MJBizMag July 2020 - 42

RECESSION ROAD MAP
The cuts have mainly involved general
corporate and administrative positions.
" That's always where you want to get rid
of people. We're not as actively doing
M&A, so we can get rid of some of those
people, " Mauff said.
6
Don't gut your
marketing department.
Another department that often gets
cut during economic downturns is
marketing, although executives warned
against doing away with your company's
communicators altogether: They provide
a link to your business' audience.
" We trimmed our marketing spend a
little bit on the channels that we thought
were going to be
quiet no matter
what and conserved
cash so we can turn
it back on as the
market comes back
on, " said Kim Rael,
CEO of Azuca, a
multistate infused
product company
based in New York.
The marketing efforts that took the
biggest cuts were for CBD products in
Kim Rael
brick-and-mortar stores, Rael said.
" We've downsized our marketing department,
but we haven't cut it outright, "
Nug's Whitney said. " It's so critical that
we're communicating what we're doing
and we've got the bandwidth assigned for
how we communicate to our customers. "
7
Retrain your existing
employees to take over
new responsibilities.
Laying off some people means those
who remain must assume the work
of those who've been let go. It's up
to company leaders to ensure the
remaining employees are trained to pick
up new types of work.
" You also have to teach people to do
new things in lieu of the jobs and skill
40 Marijuana Business Magazine | July 2020
The Lilliput Effect
Paleontologists noticed that, after mass extinctions, smaller species are more
likely to survive than larger species, which are more vulnerable to extinction.
It's called the Lilliput Effect. Could the same be true in business, specifically
cannabis?
" What I'm seeing is that a lot of small companies have been able to pivot
and find ways to move their products, to adapt, " said Pam Marrone,
a serial entrepreneur and CEO of Marrone Bio Innovations, a biopesticide
and plant-wellness company in Davis, California, that has more than
100 cannabis customers.
In fact, some multistate marijuana companies-including Acreage Holdings,
MedMen Enterprises and 4Front Ventures-have had to drop acquisitions and
lay off large portions of their workforce, many small businesses are thriving as
they navigate obstacles.
" Our business has almost doubled during this time, " said Linda Mercado
Greene, co-founder and CEO of Anacostia Organics, a medical cannabis
retailer in Washington DC.
Despite the increase in business at her store, which was damaged during the
George Floyd protests in June, Greene has doubled down on certain practices
in response to the recession. For example, knowing that the recession could
hit patients' pocketbooks, she's chosen to offer additional specials on some
products on top of regular discounts.
Similarly, Michael Domecq, co-founder and CEO of CaliHash, a Los Angeles
craft hash manufacturer, said his company's sales have ticked up during the
economic downturn-and he attributes at least a part of that success to being
a small business.
" To be successful in marijuana today, create a lean and nimble enterprise,
something that can move and morph and adapt quickly, " Domecq said. " Being
a small company, I think we're perfectly suited for this environment. "
But the recession hasn't been without
hurdles for small businesses such as
CaliHash. Domecq could no longer import
from China the glass jars in which his
company packaged its hash, so he turned
to U.S. suppliers, raising packaging costs by
20% to 30%.
Domecq grows revenue by getting new
stores to buy his products. But an inability
to meet with store owners during the
pandemic has hurt that channel, Domecq
said. The company had to lay off one
employee, reducing its staff to five.
And because it's more difficult for small
businesses to capitalize on economies of
scale, CaliHash has to execute quick decisions.
" It's not about demand. It's about capital.
We're just short of capital, " Domecq said.
While Domecq had been considering expanding his product line, the
recession forced him to come up with a new product: a pre-roll that is 0.8
grams of flower plus 0.2 grams of hash. Citing figures from Colorado-based
BDS Analytics, he said pre-rolls account for about 35% of all retail sales in
California, so they were a logical path to recruiting more consumers.
" By introducing a pre-roll product, you're accessing a bigger part of the
market, " Domecq said. " It's difficult to pick up new shops, new accounts when
you can't do demos. ... But what you can do is take the old clients with whom
you have good relationships and introduce new products to them and expand
revenue that way. "
- Omar Sacirbey
Michael Domecq
MJBizMag July 2020

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