Due to marijuana being federally illegal, the industry gets left behind in many aspects. One of them being the lack of updated technology.
For the first time ever in the cannabis industry, two companies are partnering up to launch a Lease-to-Own program. Developed by LeafyPack and KindPack, this solution is designed to make cannabis packaging automation more accessible.
“We’re thrilled with the announcement of our new partnership with KindPack® and the launch of the industry’s first lease-to-own program. We’re creating something truly innovative that will change the perception of how businesses approach automating their packaging production lines,” said Jonathan Ballard, Vice President of Business Development at LeafyPack.
Eliminating Packaging Upgrade Barriers
According to Ballard, the Lease-to-Own program eliminates the traditional barriers to upgrading packaging equipment. From small-scale operators looking to upgrade manual processes to large MSOs aiming to enhance their automation, the new program can help.
“This Lease-to-Own program will help cannabis companies by lowering the barrier to operators looking for automation and can help them pursue a sustainable growth path during a time where the industry faces drastic price fluctuations and regulatory turmoil,” he says. “This program specifically leverages their spend on flexible film-based packaging, which for many is an ongoing requirement for their retail-ready products, and folds in the machine spend they need to go faster while lowering their overhead and capex.”
In short, a business is already buying a certain amount of dollars in packaging material annually. With this program, Ballard explains they would now be approved for that same dollar value in new automation equipment without banks or other standard debt financing solutions.
The Industry’s First Ever Lease-to-Own Solution
In this symbiotic relationship, the customer buys the packaging from KindPack, which is to the customer’s specs, and then LeafyPack supplies the corresponding equipment.
Ballard suggests that the reason why a solution like this has yet to be presented to the cannabis industry, until now, is because there are generally only three options for “financing” equipment:
- Debt Facilities, whether directly or indirectly financing the equipment through an EFA or FMV lease.
- Private Equity, which is rare today in the industry.
- The manufacturer takes the liability and risk internally in the hopes that the customer will pay them back and the consistent cash flow makes up for not being paid on net terms.
What LeafyPack and KindPack are doing with their program is none of the above. “Our machines create an environment of high speed, cost effective and consistent retail ready products,” Ballard explains. “However, the efficacy of our equipment is inherently tied to the quality and format of the packaging our customers choose to use. This is why we partnered with one of the largest global suppliers in the world for flexible film packaging.”
Overcoming Challenges
As with every new project, Ballard says the process to get the program where it is today has been a challenge, “but not in the way many people would think.”
The challenges, in fact, were more on the conceptual side of the design, along with recognizing that this solution was there all along.
“KindPack and LeafyPack met almost a year ago at the Benzinga Miami conference,” he notes. “We both had a similar issue we were facing. Ours being that we, as a company, are not designed to finance customers nor manufacture flexible film.”
KindPack, on the other hand, had the challenge of their customers being unable to afford the high cost to purchase the machinery to adequately run the volumes needed at a cost that made it sustainable.
Putting their heads together, they thought the answer would be to let a finance company pay for the equipment to free up capital that customers could then use to afford higher quality film and equipment.
“However, what we found was that the approval rate and rigorous underwriting processes left much to be desired and often didn’t pan out,” says Ballard. “We needed to rewire our brains together to see the solution staring us right in the face.”
In the end, the two companies came to the conclusion to create a packaging program “by packaging people.” The contracts, program details and public rollout all came second nature as they built the foundation together as a team.
Fueling Operational Efficiency in the Cannabis Industry
The Lease-to-Own program is designed to support a sustainable option for the future of the industry.
“There will forever be the need to have a product on the shelves for customers. There will forever be a need for packaging a product to have on those shelves. There will forever be a need to refine and improve production lines as we evolve and grow that shelf space across the country,” Ballard says.
“This program will continue to offer solutions directly to those companies looking to automate their production lines, whether large scale high speed groups watching the cost per unit as millions of products go to market or smaller up-and-coming operations looking for a sustainable choice to lower cost in an effort to simply compete on a local scale,” he continues.
