Since the earliest stages of the legalization movement, cannabis entrepreneurs have been apprehensive about the “big players” entering the market. But in light of the $4 billion Constellation Brands invested in Canopy Growth in August, it’s clear that the big players have already arrived and the explosive growth of the cannabis retail sector is a siren’s call for many investors.
As hundreds of businesses jockey for position in this emerging industry, it seems as if cannabis retail and dispensary chains like MedMen, Columbia Care, Rise and Harvest of Arizona have been built overnight. But that is far from true. Each company has followed a strategic path to expansion and raising capital to set them apart from the smaller players in the space.
Ultimately, only time will tell who will become the largest retailer in North America, but these four companies — plus LivWell International, an intriguing upstart with connections to one of Colorado’s largest chains — are early frontrunners in the race.
MedMen
In June 2018, MedMen Enterprises had a valuation of $1.65 billion. In August the retail chain reported that its California stores have a revenue per square foot of $6,541, higher than tech-giant Apple in 2017 ($5,546) and iconic jewelry store chain Tiffany & Co. ($2,951). And with more than $250 million raised in capital, 19 facilities in operation across three states and roughly 850 employees, the business is growing at a break-neck pace.
Daniel Yi, senior vice president of corporate communications for MedMen says, the company has evolved from simple dispensary operators to a management company to a corporate giant. Over the past 10 years, MedMen’s founders, CEO Adam Bierman and president Andrew Modlin, have shared in and helped to create — through millions of dollars in donations to advocacy groups and lobbyists for new laws — some of the largest water-shed moments the industry has seen thus far.
It’s goal now is to continue MedMen’s trajectory for growth and to own and operate all its assets.
Managing Marijuana
As a management company, MedMen doesn’t own all of its stores.
The company’s oldest store, the West Hollywood location, is a good example of what it means for MedMen to be a management company. The store is owned by Canadian investment firm, Captor Capital Corp. Although it’s not an owned-asset, Yi says MedMen manages the store and gets a cut of the revenue. In total, MedMen manages four stores on behalf of other companies. Managing is just one footnote in the company’s decade-long development.
A Brief History
Before MedMen, Bierman and Modlin owned a boutique marketing agency in Los Angeles, in 2008. When a local dispensary hired them for marketing they held their first marketing meeting at the location, only to find a hole-in-the wall dispensary making roughly $300,000 a month in gross sales with no formal business plans. Seeing how much money there was to be made in the industry piqued their interests.
“Right after that they opened their own marijuana dispensary,” Yi says.
After running a handful of stores for a few months, Bierman and Modlin repositioned themselves as a management company for marijuana dispensaries. The two began handling inventory turnover, point-of-sales systems and operational oversight for retailers across the state.
“People didn’t even know how to use an Excel spreadsheet,” Yi says. “They realized that they could only open and run so many dispensaries, but there was already about 1,000 dispensaries in Los Angeles, so they could make money managing them.”
In 2010, Bierman and Modlin opened MedMen as their management company and started writing a standard operating procedure manual for dispensary management and then later a manual for best cultivation practices. That business eventually became MedMen Enterprises.
Fuel for the Industry
In total, Yi says MedMen has raised more than $250 million in capital.
“It’s a lot, especially for cannabis being a nascent industry. A quarter-billion dollars is nothing to scoff at,” Yi says. “The one thing this industry needs is fuel for growth, and in this industry fuel is capital.”
Before listing on the Canadian Stock Exchange, MedMen was raising money through private funding. Quite successfully, it seems, as Yi recalls the first round of funding netting roughly $60 million, followed by a second round that brought in another $75 million.
“It was enough for us to build a war chest to go in and acquire assets,” Yi says.
Among those assets was a Canadian shell company that allowed MedMen to become a publicly traded entity.
Without hesitation Yi says the biggest milestone for MedMen was to be one of the first cannabis companies listed on the Canadian Stock Exchange.
“I think it really solidified the company,” Yi says. “Now people from all over the world can buy shares in MedMen.”
Lobbying for Change
Yi estimates MedMen has donated roughly $3 million to support marijuana laws at the city, county and state levels. For example, MedMen pledged 1% of the 60% raised during its first fundraiser to the nonprofit Marijuana Policy Project.
“When we closed, MPP got a check for $600,000,” Yi says.
More than 850 Strong
When Yi joined MedMen just two years ago, he was one of approximately 45 employees. Now the company employs roughly 850. While the bulk of the company’s workforce are in the retail sector, Yi says an astonishing 200 of them work from the company’s corporate office in California and another 100 work in cultivating and manufacturing.
Current Operations
MedMen has 14 retail locations open now: two in Nevada, four in New York and eight in California.
The company also has an extraction lab and two growing facilities in California, its Mustang cultivation facility in Reno, Nevada and another cultivation facility in Utica, New York.
On the Horizon
While Yi couldn’t divulge too much information, he did discuss some of the company’s recent announcements later this year. For one, the company is at the final stages of getting a retail store licensed in Massachusetts, which it hopes to open before the end of the year. MedMen has two retail stores opening in Las Vegas this year. Also, the company has acquired through a stock-plus-cash deal a few months ago, one of the 13 original businesses licensed for Florida’s medical marijuana program, including its five-acre cultivation facility and rights to open up to 25 stores in the state.
“Under that license we hope to open three stores by the end of the year and all 25 by 2020,” Yi says.