Jim Cacioppo of Jushi Holdings: “Don’t underestimate a highly regulated industry”

Don’t underestimate a highly regulated industry. We used to be so worried about even having bank accounts, something you don’t hear about in any other business. There’s no immediate or easy access to finance, let alone listings on the NASDAQ. It is similar to how athletes train with weights on their arms and legs, so […]

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Don’t underestimate a highly regulated industry. We used to be so worried about even having bank accounts, something you don’t hear about in any other business. There’s no immediate or easy access to finance, let alone listings on the NASDAQ. It is similar to how athletes train with weights on their arms and legs, so that they feel much lighter when they’re out on the field or court. However, in cannabis, we have to wear weights at all times.

As part of my series about “5 Things I Wish Someone Told Me Before I Started Leading a Cannabis Business” I had the pleasure of interviewing Jim Cacioppo, CEO, Chairman and Founder of Jushi Holdings Inc., a vertically integrated, multi-state cannabis company developing and operating high-end retail locations, premium brands and state-of-the-art cultivation, processing and manufacturing facilities.

Thank you so much for doing this with us! Can you share with us the story about what brought you to this specific career path?

I’ve been an investor in the hedge fund industry for more than 30 years, co-founding and managing two multi-billion-dollar hedge funds in New York during that time. I then moved down to Florida to escape that pressure cooker environment, have a better work/life balance and spend more time with my family. About a year or two later, I discovered the cannabis industry and started investing in the space.

After about 25 investments in the sector, a small MSO company came to me seeking an investment from my hedge fund, and I became one of their largest shareholders for their first-round investment. Although this was a successful investment, I realized the quality of their management team (and many other management teams across the industry) could use some improvement. The idea to start a cannabis company started percolating in my head. So we incubated a cannabis company in my hedge fund for about a year before I brought everyone together to found Jushi Holdings in early 2018.

Can you share the most interesting story that happened to you since you began leading your company? Can you tell us what lesson you learned from that?

We were feeling a lot of pressure from bankers and leading investors in the industry to establish ourselves and set up operations in Florida and New York. Jushi was in New York through a minority interest, but we believed at that time the investment had become overvalued. All of the cannabis businesses were rushing into these two markets and both states were having issues with start-ups. To move into New York, for example, vertically integrated companies had to do everything themselves, from growing to processing and manufacturing, resulting in an expensive investment in a state with poor regulations.

We decided to go in a different direction, not pursuing a deal in Florida and selling our minority interest in a NY-based licensee. Those proceeds were used for the Pennsylvania and Virginia markets, targeting states that weren’t as popular. Pennsylvania has turned out to be one of the most promising states in the country in terms of revenue growth. Virginia is making real advancements in their medical marijuana program and they approved an adult-use market to begin sales by January 2024. They both present tremendous opportunities.

We bought the license in the best region in Virginia for about 30 dollars to 35 million dollars and Jushi purchased 18 dispensary licenses in Pennsylvania, which cost about 80 million dollars, and a grower-processor in Pennsylvania for 37 million dollars. These assets are worth many multiples of our invested capital right now.

Our decision to take a different path worked out very well. I learned to listen to my instincts and to make my own decisions separately from what everyone else in the space is doing. Do the work, complete the analysis and then seek the best investment opportunities for your company.

Can you share a story about a mistake you made when you were first starting? Can you tell us what lesson you learned from that?

Throughout my career, I’ve learned how to properly handle and communicate with others including both those I work with and those I work for. At Harvard Business, I was trained to focus on how to run a company, not to be the greatest employee. Along the way, I had to learn how to deal with others with whom I did not always see eye-to-eye with. For six years, I worked in investment banking and I learned a lot about integrating into organizations and working in cohesive teams.

That experience was invaluable, as I learned about how to deal with adversity, politics and those around me who don’t think the same way. Throughout those years, I increased my Emotional Intelligence (EQ). In the hedge fund business, I became known as the people-oriented guy in an industry not known for its people skills. That awareness allowed me to successfully build up a few large organizations as well as bring together a great team at Jushi.

Are you working on any exciting projects now? How do you think that will help people?

The most exciting project we’re working on that I am leading is the expansion of our grower-processor facility in Scranton, PA. As background, we have licenses to open 18 stores in the Commonwealth. During the pandemic, we were able to acquire a grower-processor that was running low on cash. It’s about 90,000 square feet and was growing flower and manufacturing products. We had to put in a lot of work, time, and allocated capital to turn it around and maximize its potential. The most exciting aspect is redesigning the interior to get the right flow and set-up.

On top of that, we’re building a very significant expansion around that facility. We are in phase one of a multi-phase project that more than doubles our square footage to approximately 190,000 square feet. During phase two, we will expand the structures to maybe as much as 350,000 square feet. Building something like this is a very interesting experience because we are completely turning around the building and creating an efficient state-of-the-art facility.

To make this situation even better, once the building is complete it will provide a lot of jobs in Scranton. According to locals, they say it’s the biggest investment project they have seen in years and it is great to support the local economy by investing in the area. We’re creating work for electricians, plumbers, contractors and ultimately permanent union jobs at the facility once construction is complete. The community is very welcoming. I find it all extremely exciting.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?

A lot of people have helped me along the way but my father was the most impactful. He was in the world of business running companies and I learned from watching by example. He came from a pretty modest background. His father was a union electrician in the Brooklyn Navy Yard, and my father went to school on the GI Bill in New York. He worked his way up in accounting and became President of his company many years later.

I was able to sit in on a lot of meetings. He’d bring me along to lunches and golf outings and I’d sit there listening to him talk. I was a fly on the wall for years from when I was 10 to 25 years old, a time when your external environment is so impactful. My father was a great example and gave me useful nuggets of advice along the way.

This industry is young dynamic and creative. Do you use any clever and innovative marketing strategies that you think large legacy companies should consider adopting?

Jushi’s creative group is overseen by our Chief Creative Director, Andreas Neumann, who is creating our online presence in this new digital age. It allows our customers to look at our menu and digitally view our products in real time as well as learn about and order our products right from their mobile devices. With regulations adapting to the pandemic, our patients are able to purchase products for curbside pickup in certain markets, like Pennsylvania.

In my eyes, allowing the products to be reserved digitally is a very innovative way to deal with the regulations in place. We are seeing between 65–75% of our transactions happening through our e-commerce channel. It is a massive change compared to last year and we’re still improving upon the user experience and process. I believe we have one of the best, if not, the best online user experience in the industry.

Can you share 3 things that most excite you about the Cannabis industry? Can you share 3 things that most concern you?

What excites me about the cannabis industry:

  1. The ability to help destigmatize a plant that helps people in so many ways. I am proud to be a part of this important change, enhancing the acceptance of cannabis in our country and around the world.
  2. Many of us are working to right the wrongs of the past resulting from prohibition. Getting people out of prison and expunging criminal records for what is now considered a legal medicinal product in the overwhelming majority of states is a must. In our opinion, all stakeholders should be working tirelessly to address this history, and we are proud to be actively participating on the front lines of those efforts.
  3. At Jushi, we are at an exciting stage of our maturity right now. The amount of growth and opportunity is tremendous, and we’re still in the very early stages.

What concerns me about the cannabis industry:

  1. Applications for licenses. The process has become extremely competitive and political, and some local leaders are biased in awarding them. It’s supposed to be an anonymous, fair process that goes through a selection committee, but at times it becomes polluted.
  2. Too many stock promoters who once led companies in the industry. Many stock promoters active in the space were exposed during the downturn from the summer of 2019 when the capital markets closed for about 18 months to most in the industry. That is a long hiatus with no capital coming in from the equity markets. Due to the lack of access to the capital markets, many companies failed or are restructuring. Some of these “leaders of the industry” were actually stock promoters. They weren’t disciplined business leaders and they built these companies haphazardly to the point where a lot of them have fallen apart. Post bear market, the larger companies that have survived are better managed, but it may take a while for that “promoter” stigma to go away completely, which does create cheaper valuations for investors and acquirors like Jushi.
  3. Managing rapid growth can be difficult. It’s a capital-intensive business. Managing large scale capital investments is not easy in a federally illegal climate where you can’t secure traditional bank financing. It takes a lot of discipline, especially as the cannabis capital markets are so volatile. It’ll be an exciting challenge for us to manage that growth over the next few years.

Can you share your “5 Things I Wish Someone Told Me Before I Started Leading a Cannabis Business”? Please share a story or example for each.

  1. The sheer magnitude of work necessary for starting and maintaining cannabis businesses is massive. There wasn’t a ton of capital available in the beginning and we are manufacturing and selling products that are federally illegal. The industry needed to be built from the ground up. The industry is still figuring out the best way to build and expand facilities, and what to do when they have access to capital, because the industry didn’t have it before. One year in cannabis is equivalent to one dog year (seven years). There’s a lot to keep up with.
  2. You will be dealing with people who are extremely irreverent toward following contractual obligations. We’ve completed many acquisition deals recently and the quality of people from whom we’re purchasing assets has improved dramatically, but in our early years, our counterparties did not always completely understand the deal or frankly care what the contracts said. We spent a fair amount of time on some of these transactions that didn’t pan out. I would have spent my time other ways if I had known what was really going on.
  3. It takes a lot more than you think to run a vertically integrated business. It’s highly unusual when you think about it. We grow our product and sell some of it as is, but then process the rest to manufacture cartridges, edibles and much more. It’s two separate businesses. On top of that, we also operate a retail system, which is a completely separate skill set. If you look at department stores like Target or Walmart, they don’t manufacture their products. If their name is on it, it’s most likely white-labeled (produced by a separate entity and sold under their brand name). The only other industry similar in vertical integration is oil and gas. They find oil in the ground, process it and create gasoline, and have a retail system with convenience stores next to the gas pumps. This vertical set up presents a lot of new and exciting challenges in figuring out leadership because no one has truly done this before at scale. That is why I have been laser focused from the beginning on building the right team with all the needed skill sets for this industry.
  4. Don’t underestimate a highly regulated industry. We used to be so worried about even having bank accounts, something you don’t hear about in any other business. There’s no immediate or easy access to finance, let alone listings on the NASDAQ. It is similar to how athletes train with weights on their arms and legs, so that they feel much lighter when they’re out on the field or court. However, in cannabis, we have to wear weights at all times.
  5. The way many people conduct business is very different from what most of us coming from other spaces are used to. Some of the people that own cannabis businesses have been growing and manufacturing products from the early days (i.e. back 10 or 20 years). It was an illegal business or grey market at best back then. These businesses could very well have some potential regulatory inconsistencies that could put our company in danger, so we have to be cautious with whom we do business. Our approach is to focus on those who are excited to mature with the industry and truly grow within this new landscape.

What advice would you give to other CEOs or founders to help their employees to thrive?

As leaders of the company, you want your retail employees to understand your products so they can advise patients and customers. They also need to understand the regulatory environment. Budtenders are the point in the process where regulatory errors can occur and it’s your responsibility to ensure they’re properly trained to avoid legal issues.

We created training videos in a way that allows them to engage with information casually every day. The best learning for a retail employee is a user-friendly app that’s almost like a game they have to complete, but an interactive training game. With this approach, your employees actually enjoy the teaching, are engaged in the training and retain the information better. Younger generations are used to working on their phones and having information accessible at their fingertips, so why not provide information in the way they’re used to?

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

The most impactful movement would be related to education and training for people in the earlier stages of development. Get them focused on what they really enjoy doing. There’s so much pressure coming from all areas of society to complete the education track and come out of it with an impressive degree and career. Many people might decide at some point that they want to do something without being pushed along, and there are various ways to contribute to society and earn a living. Not everyone should be pushed in the same direction.

So much time and money are wasted on that process. People should learn to dive into what they love, from music or math, earlier in their development. Whether it’s vocational, technical trade school or higher education, marrying the post-educational with the early stages would really benefit society. In addition, adolescent, teen and young adult mental health is a growing problem that needs to be addressed. I have focused some personal resources on this and hope to expand this effort when I retire.

What is the best way our readers can follow you on social media?

You can find Jushi on Facebook, Instagram, Twitter and LinkedIn.

This was very inspiring. Thank you so much for joining us!

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