The CEO of Ayr told us how a strategy the cannabis company shares with Starbucks helped its pot shops massively outsell rivals

• New York City-based Ayr Strategies pulls in more revenue from its pot shops than its competitors.
• We talked to the company's CEO, Wall Street veteran John Sandelman, to figure out why.
• Sandelman pointed to the clear lines of communication between its sales team and its cultivators and manufacturers as the key reason.
• Click here for more BI Prime stories, and subscribe to our weekly cannabis newsletter, Cultivated.

Despite maintaining a low profile, New York City-based cannabis company Ayr Strategies can boast about at least one superlative: It's dispensaries make more money than the competition, according to a report from industry data provider BDS Analytics.

Ayr Strategies - which has retail locations in Massachusetts and Nevada - pulled in $12 million per active dispensary over the last financial year. The closest competition, Florida-based Trulieve Cannabis, pulled in half that, at $6 million per dispensary.

Trulieve, for its part, is one of the few bright spots in the public markets for cannabis - its stock is actually going up.

The industry average is $5.1 million, per BDS Analytics data. To Ayr Strategies CEO and Wall Street veteran Jonathan Sandelman, the reason is simple.

'There's a precise science to this'

"We don't walk a random walk, there's a precise science to this," Sandelman said in a phone interview. "We coordinate extremely well between our sales and cultivation. Our customer-facing people know what people want, and what they're buying. They give that directive to our cultivators."

"That's really the secret to success: having a seamless flow of information from our customers to our cultivators and manufacturers," Sandelman said.

He gave the example of Starbucks. Customers go to Starbucks because they'll get a consistent cup of coffee, whether they are in Boston or Las Vegas. Likewise for Ayr's pot shops, said Sandelman.

'Cannabis will be one of the greatest consumer businesses of our time'

Ayr Strategies, which trades on the Canadian NEO Exchange, was borne out of a special purpose acquisition company, or SPAC, in 2017. The company's COO, Jennifer Drake, is a former managing director at Goldman Sachs, while Sandelman is a former president at Bank of America.

After it raised capital for the SPAC, the company acquired five cash-flow positive cannabis companies operating in Massachusetts and Nevada, which it now operates. That was inherent to the acquisition strategy, said Sandelman - they weren't looking for distressed assets, but rather companies that were already making money and operating efficiently.

"We've been EBITDA and cash flow positive from day one," Sandelman said.

EBITDA is a measure of profit and stands for earnings before interest, taxes, depreciation, and amortization. The company pulled in $32.1 million in revenue in the third quarter of 2019 and adjusted EBITDA increased 16% t0 $8.7 million.

The company's stock, however, is down 12% since the beginning of this year.

And despite the recent wave of bad news in the cannabis sector, Sandelman said these are necessary corrections.

"Markets are cyclical," Sandelman said. "Cannabis will be one of the greatest consumer businesses of our time."

See the chart on which cannabis companies derive the most revenue from their dispensaries:

• Read more:
• Layoffs, cratering stocks, and blown-up deals: 11 experts take us inside the cannabis industry's meltdown and tell us where the industry goes from here
• Wall Street stock traders are piling into bets against cannabis stocks, even as shares have plummeted
• Accountants are making millions from the Canadian cannabis industry, and KPMG is leading the pack. Here's how much each of the top firms is raking in.
• Cannabis companies have slashed over 1,000 jobs in recent weeks as the industry contends with a 'toxic' landscape. We're keeping track of all the cuts here.

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