Rising High: Exclusive talk with MSO ETHOS Cannabis

In this edition of “Rising High,” The Fly conducted an exclusive interview with Gibran Washington, Chief Executive Officer of ETHOS Cannabis, a multi-state vertically integrated cannabis operator. Here are some highlights:

HIGH-QUALITY PRODUCT: ETHOS, founded in 2020, is a Philadelphia-based vertically integrated cannabis company with 12 retail locations across Pennsylvania, Ohio and Massachusetts. The company aims to help consumers live their best lives through informed access to cannabis and offers a family of brands that adheres to that vision, including Natural Selections, Eleven, Headliners and Meigs County Grown. “What we try to do as an organization is consistently bring high-quality product and over the last year, we have been doing a better job of sourcing better genetics to complement our overall seed library,” Washington said. “Quality has always been a number one priority.”

He added the company will also be leaning more into its educational elements this year. “We fully understand that making cannabis an appropriate place in society is going to take some effort from us as well as the general public,” the CEO said. “We want to make sure we do a better job of education, and we have a lot more research-based product lines coming out this year. We’re trying to stay ahead of the curve, but we are also leaning back into our core fundamental property, which is quality. We believe our quality is better than any other cannabis company in the country because of our craft mentality. “

As part of those efforts, Pennsylvania State Senator Sharif Street announced the launch of Season 2 of the “Planting Seeds” podcast in December with Washington as a new co-host. “Anytime that I can be a part of a conversation where we are giving people who may not have a voice an opportunity to talk on a larger platform, I always want to be a part of that,” he said. “The basis of Senator Sharif’s podcast is really getting a diverse viewpoint of what needs to happen in the cannabis space and what is happening in the cannabis space.”

MARKETS: ETHOS has operations in Pennsylvania, Massachusetts and Ohio and the company hopes adult-use will come to fruition in Pennsylvania this year, the CEO said. “At some point during the fiscal year 2025, if not by 2026,” he said. “We are all hoping that we are going to move towards the recreational space, but as an organization, whether that is a local legalization or it’s a national legalization effort, we act as though the rules that we’re in right now don’t change. We have been operating the business as if none of those things change, but we are actively behind the scenes trying to get some form of recreational cannabis.”

When looking at the Massachusetts market, Washington noted it is a concerning space in the industry with the number of businesses that shutter every day on both the grow and retail side. “The price of cannabis continues to go down, so it’s a bootstrap mentality when you look at Massachusetts in trying to weather the storm,” he said. “It’s certainly one of the tougher markets on the East Coast. It bares resemblance to a California or Oregon scenario with the price of cannabis and the amount of providers. We have to figure out a better path forward where everyone has a foothold, and everyone has the ability to thrive.”

The CEO said Ohio took a different approach from Massachusetts capping the amount of canopy and retail spaces in the state. “As the Ohio market is taking off, it has been a nice ride because there is not an overabundance of product or retail outlets to drive price down,” he said.

PRODUCT CATEGORIES: According to research firms within the space, flower still holds the biggest share of sales of any cannabis product category, followed by vape. “Flower and vapes are the things that people are most introduced to first when we talk about cannabis,” Washington said. “Flower being the traditional methodology and vapes over the last 20 years or so have become more of a staple of the cannabis industry.”

ETHOS is also seeing ‘exponential’ growth in the beverage category as it continues to be a good entry point for people that are new to cannabis, he stated. “And then obviously the edible category, with a lot of the gummies and things of that nature, is definitely growing,” Washington said, adding, “One category that we have started looking towards ourselves is sexual wellness and women’s health. We are looking into that heavily this year and we’re trying to come up with some formulations.”

When asked about consumer purchasing habits, he said 2024 has been a value play across the industry and he expects that to continue. “We are the only commodity in the last five years that has been going down in price every year,” the CEO said. “We expect to continue to see the value play over the short-term and the long-term, obviously the value play won’t allow a lot of us to stay in the business. We are hoping that the demand for premium, high-quality, hand-trim product comes back, but as we look at 2025, we expect more of the same trend of a push towards value, price and proximity.”

SCHEDULING: The U.S. Drug Enforcement Administration announced that it would be holding a hearing on the proposal to reschedule cannabis to Schedule III under the Controlled Substances Act on January 21 but has since delayed the hearing. “For the last five or six years, we have all known that this was something that we felt that whether you are a republican or a democrat, you understood the medical efficacy of cannabis,” Washington said. “We believe that it is something that should be available before you get to pharmaceuticals, alcohol or tobacco. We fully think that once they get through all the dog and pony show and all the posturing, that they will do what they said they were going to do.”

He added with the incoming Trump Administration talking about making America healthy again, cannabis offers a good pathway to have that conversation. “We’re optimistic that a lot of this is just for show with the new director, the new administration and the new DEA coming in,” the CEO said. “We do know that RFK is a proponent of cannabis and Trump spoke for recreational cannabis in Florida right before the election. We’re optimistic as we have been optimistic for every administration that says something positive about cannabis. We’ll just wait and see if we’re able to get some real action on the table. There are a lot of things on the administration’s plate, and we just hope that cannabis doesn’t fall off.”

Rescheduling would eliminate 280E, he noted, which is a huge financial obstacle for cannabis companies in the country. “For us specifically as ETHOS, rescheduling gives us the opportunity to really unleash ourselves in terms of research,” Washington said. “We’ll be able to dive deeper into really understanding the cannabis plant and the different minor cannabinoids that exist within it.”

He added the recent U.S. Surgeon General report noting that the use of alcohol can increase the risk of cancer may give the cannabis industry an advantage in achieving rescheduling. “The substance that you do have unscheduled is the third leading cause of cancer,” the CEO said. “It is something that we really must have a conversation about because if you feel that alcohol and happy hour is okay, why is cannabis not? It is a much healthier option and there are no reports that cannabis causes cancer.”

ELECTION RESULTS: In this year’s U.S. election, Florida, North Dakota, and South Dakota rejected measures to legalize recreational cannabis, while Nebraska approved medical cannabis. “It is unfortunate that the Dakotas weren’t able to get some leeway there,” Washington said. “They were unable to move that forward and I know there is a large contention of individuals out there who probably would do well with cannabis versus the opioid epidemic as well as the alcoholism that exists out in the Midwest. I think for them and that community, it is a disservice to not be able to have that accessible.”

When looking at Florida, the CEO noted the bill got 58% of the vote, but said he believed the bill was not written in a way cannabis bills should be written. “It didn’t give the ability for smaller operators to be able to get into the space,” he said. “It was truly designed to be a big money corporate marijuana play. I think the Florida market needs to diversify itself. It needs to be more than 22 active licenses, and they need to put a cap on the amount of retail storefronts that any one organization can have.”

Washington said many multi-state operators who haven’t perfected their craft have used Florida for their ability to generate cash revenue but then used other states to drive prices down or buy more businesses. “What the MSOs need to focus on is the quality of the cannabis, instead of trying to be as big as possible,” he said. “I am very happy that the Florida play didn’t happen. I think it was the wrong message for cannabis and would have given the corporate MSOs too much of a foothold.”

CHALLENGES: When asked about the largest hurdles facing the cannabis space, the CEO pointed to access to capital as one of the biggest challenges. “There are a lot of cannabis companies, big and small, that are struggling a lot financially,” he said. “The accounts payable balances are growing across the country and there is a real bubble about to happen with the number of finances that just aren’t coming into the industry. It should be a very humbling year for a lot of us in the cannabis industry as we try to weather the storm.”

Washington said regulatory catalysts could serve as unlocking events to bring more capital into the industry, but right now, ETHOS is operating as normal and as if nothing will change. “That is what all cannabis companies should do this year, what has gotten a lot of us in trouble is we get out in front of our skis a little too often,” he said. “This year is going to be about really settling in, going deeper in the markets that you’re in and not wider. For those companies that do that, it is just going to be another year in cannabis.”

OPPORTUNITIES: As the cannabis space develops, Washington said the biggest opportunities lie in cannabis companies doing a better job in educating the public. “We really have to correlate the products and uses of the product to how people can live their lives better,” he said. “How can you sleep better? How can you eat better? How can you work out better? How can you frankly just be better with cannabis?”

The conversation on what cannabis do on a day-to-day basis must be had at both a local and national level, the CEO said, and ETHOS hopes to lead the charge. “There is a huge gap in the educational elements of what cannabis is or what people assume it to be,” he said. “Unfortunately, the corporate MSOs made THC the calling card for every state across the country. Those of us who are true cannabis culture people fully understand that THC does not dictate your experience with cannabis, it is all the other things in that plant that we want to survive and thrive. There are 117 cannabinoids that we know of in the cannabis plant and only one of them gets you high. We’re looking at the other 116 this year to figure out how we can accentuate those and get those to patients.”

CANNABIS/PSYCHEDELIC STOCKS: Publicly-traded companies in the space include Acreage (ACRHF), Ascend Wellness (AAWH), Atai Life Sciences (ATAI), Aurora Cannabis (ACB), Avant Brands (AVTBF), Ayr Wellness (AYRWF), The Cannabist Company (CBSTF), Cannara Biotech (LOVFF), Canopy Growth (CGC), Cansortium (CNTMF), Chicago Atlantic (REFI), Clearmind (CMND), Clever Leaves (CLVR), Compass Pathways (CMPS), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos Group (CRON), Curaleaf (CURLF), CV Sciences (CVSI), Cybin (CYBN), Entourage Health (ETRGF), Enveric Biosciences (ENVB), Flora Growth (FLGC), Trees Corporation (CANN), Greenlane (GNLN), Green Thumb (GTBIF), GrowGeneration (GRWG), Hemp (HEMP), Heritage Cannabis (HERTF), High Tide (HITI), IGC Pharma (IGC), IM Cannabis (IMCC), Innovative Industrial Properties (IIPR), InterCure (INCR), Ispire Technology (ISPR), Lowell Farms (LOWLF), Lucy Scientific Discovery (LSDI), MediPharm (MEDIF), MindMed (MNMD), MIRA Pharmaceuticals (MIRA), NewLake Capital (NLCP), Numinus (NUMIF), Optimi Health (OPTHF), Organigram (OGI), PharmAla (MDXXF), Planet 13 (PLNHF), Psyence Biomedical (PBM), Red White & Bloom (RWBYF), Relmada Therapeutics (RLMD), Reunion Neuroscience (REUN), RIV Capital (CNPOF), Safe Harbor Financial (SHFS), SNDL (SNDL), Skye Bioscience (SKYE), Stem Holdings (STMH), TerrAscend (TRSSF), Tilray (TLRY), Trulieve (TCNNF), Tryp Therapeutics (TRYPF), Verano (VRNOF), Village Farms (VFF), Vireo Health (VREOF) and 4Front Ventures (FFNTF).