Exclusive Interview with NorCal Cannabis Company Co-Founder and Co-CEO Jigar Patel and Co-Founder and Strategy Board Director Douglas Cortina
NorCal Cannabis Company is using a blend of modern technology and legacy roots to navigate the cannabis industry, with the ultimate goal of becoming a CPG flower powerhouse, according to Co-Founder and Co-CEO Jigar Patel. He and Douglas Cortina, another co-founder and the company’s Strategic Board Director, sat down with New Cannabis Ventures to talk about the California cannabis company’s market reach and growth plans.
Listen to the entire interview or read the summary below:
Cortina has a background in investment banking and real estate development. In 2014, he noticed how well cannabis dispensaries were able to monetize their space. But he determined it was too early to be a pure play real estate developer in the space. Instead, he decided to become an operator. He worked with a couple of attorneys and the city of San Francisco to launch a delivery-only dispensary.
Patel’s path to cannabis began differently. While he was at Purdue University, he met a group of people who introduced him to the California cannabis market. Around 2001, he knew that he wanted to be involved. He immersed himself in the cultural, legal and political landscape of California. Around the same time Cortina was launching his first dispensary project, Patel was working on launching one of the first entitled grow operations in the state. The two met and quickly realized the potential in teaming up. They, along with Blair Carter, started NorCal Cannabis Company in 2015.
The Business Model
The company’s business model has evolved over the years it has been in operation. At one point, it was facilitating more than 3,000 deliveries per day, according to Patel. But the team realized that the regulatory framework and market would not support that model in the long-term without hundreds of millions in capital. The company transitioned to where it is today.
NorCal Cannabis Company has 100,000 square feet of production space and 40,000 square feet of canopy. It produces 2,000 to 2,200 pounds per month, which fuel its branded products, including lolo, 1Lyfe and Panacea.
In 2022, the company was the number one indoor flower brand by units sold, according to Patel. It sold approximately one million eighths under its lolo brand over the course of the year.
Patel credits the brand’s success to its consistent quality and pricing. In 2021, wholesale prices were still high, but the team decided to pivot to a value product. It wanted to create a brand that resonated with consumers, and that shift to value has helped the company to remain competitive.
Navigating the California Market
NorCal Cannabis Company faces the same macro market dynamics as all cannabis companies: federal illegality, lack of SAFE Banking and lack of access to traditional capital. It also operates with the added challenges of the California market. The company is building a brand presence in a hyper-competitive environment characterized not only by other brands but also a thriving illicit market.
Patel noted that the legal market has made some progress in its ability to effectively compete with the illicit market while acknowledging that regulators have their work cut out for them. The illicit market has been a part of the state’s economy for a long time, and he believes it will be an issue regulators have to contend with over the next decade.
In the meantime, Patel contends that NorCal Cannabis Company is putting out a product that competes with the illicit market on both quality and price. He points out that new users are likely to look to retail outlets due to the ease of access, but long-time users are looking for the best product at the best price. The company is aiming to provide that product while operating as a regulated business. If companies can’t outcompete the illicit market, they don’t have staying power, according to Patel. The brand value the company is focused on building in the hyper-competitive California market could serve it well in the future. Patel anticipates that more markets will begin to look like California, Colorado and Oregon over time.
Growth Plans
The team hasn’t completely shut the door on the possibility of M&A, but, for now, NorCal Cannabis Company is focused on organic growth. It has significant runway ahead with its lolo brand. It is currently selling out of product while other operators have struggling to find buyers, according to Patel. The company is looking at expanding its footprint, retrofitting its facilities and driving further efficiency. It is also exploring SKU expansion. The company is aiming to reach double-digit market share in the flower category.
The company intends to expand beyond California, but it wants to ensure any expansion opportunities allow it to maintain its brand quality. When it comes to deciding which states to enter, the team is not afraid of competitive markets, according to Patel.
The NorCal Cannabis Company Team
Cortina and Patel both noted the strength of the company’s team. Patel highlighted Co-CEO David Hofflich and General Counsel Katie Rodrigues, as well as the company’s cultivation and production teams.
Funding
Over the past six to seven years, NorCal Cannabis has raised $40 million to $50 million in equity capital, according to Cortina. It has also raised some senior debt. The company’s first formal raise was its Series A in 2018. Its investor base is comprised of high-net-worth individuals and family offices. The company is generating positive cash flow from its operations. It may seek to raise opportunistic capital later in the year, but it has no immediate need to raise more capital.
NorCal Cannabis Company in 2023
The company’s revenue expectations are in line with last year’s numbers. Its top-line is in the $40 to $50 million range, according to Cortina. But a couple of projects that could come to fruition in Q2 or Q3 have the potential to drive more revenue.
Yield is the key driver of margin for the company, and it has plans to improve its yields. Right now, it is doing 95 to 100 grams of flower per square foot, not including total biomass, using older systems. Retrofit projects and new technology could increase yields 30 to 35 percent, according to Patel.
Macro-level challenges remain, and it is starting to become apparent which cannabis companies are sustainable and which aren’t, according to Cortina. NorCal Cannabis Company is positioning itself to be in the former group, and the team remains excited about the runway ahead.
To learn more, visit the NorCal Cannabis Company website. Listen to the entire interview:
