Oregon’s largest cannabis business, Nectar Markets LLC, is expanding beyond the state with plans to open shops in Ohio and California.
The move also shifts the business into the “multi-state operator” category.
“We have had a lot of opportunities over the years to go to other states,” said Nectar founder and CEO Jeremy Pratt. “We were really cautious. We saw competitors and leaders in the (multi-state operator) space moving all over the place. We saw that isn’t sustainable. We stuck to Oregon. We felt we need to build a sustainable business in Oregon and that allows us to move elsewhere.”
Nectar has 39 stores in Oregon and 640 employees. It has not had to close any stores or lay off workers as the industry has had to deal with a glut of product on the market and falling retail prices.
By the end of the this year, Pratt expects the company will have 50 stores. Three will be in Ohio and there are four planned for California.
“In cannabis we have been pretty cautious,” he said. “Before we try to duplicate what we do we want to make sure what we do is profitable.”
Just last month, Curaleaf, one of the largest multi-state operators in the country, said it is exiting retail and production in three markets: Oregon, California and Colorado. It is also laying off less than 4% of its workforce and reducing payroll by 10%.
Looking at the current state of the cannabis market, Pratt said he and his team projected that prices would fall after seeing a big bump during the pandemic lockdowns. However, they did not expect to see the market fall as bad as it did, but they had planning in place.
Pratt opted to head for Ohio, which approved medical use of cannabis in 2016, because the state does not require residency for businesses. The state does, however, have a lottery system for licenses. Nectar applied, investing about $800,000 in applications, and received three licenses, Pratt said.
“We got three. We were hoping for one. So we were really excited about that,” he said.
The license process for California is competitive. That means applications are submitted and then granted based on merit. Pratt noted that in California the process is weighted toward local applicants. Nectar has bought some licenses in California and is in the process of acquiring an existing store.
Nectar, which had 2021 revenue of $77.5 million, is financing this expansion largely with a loan it secured in late 2021 with FocusGrowth Asset Management. It’s the first large loan the company has taken. Its growth until then was mostly bootstrapped. That loan has been used to buy stores in Oregon as well as the work in Ohio and California.
Moving forward, Pratt expects the company to go back to a self-funding growth plan.
“I’ve seen a lot of companies get in trouble with their debt,” he said. “I don’t want that.”
