How Kings Garden Rose to the Top of the Cannabis Industry
As with any highly popular industry, the cannabis industry took the world by storm and created a high stakes opportunity that merged changing laws, a complicated black market, and legitimate entrepreneurs who looked to capture an explosive opportunity.
In California specifically, the industry has flourished for decades, as the state was at the forefront of both medicinal legal approval in 1996 and recreational approval in 2016 with Proposition 64. Simply put, the California cannabis market is the most competitive, promising, and renowned market in the world.
At the forefront of the cannabis market in California are entrepreneurs Michael King, Co-Founder, CEO and Chairman of Kings Garden, and Co-Founder and COO, Charlie Kieley. Kings Garden is one of the largest indoor cannabis producers in the state and have developed a strong brand presence on Instagram and in the market . With a dedicated focus on quality and working with state legislators, Kings Garden scaled into 250,000 sq ft of indoor operations consisting of indoor cultivation (3,400 flowering lights), manufacturing, processing, and distribution.
The company is currently producing around 40,000lbs of indoor flower to support their flower line consisting of 1/8th oz jars, 1/4 oz jars, pre-rolls, and grams. In addition to the premium flower line, Kings Garden has an ultra-successful connoisseur concentrate line consisting of shatter, budder, sugar, diamonds, and vape pens. In late 2019, Kings Garden launched their medical product line in a partnership with Avicanna to produce the highest quality medical products consisting of capsules, deep tissue gel, localized cream, tincture and spray. Additionally, a transdermal time release patch will be hitting the market at the end of Q2, 2020.
For those not familiar with the industry, an operation of this scale requires not only deep knowledge, but also financial resources and operational excellence. At this industrial scale, margins for error need to be extremely low, if non-existent. To paint the picture from a financial perspective, in 2019 Kings Garden hit $45 million in revenue (up 50% from 2018) with an EBITDA of over 20%. This is nearly three times higher than the average of the top five publicly traded cannabis companies in the world. Kings Garden is on its way to produce $75 million plus in 2020, and close to $100 million in 2021.
The Q&A below was shared by Michael King and Charlie Kieley, who gave more insight into their start in the industry as well as their success growing Kings Garden:
What was your inspiration behind Kings Garden? How did it all start?
It all started in 2014 with an idea two people had to do something great together in a state and in an industry that operated under some crazy laws and even crazier regulations. This was a time before public companies, public capital, $300+ million raises and everything else we see in the news today. Regardless of all that, the approach was very simple, if we do anything together, we have to do it right and we have to do it big. However, before we do anything, we have to build a model and a foundation which works, can be replicated, and expanded. At the time the goal was to start slow and to build up to a 100-light facility which can generate roughly $2mm gross per year. We knew that if we could build a successful 100-light operation, we could scale it. And so, it began.
After working with the local government and helping them with the licensing process, we were able to acquire one of the first licenses the city made available in 2015. Our first grow room was 16 lights in a 10,000 sq ft facility. We now operate 3,400 lights producing 40,000 pounds of cannabis per year in approximately 250,000 sq ft.
The first project launched 5 years ago to date, which we self-funded along with our partner Ivan Talan, VP of Marketing. Once we realized a working and a profitable model, we began expansion very quickly by locking down opportunities, funding them very quickly and getting operational as fast as possible. Speed was always the number one priority for us because we wanted to get ahead of our competition. We currently operate 12 buildings ranging from 9,000 – 70,000 sq ft, all of which are located in the Coachella Valley – Palm Springs and Cathedral City. The location was always by design. The goal was to have all of our facilities in a concentrated area as opposed to all over the state, thus providing us with operational efficiencies and one of the reasons for a great EBIDTA.
We have been very fortunate to have a lot of great investors who believed in the industry, in the company, and more importantly, who believed in us as people. We owe our investors everything because it was very difficult to raise money at a time of uncertainty and outdated regulations. That on top of a “non-for profit” and “medical” environment, it required complete trust and a vision to understand what a “for profit” business would be like if it actually happens. We raised funds on “per project” basis as the opportunities became available and the raises were anywhere between $2 and $12mm. In all, we were successful in raising $55mm over 3 years – all private through friends and family, and have been able to build Kings Garden together.
2. Given your experience in real estate and finance, do you have an advantage over competition that might lack “real world” business experience?
I don’t know if we have an “advantage” over others, I just know what we have. We never concerned ourselves with what anyone else is doing, why or how they are doing it. We knew what we had to and still have to do. A horse has blinders on in a race to stay focused and not to be distracted by anyone. Our approach is very similar. Of course, our respective backgrounds gave us a perfect partnership in that Charlie was able to bring an extensive cannabis operations expertise which he has been perfecting over the last 16 years.
With a degree in ornamental horticulture, Charlie’s experience included outdoor, greenhouse, indoor and retail operations. Michael brought his experience on Wall Street, specializing in finance, investments, private equity, real estate, and construction. Together it was a perfect partnership where we could rely on each other’s strengths in order to accomplish our goals. To this day, we operate very similarly – 95% of everything that goes on we are both involved in and make decisions on together, the other 5% we handle ourselves and trust each other to make the right decision.
3. What is the biggest challenge of scaling a cannabis operation as big as Kings Garden?
The biggest challenge has been not to lose sight of the details, to always strive for perfection, and to have the same standards if not higher at this scale. When it was one room or one facility with 1 employee it was easy. When you’re pushing 200 employees and an HR, compliance, and accounting departments, in addition to all the other stuff going, it’s easy to lose sight or stop paying attention to the little things. We just have to stay on top of all aspects of the operation and continue to settle for nothing but operational excellence with drive and determination. We are extremely involved in everything that happens in the business on daily basis and must continue to do so in order to be successful.
4. If you could change one thing about the industry, what would it be?
Nothing! We are where we are because of where the industry came from and because of where its going. The more challenges that get thrown at us the more of an opportunity we have to separate ourselves from the competition. Our approach to running our company is warfare. It’s not supposed to be easy and you’re not supposed to know what’s coming. You have to be prepared at all times for everything and anything that can happen. You have to be able to react instantly, adjust, and continue killing it.
If the industry didn’t have its challenges, we wouldn’t be here. We are excited about the new opportunities with the banking act and possible legalization but at the same time we are laser focused on stay ahead of everything that’s taking place now, and making sure that we are in the best position to take advantage of whatever happens next. We love challenges and difficulties. It keeps your mind sharp and allows you to stay focused.
5. What are your main goals within the next five years?
After 5 years of non-stop construction and expansion, we are 100% operational with all of the capital being reinvested back into the brand. We are laser focused on growing our company and our brand both in and outside of the state. We are currently in discussions reviewing both licensing and management opportunities in key states outside of California. We are very strategic in selecting the right relationships, right opportunities, and will continue to be methodical in everything we do.
We cannot forget what got us here and we can never get ahead of ourselves. As long as we are true to our principals and each other, the company will continue to be a leader in the cannabis industry in the future, whatever that future may bring. With most of the foundational work behind us, we are looking forward to building the company and the brand in the years to come. Kings Garden will continue to lead by example in everything we do.