22 May 2022 |
Inside MedMen’s Downfall
By Kaitlin Domangue
I’ll be honest y’all: I went to MedMen when I was in Los Angeles in March.
Why? Because I wasn’t interested in a million-dollar Uber to take me out of where I was in DTLA, and into other areas with more dispensary options. So, I settled on walking a half-mile to MedMen.
“You’re at MedMen???”, my husband texted me, who had flown in after me and was waiting for an Uber at LAX.
“Yeah.” I texted back. “How bad can it be?”
The MedMen experience
MedMen is known for being a mess, and I joked that people I know in cannabis would see me shopping and blast me on the interwebs for supporting it.
And while my experience didn’t totally suck, it surely could have gone better.
First and foremost, Green Paper creator Matt O’Brien was denied entrance at the door because he didn’t have an American ID – which makes sense considering he’d just come from Ireland less than two weeks prior and doesn’t live in the States. That’s no problem, but they didn’t handle it in the best way.
After sorting that, they didn’t allow consumers to even smell the flower, and without my husband’s connoisseur skills that I simply don’t possess, I wasn’t going to purchase anything without knowing if I’d like it.
I’m pretty particular when it comes to the effect I’m looking for, and it’s really easy for me to overdo it, so I have to look for the right varieties. The checkout process could have also been a lot more efficient.
I will say, the layout was sleek and gave off Apple Store vibes. Fitting, considering MedMen was once gunning to be the “Apple of cannabis.”
It also makes sense when you learn that the company had a $4 million marketing campaign budget for 2019. A good image has always been important to the brand, and the dispensary definitely gave off a good image.
Of course, my experience shopping at MedMen is just a fraction of what other people have endured. MedMen has lost over 95% of its market cap since it went public in 2018 if that gives you any indication about the company’s tumultuous journey.
And many people blame the founders, Adam Bierman and Andrew Modlin, who finally left the company in 2020 after pressure from basically everyone involved, shareholders included. They simply weren’t liked or respected.
MedMen’s humble beginnings
MedMen was founded in 2010, and it didn’t always have the bad reputation it does now.
The company was positioned to be the hot brand in cannabis, already hitting a $1.6-billion valuation by 2018. They played a large part in creating legislation, by hiring lobbyists and funding legal campaigns.
And, they had solid branding & marketing. You knew the signature MedMen red. They were all over billboards and anywhere else they could get. MedMen even had a partnership with Gwyneth Paltrow’s brand, Goop, at one point in time, strengthening its brand presence and memorability.
The strong branding makes sense, considering Bierman and Modlin owned and operated a branding agency together before MedMen.
But, it didn’t take long for the company’s success to implode.
The lawsuits trickle in
In November 2018, a lawsuit was filed against the company by two previous employees. The suit said MedMen had violated labor laws. The suit claimed:
- MedMen failed to pay at least minimum wage for work performed off the clock
- The company didn’t pay for all hours worked, including overtime
- Accurate records of hours worked by the employees weren’t kept by the company
- MedMen didn’t provide adequate rest and lunch breaks to employees, as required by California law
A nearly $1 million class action settlement was reached in 2021 for this case.
In January 2019, two investors sued MedMen for alleged breaches of fiduciary duty.
“Simply put, MedMen is a publicly-traded company that is withholding its shares from its shareholders. Management is using conflicted corporate structuring in breach of its fiduciary duty to its shareholders,” said Omar Mangalji, Partner and Founder of The Inception Companies. “MedMen touts itself as a torchbearer of best practices and even claims in their advertising campaigns that they are ‘Mainstreaming Marijuana.’ If that is the case then they need to adopt mainstream corporate governance practices. This industry is exciting and rife with opportunity, but unless we engender a safe and accountable environment for individuals and institutions to invest their capital, the explosive growth will be stifled. Given the industry’s storied history and its varied stages of legality in different markets, it is doubly important that our industry is well above board in all of its corporate practices.”
Eventually, the investors voluntarily dropped the suit in June 2019. But not without MedMen ultimately calling the lawsuit “frivolous”, “meritless”, and “egregious”.
MedMen was also sued in early 2019 by the company’s ex-Chief Financial Officer, James Parker. This is the lawsuit where a lot of wild financial allegations were made.
Bierman, in particular, was called out for using company money to pay for various expenses, including:
- 24-hour armed guards for founders and their families
- Private jets
- Cadillac Escalades and Teslas
- $300,000 therapist on staff, who was actually Bierman’s personal marriage counselor
- Massage therapists
MedMen denied the claims, and they actually won their suit against Parker in November 2021 after a few years of battling it out in court. Last month, the judge further ordered Parker to pay MedMen $612,000 in legal fees.
Here are some other tidbits you need to know:
- Mansions: Bierman and former Chief Strategy Officer, Christopher Ganan, also had mansions purchased around this time. The three executives offered their mansions as collateral on a $10.2 million loan from Milestone Investments LLP, which sued the trio in 2020. A lawsuit alleged Bierman had a panic room in his home. Modlin sold his mansion to Emma Chamberlain just six days before Mileseton Investments sent a notice of default. Ganan sold his $10 million mansions in 2020.
- Spending: MedMen invested heavily in tech and built a point-of-sale system. One executive employee who felt this waste of resources told Politico, “They would ask themselves at times, ‘Are we a marijuana company or a tech company?” Company funds were also spent on luxury cars, a marriage counselor, and more, according to the suit.
- Layoffs: MedMen had a round of layoffs in November and December of 2019. The first round was bundled into a five-part plan to achieve positive EBITDA – every cannabis company’s favorite financial metric to tout in their earnings reports. MedMen laid off 190 employees, over 80 of which were corporate employees. In December, just one month later, the company announced a 40% reduction to its corporate headcount – totaling approximately $20 million in annual savings.
Adam Bierman and Andrew Modlin officially left MedMen in 2020 after plenty of lawsuits and questions about the financial health and overall sustainability of MedMen with the pair in charge – much to the cannabis industry’s delight.
Bierman and Modlin left their positions as CEO and President of MedMen and gave up their board seats and voting rights.
But, that doesn’t mean MedMen as a company went anywhere. Since their departure, the company has seen a handful of executives come and go as they attempt to restructure and revamp the business.
MedMen is still struggling to maintain a profit, even after Modlin and Bierman left. Last March, the company was estimated to be burning through $25 million per quarter. In April 2021, Canadian producer Tilray acquired a majority stake in the company.
The lawsuits have slowed, but they haven’t stopped. The most recent is Ascend’s suit against MedMen, claiming MedMen “materially breached” the deal to sell an 86.7% stake in MedMen’s New York operation.
Ascend won this suit earlier this month and will purchase the New York operation for a revised total of $88 million – $15 million more than the original deal.
Bierman and Modlin are even getting caught up in lawsuits themselves, filing three lawsuits against the co-owners of Coastal Holdings Co., the company they joined under the radar last year. Bierman and Modlin eventually dropped the suits.
What I’m thinking 🧠
I’m thinking MedMen is going to have to do a heckuva lot more than focus on their balance sheets.
In an almost ironic twist of fate, MedMen’s strong brand presence could be hindering its ability to move on.
To anyone in the cannabis industry, the famous MedMen red serves as a clear sign to stay away. MedMen is known for having a poor handle on finances and unfair working conditions – and consumers don’t want to support that. Neither does the industry itself.
MedMen has cycled through three CEOs since Bierman left his position. If that’s any indication of MedMen’s future, the company has a long way to go.