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Ep. 418: Charlie Bachtell, Cresco Labs

Cannabis Economy Podcast
Ep. 418: Charlie Bachtell, Cresco Labs

Ep. 418: Charlie Bachtell, Cresco Labs

Charlie Bachtell joins us to talk about the cannabis space outside of the more classic states of California, Oregon, and Colorado. He has been part of a growing geographical footprint in Illinois, with the mission of normalizing and professionalizing cannabis. In Illinois, safety has been the main concern over other aspects like revenue, and the recent surge in cannabis-related data has helped prove its safety through allowing increased education. This opened up the conversation about cannabis and led to a solid medical program on which others are now based in different states.

Transcript:

Seth Adler: Charlie Bachtell joins us. Welcome to Cannabis Economy, I'm your host Seth Adler. Download episodes on Canneconomy.com, that's two n's and the word economy, or wherever you currently get your podcasts. First a word from Evolab and then Charlie Bachtell.

Evolab: The other really cool thing, we did do an agreement with Doctor Ben Cohen who is a pain specialist that is helping us design a pain formulation cream that will be used for athletes. I don't know if you are aware that, obviously, I mean this was I guess kind of old news, but WADA and USADA have both taken CBD off of the list of prohibited use items, and so we're going very heavily now after pain products for athletes and Doctor Ben is going to help us with that project as well.

Seth Adler: Charlie and, I apologize, but pronounce that last name.

Charlie B: Bachtell.

Seth Adler: Oo, that's not what I came in thinking.

Charlie B: No?

Seth Adler: No. I was hoping we were going to have a Charlie Batch conversation. The old Lions and Steelers, I think, quarterback, number ten. He never played for the Bears and that's why it doesn't matter, right? We're here in Chicago, thank you for having me in. Cresco labs. You guys are doing a fair amount of business here.

Charlie B: Trying to move the ball forward. I'll keep the football analogy going, huh.

Seth Adler: Look at you! If you were Sweetness, if you were Walter Payton, that's what you would be doing. So you're a lawyer, and maybe we'll get into that, or at least were a lawyer, maybe a recovering lawyer, whatever it is. As we make our way into 2019 podcast line knows no time, but that's when you and I are speaking kinda towards the beginning of that year, what is Cresco Labs looking at. I'm sitting here at your desk but what are you most focused on?

Charlie B: You know, it's the continued expansion of the industry and our role in it. Clearly we're a multi-state operator, so the footprint, the geographical footprint has grown pretty significantly over the last year, and believe will continue to do so as we move forward in nineteen. Mission of our company, which I think speaks to the industry as a whole is to normalize and professionalize the cannabis space. That was the opportunity that we saw, and that was the aspect that we thought we could bring something to that conversation. We could help draft that narrative, so that's why we got into the space in the first place.

Seth Adler: We're talking about I guess the total addressable market, and especially in states that have limited licenses. There are a number of players, number of MSOs that have your exact kind of outlook: that's exactly what we're trying to do, forget about California, Oregon and Colorado, go forth into the other states and let's try to make some hay, so to speak. Or hemp, for those that are participating in that market. Give us a sense of competition. This is a brand new market, the consumer is still being defined. From my point of view, I have the pleasure and honor of speaking and talking to you guys, so it seems like it must be very competitive, but it also seems like it must be endless, as far as the market itself.

Charlie B: There's a couple points there, so to your point, sure it's competitive, but it's incredibly collaborative and I think that's what surprises a lot of people that aren't necessarily in the highly regulated markets. We all have to get along, we all have to do this together. You have to have a program first, patient first, or customer first focus because without the programs it doesn't matter how good your packaging is, it doesn't matter how good your messaging is. The program has to be successful, so we find ourselves often working with our peers. We really don't even refer to each other as competitors and as much we refer to as peers, we coined a phrase called coop-etition, and there's plenty of coop-etition in this space. Needs to be.

Seth Adler: Charlie Bachtell joins us. Welcome to Cannabis Economy, I'm your host Seth Adler. Download episodes on Canneconomy.com, that's two n's and the word economy, or wherever you currently get your podcasts. First a word from Evolab and then Charlie Bachtell.

Evolab: The other really cool thing, we did do an agreement with Doctor Ben Cohen who is a pain specialist that is helping us design a pain formulation cream that will be used for athletes. I don't know if you are aware that, obviously, I mean this was I guess kind of old news, but WADA and USADA have both taken CBD off of the list of prohibited use items, and so we're going very heavily now after pain products for athletes and Doctor Ben is going to help us with that project as well.

Seth Adler: Charlie and, I apologize, but pronounce that last name.

Charlie B: Bachtell.

Seth Adler: Oo, that's not what I came in thinking.

Charlie B: No?

Seth Adler: No. I was hoping we were going to have a Charlie Batch conversation. The old Lions and Steelers, I think, quarterback, number ten. He never played for the Bears and that's why it doesn't matter, right? We're here in Chicago, thank you for having me in. Cresco labs. You guys are doing a fair amount of business here.

Charlie B: Trying to move the ball forward. I'll keep the football analogy going, huh.

Seth Adler: Look at you! If you were Sweetness, if you were Walter Payton, that's what you would be doing. So you're a lawyer, and maybe we'll get into that, or at least were a lawyer, maybe a recovering lawyer, whatever it is. As we make our way into 2019 podcast line knows no time, but that's when you and I are speaking kinda towards the beginning of that year, what is Cresco Labs looking at. I'm sitting here at your desk but what are you most focused on?

Charlie B: You know, it's the continued expansion of the industry and our role in it. Clearly we're a multi-state operator, so the footprint, the geographical footprint has grown pretty significantly over the last year, and believe will continue to do so as we move forward in nineteen. Mission of our company, which I think speaks to the industry as a whole is to normalize and professionalize the cannabis space. That was the opportunity that we saw, and that was the aspect that we thought we could bring something to that conversation. We could help draft that narrative, so that's why we got into the space in the first place.

Seth Adler: We're talking about I guess the total addressable market, and especially in states that have limited licenses. There are a number of players, number of MSOs that have your exact kind of outlook: that's exactly what we're trying to do, forget about California, Oregon and Colorado, go forth into the other states and let's try to make some hay, so to speak. Or hemp, for those that are participating in that market. Give us a sense of competition. This is a brand new market, the consumer is still being defined. From my point of view, I have the pleasure and honor of speaking and talking to you guys, so it seems like it must be very competitive, but it also seems like it must be endless, as far as the market itself.

Charlie B: There's a couple points there, so to your point, sure it's competitive, but it's incredibly collaborative and I think that's what surprises a lot of people that aren't necessarily in the highly regulated markets. We all have to get along, we all have to do this together. You have to have a program first, patient first, or customer first focus because without the programs it doesn't matter how good your packaging is, it doesn't matter how good your messaging is. The program has to be successful, so we find ourselves often working with our peers. We really don't even refer to each other as competitors and as much we refer to as peers, we coined a phrase called coop-etition, and there's plenty of coop-etition in this space. Needs to be.

Seth Adler: I feel like I've heard that other places but fair enough, we use it here too, to great effect, and maybe differently to other industries, and that might be what you're talking about. Especially because, once you draw a circle around the area that isn't next to a school by X feet or what have you, it is not possible for a competitor to come into that circle. And so by definition you aren't competing the same way as coffee shops or, you know, apparel stores.

Charlie B: Certainly. Really, the bigger picture is if the program, and we learned this in Illinois, and I think this is something that I would be surprised if anybody else who started in Illinois didn't feel similarly, is that we stared it in the face. We stared a potential of a failure of a program right in the face, and if it wasn't but for the efforts of the operators in figuring out how to navigate that climate and work with regulators, and work with legislators to put some fixes in place to fix the program, we were looking at failure, so that's where the collaborative efforts to make sure the program was successful became very evident.

Seth Adler: Let me, if you don't mind, bring you back to that miserable moment in time in your life, and what you're talking about, as I understand it, is a governor that was not friendly to the program, a patient count that was extremely low, a list of qualifying conditions that really wasn't a list at all, it was a few. And you did have multiple operators that were putting a lot of money into just getting the licenses and just getting up and running. So, be present in that moment again, and take us through some of the conversations that you did have with regulators and legislators and other cooperators. Take us through some of those conversations.

Charlie B: So, here's one thing I wanna make clear with my background also being an attorney, me and my other founders being from the banking space, and in particular mortgage banking, that highly regulated nature of it, it would be unfair for me to only bring up the bad parts of the Illinois program because, to be honest with you, it was Illinois's game changing law which was going to introduce highly regulated, compliance focused cannabis to the country. That's the only reason I got into this space. So, you have to live with the good and the bad.

Seth Adler: So even before the moment that I described, what you're saying is, because we're fingerprinting the patients, famously, that actually is interesting to me as a lawyer.

Charlie B: Well, I had no interest in being part of unregulated cannabis as a profession, so the whole move towards a regulated, compliance focused cannabis industry was what we were interested in doing. Hence, the normalization, the professionalization, everything, was moving in that direction. And what we realized in Illinois, if I do go back to that day and period of time, was that sometimes things could look good on paper, and their disasters in real life. So, you brought up the quintessential example of fingerprinting patients, I think if I put my legislator glasses on and go back to 2011 and 12, that probably look good on paper, make sure no bad people got into the space, you're forgetting that it's medicine though.

Seth Adler: You're forgetting grandma.

Charlie B: Yeah, for sure. So yeah it was tough and there was a lot of conversations with the peers of, look, we've got to make some significant progress in this space. And what's great about it is how comprehensive and how it was really the aggregate of everything was how you could affect change, so we had to be the most professional operators, we had to engage in the awareness and education, we had to really build the reputation of a trustworthy group of operators for the legislators to care about what we said. So the lessons that were learned, I think that's why it's not coincidence that you see some of the largest operators in the industry nationally are based out of Chicago. It was a tough climate. If you were to make it through this program, the saying you can make it anywhere is a hundred percent true.

Seth Adler: I will do away with any New York/Chicago comparisons as I am from New York, and we'll get to that another time, as far as if you could make it here you could make it anywhere. But there's a new governor now, and I want to get to that because you have a special place there, so we'll just put that aside for a second. What we're talking about is a night and day existence of this program, and of this market. It wasn't this new governor coming in. Was there an inflection point? Was it just hard, grindstone work over the past few years? Was there a moment of enlightenment?

Charlie B: Yes, it was nose to the grindstone. It was making sure that, again, it was the aggregate, it was the sort of collective efforts that resulted in us getting legislative change even with the prior governor. I think it was also part of the high quality and professionalism of the current medical operators that gave even the new Governor Pritzker a platform for success in talking about cannabis in a much more progressive way. I think if the medical program wasn't as high quality as it is that wouldn't have been as popular of a position to take, so it all works together. But it was hard work over the years, it was an enlightening sort of thing with the alternative to opiates bill in particular getting passed. Through our efforts and through the natural progression of the way people think about cannabis, we were able to get a very conservative, republican governor to understand the importance of the role of cannabis in fighting an opiate epidemic. That's pretty transformative, so a lot of things to be happy about [crosstalk 00:10:06].

Seth Adler: That's one way to bring him in, and we are talking about one person, what are some of the ways that you took away some of the bricks in the wall? Cause he really was not a friend. And I ask this on behalf of other legislators, other regulators from either states or countries, other entrepreneurs, other business folks, even other scientists, what was it? How did you evolve his thinking?

Charlie B: Two of the core values of our country are problem solving and knowing your audience. When you understand who your audience is and you really are able to put their hat on, and we use that in so many different aspects of our company. Sometimes the audience is the regulator, the administration, the general public, the medical community, customers, you know, those are all different audiences. So understanding the perspective that we needed to appeal to, and then the level of engagement that it took from, not only Cresco, but the other operators in the space to be the professionals, to be the good stewards and put the right look on the operations we were conducting, and then to be able to wrap it in a topic that was going to be more acceptable to that administration.
The final thing of course, which is probably the biggest, was the availability of data. The epidemiological studies that started to come out in 2017 that showed this correlation between a reduction in opiate in states where there was access to cannabis. You know it's real easy for somebody to deny requests saying you don't have any proof, you don't have any data. Well then data starts to become available that was an incredible help, so you gotta wrap all those together and that's how you can change perspectives.

Seth Adler: I would imagine, here, hey, not bad. Also, here, good, tax revenue, you know, how much of an eye-opener was that when those Ms starts to be Bs out of Colorado and otherwise.

Charlie B: For Illinois in particular?

Seth Adler: In other words in this conversation, moving the ball forwards.

Charlie B: To be honest with you, revenue didn't move his needle. It was the safety issue. It became a public health concern, and we were fortunate enough to be able to offer a potential part of a solution to a big problem that our state had, and for that administration it more of the potential fix to a problem more than revenue. Revenue wasn't the driver on that.

Seth Adler: I'm very much appreciating your regional accent with your flat A. So -

Charlie B: I was trying not to, there goes that.

Seth Adler: But again, I'm very focused on it, right? You know, I'm all audio. Think about it. Speaking of a different governor, this governor, you're helping him is one way to say it. What am I talking about?

Charlie B: So [inaudible 00:13:14] fortunate enough to be asked to be part of his transition team, and in particular the committee dealing with restorative justice and safe communities, and that was an honor first and foremost. But again, to their credit, they wanted to have an operator who's familiar with this issue that they were going to move forward, this issue of cannabis, in a more progressive approach to cannabis. To their credit, they saw the value in having somebody come there and present that voice and real life experience and we're big on creating win-win-wins.
Cresco lab, really, a focus of ours, and I've never been a part of an industry before that can create as many win-win-wins as cannabis can, if you do things the right way here, all of the stakeholders involved can succeed. The general public, the actual customers, the administration that passes the law, and the operators. There's a very unique ability to create great scenarios for all involved if you do it the right way. So I think it was with me bringing not only the cannabis perspective but also this perspective of always trying to create the win-win-wins, I think everybody benefited from it I think the operators that'll be a part of that program are gonna benefit from the fact that that voice was there in that room, the administration will have a more reasonable and well-rounded program, so it was a great opportunity.

Seth Adler: And just to make sure people aren't hearing things, that was your phone ringing.

Charlie B: Sorry, that's like 101, right? Interview 101: shut off the phone.

Seth Adler: Well, no, it gives some texture to the conversation, Charlie. So what was the thing that you shared that surprised your audience in that room, and what was it that was being shared that surprised you in that room?

Charlie B: One thing in particular was I had, on multiple occasions, reminded the committee and the people that were going to be holding the pen to feel free to require the operators to carry a lot of the water. It's a privilege to be a part of this industry, it's not a right, it's not something that you're just entitled to, it's a privilege to be a part of this industry, so, as they were grappling with, well, what about this and how do we make sure that that happens, it was, on a couple of occasions, I said, make the operators do it, make us commit to doing it. We'll do it.

Seth Adler: How detailed can you get -[crosstalk 00:15:53]

Charlie B: Can't get too detailed.

Seth Adler: Systematically, like how much can you just paint the picture for us at least. If not take the picture, you know, paint the picture.

Charlie B: Social justice, social equity is a big part of this adult use initiative in Illinois, and making sure that Illinois, us in Illinois, and really, I've seen so many programs, I can tell you that Illinois did create the model program, good, bad, or otherwise, on which most other medical programs that have come about afterwards are based on.

Seth Adler: Well, east of the Mississippi, certainly.

Charlie B: Yup, east of the Mississippi, certainly. In limited license, certainly. So the opportunity is there for them to do the same on adult use and to make sure that they do set the highly regulated compliance focused adult use market, and set the bar on that. One of the examples was the restorative component, making sure that as we now legalize things that used to be illegal, what do you do with the people with records.

Seth Adler: Disproportionate communities, disproportionally affected by the war on drugs.

Charlie B: Yup, and one of the concerns that was voiced in the committee was how do we make sure that the eligible parties are even aware that they can do this, and that was on of my answers was we'll do it, the operators, put it on us.

Seth Adler: Now are we talking about expungement, ownership, jobs-

Charlie B: Yeah, expungement, particularly this was expungement, and it was funny with Jason sitting in the room. He writes one of the things I think we're really good at is obtaining earned media on things relating -

Seth Adler: He's the communications guy, surprisingly soft-spoken for a communications guy.

Charlie B: You haven't spent enough time with him.

Seth Adler: There we go.

Charlie B: So we're pretty good. We've been working on this for 3, 4 years now of awareness and education is a giant part of what it takes to launch a medical program with a limited license state east of the Mississippi.

Seth Adler: Please unpack education because coming out of Colorado in 2014, it was start low, go slow, and we literally have to share what the heck is going on here because no one understands it. How did we do it here in Illinois?

Charlie B: So, you know, even we've took a step back even further it was: are you really going to explain sativa, hybrid, and indica at everybody or are you gonna start to use more intuitive nomenclatures? So just thinking about everything from scratch and breaking it down and putting it back together in a much more understandable, much more intuitive, much more relatable way, so you didn't have the intimidation.
For us, in being east of the Mississippi, in where cannabis isn't necessarily as big of a part of the normal culture as it might be in some of the more pioneering states, you need to break down that initial apprehension that's associated with cannabis. And it is 98% of the U.S. even if they're for cannabis and for legalization of it are still gonna feel apprehensive the first time they go into a dispensary. Let alone when you're talking about highly regulated medical markets, the medical community, the education that was needed to get them onboard. W
We really took a very baseline approach from the very beginning on making sure that patients, potential patients even, felt comfortable enough asking their physician about it, and that that physician, when their patients would ask them about it, felt comfortable enough engaging in the conversation, so whether it was through CMEs, lunch and learns, grand rounds, doing awareness in education campaigns on billboards, in magazines and newspapers, that was a huge lift that we, and some other operators in Illinois, undertook from the very beginning, so similar process will be taken with the new adult use program here in the social justice expungement related activities associated with that.

Seth Adler: What kinda timelines are you looking at as an operator?

Charlie B: For adult use?

Seth Adler: Mm-hmm (affirmative).

Charlie B: I think it's realistic to think that this is a 2020 initiative, actual implementation. I think Governor Pritzker's been consistent in this since his inauguration. This is a first hundred day issue for him, he wants this done this legislative session, so that would lead to implementation first part of next year.

Seth Adler: When you opened up the newspapers and you know Pritzker, but the other governors, watching them run towards cannabis after dealing with your old friend the old governor, how different of an outlook do you have, just generally on this space, in the past six months.

Charlie B: Yeah [crosstalk 00:20:44]-

Seth Adler: Andrew Cuomo's running towards cannabis.

Charlie B: Yeah, significant. It's electable, and that's the first time I think we've ever seen that in our country. We get asked that kinda questions all the time, especially being publicly traded, investors and roadshows and, tell us more, what do you think the outlook is nationally? And you'd start building the story locally, and at a state level, governors winning with a foundation rooted in pro cannabis is unique. And you see it at a federal level and a national level too with representative and senators that are, they're either getting elected on it or they're maintaining in keeping their seat by changing the way that they thought about cannabis and being more pro cannabis to stay in office so yeah, it's a change, that's for sure.

Seth Adler: A welcome change at that, I would imagine. Let's just make sure, let's just quickly go through your history so we understand how you got here. You're from Chicago?

Charlie B: Yes.

Seth Adler: North side or south side is what the outsiders ask.

Charlie B: I'll clarify. Lived here when I was young, moved away to Arizona when I was 9, so finished growing up in Arizona, did an undergrad in Arizona, came back here for law school in 2000, so I've been back her for 18 years.

Seth Adler: Cubs or White Sox is essentially what I was asking.

Charlie B: Cubs. I come from a split family though, so my dad is a giant Sox fan, the rest of the family's Cubs fans.

Seth Adler: Oh my goodness. Wow. This is a difficult thing.

Charlie B: And my dad has Berwyn roots; you didn't grow up in Berwyn and root for the Cubs.

Seth Adler: Okay, fair enough. But do you remember Leon Durham playing first base? You remember Ryne Sandberg playing second base, and Ron Cey playing third base.

Charlie B: Yeah, Lee Smith closing, yeah.

Seth Adler: There you go. That's the team right there. Manny Trillo I think was on that team, at least a little bit, playing shortstop. It was a good team.

Charlie B: It was a great team.

Seth Adler: Not good enough, though. Those Cubs teams-

Charlie B: They rarely are.

Seth Adler: Yeah. Well, but now here we are. It's a different-

Charlie B: We got one.

Seth Adler: Yeah, it's a different reality. You guys are not quite Red Sox fans because you said you still have the self-effacing humor of Cubs fans being like, we don't really win, and you almost have to remind yourself, oh my God, yeah they did win the World Series, whereas Red Sox fans now expect it, as do Yankees fans. I'm a Mets fan so that's why I have this point of view. We're not here to talk about that, and I don't think we're here to talk about anything else, so I'll ask you the three final questions. I'll tell you what they are. I'll ask you them in order.

Charlie B: Okay.

Seth Adler: What's most surprised you in cannabis? What's most surprised you in life? And, on the soundtrack of your life, one track, one song, that's gotta be on there.

Charlie B: Oh man.

Seth Adler: First thing's first, see, we are out of time, what's most surprised you about cannabis?

Charlie B: Most surprised me in cannabis is the speed in which the tide is changing in the U.S. If I think back to the fact that I first looked this because Illinois passed the law of August the 13, if you would've told me that five years later companies are publicly traded on exchanges and it's a multi-billion dollar industry, I don't know that I saw this happening this fast.

Seth Adler: Neither did I. Understanding that, how much of a difference to you think it will make in day-to-day operations in 2019 if the STATES Act passes versus if it doesn't, understanding that we are speaking to each other at the very beginning of the year because podcast line knows no time.

Charlie B: Operationally?

Seth Adler: Mm-hmm (affirmative)

Charlie B: I don't know that much changes operationally. I think access to capital changes dramatically.

Seth Adler: Okay, well, right. And internationally capital at that. Indeed.

Charlie B: It becomes more standardized. More traditional.

Seth Adler: I've been asking this a lot recently, we still have [inaudible 00:24:30] from the co-memos, but [inaudible 00:24:35] wasn't from treasury. It still there, it still says, hey big banks, you can bank cannabis.

Charlie B: I scream this from the rooftops.

Seth Adler: So, understanding you could see how the STATES Act wouldn't necessarily change anything nationally, if what the STATES Act says, which it does, is if you're state legal you're still state legal, you have nothing to do with federal. So, yes, it's off the controlled substances act so you could say it's not federally [inaudible 00:24:59] anymore.

Charlie B: [crosstalk 00:25:00] Well I think you see a banking fix as part of the STATES Act. I don't know what the final version, final form -

Seth Adler: [crosstalk 00:25:03] Of the STATES Act.

Charlie B: Yeah, I think STATES Act incorporates banking protection.

Seth Adler: It doesn't yet. Okay fine, what's most surprised you in life?

Charlie B: Most surprised me in life? That I would be a CEO of a multi-state, publicly traded, cannabis company.

Seth Adler: That gets back to, you're not this...

Charlie B: I just can't leave this topic.

Seth Adler: I mean, that makes sense based on what your answer was to, hey, the way that they set it up is what brought me in, you know? The fact that it was so, kind of, oh my God, this is not friendly. You're like, yes I love it. As a lawyer I guess, right?

Charlie B: Yeah.

Seth Adler: Are you a recovering-? How would you describe yourself?

Charlie B: I'm still licensed but -

Seth Adler: Still licensed, okay. That's fine.

Charlie B: But not practicing.

Seth Adler: Not practicing. And how does that make you feel?

Charlie B: Wonderful.

Seth Adler: Okay. On the soundtrack of your life, one track, one song that's gotta be on there.

Charlie B: It's a tough questions. I'm a big music fan so to narrow it down, right now I've gotten into Wings lately. It's funny to admit this, I can't believe I'm going to memorialize this but Band on the Run is probably one of my favorite jams right now so I'll go with that.

Seth Adler: So what's odd for our conversation is that I am re-newly into George Harrison and I've been listening to All Things Must Pass a lot, and Wah Wah would be my favorite song, but you can't listen to the album version, you gotta listen to the Concert for Bangladesh version because of the mix.

Charlie B: I'm gonna check that out.

Seth Adler: Yeah, Phil Spector can talk to you about that.

Charlie B: Wall of Sound.

Seth Adler: There ya go. Charlie -

Charlie B: Thank you very much, Seth.

Seth Adler: Thank you, we'll check in with you down the line.

Charlie B: Appreciate it.

Seth Adler: And there you have Charlie Bachtell, very much appreciate his time. Very much appreciate your time. Stay tuned.

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Cannabis Economy is a real-time history of legal cannabis. We chronicle how personal and industry histories have combined to provide our current reality.