Anyone considering a senior-level job with licensed cannabis producers the Cronos Group must first go through an unusual–but necessary–interview process.
Before being welcomed to the team, the potential candidate must live in a five-bedroom house with Chief Executive Officer Michael Gorenstein and Chief Operation Officer David Hsu, ten minutes down the road from the Stayner, Ontario-based operations.
(Courtesy of Nathan Cyprys)
“This is an opportunity we won’t see again. I won’t say once in a lifetime but in multiple lifetimes.”
This mandatory corporate overnight is partially a result of the remoteness of the company’s main facilities, but also to insure anyone joining the fast-expanding, multinational growers really gets the culture of the workplace.
“The house is a bunch of mattresses and whiteboards and the senior leadership team stays there during the week,” explains Gorenstein. “Culturally, we treat ourselves like a startup and not a big corporate entity.”
“We’re constantly working and brainstorming,” adds Hsu. “Are they going to fit in this culture, the brainstorming, and the mindset?”
Growing on Multiple Levels
(Courtesy of Nathan Cyprys)
The Cronos executive team is squarely intent on growing both its product and its foundation. Its core assets include two licensed producers. Its largest, Peace Naturals, sits on 95 acres in Stayner, and produces for the medicinal markets. On the recreational side, there’s OGBC, which covers 31 acres in Kelowna, BC. Currently Cronos grows 5,000 kg a year, a number expected to increase to 45,000 kg per year by 2018.
Cronos is now Stayner’s biggest employer, with hundreds of jobs: horticulturalists, farmers, chemists, quality assurance, manufacturing, marketing and design, among others.
The Cronos Group—named after the Greek god of agriculture—is also growing internationally. This year, they expanded to Israel, partnering with the kibbutz Gan Shmuel to produce, manufacture, and distribute medicinal cannabis internationally. The warm climate allows them to “put up 10 times the capacity, using 10 percent of the energy and 10 per cent of the costs,” says Gorenstein.
They’ve also reached distribution deals with Pohl-Boskamp, the 175-year-old German pharmaceutical company, and Caribbean Medical Distributors Ltd. in the Cayman Islands.
From Hedge-Fund Lawyer to Cannabis Grower
This thirst for growth is what prompted Gorenstein to leave behind his life as a successful hedge fund lawyer in New York. While the 31-year-old was skilled at coordinating mergers and acquisitions for some of the biggest banks and pharmaceutical companies in the US, he yearned to be an entrepreneur.
After coming home from a 16-hour workday, Gorenstein would stay awake until the early morning, reading about the cannabis industry in Colorado and Washington. He knew it was a sector that had room to grow exponentially. “This was an opportunity we won’t be able to see again,” he says. “I won’t say once in a lifetime but in multiple lifetimes. The fact you could be a part of a rapidly growing industry, where the demand’s already there and it helps people—that’s very rare.”
Michael Gorenstein, President, CEO and Chairman of the Cronos Group (Courtesy of Nathan Cyprys)
When Gorenstein became partner at the New York-based investment management firm Alphabet, he championed the vast potential of the cannabis market. But since the industry was still developing in the US on a state-by-state basis, investors deemed it too risky. It also didn’t help that cannabis is still considered illegal federally.
“The problem with the US is that because of regulations, you have to spend time dealing with strange problems like handling cash, security, and how to not get arrested,” Gorenstein says. “You’re not focused on how to use your resources to make a better product and helping people that need it. There was big legal risk. I was nervous I’d invest as a company and then the federal government would shut it down.”
“There’s a difference in the US where it’s state legal and federally illegal,” Hsu adds. “At any time the federal government could come in and shut everything down and that’s the risk Mike would worry about when investing other people’s money.”
There was also less room to grow, since not all states are onboard with legalized marijuana. That wasn’t the case in Canada, where medicinal cannabis is legal countrywide, with recreational legalization slated for July 2018.
“We like the program, we like the regulatory regime in Canada, and we wanted to get our investors to come to Canada and not the US, because there’s less risk,” says Gorenstein. “You can focus on what matters, which is basically building a company and achieving your goal. So whether that’s helping people on the medical side or bringing people together on recreational side, it’s something you can focus on without worrying ‘Will I be able to do this tomorrow?’”
(Courtesy of Nathan Cyprys)
In October 2015, Gorenstein and a few partners at Alphabet invested in PharmaCan, a holding company focused on the Canadian cannabis market. He took a board seat along with the investment. Two things quickly became clear to Gorenstein: This was the industry he wanted to dedicate his life to, and a lot of changes needed to be made at PharmaCan. After discussions with some of the other investors at PharmaCan, Gorenstein became the CEO in May of 2016. He gave up his West Village apartment, moved to Stayner, and committed his life to the cannabis sector. The strategy was to use Canada as a launch point to develop all the know-how, and then spread globally. PharmaCan was rebranded as the Cronos Group.
A Sprawling, Tightly Controlled Environment
David Hsu, Chief Operating Officer of the Cronos Group (Courtesy of Nathan Cyprys)
The Cronos Group claims to be the largest purpose-built in-door cannabis facility in the world. The Stayner property sits on sprawling agricultural-grade farmland that’s halfway to completion. A massive greenhouse is in the process of being built, along with an indoor growing facility the size of 26 hockey rinks. Both are slated to be running by July 2018.
“Every square foot has been thought about in terms of where the plants will go, where the labs will go, where we’re going to harvest and where is propagation going to go,” says Hsu.
Lighting greatly varies between each growing room, and moving between each facility is akin to entering a fun house, as it takes time for your eyes to adjust.
A former bed-and-breakfast that sits on the property now holds the company’s customer service and marketing departments. The two growing facilities that are presently in use, including a retrofitted 100-year-old barn, house an assortment of rooms with product in various manufacturing stages. There are labs to extract oil, packaging and labeling areas, and, of course, tightly controlled growing rooms with plants in various states of maturity.
The buildings where the growing takes place are highly sterilized. At any given time in either facility, you’ll find employees scrubbing tractor-sized canisters or washing down hallways. The smell of rubbing alcohol is persistent throughout the grounds, often mixed with whiffs of manure and cannabis.
These are the steps the company must take in order to produce pharmaceutical-grade product. Anyone entering the buildings must be suited up in disposable coveralls and booties, to prevent outside contamination. “The regulatory environment is so new in other countries,” says Hsu. “They’re looking to Canada for the gold standard.”
The company also doesn’t mess around when it comes to security. Employees and visitors must use a key fob to enter or exit each building, growing room, or lab, single-file, as a precautionary step to track movement of employees and product. (“I never thought I’d work somewhere where you get a door slammed in your face every day,” Gorenstein says.)
Moving between each facility is akin to entering a fun house, as it takes time for your eyes to adjust. Lighting greatly varies between each growing room, depending on the strain and stage of growth. Some give off a yellow or red glow, while others have rows of tiny, bright white LED that beam dots of red and blue. The range in lightening is intended to produce different effects on the plants, which the company’s scientists continually study for optimal outcome. In total, the company grows 150 different strains.
A Big Part of Town
(Courtesy of Nathan Cyprys)
Stayner, which is part of the Clearview Townships, is about two hours northwest of Toronto. Its primary economy has largely come from construction, manufacturing, and agriculture, so there was plenty of interest when Cronos Group applied for building permits. It’s now the town’s biggest employer, with hundreds of jobs that span an assortment of skills: horticulturalists, farmers, chemists, quality assurance, manufacturing, marketing and design, amongst others.
Strike up a conversation with nearly any employee, and they’ll tell you how happy they are to be working there. One scientist, who grew up in the region, never imagined he’d be able to find work in his chosen field–chemistry–so close to his tiny hometown.
“I think it’s really important that the people you hire are passionate about something,” says Gorenstein. “That’s what drives you when it’s 10 pm and everyone else is going home. The reason you keep working isn’t a paycheck or bonus, it’s because you’re passionate about it.”
Banking on the Future
(Courtesy of Nathan Cyprys)
Because the medicinal benefits of cannabis are still being uncovered, the Cronos Group believes in the importance of research and development. Psoriasis and multiple sclerosis are two of the conditions they’re currently researching in pre-trial studies. Gorenstein explains that the constant feedback they receive from patients is collected as data, which will eventually be used when put to trial.
“Normally if you’re a pharmaceutical, you have to take millions of dollars and go through all these trials and after five years, you hope that the thing you’ve made may actually work,” he says. “We’re confident going to trials because we have patients who’ve said anecdotally, this is what works, this is what I want.”
“We’re a global cannabis platform that’s unlocking the science behind a plant with very powerful effects and using that to help sick people and to elevate people looking to have a good time or relax.”
Many of the employees at the Cronos Group are passionate about the medicinal aspect of their product, with first-hand stories of family members with opioid addictions or cancer, who couldn’t get relief from traditional medicine. Gorenstein is keen to explore the marketing potential of medicinal marijuana.
“The idea that everything will move to rec means you’ll leave behind a very important benefit and we want to address that,” he says. “You don’t want a kid with a gasmask bong or a rapper giving you your medicine. You want someone in a lab coat who’s much more measured and more compassionate. It’s the caregiver mentality.”
When asked about his biggest challenge, Gorenstein answers without hesitation: “Time.”
“We’re going as we fast as we can but I’d love to freeze time,” he says. “Since we’ve taken over, this place has been transformed. We’ve seen the industry move really fast. It hits midnight and you think, ‘I still have so much to do.’”
He admits that another constant hurdle is defining what the Cronos Group is. While it’s often mistaken as an investment company, Gorenstein is close to perfecting his elevator pitch.
“We’re a global cannabis platform that’s unlocking the science behind a plant with very powerful effects and using that to help sick people and to elevate people looking to have a good time or relax,” he says.
The company will continue focusing on uncovering the potential uses and benefits of cannabis, both medicinally and recreationally. It doesn’t hurt that the demand is already there.
“There’s a $200 billion industry where consumers and patients already want the product,” says Gorenstein. “Our entire job is to figure out how to get them that product safely and give them something consistent. We’re in a better position than anyone to do that.”
