MedMen red seems to be everywhere these days.
While most cannabis businesses remain locked within their home states, the Los Angeles-based company has spread over the past four years to include eight retail shops in Southern California, four dispensaries in New York (including a splashy new storefront on Fifth Avenue), and two in Nevada—with two more opening soon.
“We started with two management contracts as a company and today we have 18 facilities, most of them owned and operated (by MedMen).”-Daniel Yi, MedMen’s VP of Corporate Communications
It’s hard to miss the company’s aggressive marketing. This month MedMen launched a $4 million advertising blitz, the largest in the company’s history. Earlier this summer it partnered with Gwyneth Paltrow’s self-care brand, Goop, which now curatesan in-store selection of “vapes, CBD-spiked bath bombs, and cannabis-infused teas and edibles” at MedMen’s hip Venice boutique.
Meanwhile, the company’s heavy investment in New York—where medical marijuana is still limited and adult use remains illegal—is, like nearly everything MedMen does, a strategic move to build brand recognition and position the company to pounce when the state goes adult-use legal.
That growth has paid off with investors. The company went public on the Canadian stock exchange in May, capping a two-year sprint of breakneck expansion that included broadening operations beyond retail to include two high-tech cultivation and manufacturing sites, each capable of producing five tons of cannabis annually. Today, the company is valued at roughly $1.4 billion.
All that rapid growth has inevitably drawn criticism from some competitors and consumers.
MedMen’s fast growth has drawn criticism from some competitors and market pioneers.
Around Los Angeles, some longtime cannabis operators complain that MedMen’s growth-first mentality runs contrary to the medical-minded history of the cannabis industry as well as the mom-and-pop shops that built it. Social activists have questioned the company’s commitment to racial and economic justice. And the company’s highly visible LA expansion has raised the eyebrows of regulators, as MedMen has managed to bob and weave around the city’s license cap and, in the process, build a small empire.
MedMen has come to dominate what may be the most competitive, highly sought-after market in the country: Los Angeles. In doing so, the company has deftly navigated a raft of obstacles—from soaring property values to delays in the city’s licensing process—that even veterans of LA’s cannabis industry are struggling to overcome.
So how did MedMen, which launched its first branded store in West Hollywood in December 2015, make it look so easy?
Early Fits & Starts
Co-founders Adam Bierman and Andrew Modlin “kind of stumbled into this space,” nearly ten years ago, according to Daniel Yi, MedMen’s VP of corporate communications.
They first opened a few medical marijuana dispensaries—the company wouldn’t specify how many—around 2009, but soon recognized the industry’s potential and began working as consultants to other cannabis dispensaries, helping operate shops in Los Angeles and Orange County.
“We didn’t know what we ultimately wanted,” Bierman told Leafly. But the company’s founders had a clear goal: “We knew we wanted to build a market-leading company.”
“We take a lot of pride in our responsibility that we have, because of our positioning, to build an industry while we build this company,” Bierman added.
The founders’ marketing-forward philosophy is on display at MedMen’s slick, well-branded storefronts. The company sometimes promotes itself as “the Apple store of cannabis”—including in documents filed with Canadian securities regulators. With color-coordinated uniforms, signage, and to-go bags, the shops are less dime-bag, more high-design.
It’s a consumer-minded approach that Bierman says transcends the category of products they happen to sell. “We’ve always said let’s make our decision pretending we’re not in the weed business,” he said.
The Prop. 19 Dream
In 2010, it looked like adult-use legalization might finally arrive in California. Proposition 19, on the ballot that November, promised to legalize recreational cannabis in a wide-open market. Bierman and Modlin initially planned to parlay their consulting business into a full-service management company, so that year they officially began building MedMen.
What they found, however, was that most shop owners weren’t “jumping up and down” to hand over control of their businesses, Bierman said. A lot of existing dispensaries thought their vision was too “aggressive” and “bold.” And, of course, Prop. 19 failed at the ballot box, leaving California with unlicensed medical dispensaries but no recreational stores.
Despite the Prop. 19 loss, Bierman and Modlin decided to abandon the consulting model and make a run at the industry themselves. MedMen Enterprises was born. They raised money—a lot of it—and then sought out shops of their own.
“We started with two management contracts as a company and today we have 18 facilities, most of them owned and operated [by MedMen],” Yi said.
Critical Path: Licenses & Locations
Deep pockets and shrewd moves in the licensing-and-location game played a critical role in MedMen’s rise in Los Angeles.
Prior to the opening of California’s adult-use market this past January, Bierman and Modlin began buying up existing dispensaries that were operating in compliance with LA’s complicated local medical marijuana rules. Because those shops had been operating legally within the city for years, and because LA’s licensing program gave priority to pre-existing dispensaries operating in good standing, MedMen’s maneuver guaranteed it an early shot at some of LA’s first adult-use licenses.
The company took over management of its first medical marijuana dispensary in 2015, in West Hollywood. The company also acquired a shop in the LA neighborhood of Sun Valley and, in June of this year, transferred that dispensary license in order to open a new location in Venice’s trendy Abbot Kinney neighborhood.
Franchising Past the Cap
For MedMen to grow in Los Angeles, company officials had to find a way to expand within the city’s tight license cap. Under the Los Angeles municipal code, a commercial cannabis entity may hold no more than three dispensary licenses.
Los Angeles limits a company to three dispensary licenses. MedMen found a way to allow its brand, but not the company, to move beyond that limit.
The solution was to separate the brand name from the license. It’s a form of franchising.
In some cases, shops that MedMen took over remained licensed under their original names. For example, a storefront on Lincoln Boulevard, in Venice, is branded with MedMen’s distinctive red signage, but until last month it appeared in city records as “The Compassion Network.” The shop simply changed the public-facing signage to MedMen, and the company was able to preserve the location’s established status with the city. (The company has recently changed the Lincoln Boulevard store’s designation in city records to “MedMen.”)
All Over LA
Today, the company officially owns and operates just three cannabis stores within the LA city limits: one in Venice, one in Beverly Hills, and one in Downtown LA. Two other locations—the store in Abbot Kinney and another near the LAX airport—are managed by MedMen but are technically owned and licensed by a separate corporate entity.
The company is insistent on maintaining the distinction. In response to follow-up questions about the MedMen-branded store in West Hollywood, a company representative wrote in an email that “MedMen does NOT currently have a shop in West Hollywood or hold a license.” Rather, the representative said, “MedMen manages a shop in West Hollywood under the MedMen brand for a third party owner/licensee.”
This is classic franchising. Coca-Cola doesn’t make every bottle of Coke; it produces syrup which it sells to independent bottlers. More than 80% of McDonald’s outlets are owned by franchisees, not the company. Franchisees pay a fee to the company to use its brand and food distribution systems.
To customers, the managed stores look like any other MedMen shop. But as Daniel Yi explained, they’re actually owned by a private-equity firm called the MedMen Opportunity Fund II. That firm is co-chaired by Wall Street heavy hitter Chris Leavy, who previously led the world’s largest money manager, BlackRock, and last year announced a plan to raise $250 million to invest in cannabis.
Despite the shared name, Yi said the MedMen Opportunity Fund is not connected to MedMen Enterprises.
Many Southern California observers, including competing retailers, said they were initially surprised by MedMen’s ability to launch a six-store chain, with five operating within LA city limits.
When asked about the licensing matters, Cat Packer, the head of LA’s cannabis regulatory department, said via email that the city “has made no determination, one way or another, concerning MedMen’s compliance with the City’s cannabis laws” and that the company is not under investigation.
For its part, MedMen says it employs 12 people at its Culver City headquarters dedicated to ensuring the company operates in compliance with all state and local laws.
High-Altitude Turbulence
MedMen has been hitting the triple cherries in terms of revenue. First-quarter earnings in 2018 came in at roughly $5.5 million, nearly eight times what it was a year earlier. But the company’s ascent hasn’t come without challenges.
On April 20, 2018, the company launched its upscale Fifth Avenue shop with great fanfare. The opening won coverage from mainstream publications, including CNN, CNBC, Bloomberg, Business Insider, Fast Company, Fortune, Money, and even Vanity Fair. That didn’t sit well with some activists. In their eyes, MedMen’s slick corporate branding collided with a New York criminal justice system that still charges thousands of residents—disproportionately people of color—for cannabis consumption.
“A friend of mine brought to my attention an article she saw online about MedMen opening on Fifth Avenue. The headline was that it was the Barneys of dispensaries, and I couldn’t help but notice the elephant in the room,” resident Zamari Graham-Smith told the website Merry Jane.
Critics have pointed to MedMen’s success as an example of the troubling racial and economic dynamics at work within the legal industry, with wealthy, generally white business owners generating profits for doing the same thing—selling cannabis—that’s landed many poor people and people of color in jail.
“Young black males are sitting in jails across the country for marijuana possession or distribution,” Graham-Smith said, “and my thinking was that there’s an opportunity here for MedMen to lead by example by putting social justice into action.”
Specifically, she asked the company to commit to “diverse and inclusive hiring practices” and support bail reform efforts.
MedMen replied by acknowledging the racist discrepancies in cannabis arrests, adding that “the end of prohibition will ultimately be the solution for that particular issue.”
The company has supported advocacy efforts, Yi told Leafly, by donating money to legalization campaigns and sponsoring expungement fairs to help individuals with prior convictions clear their records.
The BevMo of Bud?
MedMen’s market dominance has also created friction with some of the cannabis industry’s old guard.
Before branded t-shirts, in-store iPad learning centers, and Goop-curated product walls, Los Angeles’s cannabis game was a lot less shiny. Its character was marked by medical caretakers and risk-taking entrepreneurs who weathered raids, robberies, violence, theft, and profound stigma. Many in LA’s cannabis community now regard these scars as signs of dues paid and commitment proven.
MedMen, meanwhile, has managed to avoid most of these things entirely, something Bierman attributes to a bit of luck and the company’s being “hyper-vigilant” when it comes to legal compliance.
Sahak Ghaghian, who has worked as a consultant and adviser to the California Caregivers Alliance (CCA) on Sunset Boulevard for 12 years, hasn’t been so lucky. Located on the second floor of a Silver Lake strip mall, CCA is one of the few dispensaries in LA that’s remained in the same location since its inception, Ghaghian said. In 2011, DEA agents raided the shop, with agents clad in SWAT gear and wielding assault rifles. The raid forced the shop’s closure for nearly a year, and as recently as last year, CCA was hit by another shutdown by local law enforcement.
California Caregivers Alliance: Explore the Menu
If MedMen is the Apple store of cannabis, CCA is its neighborhood indie café. Becoming a corporate behemoth was never CCA’s goal, Ghaghian said. The homey vibe of the dispensary, coupled with its longtime presence in the neighborhood, has cultivated a fiercely loyal shopper base, he said. Often, customers drop in just to chat with the staff.
“More power to them,” Ghaghian said of MedMen. “They decided to go that route, but that was kind of never part of our plan. We always just wanted to be kind of a staple in our little community.”
One of CCA’s former managers, who worked at the shop for eight years, said the rise of highly branded chains like MedMen is just part of the evolution of legal cannabis.
“MedMen will be kind of like going to BevMo versus going to Sunset Beer [a boutique bottle shop] down the street, where they have an even cooler selection and their staff is a lot more kind and personable,” said the former manager, who asked to remain anonymous in order to preserve working relationships within the industry. As for which kind of store customers might prefer, they said, “It really depends on the person.”
Yi at MedMen didn’t disagree with the comparison. In fact, he elaborated on it.
“It’s a bit of GMC meets BevMo in a Whole Foods type of environment,” he said.
More Consumer Choice
In Venice, less than a half-mile from a MedMen’s Abbot Kinney shop, sits Green Goddess Collective, another longtime LA dispensary. Nathan Holtz-Poole, co-founder of the approximately 12-year-old dispensary, has known MedMen since the beginning, he said. Back then, Holtz-Poole said, MedMen co-founder Adam Bierman was a real-estate broker in Los Angeles and was the kind of guy you called for help finding landlords who might be friendly towards cannabis operations.
Green Goddess Collective: Explore the Menu
One of the biggest differences between his shop and MedMen, Holtz-Poole said, is that Green Goddess was founded as a nonprofit medical collective. The dispensary and its inventory were designed to treat people with a range of medical needs, from patients undergoing chemotherapy to people simply having a bad day. Rather than simply stocking products with the “flashiest packaging,” he said, Green Goddess aims to take seriously its responsibility as a health care provider.
“That’s something I don’t think operators like MedMen appreciate in any way or are trying to preserve,” Holtz-Poole said. “It’s a business model; it’s not really patient- or customer-centric.”
A Regulated Market Ain’t Easy
For his part, MedMen co-founder Bierman acknowledged that some see the brand as “anti–mom-and-pop,” but said that’s simply a misconception based on MedMen’s size. He added that he hopes there’s no animosity between MedMen and others in the industry.
“I want every mom-and-pop to be super successful,” Bierman said. “That means that the program is working. That means that the program is viable.”
While the pioneers of the industry were responsible for propelling cannabis reform forward, Yi said—“God bless them,” he told Leafly, “because they started the conversation”—he argued that MedMen is unlocking the cannabis market’s true potential.
The transition to a legal industry is costly and complex, he said. Businesses either make it in a regulated market or they don’t. It’s survival of the fittest. “Is it unfair? Is it hard? Is it a big obstacle? Of course.”
Today, MedMen operates out of a glossy, 12,000-square-foot headquarters in Culver City and employs nearly 800 people across its network. The company has spent millions on advertising and has even launched an in-house magazine, dubbed Ember. A recent issue features celebrity Lake Bell discussing “GOOP, Hollywood and her role at the center of L.A.’s cannabis renaissance.”
The company also recently invested in the parent company of California pre-roll manufacturer Lowell Herb Co. A press release sent by an outside PR firm for Lowell described MedMen as “rapidly becoming the Macy’s of cannabis,” while Lowell, it said, is “set to become Marlboro of cannabis.”
Despite their success so far, MedMen’s executives are emphatic they’re a long way from their goal. There’s room, they said, for the company to grow more than twentyfold.
“We’re not there yet,” said Yi. “We’re looking to be a $20 billion to $30 billion company.”
If they succeed, they won’t need to compare themselves to Macy’s or Apple. They’ll simply be the MedMen of their industry.
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