Gabe Mendoza: A Surprise Driver of Revenue Growth for 4Front Ventures

Gabe Mendoza: Driving 4Front Ventures Revenue Growth through Innovation from Ideas to Opportunities

Gabe Mendoza: How do you increase revenue from a wholesale standpoint? How do you maintain and increase revenue from a retail standpoint, especially if you're not growing that retail footprint? How do you maintain revenue with falling prices? How do you speak to your customer base, understand your customer base, maintain them, and then grow that? Bryan Fields: What's up guys, welcome back to another episode of The Dime. I'm Bryan Fields, with me as always is Kellan Finney, and this week we've got a very special guest, Gabe Mendoza, EVP of Revenue at 4Front Ventures. Gabe, thanks for taking the time, how you doing today? Gabe Mendoza: Happy to be here — it's negative 4 degrees in Chicago, so I'm happy to be inside with you guys today. Thanks for having me. Bryan Fields: Absolutely. Kellan, how are you doing? Kellan Finney: Doing really well, really excited to talk to Gabe, get the whole backstory on 4Front, everything they're doing. It's nice to have someone who loves living on the West Coast — Brian, you're absolutely right about that, but I know something Gabe loves more than living on the West Coast, and that's his mom. So in this East Coast/West Coast battle, Gabe, if you had to choose loyalty to either the weather or your mom, which would you choose? Gabe Mendoza: Well, now that you brought my mom into this, I guess I have to say East Coast. My mom was born in Brooklyn, Bed-Stuy, and I've opened up a handful of dispensaries on the East Coast, so if I had to choose, Mom, I'm choosing you — East Coast. Bryan Fields: That's fair, that's fair. So Gabe, for our listeners who don't know much about you, give us a background on yourself and how you got into the cannabis space. Gabe Mendoza: Yeah, so I entered the industry in 2013 when Illinois was just passing its medical law. I got together with a team, applied for, and won both a dispensary and a cultivation license here in the state — very fortunate to do that. I was then able to parlay that into selling the controlling interest to 4Front Ventures, who took me on this magical ride where I opened up 14 dispensaries in seven different states. We went public, and the rest is kind of history. It started here in Illinois, which is where I'm based, and it's taken me all over the country, including Arkansas — and that's an interesting story I'll tell you guys either now or later. Kellan Finney: I think that might be the first time that state's been dropped on this podcast, so I'd love to hear how you got there, and then we can dive deeper into 4Front's origin. Gabe Mendoza: So we were the third dispensary in Arkansas to open, in a little town called Clinton, Arkansas — a dry county except for us and the restaurant that served alcohol right next to us. We had open interviews and spent twelve hours in the local gymnasium interviewing seemingly every single person in that town, even the head of zoning and planning. I told him, "Buddy, you've got to approve our zoning — you can't be an employee here, you've got to go approve our zoning, man." It was amazing how quickly we got that open — three months. Arkansas was really amenable, but interviewing an entire town over twelve hours showed how much people really love cannabis, how much they believe in this industry and wanted to be part of it. Humbling, but man, that was a long day. Bryan Fields: So there was excitement from the people in that town to be part of this? One could envision the opposite — protests outside saying "absolutely not, this is a dry county, this doesn't happen here." Gabe Mendoza: Very surprised at the outcome. Arkansas actually has a rich underground growing history, and a lot of people came from that background and wanted to be part of something legal and in the open. We hired a really kick-ass team, and being first mover in Arkansas helped as well. Kellan Finney: So let's go back to 4Front — one of the oldest, if not the oldest, operators. I'm not that familiar with the history since it predates me. When did 4Front get started, and take us through the evolution from the early days to now. Gabe Mendoza: That's one of our unique differentiators — 4Front started as an application-writing consultancy, helping people all over the country write their license applications. We developed a really robust set of SOPs from Harborside — for listeners who don't know, Harborside was founded in Oakland and was one of the first really legitimate dispensary chains. We partnered with them to create these SOPs, then started applying and winning licenses ourselves. Once we'd won about 60 of these, we asked, "Hey, we're pretty good at this, why don't we go ahead and operate ourselves?" So we started winning and acquiring licenses in Illinois, then took that roadshow into Pennsylvania, Massachusetts, Arizona, Arkansas, and Michigan. It really started in 2011, and being around this long has helped us evolve — what we thought in 2011 versus the reality in 2024 is quite different. Bryan Fields: That sounds like a very sophisticated team for the tasks you were undertaking early on. Was that one of the biggest motivating factors for you jumping on board with 4Front when you sold your cannabis assets? What was the motivating factor for joining their ship? Gabe Mendoza: When you looked at their portfolio and what they'd helped accomplish — they'd helped win a handful of licenses in Illinois — I couldn't have found a better strategic partner, not to mention they had the capital to back it up. When we started, it was cobbling together money from friends and family to apply, with no idea of the capital intensity involved. I was grateful to have a partner with the experience and capital to get us through to the end. Kellan Finney: It's wild thinking back on everything you had to go through to get to that moment — I could see the emotion in your face. Gabe Mendoza: When we first applied, there was no guarantee we'd win anything, so I quit my full-time job to get paid significantly less and work my butt off applying. When we won, it was like, "Oh no, what's next? How do we even value this thing?" There was no comparable. It was me, my CEO, and one other individual figuring this out from the ground up, and we were very proud of what we built — finding locations, building them out. Then once you're cutting $500,000 checks to lawyers, you're like, "Where's all the money going?" You realize you need to get more sophisticated because it's way more costly and time-consuming than you ever thought. It took us a year to get our first dispensary through zoning in Chicago because busloads of people would come to City Hall saying "not in my backyard," often tied to actual political aspirations against the alderman. So many layers of complexity — we just wanted to open a dispensary and cultivation center and help people, and instead we're navigating city politics for a year and tens of thousands of dollars just to find a location. Bryan Fields: Those are my favorite points, because you win the license and then comes the hardest part — there's no roadmap, you can't just Google "how to open a dispensary." Gabe Mendoza: Right, the ability to absorb and learn from these lessons is paramount, because you don't want to repeat the same mistakes. That's unique to us because of our longevity — we've been able to take what we've learned and apply it to new states and municipalities. Kellan Finney: Let's get a top-level breakdown of 4Front's assets — where you're positioned, where your assets are. Gabe Mendoza: We have cultivation in Washington — you can't be vertical in the state of Washington — so Washington was our bread and butter for understanding cultivation processes, cost structure, and competitive pricing while maintaining quality and branding, since it's a highly competitive market. In Illinois we have two retail licenses, with a third, fourth, and fifth on the way — we're starting construction on our third next week. We currently have a smaller cultivation center in Illinois, but by the end of this year, even before, we'll move into a new facility that's 250,000 square feet with 40,000 square feet of canopy — 5x our current canopy. We're really digging deep into Illinois because we have the ability to scale here. In Massachusetts we have three dispensaries and three grow/processing facilities — we've maxed out there. We continue to see customer growth, and even with price compression happening across Massachusetts, we're not experiencing that as much because of our product differentiation — people are buying more from us, bucking the trend of other Massachusetts stores. Bryan Fields: Across those three states, do you try to maintain similar product SKUs? How do you manage your product portfolio in each state? Gabe Mendoza: In Illinois we've only done flower up to this point because we didn't want to spend capex on equipment that wouldn't scale for the big grow. When we move into Matteson, we'll bring our full portfolio — all the brands we've created in Washington. We test them there, understand what demographics they speak to, then launch into Massachusetts and Illinois. Washington's high competition helps us understand what will work and at what price. The consumers differ by state, but it helps us know what to bring in and where. Kellan Finney: Are there products in Washington targeted toward, say, an older population that you launch differently in Massachusetts where that demographic exists? Gabe Mendoza: For sure. When we create a product, we have a certain customer and demographic in mind, and we bring it to a state with that same customer in mind — we wouldn't take a highly medical product from Washington and market it in Massachusetts as recreational. Because we have so many brands in Washington, we can look at the gaps in Illinois and Massachusetts and say, "This market doesn't have an infused pre-roll that they need — let's bring that in." Having that breadth of products lets us pick and choose what to bring in based on the gaps. Bryan Fields: That's an experienced mindset — recognizing variations between states while minimizing the risk of failure and maximizing upside. Gabe Mendoza: Huge — efficiency is so important, especially now in a capital-constrained environment. You can't shotgun-approach launching ten brands hoping some stick; you lose money on packaging and fixed costs. We're deliberate about what we introduce because there's only so much cash to go around — we're stewards of the company's cash. Kellan Finney: Do you get to use the same packaging in every state, just changing stickers? I've heard that's a pain. Gabe Mendoza: It's definitely a pain most of the time. Child-resistant packaging can be reused, but the labels differ. Taking an "Island" label from Illinois and putting it on Massachusetts product isn't allowed unless you're re-stickering everything — a labor of love, but there's nothing better than someone in a different state peeling back a sticker and seeing it says Massachusetts underneath. You don't want to do that. Bryan Fields: So when you're building out this 5x facility in Matteson, is that a major strategic conversation internally? Gabe Mendoza: Absolutely — it's the most important decision the company has made, and the most important decision of 2024. Walking into that new facility, hearing your voice echo off the walls, the responsibility really hits you. You have to operationalize a massive facility and be intentional every single day, because every day brings you closer to execution. We've also done a really good job on wholesale in Illinois — we tripled it year-over-year from '22 to '23 in an effort to get our products into every dispensary we can, so people know who we are before we come to them with a full suite of products. Hopefully this new facility can triple it again. Kellan Finney: When building out something massive like that, is it a collaborative effort across your cultivation teams on both coasts? Gabe Mendoza: Great question — we have so much institutional knowledge spread throughout the country that it behooves us to lean on it. We have leads taking point on decisions, but we incorporate our strategic assets, our "brain trust," to say, here's what's worked in Washington, Massachusetts, Illinois. Even though our scale is smaller in Illinois, that team has the most accurate information about how plants behave in the Illinois environment — hot, humid summers and super cold, dry winters. No one person has all the answers. Bryan Fields: At that scale, it's not as simple as just hiring 5x more people — are there additional tools and automations being built into the facility? Gabe Mendoza: Absolutely. When we exited California, we brought all our machinery to the Illinois facility to hit the ground running. Matteson is going to be extremely automated — much more of a manufacturing process, agricultural manufacturing. That's also why we didn't invest in a kitchen or processing lab in Illinois at our current smaller scale — it would just collect dust. You can't create that kind of scale in a 40,000-square-foot facility. Kellan Finney: Were there specific strains you picked out for the new facility — walk us through the pheno hunt process. Gabe Mendoza: Yes, we have a list of strains for the facility and a list dedicated specifically to our retail stores initially, to generate buzz and a unique selling proposition. One brand I'm most excited about, coming out of our cultivation facilities in Illinois, Massachusetts, and Washington, is called The Hunt — an homage to pheno hunting. We took a bottoms-up approach, listening to our cultivators who said, "We have these phenos we're testing that are good quality — why aren't we bagging and selling them?" So we created a brand around that. It's doing really well in Illinois and Massachusetts — small batch, limited runs, where the consumer doesn't know if they'll get it again. It's an homage to back when you had a local dealer and didn't know exactly what the weed was, but you knew the guy grew good stuff. It creates desire to see what 4Front created that week or month that might not come back. We take the best of those phenos and bring them into the Matteson facility. Bryan Fields: It's a combination of exclusivity and urgency, while letting your team experiment. But I want to push back on one thing — you are an MSO, correct? Gabe Mendoza: Yes, and this is where the longevity I mentioned comes in. Back in 2011, and even a bit later, our cultivation mindset in Washington was maniacally focused on low-cost production, and quality took a back seat. About two years ago we had a seismic shift: we can grow the lowest-priced weed, but if people don't want to smoke it, who cares? We had a come-to-Jesus moment — relooking at curing, harvest, drying, and how it affects the final product. Eventually everyone gets down to low cost, and then it's about who has the best quality at that cost — if you haven't gone through those trials and tribulations to get there, you're going to be screwed. Kellan Finney: How do you balance maintaining quality with automation? People assume those two things don't correlate well. Gabe Mendoza: With technology developing the way it is, you're no longer destroying the bud. At first, our trimming machines were knocking trichomes right off, leaving product brown and sticky in a bad way. With better technology, you maintain a higher tack without knocking off trichomes. Same with cure and dry — we can now reabsorb terpenes instead of rushing product out the door. Some of it is just taking the time it takes to make the product good, and some of it is technology letting us create higher quality at the same cost-saving structure. Bryan Fields: And the biggest benefit is the consumer gets a product at a lower cost because it costs your team less to produce that high-end product. Gabe Mendoza: Exactly — there's a perfect equilibrium point of the right price at the right quality that we're always striving for. It's enlivened our cultivation team, who are excited to work for a company that actually cares about quality, which helps us retain talent and inspires innovative ways to maintain cost structures while thinking about quality. Kellan Finney: Do you think product innovation comes from the bottom up instead of top down? Gabe Mendoza: It depends who's at the top. We know what we don't know — at the executive level we can run efficient operations and have cost structures in place, but we're not in the weeds daily like our dispensary or cultivation employees. It would be foolish not to listen to them. Every quarter we hold an all-hands where we bring employees together to talk product innovation and create a roadmap based on those ideas. Some make it — The Hunt is a perfect example — some don't. We're not cocky enough to think we have all the answers; it's a team effort. Bryan Fields: Is it like someone walking around with a notepad going, "Oh, that's a good idea"? Gabe Mendoza: Pretty much — it's virtual since people are all over, but we prep individuals beforehand and tell them to come with ideas, not to be afraid to share. I like to start by throwing out a ridiculous idea of my own so people get comfortable sharing theirs. We have a note-taker who creates a project plan from all the ideas — some we'll do this year, some get tabled for when we open Matteson. Kellan Finney: I'm sure so many great ideas come out of that — give us an example of one of the crazy ideas you threw out to break the ice. Gabe Mendoza: I do think this one will actually come to fruition, though I don't know exactly how it happens biologically: there has to be a way to measure your endocannabinoid system, see where you're deficient in terpenes and cannabinoids, and dial up a mix of full-spectrum cannabinoids and terpenes to get you to that homeostasis level — because there's a threshold where consuming too much cannabis has a negative effect. Finding that equilibrium point so people consume the perfect amount, become better human beings for it, and go about their day. Bryan Fields: I think it's possible — someone just needs a wearable and a calibration model correlating endocannabinoids in your blood to specific levels. Any entrepreneurs out there? Gabe Mendoza: We'd need to hire a team of world-class scientists to run data studies on every single person — start a clinical trial, do blood work. Start it at 50 million to change the industry, hit the market by 2045. Bryan Fields: So I want to get into some of your experience, specifically the EVP of Revenue title, because I'm fascinated by it. You've launched 14 dispensaries and three cultivation centers across seven states — is there a state that's been more problematic than others, and one that's been the smoothest? Gabe Mendoza: Massachusetts was very difficult regulatorily — local municipalities really had problems allowing cannabis into their neighborhoods. It took three years to get our Brookline, Massachusetts dispensary open. Now that we're open and running, it's great, but you're seeing what's happening with the Cannabis Control Commission in Massachusetts — it's a bit of a mess over there. It's very old-school political. We opened a dispensary in Cambridge, right in Harvard Square, and the sheriff came and closed us down; we reopened because there was no legitimate reason for the local municipality to revoke our permit. A lawyer working for us called and said the local PD was planning to raid a cannabis dispensary in Cambridge, and it turned out to be us — this was 2017-2018, not the early wild-west days. They were literally setting up to raid us despite proper permits. I think they finally reissued that permit just last year. So Massachusetts has been incredibly difficult, but we're open and maxed out there now. Illinois, on the other hand — the level of price compression here, thanks to the limited number of licenses, has really helped us and the industry. Compare that to a state like Michigan, which has issued an unlimited number of licenses — their topline revenue is huge, even bigger than Illinois's, but the success rate of individual dispensaries and their pricing and cost structures is a mess. You have to operate at volume or you're sunk, and you're seeing many places go out of business, which only benefits the well-capitalized. Illinois limited licenses and rolled things out strategically so pricing doesn't crash. Maxing out at 10 licenses feels like a good number — look at the revenue the Illinois OGs like Cresco and GTI generate; their lion's share is Illinois. Kellan Finney: Were there any other states you looked at and decided not to enter because of regulatory headaches? Gabe Mendoza: We looked at Missouri and Oklahoma and decided against them. Right now we're diving so deep into Illinois that it's really the name of the game for us in '24. Bryan Fields: It seems like the feeling among the bigger-tier companies now is locking down current assets and fortifying position. Last year felt like efficiency and capital drying up; now with capital potentially coming back, everyone's doubling down on assets. The industry seems to be taking a different, more aggressive approach. Gabe Mendoza: That's exactly what's happening. Last year was tough from a capital standpoint, but we got so much more efficient across the board, so when the spigot turns back on — which it already has for us; we secured $10 million to go after some licenses in Illinois — we'll be so much more profitable. Last year was about doing more with less; this year is about strengthening our core assets so that when things shake out, we're extremely well positioned in the states we think will be best moving forward. Kellan Finney: Perfectly said. So let's dive into your role, because I'm fascinated by the title, and how you fit — revenue can mean internal, cost-of-goods-related work, or customer-facing margin work. Where do you fit, and is it both? Gabe Mendoza: I've been in this role seven months. I cut my teeth in retail operations and helped open the grows, but I wasn't a grower or deeply involved in maximizing grow efficiencies — I've been studying that now. The answer is both. My first six or seven months have focused on external revenue: how do I increase revenue from a wholesale standpoint, which I think we did really well in 2023 in both Massachusetts and Illinois — in Massachusetts it wasn't 3x but it was substantial. How do you increase revenue from wholesale? How do you maintain and increase retail revenue without growing the footprint? How do you maintain revenue amid falling prices? How do you understand and grow your customer base? You're not going to move average ticket from $60 to $100 overnight — you have to incrementally stabilize or increase it, but really you need more bodies, more people who understand and differentiate you from others. It helps to be vertically integrated with a wide breadth of products. So the first half has been figuring out where I can maximize revenue, including leveraging the retail stores with other wholesale partners, and showing growth in revenue as the answer. Bryan Fields: I think that's well said — squeezing revenue out of opportunities others may not notice. Can you give an example of a time you did this? Gabe Mendoza: Right now, as we build our third Illinois dispensary — a week away from construction, with more to follow — we looked at how to lay out the sales floor and monetize it, drawing on what the West Coast has done versus the Midwest and East Coast. We designed the floor so we can monetize specific areas for specific vendors — not necessarily for cash, but maybe a better product discount in exchange for highlighting their brands in a prime area. That's a recent example of looking at what's worked on the West Coast and applying it to maximize retail revenue. Kellan Finney: How much do margins factor into product placement — is it a conversation of "this only has a 5% margin, it doesn't go on the shelf"? Gabe Mendoza: It's not just about the physical shelf — it's about e-commerce positioning too. Sixty percent of our customers order before they even arrive, so if your menu-builder favors your least profitable product, you're shooting yourself in the foot. You have to market so that when someone looks at your menu, you're showing them products that are best from a margin standpoint and fit demand — flower and pre-roll combined are 70% of the market, so why put tinctures at the top of your menu? That's when the conversation becomes, instead of a $10,000 monthly check for placement, maybe a 20% discount on a flower brand in exchange for prime placement. You don't want to be on page 62 of the menu — the only person going there is the value shopper searching specifically. Bryan Fields: What's the most expensive lesson you've ever learned? Gabe Mendoza: This ties back to quality — we launched a brand in Illinois before we were ready. The product quality didn't meet the brand's value proposition; it was supposed to be our high-tier brand, and it wasn't there yet. That's an expensive mistake because you either have to pull it or pause until you're ready to relaunch. But honestly, I'd also say California — the market was brutally tough. When distillate prices fluctuate like they do there, it's hard to build a viable business, and you scratch your head at how some businesses are doing it. We were able to move a lot of our equipment to Illinois, but a lot of time and brainpower went into California that we essentially had to walk away from. Kellan Finney: What's the biggest lesson you took from California to Illinois? Gabe Mendoza: The equipment we created in California — we had German scientists flying back and forth to fine-tune and calibrate machinery, getting sizing and wrapping right. That took a long time, effort, and money. Now we can apply that instantly in Illinois because of the effort we put in in California — we'll be able to create these products efficiently and at scale. Bryan Fields: Everyone better be ready. Dream smoking session, three people, dead or alive — who are you smoking with? Gabe Mendoza: Jesus, obviously. And Bob Marley — I'd love to understand his ideas on Rastafarianism and the culture in general; that would be transformational. And a third — I'd love to smoke with you guys, but I can only choose one. Bryan Fields: Well, I guess East Coast it is — respectfully to Bob Marley. You said smoking with him would be transformational, but not Jesus? Gabe Mendoza: Jesus is a given — I just wanted to clarify. How did you walk on water? How are you doing that? Those aren't simple answers. First thing's water into wine — we're going to need some wine before I get into the miracles. Kellan Finney: If you could put anything on a billboard, metaphorically speaking, to get a message to billions of people — an image, a quote, a word — what's the first thing that comes to mind? Gabe Mendoza: Naming your fears and leaning into them. I deal with hundreds of employees daily, and my goal as a leader is to get the best out of them, mostly for themselves. There's so much doubt in people's minds, and doubt leads to fear — if you can name that fear, understand it, embrace it, and lean into it, you become so much stronger. It's a muscle you have to flex to become the best version of yourself, because otherwise you're limiting the only life you have. If I could remove doubt and fear from people, this world would be an amazing place. Bryan Fields: What question do you wish more people asked you? Gabe Mendoza: I wish people asked how cannabis really affects their body — how it reacts with your neurological system and binds to receptors. When you dig deep into understanding what this product is, you understand how transformational it can be. Medical acceptance is already at 80-90%, but really understanding how it affects you dispels the myth that it's just about getting high — it's about understanding how it makes you well. Kellan Finney: Prediction time — what emerging trends or market shifts do you anticipate will most significantly impact the cannabis industry in the next two years? Gabe Mendoza: Hopefully in less than two years, with rescheduling — there's debate about reschedule versus deschedule, but the fact we're talking about rescheduling at all is huge, and trying to stop that train to push for descheduling instead would be a disservice to the years of effort that got us here. Getting 280E off the table will be huge. Separately, when publicly traded companies can uplist onto major exchanges and access institutional investment, that will be really huge — our underlying financials are solid, and if you apply multiples from comparable industries, we should be trading at three to four times where we are. That gives us leverage to expand. Bryan Fields: I'll piggyback on that, Kellan — rescheduling's implications for 280E are huge. A lot of people think the SAFE Banking Act was the be-all-end-all for institutional funding, but big banks already do business internationally, so SAFE Banking doesn't move the needle much for them. Rescheduling, though, has implications for the national narcotics laws, which would let institutions into the game more meaningfully. I think those two catalysts — 280E relief and institutional capital access to normal business tools like equipment loans — are the biggest for the industry. Kellan Finney: What do you think, Bryan — take a different approach? Bryan Fields: I think it'd be really awesome, since I shop here in New York, to understand what products are similar when I visit Gabe's stores in Chicago, or in California or Washington — to know, "you like these products in New York, here are similar products." The ability to cross state lines legally and understand which products match what you're looking for would be really helpful as the industry expands beyond state silos into something more global. Right now it's a guessing game — sometimes I pick a product I love, sometimes one that's just okay, and there are so many brands it's hard to decide, especially walking into a dispensary in a new state for the first time. Gabe Mendoza: The ability to deschedule or reschedule will allow more sophisticated technology into the space — things any other traditional retail or manufacturing company has that are difficult for us right now. Tech companies in cannabis are trying their best, but even non-plant-touching companies are hamstrung by the same restrictions we are. I'm excited about technology advancements in POS, e-commerce, customer segmentation, and customer communication — that's something I look forward to as well. Kellan Finney: It's wild that terms of service lump in "cannabis-related businesses" — now anyone adjacent gets thrown into that same bucket, which is outrageous. Shout out to you, Stripe. Bryan Fields: Shout out Stripe — thank you. We're not shouting out Stripe. Kellan Finney: We're not shouting out Stripe, Kellan. Bryan Fields: Gabe, our listeners want to get in touch and check out 4Front's products — where can they find you? Gabe Mendoza: Our retail site is missiondispensaries.com — if you're in Massachusetts, Illinois, or Washington (Washington would be cultivation), go check out all the different products we offer. For the parent company, go to 4frontventures.com — that's the number 4, then front ventures dot com. There's a lot of exciting things to come in Illinois, we're continuing to innovate in Massachusetts, and we're bringing all of that from Washington, so please keep an eye on us. Bryan Fields: Awesome, we'll link all that in the show notes. Thanks for taking the time, this was a lot of fun. Gabe Mendoza: Thanks for your time, likewise — take care, guys.