When Illinois legalized medical cannabis in 2013, Charlie Bachtell felt like he’d seen it all before.

As general counsel for Guaranteed Rate, a Chicago-based mortgage company, Bachtell witnessed the rise — and subsequent collapse — of a residential lending market that would face hyper-regulation after years of unchecked operation.

“When I saw what Illinois was doing with cannabis and creating a highly regulated, compliance-focused cannabis industry in the state, it resonated with me — almost like I'd read the book before,” he says. “I kind of knew what this industry was going to go through and what it was like to be a part of it.”

Bachtell says Guaranteed Rate thrived in post-regulation mortgage banking and helped design how the industry would look as it emerged from financial disrepair. With that experience, and a chance to enter on the ground floor of the legal cannabis industry in Illinois, Bachtell saw the opportunity to contribute to its legitimization.

“Not only was it a fascinating development that could create these incredible opportunities to make some cultural impacts in the medical field — in the way that we thought about healthcare and wellness — and in criminal justice reform, but it’s also an incredible emerging industry that has been around for 5,000 years and is still federally illegal,” he says. “The industry needed somebody that could help normalize it and professionalize it.”

After creating a business plan “that wrote itself” in 72 hours, Bachtell and co-founders launched Cresco Labs, a vertically-integrated cannabis company that takes a consumer packaged goods (CPG) approach to developing brands and products.

Through a public offering on the Canadian Securities Exchange in 2018, full legalization in Illinois in 2020, and ongoing mergers and acquisitions, Cresco Labs continues to expand its footprint as one of the largest multi-state operators across the U.S.

Business overview

Cresco Labs operates 13 cultivation centers in eight states, with three in Joliet, Kankakee and Lincoln, IL. Bachtell says vertical integration was a cornerstone of Cresco Labs’ mission from its founding, since the company aimed to build products and brands on the promise of quality.

“We were so intensely focused on making sure that we did this right because we were going to set the standard, and if the industry was going to grow, it needed somebody to set the bar high for how you needed to execute this,” he says. “That meant making sure there weren't any risks of shenanigans. The idea of total vertical integration and one chain of command from seed to the consumer was the ideal scenario for us.”

Obtaining retail space in ideal locations posed a challenge during the early days, Bachtell says. In Chicago, it was difficult to find places that weren’t too close to schools, nurseries, and licensed and unlicensed daycare centers, so when initial applications came due, Cresco Labs opted to focus on cultivation first, with retail to follow.

“We wanted to make products,” Bachtell says. “We wanted to create brands. We wanted to control distribution. We figured we could always get into retail in the future, and that's what we've done.”

Cresco Labs won its first retail license in Pennsylvania in 2017, and the company’s retail presence has since ballooned to 47 licenses in seven states, pending acquisition closings. In August and September alone, Cresco Labs announced the acquisition of the Blair Wellness Center in Maryland, three Cultivate dispensaries in Massachusetts, and three Cure dispensaries in Pennsylvania.

Bachtell says merger and acquisition plays a role in how Cresco builds and strengthens its geographic position, which includes 10 states: Arizona, California, Florida, Illinois, Maryland, Massachusetts, Michigan, New York, Ohio, and Pennsylvania. The company focuses on population density — it’s in the top seven most-populated states with cannabis programs — and appropriate regulations in each state.

But navigating state-by-state regulations, along with managing independent supply chains, hasn’t been easy, Bachtell says, but doing so has allowed it to take on a leadership role in each market.

“We get the opportunity to be a true leader in the space,” he says. “We work as partners with regulators and legislators in those states to make sure that they have the resources. They have a resource in us that is thinking about things in a more global, potentially altruistic way, as opposed to just a pure profit-driven approach. We know that we can't be successful unless the programs are successful.”

In 2018, Cresco became one of more than 700 U.S. cannabis entities listed on the Canadian Securities Exchange. Bachtell pointed to the paradox created by the countries’ different stances on cannabis: U.S. cannabis companies can list in Canada and can’t list at home, but Canadian cannabis companies can list in the U.S.

“(It’s) not how we would have drawn it up, but when you're in growth mode, you need to build a plane while flying it, and you need the capital in order to build that infrastructure,” he says. “Capital is incredibly important in any business...We really look forward to the day, which I don't think is too far off, that we will be able to be listed here in the United States.”

Building brands

Though Illinois’ medical cannabis regulations may have seemed stringent when they were enacted in 2013, requiring third-party testing and child-resistant packaging at the outset prompted Cresco Labs to treat cannabis like other regulated CPG products — and build a comprehensive house of brands.

“When you can control the vessel, when you control the package that the product gets sold in — that's your Coca-Cola, that's your Budweiser, that's your Tylenol — however, you want to think about it,” Bachtell says. “That's the opportunity to create brands, and that jumped out at us on Day One, that this was a consumer packaged good.”

Cresco Labs’ product portfolio includes seven brands: Cresco, FloraCal Farms, High Supply, and Remedi, and in the edibles space, Good News, Mindy’s, and Wonder Wellness.

Bachtell says tapping into the edibles space allows Cresco Labs to serve a variety of consumers, from purely medical patients and connoisseurs to cannabis newcomers who may not seek an inhalable experience.

“Traditionally, it was sort of an entry point,” he says. “It can be concerning because the onset time tends to be the longest with edibles. The opportunity for accidental overconsumption is real, but it's much more palatable for somebody who's not used to smoking anything, let alone cannabis.”

In 2016, Cresco Labs partnered with James Beard Award-winning chef Mindy Segal, founder of Chicago’s Mindy’s Bakery, to launch gummies and chocolate bars under the Mindy’s Edibles brand. Cresco Labs relaunched Mindy’s THC gummies in December 2019 with culinary flavors inspired by fresh produce found at California farmer’s markets. The flavors include Glazed Clementine Orange, Cool Kiwi Lime, Lush Black Cherry, Freshly Picked Berries, Honey Sweet Melon, and Botanical White Grapefruit.

Cresco Labs also relaunched Mindy’s THC chocolate bars in December 2020, making them available to Illinois recreational consumers for the first time. The company tweaked the bars’ shape and per-piece dosage, offering them in three permanent varieties – Milk Chocolate & Peanut Brittle, Caramelized Chocolate Marshmallow Graham, and Dark Chocolate Almond Toffee – and one limited-edition variety, Dark Chocolate Peppermint Bark.

In September 2020, Cresco Labs introduced the Good News brand, designed to highlight the social occasions in which cannabis can be used responsibly. In addition to pre-rolls and vape pens, Good News features gummies for the following occasions: Me Time (Indica), Brunch (Hybrid), Friyay (Sativa) and Vegas (Sativa).

Cresco Labs expanded the brand in June with the launch of Counting Sheep, Black Cherry gummies formulated with cannabinol (CBN) and Indica THC to promote restful sleep. It also launched Day Off, a hybrid, peach-flavored gummy available only in California. The Good News brand also releases limited-time-only seasonal or holiday offerings in select markets, such as Pride and Halloween varieties.

With the goal of serving consumers who are accepting of cannabis but haven’t entered the category, Cresco Labs introduced the Wonder Wellness brand in December 2020. The brand premiered with low-dose Wonder Minis, 3-mg hard sweets with easy-to-understand use occasions:

●     Laugh: 3 mg THC in a Tangerine flavor

●     Relax: 1 mg THC, 2 mg CBD in a Blueberry flavor

●     Sleep: 2 mg THC, 1 mg CBD in a Plum flavor

Cory Rothschild, Cresco’s senior VP of brand marketing, says the needs of new cannabis consumers look different from long-term users.

“They might feel intimidated or worry that only an expert can enter a category filled with intimidating forms, potencies, and packaging,” he says. “It was clear to our company that we needed a brand that would speak directly to this group and offer products that would meet their preferences and ease their hesitations. We’ve developed Wonder to be a trusted and guided source for education so that new consumers can start their cannabis journey with confidence.”

Cresco Labs added gummies to the Wonder Wellness lineup in April. They’re also available in three varieties:

●     Laugh: 5 mg THC with turmeric in a Tangerine flavor

●     Relax: 5 mg THC, 10 mg CBD with lemon balm in a Blueberry flavor

●     Focus: 5 mg THC, 5 mg CBG with ginger in a Prickly Pear flavor

No matter the brand, David Sanchez, VP of manufacturing, notes the importance of dialing in the cannabis oil to align with the product and brand’s purpose.

“When we're thinking about something like an edible, we want to make sure that we fine-tune where that onset time is, and that’s in respect to the oil that we pair up with it,” he says. “(There are) a couple different ways how we develop those things, but it usually is trying to fit a need that we think the product should have, or any that the market is telling us they have.”

2020 and beyond

In 2019, Illinois became the first state in the U.S. to legalize adult-use cannabis through an act of the state legislature. The law took effect Jan. 1, 2020, and though Illinois has had nearly two years of full legalization, it doesn’t quite feel like it, Bachtell says.

“In some respects, it feels like 10 (years), and in another it feels like it was yesterday,” he says. “I think the performance of the adult-use market as it exists is living up to expectations. This is a robust market. It had the opportunity to be so, and the operators here had the track record and the experience to make it so. But, that's not always the case. This is difficult. It’s tough to capitalize. It's tough to operate. It’s tough to execute.”

The onset of the COVID-19 pandemic just two months after the law took effect complicated things. Cresco Labs developed three separate strategies for its corporate headquarters, retail stores, and manufacturing facilities. In addition to leaning on retail cleanliness controls and good manufacturing practices (GMPs), Sanchez says the company rolled out the Cresco Cares program to support employees dealing with COVID-19 concerns.

“We are taking every safety precaution that we can to ensure the safety of our employees,” he says. “One of the challenges is making sure that folks feel comfortable at work. We're asking a lot of them to make sure that we keep products in stock because our customers and our patients are looking for those products and are counting on us. We feel like we have to deliver on that.”

Despite the challenges COVID-19 presented, it proved to be a boon for the cannabis industry, as states recognized manufacturers and retailers as essential businesses. Demand also soared as consumers sought methods to cope with pandemic-related uncertainty and loss.

“It just increased the opportunities for (consumers) to participate if they were already in it, and then if they weren't already a consumer or a participant in the market, I think the stress and the pressure of COVID in general opened up the opportunity for some new consumers,” Bachtell says.

Last year also shined a light on equity and justice concerns across all realms, including those associated with cannabis. To address the parallel side of industry — and help those who have been harmed by the nation’s drug policies — Cresco Labs’ SEED initiative is working to offer pathways into the cannabis industry through restorative justice, community business incubation, and education and workforce development.

“I have responsibilities as a CEO of a publicly traded company to make sure that I'm furthering all my stakeholders ... but it's incredibly cool to be part of an industry that rewards faithfulness and these sorts of responsible efforts that do well by doing good,” Bachtell says. “This industry has the opportunity to do that more so than any industry I've ever seen.”

In addition to facilitating record expungements and initiating workforce development efforts, Cresco Labs also assists people impacted by drug laws who want to own and operate their own cannabis businesses. The company has helped roughly 50 different groups navigate the Illinois application process and will soon help them learn the tools to successfully run a cannabis operation.

“The benefit of making sure this is a responsible industry that is respected (is creating) the most robust industry that we can, and then that benefits Cresco Labs even from just a pure shareholder perspective of value,” Bachtell says. “That’s the kind of industry that this is. You need people, you need organizations to think that way in order for it to achieve its potential.”

As for the industry achieving its full potential, Bachtell says he’s looking forward to federal legalization and the opportunities it will bring.

“When that happens, you're going to see cannabis accelerate from a $20 billion industry to the $100 billion-plus industry that everybody knows it can be,” he says.