John Mueller Transcript
Clint Betts
John, thank you so much for coming on the show. I am very excited to talk to you. You are the CEO of Greenlight, which is a cannabis company. The cannabis industry has been super interesting to follow as of late and over the past year. Tell us how you even got into this. How did you found and become the CEO of Greenlight?
John Mueller
Yeah, I think going back, my brother and I have always been partners since I got out of the University of Missouri, and so we've had all kinds of different opportunities, from a cattle feedlot over in the middle of nowhere in China to rubblizing roads or doing road construction over in Ukraine and everything in between. So we've always been troubled asset workout guys, and one guy came to us about an opportunity to get into the Nevada cannabis market. We thought it'd be a small investment. Next thing you know, you're moving your wife and three kids out to Las Vegas to live. And so we built up a nice company out there and ended up selling that off in 2019, and we're able to reload back here in the Midwest in Kansas City where I'm sitting and built a nice company from there.
Clint Betts
Give us a sense of what Greenlight does exactly.
John Mueller
Yeah, so we're what they call a multi-state operator. So, we operate in seven states today. We've got about 800 employees, about a $300 million company as we're operating today. So we grow it from basically seed to sale, as they say. So we have about 300,000 square feet of cultivation that we're growing plants everywhere across the country, and then now we're at 34 different retail locations under the Greenlight brand, and we're continuing to expand into Florida and expanding our footprint in Ohio and some other states right now. So we've got the gas pedal down when a lot of people in our industry are really pulling back, and the equity markets, capital, and everything else is very, very complex. As we're moving into a new administration, we'll see what changes are in the future here.
Clint Betts
What does it take to open up a dispensary?
John Mueller
I mean, obviously, winning the license is the biggest part of the equation. So, the licenses are worth millions of dollars here in Missouri. Winning or owning one of those licenses is probably $5 million in equity on your balance sheet. And so opening it from there and then operating like a retailer, like any retailer or restaurant or anything else, you take care of the consumer, you work on milliseconds on how quickly you can get them in and out of there if they want to. We have drive-thrus like many traditional retail things, and then obviously educating our sales staff or what we call budtenders to talk to people about what their ailments are or if they're just basically replacing a glass of Tito's and having a different way to consume. So it's pretty straightforward, and like any business, you take care of your consumer first, and everything else works out.
Clint Betts
It's interesting. I live in Utah, so it's not legal here in this state, but they did make medical marijuana legal maybe two or three years ago, and they had five licenses for farmers to be able to do it. And yeah, like you said, it was like... I remember a buddy of mine who had a farm; he was like, "I'm going to start doing this," and how hard it was for everybody to get those licenses. Can you walk us through the licensing process? What does it take to earn a license? Is it like you see on TV, you just give a politician a bunch of cash in the back room, or how does it work?
John Mueller
Yeah, I wish it was like that. That'd be a lot easier. But no, in Missouri here, where we have our biggest footprint, and also Arkansas, we went through a scored application, so you get so many points by having the experience. I had a couple hundred thousand square feet and multiple dispensaries out in Nevada and California, so I had experience going into it. You write your security protocols and basically just have the baseline knowledge of how you're going to control that plant. Highly regulated. Obviously, we track, especially in a medical program, you track it all the way from where it was grown in my building all the way to who that patient was that took it home, so if you had a recall or anything else, it would be easily attainable, and making sure you don't have any black markets sneaking into the system along the way.
But it's writing those applications and proving them... In Nevada, I had to prove how much taxes we paid in Nevada, so I had to partner with the Morton family from Morton Steakhouse and things like that, that each of these regulators when they write this legislation or ballot initiatives, is the usual way to go when you can in those states. But it's about having experience, and every time we write an application, we get a little bit better as we go through it.
But then you look at it like Kentucky just had their openings two weeks ago. It was a bouncing ball. We submitted a whole bunch of applications but didn't get a bouncing ball. And so you take the good with the bad. Obviously, we love and think markets stand up a lot better when they score the applications, but obviously, everybody who submits an application thinks they are the smartest person at the table. And so you get a lot of litigation that goes along with that.
But we see in Illinois and place like that, the people that lost out on the bouncing balls, they sued too. So it's a very litigious process, but you win one or you go partner with people and go buy them after the fact. But we love scored applications because we're pretty good at what we do and we got industry knowledge and experience to prove it.
Clint Betts
Wait, is it literally a bouncing ball like the NBA Draft?
John Mueller
Yeah, yeah, exactly. Actually, in Kentucky, this is my example. They had the lottery commission basically go in there, and it was all live-streamed on YouTube to watch them pick who the winners and losers were. And so there were two big licenses in that last draw, and those licenses are probably worth 10 million bucks a piece if they want to go sell them. And so it is truly like winning the lottery. If you go into it, it's a little bit of work, more than buying a lottery ticket, but you've got to go secure locations and have partnerships and everything. But at the end of the day, when you're going into a bouncing ball, it's the luck of the draw.
Clint Betts
That is fascinating. So, do you grow all your own products?
John Mueller
No, so we like diversity in our stores, and our stores generally are about double the average stores in the state I'm sitting in right now, but you have to have diversity on the shelf. Our consumers are probably the most fickle in the world, much more than the restaurant business or any other retailing business. So consumers like variety. And so we provide about 30% of our own products in our own stores. We do wholesale to other people as well. But the consumer likes to have a whole bunch of new stuff coming in and out. So, if they have to buy a Greenlight branded product every time, I think I'd lose consumers.
Clint Betts
What is the distribution process?
John Mueller
Yeah. I mean, two drivers, cameras, geotracked. So we track it from our cultivation facility that's behind the barbed wire, if you will, and all the way to the store level, and then obviously, we've got security on the other side that's receiving that. With all the stigma of all the bad things happening and all that stuff you hear about, those curtains are kind of falling, and it's not as scary as it used to be. Stealing a truckload of cell phones is probably worth more than my marijuana in the back of our transits.
Clint Betts
Has that happened?
John Mueller
No. For a while, in Colorado, two decades ago now, they were having where they would post online where your trucks were going, thinking that that was a better way they control it, and the criminals kind of figured that out too, so they'd be waiting for them. So we go nondescript and go across. We've never had knock-on-wood, never had any issues. We've had a couple of little break-ins, I think, and this is my fourth year at Greenlight, and obviously, the years before, I think I've had like $10,000 stolen across what we are, a $300 million business today. So they try a few times and then our security measures and each of these stores have at least 32 cameras in it, if not double that depending on the size of the store, so they don't make it too far. And generally, they don't actually get any product. They do a little damage by running cars into our place and the T-Mobile store next door, etc., but they don't get away with much.
Clint Betts
Is it still a fairly nascent industry? It kind of sounds like it is, right, in terms of trying to figure out how to get licenses and how to do all this, but also, at the same time, it seems like it's like any other business. So, what is the state of the cannabis industry?
John Mueller
Yeah. Like I said, I've done road construction in Ukraine and Russia and cattle feedlots in China and all kinds of tech companies and everything else, and this is by far the hardest business I've ever run, and I've never had a real job coming out of school, so completely unemployable. But you look at this, and when you have the regulatory, you got the politics that you don't know if they're going to change the rules and basically tracking something all the way through the system, and then obviously back in my Nevada days, the banking and we'd basically have to cash people's payroll checks because you didn't have stable banking, which a bunch of that stuff's gone today and we can get FDIC financing on some of these properties and things like that.
But it was very, very challenging, and you never know what the rules are going to be when the new regulator comes in or they change the tax code or anything else in between, a competition going down the road if they issue more licenses. So it's by far the most complex business, and then the legal structuring that goes into all that. And we do a ton of merger and acquisition stuff, too. So, structuring around each regulatory environment is always a challenge. So it's highly, highly complex. The Rastafarians of the world are not really operating in the business today. So if you look at our big cannabis conferences, when we first started, it was the hoodies and the baggy jeans, and now it's a lot of suit coats and pretty sophisticated business owners.
Clint Betts
That is actually fascinating. Has it dipped? Has it been booming? What has it been like over the past, particularly when everyone was facing this inflation, the economy, and all that type of stuff? Does it go up and down with that, or is it pretty steady?
John Mueller
Yeah, no, I mean, we go by the wind. So obviously, all of our public stocks that you track right now are all traded on some kind of Canadian stock exchange or the Neo or whatever. But I mean, right now, you can go out, so where we were a high water mark, and probably 2021 was the high water mark, and we're about an 80% discount from where they were at that point if you look at total market caps.
So the equities themselves have completely cratered, and then we saw a little bump when we're getting rescheduled, which takes us from heroin and cocaine, all that stuff, takes us down to Tylenol with coating. Still federally illegal when this happens, and we think that's going to happen with the DEA this coming year. We thought the Biden administration would get it done, but that's going to push in the next year. Totally changes our tax code, et cetera.
But you can go out and buy equities in cannabis right now at four times EBITDA numbers, and a lot of these companies are making $300 million a year, and they're trading it under a billion dollars. And we're also in a market that's about 11% of alcohol. Everybody says it's going to be 22 to 25% of alcohol. So we're still second based on this equation, but with that and coupled with the interest rates that have gone up across the board, we generally pay in the mid-teens for any debt financing. We're fortunate we're debt-free, but my peers are going out and getting high-interest debt, along with a lot of consolidation with the equities being beaten up so much, you're not seeing a bunch of big M&A stuff going out there as well. So, these are really challenging times, and there are a lot of sad faces. Obviously, we had a real catalyst in Florida that was going to go adult use, and that failed by 3% down there. It was a 60% threshold, and they got 57.
Clint Betts
Oh, yeah, yeah, I saw that.
John Mueller
Yeah, it was a dagger for the equities. And you look at a Trulieve who invested $140 million in that campaign, which they're about a 40% market share down there, they lost half of their equity overnight down there. Even though they have a very, very profitable business as it sits today, it would've skyrocketed that thing. So you can buy them at three times earnings or something crazy right now.
Clint Betts
Isn't it interesting that 57% voted for it, but still, it doesn't pass? It needs [inaudible 00:13:30].
John Mueller
Yeah, DeSantis came out and did some real nefarious things relative to that, in my opinion, used some opioid funding to kill that off, which I don't know why when President Trump came out in favor of it where that arm wrestling came into play. Doesn't make a lot of sense to me.
Clint Betts
Yeah. Tell me from a political standpoint, if you could just wave a magic wand, what would you want to happen? Just legalize it at a national level, so you don't have to figure out state by state. The politics of it must be fascinating. I mean, you're following some proposition bill in Florida, and it actually makes a huge difference in the industry. That's fascinating.
John Mueller
Yeah, yeah. No, and we were the biggest funder for the Nebraska Medical Program, for example. So that was our only win. We lost up in South Dakota on adult use and down in Florida. Those were the two big losses for us personally. But yeah, we followed that along. Obviously, what we believe in is the states' rights, and we don't think there's going to be federal legalization across the board anytime soon, so if they just push it back to the states, at least that's what President Trump has verbalized. Matt Gaetz, if he's confirmed there, he's been pro-cannabis for a significant amount of time. Bobby Kennedy is one that's pro-cannabis, although he wants a national tax on it, which I always worry about any additional taxing adds to the black market. So I think you have to be very, very careful there that you don't promote the cartels to be shipping stuff instead of having these local operators.
Just in Missouri, we're the youngest program in about... We're the fifth-largest program now in Missouri, which doesn't make a lot of sense, but we've got 20,000 jobs we've created here out of effectively thin air that was all black market before. So, as you look at all that stuff coming in there, what we hope the president does is what he said he is going to do is states' rights. So Missouri gets to make its own rules, and Illinois has different rules, etc. So we hope that they continue forward with HHS's recommendation for rescheduling from schedule one to schedule three, which then opens up... You can do R&D testing, and it normalizes it where we're not treated like we're cocaine dealers.
So I think that's the biggest one, and then hopefully, we will get up listing and not have to trade in Canada and all this other crazy stuff. But the rescheduling is a huge thing we think is coming. There's safer banking and some other things that are going to be moving their way through Congress, but the main one is rescheduling, which we're coming up with next year.
Clint Betts
You know what's fascinating? If you were a corn farmer, you wouldn't worry about some black market corn industry trying to undercut you, but is the black market your biggest competitor really, at the end of the day, or is it your other companies? It seems like the black market would be the one you'd most want to have some sort of regulation around, some sort of sense of what's going on.
John Mueller
Yeah, no, I think... and obviously they operate because we're federally legal, so that's their thing, even though we're state licensed and I pay a boatload of taxes. Excuse me. So we see the black market, like in Missouri, there was a billion that was already coming in Missouri before we had a stood-up program that's tested and taxed. And there are scary things out there where people pass around a black market joint; it's got fentanyl in it. There's a group up in West Virginia. We did commercials on this. Five people in a room, four of them ended up getting Narcan, and one died because whoever they bought that from laced that with fentanyl, which I don't even... can't comprehend somebody doing that. What's the math? Did you sell more weed or something like that by lacing it?
But those are the scary things I worry about on that, and then obviously all the Delta-8 that's out there that's kind of found this loophole in the farm bill to have intoxicating cannabinoids in there that are completely untested. They look like a bag of Skittles, things like that that I think give our industry a bad name. So, let's get it tested, taxed, and regulated, and everybody operates on the playing field. I think the corn guy gets to operate on the same playing field as the guy next door, so let's keep it that way.
Clint Betts
Yeah. Give me a sense of if you know how bad the fentanyl crisis is.
John Mueller
Yeah. I mean, other than the stats I read and see on X, et cetera, I'm not the foregone expert on that. I just know a few of the things that impacted our industry, like the example I just gave you. But obviously, you can read the stats in every state across the board, and obviously, I don't think there's an American person who doesn't want to solve that problem.
Clint Betts
Yeah, for sure. My sense is that you're dealing with the black market within the United States, and then you're dealing with countries. You've got Mexico, you've got Canada. I mean, I don't know what they do, but you've got these two other countries who have totally different roles and can smuggle the same stuff inside of here. Your business is fascinating to me. I mean, what's that like? Are you tracking what's happening with the cartels?
John Mueller
No, I think because we're now at 38 states legalized across the country in some form, some are real low THC, different market than the one I'm sitting in here today. I worry more about the Oklahomas of the world. They have a medical program. What they did was puke out 20,000. We have 64 cultivation licenses in Missouri. They puked out over 20,000 of those. So there's no way to regulate those, check their cameras, see how it's all tracked. Just like we used to have in Northern California up in the hills, they would basically send it out of there.
So, I don't think it's as much coming across the border in cannabis as it used to be. Obviously, every market that flips is one less one you worry about, but it's those markets where it's unlimited licenses, and there's no way to track it, and then you can go down the street, and basically, they have to play whack-a-mole for the nefarious operators in that equation, and it's giving them a little bit of a license to ship out of the state. So we see the black market coming out of the Oklahomas of the world where obviously, in our business, you're not allowed to send it outside your state. So if it's produced in Missouri, it's sold in Missouri. Same as Arkansas and Illinois, et cetera.And then you've got Oklahoma where the regs say that that's supposed to happen, but when you have so many licensed operators, it's basically a free-for-all all, and there's not enough regulators that you could hire to control that genie.
Clint Betts
What does a typical day look like for you?
John Mueller
I cram all my main meetings in on Mondays, and I do a lot of our legal work. I'm not a lawyer, but I play one. So we're doing a lot of mergers and acquisitions, audits, things along those lines. But I cram all my one-on-one meetings into one day and just kind of make it my hell day where I'm barely eating and get all my team to come meet me in the office. I'm sitting in here today. So that's my main one, and I do that weekly.
And then on Tuesday, I don't travel as much as I would like to. I love being in stores. I love talking to our employees to find out what's working and what's not working and get a vibe. In my history, I've been too much of a control freak, so I'm trying to let a little bit of that go, although I'm OCD when it comes to having dust on the floor, paper on the floor, or anything like that when I go to my stores to make sure that consumer experience is perfect every time. But Mondays are hell for me, and then I blend in the rest of the week, a lot of merger and acquisition counting and things along those lines, typical CEO stuff. But I made one day the toughest day.
Clint Betts
What is AI doing to your industry, if anything at all?
John Mueller
So we have an AI budtender who is like our salesperson and sits on our website today if you will. So we give recommendations, things like that, and stack that on top, and we've seen our sales carts expand by doing that. So they go in there and find out what their chronic pain is or whatever their issue is, and we can recommend products that way, the same as my cashiers do. So I think it's going to be implemented more in the system.
A lot of these retail locations, though, especially in the cannabis industry, is like they're coming to talk to Jane, who served them before, and this worked; this didn't work, and there's more of a personality connection there than there is in other industries, in my opinion. But we're using that, and then obviously, I've got three different people, so one on the marketing front is just doing those kinds of AI budtenders and that stuff. We've got a whole data scientist crew that's basically drilling down in all the data of what people are buying across all of our other... We scrub the websites of everybody else, what's moving on there, their staff picks, what their pricing is, and all that other stuff.
So I've got another person that... and then obviously our marketing team is producing content much more efficiently than they were before and some of the stuff you can do nowadays. I am not remotely the expert on that and may be too old, but I've got three people that we're basically dedicating resources to just build out those three portions of our business as we drill down and what are our margin structures, reorganizing our menus based on, I make a little more money on this vendor versus that vendor and how do I move the products that I produce up to the top and get people to try, and then obviously we couple that with our text and marketing programs, et cetera.
Clint Betts
What's it like to recruit people, recruit executives, recruit managers or stores? Have you noticed that's different than other industries or what's that been like?
John Mueller
Yeah, we do a lot... Compared to other retailers, we get a lot more applicants for sure. And our interesting is new and interesting, and it's not like flipping burgers, and we pay a little bit more too. So recruiting on that side is relatively easy. A lot of the time, we have a lot of cannabis operators, and maybe I don't want that skill set here, so as you go up to the next levels, I'm very cautious of bringing in bad habits from other retailers. We look at ourselves and our peers in the billion-dollar company range, and I try to beat them in every category. However, we are very cautious about upper management and like to hire outside the industry as it's so new. We see a tremendous amount of inefficiencies in our industry that we don't want to bring into our collective group. So we try to go outside for upper management and stuff like that. So it's not necessarily when we look at applications that you worked at another cannabis operator that it might not be a good thing for us.
Clint Betts
That's interesting. You mentioned this a little bit, and I wonder as you're thinking about and preparing for 2025, we did just have an election, there will be a new administration, there will be new everything it seems like. How do you prepare for something like that?
John Mueller
Well, so a lot of it is obviously the government never moves as fast as we want. Rescheduling is our biggest thing. We thought the Biden administration would get that done. It was promised to us for about the four years that they were in there. That was a campaign promise that never happened, so obviously highly disappointed in what transpired there.
At least Trump is saying all the right things. We love the fact he voted and came out bullishly for adult use in Florida, obviously, his home state, so that's good news. Matt Gaetz, obviously, if he makes it to the attorney general and has the DEA basically approve the rescheduling, and that's their job. So they're just clicking us down a couple of schedules there from one to three, so we're hoping that that transpires. But anytime there's confirmation hearings and all that other stuff, it just delays life, and nothing in Washington moves very fast.
So we were hoping it would get done maybe in the lame duck and that, but now they've punted on some open hearings and things like that, so nothing's going to get done between now and January 20th, and then who knows what the timeframe is after that. And I think that's why you're seeing a lot of the equities drop and then also the capital expenditures and expansion plans for a lot of my peers are slowing down.
Clint Betts
Yeah, you got to watch these confirmation hearings and root or root against whoever has been nominated depending on how they see it. That's fascinating. Finally, we end every interview with the same question, and that is at CEO.com, we believe the chances one gives is just as important as the chances one takes. When you hear that, who gave you a chance to get you to where you are today?
John Mueller
Yeah, I mean, obviously, so my story's a little different. Came out of college and partnered up with my brother. He's five years older than me, so he was working in investment banking, and we started a barbecue company together, slicing meat in our apartment and growing that over the next four years to a $25 million business. I give credit to him, but then, obviously, the entrepreneurial part of that is that my dad always owned his own business. Unfortunately, we didn't get to inherit a business from them that we could take over and run with, but we always knew that we were going to be entrepreneurial, and both were not employable anywhere else. So, I give credit to my dad for the entrepreneurial spirit and then my brother for letting me run. I run their operation. He kind of stays out front. We figure it out. We don't argue. We always see eye to eye on this and always row in the same direction, so probably give him the credit and my dad for the gut.
Clint Betts
That's incredible. John, thank you so much. Best of luck in 2025. We should have you back on once things get cleared to get a sense for the update on the industry. Thanks so much, man.
John Mueller
Well, I appreciate it, as well as your show and all the podcasts. Love to hear.
Clint Betts
Thanks, man.
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