Marijuana Business Magazine April 2021 by MJBiz Daily

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Insights for cannabis executives, investors & entrepreneurs

VOL 8 • ISSUE 4 • April 2021

The Compensation Spectrum Sector, company size and location all play a role in determining cannabis industry salaries and benefits

Buying a Business License on the Secondary Market Recruiting for Retail What Really Happened to Colorado’s Sweet Leaf?

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April FEATURES

TABLEOFCONTENTS

Retail staffers help a customer at Sunnyside in Buffalo Grove, Illinois. Courtesy Photo

Marijuana Business Magazine

April 2021 • Volume 8 • Issue 4

38 THE COMPENSATION SPECTRUM

Sector, company size and location all play a role in determining cannabis industry salaries and benefits.

56 SECONDARY EDUCATION

Purchasing a marijuana business license from the original owner can expedite industry entry, but risks exist for both buyers and sellers.

62 WHAT REALLY HAPPENED TO SWEET LEAF?

In an exclusive interview, Nichole West, former vice president of the ill-fated Colorado retail chain, speaks out.

From the Editor

Five Questions With Ryan Douglas

Hemp Notebook

Trends & Hot Topics

Company News

Industry Developments $12.95

Best Practices in Retail

VOL 8 • ISSUE 4 • April 2021

The Compensation Spectrum Sector, company size and location all play a role in determining cannabis industry salaries and benefits

On Our Cover +

Buying a Business License on the Secondary Market Recruiting for Retail What Really Happened to Colorado’s Sweet Leaf?

Industry Players The third annual Marijuana Business Magazine compensation issue contains our most comprehensive and compliant data ever.

Marijuana Business Magazine | April 2021

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MJBizCon 2021 LAS VEGAS

Since 2011, the cannabis industry has relied on MJBizDaily for useful business news, financial numbers and connections to industry leaders through our annual event, MJBizCon. Held each fall in Las Vegas—and now online as well—MJBizCon brings together more than 30,000 cannabis industry executives, entrepreneurs and major investors. Sign up for exclusive access to 2021 show updates and more information at mjbizcon.com. We can’t wait to see you in Vegas!

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Contributors

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Mary Pemberton Mary.Pemberton@MJBizDaily.com

Sales Team

David Braswell David.Braswell@MJBizDaily.com Savannah Brown Savannah.Brown@MJBizDaily.com Rachel Grundner Rachel.Grunder@MJBizDaily.com Molly McElwain Molly.McElwain@MJBizDaily.com Brooke Moore Brooke.Moore@MJBizDaily.com Alex Sutliff Alex.Sutliff@MJBizDaily.com

Kevin Huhn Kevin.Huhn@MJBizDaily.com

Laura Drotleff Laura.Drotleff@HempIndustryDaily.com Solomon Israel Solomon.Israel@MJBizDaily.com Matt Lamers Matt.Lamers@MJBizDaily.com Kristen Nichols Kristen.Nichols@HempIndustryDaily.com Omar Sacirbey Omar.Sacirbey@MJBizDaily.com Bart Schaneman Bart.Schaneman@MJBizDaily.com John Schroyer John.Schroyer@MJBizDaily.com Jeff Smith Jeff.Smith@MJBizDaily.com

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Marijuana Business Magazine | April 2021

Cassandra Farrington and Anne Holland Jessica Billingsley Tyler Beuerlein Liz Connors Mara Gordon Robert Groesbeck Jesce Horton

Chanda Macias Jim Makoso Roz McCarthy Kristin Nevedal Alanna Sokic Nancy Whiteman

To start/change/cancel your subscription, visit MJBizMagazine.com, call us at (720) 213-5992, ext. 1, or email us at CustomerService@MJBizDaily.com. Marijuana Business Magazine subscriptions are currently free to qualified U.S. cannabusiness professionals and investors age 21 and over only. To advertise with us, email Sales@MJBizDaily.com or call us at (720) 213-5992, ext. 2. Marijuana Business Magazine, Volume 8, lssue 4, April 2021 lSSN 2376-7375 (print); lSSN 2376-7391 (online) Marijuana Business Magazine is currently published 10 times per year by Marijuana Business Daily™, a division of Anne Holland Ventures Inc. POSTMASTER: Please send address changes to: Marijuana Business Daily, 3900 S. Wadsworth Blvd., Suite 100, Denver, CO 80235. Copyright 2011-2021 by Marijuana Business Daily, a division of Anne Holland Ventures lnc. All rights reserved. Materials may not be reproduced in whole or in part without written permission. For reprints of any article, please contact Customer Service. MJBizMagazine.com

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FromtheEditor | Kate Lavin

Opportunity of the Decade Talented candidates are actively seeking jobs after the unemployment crisis of 2020

o matter what their roles are, staffers at every workplace are curious about how their wages stack up—both against their peers and those with similar positions at other companies.

For the third year, Marijuana Business Magazine has dedicated the April issue to hiring and compensation. And thanks to a new partnership, this is the most accurate data set we’ve ever published. National compensation frim BlueFire Cannabis by FutureSense analyzed 4,800 unique data points from individual organizations’ submissions and anonymous payroll data from California-based Greenleaf Business Solutions to provide the industry’s most complete compensation survey. It is also the most compliant salary report of its kind, in that the figures on pages 46-47 meet antitrust and anti-collusion regulations set by the U.S. Department of Justice. (Read more about that on page 44.)

But with nearly 5,000 compensation data points to consider, BlueFire Cannabis has salary data for more than 100 positions in the industry. You can access these figures for free by downloading the final report later this month at content.futuresense.com/2021cannabiscompensationreport. And be sure not to miss the other stories in this issue’s cover package. Starting on page 38, we address how many jobs newly legal cannabis markets are likely to create, the industries from which multistate operators like to recruit executives and specialists and how minimum wage and equal-pay laws could affect the compensation landscape this year and moving forward. Regardless of your company’s compensation structure, we hope you’ll find this month’s cover story to be an invaluable tool for knowing how your business compares. Sincerely,

Not a Moment Too Soon The timing of this salary data is fortuitous: One year ago this month, 20.5 million Americans lost their jobs, according to the U.S. Bureau of Labor and Statistics (BLS). Fueled by the coronavirus pandemic, the U.S. unemployment rate reached 14.7%, marking the highest level of joblessness since the Great Depression. The BLS reports that unemployment is still hovering at more than 6%, well above pre-pandemic levels. According to Kara Bradford, owner of Seattle-based recruiter Viridian Staffing, “There are so many people who are extremely talented that have experienced job loss in the past year. We may not see a chance like this again for another 10 years to be able to get that talent over into the cannabis industry.” If that’s not making lemonade out of lemons, I don’t know what is.

But Wait, There’s More We divided the job titles listed in this issue into more than a dozen families—cultivation, manufacturing and retail, for example—and shared the salaries for one high, midlevel and entry level position in each family.

Marijuana Business Magazine | April 2021

Kate Lavin Marijuana Business Magazine Editor

FiveQuestions | with Ryan Douglas

How to Hire and Pay a Lead Grower A master cultivator is one of the most important hires a cannabis cultivation company can make, and the position deserves the pay to match By Bart Schaneman

t’s one thing to know how to grow a plant, but running a commercial cultivation facility is another skill completely. So says Ryan Douglas, a Florida-based cannabis consultant and former master grower at Tweed, a major cannabis producer with headquarters in Ontario, Canada.

When looking for a lead grower to manage and operate a cultivation facility, cannabis executives should expect to hire someone with a background in commercial agriculture or horticulture, according to Douglas. In turn, that person should be placed at the top of the grow’s pay pyramid and earn at least six figures, he added. Marijuana Business Magazine asked Douglas what to look for when hiring a lead grower, how much to pay the person in that position and how to retain them on staff.

What are some key considerations when hiring for a lead grower in cannabis? Cultivation businesses should hire for commercial plantproduction experience, not cannabis knowledge. Ten years of growing ornamental or edible crops on a large scale are more valuable than 10 years of raising a few cannabis plants at home. Commercial growers bring with them a wealth of experience managing people, production and facilities. For businesses that are laserfocused on early market penetration or rapid expansion,

these skills are often more valuable than cannabisspecific knowledge alone. Executives should not be hesitant to place a noncannabis person in charge of their crop. Commercial growers are trained to learn new crops quickly, and 90% of the concepts and techniques used in traditional horticulture are directly transferrable to cannabis. Whether it’s corn, cucumbers or cannabis, the fundamentals of managing a commercial-scale production site are the same.

How much should an executive expect to pay for this position? Executives should plan on hiring the best grower they can afford and anticipate them being one of the highest-paid positions in the company. A cultivation business makes money by selling what they produce, and the responsibility of the cultivation program ultimately rests on the shoulders of the lead grower. They directly influence the likelihood of success or failure for a cultivation business. Serious operators should anticipate paying six figures for an excellent grower. If the company forecasts selling $20 million of cannabis over the next 12 months, a $150,000 salary is easily justified. Smaller operations can get away with paying less for a novice grower, but they should be prepared for a long and expensive learning curve.

Executives should plan on hiring the best grower they can afford and anticipate them being one of the highest-paid positions in the company. —Ryan Douglas Cannabis consultant and former master grower

10 Marijuana Business Magazine | April 2021

What can a business owner do to ensure the cultivator is happy when it comes to salary, bonuses and other benefits? Be careful about production-based incentives because even world-class growers can only increase production by so much. A plant has a finite production capacity, and it would be unfair only to propose bonuses tied to production increases. A cultivator might be able to increase a grow room’s production by 15% by switching out varieties and playing with pruning techniques or fertilizer, but it’s unrealistic to assume they’ll realize this kind of increase with each harvest. Even under ideal conditions, a crop’s productivity will hit a ceiling, and your grower knows that. Once this happens, your grower may start looking for a new job. Instead, offer incentives based on improvements that are within the grower’s control. Are there ways to de-leaf or prune a crop so that more of the harvest is sold as premium flower and less for extraction? Are there ways to reengineer the flow of the post-harvest process so that employees spend less time grabbing plants, emptying bins or looking for tools? Is there sanitization technology that could be implemented to clean grow rooms and reduce the number of hours employees spend sloshing around mop buckets of bleach? Increasing production is a noble cause, but don’t forget about efficiency. Bonuses based on lowering production costs, minimizing labor and improving crop quality have more extended staying power than production incentives alone.

Where should an executive look to hire a lead grower? The easiest way to acquire a new grower is to poach from an existing, successful operation. Everyone is interested in hearing about new opportunities, and it’s flattering to be recruited. Even if the potential grower is not interested, they can likely refer you to a grower looking for work. Posting vacancies on cannabis job websites can generate mass interest, but be prepared to comb through plenty of unqualified candidates. Ask a friend or consultant who is knowledgeable about growing to help you weed through the dozens (or hundreds!) of resumes you are sure to receive. Networking at cannabis conferences is a great way to meet potential candidates, but due to show and attendee schedules, there typically isn’t much opportunity for a lengthy sit-down interview. Use conferences to make personal introductions and exchange contact information, then request resumes and schedule follow-up interviews later.

Lead growers should report directly to the operations manager or owner, depending on the size of the company. Courtesy Photo

How should the lead grower fit into the organizational structure of the company? If a cannabis company takes the time and money to hire the best grower it can afford, it’s critical to let them do their job. Too often, companies pile layers of management on top of the lead grower like a suffocating stack of pancakes. This results in multiple decision-makers and cumbersome committees that grant or deny permission, preventing growers from reacting quickly to daily challenges and implementing rapid solutions. To prevent this problem, a lean organizational chart is best. In small companies, the lead grower should report directly to the owner. In large companies, they should report to the operations manager—and that’s it! The organization of the cultivation team should also be kept simple. Under the lead grower are usually section growers who manage activities for a specific area. In greenhouses, this is generally defined by greenhouse bays, while indoor operations typically divide sections by grow room. Under the section growers are plant technicians or production assistants who perform the day-to-day labor and account for most of the hires on a cultivation team. Keeping the team lean and efficient not only keeps payroll down but also increases the overall productivity of the cultivation site.

Bart Schaneman covers cultivation and extraction for Marijuana Business Magazine. You can reach him at bart.schaneman@mjbizdaily.com.

April 2021 | mjbizdaily.com

HempNotebook | Kristen Nichols

Is Hemp As Green as We Think It Is? Hemp evangelists face a tough challenge in the climate battle: responsibility for the supply chain

might not be the most profitable (though research in this area is sorely lacking). • The inputs needed to grow hemp must be accounted for when considering its climate impacts. While no plant needs fertilizer or pesticides to grow, simply growing a plant and growing it for profit are two different things. All too often, farmers turn to chemical inputs to improve yields and per-acre returns. And growing organically doesn’t solve everything: Even the most earth-friendly inputs require transportation to the farm, which comes with carbon costs. • Where are commercial hemp plants getting water? If irrigation is not just from rainfall, where would that water otherwise be used?

emp sequesters carbon, presents low water and nutrient needs and is so versatile that many in the business have stopped counting the number of uses for the plant’s components.

This is all great news, right? So imagine my surprise when a prominent figure in the sustainability space gave a lackluster assessment of hemp as a climate solution at a university symposium. Asked whether hemp could stop climate change, Ross Macfarlane, vice president of the Sierra Club, called the answer “a big ‘it depends.’” Excuse me? This from a global thought leader on energy and a top executive at the Clean Energy Transition Institute?

Not What, But How After I recovered from my shock, I realized Macfarlane has important—if challenging—points for everyone in the hemp supply chain. No single plant is going to save us from an urgent need to reduce carbon emissions. Hemp might famously gobble up to 10 tons of carbon dioxide per acre, but that’s not enough to roll back climate change. We could plant hemp as far and wide as Jack Herer ever dreamed, but hemp alone can’t save us. And that’s assuming it’s grown sustainably. Macfarlane pointed out that hemp’s overall carbon footprint varies tremendously based on how it’s grown. Consider: • Not all varieties of hemp metabolize carbon dioxide at the same rates, and some of the best carbon-gobbling cultivars

What Is Hemp Replacing? Another eye-opener for me was to consider what hemp is replacing. I don’t mean hemp as an end product, where it can replace plastics and all sorts of things. The industry should also consider hemp as a crop—and what was in the ground before hemp was growing there. Macfarlane pointed out that if hemp acreage is replacing natural grassland or forest, that’s not a net gain for the planet. Even if hemp is being cultivated on land formerly growing other food crops, that hemp plot could be displacing food production onto other land—possibly contributing to local food insecurity. And what about indigenous farmers who might have formerly worked that land? Is there any

12 Marijuana Business Magazine | April 2021

thought given to sharing profits with displaced communities?

The Good News There’s still much to celebrate about hemp’s potential to help heal the planet. It can and should be a star player in global plans to find natural climate solutions. But as we celebrate hemp’s potential this Earth Day, I want to point out how Macfarlane concluded his talk to hemp producers about the plant’s ability to fight climate change. “Don’t buy into the hype. Let’s earn it and prove it.” Wise words. Kristen Nichols is editor of Hemp Industry Daily. She can be reached at kristen.nichols@ hempindustrydaily.com.

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Trends & HotTopics | Andrew DeAngelo

The Missing Ingredient Getting company culture right is the key to success in the cannabis industry

oes your cannabis company have a documented mission statement? How about a strategic plan? How often do you discuss company culture at the executive and board level? Are all of these things shared with the entire team on a daily basis? Most cannabis companies I consult with do not have any of these—and, if they do, they are not used much. Generally, the human-resources department is too busy to be focused on the big picture, and I’m often told by CEOs that there’s not enough time to invest in culture or get people oriented around it. There is marijuana to grow, manufacture and sell—and there are investors to make happy. There are lobbyists and regulators to lead. There are simply too many external forces to manage. I can understand that answer, as I have sold a fair amount of cannabis in my life. It’s still the wrong answer.

‘Culture eats strategy for breakfast.’ — Peter Drucker Culture is what eventually will save the necks of all cannabis companies, not strategy or a dynamic CEO. It’s the team that works together, not the brilliance of the board of directors, that will win the day. This business is difficult with many ongoing crises, most of which are moving at lightning speed. The only way to keep up is with a strong company culture. There will be at least one existential crisis for every company—if not a few of them. When the chips are down, strategy will not save you, but the right team and attitude might. As a consultant, I help leaders slow down enough to define the

culture they feel is best for their company and then hire the right team to fit within it. Some companies already have a culture, and it just needs a tuneup or some additional attention. In the heat of battle, it’s easy to forget to talk about how we work together, or the importance of listening and solving problems together. The urgency of the moment puts many of us into a default mode of boss/worker instead of team/goal. Falling into that trap can make things worse as staff become alienated or burned out and leaders lose their influence or positions.

HR and the Executive Team Two touchpoints are critical for building engaging and fun cultures. The first is at the top of the organization: The board and the CEO must define, communicate and engage in an inclusive process to create culture, which is a living thing and has to be worked on every day by these leaders. They also must exude the culture themselves and lead by the best of examples. The second touchpoint is HR and hiring. Companies that hire for culture—not just strategy or need—have better outcomes. Give me a worker with the right attitude and a little less pedigree than the Ivy Leaguer anytime. I’m looking for potential as much as I’m looking for expertise, because I can teach skills more easily than I can adjust attitude. If your company wants a sober, disciplined and results-driven culture, that’s great—just make sure you set those expectations in the hiring process. The CEO had better live and breathe by

14 Marijuana Business Magazine | April 2021

those same standards, too, or the company will be in a world of hurt. Let candidates know up front what kind of attitude and culture you’re trying to foster. Employees these days value the environment they’re in and the people they’re working with. Some workers love an intense place striving for growth. If that’s your company, test that attitude in the interview. Ask pertinent questions that are about temperament. I also employ stories to solicit a more nuanced response. I ask candidates to tell about a time they cooperated well with a group of people or failed to do so. I always inquire about why a story ended up with a certain outcome, whether it could have been different and how.

I also may ask a candidate about a useful leadership lesson and how they learned it. Allowing candidates to tell stories can loosen people up and get them off their script. Another culture tool in an interview is to ask the candidate to describe something simple, such as making a sandwich. When people teach others something, they reveal their emotional intelligence, their patience and their communication skills.

Culture in Crisis In the best of times, it’s easy to ignore, forget about or put off paying attention to culture and how we all work together. The pandemic has brought people together culturally to keep cannabis businesses open. But it also has mandated physical distance

between colleagues, creating a 24/7 emergency situation. Every day is an intense, long, difficult day. That’s hard on culture. Great leaders understand that and embed with those teams to make sure the team has good morale, offer extra compensation during this emergency time and stay with the team—not in the Ivory Zoom tower. By investing in a strong company culture, leaders will find tremendous ROI down the road, when another pandemic hits or a new regulation causes a crisis. Strategy is a wonderful tool to deploy when everything is going well, but when things are in crisis, it’s the culture that will pull the team together and allow them to win the moment. The CEO will look like a genius because, of course, he or she

invested in culture in the first place. Talent will come running as word gets out about a great company that’s a fantastic place to work. Not only will the company perform better, it will feel better for the performers, and the investors will give everyone a standing ovation. These are the outcomes we can look forward to when we invest in company culture in the global cannabis industry. Andrew DeAngelo, cannabis industry consultant and strategic adviser, is a leader with a proven track record of enacting systemic social change and developing best practices in marijuana. Co-founder of Harborside and Last Prisoner Project, DeAngelo has been an activist for more than two decades while pioneering legal cannabis.

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BEYOND LIGHT April 2021 | mjbizdaily.com 15

CompanyNews | U.S., Canada & International

U . S . D E V E LO PM E N T S

By Omar Sacirbey

Recent deals, acquisitions and other announcements from cannabis companies

Dutchie Raises $200 Million

Marijuana MSO Cresco Labs Files $1 Billion Shelf Prospectus Illinois-based marijuana multistate operator Cresco Labs filed a preliminary prospectus to raise up to $1 billion in securities over the next 25 months. Cresco is the latest cannabis company to file a large, so-called shelf registration as the investment climate for marijuana companies brightens. In January, Cresco raised $125 million in a securities offering in Canada that was enabled by a shelf registration filed in July 2019. That capital raise came around the same time Cresco signed a definitive agreement to acquire Bluma Wellness for $213 million in a move to expand into Florida’s high-growth MMJ market. Cresco’s shares trade on the U.S. over-the-counter markets and on the Canadian Securities Exchange.

Marijuana SPAC Silver Spike II Prices IPO to Raise $250 Million Silver Spike Acquisition Corp. II, a marijuana industry special purpose acquisition company (SPAC), priced an initial public offering on the Nasdaq exchange to raise $250 million. The company is issuing 25 million units at $10 each. Each unit includes one share and one-quarter of a redeemable warrant that entitles the holder to purchase a share at $11.50 per warrant. Silver Spike Acquisition Corp. II “intends to focus on businesses in the cannabis industry that are compliant,” but the SPAC could also target “related industries,” according to a preliminary prospectus filed with the U.S. Securities and Exchange Commission. “Given the management team’s extensive financial expertise, we may also pursue a business combination in the financial services and asset management industries.” Silver Spike Acquisition Corp. II is headed by founder and CEO Scott Gordon, who was also chief executive of a previous SPAC, Silver Spike Acquisition Corp., that merged with cannabis tech firm Weedmaps in December 2020.

16 Marijuana Business Magazine | April 2021

Cannabis retail technology platform Dutchie raised $200 million in a Series C funding round it says values the company at $1.7 billion. The funding round was led by investment firm Tiger Global and also included previous investors Casa Verde Capital and former Starbucks CEO Howard Schultz. The Oregon-based company also announced it had acquired two other marijuana software platforms, Greenbits and LeafLogix, for undisclosed sums.

Cannabis MSO Verano to Expand Via Deals Exceeding $100 Million Cannabis multistate operator Verano Holdings announced agreements to acquire a total of nine operating retail outlets or licenses in Arizona, Illinois and Pennsylvania for nearly $100 million in cash and tens of millions of dollars more in stock. The acquisitions include Perpetual Health Care in Arizona, which operates the Emerald Dispensary in Phoenix; the Herbal Care Center in Chicago; TerraVida Holistic Centers, which operates three medical dispensaries in Pennsylvania; and a license in Pennsylvania that would enable Verano to open three dispensaries. The announcement came shortly after Chicago-based Verano raised nearly $80 million for acquisitions and went public through a reverse takeover.

Charlotte’s Web Plans to Enter Marijuana Market Charlotte’s Web Holdings, a Colorado-based, hempderived CBD leader, said it signed a five-year purchase agreement option to acquire Stanley Brothers USA Holdings for $8 million. The deal is structured so that Boulder-based Charlotte’s Web can take over the marijuana business once the drug is legalized nationally—or perhaps earlier, depending on the policies of the stock exchange where the company’s securities are listed.

Schwazze Completes Acquisition of Cannabis Stores Schwazze, a Denver-based vertically integrated cannabis operator, said it has acquired the five remaining Star Buds retail outlets in Colorado for $72.3 million, including $27.5 million in cash. With the acquisition, Schwazze, formerly Medicine Man Technologies, now owns and operates all 13 Star Buds locations in Colorado. Schwazze previously acquired six Star Buds stores in December 2020 and two in February 2021—with all 13 outlets pursuant to a June 2020 definitive agreement. The terms included $26.9 million in sellers’ notes and $17.9 million in preferred stock.

MariMed Secures $46 Million to Expand Footprint Multistate marijuana operator MariMed of Massachusetts said it has raised $46 million to support acquisitions and repay most of its long-term debt. Hadron Healthcare Fund is providing the capital, including an initial $23 million in exchange for MariMed stock and warrants. The fund is managed by Hadron Capital, which is incorporated in the Cayman Islands. If all the warrants are exercised for cash, MariMed will receive additional proceeds of approximately $34 million on top of the $46 million, according to a news release.

SPAC to Acquire Four Marijuana Operations in Deal New York-based Greenrose Acquisition Corp., a special purpose acquisition company, entered into definitive agreements to acquire four marijuana businesses in a deal initially valued at $210 million. The companies to be acquired are Futureworks (doing business as The Health Center), Shango Holdings, Theraplant and True Harvest.

Greenrose said the acquisitions will establish a footprint in high-growth, limited-license markets that include new and potential recreational marijuana states. The $210 million deal will include about $170 million in cash, $15 million in stock and $25 million in debt, according to Greenrose, which will be renamed The Greenrose Holding Co.

Ascend Acquires Most of MedMen’s NY Cannabis Operation for $63 Million Massachusetts-based Ascend Wellness Holdings is acquiring an 86.7% interest in financially strapped MedMen Enterprises’ cannabis operation in New York for $63 million. Ascend Wellness has an option to acquire the remaining equity in the New York operation for $10 million, contingent on the launch of an adult-use marijuana market in the state. Under terms of the agreement, AWH will invest $35 million of cash into the MedMen New York subsidiary and issue a guaranteed $28 million loan to reduce the debt owed to the subsidiary’s senior secured lender.

April 2021 | mjbizdaily.com

CA N A DA D E V E LO PM E N T S

CompanyNews | U.S., Canada & International (CA$260 million) into the 1.7 million-square-foot complex. However, millions of dollars in additional spending could be needed if a buyer completes the greenhouse for the original purpose.

Fire & Flower Strikes U.S. Licensing Deal Aurora Cannabis Files $1 Billion Shelf Prospectus Aurora Cannabis filed a preliminary short-form base shelf prospectus to raise up to $1 billion by issuing securities over a 25-month period. Edmonton, Alberta-based Aurora filed the prospectus with Canadian securities regulators and with the U.S. Securities and Exchange Commission. After it’s finalized, the prospectus will allow Aurora to sell securities such as common shares, warrants, options, subscription receipts and debt securities. Shares of Aurora trade as ACB on the Toronto Stock Exchange and the New York Stock Exchange. Separately, Aurora is entertaining offers for one of the largest and most expensive marijuana greenhouses ever built. The company has put $205 million

Canadian cannabis retailer Fire & Flower Holdings is licensing its brand and technology to American Acres Managers, a private Canadian firm with marijuana retail ambitions in Arizona, California and Nevada. Under terms of the deal, Fire & Flower will license its eponymous store brand to American Acres along with its store operating system and Hifyre digital platform “on a royalty-free basis.” Fire & Flower said the company’s first branded U.S. store would open in Palm Springs during the first half of its fiscal 2021 year. The agreement also includes an acquisition option that would allow Fire & Flower to acquire American Acres “upon the federal legalization of adult-use cannabis in the United States.”

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I N T E R N AT I O N A L D E V E LO PM E N T S

British American Tobacco Strikes Deal With Organigram A subsidiary of cigarette maker British American Tobacco (BAT) and Atlantic Canada-based marijuana producer Organigram signed a $175 million strategic collaboration with a focus on research and product development. The BAT subsidiary acquired a 19.9% stake in Organigram by buying 58.3 million common shares at a price of $3.02 (CA$3.79). The deal lays the groundwork for BAT to capitalize on cannabinoid-based products and delivery systems and might herald similar investments if U.S. marijuana prohibition ends, experts said.

Curaleaf Enters Europe With $286M Acquisition Curaleaf Holdings of Wakefield, Massachusetts, signed

a $286 million definitive agreement to acquire Londonbased medical marijuana company Emmac Life Sciences. The purchase gives the multistate operator a major foothold in the European cannabis market and a leg up on rival businesses. The terms of the deal call for Curaleaf to pay $286 million up front, with 85% in Curaleaf stock and 15% in cash. The transaction includes another $57 million dependent on achieving certain performance targets, meaning the deal ultimately could total up to $343 million. Emmac, already a vertically integrated cannabis company, has an existing footprint in eight European countries, including the United Kingdom, Germany, Italy, Portugal and Spain. The company exports cannabis grown in Portugal to the Israeli marijuana market, for instance, and plans to ramp up production capacity significantly this year. Have a company announcement? Send a news release or general information to omar.sacirbey@ mjbizdaily.com. (Note: We’re looking for news about expansions, financing, deals, partnerships and similar developments, not product-related announcements.)

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IndustryDevelopments | International & State MAP LEGEND High level of medical development/implementation Medium level of medical development/implementation Low level of medical development/implementation Other - federally illegal but unique circumstances Recreational

Countries included have passed legislation at the federal level and must fulfill at least one of the following criteria: • Cultivation, manufacture or sale of medical and/or recreational cannabis allowed. • Doctors can prescribe medical cannabis. • Import and/or export of medical cannabis allowed. High: Countries at the forefront of the global industry. Frameworks are established, and adoption is well underway. Medium: Implementation has begun but is still limited or restricted; lots of room for the market to develop. Low: Legislation has been passed, but implementation is very limited or nonexistent. Decriminalization is not included.

National & International News New Attorney General Merrick Garland Offers MJ Sector Hope at Federal Level Merrick Garland, President Joe Biden’s pick for U.S. attorney general, was confirmed by a 70-30 vote in the U.S. Senate on March 9. The development was cautiously hailed by some marijuana advocacy groups. Garland doesn’t appear to have as negative a view of the cannabis industry as his predecessors, though questions still remain about how the Biden administration will approach marijuana. It’s unclear, for example, whether Garland might issue an updated version of the Cole Memo, which was a guiding Justice Department document for years under the Obama administration. Garland said during his confirmation hearings that he doesn’t believe prosecuting marijuana-related offenses

22 Marijuana Business Magazine | April 2021

in states that have legalized MJ is a good “use of limited resources” by the DOJ. But Garland did make clear he will continue to pursue some types of enforcement to “be sure there are no end-runs around the state laws that criminal enterprises are doing.”

Canada Extends Wage Subsidy Popular With Cannabis Producers Canada’s government is extending a COVD-19 pandemicrelated wage-subsidy program that has been tapped by more than a dozen federally regulated cannabis producers. The Canada Emergency Wage Subsidy (CEWS) program, which subsidizes wages for employers that have lost revenue because of the coronavirus crisis, was set to expire March 13. The program has been extended to June 5.

To qualify for the CEWS program, companies must show a drop in eligible revenue during the crisis compared to revenue from a previous period. Finance Minister Chrystia Freeland said businesses can use pre-pandemic revenue levels when applying for the subsidy in the coming months. The CEWS program has been utilized by most of Canada’s top cannabis producers, including Aphria, Aurora Cannabis, Canopy Growth and Tilray.

Mexican Lawmakers Forward Marijuana Legalization Bill to Senate as Deadline Nears Mexico’s Lower Chamber of Deputies approved a bill on March 10 to legalize recreational marijuana, putting the North American country one step closer to becoming the largest legal cannabis market in the world.

The legislation is expected to be approved by the nation’s Senate as well as President Andrés Manuel López Obrador. Lawmakers have until April 30 to pass a law after Mexico’s Supreme Court ruled in 2019 the prohibition of marijuana was unconstitutional. After the law is enacted, Mexico will join Canada and Uruguay as the only countries to legalize an adult-use cannabis industry. However, the scope of the industry and available business opportunities will be largely carved out by the regulations in support of the law. The bill approved by the lower house was stripped of a requirement to create a Mexican Institute for the Regulation and Control of Cannabis, a regulatory agency that would have been in charge of issuing regulations and giving out permits.

April 2021 | mjbizdaily.com 23

IndustryDevelopments | International & State

WA MT

MN ID

DE MD VA

TN AR

SC MS

RI PA

LA FL

■ Medical ■ Recreational HI

Note: This map does not include states that have legalized only CBD-based oils.

State News Alaska State officials are pressing a criminal case against two associated cannabis companies accused of falsifying business records, misusing pesticides, pesticide pollution and reckless endangerment. Ronald and Lacey Bass, owners of cultivator Calm N Collective and retailer Houston Grass Station, also have been charged. Alaska’s marijuana regulator recalled products from the cultivator and the retailer in January 2020, saying they were contaminated with myclobutanil, a fungicide, and cyfluthrin, an insecticide. Separately, Gov. Mike Dunleavy appointed Glen Klinkhart, interim director of Alaska’s Alcohol and Marijuana Control Office (AMCO) since 2019, to the role on a permanent basis.

24 Marijuana Business Magazine | April 2021

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IndustryDevelopments | International & State Arizona Nearly 400 hopeful cannabis entrepreneurs ponied up $25,000 apiece for an opportunity at an upcoming business license lottery, which will determine the winners of 13 new permits. The state Department of Health Services received 377 competing applications for the 13 vertically integrated licenses. The permits will be available only in eight rural counties: Apache, Cochise, Gila, Graham, Greenlee, La Paz, Santa Cruz and Yuma. It’s unclear when the licenses will be awarded, but the lottery for Cochise, Graham and Yuma counties might happen in April. Industry officials estimate the rural-area licenses will be worth at least $5 million.

California California is handing out $15 million in grant money to 10 cities and counties that have adopted social equity programs to help get minorities and those harmed by the war on drugs involved in the legal marijuana market. The new allotment, awarded by Gov. Gavin Newsom’s Office of Business and Economic Development and the state Bureau of Cannabis Control, builds on the $40 million previously awarded for the same cause. A minimum of $11.5 million of the funds will go straight to social equity entrepreneurs in the form of loans or grants, according to a news release.

26 Marijuana Business Magazine | April 2021

Colorado The state cannabis market hit a high-water mark—$10 billion in sales—since Colorado started selling licensed recreational marijuana in 2014. According to sales figures released by the Colorado Department of Revenue, the state’s recreational and medical marijuana retailers brought in $187.6 million in January 2021, bringing the market total to $10.2 billion. This comes after the state posted a record 2020, in which sales totaled $2.19 billion, a 25.35% increase over 2019.

Massachusetts State health-care providers may continue registering new medical cannabis patients via telehealth appointments instead of in-person visits, state regulators announced, citing the risk of exposure to COVID-19. The state initially allowed expanded telehealth services, including clinical visits for new medical marijuana certifications, last March as a result of the pandemic and will extend the services, according to the Cannabis Control Commission. Massachusetts health-care providers must ensure they can deliver the same standard of care and must comply with other requirements such as verifying a patient’s identity and ensuring confidentiality.

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IndustryDevelopments | International & State Michigan An aspiring cannabis business owner is suing Detroit for discriminating against marijuana business license applicants who don’t meet the definition of a resident. Plaintiff Crystal Lowe alleges in the lawsuit that the city’s licensing process gives preference to people who qualify under a Detroit Legacy stipulation. Legacy applicants get the first opportunity at licenses when the city begins receiving applications in April, the suit claims. The city then will consider applications from nonlegacy businesses that already have medical marijuana licenses, meaning applicants who are nonlegacy and non-MMJ licensees will be reviewed only if there are any permits left, the suit says.

Mississippi The state House of Representatives killed a Senate bill that would have created a legislative alternative to the medical marijuana program the state’s voters resoundingly approved in November. The move puts the fate of Mississippi’s medical marijuana program in the hands of the state’s Supreme Court. Mississippi’s highest court is scheduled this month to hear a challenge to Initiative 65, which nearly 74% of voters approved on Election Day. Despite the challenges facing the Mississippi MMJ program, the state Board of Health is moving ahead in its bid to develop regulations by July 1.

28 Marijuana Business Magazine | April 2021

Missouri State regulators extended the deadline for Missouri’s medical cannabis companies to open after the bulk of them failed to meet the one-year cutoff to be up and running. Roughly 260 of the state’s 370 licensed businesses now won’t have to open until as late as September, although each deadline extension is based on a company’s specific circumstances. The Missouri Medical Cannabis Trade Association said that more marijuana companies are expected to continue to open each week, although permits for a handful of marijuana manufacturing, transport and testing companies have been revoked.

Montana State lawmakers are mulling legislation that aims to prevent crosspollination between marijuana and hemp. The bill would require medical marijuana cultivators to keep their operations confined to indoor facilities such as greenhouses or hoop houses, leaving the outdoors for hemp production only. The bill’s sponsor, Sen. Tom Jacobson, said that most marijuana growers already grow indoors to maximize year-round production. MMJ growers oppose the measure, saying the bill would impact the investments they have already made in outdoor facilities. The proposal would not grandfather in marijuana cultivators already licensed to grow outside.

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IndustryDevelopments | International & State Nevada The Las Vegas City Council voted to rescind a citywide restriction on marijuana retail drive-thru operations. Marijuana business advocates and other industry stakeholders welcomed the move as one that will promote safety and commerce during the COVID-19 pandemic. Several Nevada jurisdictions already allow marijuana businesses to offer drive-thru service. Las Vegas marijuana retailers that want to add drive-thru options will have to follow regulations under which all other drive-thru facilities in the city currently operate.

New Jersey Gov. Phil Murphy on Feb. 22 signed a bill into law to implement a projected $1 billion recreational marijuana market. New Jersey is poised to become the largest marijuana market on the East Coast, and adult-use sales could begin before year-end. Rules now must be developed within 180 days. An existing medical cannabis operator could begin adult-use sales immediately after rules are issued—but only if the company can prove it has sufficient supply to meet MMJ demand. Licensing priority will be given to microbusinesses owned by residents as well as applicants from economically hard-hit communities or those impacted by the war on drugs.

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30 Marijuana Business Magazine | April 2021

New Mexico State lawmakers didn’t make the deadline for passing an adult-use marijuana legalization bill and sending it to Gov. Michelle Lujan Grisham, who has been pushing for legalization. Nora Meyers Sackett, the governor’s spokeswoman, indicated that Lujan Grisham likely would call a special session if the bill didn’t pass the finish line. The state House passed the legislation by a 39-31 vote. The latest version of the bill had retail sales starting as soon as April 1, 2022. An excise tax of 12% would be placed on sales of adult-use products while medical marijuana sales would be tax-free.

New York A lawsuit filed Feb. 5 claims that New York-based Hudson Health Extracts (HHE) merited a top-five ranking for its MMJ application in 2015. The company appears to have had the credentials that would make for a successful applicant, yet HHE ranked 13th among 43 applicants with a financial standing score of “average.” Since launching in 2016, the New York MMJ program has experienced turnover involving half of its 10 vertical licenses. The lawsuit blames these issues on the state awarding licenses to companies “that lacked the operational competence and the financial resources necessary to build a capital-intensive cultivation facility, run a processing plant, and sustain four retail locations spread across the state.”

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IndustryDevelopments | International & State Oklahoma Retail licenses for Oklahoma’s medical cannabis program declined 8% in 2020, the first contraction for the open-license market since MMJ sales began in 2018. Despite surging sales and patient numbers, Oklahoma ended 2020 with 181 fewer retail licenses than it did in 2019. Industry insiders say the contraction was expected and is the inevitable result of speculation, increasing competition and market saturation in a state that has no license caps for cultivators, processors and dispensaries. Despite the 2020 decline, the state led the nation in the number of retail licenses, ending the year with 2,057.

Oregon The state’s Water Resources Department uncovered water violations by 33% of hemp growers in a 2020 audit reviewing operations in southwestern Oregon. The department reviewed 187 the 1,000 hemp farms in the region, which represents about half the state’s hemp operations. Most of the violations were given to hemp farmers who irrigated their crops with well water, despite lacking water rights. More than 40% of the hemp growers visited said they had been trucking in water from municipal sources. The agency attributed the bulk of the problems to a lack of education and outreach, saying most farmers weren’t aware of restrictions.

32 Marijuana Business Magazine | April 2021

Rhode Island Gov. Dan McKee wants to legalize adult-use cannabis, proposing a program that would issue 25 retail licenses per year with a market launch in April 2022. McKee included the proposal as part of his fiscal-year 2022 budget. McKee’s proposal includes five retail licenses for minority business enterprises, establishing an Office of Cannabis Regulation, a retail excise tax of 10% and a weight-based excise tax on marijuana cultivation. The plan also would create a task force to make recommendations on the marijuana industry.

South Dakota State lawmakers will not allow qualifying medical marijuana patients to use telehealth to consult with doctors or receive recommendations for cannabis. The move is in contrast to other states with MMJ programs that have been adding telemedicine consultations during the COVID-19 pandemic. South Dakota’s House voted 38-30 against a bill that would have allowed telemedicine, even though 69% of voters approved medical marijuana in the November election. The telemedicine defeat follows other efforts to stymie or slow the rollout of medical and recreational cannabis legalization in South Dakota.

April 2021 | mjbizdaily.com 33

IndustryDevelopments | International & State Texas A freak ice and snowstorm that caused more than $600 million in damages to the state’s agricultural economy in February largely spared the hemp industry. Many of the state’s hemp farmers hadn’t planted their crops yet. “In South Texas, we won’t be planting until March or so, but the further north you go, that will be closer to June,” said Noel Garcia, chief operating officer and head crop production consultant with TPS Lab in Edinburg, Texas. Hemp might be tough enough to withstand cold, with fiber varieties faring better than some others.

Vermont Voters in Burlington, Montpelier and at least 16 other Vermont towns approved recreational cannabis sales in their communities. Residents of at least 27 cities and towns voted March 2 on whether to allow adult-use marijuana businesses as part of the state’s annual Town Meeting Day, when communities decide local issues such as whether to raise property taxes or how to spend the municipal budget. The Vermont Legislature drafted a recreational marijuana measure that became law last October, but it requires towns and cities to approve of recreational licensees doing business within their boundaries. Recreational sales aren’t expected to begin in Vermont until October 2022 at the earliest.

Virginia State lawmakers narrowly approved compromise legislation Feb. 27 to legalize a commercial recreational marijuana program that could generate nearly $1.5 billion in annual sales within five years of the scheduled start. The measure includes a clause that requires the General Assembly in 2022 to reenact a number of provisions of the bill, including those that detail the regulatory and market structure such as licensing. Legislators agreed to establish an independent agency, the Cannabis Control Authority, to oversee an adult-use market. Gov. Ralph Northam is reportedly trying to expedite sales before the 2024 start date.

Washington state David Postman was appointed chair of the state’s Liquor and Cannabis Board (LCB) by Gov. Jay Inslee. Postman, who served as Inslee’s chief of staff from December 2015 until Nov. 15, 2020, started his six-year term on March 15. He replaces Jane Rushford, whose term expired last month. Postman joins current board members Ollie Garrett and Russ Hauge. Rick Garza, the agency’s director, manages day-to-day operations.

Note: Entries sourced from Marijuana Business Daily, Hemp Industry Daily and other international, national and local news outlets. These developments occurred before this magazine’s publication deadline, so some situations may have changed.

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The

Compensation

38 Marijuana Business Magazine | April 2021

Spectrum

By Omar Sacirbey

Sector, business size and location all play a role in determining cannabis industry salaries and benefits

April 2021 | mjbizdaily.com 39

The Compensation Spectrum

Robust Yet

Realistic

he cannabis industry continues to pay competitively, with statistics from recruiters showing yearover-year compensation increases for most top, mid- and lower-level positions. There is less evidence of the “insane lack of discipline on pay” that some marijuana companies exhibited three or four years ago, said Dan Walter, a compensation specialist and managing consultant for San Rafael, Californiabased BlueFire Cannabis by FutureSense, the national compensation strategies firm that provided cannabis business payroll data for this report. “We’re seeing more people being paid relative to their position in the company as opposed to just being paid for a title or for a relationship,” he said. What are the consequences of this compensation evolution and upheaval? Executive and lower-level positions continue to enjoy solid compensation increases, while midlevel positions have seen more modest increases in compensation—and even some declines. Compensation increased the most in parts of the cannabis supply chain that experienced sales increases—most notably in cultivation and retail. Meanwhile, roles related to manufactured cannabis products experienced more tepid growth. Mature and growing marijuana companies require higher-level team members who have experience scaling businesses.

That talent pool remains relatively small for cannabis companies, but it has been growing—especially over the past year, when layoffs released a flood of experienced individuals into the job market.

Competitive Comp

“Cannabis is becoming more and more of a competitive space. All the MSOs (multistate operators) that are expanding are hiring from a similar talent pool. So, salaries are definitely increasing,” said Liesl Bernard, CEO of CannabizTeam, a national marijuana-focused recruitment firm headquartered in San Diego. Walter concurred, adding that smaller cannabis companies should also be prepared to pay executives competitively and offer better-than-average wages to lower-level employees. “You should know that if you want to hire a C-suite officer at your cannabis company, and your cannabis company has more than 50 people, you’re probably going to pay them somewhere between $150,000 and $200,000 a year,” Walter said. “As a startup, you need to know that if you’re going to hire people working in your stores, you’re probably going to pay them $15 an hour or regardless of what minimum wages are (in your market) or what you think somebody at Taco Bell makes down the street.” “Putting together a competitive compensation package” is critical for

40 Marijuana Business Magazine | April 2021

Between pandemic layoffs and the rapidly declining stigma around marijuana, there has seldom been so much talent available to cannabis industry executives looking to hire. Nevertheless, it’s as important as ever to recruit wisely, vet candidates and compensate them appropriately. Here are things to consider when evaluating business staffing needs: • Thanks to newly legal marijuana markets launching and more companies starting or expanding, job growth has increased dramatically during the past three years. The number of workers required by the industry will continue to increase—at least for the short term. • Cannabis industry salaries continue to be competitive, and payroll data shows the cultivation and retail sectors are enjoying solid growth in compensation. • While cannabis companies continue to recruit heavily from mainstream businesses to fill certain executive and specialized positions, an increasing pool of candidates has both mainstream and cannabis industry experience. • Tech personnel are also in high demand, driven by the need for online order and delivery frameworks. • States seeing especially strong job growth include California, Colorado, Illinois, Massachusetts, Michigan and Oklahoma. • While workers come to the marijuana sector with a variety of experience, highly regulated industries such as alcohol and food have proved to be especially good sources of talent for marijuana companies.

companies to win the recruitment battles shaping up in the industry, Bernard said. “More and more, we’re seeing companies recruit people with compensation packages that have higher base salaries, have some sort of equity and a bonus component to it, in order to attract the right talent.”

States with Salary History Bans Salary History Bans No Laws Established

More than half of states have passed salary history bans, which prohibit companies from asking job candidates about their wages at current or previous jobs. The trend is intended to prohibit unequal compensation for job candidates, specifically women and minorities who often are paid less for the same work. In Colorado, the new Equal Pay Act also requires employers to include salary information in job advertisements.

Executive Salaries

While the cannabis industry has been drawing executive talent from mainstream businesses for a few years now, the trend is accelerating as companies expand. When growing businesses become more complex to manage, they require a higher degree of talent that is harder to find, which pushes up salaries, compensation experts explained.

“In terms of competitive pay, the CEO or other executives at a top cannabis company won’t make as much as the executives at top mainstream companies,” Walter said. “But the specialists at a big cannabis company will make comparable pay—or more—compared to specialists in other industries.” According to a report from CannabizTeam, marijuana is seeing “a second wave of senior management …

drawing from proven business leaders from the CPG (consumer packaged goods), biotech, food and beverage, retail, financial services and pharma industries. Demand for this new talent has pushed average executive comp up as much as 16% in 2020.” Bernard said highly sought-after candidates who can command high compensation include people from compliance backgrounds, retail veterans

April 2021 | mjbizdaily.com 41

The Compensation Spectrum who have managed multiple stores, chief financial officers and lawyers from global companies. Bernard noted there’s a big difference in chief financial officer pay now compared to four or five years ago. “As MSOs grow, get more funding and move into new states, they need people with public company experience. … They need more sophistication. And, because of that, they have to increase their salaries as well,” she said.

Sales and Salaries

Multiple factors independent of the candidate influence salaries, including how well a company’s product lines are doing. In the marijuana industry, the degree of success along the cannabis supply chain could have an impact as well, observers said. Marijuana Business Daily found that the average price of smokable cannabis and pre-rolls was up sharply in 2020, while just about all other categories—edibles, infused beverages, vape cartridges, concentrates and others—saw declines, stayed flat or had modest gains at best. Compensation data from Denverbased cannabis recruitment firm Vangst echoes this trend. Cultivation salaries were up 5% in 2020 compared to 2019, according to the company. The top posts—cultivation director and cultivation manager—saw salary increases of 25% and 3%, while salaries for lower-level posts such as trimmer decreased or stayed flat. Retail salaries were up 3% in 2020 over 2019, Vangst reported. Salaries in the extraction sector, meanwhile, were down 4% in 2020 compared to 2019.

Future Outlook

While extraction and manufacturing salaries are down compared to cultivation and retail salaries, they are expected to bounce back as the economy recovers, cannabis businesses expand and consumers can afford more expensive, value-added products such as edibles and infused beverages, Walter said.

People with science backgrounds will become a hiring priority because of increased industry regulation, experts said. Photo courtesy of Peak Extracts

“Specialists at a big cannabis company will make comparable pay—or more—compared to specialists in other industries.” - Dan Walter, compensation specialist and managing consultant, BlueFire Cannabis by FutureSense As the industry matures and delves into more sophisticated products and garners more scrutiny from regulators, people with science backgrounds will again become a hiring priority. “Regulators are going to force more science into this,” Walter said. “There are already a few companies saying, ‘Hey, this is a competitive differentiator for us.’” The right talent comes down to having the right experience, which increasingly means professionals who have both mainstream experience and legalmarket cannabis experience. Ideally, that mainstream experience will include tenures at small startup companies and large, established companies. “We do get more requests for cannabis experience,” said Kara Bradford, CEO and founder of Viridian Staffing, a

42 Marijuana Business Magazine | April 2021

marijuana-focused recruitment agency based in Seattle. She said companies often say they’d like an executive from CPG with at least five years of food and beverage experience before entering the cannabis space. And on top of that, they want the candidate to have another five years in marijuana. “There are a few people who can do that, but you’re going to have to pay for them, because that’s a limited pool of individuals who have that much experience on both sides,” Bradford said. “Absolutely they can ask for higher salaries.”

Omar Sacirbey is a reporter for Marijuana Business Magazine. You can reach him at omar.sacirbey@mjbizdaily.com.

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INSTALLATION

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The Compensation Spectrum

Download the full report:

content.futuresense.com/ 2021cannabiscompensationreport

Denver recruiting firm Vangst said retail salaries went up 3% from 2019 to 2020. Photo by Sean Capshaw

What Makes Compensation Data ‘Compliant?’ The salaries listed in this section represent some of the cannabis industry’s first federally compliant compensation listings to date By Matt Finkelstein

s the cannabis industry continues to expand across the United States, so does the need for compensation data that follows federal regulations and guides sound business practices. While numerous salary guides are produced each year, the U.S. Department of Justice has rules regarding the collection and dissemination of compensation data. These laws, which are part of antitrust and anti-collusion regulations, are meant to protect the anonymity of organizations and employees while ensuring unbiased results when producing compensation surveys. Our understanding of these regulations include: • The survey must be managed by an independent third party such

as a compensation consultant, government agency or trade association. • The information provided by survey participants is based on data more than three months old. • There are at least five companies reporting data for each job or position. • Data is not displayed if a disproportionate percentage of the underlying incumbent data comes from one facility. • Information is sufficiently aggregated, so the public won’t be able to identify compensation paid by any particular participant or company. Utilizing third-party surveys that adhere to these regulations might

44 Marijuana Business Magazine | April 2021

provide an extra layer of compliance and protection—not to mention following best practices that support organizational growth and success. BlueFire Cannabis by FutureSense, Marijuana Business Magazine, the National Cannabis Industry Association and Greenleaf Business Solutions have worked together to produce a compensation survey that adheres to these regulations and is actionable for cannabis companies and ancillary businesses nationwide.

Matt Finkelstein is a consultant with BlueFire Cannabis by FutureSense, which provided the data for this report.

The Compensation Spectrum

Industry Wages To access compensation data for more than 100 cannabis industry jobs, visit content.futuresense.com/2021cannabiscompensationreport

ANNUAL SALARY Job Title

25th %

50th %

75th %

$144,231 $180,000 $110,769

$265,000 $225,000 $192,000

$288,000 $226,120 $192,000

$160,892 $75,000 $40,040

$192,308 $95,000 $42,009

$256,250 $100,900 $44,927

$66,021 $44,859 $36,214

$83,400 $47,000 $43,300

$87,600 $49,400

$210,850 $71,800 $33,372

$228,250 $80,854 $37,440

$75,000 $40,800 $35,360

$79,483 $44,250 $40,700

$155,100 $90,850

$184,311 $112,000

EXECUTIVES Chief Executive Officer President (not CEO) Owner-Operator

ACCOUNTING AND FINANCE Chief Financial Officer Manager Associate/Assistant/Specialist/Coordinator

BUSINESS Human Resources Manager Office Manager Customer Service Specialist

CULTIVATION Vice President of Production/Cultivation Manager Technician

$148,548 $65,853 $32,186

DISTRIBUTION Manager Inventory Specialist/Clerk/Associate Warehouse Associate/Clerk/Worker

$68,548 $40,400 $33,586

INFORMATION TECHNOLOGY (IT) Top Executive Manager

$143,198 $85,887

46 Marijuana Business Magazine | April 2021

LEGAL Top Executive/ Corporate-General Counsel Compliance Manager Compliance Specialist/Associate/Coordinator

$138,851 $76,900 $49,000

$162,500 $85,600 $51,700

$239,159 $91,700 $65,200

$240,318 $83,521 $52,000

$275,000 $105,500 $52,285

MARKETING AND PUBLIC RELATIONS Chief Marketing Officer Manager Coordinator/Specialist

$226,700 $65,141 $51,240

MANUFACTURING AND PRODUCT DEVELOPMENT Top Executive Manager Associate/Assistant/Technician/Worker

$135,307 $68,998 $32,760

$156,478 $82,866 $34,320

$192,600 $66,021 $43,059

$260,345 $73,900 $52,069

$310,000 $84,475 $56,074

$104,100 $39,196 $30,464

$135,000 $55,385 $31,314

$162,500 $59,148 $32,488

$135,000 $54,464 $40,400

$142,957 $66,021 $52,069

$216,400 $81,657 $65,450

$99,882 $42,915

$143,081 $44,909

$155,579 $55,375

$120,513 $54,321 $31,200

OPERATIONS Chief Operating Officer Manager Coordinator/Specialist

RETAIL Director of Retail Store Manager Budtender/Customer Service Associate

SALES Vice President Account Manager Sales Representative/Associate

SCIENCE Top Executive Lab Technician

April 2021 | mjbizdaily.com 47

The Compensation Spectrum The food and beverage industry has proved to be a popular area for recruiters looking to fill positions at cannabis companies. Photo by Bill Reitzel

48 Marijuana Business Magazine | April 2021

Green Thumb Industries owns Rise cannabis stores. Photo courtesy of Rise

Where Do MSOs Cast Their Nets? Beverage, consumer packaged goods and other highly regulated industries offer fertile territory for hiring, executives say By Omar Sacirbey

ertically integrated multistate operators need dozens of different skill sets on staff, debunking the fantasy of a one-stop shop for job candidates. That said, there are a few sectors and mainstream companies that marijuana hiring managers like to lean on. “When we’re building out our manufacturing or CPG (consumer packaged goods) side of the business … we tend to look at the big CPG companies. Procter & Gamble, General Mills (and) large, blue-chip companies that have strong maintenance organizations and strong engineering organizations focused on rigor in their processes,” said Joey Muehlstein, director of talent acquisition at Chicago-based

MSO Green Thumb Industries. Jushi Holdings, a Florida-based Muehlstein said about 75% of the MSO, also seeks out candidates from 1,300 employees GTI hired in 2020 highly regulated industries such as were hourly workers—especially those food processing, according to Nichole in the company’s retail and production Upshaw, executive vice president of facilities. human resources. “On the shared-services side … “GMP certification is very important,” we find a lot of really good success Upshaw said, referring to job applicants out of alcohol (companies): Diageo, with experience adhering to Good Constellation Brands, Manufacturing Practice Molson-Coors. We find guidelines. “We have a lot of good talent out of HR people in every state the pharmaceutical space: making sure we are hiring Baxter, Abbott,” Muehlstein the best people we can for said. “More generally, our dispensaries or our we are putting a lot of growing and processing emphasis on advanced facilities.” degrees, especially in our Upshaw added that some Nichole Upshaw leadership positions.” roles are so specialized they

April 2021 | mjbizdaily.com 49

The Compensation Spectrum

Tilt Holdings owns vaporizer maker Jupiter Research, which has several positions that require specialized knowledge. Courtesy Photo

require cannabis experience in addition to mainstream experience. She noted that Jushi had roughly 160 positions that sat open for months last year before the right candidates came along. Nevertheless, the company has gone from about 200 employees at the end of 2019 to 675 today. The leader of Tilt Holdings, a Phoenixbased MSO that is focused more on wholesale than retail sales but also owns vaporizer maker Jupiter Research, said the company draws from a “pretty diverse” set of industries. “If I’m looking for a master grower or a lab technician or some R&D for Jupiter, those are going to be more specialized,” Tilt presidemt Gary Santo said. “Those are the folks that will come out of those more regulated manufacturing-type industries or agricultural backgrounds.” Santo said Tilt’s recent opening for a vice president to lead its marketing efforts drew many candidates from the beverage sector. “They understand how to build brands at the corporate level and then bring it down to the various independent individual components—as opposed to a pure CPG marketer, where I’m just going to build it out by individual product line,

“We tend to look at the big CPG companies ... that have strong maintenance organizations and strong engineering organizations focused on rigor in their processes.” - Joey Muehlstein, director of talent acquisition, Green Thumb Industries

Gary Santo

like Procter & Gamble,” Santo explained. “We’re seeing more and more food and beverage (candidates) along those lines. “I think when it comes to our lab folks, you’re probably seeing a little

50 Marijuana Business Magazine | April 2021

more life-science backgrounds, folks who understand compounding, have a pharmacy background. They understand the processes—and, more importantly, the regulatory environment.” Bob Fireman, CEO of Massachusettsbased MSO MariMed, has found success hiring for the company’s infused product lines by tapping employees from the CPG and beverage sectors. He’s also hired workers from Waters, a Massachusetts company that makes scientific equipment and products. “Not their expensive guys,” he clarified, “but the guys that understood that the cannabis industry was going to be an opportunity.”

The Compensation Spectrum

Rise currently has marijuana retail outlets in multiple states including this one in Florida. Photo courtesy of Rise FL

52 Marijuana Business Magazine | April 2021

Cannabis Job Numbers Climbing Influx of capital, expanded legalization and social-distancing regulations contribute to uptick in hiring By Omar Sacirbey

f job creation and hiring are measures of an industry’s growth, then cannabis is going gangbusters. That means cannabis executives must use diligence and savvy when sifting through resumes. While the quality of candidates for marijuana jobs has improved significantly in recent years, only a handful of applicants will be a truly great match for your business. “The type of talent that we were trying to attract in 2017 wasn’t interested (in the marijuana sector). Now, they’re banging down our door,” said Joey Muehlstein, director of talent acquisition at Green Thumb Industries, a Chicago-based multistate operator that in 2020 hired about 1,300 people, roughly doubling its workforce. Green Thumb received more than 700 applications for a recent job listing for a regional retail director. “We get to be very selective in who we speak to and who we’d like to interview,” Muehlstein added. “The bar is raised.” In this type of environment, Kara Bradford, CEO of Seattle-based Viridian Staffing, advises companies to take advantage of the availability of the talent while continuing to practice prudence. “Companies have pulled back from hiring as aggressively as they would have because of COVID-19—and being conservative in your hiring strategy for 2021 is recommended,” she said. “But I don’t think that they need to be as conservative as they were in 2020. Companies that have been holding back a little might be able to take some calculated risks that they weren’t taking this past year.”

Bouncing Back From Pandemic Layoffs

“Cannabis jobs are expanding super fast. In the past three or four years, we’ve seen absolute expansion, 30% year-overyear growth in jobs being created,” said Liesl Bernard, CEO of CannabizTeam, a San Diego-based national recruiting firm focused on the marijuana industry. Bernard said there are roughly 250,000 full-time cannabis-related jobs in the United States. “We see that number growing exponentially over the next few years,” she said. “And we’re expecting there to be half-a-million jobs three years from now in the cannabis industry.” Karson Humiston, CEO of Vangst, a national cannabis-focused recruiting firm based in Denver, was even more bullish. She said the number of marijuana industry jobs has grown from 120,000 in 2017 to 321,000 today. “Cannabis businesses are raising money again, and capital is moving into the space,” Humiston said. “We think 2021 will be the biggest hiring year the cannabis industry has ever seen.” Marijuana companies are back to robust hiring after job cuts and hiring freezes spawned by a dearth of capital in 2019 and pandemic-induced recession in early 2020, observers said. Key factors driving hiring include the sales boom that cannabis has enjoyed in the past year, complemented by increased funding that is allowing marijuana companies to expand staff numbers. “In the beginning of the pandemic, we saw mass layoffs and mass hiring

freezes across the majority of cannabis businesses,” Humiston said, adding that the trend affected roughly 80% of companies in the industry. But many of those businesses ultimately recovered. A year later, Humiston said, her clients are again doing well, hiring and have “really promising plans” for 2021.

‘Essential’ Effect

The “essential business” designation bestowed upon marijuana companies in nearly 30 states with legal cannabis markets is fueling the hiring as well. “Once it was clear that cannabis was deemed essential and that online ordering and delivery was a trend, we started seeing a lot of those ancillary businesses do really well, which resulted in them having the ability to hire more people as well as raise more capital,” Humiston said. She added that companies that raise capital usually spend some of it on new hires. Humiston cited Dutchie, a national online ordering platform based in Bend, Oregon, and Grassdoor, a Los Angeles delivery service, as examples of companies that profited because of pandemic regulations and were able to hire more staff. Dutchie, for example, roughly tripled its staff in 2020, from 40 people to about 120, Chief Financial Officer Ross Lipson said. “The pandemic really boosted the need for businesses like theirs,” Humiston said. Implementing social-distancing protocols also prompted hiring at some companies. For example, a producer-

April 2021 | mjbizdaily.com 53

The Compensation Spectrum

States Increasing Minimum Wage in 2021

Half of U.S. states, many with legal medical and recreational marijuana businesses, are increasing their minimum wage this year. Yet many marijuana businesses, including retailers, already pay above the minimum to retain employees.

Wage increase

WA MT

No increase

PA IL

KS OK

VA NC

TN AR

States with legal marijuana markets Recreational and/or medical

SC MS

CT NJ DE MD

NH MA RI

FL HI

Data from BlueFire Cannabis by FutureSense shows the average salary for budtenders is $31,314 per year, or $15.05 per hour, assuming a 40-hour workweek. The federal minimum wage is $7.25, although some states have minimums set as high as $14 per hour. Emeryville, California, boasts the highest minimum wage in the nation: $16.84 for hourly workers.

processor that once had 12 people working at 12 stations during a single shift might now need to spread workers out between two shifts. That could require an extra shift manager as well as one or two more workers to keep productivity at previous levels. “If you are adding a couple of workers and an additional shift—and multiply that by the thousands of cannabis companies out there—you can see the compounding effect that it starts to have on job creation,” said Bradford of Viridian Staffing.

Hot States and Future Outlook

While states with new cannabis markets are likely contenders for the most job growth, established markets are still

experiencing robust hiring, cannabis industry experts revealed. Recruiters said the most jobs are being created in California, Colorado, Florida, Massachusetts and Oklahoma, while Illinois and Michigan also are considered big states for job creation. Bradford noted that while urban and suburban areas continue to attract new cannabis businesses, more are going into rural areas. “In both newer and older markets, we’ve really seen a push into the rural areas, and a lot of that is a result of the price pressures on the market,” she said. Bernard anticipates that year-overyear job growth will continue or increase as more medical-only states legalize recreational marijuana and holdout states legalize MMJ. She also

54 Marijuana Business Magazine | April 2021

expects New Jersey and New York to become major job creators once they get recreational marijuana programs launched. According to a 2020 report from Vangst, in the next five years, 40,000 cannabis jobs will be created in New Jersey and 25,000 in Arizona. Given the number of talented people who have been laid off from other industries, there has seldom been a better time for cannabis companies to hire, Bradford said. “There are so many people who are extremely talented that have experienced job loss in the past year,” she said. “We may not see a chance like this again for another 10 years to be able to get that talent over into the cannabis industry.”

Secondary

Education

56 Marijuana Business Magazine | April 2021

This 20-acre cultivation, manufacturing and distribution business in California City, California, is listed for sale on CannaMLS. Courtesy Photo

Purchasing a marijuana business license from the original owner can expedite industry entry, but risks exist for both buyers and sellers By John Rebchook

April 2021 | mjbizdaily.com 57

Secondary Education

arijuana business owners seeking to sell their operations on the secondary market are sitting in the catbird seat, experts say. Multistate operators wishing to expand their footprints are fueling demand, as are investors entering the market anticipating federal marijuana reform. “With $1.6 billion in capital raised in January alone, public cannabis companies now have a lot of cash on their books, so I think we are going to see a lot of mergers and acquisitions this year,” said Charles Alovisetti, a partner at Denver-based cannabis law firm Vicente Sederberg. There is an “optimistic expectation of accelerated federal cannabis reform now that the Democrats control the White House and Congress,” added Jade Green, founder and CEO of Seattle-based CannaMLS, a nationwide listing service for marijuana properties. At the request of Marijuana Business Magazine, Green looked at the activity of buyers and sellers contacting CannaMLS in the first six weeks of 2021 compared to the same period in 2020. The increase in activity, Green said, was “incredible.” Interest from buyers jumped 427% between January 2020 and January 2021, and seller interest rose by 500%, according to CannaMLS records. In the first two weeks of February, buyer interest was up 500% from the same period in 2020. Alovisetti, who is based in Vicente Sederberg’s Boston office and is licensed to practice law in Colorado, Massachusetts and New York, said he expects that special purpose acquisition companies, also known as SPACs, will be major players in buying private cannabis firms this year and bringing them public.

KNOW WHAT YOU’RE SIGNING UP FOR

While demand for existing marijuana operations perhaps has never been hotter, experts said there are tips and red flags that both sides should be aware of before agreeing to acquisitions.

Charles Alovisetti

Veterans in the marijuana licenseresale market say 2021 could be the biggest year yet for mergers and acquisitions. But buying a company can be perilous if you don’t know what red flags to look for or have experts guiding you in the process. Business brokers, attorneys and consultants told Marijuana Business Magazine that buyers and sellers should keep these things top of mind when considering a deal:

For example, it is crucial that sellers don’t price their operations too high. “A lot of sellers think their business is special and deserves a premium price. If other dispensaries in your city are selling for 1X gross revenue, you should realize you are not likely to sell your dispensary for 2X gross revenue,” said marijuana attorney Alex Freedman, founder and principal of Los Angeles-based Freedman Strategic Consulting. For help pricing your business, interview brokers to find out what your business is worth and how they will help sell it. Lawyers and credit lenders well-versed in local, state and federal marijuana laws will be helpful in vetting potential buyers and closing the deal. Buying an existing marijuana license from an ongoing MJ business is especially daunting for newbies, according to Green. “For investors interested in purchasing a license on the secondary market, I would first advise (that clients be) 100% sure they are ready to enter the cannabis industry at all,” Green said. She noted that the industry is a “highly complex, ultra-fragmented, federally illegal business that can take years to understand—let alone successfully operate in.” “From IRS rule 280E (that prohibits tax write-offs) to a complete lack of interstate commerce, there are plenty of challenges that aren’t common in any other multibillion-dollar industry,” Green pointed out.

58 Marijuana Business Magazine | April 2021

• Overpricing a marijuana business positions sellers for failure before they’ve spoken with any potential buyers. To price your company competitively, find out how other businesses in your sector are priced relative to revenue and use that as a guide. A business broker can also help come up with the perfect number. • If your professional background is not in cannabis, know that planttouching companies are not eligible to take standard business tax deductions, and licensing fees will be substantial. • Don’t take the seller’s word for it when it comes to ease of license transfer. Check in with your local regulator to learn exactly what documentation and fees are necessary to complete the deal. • Success in other industries does not always equate to success in the marijuana industry. Onerous tax laws command a large part of revenue, and regulations hamstring many businesses in areas such as transportation and security.

Just buying an MJ license can be a time-consuming task, which will include a criminal background check. “Most jurisdictions require background checks for new owners,” Freedman noted. “Often, the most difficult part of buying a license is just the lengthy wait to get a response from regulators,” added Freedman, who previously served as general counsel to Los Angeles’ Department of Cannabis Regulation and Cannabis Regulation Commission.

Christopher Stefan

There can be real advantages to buying a turnkey operation as opposed to starting one from nothing. “When you build from scratch, you face many headwinds in the form of entitlements, regulatory agencies and construction timelines,“ said Christopher Stefan, a Denver-based cannabis broker and principal of Desarollo Real Estate. “In cannabis, all of these things take twice as long as in a conventional transaction, and things tend to drag out,” Stefan said. “Buying a cannabis business gives the buyer the benefit of time, which accrues to the bottom line.”

HEAVY HITTERS ARRIVE

Although some individual investors look to get into the marijuana industry, Alovisetti predicted most of the acquisitions this year will be by multistate operators looking either to enter new markets or expand their footprints in states where they already have operations. In January, Chicago-based Cresco Labs announced it was entering the Florida market by buying Bluma Wellness in a deal valued at $213 million. “We identified Bluma as having the right tools and key advantages for growth,” Cresco CEO Charles Bachtell said in a news release, citing the company’s “proven track record” and management team as advantages of the purchase. While not all deals will be the size of the Bluma acquisition, experts provided these tips for prospective marijuana investors:

• Hire an experienced lawyer, broker and even an investment broker familiar with state and local marijuana licensing regulations, said Green, founder of CannaMLS. • Do your own due diligence, starting by carefully reviewing state and local rules governing the cannabis sector. “I often see buyers take the word of the sellers,” said attorney and consultant Freedman. “The seller obviously is motivated to make the deal seem as easy to close as possible and might not fully explain all of the challenges involved in transferring the license.” • Stick to basics such as growth, profitability and management, Stefan said. And don’t “throw healthy skepticism out the window.” • Don’t assume you have the “secret sauce” to drive sales higher than the market allows. “I’ve seen buyers pay twice the market rate for a dispensary license based on their belief they could quintuple the dispensary’s revenue only to later find such growth wasn’t possible based on the competitive landscape in the city,” Freedman said. • Don’t believe your own PR, Stefan argued. “Too often, people who have been successful in other industries think their strategy will work in cannabis and are proven wrong,” he said. That trap can easily be avoided by consulting with cannabis-industry veterans. Jade Green

Beating Goliath Most of the buyers of marijuana businesses this year will be multistate operators flush with millions of dollars in capital, cannabis attorney Charles Alovisetti predicted. “But even among MSOs, there is a learning curve,” as the marijuana industry is so complicated, said Alovisetti, a partner in the Boston office of law firm Vicente Sederberg. “After a (company) does one deal in a state, the next ones are easier.” It is not as easy, however, for momand-pop buyers hoping to enter the market before marijuana is legalized at the federal level. Colorado-based cannabis broker Christopher Stefan has worked with groups such as grocers, oil and gas executives as well as alfalfa and corn farmers seeking to claim a stake in what they hope will be a more lucrative business: marijuana. Here are some tips for smaller investors looking to enter the industry: Understand that you won’t be able to take the tax write-offs you are used to in other industries. “Work with an accountant or a tax lawyer who understands (IRS Section) 280E restrictions on deductions,” Alovisetti said. If a deal appears too good to be true, there probably is a reason. Stefan remembers one large grow facility in Colorado that attracted a lot of attention because of its size and attractive terms. Drilling deeper, “the ceilings were too high, the building too porous, and the HVAC would never dial in the climate quite right,” said Denver-based Stefan, principal of Desarollo Real Estate. Take your time. There is a “potential for a huge rush of deals” this year, but go in with the knowledge that everything in cannabis takes longer than with other businesses, Alovisetti said. Don’t expect that owning an MJ business will result in getting rich quickly. “There’s a huge misconception that the marijuana business is a license to print money,” Alovisetti said. “Marijuana is as challenging a business as there is.” – John Rebchook

April 2021 | mjbizdaily.com 59

Secondary Education

CannaMLS reports that interest from potential business buyers grew more than 400% between early 2020 and early 2021. Courtesy Photo

For sellers, advice ranges from pricing your property right to having all your financial disclosures in order. Things you need to consider before putting your marijuana operation on the market include: • Hire an experienced broker who can not only sell your property but also create advertising materials, facilitate the signing of documents such as nondisclosure agreements and verify proof of funds, Green said. • Insist potential buyers offer proof of funds before putting a property under contract. “Proof of funds is usually the best way for a seller to avoid agreeing to deals that will never close,” Freedman said. “Many buyers sign term sheets without sufficient funds and then use the term sheet to attract capital.” • Have audited financials available, said Alovisetti, who has structured deals in numerous states with medical and adult-use marijuana industries. He noted smaller marijuana companies might have their financial data saved using accounting software such as QuickBooks, but that won’t be acceptable to a sophisticated buyer.

“A properly priced asset can attract multiple parties, creating an auction environment that will drive up the price naturally.” - Christopher Stefan, cannabis broker and principal, Desarollo Real Estate

• Create a presentation deck that includes detailed financials for potential buyers to review. Make the minutes of board meetings available, Alovisetti added, so prospective buyers understand your corporate strategy. Broker Stefan echoed the importance of pricing the property right, even in a hot market. “It is a terrible mistake to overprice and overexpose your asset, as it will lead to a longer sales timeline and potentially less proceeds,” Stefan said. “A properly priced asset can attract multiple parties, creating an auction environment that will drive up the price naturally.”

BEWARE OF RED FLAGS

Both buyers and sellers need to be looking out for danger signs. Ignorance of regulations regarding the transfer of license ownership and licenses that are not are in good standing are red flags, Green said.

60 Marijuana Business Magazine | April 2021

Additionally, liens, encumbrances or litigation could end up being costly headaches. “I’ve seen many buyers who, a year after buying the license, discover millions of dollars in undisclosed tax liabilities or have to fend off lawsuits from individuals claiming to have an ownership interest in the business based on a deal done a half-decade earlier,” Freedman said. Stefan said a way to avoid those potential problems is to buy the assets of the business rather than the business itself. An experienced real estate attorney or a knowledgeable commercial real estate broker should be able to structure the contract to avoid future liabilities, he said. “You need to know who you are doing business with, what they have done in the past and how their other businesses have gone,” Stefan said. “I have had clients who are charming people with powerful public personas that have a trail of unpaid lenders, investors and landlords that were never asked to give a reference.”

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What

Really

Happened 62 Marijuana Business Magazine | April 2021

The Sweet Leaf marijuana store in Federal Heights, Colorado, was allowed to remain open temporarily after Denver regulators shuttered most of the chain’s other storefronts. Photo by Matt Staver

with

Sweet Leaf?

In an exclusive interview, Nichole West, former vice president of the ill-fated Colorado retail chain, speaks out

By Bart Schaneman

April 2021 | mjbizdaily.com 63

Sweet Leaf

ew details have emerged from both sides in the high-profile flameout of Denver-based cannabis company Sweet Leaf, one of the most talked-about falls from grace in the regulated marijuana industry to date.

A brief background: In 2017, the company boasted 400 employees and was on pace to become one of the largest retail chains in Colorado. It held 26 marijuana cultivation, processing and dispensary licenses in Denver alone, with more in surrounding communities as well as a cannabis business in Portland, Oregon. Then the wheels fell off. By the end of that year, the Denver police would raid the company’s stores, arrest more than a dozen budtenders, destroy roughly 7,000 pounds of cannabis and sentence the three owners to a year in prison each for their roles in an illegal, multimillion-dollar sales scheme. In 2019, owners Matthew Aiken, Christian Johnson and Anthony Sauro each pleaded guilty to violating the Colorado Organized Crime Act. Local authorities found them to be fostering the practice of “looping,” in which one customer would buy the maximum amount of marijuana allowed (an ounce) multiple times during the same day. The Denver prosecutors said some consumers “looped” up to 40 times per day, leading to almost 2.5 tons of marijuana diverted to the illicit market. But there’s a lot more to the story, says Nichole West, who was vice president of sales for Sweet Leaf before the raid and arrests. West pleaded guilty to felony drug charges and served a 30-day jail sentence for her role in the sales plot. In an exclusive interview with Marijuana Business Magazine, West explains why she believes the company was targeted by police and what she would have done differently.

Workers at a Sweet Leaf location in Denver fill cones to make pre-rolls in February 2017. Photo by Matt Staver

Nichole West

Why do you think law enforcement went after Sweet Leaf? My biggest statement about this is 60% of the industry was practicing the same practice.

64 Marijuana Business Magazine | April 2021

Sweet Leaf had made an effort to (offer) the lowest prices in town. That was literally our goal: to be the best price. “Working man’s weed” was our goal. We wanted to be weed for the people. With as many stores as we had (operating), we had buying power. We had huge volume and the ability to buy a lot of product. We greatly affected the price point of the (Denver cannabis) market. Based on our ability to buy so much more, we would get discounts. If I said, “I will buy all of it,” I would get a better price. We were drastically busier than a lot of the other facilities around the state based on the fact that we (had) the best prices. Regardless (of whether) people were coming back multiple times, sometimes we would have lines out of our store. We were in a lot of these really cute neighborhoods around Denver. We would end up with disrespectful

How Regulators Uncovered a Pattern of Looping At the time of the Sweet Leaf raids, Philip Martin managed the data analysis unit for the Colorado Marijuana Enforcement Division (MED). He worked in the regulator’s office from June 2017 to December 2018. Martin testified in the administrative hearing that revoked Sweet Leaf’s business licenses in Denver.

state, 1-ounce flower sales as other Sweet Leaf outlets.

Philip Martin

In an interview with Marijuana Business Magazine, Martin said Sweet Leaf landed on MED’s radar when neighbors started complaining that people were parking on the street, going into a store, coming back to the car to drop off a package and then going back in. In some cases, he said, this would go on all day. Martin said it was obvious to neighbors that Sweet Leaf’s business practices were “questionable if not illegal.” This raised a flag with the investigating agencies, he added. “It’s not every day that some person a block or two down from a store puts in a complaint about compliance practices,” Martin said. In addition, internet threads on websites such as Reddit contained information about looping—buying the legal maximum in a single purchase, then buying the same amount again the same day. “Sweet Leaf (outlets were) known as the stores that you could go to and do it all day long,” Martin said of looping practices. The Denver prosecutors later said some consumers “looped” up to 40 times per day, leading to almost 2.5 tons of marijuana diverted to the illicit market.

CONNECTING THE DOTS

Martin said he wasn’t told which company he was investigating until the day of the raids in late 2017. At first, he was just analyzing seed-to-sale data, or aggregate package sales from Metrc, which provides marijuana trackand-trace software for the state of Colorado.

Diverse wholesale suppliers: When he analyzed the wholesale data, Martin saw that Sweet Leaf was buying from 50-60 wholesale providers, whereas most businesses bought from three or four wholesalers. He estimates Sweet Leaf’s purchasing accounted for around 10%-20% of Colorado’s wholesale market at the retailer’s peak. MMJ paper trail: On the medical marijuana side, Martin said the regulators could see exactly what Sweet Leaf was doing. “It was right in your face,” he said. A patient number was associated with every transaction, and the regulators could identify that the same person came back to the same store repeatedly. Individual MMJ patients were leaving the store with thousands of dollars of product each day. From February 2017 to the end of 2017, Martin estimates $10 million of medical marijuana had been “looped.” Some patients spent a half-million dollars in eight months buying medical cannabis. The regulators found that, at three locations, 5,555 pounds of medical marijuana were sold in looping transactions between June 1, 2016, and Dec. 13, 2017, with gross sales revenue totaling $6.8 million. Then, in late May 2017, after a request from a cannabis attorney on behalf of Sweet Leaf to the MED about the rules regarding looping, all the stores stopped recording that data, according to Martin.

LETTER OF THE LAW VERSUS SPIRIT OF THE LAW

The other point of contention at the time was that the law wasn’t explicit in its language around looping. In fact, regulators opted to clarify the law after Sweet Leaf was shut down.

Hitting the limit: When regulators received point-of-sale data from the business, it became much more obvious that Sweet Leaf was selling an unusual number of full-ounce purchases per day, Martin said.

Sweet Leaf’s defense was always that the company was within the code and letter of the law, but, Martin said, cannabis companies were still expected to follow the “spirit of law.”

“Sweet Leaf was moving a lot of weight through their stores,” in terms of flower, according to Martin. At times, upward of 80% of the company’s sales were in the form of 1 ounce of flower at a time.

According to Martin, the pattern of sales behavior showed a business practice rather than just a budtender failing to recognize the same person coming back repeatedly.

Change of ownership: Another indication that something was off at Sweet Leaf, Martin said, came in analyzing the Metrc data at two retail locations that the company purchased in 2017. Immediately after the sale, those two stores started reporting the same proportion of out-of-

“We understand that you might not be able to stop all loopers—they could just go to another store—but it is clear that you shouldn’t be selling ounces over and over again to the same customer,” he said. – Bart Schaneman

April 2021 | mjbizdaily.com 65

Sweet Leaf

customers that pissed off the neighbors, and so the city of Denver wasn’t stoked with us. We had become somewhat of a nuisance based on how busy we were—and we weren’t in neighborhoods where that was OK. In the Highlands, they didn’t want to see people out the door when they’re walking their children to the park. The neighborhood still had a very NIMBYian view of cannabis. We had shifts where we would go clean up trash because customers were disrespectful. People would go buy weed and leave papers on the ground in these neighborhoods. We would be chasing these papers around. But at a certain point, we had so much business that it was hard to keep up. It was hard to keep up with maintaining everything in the neighborhood properly while growing at the rate that we were. The city was receiving nuisance reports from neighbors that the customers were leaving trash and weed jars all over the ground. That was a problem.

Was there anything Sweet Leaf could have done differently? Taken a more conservative approach. We were pushing the limit. We were trying to change things. Realistically, how should you read the law? It never once said you can’t let somebody come back twice in one day. Never. It never said we were responsible for knowing how much someone had purchased in one day. From our understanding, it was, “Regulate like alcohol.” You don’t track people’s beers, so why would we track your weed?

What happened to the inventory during the raids and seizure? Everything got taken. When the raid first happened, because this was a Denver issue, the stores that were not in Denver were not shut down.

At the root of the Sweet Leaf situation was the practice of “looping,” where one customer would buy many ounces of flower in a single day, well over the legal limit of 1 ounce. Photo by Matt Staver

The city of Aurora wasn’t willing to even shut them down. They were like, “That’s not against the law.” The city of Aurora did not understand (Denver’s rationale), and the same thing with Federal Heights (another Denver suburb). So (Sweet Leaf was) able to operate in those two cities. In the city of Denver, which is where their grows were, everything got shut down. I’m assuming the plants rotted. I wasn’t there, though.

You were generating tax revenue. Did that seem to matter to prosecutors? The state. The city. Jobs—we had 400 employees. Think about how much money that is for the economy. The owners are the most kind, salt-of-the-earth, good, working people I’ve ever known in my life. We thought we were all on the same team. That’s where we went wrong. It turned out to be Sweet Leaf versus the world.

Why weren’t you able to fight back more? On a city level, we would have been able to, and on a state level, we would have been able to. But the state Attorney

66 Marijuana Business Magazine | April 2021

General’s Office was going to be the next court that we hit. We were terrified of federal court. That’s where I tapped out. I ran out of money. My lawyer said, “It’s a $150,000 retainer to go to a federal trial.” Federal trial was a big deal and terrifying, and we would have faced 10 years in jail—federal prison. We were out of options. … I had nothing left. The Denver Police Department worked on the case for a year and a half. Their budget was endless and ours was pennies. None of us had the money. Every penny I had was going to pay my lawyer. It was exhausting. I wish every day that I was rich. I wish every day that I had the ability to do this for the industry, to fight harder. I wish I had it in me. But I didn’t. (The police) had invested so much. They’d sunk their teeth into us. At that point, there was no going back. This interview has been edited for length and clarity.

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BestPracticesInRetail | Solomon Israel

The Soul of a Store Recruiting and retaining the right retail staffers can set a new business up for success

ou’ve found the perfect location and designed your dream dispensary—now it’s time to recruit the staffers who will bring your store to life. Exact strategies will vary based on a retailer’s size and resources, the local labor pool and available time. But a few basic tips can help you find the employees your store needs to succeed.

Retail staff members serve customers at Cresco Labs’ Sunnyside store in Buffalo Grove, Illinois. Courtesy Photo

Finding Your First Employees Recruitment can be time-consuming even in the age of online job boards, said Alison McMahon, CEO and founder of Cannabis at Work, a Canadian human-resources and recruitment company for the marijuana industry. “Usually, people are reaching out to us because they have a lot of different priorities, and something has to give somewhere,” she said. “They’re willing to assign a piece of their budget to a recruitment firm to help them get some of that key talent in the door.” McMahon said retailers often seek Cannabis At Work’s help for key hires such as general managers, even if they’re not using the recruitment agency to fill all their positions. One-time recruitment agency fees are typically structured as a percentage of the hire’s annual salary, McMahon explained. That often includes a guarantee that the recruiter will replace the employee if they leave within a certain period of time. Expect to spend 10%-20% of the target position’s annual salary for the recruitment fee, McMahon said—or even more for management or executive roles. Kara Bradford, co-founder and CEO of Seattle-based cannabis recruitment and human-resources company Viridian Staffing, said she’s seen some other U.S. recruitment firms charge as much

as 30% for a placement. For smaller stores, though, she said referrals and word of mouth are still effective strategies to get new hires on board. Local media coverage—such as inviting a TV news crew to tour your store—can be another low-cost way for upcoming retailers to attract applicants. “In some areas, it’s really big news when a new cannabis store is opening,” she said. Bradford also has seen some marijuana retailers use an age-old recruitment tactic: poaching workers directly from competing stores. Scott Wells, executive vice president of talent acquisition at multistate marijuana operator Cresco Labs, said the Chicago-based company doesn’t make a practice of poaching workers from competitors, citing “a little bit of an unspoken agreement that we’re not going to try to raid each other.” “If we play nice in the communities that we work in, we think our competitors will do the same,” he said. Of course, with a 50-person HR and recruitment team, Cresco’s hiring process looks different than a momand-pop retailer’s might. Wells said Cresco relies on a variety of recruitment methods such as employee referrals, online postings,

68 Marijuana Business Magazine | April 2021

Cannabis stores face many of the same recruitment challenges as any other retailer. Finding qualified, reliable employees in a fast-moving, competitive job market can be challenging. Cannabis industry recruitment experts recommend: • Using a range of hiring tactics, including employee recommendations, word of mouth and professional recruiters. • Relying on data from job-listing platforms and industry recruiters to set compensation levels. • Offering employees a clear path to earn promotions and raises. Knowing that these incentives are on the horizon can help top retail talent. • Treating all applicants—even those you can’t hire—with respect in order to win and keep loyal customers.

third-party recruitment agencies and job fairs to staff its stores and facilities. He sees benefits to hiring a diverse range of retail workers, including those with a passion for cannabis, but said retail experience definitely matters. “It’s not an easy job. It’s stressful, you’re dealing with the public, you’re dealing with patients, you’re dealing

with customers who might not be as knowledgeable. … You really need that base of retail experience, wherever it might come from,” Wells said.

Compensation and Promotions “Compensation is always a really tough area, because you want to pay your employees enough to excite them and retain them,” Bradford said. “But you also want to make sure that you’re able to pay your bills.” The typical method for setting a pay scale is to assess what other local retailers are paying. Some jurisdictions such as Colorado require job postings to list compensation ranges. But compensation data can be obtained from job websites such as Indeed and Glassdoor. “Then, maybe go up a little bit to offer a premium, especially if you’re in a state or municipality that does not allow tips,” Bradford suggests. Recruitment agencies also collect their own compensation data, McMahon said. But setting compensation isn’t a one-time exercise: Raises and promotions can help retain those hardearned workers over time. “I think that what makes a lot of sense is to structure a few steps within each role,” McMahon said. For example, the hourly wage for a budtender could be increased over time to a maximum rate based on the number of hours worked and their performance. “I think giving employees some line of sight on how they can get raises is important,” she advised. McMahon points out that raises and promotions can be challenging for some retailers, since there aren’t always many positions above the basic front-line roles. Viridian’s Bradford said that small retail operations will likely limit an employee’s upward mobility. “Unfortunately, those companies often lose those people to larger companies,” she said.

Still, Bradford said vertically integrated marijuana companies might be able to offer more room for growth, moving promoted retail workers over to another area of the business such as cultivation or manufacturing. At vertically integrated Cresco Labs, Wells said, employees undergo a formal review process every year. “It’s the front-line managers who are responsible for rating their employees and coming back with consideration for (salary) increases,” he explained. “Of course, our flat rates do change over time, just from a cost-of-living perspective. As cost of living goes up, so does the need for compensation for your employees.”

Background Checks Local laws and regulations could require background checks for prospective cannabis store employees. Bradford points out that some jurisdictions such as California actually prohibit criminal background checks until a conditional employment offer has been made. That complication highlights the usefulness of a professional humanresources practitioner—or at least an outsourced HR service, she said. “From a best-practice standpoint, I would say most companies do background checks,” she said. Making an offer of employment before conducting a criminalbackground check can bring advantages, Bradford said. “Specifically in cannabis, there are a lot of people who, unfairly, have records of some sort or another because of cannabis,” she said. “It’s better to make sure that you’re hiring them because they can perform those job duties, and then making them the offer and then doing the background check.” Cresco Labs’ Wells said the company runs background checks in most states where it operates, but it doesn’t pass up the opportunity to hire someone

with a record for nonviolent cannabis offenses. “We look for folks who have had those negative experiences with the war on drugs, and we try to find a way to hire those folks,” he said.

Treating Applicants With Respect Throughout the application and interview process, advised Viridian’s Bradford, it’s important to remember that even unhired applicants can become loyal customers. “By having a great interview process and standardized hiring process in place, it could mean the difference between (getting and) keeping a customer … or them going down the street somewhere else because they had a bad interview experience with you.” Cresco’s Wells similarly advises any cannabis retailer just starting their hiring process to “treat people with respect.” “Always remember to follow up with people. If you’re not going to hire somebody for whatever reason … you always have to let them know,” he said. “Word gets out very quickly if you don’t treat candidates with respect. You have to tell them no when it’s a no, and you have to tell them why.” Wells also advises keeping social equity in mind throughout the hiring process, particularly in light of the harms caused by the war on drugs. “As a cannabis company, if you’re not focused on diversity, equity and inclusion and providing the right culture for your organization and putting the right people in front of your customers and your patients who have diverse backgrounds, I think you’re doing yourself and the industry itself a disservice.” Solomon Israel is a reporter for Marijuana Business Magazine and MJBizDaily. You can reach him at solomon.israel@ mjbizdaily.com.

April 2021 | mjbizdaily.com 69

IndustryPlayers | New Hires & Promotions

Esther Song

By Omar Sacirbey

Family-Friendly Grow Draws Marketing Exec

f cannabis companies need proof that benefits such as maternity leave matter to the executives they’re recruiting, look no further than Esther Song. The former fashion marketing executive left MedMen Enterprises in November and is now the chief marketing officer at Canndescent, a marijuana-cultivation company based in Santa Barbara, California. The Los Angeles-based marketing guru gave birth to her first child in late March 2020, shortly after California Gov. Gavin Newsom issued a statewide shelter-in-place order to slow the spread of the coronavirus. “The process of looking for a job when you’re a new mother during a pandemic is not easy,” Song told Marijuana Business Magazine. “It made me really ask the hard questions. I asked the leadership at Canndescent and all the other companies I was speaking with, ‘What does your work-life balance look like? What does post-pandemic work-life balance look like?’” A big reason Song ultimately took the job was Canndescent’s willingness to accommodate childcare responsibilities, such as allowing her to work from home when needed. Cannabis executives, take note: “If this industry is going to attract top talent, maternity leave, paternity leave and certain benefits need to be competitive with other industries,” Song said. Before joining MedMen in 2019, Song spent about 15 years in various senior public relations and marketing posts in the fashion sector, including nine years with national fashion brand Tory Burch, where she was vice president of public relations and partnerships. “I think the way we are taught to do storytelling in fashion is not that different than in cannabis. People want to be educated,” Song said.

70 Marijuana Business Magazine | April 2021

A look at some recent hiring moves in the marijuana industry

 Compliance Firm Nabs Twitter, Omnicom Execs Katie Ford, Twitter’s head of global brands for the past two years, joined Fyllo, a cannabis compliance software company in Chicago, as its chief operating officer. Ford’s experience includes more than 20 years at Publicis Media, where she was the lead executive on Procter & Gamble, Coca-Cola, USAA and Kellogg’s accounts, ultimately rising to president. From there she joined Amobee, an advertising platform, as chief client officer. Ford, once recognized by Ad Age among its “Women to Watch,” was also the first person to join Fyllo’s board of directors in 2019. She will step down from that post to take her new role. Joe Raaen, formerly the director of global strategic partnerships for Annalect, is joining Fyllo as vice president of product management. The company also added Roxanne Taylor to its board of directors. Taylor is the chief marketing and communications officer at the Memorial Sloan Kettering Cancer Center in New York City.

 IPO-minded Parallel Taps Walgreens CFO Atlanta-based Parallel appointed Walgreens veteran Jeremy Kunicki as its chief financial officer on March 1, a few days after the vertically integrated multistate operator announced plans to go public through a merger with Ceres Acquisition Corp., a special purpose acquisition company. Kunicki joined from Walgreens Boots Alliance, a holdings company where he spent 20 years and most recently served as CFO for the Walgreens division. Kunicki was responsible for financial oversight of investments, financial planning, performance management and business development.

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IndustryPlayers | New Hires & Promotions CFO Shake-up at Acreage

Faith Graham

 Acting CEO Appointed for Jamaica’s Cannabis Authority Jamaica’s Cannabis Licensing Authority appointed Faith Graham as acting CEO. Graham replaces Lincoln Allen, whose term expired March 1, and will serve until a replacement is found, according to a news release. Graham joined the agency in 2018 as director of enforcement and monitoring.

Acreage Holdings, a marijuana MSO based in New York, announced that Glen Leibowitz, the company’s chief financial officer, is leaving the business effective April 2. Leibowitz will be succeeded by Steve Goertz, who most recently spent 14 months working with Bespoke Capital Acquisition Corp., a special purpose acquisition company focused on the cannabis industry. Before entering the cannabis sector, Goertz was chief financial officer of SGS & Co., a private equityowned global marketing services organization, and Goeasy, a publicly held consumer-finance company. Goertz also served in various finance and accounting roles at Sobeys, Maple Leaf Foods and Deloitte.

 NasdaqListed Firm Gets Health-Care CFO New York-based Clever Leaves Holdings, a multinational producer of pharmaceutical-grade cannabinoids, appointed Hank Hague as its new chief financial officer. Hague most recently served as CEO at Aidance Scientific, an FDA-registered manufacturer of branded and private-label, over-the-counter topical medications. Before that, he was CFO of Abacus Health Products, where he led the company’s public listing and the acquisition and integration of Harmony Hemp. Hague steps in for Amit Pandey, who has served as Clever Leaves’ interim CFO since December 2020.

 L.A. Law Firm Hires City’s Former Cannabis Counsel

Washington Cannabis Board Gets New Leader

The cannabis group at Michelman & Robinson added Alex Freedman as counsel at the national law firm. Freedman previously served as general counsel to the Los Angeles Department of Cannabis Regulation and L.A.’s Cannabis Regulation Commission. While there, he drafted Los Angeles’ licensing ordinances and regulations. He also operates Freedman Strategic Consulting, a nonlegal consultancy company in Los Angeles.

Washington Gov. Jay Inslee appointed David Postman to chair the state’s Liquor and Cannabis Board (LCB). Postman served in the Inslee administration since the governor took office in 2013, first as executive director of communications and then as chief of staff from December 2015 until Nov. 15, 2020. Previously, Postman served as a senior director at Vulcan, the company headed by Microsoft co-founder Paul Allen. Postman also was a reporter for 26 years, including 14 years as a political reporter for The Seattle Times as well as newspapers in Oregon and Alaska. The LCB is composed of three members appointed by the governor to six-year terms.

 Horticulture Leader Hires New COO Lafayette, Colorado-based Urban-Gro, a global horticulture company that engineers and designs commercial, controlled-environment agriculture facilities, appointed James H. Dennedy as president and chief operating officer. Dennedy has served on the firm’s board since August 2018. He also has served as managing director at the Atlas Technology Group, a Cincinnati-based business that provides M&A advice to software firms, and managing partner at the HamiltonMadison Group, a business advisory firm in Springboro, Ohio.

72 Marijuana Business Magazine | April 2021

Hired or promoted someone for a senior-level position? Send a news release or general information to Omar Sacirbey at omar.sacirbey@ mjbizdaily.com.

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