Cannabis regulatory software company Metrc is invested in helping governments and the cannabis industry establish a credible regulatory framework, according to COO Lewis Koski. And, the company currently has a leading market share in its arena. Koski spoke with New Cannabis Ventures about how the Metrc platform works and how the company is planning for future growth. The audio of the entire conversation is available at the end of this written summary.
Cannabis Regulatory Experience
Koski has about a decade of experience in the cannabis industry, beginning on the regulatory side. He worked with the Colorado Marijuana Enforcement Division and helped to build the state’s regulatory framework. When he later entered the private sector, he served as a consultant to cannabis companies, including Metrc. As Koski worked more and more the company, it made sense to join its leadership team.
In addition to Koski, the Metrc leadership team includes key members like CEO Jeff Wells, CTO Jesse Naranjo and Director of Support and Training Cherie Denholm. Wells founded Franwell, which is the company that designed Metrc. He has more than 30 years of experience in supply chain management and technology, according to Koski. Naranjo leads the continuing evolution of the Metrc platform as it adapts to changing policies across the country. Denholm has been a part of every deployment and training launch since the company’s inception.
Koski highlighted the strength of the company’s entire team, which has grown by more than 60 percent over the past year.
The Metrc Platform
The Metrc platform is a track and trace system that uses RFID-enabled tags. The system enables regulators to track cannabis from the time it is a plant all the way to the point of sale. Data gathered from the RFID tags at each stage of production (cultivation, manufacturing, distribution, packaging and sale) enables compliance monitoring throughout the entire cannabis supply chain.
The platform is supported by a fee-based structure. Governments integrate the Metrc platform into their regulatory frameworks and pay a low cost for hosting the data, according to Koski. Licensees pay a $40 monthly fee to access unlimited training and support. They also pay $0.45 per plant tag and $0.25 per packaging tag. The company’s system is scalable, which means smaller businesses with less inventory pay less. Cost increases proportionately as licensees increase their inventory and have more data in the Metrc system.
Footprint and Forming Relationships
Metrc operates in 15 states and Washington, D.C. It has a footprint on both coasts, with states like Alaska, Oregon, California, Maryland and Massachusetts. It also operates in states like Colorado, Nevada, Michigan, Missouri and Ohio. Metrc is currently in the process of implementation in Oklahoma and West Virginia.
The speed of deployment is one of Metrc’s key differentiators. The company is able to bring its system to a market and have it fully operational within two to six months, according to Koski. The company takes a focused, narrow approach to forming relationships. Its customer base is exclusively governments, and its product is a regulatory tool that allows governments to track compliance. It is that focused approach, instead of trying to offer a broad range of services, which has given Metrc such a competitive edge in its chosen niche, according to Koski.
Prior to the COVID-19 pandemic, face-to-face interaction was a significant part of Metrc’s approach to working with its customers. Of course, the pandemic necessitated a change. The company wanted to maintain business continuity while keeping its employees and customers safe. It shifted its training and support to a virtual model while ensuring the platform continues to play its key role in compliance and product accountability.
As the company looks to future growth, it will consider new markets coming online, which will need compliance support; states considering changing or onboarding a track and trace system; and expanding the functionality of its system for current customers.
While M&A could be an option, Metrc is currently focusing on organic growth. Acquiring another company would include the challenge of integrating software developed by an entirely different team. The company is currently well-positioned to efficiently build many of the capabilities it could potentially acquire, according to Koski.
Funding and Strategic Relationships
The company is not currently holding any discussions about further funding. It is focused on maximizing its current funds to continue expanding its track and track system across the country.
As the company considers future growth, its team is carefully tracking potential policy changes at the state and federal levels. As more states come online, existing markets add licensees and the potential for federal policy shifts grows, the demand for regulated products and regulatory systems will expand. Metrc is poised to take advantage of those opportunities, and it will continue to reinvest in its system in order to increase its value to customers.