Built for Consolidation, Guided by Icahn-Like Discipline, and Poised for Cannabis’ Next Iteration, ft Jared Maloof

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Jared Maloof: I think that if you look at where lobbying dollars are being spent, you can see that certain industries are perhaps working against the cannabis industry to maybe starve us out a little bit more, but they don't have to work very much harder — we're starving ourselves. The debt wall is coming. It's between four and six billion dollars of debt that comes due between this year and next year, and so there will be significant failures and the ability to acquire assets at fair prices. Bryan Fields: What's up, guys? Welcome back to another episode of The Dime. I'm Bryan Fields, and with me as always is Kellen Finney. This week we've got a very special guest, Jared Maloof, CEO of Standard Wellness. Jared, thanks for taking the time. How are you doing today? Jared Maloof: I'm doing great. Thanks for having me. Excited to dive in. Kellen, how are you doing? Kellen Finney: I'm doing really well, grateful to get a chance to talk to Jared. How are you doing today, Bryan? Bryan Fields: I'm stoked. We're going to learn about some markets that I'm very curious about, maybe some hard decisions, and some forward-looking thoughts about how things might evolve — and maybe some foresight into big players that might be interested in the industry in the future. Before we dive into the fun stuff, Jared, can you give our listeners a quick background about yourself and how you found your way into the cannabis space? Jared Maloof: Yes, absolutely. I have a finance background, and I'm also an attorney. I was working as the CFO for a company that Carl Icahn owned, and a very good friend of mine named Kevin Murphy — not the Acreage Kevin Murphy, a different Kevin Murphy — called me up and asked, "Hey Jared, how would you like to legalize marijuana in Ohio?" I thought that sounded like a great idea. If, on the other hand, he had said, "Hey Jared, you've got a really good life you've built for yourself — how would you like to ruin it?" I would have answered differently. But nonetheless, that's how we got going. We legalized it in Ohio, and here we are. Bryan Fields: There's a distinct moment when Kevin's offering you that opportunity and you're weighing the pros and cons. How quickly after you said yes did you realize this might not go the way you'd envisioned? Jared Maloof: Here's how naive I was — I worked hard with Kevin and a bunch of other people in Ohio to legalize medical cannabis. We got it legalized, stood the company up, and I remained at Icahn Enterprises. Then in the summer of 2018, I learned that Missouri, Utah, Maryland, and New Jersey were all going to have competitive licensing processes. I realized this was a one-time opportunity to grab land in this new industry, so I needed to jump in full force. I joined after the company had made its first sales, initially as CFO. Bryan Fields: There must have been something pulling you toward making that full transition, especially leaving a place like Icahn Enterprises. Jared Maloof: It was the opportunity to grab new land, but also — I was at a scrap metal company before that, buying used beverage cans for 63 cents a pound and selling them for 65 cents. There was no margin. I always promised myself that if I ever left metals, I'd go into an industry with actual margin. For a while you could say that about cannabis — unfortunately, it's almost like I'm back in the metals industry now. Bryan Fields: Ohio gets started, you come on as CFO. What's next? Was Ohio vertically integrated at that time? Jared Maloof: We were the first vertically integrated operator in Ohio and held that title for about a year. We won cultivation and processing, plus one dispensary in Sandusky, where we served the first patient ever in the state — her name is Hennington, and she was actually an employee of ours. Then a great friend of mine, who was our CEO, and I led our first acquisition in Ohio, buying a Springfield dispensary from a good friend of mine, Larry Piper, of Pure Ohio. We were vertical, medical only, and when the program launched we had only 10,000 patients — it was pretty rough. Bryan Fields: What was the roughest part of those early days? People sometimes forget how far the industry has come. Jared Maloof: Literally two weeks after I started, we were out raising capital — we owed Pure Ohio another million dollars on the dispensary purchase — and the capital faucet stopped in 2019. 2017 and 2018 were great years; 2019 was tough. I'm with the company two weeks and wondering how we're going to pay that. I'd just left a job where things were going great, and then we had the first-ever product recall in the state's history. Not to mention some regulatory issues. In that one-to-two week span I had to step in and take over as CEO, and I was genuinely wondering what I'd gotten myself into. But we worked hard every day, and we're still around. Bryan Fields: You're drinking from the firehose, trying to figure everything out while the world is changing around you. How do you internalize all of that and figure out how to put out fires while also positioning the team to move forward? Jared Maloof: I can tell you how we got out of it. First, we got the recall under control — it did some damage, but we moved past it. Second, I had put most of my life savings toward the down payment on that Ohio dispensary, and if we didn't convert on the final payment, I was at risk of losing everything, plus potentially the licenses. Then a great thing happened — we won in Utah. Once word got out that the license was granted, capital started flowing again, and within two weeks I was able to show up with a check and take care of it. Luckily, our team had put us in an incredible position, and we started to succeed commercially. Like anything in life, momentum is really important — we got hit with a lot of punches, but we were able to counterpunch just as often. Kellen Finney: It's good that you were already an expert in the industry at that point — you didn't have to learn cultivation techniques on top of everything else. How did you rely on specific teammates to manage all of that? Jared Maloof: We didn't know anything — we were launching a gummy line, tinctures, flower, opening dispensaries — and we were lucky. A lot of credit goes to the firm that helped us write our license application, Denver Relief. The three principals were Ean Seeb — who now works for the state of Colorado — Kayvan Khalatbari, and Nick Hice, and each had their own core competencies. They owned the first vertically integrated operation in Colorado and eventually sold it, and it became part of Willie's Reserve, Willie Nelson's brand. They helped us get started, but we still had to grow up on our own. Bryan Fields: You'd just added Utah, so you're figuring out how to open that while paying off capital in Ohio. Why was Utah so attractive to investors — how big was that market? Jared Maloof: I want to be careful about attracting too much competition to Utah — we've got a pretty good thing going there. But first, they were running a competitive licensing process, and you have to learn about a program before deciding to apply. Utah was only going to award eight cultivation licenses and 14 pharmacy licenses, so we knew the market would be relatively well controlled. We also wanted to understand where the Church of Jesus Christ of Latter-day Saints stood — and we learned they were supportive of the program. I'm still not entirely sure if that was because they're generally supportive of cannabis, or because they feared an adult-use program might come and wanted it controlled if it did. I always joke that if you're Mormon, you can go to hell for swearing or drinking coffee, but if your doctor tells you to consume cannabis, you can still get into heaven. Every business experience I've had with people there has been exceptional — Utah is a great, common-sense place to do business. They don't get wrapped up in red tape, but they run a safe, compliant program. Bryan Fields: It probably felt like you were being pulled in a hundred directions. How did you prioritize the day-to-day while still thinking forward, all while new in the CEO role? Jared Maloof: You're right, and you have to trust people to do what you've asked them to do. In some cases I have no choice but to trust, because I lack the expertise to be dangerous — I can't run a hydrocarbon extraction machine, and as far as cultivation goes, I can tour the grow, I can skirt, defoliate, put up trellises, but I don't understand EC levels and environmental set points at different growth stages. I do my best to learn, but ultimately I need to trust the director of cultivation to do their job. On the finance side, we've rarely gotten over our skis. You'd hear about Company X hiring a VP of marketing from Revlon, or Company Y building a million-square-foot facility — we never did anything like that. Our Ohio facility is 60,000 square feet with about 25,000 to 30,000 square feet of canopy. Missouri is a bit smaller but similar, and in Utah we have an outdoor grow in pots. We've always run pretty scrappy. Bryan Fields: Do you think those hectic early days — the regulatory issues, the abrupt CFO-to-CEO transition — shaped that conscious decision to grow slow and steady rather than getting out ahead of yourselves like some peers did? Jared Maloof: Partly, yes. It's also just how I'm wired — as a lawyer who'd worked in the scrap industry dealing with commodity cycles, where metal prices go up and you hire people, then prices go down and you have to reorganize. I didn't want to see that happen, so I've always been judicious with spending. The other thing was, I wasn't allowed to spend a lot of money. One of our old lenders likes to joke that Standard raised capital on the "country club circuit" — we don't have billionaires writing blank checks like many others did. That was a curse but also a huge blessing. Bryan Fields: You could just ask Carl. Jared Maloof: Yeah — when I left Icahn Enterprises, nobody believed what I was doing. "This CPA, attorney nerd — there's no way this guy's going to sling lead." Once people got over the shock, I flew to New York to test the waters, asking if they'd be interested in getting involved. I think Carl and his team had a little interest, but Icahn Enterprises holds entities with federal gaming licenses, and I think the attorneys decided the regulatory risk was too great at the time. But I think the relationship remains a potential asset for the future. Bryan Fields: It's easy to forget how early we still are in this industry. You were essentially planting flags in a brand-new industry, figuring out supply chains from scratch, and then trying to connect two different companies to run as one integrated machine and pipe all that data into a single dashboard so you can understand the health of each business simultaneously. Jared Maloof: It's painful, and one of the challenges is that regulations differ so much state to state — you're in the same industry but operating fundamentally different businesses. In Utah, for example, the Church of Latter-day Saints supports the program but has asked members not to consume cannabis via inhalation or smoking. If you look at the numbers, flower represents only about 30% of total sales in that program, which tells you members are following that guidance — but it means you have a totally different business focused on gummies and vapes. You also can't have chocolates in Utah. Product packaging differs by state, the seed-to-sale software differs — MJ Freeway versus Metrc — so you try to put in operating procedures that look and feel similar, but you're always managing for something different. Bryan Fields: That almost sounds impossible. Even with the same demographic — say, males 18 to 35 — purchasing behavior in one state looks completely different from the same demographic in Utah. You can't view the data as one whole; you have to silo decisions market by market and hope for synergies on top. Jared Maloof: Bryan, if podcasting doesn't work out, you've got a job here — you said it perfectly. It's a three-dimensional, four-dimensional maze. Different form factors are allowed in different states — pre-rolls are fine in Missouri, not in Utah, and until two weeks ago, not in Ohio either. Layer on vertical integration — you're running six businesses simultaneously in one state, and you need all the core competencies for each. Vertical integration is a blessing and a curse: if you run it well, it provides massive value; if you struggle in certain areas, it drags down your margin. Bryan Fields: So you're having to figure out operational efficiencies within each state and then determine what can transfer to other states and what can't — another layer of complexity in running all these businesses at once. Jared Maloof: Exactly. As a real-world example, in Ohio we made the mistake of building greenhouses for flowering canopy and running veg and mother plants indoors — probably should have been the opposite, running flower indoors for top-shelf product. Our first few harvests were in winter and the product was fire — we thought we had it figured out. Then summer came, it's 90 degrees outside, 105 inside the greenhouse, 80% humidity, and the plants are struggling to survive, let alone develop trichomes or terpenes. Every season our brand cycled through great winter product and a rough summer. We learned our lesson — in Missouri we built an indoor grow that's highly controlled, and I'd say it's among the best in the state. In Ohio, some of the greenhouse product gets sold through a different line at a different price point. Bryan Fields: I can imagine — you have a great winter, you're forecasting nicely on the spreadsheet, and then you get the email that yields are down and things are bad, and you're wondering why after such a strong winter. Every market needs to be understood on its own, with constant active problem-solving. Jared Maloof: Right — we're forecasting for lower volume in Ohio in the summer, we know THC will dip, we plan for a lot more fresh-frozen product, and sometimes we'll send an entire crop a different direction depending on how it turns out. It'd be great if we had seven identical flowering rooms and harvested once a week across all of them, but it doesn't work that way — we now have both greenhouse and indoor in Ohio, so it's greenhouse one week, indoor the next. It makes it hard to build a repeatable system of SOPs. Bryan Fields: Back to vertical integration — has there been a moment where you dreamed of just running a retail-only company? Jared Maloof: Many times. Wouldn't that be great? Every cultivator and processor would be working hard to get onto your shelves, and you wouldn't have crop variability to manage. Our philosophy at Standard — our retail brand is The Forest — is to keep 30% to 35% of our own product on the shelves and reserve the rest for competitors. We think that creates a better retail experience than companies pushing 70% to 80% of their own product through their own stores. There are pros and cons either way — we leave room for competitors because we hope they'll leave room for us in their stores too; we want our brand present across the whole state, not just in our own footprint. If we didn't have cultivation and processing, we wouldn't worry at all about how much shelf space we give ourselves — we'd just bring in whatever sells best. There's a real benefit to vertical integration when it's run well, but real drag when any piece struggles — including the fact that there aren't many software tools that work seamlessly across every market. Bryan Fields: You might be using one tool that works great in Ohio but need a completely different one in Utah. Jared Maloof: Everyone's world in cannabis is Microsoft Excel, honestly, plus Power BI, with APIs pulling in structured data here and there. We did review a few ERP solutions and concluded either the tools weren't designed well enough for cannabis, or we as a company weren't ready — probably more the latter. At this point, we're revisiting that decision. Bryan Fields: What got you here isn't what's going to get you to the next level, especially with how fast things are iterating — look at what AI companies are doing right now. Let's continue on growth — Ohio, then Utah — what state was next, and were there any that didn't materialize? Jared Maloof: In the summer of 2019 we applied in Utah and won; we applied in Missouri and won three cultivation and three processing licenses, no dispensaries. We applied in Maryland with a partner, Christina Johnson, who I know you've spoken with — her journey to get her license issued involved an egregious, years-long administrative appeal process, and the fortitude she showed to get to the finish line was incredible. We also applied in New Jersey — honestly, I think that was our finest application — and twice we finished just outside the winners' circle. We also applied in Georgia and were not successful. What I look for in a market: limited licenses, high population, and ideally a good list of qualifying medical conditions — does it include pain? Does it include anxiety? And it helps to have an eventual adult-use catalyst. Bryan Fields: Do you look for similar regulatory frameworks across states — packaging rules and so on? Jared Maloof: Often the rules and regs aren't fully known when the enabling law passes — it's a bit of a black box. Living in Ohio, people constantly ask why we're not in the hemp business. I thank God every day we didn't fall prey to that temptation. Bryan Fields: Did you ever consider it? Jared Maloof: There was one time a Native American tribe asked us to help build a business, and we considered it, but I never seriously pursued it — I had conversations to be polite, but I thought, this is going to be craziness, and I want no part of it. Bryan Fields: When applying to these states, do you think about a future where interstate commerce becomes real — would being closer to other markets be a benefit or a drawback? Jared Maloof: That question came up in almost every investor meeting, and I always gave the same answer: it's the one risk I don't know how to mitigate. We don't have the capital for a 5-million-square-foot facility, so we won't be the ones exporting to every state and country. All we can do is build a great business in the states we're in and keep improving quality with every iteration — like the craft beer segment within the broader beverage industry. If we can't do anything else, we'll try to occupy that space. The other thing that will likely happen is that because the feds have ignored us for so long, there's significant lobbying in every state, and I believe the entrepreneurs who've invested billions will work hard to ensure interstate commerce, if it happens, is tightly regulated. In Ohio, for example, all liquor transactions go through the Department of Liquor, and only 500 stores are authorized to sell it. Some states will regulate interstate commerce tightly, and some won't. Bryan Fields: That's a good description of the chaos and logic behind all of it. One variable you have to fight is the illicit and hemp-derived market — competing for the same demographic. Jared Maloof: Hemp is a big topic to unpack. Back in 2019, one of our lab technicians isomerized some CBD into a Delta-8 blend, and I thought this could be something. We applied for a patent on the isomerization process and went to Utah regulators, telling them we could dramatically lower product prices if they let us bring it to market — and they worked with us. We sold the first-ever Delta-8 in Utah, but our patient population rejected it, and we realized we needed to stop if we wanted to protect our reputation. Meanwhile the patent office was slammed by COVID and supply chain issues — who knew there'd even be a patent backlog — and it took about two years to get comments back. By then the illicit isomerization market had exploded. I sometimes wonder how big the boat would be if we'd stayed the course and gotten that patent, but ultimately we walked away from it. The challenges around hemp are incredible — I want to be for the plant, but there can't be two sets of rules where one group is forced to comply with strict testing, seed-to-sale tracking, and advertising regulations, and the other gets banking and interstate commerce with none of that. Bryan Fields: The hemp industry is pushing for descheduling, while regulated cannabis is pushing for rescheduling — and it's a real thorn in the side of the regulated market because the same customers are buying from both. Jared Maloof: Exactly. In Ohio there are 3,000 vape shops and countless gas stations and liquor stores selling infused pre-rolls, gummies, Delta-8 and THCA flower, and we think that market is probably larger than the regulated market we operate in. Walk into a vape shop today and you'll see exposed electrical, broken fans, dust everywhere — not a curated experience. But I promise you, in five years, if things stay the way they are, those will be beautiful dispensaries with recognizable national brands, and we'll have conceded this entire segment to intoxicating hemp and THCA flower. Bryan Fields: There might still be some boutique flower out there from actual cannabis operators who managed to stay afloat, but it's a tough fight given the economies of scale — hemp operators are talking about hundred-acre fields. Jared Maloof: Right, and it's a totally different game — back to my old life, 63 cents versus 65 cents a pound. We have outdoor grows in Utah and Missouri, and the cost-per-pound dynamics are wild: about $150 a pound outdoor versus $500 to $700 a pound indoor, and hemp operators running 100 acres can produce THCA flower for something like $8 a pound. The consumer doesn't care about the source — they just want to know, can I get high? So why would they spend $75 on our product when they can spend $12 on that? Bryan Fields: I can understand consumer confusion — if you drive down a street with a regulated dispensary on one side and Planet of the Vapes on the other, the consumer just thinks, "we legalized marijuana by vote," and doesn't distinguish. Jared Maloof: Right, they don't know, and they can pay with a credit card, so why wouldn't they? Bryan Fields: It's like beverages, too — you can walk into a regular grocery store and find THC drinks on the shelf. It still blows my mind every time. Jared Maloof: I know — some of our own employees buy beverages at the supermarket because that's how they want to consume. If any of you are listening right now, you're all fired — just kidding, beep out the names. But in fairness, the price difference is substantial, and it's hard not to be tempted. Here's the solution for beverages, though: a 12-ounce can takes up a lot of shelf space in a dispensary — you can fit a hundred packages of gummies in the same space as a handful of 12-packs, so it never quite made sense to sell beverages through dispensaries in the first place. For beverage to really flourish, you need to be able to buy it at CVS off the shelf, and all alcoholic beverages already run through a regulated program. If cannabis beverages get routed through a similar regulated program, I'm at peace with conceding that market to companies like Anheuser-Busch — though I'd like to see them use the actual THC molecule from the cannabis plant rather than a molecule isomerized from CBD. Bryan Fields: Do you think some of these bigger outside companies actually want to see cannabis companies continue to struggle, so there's consolidation and opportunities to pick up hard-earned assets — facilities, SOPs, supply chains — at a discount? Are you thinking about positioning more aggressively as the debt comes due? Jared Maloof: Absolutely. If you look at where lobbying dollars are being spent, certain industries are perhaps working against cannabis to help starve us out — but honestly, they don't have to work very hard, because we're starving ourselves. The debt wall is coming — between four and six billion dollars of debt comes due between this year and next — and there will be significant failures, creating opportunities to acquire assets at fair prices. I'd be lying if I said we weren't hoping to be in the room when lenders are trying to figure out safe places to put capital, or when a lender is deciding who the responsible party is to transfer distressed assets to, someone who can actually repay the debt. We're part of some of those discussions and would like to be part of more. Standard Wellness has made its name hitting singles and doubles — we've never gone after a home run — but some of these assets are priced so low right now that you might get a home run for the cost of a single. The trick is integrating them without screwing it up. Bryan Fields: That's probably the hardest part — the model can look great on paper, but bringing the asset back into operations, staffing it, and making everything flow together is the real challenge. Do you have specific markets or types of assets in mind? Jared Maloof: First, I want each of our four existing markets to be bulletproof — meaning enough retail to fully sell out our cultivation. Beyond that, I'd look at markets like Pennsylvania, Illinois, or New Jersey. I can't look at Florida — you need about $100 million to play there, and our balance sheet doesn't support that. So it's really: round out our existing footprint first, then look at markets we think are reasonably well protected, and third, watch for opportunities that fall into either bucket. Bryan Fields: It really is like the game of Risk on steroids — recognizing the ebbs and flows as they happen. One more thing — what are you thinking about with AI? Is anyone on your team focused on that? Jared Maloof: We don't have anyone whose sole role is AI, but at our corporate office in Cleveland, with 15 to 20 employees, just about everyone uses it daily. As an example, litigation is part of every company, and I put a brief into AI and it came back saying, "you've built a strong brief, but here are seven ways you could improve it" — and reading through it, even though I'm not a practicing lawyer, I thought, that's genuinely thoughtful. Data purveyors like Headset and BDSA are integrating AI into their platforms so that if you're selling in a dispensary, it can flag products that sold quickly but have been out of stock for months, giving salespeople real guidance. For a while we used AI to develop strain art, but we learned quickly that was a bad idea — it came up with cool stuff, but it was very recognizable as AI-generated, so now all of our strain art is hand-drawn. We also use it for competitive analysis. Bryan Fields: Last question — what question do you wish more people asked you? Jared Maloof: The issue that's not talked about enough is uplisting. Everyone talks about rescheduling, descheduling, safe banking, or safer banking, but true institutional capital doesn't come into this space until there's uplisting — until GlaxoSmithKline believes their ticker symbol is safe if they invest in a cannabis company, or until hedge funds and mutual funds can put money into cannabis equities. That's when we become a real industry. Bryan Fields: I love it. Jared, for our listeners who want to get in touch or learn more, where can they find you? Jared Maloof: Standardwellness.com, or theforestdispensary.com.