This transcript has been auto generated
00;00;00;00 - 00;00;40;06
Hilary Bricken
Welcome. I'm your host, Hilary Brecken, and this is the Cannabis Law Now podcast, where we regularly discuss issues related to the cannabis industry, including investment, day-to-day operational issues and potential reform on the horizon that will impact all cannabis businesses and investors in the United States. Welcome back to the podcast, everybody. Today we have Mitch Meyers, who is a founder and partner of BeLeaf Medical, a vertically integrated operator with various retail locations in the great state of Missouri.
00;00;40;06 - 00;00;48;05
Hilary Bricken
And I am very happy to say Mitch is the first cannabis executive I've had on from the great Midwest. Mitch, welcome to the podcast.
00;00;48;07 - 00;00;50;10
Mitch Meyers
Thank you, Hilary, and yay Midwest.
00;00;50;13 - 00;01;06;12
Hilary Bricken
I know, I know. Yes, here I sit in California, very jealous of how explosive Missouri has truly become. And before we get into the dynamics of that market, why don't you tell us a little bit about your background and how you got into the cannabis industry?
00;01;06;16 - 00;01;26;04
Mitch Meyers
Well, like most people, I did not grow up in cannabis. In fact, as a kid, I never used it or experimented. I was kind of the just say no to drugs, kid. As I got older and realized my drug of choice was alcohol and ended up working in the alcohol beverage industry. I started looking at cannabis in 2009.
00;01;26;04 - 00;01;44;08
Mitch Meyers
As it was, the medical program was being brought into Colorado. My son was going to school out there and when I would be out visiting, I just noticed that all these new businesses were popping up, and it amazed me that it was like the beginning of the internet when there's a new industry just up here in front of your eyes.
00;01;44;08 - 00;02;10;12
Mitch Meyers
And so I would knock on doors and many of the cultivators and dispensary people would allow me in. They gave me tours. It amazed me what a community cannabis people were. And because I had never experienced that in my life in corporate America. So I live in Illinois, and I came back home and there was a legislative effort coming through, you know, our legislature at the time.
00;02;10;12 - 00;02;31;28
Mitch Meyers
And I approached a couple of people and we decided to make a application there. We ended up we had no idea what we were doing. We had no experience in it. I guess we were good term paper writers, but we ended up getting a dispensary license in the Chicago area, so got that up and operational and started studying the patients that were coming through there.
00;02;31;28 - 00;03;00;17
Mitch Meyers
And it really just blew my mind as to the help this plant was providing people. And then Missouri and and the state of Missouri in 2015, they offered licenses for two people to cultivate, extract and treat epilepsy patients. So I applied for that and received it, which got me into growing and manufacturing and directly treating patients. We still do that today.
00;03;00;20 - 00;03;23;09
Mitch Meyers
It's it's really our foundation and our beginning in the state of Missouri. But short of being on the ground, one of the first cannabis growers in in Missouri in 80 some years, I began touring people through it so that they could see what the plant was and what it wasn't. And it was really the beginning of the Missouri program.
00;03;23;11 - 00;03;48;14
Mitch Meyers
There was an advocacy group that was trying to do a constitutional amendment and get it on the ballot for the public to vote on. So we jumped on that bandwagon. I mean, literally, our conference room was the convening area for people around the state that wanted to participate in that event. And it's truthfully why the state of Missouri has such a great working relationship with one another.
00;03;48;17 - 00;04;01;22
Mitch Meyers
We all compete, but we're all good friends and we help each other. We formed and trade in that same conference room, so it was a slow start, but me and we've kind of hit the ground running, obviously.
00;04;01;24 - 00;04;13;16
Hilary Bricken
Yeah, indeed. And just in your personal opinion, obviously starting with medical, as most states do, and kind of pushing forward into adult use. How has the rollout of the adult use market gone today?
00;04;13;18 - 00;04;44;03
Mitch Meyers
You know, I will tell you, having participated in Illinois and then studying the other states and how their rules and regulations were put together. But the best thing about the Missouri program is that most of the details were nailed down in the Constitution. So it was an up or down vote. Do you want this or not? And once they voted positively to bring it all of the deadlines and the dates that the Department of Health had to meet were in the Constitution.
00;04;44;06 - 00;05;15;02
Mitch Meyers
So we were the fastest state to get stood up for medical. And the same with the adult use, because those details were not left to the legislature to monkey around with. So, you know, people want to know why it was so successful. I truthfully think that's a huge part of it. The other thing is, because we knew those of us that had the licenses and were operating in medical, we knew there was a six month term and we worked.
00;05;15;03 - 00;05;44;29
Mitch Meyers
There was date certain when those dispensaries could switch on the adult use activity. So people who were manufacturing and cultivating were able to start stockpiling material so that when it hit, we didn't see the crazy lines and the out of stocks and things like other states have, like Illinois did. I remember when they first, when adult use people stood in line for four and five hours and still wouldn't be able to get any product when they got there.
00;05;44;29 - 00;05;49;14
Mitch Meyers
It was absolute craziness and we were very much more prepared.
00;05;49;17 - 00;06;11;23
Hilary Bricken
You know, the states that I've worked in, mainly Washington, California, these have had legacy operators in a quasi regulated medical sphere, you know, for more than 20 years. Do you think, though, that it was maybe an advantage in Missouri or even in Illinois not to have to deal with bringing that marketplace in, getting that marketplace to come to heel?
00;06;11;26 - 00;06;38;09
Mitch Meyers
Sure. I do think that because I think we had pretty sophisticated business people in Illinois, that's got involved in the beginning there. So, you know, they had to study the cannabis cultivation and manufacturing. Obviously retail was a little bit simpler, but they put on their business hats that worked for them in other industries. And I think it was very successful.
00;06;38;12 - 00;07;09;04
Mitch Meyers
In Missouri, I always laugh and tell people that you do not have to create demand in Missouri. The demand has always been there. We just need to show up with good products and good pricing and treat our customers fairly. You know, I feel really bad about the California situation, and there were some there are some amazing farmers there that, as you said, been doing it 20 plus years that still can't figure out how to make money at it now.
00;07;09;06 - 00;07;29;06
Mitch Meyers
That it's gone legal with all the taxes and rules and regs that change on them all the time. So that is an unfortunate situation. We looked at a lot of states and tried to bring to the Department of Health in this program kicked off, you know, best practices from states that had done it wrong and then corrected it.
00;07;29;08 - 00;07;52;21
Mitch Meyers
State that we're doing it well. And the good news is the department of Health listened, because obviously that this was nothing that they had ever regulated before. And they put in a director at the time, Wendell Fraker, who very much was a business person and did his level best to, you know, bake our customers, the North Star of the program, keep the public safe.
00;07;52;21 - 00;07;58;11
Mitch Meyers
But make sure that the business owner operators, could manage the program effectively.
00;07;58;13 - 00;08;18;02
Hilary Bricken
Got it. Yeah. It is helpful to have a sunshine regulator that listens to feedback, executes on industry issues, and kind of doesn't do that cookie cutter, one size fits all coming from another industry. And on the back of that, given the kind of regulatory atmosphere in Missouri and the business climate, has it been tough to be vertically integrated?
00;08;18;03 - 00;08;21;28
Hilary Bricken
And, you know, if yes, why is no why?
00;08;22;00 - 00;08;46;10
Mitch Meyers
Answer to that is yes and no. Yes. Because again, our Constitution, stipulated that if you received a license, you had to be operational within 12 months. And we took that seriously. We felt like if we weren't open within 12 months, we could potentially lose our license. Unfortunately, it was at the beginning of Covid. Market was upside down.
00;08;46;12 - 00;09;14;04
Mitch Meyers
Nobody. It was very difficult to get, investment dollars equity dollars in. But the state the law also said we had to have 51% Missouri ownership. And so it really restricted some of the MSOs. And, you know, any of the public companies from coming in at the time of medical. So it was challenging to get the capital, if you didn't already have it arranged to get going.
00;09;14;04 - 00;09;36;03
Mitch Meyers
And, you know, build through Covid and get open within 12 months. So we had to make some choices. We had to do some sale leaseback of some of our real estate so that we could maintain that capital for the build out, instead of buying the building or the land or whatever. You know, now that's a struggle because we want a healthy balance sheet going forward.
00;09;36;10 - 00;10;04;27
Mitch Meyers
So, you know, we're having to make some concessions now. But, you know, without being vertically integrated, it's a challenge to have a successful launch. So if we only had cultivation and no retail stores to sell it through in the beginning, we could start cash flowing as soon as we had flower to sell. But if you had retail and no cultivation or manufacturing, you kind of got put at the end of the line with people who are vertically integrated.
00;10;05;03 - 00;10;25;16
Mitch Meyers
And I struggled with that in Illinois because I only had one dispensary. I was the last person, you know, to get product. So, you know, it is a benefit in that you can feed yourself and kind of start building the market. And a first in is a really nice position to be. Obviously, when you're trying to build a brand.
00;10;25;18 - 00;10;51;09
Hilary Bricken
Understood and what has been and this is a tough question, but I ask it pretty much of anybody that comes on. That's an operator. What's been the biggest challenge to date for the lease and specifically, I think in operating in Missouri and these other states, everyone has a different pain point. Nothing has been universal, which is so fascinating about this multistate patchwork quilt of regulations and different enforcement issues.
00;10;51;15 - 00;10;54;09
Hilary Bricken
What's been your biggest challenge by far?
00;10;54;11 - 00;11;27;28
Mitch Meyers
Affordable capital. The availability of capital and that it's affordable. You know, when we first got started in 18, the cannabis industry looked very different. MSOs were buying businesses with cash. A lot of people were investing in stocks and Canadian stocks. And there was a really enthusiastic, bright future for people investing in cannabis. By the time we were, you know, granted our licenses and starting to build out, there was really a big change in the market.
00;11;28;00 - 00;11;49;20
Mitch Meyers
And today it has continued to just constrict in terms of people investing in cannabis because of the uncertainty. I think there was excitement a year and a half ago about potentially the rescheduling, and that we would all have more money to drop to the bottom line to run our business or pay down debt or whatever, you know, and that has since fizzled out.
00;11;49;20 - 00;11;57;20
Mitch Meyers
I don't even see people talking about it anymore. So it's really capital. It's access to capital and capital that is affordable.
00;11;57;22 - 00;12;07;02
Hilary Bricken
Understood. Okay. And then the flip side. What's been the biggest one, in the past three, four years for the leaf operating in the great Midwest?
00;12;07;07 - 00;12;39;24
Mitch Meyers
Well, I don't have this one. I have a list. First of all, I just read yesterday that we have donated $80 million to date to the Veterans Association, which is big money for for them. And there's more, you know, where that came from. So that makes us all feel great. Secondly, we've expanded to over 150,000 records of people that had low level, you know, drug offenses so that they can get back into the job force and vote and do everything that they should have been doing.
00;12;39;27 - 00;13;05;22
Mitch Meyers
And then that we have such a cohesive community in the state working together. I just spent two hours this morning on my government affairs call with Vote Can Trade, working on issues and opportunities for all of the participants in the state of Missouri. And it's really unique. I mean, when we talk to other people from around the country and just my experience in Illinois, our market is different.
00;13;05;22 - 00;13;25;04
Mitch Meyers
And people do want to know, you know, how did you how did you get that? It was just a lot of local Missouri people that wanted to be part of it and and got involved and worked very hard. And we've had some, you know, incredibly heartwarming stories of, you know, people that got involved. We have since had consolidation.
00;13;25;04 - 00;13;46;14
Mitch Meyers
You know, there's some out-of-state groups that have come in and started buying up entities, which now the good news is some of these independent people were able to take money off the table them. And then, you know, the bigger companies are, you know, able to take advantage of this great marketplace. But, you know, I'm thrilled with the staff that we've built.
00;13;46;15 - 00;14;10;02
Mitch Meyers
We just have incredible people that work for us. And it makes me happy to be able to pay them over market wages and have full benefits. And 401 K, you know, we there was a couple of years ago, 1 in 10 jobs created in the state of Missouri, work created in the cannabis space. And that gets people's attention, you know, gets the governor and the legislators paying attention.
00;14;10;02 - 00;14;38;21
Mitch Meyers
And the tax dollars were, you know, we did a million for last year in revenue with a state that has 6 million people will do. Things are growing. Just last month, our sales were 5% greater than they were a year ago this time. So we feel like we've kind of found, you know, our steady state here. Now. And obviously price compression is something that we all know is going to continue to come.
00;14;38;21 - 00;14;48;18
Mitch Meyers
And we just have to manage our business to be as profitable as we can in this state and knowing that pricing will continue to decline.
00;14;48;20 - 00;15;10;26
Hilary Bricken
Right. I spoke to a receiver that I had on the podcast, an episode ago, and he's calling it The Great ShakeOut, and he's very busy with all of the failure that's occurring, you know, from west to east and, and I don't I don't necessarily think that it's an outlier. I think all industries go through these cycles. Cannabis is lasting longer because of the federal illegality and lack of reform.
00;15;10;29 - 00;15;29;19
Hilary Bricken
But you can still be dynamic. You can still scale, you can still be profitable. You really have to be intelligent about it. And I think we've gotten past the point, which, frankly, is good, that the hype is gone. And cannabis doesn't just sell itself. You have to be intelligent. Like you said, I have a healthy balance sheet and really being strategic, which is ultimately good in the long run.
00;15;29;21 - 00;15;49;19
Hilary Bricken
Can you tell me in your opinion, you kind of hit on it a couple of times, like, what is this should be in Missouri. Why did it explode? Is it because Illinois kind of missed the opportunity to, you know, you've got Minnesota, but their program is so restrictive. To a degree. What what is it that has made it so great?
00;15;49;25 - 00;16;17;10
Mitch Meyers
I will tell you, not a lot of restrictions. Our tax rate is very reasonable. And that's what kicks Illinois in the butt, right? Their taxes are almost 30% on purchase. Ours is 4% for the state and another 3% that can be added in by the city or the county. And, you know, that didn't happen in other states when we allowed that city or county tax to be added.
00;16;17;10 - 00;16;40;06
Mitch Meyers
You know, and we're we're a few years behind Illinois. So people see the sky doesn't fall. Yes, there is product that helps people here, but we were being courted by cities to bring these cannabis dispensaries. Where in Illinois we were being run out of town on a rail. So, you know, I think that that's part of it. We have limited license.
00;16;40;06 - 00;17;02;21
Mitch Meyers
And granted, it's higher than the state of Illinois, but it's fair. You know, there's enough people that can get into business and make money. And as I said, we have a community that works together. And so we don't want to oversupply the market. You know, a lot of us have not built out 100% of our capacity just trying to determine what is the real need.
00;17;02;24 - 00;17;17;23
Mitch Meyers
So we're not going to be like Oklahoma ship and train cars of cannabis out of state. You know, we are going to grow and sell what we can within the state borders. And it just makes for a really even fair marketplace.
00;17;17;26 - 00;17;38;11
Hilary Bricken
And do you know, just off the top of your head, are you seeing a lot of tourism coming to Missouri to have this experience there. I know in California there's a ton of it because we have other collateral attractions like Disney, the salad bowl, Wine Country. Where are you seeing in Missouri as far as outsiders coming in just to consume or purchase?
00;17;38;12 - 00;17;58;27
Mitch Meyers
So we obviously in the Saint Louis area have a lot of out-of-state people that come for Cardinals games and hockey games. And now we have city soccer, which is amazing. And I'll be in my store sometimes and people will come in and they'll be from out of state. So excited, you know, that they can just walk in and buy a couple of pre-rolls.
00;17;59;04 - 00;18;19;19
Mitch Meyers
Yes. So we do see that increase when there are events. And like we've got a big NASCAR race coming up just right across the river that will drive everybody's business on the Kansas City side. We now have stores and that is a little bit better market every day because they border three states that do not have a cannabis law.
00;18;19;22 - 00;18;36;22
Mitch Meyers
Kansas, Nebraska and Iowa. So you see a lot of out-of-state people just on a weekly basis crossing over and purchasing product. But again, when there's a Chiefs game, you know, it's like all hands on deck. We are going to have a good day.
00;18;36;24 - 00;18;52;16
Hilary Bricken
I believe it. Now let's talk about an independently hot topic within the industry intoxicating hemp. This is also kind of ironically rolling out in a 50 state patchwork quilt. Deregulation. Prohibition. What's the scene like for intoxicating hemp? Delta nine in.
00;18;52;16 - 00;18;54;17
Mitch Meyers
Missouri. It's absolutely terrible.
00;18;54;20 - 00;18;56;01
Hilary Bricken
Oh, all right, let's dive in.
00;18;56;02 - 00;19;24;19
Mitch Meyers
It's absolutely terrible. I mean, we have worked for the last three years to try to pass legislation to get it stamped out. What what I just don't understand is in 2015, when I was growing a CBD, you would have thought I had a plutonium factory. Like people. The department of AG would come in once a month, test my flower, and if it was more than 0.3 percent THC, you know, bye bye.
00;19;24;19 - 00;19;53;26
Mitch Meyers
Dry. Wait. Delta nine. Bye dry. Wait. They make me throw out the plants. Cut them down. I mean, that's how frightened they were of anything that had psycho activity to it. Now all of a sudden, with these hamsters here just selling 300 milligram gummies and saying, you know, farm bill legal, what's happened is you've got a lot of these independent convenience stores, liquor stores, you know, everybody's jumping on the bandwagon and you can buy it anywhere.
00;19;53;29 - 00;20;18;11
Mitch Meyers
And no one knows where this is coming from. Many of these manufactured products are coming from China. There's no testing, no child protection, no taxes paid. And all of a sudden, people are okay with it. I don't get it. These are drug dealers, and they're just turning their back and saying, oh, yeah, we're going to send a few kids to the emergency room.
00;20;18;11 - 00;20;48;11
Mitch Meyers
But, you know, other people now can participate in the marketplace. So now it's about the business, right? We don't want to tell our convenience store owners that they can't sell this stuff because they're making a lot of money on it. You know who cares who gets hurt? Well, we care because the cannabis industry has worked for 20 plus years to try to make it secure and safe and tested and all the kind of rules that we live within.
00;20;48;13 - 00;21;02;08
Mitch Meyers
So we're hopping mad about it, and we're doing what we can to try to get these places shut down. I mean, I have stores that open right across from my dispensaries selling 28 and 32% THC flower.
00;21;02;11 - 00;21;17;27
Hilary Bricken
Understood. It is a big issue. And you're seeing states one by one. Kind of analyze it, opt out, opt in. In California, there's been Texas. Just ban it. But then you've got a Minnesota that allows it and regulates it, at least in beverage and food form, I don't know.
00;21;17;29 - 00;21;44;23
Mitch Meyers
But here's what I here's what I will say. We were willing to do a low dose beverage carve out in Missouri to just try to get to get to a bill that everybody would approve. I personally think that beverages are a great way to consume cannabis. And if you can put some guardrails on these producers like Anheuser-Busch is interested in doing this, I trust that they're going to make a quality product.
00;21;44;23 - 00;22;13;00
Mitch Meyers
And they care that there's, you know, quality ingredients and tested and child protected and all that. You can't guarantee that with a lot of these out of state, out of country products. But if we were to allow a five milligram beverage to be sold outside of cannabis dispensaries, that would introduce a whole new audience to cannabis and make them understand it better, which I think would just help the industry overall.
00;22;13;02 - 00;22;40;06
Mitch Meyers
So beverages I get because they are expensive to produce. They're hard to distribute. Cannabis dispensaries aren't big enough. We don't have big coolers and things like that the way people like to buy it. So in my opinion, I could justify that. And you know, you can't sit and drink necessarily a six pack of something, whereas you totally could set a need a whole package of gummies and consume 300mg.
00;22;40;08 - 00;23;02;05
Hilary Bricken
Well, and you bring up an interesting point, which is maybe the striking of the balance is via a product segment, and that could be beverage because it is so dialed and calculated and tough to make and expensive. So you're going to have only good actors participating. I think that's very interesting. I think nobody knows how it's going to play out at the federal level while these two industries hang in the balance.
00;23;02;11 - 00;23;22;11
Mitch Meyers
Well, we know these beverage guys are struggling. I mean, alcohol sales are declining like crazy. So they have huge lobbies. They got way more money than we do to put pressure on politicians. And, you know, it's working. But again, if we could restrict it to them, you know, we know who they are. We know where they make this stuff.
00;23;22;12 - 00;23;42;16
Mitch Meyers
Again, it's not like some third world group sending in dangerous product. It blows my mind that somebody will go into one of these little trap houses and buy, you know, unknown, unmarked, untested flour in a baggie and not walk out of there and be concerned that what else could be in that.
00;23;42;19 - 00;24;05;27
Hilary Bricken
The consumer psychology is kind of all over the map. And the consumer protection issues around it are really untapped. And I feel like that will also help move the ball forward because courts might. And deciding what's going to be allowed versus essentially legislative arms. But grab grabbing your crystal ball since we're kind of, you know, talking about the farm bill and Will or they won't close the loophole, what are these states going to do?
00;24;05;29 - 00;24;23;08
Hilary Bricken
What does the future hold for belief in the next 2 to 5 years? Are you going to try to become an MSO, go to state to state, license your IP and to keep it to Missouri? Are you looking forward to rescheduling or are you holding your breath? You know, that's probably my final question for you. What does the future hold for you in Missouri?
00;24;23;12 - 00;24;50;01
Mitch Meyers
So we have spent five years really just building a good company and being profitable. And, you know, having audited financial statements, continuing to grow our top line revenue and our EBITDA, trying to staff the business with the right people, the right people on the bus. Right. We've made mistakes in the beginning, like a lot of people did. And you try some people on and they don't necessarily work.
00;24;50;05 - 00;25;18;11
Mitch Meyers
And sometimes you hire great people and who who was good in the beginning to get you going may not be the right people to to grow the business into the future. So we as a partnership group have really focused on that, and we could not be prouder of, you know, where we are. We've been able to acquire some more retail locations, as we can produce more product and sell it through our own stores.
00;25;18;18 - 00;25;47;19
Mitch Meyers
Obviously, that's a higher profit margin, which we always have our eyes focused on. Again, we want to make sure we've got a strong balance sheet, and we have been asked to take our brand to a couple of different states, and we know enough about bad rules to steer clear, like we had an opportunity in New York. And it's like, I just can't figure out who's making money there yet except the black market.
00;25;47;21 - 00;26;23;26
Mitch Meyers
So we have not jumped at every bright, shiny object that's been put in front of us, and I'm so happy we have it. You know, the opportunity now is to maybe look at other companies or brands and partner with them and take small steps into another like minded state, if you will. But at the end of the day, you know, if 2 to 3 years from now rescheduling happens, I think if they just reschedule us to schedule three, the net of that that's going to be we're not going to pay as much taxes, but that will probably in new order to the customer.
00;26;24;03 - 00;26;47;18
Mitch Meyers
You'll probably see prices continue to come down for them, so that'll be good for them. If the federal government just basically says we're out of it and you can do whatever you want and you can ship across state lines, that's a different kettle of fish, I think we'd have to figure out, you know, at what point can people do cross state, shipping and then where do we go from there?
00;26;47;18 - 00;27;08;11
Mitch Meyers
But we're always you never start a company to sell it, right? You start a company to build it and be profitable and pay your investors back. And that's the path we're on. And hopefully in 2 to 3 years, if there is some big fish out there, Anheuser-Busch, that wants equality organization, you know, we'll be sitting here looking pretty.
00;27;08;13 - 00;27;25;02
Hilary Bricken
I love it, I love it. An exit no one ever frowned at a good exit, either. All right, ladies and gentlemen, Mitch Meyers, founder and partner of BeLeaf Medical. Vertically integrated in Missouri. You keep rocking out during the great cannabis shake out. I'm so happy for you. And thanks so much for your time.
00;27;25;02 - 00;27;26;20
Mitch Meyers
Thanks, Hilary. This was fun.
00;27;26;22 - 00;27;46;10
Hilary Bricken
And that concludes today's episode of the Cannabis Law Now podcast. Until next time, stay alert. Stay alive.