Exclusive Interview With Nick Kovacevich, CEO Of KushCo Holdings
By Alex Rogers, Founder of the International Cannabis Business Conference
In the cannabis industry, you will be hard-pressed to find a company that is as experienced and respected as KushCo Holdings, Inc.
KushCo (OTCQX: KSHB) is a publicly-traded company that serves as the parent company to a diverse group of business units that are transformative leaders in the cannabis space. KushCo brands include:
- Kush Supply Co., the nation’s largest distributor of vaporizer products, packaging, supplies, and accessories
- Kush Energy, which provides ultra-pure hydrocarbon gases and solvents to the cannabis industry
- The Hybrid Creative, a premier creative design agency for cannabis brands
- Koleto Innovations, the research and development arm of KushCo that aims to drive intellectual property development and acquisitions in the cannabis space
The parent company was originally founded in 2010, and has now sold more than 1 billion units and regularly services more than 6,000 legally operating cannabis dispensaries, cultivators, and producers across North America, South America, and Europe.
I recently linked up with Nick Kovacevich, CEO of KushCo Holdings, to discuss his company and some of the major issues and trends from the cannabis space:
AR: Your company is almost a decade old. What has been the highlight for the company during that time?
NK: The biggest highlight for us has been being a part of the growth and transformation of the industry in such a short period of time. In the four years that we have been a public company, we have more than doubled our revenue every single fiscal year, generating $149 million in fiscal 2019. We’re talking about an industry that is “emerging from the shadows” and to be able to be a part of it from the very early days is truly an impressive accomplishment. Today, KushCo is one of the largest companies in the industry in terms of quarterly revenue and is proud to boast a deep network of more than 6,000 customers who constantly rely on us to power their brands, their products, and their supply chains.
AR: Cannabis policy and industry regulations have evolved a lot since your company started. What change/evolution has been the biggest surprise in your opinion, and why?
NK: Perhaps the biggest surprise has been how slowly many of the states have been rolling out their legal adult rec use programs. There simply are not enough licenses to service the significant demand in most states, nor is there the proper enforcement to crack down on the black market. That being said, we have to keep in mind that no industry has really taken off without its share of challenges. So, these issues are not so much of a surprise as they are challenges that we have to work through to grow and thrive as an industry.
AR: What is the biggest hurdle/issue facing the cannabis space today?
NK: The biggest hurdle today is the lack of access to capital for many industry participants, as well as a resilient and established black market that makes it challenging for the industry to thrive. We do believe these issues will correct themselves over time, but it’s certainly not happening at the accelerated timelines that a lot of people initially thought it would.
AR: Why is proper cannabis packaging important for the regulated cannabis space?
NK: Packaging in the cannabis industry can mean the difference between the success or failure of a brand. Not only do brands have to be extremely cognizant of making sure their packaging is compliant with each of the different state and federal regulations, but they also have to balance this compliance mindset with an eye toward creativity and adopting packaging that is unique, proprietary, and able to attract consumers. Having been in this industry for nearly 10 years, we’ve seen nearly every form of state and provincial regulation as it relates to packaging, and have been working with our customers to help them navigate this constantly evolving regulatory landscape. Our innovation arm Koleto has developed a reputation as a trusted provider of hyper custom packaging that many of our customers, especially the larger ones, are migrating toward to differentiate their brands.
AR: What common issues do entrepreneurs/companies experience when it comes to cannabis packaging, and how can they mitigate those issues?
NK: Some of the issues cannabis entrepreneurs and companies experience when it comes to packaging is underestimating the difficulties of managing their supply chain and being more than just a packaging provider. We recognized early on that providing child-resistant packaging was just not going to be enough for our customers, which is why through organic and inorganic initiatives, we have significantly expanded the business to include a wide variety of complementary products and services, including vape hardware, energy and natural products, papers & supplies, retail services, anti-counterfeiting and authentication labels, and hemp trading.
AR: How do you see the cannabis space changing over the course of the next 5 years?
NK: It’s hard to say where the industry will be in the next five years, given how quickly and unpredictably the industry is evolving, but we expect to see some sort of broader legalization and/or de-scheduling to occur, including the potential for federal legalization or the passage of something like the STATES Act, which will significantly expand the adult rec use market. We also expect for there to be more consolidation as companies look to scale and drive efficiencies in their business, while working to get to or expand profitability. In addition, we expect capital sources to gradually open up, and we expect the industry to look more and more like a CPG industry, with the successful brands being the ones that are most recognizable, have the strongest value propositions and customer appeal, and have the deep balance sheet and access to capital to scale.
AR: What tips/advice would you give an aspiring cannabis entrepreneur?
NK: Be resilient, fearless, and willing to take initiative and adapt. This is a dynamic industry that requires thinking on your feet and constantly coming up with creative solutions to difficult problems. We started out with a simple child-resistant pop top bottle but have prioritized a deep commitment to our customers to evolve with the industry and build the sector’s most valuable ecosystem of products, services, and clients.
AR: What exciting things does KushCo Holdings have planned in the near future?
NK: What excites us most is that we’re constantly innovating and working to drive value for our customers, partners, and shareholders. Our core business continues to grow nicely and is positioned to expand further with new products and new markets coming online. Supplementing that is the launch of some of our newer initiatives to expand our ecosystem, strengthen our competitive moat, and drive higher margins. These initiatives include the recent launch of our Retail Services business and our hemp trading business, which along with our packaging, energy and natural products, complete our CBD ecosystem from “seed to sale.” Further, we have an elevated focus on getting to adjusted EBITDA profitability and being in a position to control our own destiny. We believe that with the growth in our current business, expansion of newer and higher-margin services, as well as our operational restructuring and cost-cutting initiatives, that we have a clear pathway to achieve this objective.
Alex Rogers is the Owner and CEO at International Conferences Group LLC, the parent company of the International Cannabis Business Conference series. International Cannabis Business Conference events are the premier cannabis events for entrepreneurs across the planet. With events in Canada, the United States, Switzerland, Spain, and Germany the International Cannabis Business Conference is where the world meets cannabis. Find out more at InternationalCBC.com and on LinkedIn, Twitter, Facebook, YouTube, and Instagram.