Multi-State Cannabis Operator C3 Industries Activates Assets, Grows Revenue – New Cannabis Ventures
Exclusive Interview with C3 Industries Co-Founder and CEO Ankur Rungta
C3 Industries currently operates in four states: Oregon, Michigan, Massachusetts and Missouri. The multi-state operator is currently in the midst of a development phase, bringing production facilities and retail stores online across its footprint. Co-Founder and CEO Ankur Rungta last checked in with New Cannabis Ventures in September 2021, and he reconnected in 2022 to talk about company assets, new markets and growing income.
Listen to the full interview or read the summary below:
C3 Industries has growing and processing operations, as well as a retail store in Oregon. The company maintains its position in the market, but its growth efforts are largely focused on its other three markets, according to Rungta.
When Rungta last spoke with New Cannabis Ventures, the company had an approximately 40,000 square foot indoor cultivation and processing facility in Michigan. C3 Industries is in the process of adding 90,000 square feet to this campus with completion scheduled for early July. The company also plans to roll out additional products, including edibles and beverages, in the Michigan market.
On the retail side of the business, C3 Industries has as many as eight stores in the state. It is in the process of building and opening six additional locations. Eventually, the company is aiming for 20 to 25 stores.
Late last year, the company brought its growing and processing facility in Massachusetts online. It began wholesale from this facility in recent weeks, according to Rungta. He sees an opportunity to fill a gap of high-quality, full-spectrum products in this market.
C3 Industries also has three stores in Boston. The first opened in Dorchester in March and the other two are expected to open in the third quarter.
The company now has its five stores open in Missouri. The stores are performing well and generating positive feedback from patients, according to Rungta. In recent months, the company has also brought its 15,000 square foot processing plant in St. Louis online. C3 Industries is also set to bring its 40,000 square foot cultivation facility in the state online.
C3 Industries has a vertical platform in the state, and there’s momentum behind an adult-use voting initiative. If this passes, the company will be able to be a major player in the Missouri market, according to Rungta.
So far, C3 Industries has largely grown its business through organic means and will continue to seek licenses. The company is building apps in Connecticut and looking to get involved in the New York market. New Jersey was initially on the company’s radar, but the C3 Industries team ultimately decided against applying to that market.
The company is also considering acquisition opportunities in markets like Ohio. The team hopes to strike a deal this year and enter the market, according to Rungta. C3 Industries prefers vertical integration, so cultivation and retail assets are attractive.
As C3 Industries goes through this phase of development, it is also strengthening its team. The company has hired a new CFO: Valay Shah. Shah has 12 years of private equity experience; he was recently a partner at Apollo Global Management. Rungta and Vishal Rungta, his brother and co-founder, have known Shah for a long time. Shah will play a key role in mergers and acquisitions and capital markets in his role as chief financial officer.
The company also recruited two new team members at the Vice President level. John Moyers has joined the team as Vice President of Marketing. He previously worked with Harvest Health & Recreation. Parks McMillan has joined the company as vice president of culture. He previously led cultivation at Colorado-based Seed & Smith.
The balance sheet of C3 Industries
NewLake Capital Partners provided $34 million in capital to fund the company’s Missouri cultivation project. Rungta is confident in C3 Industries’ balance sheet in terms of available cash and rental charges. It provides that the company has the capital it needs to execute its strategy. Rungta is also excited about the level of interest the company is seeing from different investors in the space. He expects the company to have the capital support it needs to execute mergers and acquisitions and other growth opportunities.
To date, much of the capital raised by the company has been through personal and direct relationships with high net worth individuals and family offices. The company has also attracted groups like Navy Capital, Welcan Capital and Madison Square Park Capital. He has sale-leaseback with NewLake, as well as a few other small sale-leasebacks with family offices. Additionally, a family office funded a small amount of senior debt, according to Rungta.
Going forward, the company will likely consider more institutional capital partnerships as it contemplates mergers and acquisitions and larger-scale development. REITs and debt and equity funds are all possibilities. The team is currently having broad conversations to determine how best to grow the business, according to Rungta.
A year of growth
C3 Industries was targeting $60 million to $70 million in revenue for 2021. The company was down to just under $60 million. The company’s revenue losses were largely related to delays in construction and equipment procurement related to the launch of new projects. But the company expects a significant ramp-up in 2022.
The company is targeting more than $100 million in revenue this year, according to Rungta. Assets brought online, as well as complementary acquisitions, could impact revenues on a pro forma basis. The team also expects a decent EBITDA margin.
While the delays are still a challenge, the team is excited about its growing footprint in Massachusetts and Missouri. C3 Industries is focused on upgrading its assets and leveraging its platform for cash flow and profitability. So far, much of the company’s cash flow has been generated in Oregon and Michigan, two very competitive markets. C3 Industries seeks to take what it has done in these competitive markets and bring it to new markets, including limited license states.
Construction and hiring are two persistent challenges, as well as the regulatory landscape. Rungta expects the next two years to determine which companies are able to become truly cash flow and EBITDA after tax and interest positive.
To learn more, visit the C3 Industries website. Listen to the full interview: