WORKWEEK

Slotting fees enter Michigan’s market

Slotting fees are becoming increasingly popular in cannabis, and Michigan is the latest state to join the trend.

Slotting fees are sometimes called a shelving fee or slotting allowance. It’s a normal practice in traditional retail. Brands pay retailers for shelf space – or a premium spot on the shelf. 

Data from Nielsen found that 85% of traditional retailers were charging slotting fees by 2000 – and that number has only gone up since. Now, slotting fees are nearly impossible to avoid. 

It’s easy to see why. 

Organic juice brand, Apple & Eve, spent around $150,000 to get its products into a limited number of Safeway grocery stores. The slotting fee market is believed to be around $9 billion. 

For cannabis operators, slotting fees come with a clear benefit: cash money. But those against this new practice argue slotting fees make it hard for small operators to do business. 

Cannabis retailers in California and Nevada have implemented slotting fees for several years. Brands are paying anywhere from $500 to $15,000 per month for a premium spot on a retailer’s shelf. 

Slotting fees are hard to avoid

Slotting fees make it harder for smaller brands to compete with brands who have big bucks.

But unfortunately, nobody is guaranteed an even playing field in business. And, cannabis retailers also have to make a profit – which is exceptionally hard to do in cannabis. 

“As much as I hate to say it, this is a normalization of cannabis in the mainstream retail market model,” said George Sadler, co-owner of San Diego-based cannabis brand, Gelato, with products in Michigan. “Grocery stores and retail outlets have established this practice for years. It is unfortunate, but it is a reality.”

Yes, some brands might struggle to compete, just as all brands in every space do. But it’s important to look at the flip side, too. 

Brands who can afford to do so can leverage slotting fees strategically and use them to their advantage. 

There’s no better form of cannabis brand advertising than putting yourself directly in front of the consumer – and shelf space is the way to do that. 

But take a lesson from Nancy Whiteman, the Founder and CEO of Wana Brand and pay close attention to how much you spend on slotting fees. 

“It’s important that cannabis brands project their sales carefully and understand what slotting fees would do to their margins. It would be a high-volume store that sells 5,000 units a month. If you’re paying $5,000 a month in slotting fees, you’re taking at least a dollar off a unit. If you’re selling 1,000 units, you’re taking $5 off your price. There’s no scenario where that makes any long-term sense,” said Nancy. 

TLDR: Slotting fees can make it hard for small businesses to compete, but they are a practice of traditional business which means we can expect the cannabis industry to do the same – regardless of whether we want to welcome this practice or not. 

Ascend Wellness reorganizes executive team after CEO’s arrest

3 weeks after the arrest of Abner Kurtin, Co-Founder and former Chief Executive Officer of Ascend Wellness Holdings, the company’s executive team sees a reorganization.

Kurtin was arrested in Florida, where he lives, and charged with battery against his girlfriend.

He was moved from the position of CEO to Executive Chair of the Board, announced yesterday. Ascend Wellness’ Chief Financial Officer Daniel Neville and President and Co-Founder Frank Perullo will take on the positions of interim CEOs in the meantime. 

“AWH has an incredibly strong foundation in place and remains well positioned to advance the goal of breaking down traditional walls in the cannabis marketplace and redefining the industry from the ground up. As the company prepares to enter the next phase of its growth story, the board determined that now was the right time to initiate this transition,” Ascend’s board said in a statement. 

Seems suspicious – but whatever. 

For some, Kurtin’s arrest isn’t shocking. A Reddit thread sparked some comments about the operational pitfalls of various Ascend locations and life behind the corporate curtain. 

“Hopefully a wake-up call for the staff too. Shitty owner, worse wages, zero budtender education. Better opportunities are out there! Ascend doesn’t deserve to succeed,” one commenter writes. 

“Their executives outwardly and vocally dislike cannabis users and they pride themselves on how “good old boy” they are. That’s their way of hushing up how fucking racist, sexist, and homophobic they are,” writes another.

“Worked with him years ago at another company. CEO comes from a wealthy family and has a top-notch education. Very intelligent but definitely looks at underlings as being less worthy humans,” said another.

What’s next for Ascend Wellness? 

Ascend released a statement when Kurtin was arrested and said “the company is aware of allegations” against the CEO and they are working closely with an independent legal firm to conduct an investigation into the situation. 

Corporate cannabis is often under the microscope and heavily criticized, especially by longtime cannabis advocates. It makes sense, as many cannabis companies are a mess – including the people who run them. Kurtin’s arrest is proof of that. 

With that being said, I consistently beg the cannabis industry to please not assume that small operators aren’t getting involved in legal trouble like this. 

Oftentimes, small operators are behaving inappropriately as well, but it’s not talked about as much because large companies like Ascend Wellness Holdings are in the spotlight. 

I’ve seen small operators involved with schemes and crimes that would make people furious. And these small operators don’t come from the world of Corporate America.

As far as Ascend goes – some people believe that Kurtin’s influence or control won’t change given his new role as Executive Chair of the Board. 

If convicted, battery is typically punishable by up to one year in jail, at which point Kurtin will be released and potentially still part of the Ascend Wellness network upon his release. His hearing is set for tomorrow, September 30th. 

Unless there is a consistent stream of pressure, I don’t predict Kurtin to lose much of his decision-making power at Ascend Wellness and I don’t expect Ascend Wellness to see much damage on their long-term bottom line.

This is unfortunate, but it’s often the reality for people who have power, money, and influence like Abner Kurtin does. 

Many cannabis professionals don’t forgive and forget so easily however – so I imagine Kurtin will be on several industry blacklists for years to come.

TLDR: Ascend Wellness hasn’t commented on Kurtin’s arrest beyond the fact that they are aware of it, but the company’s reorganization speaks for itself. This, unfortunately, might not impact Ascend Wellness’ bottom line in the future.