‘There’s a bright future for the cannabis industry’: Flora Growth CEO

Luis Merchan, Flora Growth CEO, joins Yahoo Finance to discuss the outlook on the cannabis industry and the reason behind moving the company’s headquarters to Miami, Florida.

Video Transcript

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ALEXIS CHRISTOFOROUS: Miami's Mayor, Francis Suarez is looking to rebrand the city as a hub for tech and crypto companies but he's also rolling out the red carpet for the cannabis industry and it appears to be working. A growing number of cannabis producers and distributors are moving their headquarters to South Florida, including Flora Growth, which grows its cannabis product in Colombia.

Joining us now is Flora Growth's CEO, Luis Merchan. Luis, good to see you. Shortly after listing on the NASDAQ this year, I know that Flora announced plans to move the company's headquarters to Miami. What made you so attracted to that Florida city?

LUIS MERCHAN: Good afternoon, Alexis, and thank you for having me on the show. There were a number of factors that my team considered for the move to Miami, Florida. The first of which is the access to incredible diverse talent. But we also considered the favorable tax rate from a corporate standpoint, the access to the supply chain. As you know, Miami's port is one of the busiest in the world and in the United States. And of course, it's a great bridge in between our Latin American operations and North America.

KRISTIN MYERS: So I'm curious to know what you think the outlook for this space is. There's been so many cannabis companies, I should say, that have come out over the last couple of years and a lot of excitement around the cannabis space. But that hasn't always really borne out yet. I think the excitement outpaced some of the actual numbers and growth that we've actually seen. So what are you expecting for the rest of 2021 into 2022 and beyond?

LUIS MERCHAN: Well, if the numbers from 2020 are an indication of how fast the industry is going to grow, you will see that there is a bright future for the cannabis industry. In the United States alone, the cannabis industry grew to $17.5 billion, and that's just a legal portion of it up, 46.5% over last year. Now the total size of the industry including black market is about $100 billion. So clearly, the industry is growing at a very rapid pace. And that is because there's more consumers using cannabis, both recreational and medicinal, but there are also the users that exist today are utilizing more of it. And as you see, the regulations are continuing to decrease, not only in the United States, but worldwide, and that bodes well for the expansion of the cannabis industry.

ALEXIS CHRISTOFOROUS: I was taking a look at the stock. I know that Flora Growth debuted on the NASDAQ May 11th, so you've only been in the public market for a few weeks. But in terms of the way the market has been embracing the company, the stock is down about 20% from its IPO price. Do you think that investors just aren't understanding the Flora Growth story? Why do you think that the stock hasn't been able to gain traction here in the early going?

LUIS MERCHAN: Yeah, I think that's a consequence to the overall market trend. As you probably saw, Alexis, earlier in the year, there was a big rally in cannabis once there was a changing guard in terms of the government and the president. And there was a massive rally and that rally has succeeded for over the last couple of months. When you look at cannabis companies they have been down double digits over the last three months, but we're very confident that we're going to quickly overcome the deterioration of this stock. As we announced number one, our M&A strategy, which is incredibly robust.

Number two, our growth plan and expansion plans throughout the entire world. And then number three, the competitive advantages that we have, being the lowest production cost of organic cannabis in the world that is coming out of Colombia. And then second, our brand portfolio of products that are resonating exceptionally well with consumers.

KRISTIN MYERS: Luis, I'm wondering if you can talk a little bit about some of the national decriminalization movements that we are seeing. New York was one of the most recent states that decided to decriminalize marijuana, same with New Jersey, and some others. Do you think that any time soon we will see nationally marijuana becoming legalized? And if so, what kind of pressure do you think a company like yours is going to have as you mentioned from that black market, which is so huge and is able to undercut you guys on price?

LUIS MERCHAN: Well, that's a fantastic question. First, to answer the first portion of your question the MORE Act is being evaluated today, which will allow for the first step towards legalization, which would be number one, the decriminalization which will allow for all convictions with regards to marijuana being expunged or reviewed. And then number two, for states to be able to tax any of the revenues that are coming from the cannabis industry. That will immediately signal that we're taking a step in the right direction towards legalization.

Now once legalization happens, companies like mine actually have a tremendous competitive advantage because we are cultivating under the strictest standards in terms of GMP certification, GACP, which means we are manufacturing cannabis with the highest quality standards which are what consumers are going to look today. There is estimated about a $40 billion gap that will be generated overnight once legalization happens. And companies such as mine are the ones that are going to be able to take advantage of that gap.

ALEXIS CHRISTOFOROUS: All right. We're going to have to leave it there. Flora Growth CEO, Luis Merchan, thanks so much for being with us today.