Cresco Labs to Move Away From Third-Party Distribution in California

Cresco Labs Shifts to Owned-Brand Distribution in California to Increase Profitability, Reduces Third Party Distribution

CHICAGO, September 30, 2021–(BUSINESS WIRE)– Cresco Labs Inc. (CSE:CL) (OTCQX:CRLBF) (“Cresco Labs” or “the Company”), a vertically integrated multistate operator and the number one U.S. wholesaler of branded cannabis products, announced today the decision to exit agreements under which Cresco Labs served as the exclusive distributor of certain third-party branded products in California. The decision marks the latest step in Cresco Labs’ multi-year strategy to increase profitability and shift toward owned-brand distribution in the world’s largest and most competitive cannabis market.

California became a foundational state for Cresco Labs early in 2020, as we began operating the Continuum distribution platform to bring a curated portfolio of leading brands to California retailers. Thanks to partnerships with top-performing brands like Kings Garden, we have achieved significant scale and penetration in the state. The progression of our distribution strategy has led to owned-brand FloraCal now consistently landing among the top-15 flower brands in California and Cresco Liquid Live Resin among the top-10 live resin brands.

Charlie Bachtell, CEO and Co-Founder of Cresco Labs

As we continue to implement localization strategies tailored to each state’s market dynamics, this decision will enable us to put our full weight behind our rapidly growing owned-brand portfolio in California, while also expanding profitability margins for our overall business. Operating in California has been a key component for Cresco Labs in becoming the number one wholesaler in the industry, and we look forward to building upon our momentum in the state.

The Company will continue to partner with a small group of leading brands in California. The removal of most third-party brands results in a decrease in projected sales for the fourth quarter of 2021 and therefore the Company adjusts its previous Q4 2021 revenue guidance to a range of $235 million to $245 million. The Company reiterates its Q4 adjusted EBITDA guidance of at least 30% and gross margins in excess of 50%.

About Cresco Labs Inc.

Cresco Labs is one of the largest vertically integrated multistate cannabis operators in the United States, with a mission to normalize and professionalize the cannabis industry. Employing a consumer-packaged goods (“CPG”) approach, Cresco Labs is the largest wholesaler of branded cannabis products in the U.S. Its brands are designed to meet the needs of all consumer segments and comprised of some of the most recognized and trusted national brands including Cresco, High Supply, Mindy’s Edibles, Good News, Remedi, Wonder Wellness Co. and FloraCal Farms. Sunnyside, Cresco Labs’ national dispensary brand, is a wellness-focused retailer created to build trust, education and convenience for both existing and new cannabis consumers. Recognizing that the cannabis industry is poised to become one of the leading job creators in the country, Cresco Labs operates the industry’s largest Social Equity and Educational Development initiative, SEED, which was established to ensure that all members of society have the skills, knowledge and opportunity to work and own businesses in the cannabis industry. Learn more about Cresco Labs at www.crescolabs.com.

Original press release

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