The wife, who is also a shareholder, and I attended the annual meeting and turned in our proxy cards supporting the BOD's suggestions. It was conducted in a perfunctory manner and lasted about 20-minutes. We arrived 15-minutes early and met most of the leadership at Schwazze by telling them we felt as if we knew each of them already by their bio's and there would be a name contest after the meeting. Justin Dye chaired the meeting with Dan Pabon as the meeting's secretary and Nancy Huber served as the elections and proxy reporter. The nominees were approved overwhelmingly even if only our 550K votes were used as "for" along with many millions (vs 170-193K actual no votes that were reported as to each of the nominees) and the accountant was selected I believe without any meaningful dissent as well. No new business was brought by us or any other attendee. I did however make a statement thanking them as to the outstanding manner that the company has conducted itself and congratulated those who were present on the growth and investment opportunity they are presently creating for shareholders. The meeting was then adjourned. We spoke informally with several leaders as we were arranged in chairs on the floor and made our way to Justin at the head table after a few mins.
Someone reminded Justin that Collin Lodge, VP of Retail, would be taking us to see a dispensary operation. The time they spent with us was extremely generous as we found ourselves the only outsiders of the company executive team of shareholders present. There was a very real benefit to attending this, for us, as we now have an even greater level of confidence that this company with these persons (read this right team of persons) is going to succeed!
I personally don't think they (as a group) could be hired by another company at this point in the company's lifecycle. It is apparent they WANT to do this for themselves. That is a heck of a motivator. See superego. They are guiding their own destiny and the culture present is infectious. Each one we met is a shareholder. We saw even in this brief impromptu introductory meeting an exchange of ideas and saw how ferreting out success really drives the decision-making process even while they spoke of their current projects. The CEO always had a question for each person (and us) and this was obviously not rehearsed. A little spontaneity and laughter with some we'll have to consider that.
Jim Parco said a couple of things that stuck with me on the trip. He said, "Justin Dye is the real deal." He grew my business by 80% --all mechanics, and we could not be happier. His final offer to me (paraphrasing) "Watch. We are incredibly excited as insiders to be a part of this. With our access and knowledge that nobody like us has, it is especially telling when it makes us feel this way."
With that, and a few more handshakes, sensing our imminent departure with Collin, Justin said before you go, please stay for a bit longer and meet the entire team. We sat amongst them and each member who was present following the meeting introduced himself and explained to us what they are doing --specifically what their current focus is. We asked a few questions which all responses should be taken to include the usual forward looking type statement application as I write as they couched their responses as believes, hopes, anticipates and is working towards, etc.
One by one our impressions and our takeaways as to the Team and what was said (paraphrasing our best recollections and why we thought this important) are as follows:
Justin Dye, CEO & Chairman of the BOD, impressed us as a caring leader, mentor, and instantly likeable fellow. It is obvious that he runs this and is enthusiastic. It is not a cult of personality. This appears as a collection of type A operators working in harmony. Very refreshing and why we are more excited by what we've seen, the persons we have met, and the focus on the biz being a success. This was a great trip for the foregoing alone.
Collin Lodge, VP Retail, told us at one of their meetings that he wanted Justin to consider how to tell the investing world more about the culture that is Schwazze (from at Albertsons where Collin met Justin) and the fact these guys "don't go skiing every weekend as their hobby". Instead, they are looking to the next deal or metric to sample at the company and improve. That is what they enjoy doing. (My thoughts, you can't force this or get people to buy in unless they are really in. We saw a team that probably asks more questions and provides solutions with an algorithm-like-focus-of-purpose not unlike this message board in terms of what's next) Collin believes NM will be set up as a near peer operation as the house of brands grows with R Greenleaf Organics that is already a successful and established name.
Nirup Krishnamurthy, COO, believes that the business will continue to grow and would continue to do so in CO and in new markets with margins far stronger than their MSO competition.
This theme came across in each conversation one has with them, from my wife talking with Nancy Bush Huber, CFO, who also lives in Denver (we were all Nevada residents previously) what was clear: They WANT to be there and enjoy doing this. Highly motivated and functional C-Suite. The quote, "This team likes to win!" comes to mind as echoed by my wife.
Jim Parco, President Biosciences, spoke about what Schwazze really does and is. He stated "We are a compliance business first and last. If we do those right, then we get to work as a cannabis business inside of those restrictions." He stated Purplebees was in fact, and by far, the largest distillate mfg in CO. They provide for more brands than anyone. (The best part, we resell those as do our competition per Collin) Jim sees substantial growth for mfg in '22.
Dan Pabon, General Counsel, stated that Schwazze has an unequalled level of respect and solid relationships with State Government which are envied by other operators and those that they seek to acquire. (my sense, it becomes a competitive advantage being best in class) And they expect to grow because of how they are viewed and maintain their adaptive excellence to constantly changing laws, regulations, and the high standards they impose on themselves.
Todd Williams, Senior Advisor, Strategy. The first thing I did was accuse him of being responsible for all of those ridiculous email alerts I get some mornings about acquisitions. Then laugh and explain how my day is spent with smiles because of it. He hinted a 2022 "essentially mirroring this year".
Jeremy Bullock, VP Commercial Sales gave us a brief overview of wholesale and their expected growth with Big Tomato, Success Nutrients into new and existing markets. NM poses some growth opportunity. Store display in a store?
In sum, the leadership appears focused for becoming what they've said: A Super Regional. They possess the skills, initiative and reserve drive necessary to take on growth. I would not bet against them. This is a nascent Fortune 500 company.
As for pictures, there are a few restrictions, one being no customers in the shot (THAT is/can be difficult to do)! And, in our tour for instance with Collin at Starbuds, I view their security more important than sharing shelves and vaults of supplies with you. It is enormous and the turnover pretty rapid (no more than a few weeks will wipe out a store). I learned what were the busiest days, percentage of goods sold, trends, and turnover rates. One fun fact only about 5% of the total product in inventory ever goes to waste. Then "Shake it, Baby! Yeah!"
The folks that run dispensaries are 20-30's young, smart, energetic, helpful and genuine. The eyes smile with the grin (anyone else a trained CI Agent reading expressions with masks?) They demonstrated their courtesy, knowledge and helpfulness. One of my concerns was labor shortages. Per Collin: We have no issues hiring (away) employees as we grow in CO. We are extremely competitive and have no problems filling retail positions.
Our terrain reconnaissance. The best bit of news is expansion potential. The type not announced. There is more meaningful retail opportunity as soon as one leaves the airport. The East side of Denver is rapidly being built out from the DEN airport to the west downtown along 525 - 70 and S. to Aurora. Straddling Pena and Tower are construction zones in abundance. Tower Road is one such hotel cluster SSW of the airport. There are multiple single and multi-family housing construction projects being undertaken in the area as well as some key infrastructure (largest airport in CONUS) As of 2021 DEN serves 215 destinations, including 189 US destinations, making it the airport with the second-largest domestic network (per T. Busson, The ClaimCompass Blog) so the growth game is alive and well for the foreseeable future. Urban sprawl from Denver has no shortage of ripe land in this area. Finding the best location is part of what Collin does. He has a list that forms a metric and has essentially boxed out or cut-off competitors stores from ours and placed us in high traffic patterns for the consumer. This is the kind of retail stereo-like instructions I love to hear! The fact they have a methodology for this is the sugarcoated frosting. Think Albertsons. There are many similarities, and the exploitation is amazing.
Expectations from the Team: Identifying gaps and fill-ins for brand new dispensaries (see above). The Distribution Center (is/will be) a reality. Taking delivery to a whole new level from a B2C (business to customer) I think that may be a press release all by itself, so I'll save that for Schwazze and their fleet services.
Hope to see more of you there in '22. We've been welcomed back and with a specific tour in mind for comparisons of a known dispensary (now) and what it will become by then. I'll post some images on twitter with a link here shortly.
