Pot tech: MedMen opens large, state-of-the-art cannabis factory near Reno
A sky-high view of MedMen's high-tech, 45,000-square-foot cannabis factory just east of Reno recorder on April 11, 2018. Reno Gazette Journal
The blades of an oversized pair of scissors labored mightily against an even larger ribbon wrapped around an entire building with the word “MedMen” emblazoned in large, red script.
“Please cut through, please cut through,” a member of the MedMen marketing team murmured under her breath from a few feet away.
The struggle of MedMen president and co-founder Andrew Modlin to get in that one, final snip serves as an almost poetic metaphor for the challenges faced by any company that tries to get into the legal marijuana business.
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Just like his cannabis firm transitioned from an upstart company into a major player in a multibillion-dollar industry through the efforts of several people, however, Modlin eventually manages to cut through the chunky ribbon with a little bit of help. A year and a half since breaking ground just 10 miles east of Reno-Sparks, MedMen’s large, state-of-the-art cannabis factory was officially unveiled to the assembled crowd.
From the buzz of a drone flying above to the unveiling of an enormous 45,000-square-foot pot plant in Nevada’s high desert, the puns practically wrote themselves during the Wednesday morning unveiling. For MedMen, however, the factory means serious business. This is especially true for an industry that continues to seek legitimacy even as it posts growth that would be the envy of most other sectors of the economy.
The company itself invested $15 million, a not-so-small portion of its capital, on the facility. Boasting several technological touches and a dose of Dutch engineering, MedMen CEO Adam Bierman hopes the factory will show just how legitimate the marijuana industry has become. For the MedMen co-founder, it’s all about changing the conversation around marijuana beyond pot jokes and stoners.
“What does it say to the world that marijuana can be this high-tech?” Bierman said. “What does it do to the stigma … when (people) talk about marijuana and the industry? This is history.”
Treating marijuana seriously
Despite the pomp and hyperbole that comes with facility unveilings such as this, the MedMen factory actually gives new meaning to the phrase “high-tech.”
The facility includes a 26,000-square-foot greenhouse that was manufactured in Holland — long known for its tulips and tolerant attitude toward marijuana use — and features a host of advanced machinery and lighting that can be fine-tuned to a spectrum more conducive to marijuana growing.
The Nevada factory is the first of three MedMen facilities slated for completion. The other factories will be located in Desert Hot Springs, California, and Utica, New York, and will be based on the same blueprint and design used in the Nevada facility.
Entering the facility is akin to stepping into a research laboratory. Workers need to don lab coats and disposable pants over their clothing while also covering all their hair, including mustaches and beards. Staff also must place their hands in a machine that shoots a stream of sanitizing liquid for a set time in order to get rid of microbes and further prevent contamination.
Areas in the factory include an analytics lab, rooms for extracting the plants’ active properties and a tissue culture lab that allows staff to clean and snip plants in order to increase yields through micropropagation.
“If you look at other agricultural crops, the beginning process is actually in the tissue culture process,” said Dan McClure, the MedMen factory’s cultivation manager. “We’re taking technologies that exist (in other fields of agriculture) and bringing them to cannabis.”
Those technologies include using advanced Dutch greenhouse design and adapting them for use in marijuana as well.
Inside the greenhouse, a modular system allows one person to easily move racks of 600 plants from the early planting stage to another section of the greenhouse for the flowering phase. Each section also can be adjusted to use different light cycles that suit different phases of the growing process. Lighting during the test tube phase, for example, takes a deep purplish hue compared to the brighter lights for the planting and flowering phases.
The goal is to not only increase plant yields but also achieve predictability and uniform consistency in quality.
“This is not your mother’s greenhouse in the backyard,” said Daniel Yi, MedMen’s senior vice president of corporate communications. “This is a hermetically closed, fully controlled environment with temperature controls and LED lighting to supplement sunlight.”
The factory’s flowering room can house up to 25,000 marijuana plants at any given time, allowing it to produce about 10,000 pounds of cannabis per year.
Some of the plants produced in the facility will be sold as buds and flowers, Yi said. The rest will be used for edibles that are made in the factory’s bakery and chocolate kitchen rooms. Eventually, MedMen plans to have its own unique branding encompassing tinctures, lotions, edibles and drinks, the same way that Costco has its Kirkland brand for its own products.
The factory is part of an investment spree by the company in the legal marijuana industry’s “green rush.” Yi estimates that the sector is growing at a compounded 25 percent rate annually.
“We joke about this all the time but in this industry, we live in dog years,” Yi said. “Things change so fast and a month in this industry is like a year in other industries.”
The legal marijuana industry itself continues to see growth as more and more states jump on the pot bandwagon to add more revenue to state coffers. Medical marijuana is already legal in 29 states as well as Washington, D.C. Recreational pot, meanwhile, is allowed in eight states and D.C.
Tax revenue from marijuana is projected to grow from $745 million last year to $2.3 billion by 2020, according to cannabis market research firm New Frontier Data. MedMen believes that those numbers just scratch the surface of the industry’s potential. The company estimates that $1 billion worth of pot is consumed in Los Angeles alone, most of it acquired from gray or black markets.
“The percent of Americans in support of legalizing marijuana continues to grow each year,” Yi said. “What we’re seeing in polls is that Americans are OK with marijuana being legal. They just don’t want it in every corner.”
MedMen is one of the biggest and fastest-growing cannabis companies in the United States. The company claims a valuation of $1 billion and reported 480 percent revenue growth in 2017 — driven by a 350 percent increase in customer traffic. Its number of employees also jumped from 15 in 2015 to more than 700 workers last year.
MedMen, which has raised about $150 million in funding, has relied so far on private equity such as venture capital and angel investors. Part of it is by necessity. With pot still considered illegal at the federal level, cannabis businesses in the United States typically have a tough time getting commercial loans, Yi said.
The same challenge extends to banking services. Although the situation has improved with more banks and credit unions doing business with cannabis companies, those still represent a small part of all U.S. banking institutions, Yi said. A cannabis study by BusinessStudent.com pegged the number at 368 in 2017, about a 23 percent jump from the previous year but still a fraction of the 12,000 financial institutions in the United States.
Real estate costs are also typically higher for cannabis businesses. It’s one reason why MedMen likes to own most of its facilities outright or at least have them in long-term leases.
To further increase its access to capital, MedMen plans to turn its company public in the second quarter of this year. MedMen is not allowed to be listed in either the NASDAQ or New York Stock Exchange, however, because its business involves touching and handling marijuana plants, Yi said. Instead, the company will go public through Canada. Yi says he is not allowed to name the exchange but reports earlier this year indicate that MedMen will go on the Canadian Securities Exchange.
“We saw in Canada an opportunity to raise capital much faster in a public stock exchange,” Yi said. “(The capital) is a lot more liquid, first of all, and it also gives an opportunity to individual investors to buy equity in the firm.”
MedMen is also looking to expand its footprint beyond the three states where it does business. The Nevada factory is one of 18 licensed cannabis facilities managed by the company in California, Nevada and New York. MedMen talked about such states as Massachusetts, Pennsylvania and Florida but did not mention Colorado. Yi says the company prefers to get into emerging markets or places with a limited number of licenses and higher barriers to entry.
“If you have a market like Colorado where you have more dispensary licenses than 7-Elevens, it’s very much a free-for-all,” Yi said. “You see high turnover and it’s hard for you to get traction as a business.”
In contrast, CEO Bierman had positive praise for Nevada, which he called “the premiere marijuana program in the nation.”
MedMen operations are split between the northern and the southern part of the state. There’s the factory in Washoe County, which is not open to the public and is only for growing plants and making products. Las Vegas, meanwhile, hosts MedMen’s store as well as the company’s state headquarters, which will be built this year.
After dealing with the county and the state and experiencing their support and business-friendly policies firsthand, Bierman says it’s no surprise that the nearby Tahoe-Reno Industrial Center attracted a lot of big names. The industrial park is the site of Tesla’s Gigafactory and also counts Google, Switch, Walmart and Zulily among its clients.
With Nevada’s legalization of marijuana, the same business environment and policies that make the state attractive to traditional companies now apply to cannabis companies as well, according to Bierman.
“I don’t think (Nevada) gets enough credit for its marijuana program,” Bierman said. “There’s no better place to build this facility than here.”
At the same time, the industry still has work to do before it gains equal footing with more traditional companies. Building a company is one thing but building an entire business sector is a whole challenge in itself, Bierman said.
MedMen’s moves in Nevada and other states are part of an ongoing effort to grow the legal marijuana industry while working toward cannabis’ holy grail: legalization at a federal and national level.
Yi pointed to alcohol’s transformation into a legitimate commodity that now supports a thriving industry. There’s no reason why marijuana can’t experience the same change, he said.
“If I were to take an educated guess of what the future looks like for us, I see the prohibition of marijuana ending in five to seven years,” Yi said. “You can’t build an industry or a company like MedMen overnight but we’re also not waiting for prohibition to end. We’re preparing ourselves for that now.”
A large, state-of-the-art cannabis factory is officially up and running Wednesday, April 11, 2018 in the desert east of Reno-Sparks.