MedMen, the Los Angeles-based marijuana company, recently became the first American cannabis company to be valued at over $1 billion, thus qualifying it for “unicorn” status. Its chain of retail stores have been called the Starbucks of weed and have been compared to the Apple Store.
The company announced plans to go public on the Canadian Securities Exchange (CSE) in the second quarter of 2018. MedMen operates 18 facilities in three states (California, Nevada and New York) with operations including cultivation, manufacturing and retail.
I spoke with MedMen Senior VP of Communications Daniel Yi about the marijuana industry’s growth prospects and the legal and regulatory challenges it faces in the U.S. in Part 1 of this exclusive two-part interview.
Karl Kaufman: It must be an exciting time for you and the company as a whole.
Daniel Yi: Exciting, yeah, but also very crazy. I know it’s a hackneyed metaphor, but it has really been a roller coaster ride. It’s just as exhilarating, just as frightening.
Kaufman: With the sea change in the public’s perception of cannabis, how do you view the long-term growth prospects and challenges as a business, and for the industry as a whole?
Yi: All of this revolves around the changing public perception, which is key to a change in policy, right? If we turn the clock back 20 years ago to when California became the first state to legalize medical marijuana, there really wasn’t much commerce for the first 15 years. It made a splash in the news but there wasn’t much of an industry to speak of, it was more of a grassroots movement.
The important thing that happened in those first 15 years is that people got more comfortable with the idea of medical marijuana. If you look at the latest polls today, 94% of Americans support legalization of medical marijuana, 61% support legalization for adult (recreational) use.
Every year there has been exponential growth. Now you have 30 states that have medical marijuana and eight states that allow recreational marijuana use, including California, the biggest of them all. The evolution started 20 years ago, but it really picked up speed about five years ago and we have to give credit to Colorado for legalizing adult use. Colorado gave the nation a bit of a lab test.
Pot legalization is not a part of people’s everyday lives. I don’t think a soccer mom in Minneapolis wakes up everyday and says “Oh, what’s going on in the cannabis space?” For a lot of Americans, this is not part of their everyday reality.
If you read the news, in the back of your mind, you’re like “Wait, Colorado legalized adult use a few years back, didn’t it? What happened to Colorado? Is it still a part of the union? Did people’s heads explode because of marijuana?”
No, in Colorado, people still go to work, life is normal even after legalization of pot. Over time, subconsciously, there is that acceptance culturally, and Colorado started the ball rolling.
I just saw that Governor Murphy of New Jersey has doubled down on adult legalization. This is a governor who ran last year on the promise that he was going to legalize marijuana if he got elected. There was some pushback but he’s not backing down.
Canada is going to legalize recreational use this summer. On the entire West Coast of the U.S. from the border with Mexico all the way to the border with Canada, adult use is legal. Then you cross the border into Canada, medical is legal and adult is going to be legal this summer. Then you go to the Northeast, Massachussets, Maine, Vermont have legalized it, and you have several states with legal medical marijuana. Once Canada goes rec and New Jersey goes rec, New York, another hugely influential state, is going to be surrounded by legal pot. We feel pretty good about the long term prospects of this industry.
Kaufman: How does Attorney General Jeff Sessions and the current administration’s stance on marijuana provide an obstacle to that acceptance?
Yi: Complexity is a fact of life when you’re in the marijuana business, dealing with a controlled substance that is illegal on the federal level. Even in states where it’s legal, like California, the state legalized pot but every city has slightly different ordinances.
We are in the very beginning of this industry, so there are a lot of complexities, and Sessions adds yet another layer to that.
I can see how headlines can scare people, but if you go beyond the headlines and actually understand the facts on the ground, you gain a lot more confidence. Here’s the reason why I’m saying that: I think the political momentum to legalize pot is something even Sessions can’t deny. He’s got to be reading the polls. He’s got to be paying attention to the political ramifications of going after pot when the attorney general of California, Xavier Becerra, threatens to sue the federal government if they come after their marijuana program.
People can react to Jeff Sessions’ own personal views but there has been no solid policy that has come out of this. Case in point: he rescinded the Cole Memo, which is natural for any Attorney General to do when an administration changes. You want to put your own mark on an administration, so you undo what the previous guy did. But he didn’t put anything in its place.
The Cole Memo gave our industry some assurance. That assurance disappeared but it stops there because he didn’t come down and — God forbid I hope he doesn’t — but he didn’t come down and announce “Here’s a new memo: from now on, I don’t care what the states say, this is federal law and I’m going after you guys.”
California is already counting on a billion dollars worth of tax revenue from cannabis sales, Colorado’s already gotten used to their tax revenue from pot, Washington and Oregon have too, so from a political standpoint, I think it’s a much bigger risk to go after cannabis at the state level. It’s complex, and companies like MedMen, who are betting on the long-term viability of this industry, will continue to navigate those waters.
The only way we would be completely certain is when the federal prohibition ends. We figure that will happen too — you’re looking at 5-7 years, you can talk to the experts that say a 5-7 year time frame.
At what point does the federal prohibition still make sense? Thirty states have now legalized marijuana in some form, that’s more than the majority of states. Two-thirds of Americans live in a state where marijuana is legal.
I think the federal prohibition will go away because it’s the natural will of the people.
In Part Two of this interview, we discuss MedMen’s future, the inspiration for their retail space and why the company decided to move on from private equity and go public. It will be published shortly…
