* The following article was originally published in the October issue of Marijuana Venture, available now.
A row of sniffer jars contain top-selling cannabis strains at Green Dragon’s Byers Place location in Denver. In the middle sits a jar of coffee beans with which patrons can cleanse their palate.
With each transition of Colorado’s cannabis market — from unregulated to regulated; from medical to recreational; from mandated vertical integration to open market; from a wide range of independent licensees to an increasingly consolidated faction of retail chains — operators have been forced to adapt quickly or die on the vine.
But businesses that have proven themselves capable of integrating the constantly changing rules have had the opportunity to buy up other licenses and expand into new territories. Marijuana Venture recently spoke with two of the leading Colorado retail chains, each at different stages of growth, about their longevity, expansion plans and what it takes to stay in the hearts and minds of their consumers.
Tucked away in an industrial park, the Denver Medicine Man store started as a cultivation facility, but its competitive pricing model has consistently driven consumers to its doorstep.
Medicine Man
The Williams family has been a disruptive force in the cannabis industry since starting Medicine Man in Denver in 2009.
When the company first started as a cannabis wholesaler, competitors tried to dissuade Medicine Man from upsetting the apple cart with an aggressive pricing model.
“We had an operator up the street tell us, ‘We got a good thing out here. Don’t interrupt it,’” Medicine Man co-founder Andy Williams says. “My brother, who is the nicest guy and just as honest as can be, smiled and said ‘No, we’re pretty much going to put you out of business.’ Then he walked out.”
Shortly after the encounter, the company took out an ad in Denver’s weekly magazine, Westword. Williams says his brother, the nice one, insisted the ad should read “Let the Price Wars Begin.”
That war never stopped, but it did change. In 2011, the government stepped in and mandated vertical integration, effectively cutting the number of independent businesses in half. Medicine Man expanded into retail and Williams says it was one of the best things that has happened for the business.
The company now has 93 full-time employees (10 of which are family members, including Williams’ mom, who helped launch the company), two retail locations, a cultivation facility, its own line of nutrients and a sister research corporation, MedPharm. Through it all, Medicine Man has grown in accordance with its own set of rules and little compromise.
“Being successful in any business is a lot of good planning and knowledge and a lot of it is luck,” Williams says. “There were a lot of people that just weren’t capable of vertical integration for all kinds of reasons and one of the big ones was facility. We had this big warehouse in the middle of an industrial area and, as dumb luck would have it, our building was zoned in a way that allowed us to have a retail center in the front of it.”
The Williams brothers wanted to model the company after Costco and set forth a basic mission statement — the “secret sauce” as Williams puts it — containing five key points: high quality, value pricing, tested and safe, consistency and customer service. Other businesses have echoed similar missions, but Medicine Man takes a lot of the guesswork out of the equation by controlling the products on its shelves.
“We only sell our own cannabis out of our dispensaries,” Williams says. “Our model is one that we don’t open a store unless we can supply it with 100% of our own cannabis.”
Medicine Man is preparing to open its third location, in Thornton, and is also looking for a location to plant a fourth retail outlet. Every store will continue the model established by the Williams brothers and replicates the infrastructure of the company’s flagship location in Denver.
“Having that kind of model and not just shotgunning out and starting dispensaries all over the place really keeps our costs down,” Williams says. “Everywhere you go you have to duplicate the management, security, network, infrastructure, license payments and so forth. All of that adds to your cost. Since we don’t do that, we can keep our costs down and pass those savings on to the consumer.”
However, Williams warns that keeping costs low for consumers is a double-edge sword.
“One thing customers hate is fluctuation in prices, unless it is in a downward direction,” Williams says. “Customers understand sales, but holy cow, if you raise the price on them, even if it’s still lower than other people around you, they’ll get pissed off and leave you for a while.”
Consistency is another pain-point for most marijuana retailers. It’s something that Medicine Man continues to work on, but by controlling 100% of the flower on store shelves, Williams doesn’t have to worry about other cultivators’ practices. A top-selling flower strain such as Blue Dream can vary drastically from grower to grower, with different flavors, cannabinoid profiles and trim techniques. That discrepancy also means customers buying the same strain can leave with different experiences and ultimately, with an unclear opinion on whether they like the strain in the first place.
“People don’t like that,” Williams says. “They don’t go to Starbucks every day for a surprise coffee. They go for their favorite and they want it to be the same.”
The Byers Place storefront is one of Green Dragon’s two Denver locations in the company’s chain of 12 retail stores across Colorado.
Green Dragon
Green Dragon Cannabis Co. has grown to become one of the largest chains in Colorado. The company has 200 employees and 12 retail outlets, including several acquisitions that were rebranded as Green Dragon stores.
As with Medicine Man, vertical integration plays a major role in providing Green Dragon with a competitive edge. Unlike many Colorado cannabis businesses, Green Dragon elected from the outset not to divide its consumer base into two categories.
“One of our corporate decisions was to sell only recreational cannabis,” director of operations Alex Levine says. “By just focusing on the recreational market, we were able to significantly realize cost savings in the grows and on the corporate level in compliance, and by reducing redundancies in staffing. We were then able to pass these savings onto our customers.”
The company designed and constructed a three-acre, “state-of-the-art indoor/greenhouse hybrid system” in Denver. The facility took two years to build and features automated controls for CO2 levels, humidity, temperature, light intensity and fertigation. The facility was also one of the first in the country to incorporate a fully-automated packaging system with air-proof nitrogen seals.
Levine says the company has always perceived itself to be on the forefront of a changing landscape. He believes that as medical laws are adopted and approved throughout the country, recreational laws would soon follow.
“Based on these assumptions, our plan was to grow within the state of Colorado through acquisitions and by winning licenses in newly opened municipalities, and then slowly to enter into additional states,” Levine says.
The company was originally called Greenwerkz, but adopted the Green Dragon name in 2015 after acquiring a pair of retail stores and a 30,000-square-foot grow, because the new name offered “more branding opportunities,” Levine says.
Next, Green Dragon purchased Backcountry Cannabis Company, a dispensary made famous by the CNN reality show “High Profits” when it was known as Breckenridge Cannabis Club.
“The dispensary was forced to move off of Main Street in Breckenridge and was relocated to Airport Road on the outskirts of the town,” Levine says. “Many marijuana companies find it difficult to come back after a devastating financial blow, so we were lucky to be at the right place at the right time to take advantage of the opportunity to acquire this location.”
In 2017, Green Dragon acquired three Tru Cannabis locations in Aurora, Denver and Mountain View to round out its current repertoire of retail outlets.
“When evaluating acquisitions, we look for strategic locations that have high-traffic volume and have the potential to succeed,” Levine says. “Once we purchase a new store we rebrand it with the Green Dragon design and colors.”
While much of the company’s expansion has come through acquisitions, Green Dragon remains committed to winning licenses in Colorado’s newly-opened municipalities. Though competition is steep, the company recently pitted itself against 400 other applicants in Aurora to become one of 24 new license-holders within the city. There, Levine says, the company secured a plot where it could build a new dispensary from the ground up.
“We were also awarded a license to open a retail store in the city of Thornton in another highly competitive application process in which only four licenses were awarded,” Levine says. “This also involved building a store from the ground up, which should be completed by the end of 2017.”
As with the rebranded dispensaries and the original three Greenwerkz locations, Levine says all the Green Dragon stores share a similar design and color scheme to retain a uniform brand identity — a major key to the company’s continued success as it looks ahead to 2018.
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