Benzinga - In January, Kyle Kazan, co-founder, chairman, and CEO of Glass House Brands (OTC: GLASF), one of the fastest-growing, vertically integrated cannabis companies in the U.S., posted on social media a video of himself asking President Joe Biden to pardon all 2700 cannabis federal prisoners. “Time’s up @POTUS! Nobody should be in prison for a plant. #CannabisClemencyNow,” Kazan posted.
In the video, Kazan asks for the release of Jose Valero Jr. “He was getting sentenced for less than £8 of cannabis in Georgia, and his family asked me if I'd speak at sentencing in federal court,” Kazan said.
In court, Kazan referred to the current ludicrous situation in which everybody in the courtroom could buy GH stocks and profit from cannabis while people still go to prison for cannabis.
“I told the judge what I do, and how much cannabis we grow. Over the next 12 months, we'll sell more than a quarter of million pounds of cannabis.”
“I told Ali [Valero] that I am not going to stop until he is out and fully pardoned. Everybody got upset about Brittney Griner and I'm happy she's home. That was Putin's prison. In Biden's prison, there's Ali, there's Parker Coleman, and 2700 others. And all they need is a pen. No negotiations with the Russians,” Kazan continued.
Photo: Kyle KazanIn an exclusive interview with Benzinga, Kazan discussed the video and addressed the U.S. Congress and The White House in terms of the urgent need for cannabis decriminalization, to stop hijackings and restore communities impacted by the war on drugs, and the role of multinational corporations in blocking the development of a thriving American hemp and cannabis industry.
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Full Stop To The War On Drugs: Free Market And Incentives
As a law enforcement agent, Kazan experienced first-hand the negative impact of the war on drugs. When he became a police officer, he didn't realize he was entering the drug war and found out that the main KPI to be a good police officer was to make felony arrests.“I was arresting addicts for hurting themselves. I learned we have a massive prison industrial complex, private prisons, and this a war on poor people. And who are the poor in this country? It's mainly black and brown people,” Kazan said.
Cannabis prisoners lose their political and civil rights. But that is not it. When they come out of jail, they are also deprived of social and economic rights by social stigma, making it impossible to find a job or decent housing. Hence, the importance of guaranteeing economic opportunities in this industry.
But, are there any ways that companies like GH can co-create brands or incubate or accelerate companies forged in the gray market? Kazan explained the situation and said he will sponsor Ali and Coleman and will provide them with housing for a year and a job.
“Once they are out of prison, they can't work in the cannabis industry because they are granted clemency. I will give them a job at one of my other companies. Hopefully, I can get them working at our cannabis company because they both know about it,” Kazan said and added that GH is in constant conversations with folks in the gray market that have great products.
However, he acknowledges that the passage from grey to legal could be possible if there were incentives for individuals to see a clear path to profit. “We have talked to many folks in the grey market and it's very difficult. You need somebody that wants to get into the legal market and a lot of people are doing better on the illicit side,” Kazan said.
“We are using our platform, basically the largest publicly traded cannabis company in the world to push the government to make it easier, not harder for these folks to come into the legal market,” Kazan explained. “I think it's better than the legal market encouraging those folks to come. We're pushing and supporting farmers' markets for the small growers up in northern California. Will it help Glasshouse? No. Is it the right thing to do in a free market? Absolutely.”
“We want to get people back in. In an interview with Glasshouse, we see cannabis convictions as a big positive. We put that on the top of the pile. We need to make sure those people can be employed,” Kazan said. “These people have felonies, they're not wanted in the workforce, and all that talent is not being harnessed. These are talented people.”
A Win-Win For Cannabis Prisoners And Consumers
As a board member of the Weldon Project from the Weldon Angelos charity, Kazan is working on the design of a new brand that will benefit people that were incarcerated for cannabis.Photo: Kyle Kazan And Weldon Angelos “I can only give you a teaser. We're lining up the best strains from some amazing strain hunters and it's going to be ‘fire’. This is a good way to right the wrongs of a person who was seriously harmed by the drug war. But most importantly, if you're a consumer, you're going to want to get your hands on this,” Kazan said. “That's as much as I can say, and stay tuned.”
The most successful cannabis business event in the world, the Benzinga Cannabis Capital Conference, returns to Miami for its 16th edition. Meet big cannabis executives like Kyle Kazan, all in one place.
This is the event where DEALS GET DONE, where money is raised, M&A starts, and companies meet investors and key partners. Join us at the Fontainebleau Miami Beach Hotel in Florida on April 11-12. Don’t miss out.
Secure your tickets now. Prices will surge very soon.
‘A Ferrari For Costs’
Part of the success of GH is driven by efficiency, sustainability, and common sense. The company has been able to improve margins in the storm.Ok, size matters in this case and the extension of its footprint is a comparative advantage vis-a-vis other companies with smaller scales. But, is it all about the size? Which were the strategic technical aspects?
For Kazan the key was to adapt the operations to their main business goal: “to grow the absolute best cannabis I could at the largest scale and the lowest price,” Kazan explained.
“Some growers want to use living soil to produce the absolute finest cannabis in the world, in 10,000 square feet. Their goals are different from mine,” Kazan said. “We started with a small farm, a relatively small farm, 150,000 square feet, and we bought a 335,000 square foot area, and then we bought the one that's 5.5 million,” Kazan said. “If you're on 10,000 square feet, it's very hard to compete on price. We start with, about 2 million square feet and turned into 6 million square feet.”
When it comes down to growing good cannabis, 1% more is 1% more yield. Based on the topography and climate, on the last farm we bought, we get 1% more yield. We'll get more light for sure, and the infrastructure was built for tomatoes, which is a 5% margin. Meaning you pay a buck to grow it. You sell it for a buck five. It was built as a Ferrari for cost,” Kazan said. “If you want to replicate this in California, you would have a lot of inefficiencies because you'd have a footprint spread out all over.”
“I would say we have some strategic advantages based on some of the purchases we made. Our cannabis will not be the craft kind of cannabis that you see at small farms. When you grow something at scale, you give up things that you find in a very small farm,” Kazan said.
“I am a fiduciary for a publicly traded company and they have to know that my number one goal is to make them money. That is my role, and ESG (Environmental, Social, and Governance), for example, is a big deal to us. It complements my fiduciary responsibility to make money,” Kazan said.
ESG Can Improve Your Margins
“How? If I'm just doing ESG for ESG's sake to virtue signal, then I'm not a fiduciary. I'm not doing ESG for ESG's sake. I'm an investor. I want my money to be led by people that are there to make more money on my money. So, for instance, a lot of cannabis in this country has grown in a warehouse-like environment. You create an artificial environment to recreate the sun and try to make a perfect world condition. That comes with environmental costs, big environmental costs,” Kazan continued.“For example, 10% of the entire electrical grid of the state of Massachusetts grid is used to grow cannabis. It is not an agricultural state. That means that if you're using cannabis, you are doing it at the peril of the environment. What do we do? We harness the sun through a greenhouse, so we control all the elements that we can, and we just let the sunshine in,” Kazan said.
“We use the environmental air to cool it, we do not use an air conditioning system, and we use well water, which we reuse. And by the way, we generate 14 megawatts of electricity on site. Solar doesn't get much better than that. We generate CO2, the plants love CO2. We do it in a way that makes our costs lower and does it in a good way with the environment,” Kazan said and explained how federal legalization will allow agricultural states and small farmers to grow cannabis efficiently, ship it across states, and make a profit of it.
“The feds need to open up and let all the farmers along the West Coast from California to Washington, just like wine. You don't buy Massachusetts wine, but you buy wine from the West Coast. Amazing wine because that's what we do,” Kazan said.
California Republic FTW
When federal legalization takes place companies with large scales and margins, could supply the entire country. But is GH planning on expanding, to the East Coast, right now the most promising market in the U.S.?“We think about interstate commerce but we don't need interstate commerce to do anything. We can do just fine living in the fourth-largest economy in the world. And we can do just fine living in the largest economy in the United States. And if we're prepared to go on indefinitely doing that,” Kazan said.
“There are not enough licenses or products. As far as pricing, it's still not a real open market. Quite frankly, we'll be able to grow our product at GH and sell it in other states for less than most of those large companies can grow it for themselves. So we'll have a structural advantage that way. And again, 1% more light, 1% more yield. I'm here in California and I have a scale,” Kazan said.
“The rest of those folks have indoor facilities in many states…. tell me what other agricultural product is grown indoors… the idea that this won't just normalize as every other industry is crazy. If you're thinking that, I think that's a dangerous place to be investors,” Kazan continued. “Think about alcohol, how does it work? Grapes are not grown everywhere, but wine it's shipped everywhere. 50% of all fruits and vegetables sold throughout the United States come from California. So we can get our agricultural products. There's already a supply chain out here.”
“We will be partners with MSOs and we'll be selling in their retail network because people are going to want good quality cannabis that doesn't destroy the environment from California. And we're not alone. There's amazing cannabis grown this way in Oregon and Washington,” Kazan said. “The pricing right now in the wholesale market is destructive. People are going out of business. And by the way, thank the federal government for this. It'd be almost like telling all the Iowa corn farmers that you can't sell corn outside of Iowa. What do you think would happen to all those farms? People are committing suicide over this and our federal government has a lot of blood on its hands.”
Dear Congress, The White House …
There's something that goes well with scale, and that is hemp. If the FDA moves forward with the CBD issue or is it when interstate commerce happens, where are GH plans for hemp? Kazan explained that the main obstacle to hemp in America is some “entrenched businesses are not anxious to see hemp come out.”“Very, very big industries. Cotton investors. Hemp is very strong and very cheaply made in an environmentally friendly way… Who does not want cannabis to be legalized? Why did we not get state banking? Why does Chuck Schumer keep blocking it? Big Pharma. It's the money. Follow the money,” Kazan said and argued that GH probably “won't play in hemp”.
“Our’s its probably not be the best strain that Patagonia is going to want to put inside of a jacket, and you probably can grow it cheaper than in areas where folks grow tobacco,” Kazan said.
“If you say, look, I think climate change is bullshit, you're welcome to an opinion, I am a libertarian, but why not buy cannabis or hemp or products that don't hurt the environment and it still gets to the same place? Isn't that not being an asshole? That is why I'm excited about hemp and because it's going to be a very large American industry, I want to do things here in America where we can,” Kazan said. “As Americans, we have to tell our politicians, cut the bullshit, and stop letting Big Pharma get in the way of legalization. The elected officials need to do what they promised to do when they got elected!”
“Chuck Schumer would not get SAFE banking passed in two years. I do not need SAFE banking. So you may ask yourself ‘why are you even speaking about it?’ Because it's the mom and pops that own a store getting murdered unnecessarily. Schumer just keeps coming up with different reasons, he's willing to take money from Big Pharma and come up with all kinds of reasons why he won't do it. And people are going to bury other human beings because of him and his inaction. He leads 199 other senators, and then we have 435 congresspeople. Shame on all of them,” Kazan said.
“It's disgusting, our money is absolutely not clean. We have the largest military-industrial complex in the history of human beings. We have a massive military-industrial complex, and they don't make decisions based on security. We're screwing around with what could become a nuclear war, and everybody is getting rich. There are a lot of great things we do here. I'm a patriotic American, but one of the reasons I'm quite ironic is because I can speak truth to power and we can have this conversation publicly and we can say, cut the bullshit to our leaders,” Kazan said.
“It's time to get those people out of prison. They're disenfranchised. They can't vote, can't get a job, can't get an apartment. They're fucked. The cartel's craziness in Mexico…. that's a direct result of the demand here. The drug war is money. It's just money,” Kazan continued. “You would not believe how many people in my family are telling me you're risking too much. Then why don't they arrest me? I have the largest greenhouse per cannabis in the history of humans. Why are you letting me do what I'm doing at this scale? If our politicians feel that they're going to get their money train cut off and voted out of office, they will do the right thing. That's the only thing that gets them to do. Call your representative's office and say, do this. They mark those things down. They don't want to lose their money. They have no risk, recessions won't hurt them,” concluded the CEO.
Cover Photo: Kyle Kazan and Jose Valero Jr. - All photos courtesy of Glass House Brands.
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