[dropcap class=”kp-dropcap”]W[/dropcap]hen the California Gold Rush broke out in 1848, the first millionaire didn’t get rich by mining or prospecting.
San Francisco businessman Samuel Brannan made the first million dollars selling equipment to the frenzied hordes who descended on California with gold in their dreams and money bursting out of their pockets. He went on to become one of the world’s richest men.
A different sort of rush is happening now in California and the other 10 states that have legalized cannabis. It’s been called the “Green Rush,” and like Brannan, one California company is proving you don’t need to grow, sell, extract or even touch the plant to be successful.
“We have a small part of more legal cannabis transactions than any other company in the world,” says Nick Kovacevich, 33, chairman and CEO of KushCo Holdings. “Maybe we provided them with the vaping pen. Maybe we provided them with the packaging. Maybe we provided them with branding services.”
In just five years the company has grown from practically nothing to $145 million in annual sales providing packaging, branding, vaping products and myriad other services to the burgeoning legal cannabis industry.
“One way or another, if you’re picking up a product, there’s a high likelihood we had something to do with it. Because we’re working with 6,000 cannabis businesses throughout the world, we’re getting our fingers and hands on a lot of these transactions. By being an ancillary company, we don’t actually touch the plant.”
A born entrepreneur, Kovacevich launched his first company in 2007 with a college friend. PackMyDorm provided college students at four California campuses with packing materials, scheduled movers, arranged storage between semesters and scheduled movers for the return to school.
He wasn’t lifting heavy boxes, though. The actual moving was contracted out. He sold the company in 2010.
Around that time, Kovacevich grew interested in the cannabis industry. He’d been raised by his district-attorney father to see it in a negative light and as an athlete in college he rarely partook.
It was while recovering from knee surgery he decided to try it again and “quickly realized a lot of the information I believed was false.” Ever the entrepreneur, he decided after selling PackMyDorm he would launch his own company in 2010.
“One way or another, if you’re picking up a product, there’s a high likelihood we had something to do with it.”
Medical cannabis was booming in places like California and Colorado, but he didn’t want to join with the rest of the herd and run a farm or store.
“When people were looking at growing and opening dispensaries, we were looking at how do we build a set of products to support those endeavors? What are they going to need on a daily basis that we can provide?” he recalled. So Kush Bottles was born, designing and selling packaging for cannabis products and helping to make childproof packages the industry standard.
He took over as CEO in 2014 and has since renamed the company KushCo Holdings, because these days, the company is about way more than just bottles.
Today, Kovacevich’s company is actually several smaller companies: Kush Supply Co. provides vaporizer products, packaging, supplies and accessories. Kush Energy sells ultra-pure hydrocarbon gases and solvents. The Hybrid Creative is a design agency for cannabis and non-cannabis brands. Koleto Innovations focuses on research and development.
From his humble beginnings, his companies have sold more than 1 billion units, with 220 employees spread across five facilities in five states with legal cannabis.
Never heard of these companies? Not surprising. They don’t sell a single product containing THC. That’s up to their customers.
He credits his success to foresight and customer service. KushCo Holdings had a warehouse in Colorado within a few months of legalization there. It had one in Washington years before legalization. It had one in Massachusetts three months before legal cannabis sales began there.
And having customers who are also growing exponentially helps too.
“All our customers, for the most part, have been growing. So, when our customers grow, they buy more from us, which means we grow.”
Taking on the Black Market
There are still threats to the industry, but Kovacevich sees none greater than the black market.
“The black market, especially in California, is very rampant. People in this industry are used to buying through informal sources like dealers, but they’re also used to going to pop-up medical shops, which are now servicing rec,” he says.
This year, the United Cannabis Business Association released an analysis that found there were 2,835 illegal stores and delivery services in California, more than three times the 873 legal sellers.
Kovacevich says these illicit operations often sell vaporizers and other products that are untested and potentially unsafe, contributing to the wave of vaping-related illnesses sweeping the nation.
He blames the fact that California doesn’t have enough retail cannabis stores to meet the needs of the state, and many cities have none at all, since the state left it up to municipalities to determine if they would have dispensaries.
“There are not enough stores from the convenience standpoint and because of the testing requirements and all the onerous red tapes, pricing is significantly higher, so the black market is winning on convenience and price,” he said. “The key to taking back the market is to make it more convenient, by allowing more retail stores, and driving the cost down by lowering taxes.”
He sees the need for the federal government to begin regulating the industry to ensure what’s in cannabis and vaping products is safe. Of course, that would involve removing it from the list of Schedule I drugs.
He pointed out that research has shown teen use decreases in states that establish legal, adults-only stores.
“Everyone is looking for a reason to say legalizing cannabis is a bad idea, but I think if we can create fair, strong regulation, we can make sure the integrity of these products is kept,” he said. “The question is, ‘Why would you not legalize?’ You’re reducing the likelihood that kids will get involved. You’re reducing the crime aspects and you’re making safer, more effective products available for adults who choose to use it.”