Why MariMed is Doubling Down on Brand Consistency & the Boston Tea Party-Style 280E Protest

Why MariMed is Doubling Down on Brand Consistency & the Boston Tea Party-Style 280E Protest ft. Jon Levine

[Intro/Music] Jon Levine: We want to take that and continue that growth of our branded products across the country in an orderly way that we're not losing the integrity of our products, so the people get the consistency and every time they have our product we want to be the Coca-Cola, we want to be the McDonald's. Bryan Fields: What's up guys, welcome back to another episode of The Dime. I'm Bryan Fields, and with me as always, Kellen Finney. This week we've got a very special guest, Jon Levine, CEO of MariMed. Jon, thanks for taking the time. How are you doing today? Jon Levine: Very good, you guys, great to see you. Bryan Fields: Good to see you, Kellen, how are you doing? Kellen Finney: I'm doing really well, really excited to talk to Jon, really excited to learn about the East Coast market from someone who's actively participating in it. How are you doing, Bryan? Bryan Fields: I'm excited, and as you did say, we are talking East Coast again today. Jon, just for the record — a little East Coast/West Coast; Kellen likes to say West Coast for himself, but we both know that's not true. Jon, where would you put yourself on the East Coast/West Coast file? Jon Levine: We're East Coast, we're the New York/Boston fighting of the East Coast. Bryan Fields: All right, so Jon, before we dive right in, I think we should start with a topic that we don't really discuss too much, especially in this industry, and I think that's succession planning. I think the story with you and MariMed about the transitioning of the executive role, but also mourning your colleague and a brother of yours, I'd like to talk about the difficulty of that and just kind of the importance of understanding those components and the transition period. Jon Levine: Well, as you said, we lost my best friend, brother, partner, and co-founder of this company, Bob Fireman, in December of last year. And as you were saying earlier, succession plans are always a good thing to have. I guess we got very lucky that Bob and I were as close as we were, though we were never prepared for what happened. I'm happy that I was around and ready to be able to step up and continue this company growing in the right direction. We lost him at a very young age, and we lost him quicker than any of us had hoped. But Bob and I were extremely close when we founded this company many years ago — or as I should say, as we got into the cannabis industry back in 2008. We never thought that long ago that we would still be heavily in this as we are, and it was a tough situation to lose a good friend while we're in the middle of continued growth of this company. But I've been finding that the team around us — we put together a great team, we have a lot of great support within management — we didn't really miss a beat. We have continued to grow and we're looking forward to accomplishing everything that Bob and I had set out to do when we first started. Kellen Finney: I think that's so important, and unfortunately those are part-of-life events that you've perfectly described. So as a company, are there changes that happen after that to lay future groundwork to prepare for succession planning? Take us through those intricacies, because I would assume most companies don't have two leaders as close as the two of you were, so they don't even have that ability to lean on each other. Jon Levine: Preparing a succession plan sounds like a scary word to talk about — no one ever wants to say they're going to need one because they don't think they're going to pass away, or they don't think of it in the right way of growth or moving up to other things. With Bob and I, though, we had started an organizational restructure where we were bringing in additional people on the management team, and we had actually already started to talk about the future of growing the company into areas that Bob and I were basically new to. We were a public company, and Bob and I didn't have a lot of public company experience, but we put really good people around us. We also brought in our CFO, Susan, back in March of last year, before Bob got sick, and that was to start the succession process and start other roles for him and me to help the company grow to the next level. So it kind of was a good opportunity when it happened — I went from CFO to president, and then with Bob's passing I became CEO and president. It gave me a little more exposure, which helped me understand how the company would operate. Bryan Fields: I just want you to expand on the Benzinga award that will be given after this airs, so if you could just quickly touch on that and the importance of it. Jon Levine: Yeah, well, I'm very excited to say that we wanted a way to honor Bob and everything we've achieved. Benzinga has always been very supportive of MariMed and of Bob and me being around there, and Howard, our chairman of communications, came up with the idea, and I thought it was a great idea. So we spoke with Benzinga and we created the Bob Fireman Entrepreneur Award, which we will issue at the Benzinga event every year. I think it's a great opportunity to find people in the cannabis industry who have had the heart and desire to do something in an industry that's not easy, and we've structured this award to celebrate a person who's learned how to really grind it out and fight to get what they want and succeeded in many different areas of cannabis. We have an exciting candidate that we'll be announcing on Wednesday of next week with Ed at Benzinga, and I'm really looking forward to it. They remind me a lot of Bob and his entrepreneurial spirit. Bob and I got into business way before MariMed and did a lot of ventures together, but it was great to see somebody excited to try different things, take risks, and do entrepreneurial things that helped people, which is what gave us the opportunity to become what we are today. Bryan Fields: That's awesome. We'll leave it there — some phenomenal ideas from Howard, what a star team member. So in those early days, when you and Bob were having these conversations about getting into cannabis, what was one of the catalysts that pushed you guys over the edge? Walk us through those early days and how MariMed actually became a public company. Jon Levine: In 2008, Bob and I were running a different company at the time, doing medical billing and collections, and he brought me a business plan for a company in California. I looked at it and said these numbers don't make any sense, so I flew out to San Francisco, down to San Jose, to Aptos, and I went to a house where these guys had built a grow room inside a three-bedroom house — down to two and a half rooms with flower in it. I studied what they were doing, they took me into San Jose and showed me a dispensary they were selling flower to, and I talked to that person, then got back on the plane that night for the red-eye home, running numbers all night. I said, damn, these numbers actually do make sense — maybe a little aggressive, but even cutting them in half it made sense. So after several more red-eyes back and forth, we financed our first grow house in Aptos, California, within three months. Somebody came knocking and offered us the keys to a dispensary in San Jose because he was in a little trouble with his wife and just tossed us the keys. Bob and I got heavily into cannabis in the wild, wild west — not Colorado, California is the wild west. Bryan Fields: I could not agree more, I spent time out there, very different for sure. Jon Levine: Yeah, so we started in San Jose and Aptos, and I learned a lot of ways to grow flower wrong, and the misconceptions everybody has about the right way to do things. We got a phone call to help write the referendum in Massachusetts, and the gentleman who asked us introduced us to a group in Rhode Island that had a license to build a seed-to-sale operation in the Providence area. I met with them and said there's really only one way to raise money for cannabis, and they agreed, but I didn't like their building, so I set out to find a new location. This was a time when cannabis was still a bad word, and the federal government was selling a small postal distribution center across the street from their new facility. So I bought that building from the federal government and built the first seed-to-sale operation in Providence, Rhode Island, which we leased to our partners, bringing in staff from California to teach them how to grow, sell, and package. That's really how we got into this business. Bryan Fields: And how you became a public company? Jon Levine: When we got into consulting, we won a bunch of applications — one in Delaware, which was our first facility there, and we raised money the same way we had in Rhode Island and California. But we also won applications in Illinois and Nevada, so we needed to raise more money. Bob was sitting on another board, and those board members suggested we merge with another public company that had no revenue, so we could raise money through the public markets. It took about eight months to get that deal done. There were two stocks at that time, in 2013, that were trading at a couple bucks, maybe ten or fifteen, but by the time we signed the agreement, those stocks had dropped to ten cents because everyone realized they were just an imaginary paper idea. Then we started raising money privately again, and eventually did a raise under Marimed Advisors with the public stock being a convertible — that was our first real entry into the public market. We were already owned 50% by Worlds Online at that time, and eventually they said we couldn't be Worlds Online anymore, so we decided it made more sense to call it MariMed — we took over the name and the stock symbol. We've done successful raises as a public company, and our stock has been strong compared to a lot of the industry, though not at that valuation because we didn't go to Canada right away and raise a lot of money to just go buy things. We concentrated on doing it from the application side, building things out and getting them up and running. We started consolidating in 2018, merging all of our partners into MariMed, and that's how MariMed now reports the plant-touching side of the business rather than just consulting. MariMed has had 14 quarters of continued revenue growth, and positive EBITDA and positive cash flow for the last two years. We may be coming along slower than others, but we've always been around — we just weren't touching the plant and reporting the revenue until our partners reached legalization or converted from not-for-profit to for-profit. Kellen Finney: I think that's really impressive, and there's a ton of retail investors raising the MariMed flag loud and proud. Let's talk about Maryland specifically — a lot of people are talking about the growth potential there. How does that state play into your future growth, and what's the current status? Jon Levine: We're so excited about Maryland right now. Maryland going adult-use last year was a great opportunity for continued growth. Now that we've finished the roll-up there, we're putting dollars this year into expanding grow operations. Last year we opened our brand-new GMP-certified kitchen, which allows us to do high doses in the state. That kitchen is just part of the story — when we build additional grow rooms, we're able to produce all of our brands at a high level with better control of the flower we need. Maryland isn't as aggressive on tax as Missouri, but it's a state that's really behind the program — they took a vote in November and turned it around by July 1st to be up and running as an adult-use state. I applaud the people of Maryland; most states are very slow, but this was a great opportunity. We hope to have our expansion completed by the end of the year, with additional flower and products into Maryland early next year. Kellen Finney: When you're making those expansion decisions, is it more of a macro strategic approach — we have this capital, invest in growth here or there — or is it more specific, like Maryland's market needs more capital right now? Jon Levine: We've put together a very strong management team, and we take advantage of weekly discussions to figure out the right direction. At the beginning of the year we weren't concentrating on Maryland, figuring there was no way it would be up and running by July, and we were looking at expanding Massachusetts instead. But we decided Maryland could expand a lot quicker, so we repurposed capital there. We're still working on Massachusetts, just not doing the build-outs as big or as fast, because Maryland will generate additional cash flow much quicker. With the kitchen expansion and the additional grow, we'll produce almost double the flower we presently do by the end of the year, which should help fund other growth within the company. Bryan Fields: One of the challenges in cannabis, as we know, is 280E, which makes it harder to have that extra cash. I know you're a bit more outspoken about the removal of 280E being more beneficial to the industry than SAFE Banking. Can you shed some light on that? Jon Levine: The magical Tea Party for 280E — another Howard special — was a great opportunity to teach people how 280E is a bigger issue than legalized banking. The 280E tax code hurts everybody in this industry by taxing gross profit and not allowing ordinary business deductions. I've been fortunate to be in this industry since 2008, so I've learned quite a bit about how to be prepared for it, but I think if the government rescheduled cannabis to Schedule III or IV, that would be a much bigger benefit than the banking bill. The banking bill just makes banking a little more available, but 280E is the real benefit to the consumer, because it means we don't have to pay such a high tax to the government, which means we don't have to sell as much just to survive. Getting rid of 280E would make us like any other company that can take ordinary business deductions — a huge tax savings, especially for smaller players trying to get into markets like New York. Raising money is never enough because you have to pay so much more in taxes when you're not making money yet, which sets you further behind. So it's exciting to hear the government is looking at rescheduling to III or IV — I think that's the more important piece. Kellen Finney: Could you briefly describe what 280E is for listeners who are unaware, and does it affect each part of the supply chain equally — retail versus cultivation versus vertically integrated operations? Jon Levine: The 280E tax law says that if you're conducting an activity that's not federally legal, like dealing in a Schedule I drug, you're not able to take ordinary business expenses as tax deductions. When I first got into this, it took a lot of research to understand that your cost of goods sold is really the only expense you can deduct, as long as you're not selling directly to the patient — which is where a retail store gets hit worst. You can't deduct rent, payroll, or advertising, and they'll even fight you on non-cannabis supplies. Back when we started, people set up management companies to lease services to dispensaries, but there were questions about the legality of marking those up. Manufacturing has a bit more leniency because you're selling to a retailer, not directly to the consumer, so there's more flexibility in what you can deduct on that side. It's a very complex piece — I've already passed a couple of audits, so I don't need the IRS coming at me with a magnifying glass. Bryan Fields: I think that's fair, and I think creative accounting is unfortunately necessary in these situations for everyone involved. But I want to stay with the Tea Party event, because it had Howard's fingerprints all over it — you knew right away. Does he bring you the idea fully baked, or is it more of a concept he pitches? Jon Levine: Howard brought us several ideas, and this was one where a lot of people were like, okay, Howard, you did the brownie thing, that was a big score, we don't know if we believe in this one, but we support you. It went off even better than I would have envisioned, maybe better than Howard envisioned. He worked very hard, and I cannot believe the outfits he got us — the real look and feel of our ancestors — and doing it in the 50th anniversary year of the Boston Tea Party was magnificent. We brought in our top employee of the month from each of our facilities, flew them into Boston, they met their cohorts in Massachusetts, joined us on the boat, and had a nice dinner afterward. Some of them didn't even understand 280E, so explaining what they were protesting made a lot of sense of what we were doing on that boat. It was a great opportunity to show the industry that we all stand together — this wasn't just about MariMed, it was about making a statement to help the industry. Bryan Fields: Just quickly for our listeners who may have missed it in the news, can you describe what actually happened? Jon Levine: We stormed the schooner, took it out into the harbor, chanted "down with 280E," our CEO Tim Shaer read a statement about how unfair it is that 280E exists and that the government should reschedule, and we threw boxes labeled "weed" into Boston Harbor. We brought them right back out — there was no real weed inside, so everyone can relax, we didn't damage any good flower. It was about demonstrating in full Colonial garb — it was very hot, I'll admit, wearing all that stuff. I was the one who was wet, and the boxes were drier than I was. It was a beautiful day, a great celebration, and I can't wait for Howard's event next year. Bryan Fields: Did policymakers reach out after that? Jon Levine: We have to notify the state prior to doing any of this, so local people weren't as surprised as the rest of the country, but I'm sure Howard had people reaching out to understand more. I had a lot of great feedback — text messages and emails from other CEOs congratulating us on a great idea. Bryan Fields: Do you think this motivated the HHS rescheduling recommendation? Jon Levine: I would love to say that — there's nothing called a coincidence. Kellen Finney: Expanding back on the Maryland facility — when it's up and running, is it built out with an understanding that certain sections are for certain brands, or is it more that you're building cultivation to fulfill the needs of all the brands? Jon Levine: We already have half the building built out with flower rooms and our GMP kitchen making our brands. This expansion is to supply additional flower for our branded products, to expand the ability for more people to enjoy high-quality Nature's Heritage, and maybe some in-house products as well. Kellen Finney: Is there ever a conversation where you position part of the grow to manufacture a specific type of edible because you're trying to push a particular branded edible more? Jon Levine: One hundred percent. We have to make sure we have enough flower to keep our brands in full supply — we don't want to be buying flower and trim from others if we can manufacture it ourselves. We take a portion of every room and extract it right away for all of our products, not just edibles, but also dabs and waxes for patients looking for something other than smokable flower. Kellen Finney: How hard is it to maintain strain consistency from state to state — has that been a huge challenge? Jon Levine: It was a very big challenge many years ago, but it's getting easier now because you're able to legally move seeds and clones across state lines, though you still have to register those strains with certain states. We've been fortunate to have similar strains in each state we started in, though not full consistency across every state — but we're getting there, and now we're able to move some strains from state to state legally. Kellen Finney: One of the semi-hidden benefits of a large wholesale grow is economies of scale internally — is controlling input parameters a big consideration for driving down costs? Jon Levine: It's more about control, not just cost — it's consistency and high quality across every one of our brands, whether it's Betty's Eddies, Bubby's Baked, Vibations, or Nature's Heritage flower. We have to put out really good quality, consistent products, and that's the biggest key — when you produce it all in-house, you have better controls. Bryan Fields: Do you have a favorite brand in your own portfolio? Jon Levine: I'm a golfer and not much of a smoker since I was an athlete most of my life, so Vibations is pretty much my favorite — I can have a couple on the golf course, it keeps me awake, rehydrates me, and gives me the ability on the 18th hole for that money putt. It's a lot easier to handle than smoking. Bryan Fields: Are there any brands on the horizon that you think will grow significantly in the next six to twelve months? Jon Levine: We've got Bubby's Baked — we're introducing new products there, we just announced a blueberry muffin, which people think of as a morning food, but it's great all day long. Betty's Eddies — we keep expanding the different effects, like a sleepy version or a Betty Go for energy. And Vibations, our rehydration product — there's more coming with common ups, or something to help relax or take the edge off. Those three product lines are going to continue to be growth products as we expand into new flavors and effects. Kellen Finney: There's growing scientific work showing cannabinoids have therapeutic and recovery benefits — have your consumers shared stories about using Vibations for hydration and recovery? Jon Levine: We've heard some stories of recovery and of people using it for a boost, since we have some caffeine in the brand, but we're not allowed to talk about health benefits in most states because we're not medically tested under government guidelines. But yes, we've heard great feedback about rehydration and re-energizing effects. Bryan Fields: The joys of cannabis — for people who've been in this since the medical days, I imagine you've seen a lot of medical benefits firsthand. Jon Levine: I always tell the story that brings me the most joy — when I was helping run a register in Delaware when we first opened, a gentleman in a wheelchair came up in tears because he wasn't worried anymore about getting rolled in alleyways, that he could get good quality products without worrying about getting robbed or his wheelchair broken. I rang up his order, counted out his change, gave him some extra product for being a great customer, put the bag on the back of his wheelchair, and gave him a hug. That's why I originally got into this business — to help people get better through the use of cannabis. Those are the stories that change perspectives and show this is more than just a recreational product. Kellen Finney: Continuing on growth — Maryland's a hot market, Missouri's another hot market with expansion plans. What's happening in Missouri? Jon Levine: We have a license we bought for manufacturing and we're building it out, but Missouri is one of the slower states for approvals, similar to Massachusetts, maybe even a bit longer, so we can't give a timeline yet. We're looking at continuing growth in the states we're in, aiming to be fully vertical everywhere and to expand to license maximums in each state. In Illinois, we're opening our fifth dispensary with five more to go, plus a cultivation and processing facility, so we'll be fully vertical there in the next month or two. In Ohio, we can have up to five dispensaries plus cultivation and processing. Massachusetts, we just finished capping out and have one more medical license we can apply for. Delaware, we're waiting to roll that in — they're looking at adult-use in 2025, so we're hopeful MariMed will be reporting that portfolio by then or before. We've applied in Texas, we're going to apply in New York, we're looking in New Jersey, and we have a social equity license we supported in Connecticut. We're going to continue looking at growth states at our own pace, not the industry's pace — we want to keep our balance sheet strong and positive cash flow without borrowing at these high interest rates. Kellen Finney: As you're growing, there are two options — build out the max number of dispensaries in an existing market like Illinois, or expand into a new market. How do you decide between the two? Jon Levine: About two years ago we set goals for the next five years and we're still following that formula of four pillars. First, complete the roll-ups of entities we were managing — Delaware is the last one. Second, expand the states we're presently in to make us vertical in as many states as possible. Third, expand through mergers and acquisitions in additional states, including writing new applications like Texas. Fourth, grow the brands — this whole industry is going to be about branded products, and we want to continue growing our brands across the country in an orderly way, without losing product integrity, so people get consistency every time. We want to be the Coca-Cola, we want to be the McDonald's. Bryan Fields: I'd say Budweiser, but I don't know if that's safe right now. Jon Levine: Right, so we want that consistency — not just finding any partner to manufacture our brands, but doing it in an orderly fashion with a strong partner, or going into a state and doing it ourselves, like we're doing in Missouri. Kellen Finney: That sounds pretty aggressive given all the complexities of each state operating differently. Are you looking at a big U.S. map figuring out the puzzle, or do you have multiple people leading each division and aligning them strategically? Jon Levine: I could say we're throwing darts at a wall, but no — as we discussed, we have a very strong management team with years of experience because we were consultants first, managing multiple states, which gave us experience in managing multiple operations. Our management team is the reason we're successful in capitalization and raising funds — there's no cheap market for that today unless you want to pay high interest rates. We take time, find the right locations, and forecast whether cash flow will be there within six, ten, twelve, or twenty-four months. We built a lot of the company off cash flow rather than raising money and throwing it in, unlike a lot of other companies. We've changed some objectives from building ground-up to buying things already up and running that we can bring to cash flow sooner with our expertise and management. Bryan Fields: When you're pushing different brands into new states to generate cash flow, do you push the same brand as the cornerstone everywhere, or let the market dictate which brand gets the most traction? Jon Levine: I think you've been stuck in Colorado a little too long. We take our brands to every state — we want our brands in every state. Betty's Eddies, our top-selling brand, has been around the longest and has been number one in almost every state it enters. We're not going to adjust to make a product that everybody else is making just because we're entering a new state — everybody has a gummy, but Betty's Eddies is a taffy chew, which isn't common. Bubby's Baked makes blueberry muffins, brownies, and snickerdoodles. Vibations is a drink mix rather than a pre-made drink, which is more discreet — you can add it to a bottle of water or sprinkle it on food. So we take a different approach to product formats, and we bring our brands to every state, with gummies being a little slower to get into the market, but Betty's is so good it helps open the door for all of our brands into each market. Bryan Fields: Eventually, in Colorado. Bryan Fields: What's the most expensive lesson you've ever learned? Jon Levine: Don't listen to a grower coming out of the hills of California. Bryan Fields: Were you ever close to closing up shop, and if so, what changed to alter your path? Jon Levine: We ended up walking away from our California operation — not because we were doing a bad job, but because of the real East Coast/West Coast logistics — I could get to Colorado quicker. San Jose went from 240 dispensaries down to six, and we were among the final six. They called and told us the new location we'd picked had a squatter, which meant it became classified as residential, and we had 60 days to find a new spot or lose our license. A squatter in California has more rights than a building owner. We decided it was easier to hand back the keys to the government and say thank you — that was the only time we ever walked away. I've taken a lot of beatings in this industry from 2008 to present, but I enjoy it and see what I do to help people, so no, I've never thought about walking away otherwise. Bryan Fields: If you could have a session — smoke or otherwise — with three people, dead or alive, who would they be? Jon Levine: Bob Fireman would be one, to enjoy some of our products together, and the rest would be my management team, just having one day to relax and enjoy what each of us likes. I do a monthly call with new employees where we have lunch and talk about what everyone likes to partake in when it comes to cannabis, whether they do it or not — it's really fun to hear what everyone has to say. So getting the whole team together for a big smoke fest would be a lot of fun. Bryan Fields: What did you get right when you got started in cannabis, and what did you get wrong? Jon Levine: What we got right was figuring out how to raise money in a difficult time when people didn't believe in cannabis. What we got wrong was all the different ways we learned to grow wrong in California before we figured it out and started doing it right on the East Coast. Bryan Fields: Prediction time — the future is brands. What do you think will separate brands from each other when consumers are making selections? Jon Levine: Consistency, quality, flavor, and giving customers what they want — choice of different effects, whether for aches, pains, energy, or sleep. Betty's Eddies Sleep is number one in every market it enters, and I have people who swear by it, telling me sleep aids never worked for them until they tried it. I think that's going to make us one of the top brands when it comes to sleep. Kellen Finney: It's tough not to agree with Jon. I think the biggest issue with brands across the country is lack of consistency — you can buy a pre-roll in California and get a completely different experience in another state. Consistency will be vital moving forward, along with quality — high-end, high-consistency products will separate the boys from the men. Bryan Fields: I think messaging and branding speak to individuals. A lot of consumers trying products for the first time are overwhelmed by selection, and having a connection with brands and the ability to speak to the consumer is what separates them and drives repeat purchases. I agree on consistency, but I think there's an earlier selection process where branding, ethics, and messaging matter too. Jon Levine: Messaging is definitely going to be a big aspect — getting the right message across quickly about the benefits of a product or what it's best at — but the consistency of knowing you're getting the same product every time you walk into any shop is absolutely key. Bryan Fields: Jon, for our listeners who want to get in touch and buy MariMed's products, where can they find it? Jon Levine: They can find it at marimedinc.com, and they'll be directed to the proper websites for where our products are sold, or they can reach out to Howard directly through the website — there's information on how to reach him, and he'll be happy to help. Bryan Fields: I really appreciated the time today, gentlemen, it's been fun. Jon Levine: Good speaking with you. Bryan Fields: Talk to you soon. Jon Levine: Thank you, bye-bye. Bryan Fields: Thank you.