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March 04, 2020

Q&A with Kim Rivers: CEO of Trulieve

Conversations with the Cannabis 50

The Cannabis 50 highlights the pioneers and innovators helping push the cannabis, hemp and CBD industries forward. In addition to the 2019 Cannabis 50 Impact Review, we are also sharing interviews with our honorees to help spread their message of positivity and growth.

In a year of lower-than-projected revenue, operational difficulties and dips in stock value for many cannabis companies, Florida-based multi-state operator Trulieve bucked that trend and posted positive results across the board. We sat down with Trulieve CEO Kim Rivers to discuss why the company’s alternative approach proved out, how investing in communities helps everyone, and much more.

MGO: With the industry’s current cash flow crunch and profitability concerns, was there a strategic plan that got Trulieve into its current position?

Kim Rivers, CEO of Trulieve: We are a founder-funded business, so naturally we started with investments from our founders, some of whom are multi-generational business owners in the traditional agriculture space. So they tend to be very conservative when it comes to investing, and have a very “fundamentals-first” mentality, which has been my approach as well. I don’t think what we are doing is specific to cannabis, necessarily, it is just how you grow a profitable business.

We knew from the very beginning it was our responsibility to hold dollars accountable, which only amplified when we made the decision to go public. We feel a responsibility to our shareholders to be able to answer for every dollar.
The idea of holding those dollars accountable, again is not unique to the cannabis space, but perhaps it hasn’t been focused on as much up to this point in this industry.

MGO: For a while the cannabis industry seemed to have a “land grab” mentality. Now that feeling has changed. Was there a point when you realized the rest of the industry was understanding what you already knew?

Rivers: I wouldn’t say there was a single defining moment. When we founded the company, I was brought in early to help with the application processes. I had a lawyer’s perspective of ‘let’s do the research.’ As a team we traveled the country and knocked on doors trying to start discussions with everyone we could. It was right at the start of the ‘MSO (multi-state operator) concept’ and this process showed us a couple of things. One, that cannabis was a real industry and a real opportunity. And two, that there weren’t any really leading brands yet.

However, when we spent some time in Colorado that was fascinating to us because it was a more mature market. There were some companies that had developed and were setting themselves apart as dominant players.

And when we looked at the Florida opportunity, we had 21 million people, the opportunity to scale in a real way, and, what many don’t realize, is that Florida is a market where many concepts in the franchise industry come to the test market. That’s because of the diversity across the state, it is representative, socioeconomically and culturally, of different areas of the U.S.

And so we said, “wow, here in our backyard is an opportunity to really see if we can build a company that can truly penetrate and resonate with customers across a diverse population.” That would tell us if we really had something we can ‘franchise’ and take out of state.

While doing our road show for our RTO, we had people asking “where is your map slide? where is your addressable market slide?” And our response was that we had 21 million people in this single state (laughs). We’d talk to bankers who wanted a ‘single state discount.’

There was a lot of pressure for us to make acquisitions and do something transformational so we could make sure we were ‘keeping up’ with the MSO conversation. But for us, we remained disciplined and focused on the rate we were growing, how we were growing, and having honest conversations about bandwidth and the work we still needed to do in Florida. Really, we needed to prove penetration and market domination – and we hadn’t gotten there yet.

Ultimately, things shifted when we started to see some of the underpinnings of the market change. It started with the drop in capital markets in Canada, and then that trickled down to the U.S. As we peeled back the layers and looked under the hood, we realized companies that we thought were pillars of the cannabis industry were spread a little thin. They lacked a certain amount of depth they could use as a capital resource to support their expansion activities. It all looked great when there was access to capital markets and people were clamoring to invest. But now, obviously that has shifted.

It is funny, because now everyone looks at us and thinks “oh single state is the way.” But that’s all going to change in 4 to 6 months. You just have to define how you’re going to grow your business, what your core aspects are, and stick to that. You need leadership, discipline, and mutual accountability built around that.

There are lots of ways to win. And there is going to be more than a single winner.

MGO: For you personally, and as a corporate culture, do you feel you have a consciously contrarian approach?

Rivers: I will say that it was somewhat surprising, and perhaps a little naïve on mine and the company’s part, that we thought everyone would be driving toward profitability and that EBITDA (earnings before interest, taxes, depreciation, and amortization) would be a metric others would use in this space. I remember being on my first panel as CEO, and at that point I had heard so many pitches about the ‘addressable market slide’ that I just decided I would say EBITDA as many times as possible. Like, “thank you so much for asking me that customer-centered question, well actually, when you have EBITDA we are able to invest in these types of things.”

I don’t think we are being contrary just to be contrary, but as we approach the possibility of listing on the US stock exchanges having investable metrics is going to attract the kinds of institutional investors that we all want in the cannabis space.

We are in a growth industry with a ton of runway and value creation stories, but if we can also show that we have actual business fundamentals and we are able to talk in profitability and EBITDA terms, that is what they will be looking for.

And we are lucky that in the cannabis industry, unlike most industries, we actually have the time and opportunity to get these things into place.

MGO: What is it about your viewpoint or investment thesis that is so different from what is in the market right now?

Rivers: For us, and this has been true from the start, it is about depth and winning, keeping, and nurturing mindshare in a market. When we look to enter a state or opportunity, we ask ourselves how we are going to penetrate, how we are going to scale, what do the regulations allow, what is the competitive landscape, and what tools are we going to pull out to make this successful as viewed through the Trulieve lens?

We think at the end of the day, as walls start to come down and regulations change, that our relationship with our customers is very, very valuable.

MGO: What do you think is the next biggest opportunity: porting into new markets or adult-use legislation in Florida?

Rivers: Florida is our homebase, our ‘home stadium,’ and we’ve got to protect our backyard. We are very personal and passionate about that. We’ll always have a large presence and focus in Florida. Florida is the beacon of cannabis in the South right now, so that is important as well, as other states come online. There is a lot of work to be done in the South.

Ultimately, I believe there will be five regions that will develop across the U.S. As we think about how to capitalize on resources we think are portable, including talent and aspects of supply chain. Developing hubs across the country is a strategy that we are very much focused on.

MGO: Are you looking at mature markets? Limited license markets?

Rivers: I have always said that if your business philosophy is based on there not being competition, it is a fundamentally flawed philosophy. Hard stop.

So again, we look at whether we can penetrate a market, create mindshare, and expand in what we can call the ‘Trulieve way.’ There are certain regulatory schemes that are more open to that. Certain states currently don’t want to have big companies in their market. And at this point, that’s okay so I’m going to spend time and resources elsewhere.

Ultimately it is a bandwidth question, so we are looking for partners who are local and tied in to the communities in which they operate; have expertise and share our foundational philosophy; and who want to be part of something bigger. And partly because of the times, we are finding that there are more and more of these conversations to be had.

MGO: What is your perception of the state of the black market in Florida?

Rivers: The black market is certainly alive in Florida. From the medical program perspective, our average patient’s age is 50 years old. So there is a huge segment that we are not addressing. In South Florida, for example, there is a very sophisticated black market. They are branded, they have social media and packaging, they are very robust.

I believe that as a developing industry, it is very important to offer a choice, but also to understand that if we are going to be in a position to ‘compete’ with the black market, there are few things that are important. First is value, we must be able to compete at the pricepoint and be sure we are always adjusting and evaluating pricing. And two, getting information to the customer with respect to safety and other points of differentiation with our products.

One thing that Trulieve did very early is make third-party lab reports available online, to both physicians and customers. This gives truth and transparency to what we are doing. The reality is that safety is a clear difference and the vape crisis is something we can point to, as regulated providers, to say: ‘this is why it is important to have a regulated market.’

Ultimately, I think it is our responsibility as providers in the regulated space to offer products with a value proposition that is so compelling that the black market becomes the less attractive alternative.

MGO: What is your opinion on the local government’s role in creating an environment, with sales tax regimes and other factors, where regulated operators can succeed?

Rivers: I think that it is a lot about education. Just like the response to the vape crisis, where local governments reacted by shutting down access to regulated vapes. It was the opposite of what we needed and actually drove people to more dangerous products.

One of our responsibilities is continuous education. We are constantly touring and talking to local governments. If you look at what is going on in California right now, you just shake your head. You have one of the most robust cannabis programs in the world and it feels like it is getting taxed to death.

MGO: As a successful woman in the cannabis space, how do you see opportunities for women progressing?

Rivers: Cannabis doesn’t discriminate. I think it has been helpful to be a female CEO because cannabis, whether we like it or not, is emotional. We all come to the subject of cannabis with some bias or feelings, positive or negative, because of the propaganda that has surrounded cannabis historically, or maybe you have fond memories from college. There’s always some sort of emotional response. Being female has allowed me to embrace and talk a little more openly about that authentic connectivity with a customer or patient, and understand why that’s so important.

I will also say that business is business. And the cannabis business is no different. As females, we take our seat at the table and we lead from the front. I’m hopeful that more and more women will be onstage with me and that this industry has a unique opportunity to take a leadership role in diversity and inclusion, across the board.

Diversity and inclusion are a part of who we are as a company, as well as a stated goal that from the top of the organization we are not only ‘talking the talk’ but also ‘walking the walk.’

I like to say that the different perspectives we have lends itself to our profitability. We are profitable because of that, not in spite of it. I think a lot of companies have diversity statements on page four of their website, but when you start to turn the lens inward and look at their board composition and their c-suite, their mid-level managers and production folks, you see a lot of issues. Are they contracting with minority and women-owned businesses, are they supporting the communities in which they are investing? When you peel back the layers it can start to get dicey.

For us, having a female CEO, we are very cognizant of this and thankfully our board has embraced this and I think it is one of our strengths. Varied perspectives and voices allow us to understand our customers on a much deeper level.

MGO: How has Trulieve been proactive in the areas of diversity and inclusivity?

Rivers: Very early on we started recording diversity metrics and holding ourselves accountable to those metrics. One thing I would encourage any company to do is just take a baseline measure. Don’t have any expectations and just measure where you are today and set a goal. It is amazing what happens when things become top-of-mind and you include them in conversation.

Another thing we do is work to create opportunities for easier employment access. We partner with different groups that bring us employees with certain characteristics. We work with a group that helps place veterans and we also work with a group that helps people who have been out of work for six months or more find employment.

Another aspect of ‘walking the walk’ is we choose to invest in communities. All of our cultivation facilities are in Quincy, Florida, which is a majority-minority community. Similarly, in Holyoke, Massachusetts, we are developing a cultivation space in a majority-minority community.

We have an opportunity in this industry to transform communities and give folks new skills and job opportunities that didn’t exist five or six years ago.

MGO: What impacts have your business activities had on the communities where you operate?

Rivers: Right now we have about 3,000 employees in the company. In Gadsden County, where our cultivation and manufacturing facilities are, we are by far the largest employer. We’ve been able to provide a shot in the arm for the local economy. We are also members of the Chamber of Commerce and we are sponsoring other economic development activities within the community.

We want to be good corporate citizens reinvesting into the areas where our employees not only work with us but also live.

MGO: Can you tell us a little about what attracted you to this industry?

Rivers: I had a little of a different path. I am a ‘recovering lawyer’ and had switched to the entrepreneurial side of things and had a successful exit. When Florida started its program it was first a lottery drawing, but eventually became competitive, and when it did I was asked to come in and help.

But going further back, my mom was an elementary school assistant principal and my dad was a police officer for 25 years. He did undercover narcotics for a brief period of time. For me, I was fascinated by the industry and what I saw in the research.

But really, I felt responsibility to provide the best quality medicine and access to that medicine for the long haul.

MGO: What was the highlight, personal or professional, of 2019?

Rivers: I think 2019 was a year we will look back on feel that we reaffirmed our business thesis. Instead of feeling like I was always defending our thesis, I feel like there was a moment when the light bulbs went off at the investor table, I was walking into meetings and getting high-fives. There was no more “where is your map slide!”

MGO: Looking ahead to 2020, what does Trulieve have planned to make a positive impact?

Rivers: We are going to start taking the show on the road and will hopefully continue to prove our business philosophy: you can operate in a fiscally responsible and profitable way while also growing. I want people to be able to point to us and show that this is an industry that doesn’t only survive in the good times, but can also weather the storms.

MGO: Who do you view as a pioneer or mentor in the cannabis industry?

Rivers: Oh, I have quite a few of those. First Beth Stavola (Chief Strategy Officer at iAnthus Capital Holdings) is another female trail-blazer. She and I talk and Beth has been kind enough to share her journey. It is always great to get her perspective.

I also believe there are companies out there doing amazing things. There’s a smaller Canadian company, Superette, and Mimi Lam is CEO. She is a very focused leader who has defined a retail concept and is laser focused on bringing that concept to fruition. She is also showing the Canadian market that brand development is a positive and she has been active in changing the regulatory conversation from the inside.

MGO: Do you have a final message to the industry?

Rivers: We are all in this together. We want folks to be successful. The customer demand is there, we see it every day in our stores, and there’s more coming. There are lots of ways to win and there is more than one winning strategy. The time is right for sharing ideas and the rising tide lifts all boats.

Photo credit: Kira Derryberry Photography