Curaleaf Founder and Executive Chairman Boris Jordan sits down with Yahoo Finance's Dave Briggs at the Benzinga Cannabis Capital Conference to discuss the trajectory of the cannabis industry, inflation's impact, and the road to legalization and regulatory improvements.
DAVE BRIGGS: All right, back here at the Benzinga Cannabis Capital Conference in Chicago. Had the chance to sit down with the executive chairman of Curaleaf, Boris Jordan. Talked to him about everything, including the global macro environment for the economy, the regulatory environment in cannabis, and of course, we started with the conversation about inflation, that hot TPI print, and its impact on the cannabis industry.
BORIS JORDAN: We haven't seen the kind of impact that some other consumer products businesses are. We've become a staple. So people are buying cannabis, whether or not there's inflation. However, they're changing their patterns of buying. So instead of coming in once a month and buying a lot, they're coming in paycheck to paycheck. And so we've seen a small decrease in the basket sizes. But for the most part, our customers are continuing to come back.
DAVE BRIGGS: So cannabis is now a consumer staple.
BORIS JORDAN: I think it is. That's what we're seeing now with the results during this difficult inflationary period.
DAVE BRIGGS: It is difficult. And some feel that-- I know you've said you think we're in a recession now. Many feel we are going into one. Is cannabis recession proof?
BORIS JORDAN: Well, it's early to tell. This is the first global recession that we've seen. And it's the first time cannabis as an industry is going through that recessionary period. So it would be ill advised for me to make a prediction at this point in time. But we are encouraged by the results we're seeing. We're continuing to grow 15% to 25% on last year's numbers. And I think that's a pretty good sign given the environment we're in.
DAVE BRIGGS: Do you still feel we are in a recession?
BORIS JORDAN: Oh, we're very much in a recession. I think we've been in a recession for two quarters, at least the way I learned in business school what a recession is. And I expect that this quarter and next quarter will continue to contract given the hikes in interest rates.
DAVE BRIGGS: When do you think things turn?
BORIS JORDAN: I think once we see a peaking of inflation, we saw it come in a little bit hotter than we expected today. I think that we're probably coming near a high on inflation given the moves that are going to be made over the next two months with the fed. I suspect we've seen the high. But sometimes, it takes a long time to start seeing a reduction in inflation. So we'll have to see how long that takes.
DAVE BRIGGS: All right. Let's talk about the legislative environment. It's been really a mess. There was some optimism with the Biden administration. It went away quickly. What is your optimism of federal legislation or even SAFE Banking? Any progress at all in the federal level?
BORIS JORDAN: I think we're closer today than we've ever been on getting SAFE Banking passed. I think that we have close to 80 votes if it was pure SAFE. In the Senate, I think that with some of the social justice issues, we're probably closer to a 60 number, 60, 65 in the Senate. So I think we've got the votes to pass. It depends on timing at this point in time. Do they have enough time, one, to try to get it in before the midterms? I suspect not. I suspect that's going to be attached to another bill during the lame duck session. And then we'll see how it goes. But I'm fairly optimistic at the moment that we will get SAFE.
DAVE BRIGGS: The other market that everyone is talking about right now is, of course, California, which looks like a debacle. Many thought it would be the building block, the foundation of federal cannabis. It's been anything but. Are you able to put your finger on what went wrong? Or are there just too many things?
BORIS JORDAN: The problem is that what we've seen is in democratically controlled states around the country, there are very little enforcement of the illicit market. And it's the illicit market that's the problem. The illicit market doesn't pay tax, doesn't regulate their products, isn't safe, and yet the regulators are not touching that market at this point in time. And that's where the real problem is. It's not with demand. Demand is very strong. It's with the illicit market, mainly in California, Oregon, Colorado, Washington State.
DAVE BRIGGS: Some say it's 10 times the size of the legal market in California.
BORIS JORDAN: I suspect that it is. Yeah.
DAVE BRIGGS: And will it ever work as a recreational market?
BORIS JORDAN: I think that if the regulators-- once we-- I think the recession in many ways in the United States is going to help the cannabis industry beat, and it's going to refocus these state governments on taxes. They need to collect taxes. You can't collect taxes if you're not enforcing the illicit market. The industry just can't survive. And so I think you're going to start seeing over the next six months a new emphasis on tax revenues because you remember, a year and a half ago, the Biden administration passed a 1.3 trillion package, which bailed out all of the states and their deficits.
Now that money is coming to an end and they're going to need tax revenues. And tax revenue from an industry this big can't come in unless they regulate the illicit market. And so I'm hopeful over the next 12 months, we're going to see more and more regulation of the illicit market.
DAVE BRIGGS: What new markets do you have your eyes on coming online over the next year or two?
BORIS JORDAN: So in the United States, obviously, we're all waiting for New York and Connecticut to come online next year. We still think that's going to happen, although there's some issues, particularly in New York, that we need to work through. Curaleaf and myself are actually going to be meeting with the regulators at the end of this month to have those conversations. And of course, for Curaleaf, specifically Europe. We are spending probably 60% of my time right now in Europe physically working on our development of our business there.
We want to make sure we're ready. When Germany presses the button on adult use in 2024, Curaleaf wants to be the dominant player in that market. So--
DAVE BRIGGS: How big is that market, Germany?
BORIS JORDAN: Five to six billion over five years.
DAVE BRIGGS: Enormous. Are you concerned about the likelihood that they face a very deep recession?
BORIS JORDAN: Yes. Europe is going to be facing the hardest recession, in my opinion, since the 1920s this winter.
DAVE BRIGGS: Europe facing what Boris says the toughest recession since the 1920s. The investor story in cannabis has also been negative over the last 12 months. They need some optimism on the federal level. And frankly, there is very little here at the Benzinga Capital Conference.