LivWell Enlightened Health, which was ranked as number 1 on the 2015 CBE 100 PPR list, continues to lead the way in Colorado and nationally as one of the (if not the largest revenue producing) vertically integrated operators. CEO John Lord, who has also been one of the most transparent industry leaders, recently shared an update with CBE on what’s going on at LivWell and in the industry.
CBE: Thanks for joining CBE for an update, John. A lot has changed in the industry since we posted your story back in March 2015. What is new at LivWell Enlightened Health?
John Lord: Since March 2015, LivWell has continued to grow and innovate. First, in November of 2015, LivWell and Snoop Dogg announced the launch of Leafs By Snoop—the rap icon’s brand of cannabis which includes flower, concentrates, and edibles. After initially debuting exclusively at LivWell, Leafs By Snoop products are now available at more than 100 dispensaries across the state.
Second, we opened up 4 new retail locations within the first 5 weeks of 2016, and then reopened two of our existing locations at brand new, beautiful, and purpose-built dispensary store fronts.
Third, LivWell has made a concerted effort to work even more closely with our preferred vendors. Recently we have worked to narrow the brands available in our stores to those which we feel not only produce the highest quality products but also demonstrate an ability to continuously innovate. We plan to remain on the cutting edge when it comes to delivering superior retail shopping experiences, and by working more closely with our preferred vendor partners, we are confident in our ability to do just that.
We stepped up our advocacy and government relations work. We soft-launched LivWell Cares, an effort kicked off directly by my son Michael, in which we are really focused on finding opportunities to work with the communities in which we operate. We are currently attending neighborhood meetings and listening, and plan to roll out some exciting community engagement projects in 2017. This goes beyond participating in local events, charitable activities, and educational initiatives that we have always participated in.
Our Senior VP of Government Affairs, Neal Levine, recently won a seat on the board of our national industry association, National Cannabis Industry Association (NCIA). Neal ran on a platform of fixing 280E and banking for the industry, and we are getting very engaged in those efforts.
LivWell also helped lead the industry group that successfully defeated a proposed ballot initiative that would have, among other things, capped the potency of all cannabis products at 16% THC.
Finally, we are currently involved in efforts to prevent a proposed ban on cannabis in Pueblo; which would only serve to stifle our industry and breathe life into the criminal market down there, negatively impacting us all. We believe these actions demonstrate LivWell’s reputation as a highly engaged, responsible company determined to lead by example across the board in terms of how we treat our employees, how we interact with our local communities, and how we lead the ongoing political fight for legal cannabis.
CBE: What have you changed, updated, etc. since we last spoke?
John Lord: One change worth noting is how we continue to elevate the conversations we foster with our customers about the strains of cannabis we sell, particularly when it comes to terpenes. With recent science suggesting that the indica-sativa dichotomy may no longer be as instructive as it once was, we have begun including the three most dominant terpenes present in a strain on the displays that accompany the jars of flower on our shelves. Now customers can make note of the terpenes present in strains they already know and love and use them as a guide when selecting new strains to try. The response from our customers has been overwhelmingly positive, with the vast majority having not even been previously aware of either the existence of terpenes or the role they play when it comes to the taste, flavor, aroma, and effect of a given strain.
CBE: What hasn’t worked to your expectations?
John Lord: Our organic growth within Colorado has been capped by plant limits, which is going to prevent us from expanding as fast and as large as we otherwise would have. Hundreds of jobs that we would love to create in the state of Colorado will likely now be created in other states, completely out of necessity.
We also continue to be disappointed when it comes to cannabis’ status on the Controlled Substances Act as well as the continued imposition of 280E taxation on our industry. The DEA made some noise earlier this year about rescheduling cannabis, but our goal remains the de-scheduling of cannabis entirely. Unless and until that happens, effective tax rates upwards of 80% will continue to hobble the growth and development of our industry. As I said earlier, we will be working very hard on that over the course of the next year.
CBE: What business activity(ies) has surpassed your expectations?
John Lord: One area that has surpassed expectations has been the phenomenal growth in the concentrates segment. Although flower remains the overwhelming preference for cannabis consumers, concentrates have been responsible for much of the excitement and innovation in terms of new product development. In January of 2014 concentrates represented just 13% of cannabis sales in Colorado. As of July 2016, that figure has nearly doubled to 24%, accounting for almost $30 million in sales that month alone. This increase in market share is also reflected in the volume of new concentrate companies we see launching and the increasing diversity of concentrate products. With a well-defined and regulated legal cannabis market now in existence, organizations are able to devote more time, energy, and investment into product innovation. Concentrates have been the greatest benefactor of this new environment.
CBE: Who are some of the best-in-class vendors that LivWell has engaged with, and whose products or services are essential to your integrated operations?
John Lord: We believe all of our vendors are best-in-class and chose to do business with them through our preferred vendor management program. It takes dozens of companies and hundreds of products to properly serve a wide segment of the market and we pride ourselves on the large selection of quality products offered to consumers every day at LivWell.
CBE: How large is your staff now and how many retail stores does LivWell expect to have open by the end of the year?
John Lord: LivWell now employs just shy of 600 full-time employees, all of whom enjoy competitive pay, 100% employer-paid health insurance, and 401(k) plans. We currently have 14 locations in Colorado, and we will probably remain at this size through the end of the year. It is worth pointing out, though, that LivWell does hold several licenses that we have yet to operationalize due to the restrictive plant count limits placed on our industry. While we would very much like to continue growing in Colorado and creating new jobs in this state, the inability to guarantee adequate product selection on store shelves has forced us to dial back our expansion plans here.
CBE: What do you project for year-end 2016 revenues?
John Lord: We foresee a steady growth in revenue over last year’s numbers, though not quite what we would have seen without the growth restrictions placed on us due to strict plant count limits. However, the better question is not how much money we’ll make, but how much we’ll get to keep. Given the imposition of 280E taxation, we will likely pay an effective tax rate of around 80% to the federal government (not to mention state and municipal taxes). While the cannabis industry continues to grow in Colorado and elsewhere, the extraordinary tax burden we face will remain an enormous impediment to individual business success and overall industry development.
CBE: Has LivWell diversified its revenue streams or streamlined operations and efficiency in light of market dynamics and pricing?
John Lord: We are constantly streamlining both retail and cultivation operations in order to achieve maximum efficiency while continuing to deliver superior products and quality experiences. One example of this comes from our grow, where over the past two years we have methodically experimented with and rolled out cutting-edge LED lighting technology.
LivWell was recently the first cannabis company to ever receive a rebate from Xcel Energy due to the reduced electricity costs we have realized in our HVAC system, as LEDs give off far less heat than traditional lighting. With LEDs, we are also able to fine tune the lights to the exact frequency best suited to each stage of the cannabis plants’ cycle of life in order to maximize healthy growth and production volume.
On the retail side, we re-opened two of our existing facilities in brand new, purpose-built dispensaries which represent the next generation of LivWell retail. These new locations incorporate all of the lessons we have learned over the better part of a decade spent operating cannabis dispensaries, including more efficient customer flow from the waiting room to the bud room, the latest security technology that ensures employee and customer safety without feeling overbearing, and a layout of product and merchandise displays more similar to traditional retail than what once characterized the earliest cannabis shops.
CBE: What is next for LivWell Enlightened Health?
John Lord: First and foremost, LivWell continues to move forward with plans for out of state expansion. As new markets open up in states across the country, we have teams actively investigating circumstances on the ground in order to determine what makes sense for our business development.
In addition, we continue to invest more in our LivWell University training program, where our staff undergo 2 weeks of intensive training before starting their careers at LivWell. Education remains one of the single greatest challenges facing our industry, and we are working to make LivWell University even more effective for employees while also developing certain aspects of the curriculum into customer-facing resources.
Finally, with the launch of LivWell Cares we aim to deepen our already close ties with the communities in which we operate. As you can probably tell, we are really excited as a company about the potential of LivWell Cares, and all of the good things that we can be a part of within the communities in which we operate.
Like I said, we are currently listening to our neighbors and exploring ways that we can be the most impactful. We should have some exciting things to talk about over the coming year.
CBE: Thank you for the update John, and CBE can’t wait to hear more in the future!