, and in cutting-edge products, like drinks and other forms of social consumption. So Green Thumb is well-positioned with brands in each one of those spaces to take advantage of who is that consumer and how they develop a relationship with that product.