The rise and fall of MedMen exhibits that the hashish trade is stuffed with classes. However is anybody truly studying?

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“MedMen is the industry’s figurehead that goes broke. That’s the unfortunate outcome of growing up. When you fall, you fall very hard.”

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Anisha Dhiman Showgirls hold cannabis flowers during the MedMen opening in Las Vegas in 2018. Showgirls hold cannabis flowers during the MedMen opening in Las Vegas in 2018. Photo by Bryan Steffy / Getty Images for MedMen

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Craig Wiggins, co-founder of The Cannalysts, is direct and frank when comparing the cannabis industry to the opening of Saving Private Ryan: “Few successful companies will make it off the beach.”

For a long time, it was believed that MedMen, a chain of cannabis dispensaries from California, was not just one of the few achievements, but a leader in an industry that was in dire need. It was something special: a forerunner, a standard that other companies could look for. MedMen was one of the “rare startups with an enterprise value of more than 1 billion US dollars,” reports POLITICO.

  1. FILE: WEST HOLLYWOOD, CA - JANUARY 2: A customer smells a cannabis product at MedMen, one of two pot stores in Los Angeles that opened in West today on January 2, 2018 with the sale of recreational marijuana according to the New California Marijuana Act started Hollywood, California.  (Photo by David McNew / Getty Images)

    Troubled MedMen will cease operations in Arizona just one year after entering the market

  2. None

    Netflix and MedMen have teamed up to promote the movie “Breaking Bad”

  3. Toronto nationals gather at a local concert venue to see this

    U.S. cannabis companies say legalization would be an economic savior. Didn’t you learn anything from Canada?

The company went public on a Canadian stock exchange in June 2018 with an implicit valuation of $ 1.6 billion. Co-founder Adam Bierman, who referred to himself as “Steve Jobs of Green Rush,” said he wanted the company’s retail stores to “invite the world in and see what the future looks like”.

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And for a short while he seemed to get what he wanted.

Success is seen but not found

People are queuing to get into MedMen, one of two Los Angeles area pot stores that go on sale today, January 2, 2018, in West Hollywood, California under California's new marijuana law of recreational marijuana. People are queuing to get into MedMen, one of two Los Angeles area pot stores that go on sale today, January 2, 2018, in West Hollywood, California under California’s new marijuana law of recreational marijuana. Photo by David McNew / Getty Images

The brand was everywhere – from a spot in South Park by Comedy’s Central to an ad by Spike Jonze. Retail offerings were also up to date. The company was reported to have 32 stores in nine states with a license to operate a total of 70 stores.

“Coming from Canada, where the product offering is pretty slim, it was cool to see that so much product choice comes with a great customer experience,” said Lisa Campbell, CEO of the Toronto-based cannabis advertising and marketing platform Mercari Agency.

Although successful on the surface, the company did not do well. A class action lawsuit was filed in December 2018 because employees alleged violations of labor law. Investors weren’t happy either. Several shareholders sued the founders for proprietary trading and other devious tactics.

Campbell calls MedMen “the industry flagship that goes broke. That is the unfortunate outcome of growing up. When you fall, you fall very hard. “

Who runs your company is important

Prior to MedMen, co-founders Bierman and Andrew Modlin ran a branded company. While the two were one step ahead when it came to identifying an opportunity. You were wrong when you ran a successful business.

The company was charged with excessive spending. Bierman had installed a panic room in his home and company funds were used to “buy custom Tesla SUVs, pearly white Cadillac Escalades and a salary for Bierman’s personal marriage counselor,” reports POLITICO. Bierman stepped down as CEO in January.

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In his role as an analyst in Windsor, Ontario, Wiggins finds MedMen’s errors all too familiar. “I’m a banker, as a banker you don’t want me to run the company. I’m not the one for that, ”says Wiggins.

“For this reason, we see a similar plight in Canadian companies as MedMen. It’s almost like they bragged about it, scaled up way more than necessary, and are now back in the process of cutting costs, laying off employees and shutting down production facilities. “

You don’t have to spend money to make money

A processor (R) carries out orders for bud-tenders (L) who sell the product at MedMen. A processor (R) carries out orders for bud-tenders (L) who sell the product at MedMen. Photo by David McNew / Getty Images

As a publicly traded company, MedMen experienced a capital rush, and with it the overconfidence that led them to continue their spending.

“It’s easy to excuse that this is a new industry, that this is an emerging industry, that we have to spend money to make money,” said Harrison Stoker, vice president of the brand at Donnelly Group, a 20th company -year-old company owns nine Hobo cannabis stores across Canada. “But that doesn’t always work and the bubble bursts. In the past six to 18 months, which is almost the existence of the industry, we are beginning to see this kind of impact in Canada. “

Stoker admits that there is a great deal of similarity between Hobo Cannabis and the MedMen style of operation, but with the key difference that they are still going strong: “We have an aggressive growth plan like MedMen, but it’s different,” says Stoker.

“We’re not publicly traded, we don’t spend money, we buy yachts and mansions, and we throw lavish parties. MedMed was so focused on the future of divine profitability that they lost focus in getting to where they needed to do really well. “

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Bigger doesn’t mean better

MedMen rose in the early days of cannabis when money was flowing free and everyone had high hopes for the industry. “The way things turned out wasn’t exactly what we wanted it to be,” says Campbell.

“Many of these companies are publicly traded, and often they all fight to be the biggest and best. (But) just because you’re the greatest doesn’t mean you’re the most successful. “

Campbell claims that those who will survive in the long run will be companies that pay attention not only to management, but to the people on the front lines as well. “If people are unaware of the burn rate and just pay attention to where the next increase is coming from, companies will fall apart.”

We are here now

In the early days of legalization – whether at the federal level in Canada or state-to-state in the US – we watched expectations turn into disappointments. While stories of failed businesses are more common than success stories, it is worth questioning whether or not we are learning from developments in the cannabis industry.

MedMen lost $ 40 million on sales of $ 46 million in the March quarter, reports Barron’s.

“At the end of the day, you can be conspicuous, you can go out and spend your money, but it doesn’t show the returns that you hope will show up,” says Wigging. “I sound gloomy, but the industry is getting better. Ultimately, the environment for success will get better. Companies have to act successfully in order to take advantage of what is happening. “

In the end, that might be the only good thing that comes from the rise and fall of MedMen. It’s another warning of what not to do in the cannabis sector.

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