US cannabis retailers take mixed approaches amid pandemic-fueled downturn, with some eyeing costs and others spending more

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cannabis recession approaches, US cannabis retailers take mixed approaches amid pandemic-fueled downturn, with some eyeing costs and others spending more

As the U.S. economy struggles to recover from a recession spurred by the coronavirus pandemic, some cannabis retailers are looking for ways to cut costs while others are ramping up spending on measures to keep their employees and customers safe.

Cresco Labs co-founder Joe Caltabiano, who stepped down from his role as president of the Chicago-based company in March and the company’s board of directors this week, pointed to three areas marijuana retailers can examine to contain costs:

  • Staffing.
  • Deliveries.
  • Technology.

To determine the optimum number of employees working at different times of day, it’s important for marijuana retailers to analyze their sales data to understand when they’re busiest and which specials elicit the greatest response from consumers.

For example, you’ll know if Mondays are better than Thursdays to run specials and whether foot traffic drops off the day after a special.

“If you are the retailer of old who goes by gut and the feel of things … you’re a dinosaur,” Caltabiano said.

“Within a dispensary, staffing is your No. 1 variable cost. You have to staff appropriately but make sure you don’t overwork employees.”

Reducing vendor deliveries 

Limiting the number of vendors and the times they can make deliveries is helpful when determining how many employees to have on-site at any given time.

In the early days of legal cannabis, dispensaries would get deliveries from as many as 50 companies, which was a huge time commitment for employees who must take delivery of products and other supplies.

Marijuana retailers should look to mainstream businesses such as 7-Eleven, which has a handful of vendors who deliver all products the stores carry, according to Caltabiano.

“You want all of your energy focused on revenue-generating activities,” he said.

Technology also can help keep labor costs down. Customers who order online take less time in front of employees than those who visit a store and talk with a budtender.

Caltabiano points to the fast-food industry as an example.

“You place your order in advance and you’re not standing in front of the person making food for you,” he said. “In cannabis, you put your order in and go to a separate part of the store to fulfill it.

“With online ordering, you shorten the time a person is in the store. You can reinvest in technology.”

San Francisco-based dispensary operator Sparc is a case in point: Its new e-commerce platform has made a huge difference for the company, which was in the process of launching the technology before the coronavirus pandemic struck.

“It couldn’t have come at a better time,” said Robbie Rainin, Sparc’s vice president of retail. “Ninety-five percent of our sales now occur in advance through our website, enabling us to keep in-store labor costs from skyrocketing out of control.”

Pay cuts

Sparc also took cost-cutting measures in the early days of the pandemic.

The executive team voluntarily took a pay cut and the company’s owners suspended their salaries indefinitely to ensure its team members on the front lines would be impacted as little as possible, according to Rainin. Then, in early June, Sparc confirmed it furloughed seven staffers and eliminated some positions.

“We also paused some planned expenses and held off on hiring some new roles while we could evaluate the trend,” Rainin said. (The company declined to detail the “planned expenses.”)

“We have always run our business with financial prudence and don’t anticipate further measures.”

Spending more

But not all cannabis retail operators are cutting back.

The Bakeréé in Seattle and Canada-based TerrAscend both report spending more money now than they did pre-pandemic.

Anna Shreeve, managing partner of The Bakeréé, said she’s been spending more money so her staff and customers are comfortable with their in-store experience.

Shreeve estimates she’s spent nearly $30,000 on personal protective equipment (PPE), keeping stores disinfected and purchasing technology to ensure online ordering and curbside pickups go smoothly.

Shreeve also has spent thousands of dollars on COVID-19 antigen test kits: If an employee gets sick, other staffers can be tested so they and customers are protected.

“Those are investments you need to make,” she said. “There is a tendency to say, ‘Let’s hunker down and not spend money,’ but now is the time to invest in your brand, invest in your service and take a look at what values you have as a company and who you want to be during these times.”

TerrAscend – which is in the process of relocating its headquarters from Mississauga, Ontario, to New York City – has been spending money to ensure its frontline workers are protected from COVID-19, said Greg Rochlin, CEO of TerrAscend Northeast and Ilera Healthcare. Ilera is a vertically integrated cannabis company TerrAscend acquired in September. Ilera operates dispensaries in Pennsylvania.

Ilera’s sales are up, but Rochlin said it’s difficult to quantify by how much because sales have been up every month for at least the last year.

“People have a pretty good amount of anxiety, and cannabis is a good option for anxiety,” Rochlin said.

The company has given an extra week of sick time to all its employees so that if they don’t feel well or someone in their home is sick, they will still be paid if they don’t show up for work.

The company also has hired more employees to help with opening its new medical cannabis store in Lancaster, Pennsylvania.

Other cannabis retailers such as Wakefield, Massachusetts-based Curaleaf have not seen the need to implement cost-cutting measures.

Because the vertically integrated marijuana company has been deemed essential, its stores have remained open and experienced an uptick in sales, said Chris Melillo, senior vice president of retail operations for the multistate operator.

Curaleaf has hired new full-time and temporary employees to meet the increased demand for cannabis products, as well as cover for any employees who need extended sick time.

“Part of being deemed an essential service means that we continue to provide employment to our people,” Melillo said.

“In some states, Curaleaf is actually hiring, and we feel good about providing jobs to those who have lost their means of income during this crisis.”

For more of Marijuana Business Daily’s ongoing coverage of the coronavirus pandemic and its effects on the cannabis industry, click here.