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TILT Holdings CEO Explains What Makes Its Business Model Unique Among East Coast Cannabis MSOs

Gary Santo, CEO of TILT Holdings (NEO: TILT) (OTCQX: TLLTF) sat down with Benzinga Cannabis Editor Maureen Meehan on the first day of the Benzinga Cannabis Capital Conference in New York City.

On stage at the Marriott Marquis Hotel, Santo described the business model that makes TILT stand out amongst cannabis MSOs across the East Coast.

“It’s different altogether,” Santos said. “We don’t really look at our retail footprint as where we’re going to grow. We look more on the wholesale side.”

TILT: A Unique Model For A Multi-State Operator

The CEO firmly believes that CPG (consumer product goods) are the future of cannabis, and that certainty led the company to build a business model to navigate that space.

An initial strategy for that — one used by many MSOs— is to go out and buy brands.

“The problem there is that it’s expensive to buy them, it’s expensive to maintain them, and you don’t always know if that brand is going to be that winning brand,” Santo said.

Another issue with that model is competition. In Santo’s words, “MSOs generally don’t like buying from each other unless they have to.”

Building a brand portfolio would mean losing sales opportunities with other companies in the space.

That exploration into a new and successful business model led the company to structure itself in a way that it would not be in competition with other MSOs or LPs (Canadian licensed producers). Instead, the company seeks to become a “true partner.”

While this model can seem like a standard contract manufacturing model at first glance, Santo explained that there’s a lot more to it.

“Contract manufacturing is where I take your recipe, I create a bunch of products, and I hand them back to you, and go ‘good luck, go sell it out in the market and have fun’.”

For TILT and its partners, that’s not a good model because it “forces brands and others to have to become subject matter experts in new markets.”

There are brands in Western legal states like California, Colorado and Washington that have done a great job at establishing themselves and winning the “race to the bottom” price war, said the Tilt CEO.

“But when it comes to coming East, they don’t really understand the regulations, they don’t understand limited licensing, limited store-fronts and all of those things, and they shouldn’t have to build a whole team out to do that.”

One of Tilt's forward-thinking East Coast strategies was seen recently when the company formed a partnership with Little Beach Harvest, a brand-new cannabis business entirely owned by the Shinnecock Nation, a federally recognized Native American tribe living on their traditional lands on Long Island, N.Y.

The agreement aims to establish vertical cannabis operations on Shinnecock territory in the Hamptons where operations will take place on the Nation's sovereign land and include cannabis cultivation, processing, dispensary and consumption lounge facilities, Santo told conference attendees. The dispensary and consumption lounge are set to open in early 2022.

When TILT Comes In

Brands come over with their own brand architecture and TILT works with them to see what has to change for the regulations: “It could be packaging, formulation, or form factor.”

“What we do at TILT is basically give you the run of our cannabis assets. So we have facilities in Massachusetts, in Pennsylvania, in Ohio, soon-to-be in New York, where we’re able to provide the plant itself, operations, and also access to our entire sales team,” Santos said.

This way, the company acts like a partner using its own stores to promote the brands of its partners, while focusing on the wholesale and distribution side of the cannabis equation, Santo concluded.

Photo: Gary Santos at the New York Benzinga Cannabis Conference In October 2021.

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