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The Sunday Read: ‘How Do You Make a Weed Empire? Sell It Like Streetwear.’

By The New York Times

Delve into the intricate ascent of the cannabis entrepreneur and former rapper Burner's powerhouse brand, Cookies, on "The Daily" with insights from Ezra Marcus and James Patrick Cronin. The episode unpacks the unique blend of musical influence and black market savvy that has skyrocketed Cookies from underground sensation to a household name in the legal marijuana industry. The brand's innovative marketing, reminiscent of streetwear tactics, has embodied the cannabis lifestyle while challenging stereotypes, thus building an authentically engaged and loyal customer community.

However, the burgeoning empire isn't without its controversies. Legal entanglements and ethical questions loom, from lawsuits citing dubious business practices and black market affiliations to the challenges posed by the patchwork legality of cannabis across the United States. Cookies' story, as narrated by Marcus and Cronin, not only highlights the brand’s exceptional growth strategy but also shines a light on the legal and logistical hurdles faced when scaling a national cannabis company within the current federal framework. This episode of "The Daily" is a deep dive into the tension between mainstream success and the lingering shadows of an industry's illicit roots.

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The Sunday Read: ‘How Do You Make a Weed Empire? Sell It Like Streetwear.’

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The Sunday Read: ‘How Do You Make a Weed Empire? Sell It Like Streetwear.’

1-Page Summary

The growth and branding strategy behind the cannabis company Cookies

Cookies, a notable cannabis brand in the U.S., has experienced significant growth thanks to a robust branding strategy. CEO Gilbert Milam, formerly a rapper and black market dealer known as Burner, capitalized on his background to build the company's status. Burner utilized rap music to promote cannabis strains such as Girl Scout Cookies, which he cultivated with grower Jai Chang. By giving free samples to influential dealers and limited supply to boost demand, he and his brand gained hype. Not only did Burner's music career help proliferate strain awareness through associations with iconic rappers, but the branding strategy was also influenced by streetwear and black market appeal. The trademark cookie logo and clothing line signal a cannabis lifestyle, challenging stereotypes and creating a loyal consumer base. Cookies' grand opening events and promotions, such as partnerships with known figures like Branson, celebrate its illicit market origins while transitioning into legality. To reach restrictive markets, Cookies has employed controversial THC alternatives, further demonstrating strategic growth. The brand's venture, starting on the West Coast and expanding, is deeply rooted in black market and musical culture, establishing authenticity and capturing the subcultural imagination.

Lawsuits and scrutiny facing Cookies around business practices and involvement in the black market

Cookies faces lawsuits and public scrutiny around its business practices and supposed black market connections. Accusations are aimed at management for self-dealing with construction firms and manipulated balance sheets. Shareholders have taken issue with management's directive to work with a certain construction firm that overcharges, an issue compounded by familial ties between the firm's executive and Cookies' management. Additionally, Cookies has been accused of depleting its cash reserves through transactions with companies linked to its associates, raising further ethical concerns. The company is also under scrutiny for producing unregulated hemp-derived intoxicants, which some argue could undermine legal cannabis markets by circumventing established regulations.

Challenges growing a national cannabis company

Growing a national cannabis company like Cookies presents unique challenges due to U.S. federal law. One major obstacle is the inability to transport products across state lines, requiring the establishment of separate supply chains in each state. This limitation increases operational complexities and costs. Cookies also grapples with thin profit margins stemming from high industry taxes and the lack of access to banking services, due to federal regulations that classify marijuana as an illegal substance. As a result, cannabis companies are forced to handle large cash transactions, heightening the risk of theft and creating an onerous financial management environment. Milam's experiences underscore the difficulties of navigating the financial hurdles and safety concerns imposed by the disconnection between state legalization and federal prohibition.

1-Page Summary

Additional Materials

Clarifications

  • Gilbert Milam, also known as Burner, was a rapper and black market dealer before becoming the CEO of Cookies. His background in the music industry and the illicit cannabis market influenced his approach to building the company's brand and business strategies. By leveraging his connections and experiences from his past as Burner, Milam was able to create a unique and authentic image for Cookies within the cannabis industry. This background helped him establish credibility and differentiate Cookies from other cannabis brands in the market.
  • Gilbert Milam, also known as Burner, leveraged his background in rap music to promote cannabis strains like Girl Scout Cookies. By incorporating cannabis-related themes into his music and associating them with popular strains, he was able to generate buzz and interest in the products. This strategy helped increase awareness and demand for the strains among consumers familiar with his music and persona. The use of rap music as a promotional tool was a creative and effective way to market the cannabis brand.
  • The branding strategy of Cookies was influenced by streetwear and black market appeal, incorporating elements like the trademark cookie logo and a clothing line that symbolized a cannabis lifestyle. This approach challenged stereotypes and attracted a loyal consumer base by tapping into the edgy and underground aesthetics associated with streetwear and black market culture. By blending these influences, Cookies aimed to establish authenticity and resonate with consumers who identified with the subcultural aspects of streetwear and the black market. This strategy helped differentiate Cookies from traditional cannabis brands and create a unique brand identity that appealed to a specific demographic.
  • National cannabis companies in the U.S. face challenges due to federal laws that prohibit the transportation of cannabis products across state lines. This restriction forces companies to establish separate operations in each state where they operate, leading to increased costs and operational complexities. Additionally, federal regulations classify marijuana as illegal, resulting in limited access to banking services and forcing companies to conduct cash transactions, which poses security risks and financial management challenges. The disconnect between state legalization and federal prohibition creates a challenging environment for cannabis businesses to navigate.
  • In the cannabis industry, high taxes are imposed on cannabis businesses at various levels, including excise taxes and additional state taxes, which can significantly impact profit margins. Additionally, due to federal regulations, many banks are hesitant to provide financial services to cannabis companies, forcing them to operate primarily in cash. This cash-centric operation not only poses security risks but also leads to additional costs for secure cash handling and storage, further squeezing profit margins.
  • Handling large cash transactions in the cannabis industry is a result of federal regulations that classify marijuana as illegal. Due to this classification, cannabis businesses often face challenges accessing banking services, forcing them to operate primarily in cash. This cash-intensive nature poses security risks, as large amounts of cash on hand can make these businesses targets for theft. The lack of banking services also complicates financial management and regulatory compliance for cannabis companies.

Counterarguments

  • Cookies' branding strategy, while successful, may not be entirely replicable as it heavily relies on the unique background and connections of its CEO, which could be a limitation for other entrepreneurs in the industry.
  • The celebration of illicit market origins, though appealing to some, might not resonate with all consumers, especially those who are more conservative or who prioritize legal compliance and safety.
  • The use of controversial THC alternatives to reach restrictive markets could be seen as exploiting legal loopholes, which may not align with the ethos of promoting a regulated and safe cannabis industry.
  • The expansion of Cookies may contribute to the corporatization of cannabis, which could potentially marginalize smaller, local growers and businesses that have been part of the industry for a longer time.
  • The lawsuits and scrutiny facing Cookies around business practices could indicate a need for stronger corporate governance and transparency, which are critical for long-term sustainability and consumer trust.
  • The challenges of growing a national cannabis company due to federal law might be seen as an opportunity for advocating for policy change, rather than just a business hurdle.
  • The reliance on large cash transactions due to lack of banking services could be addressed by seeking alternative financial solutions or pushing for legislative changes, rather than accepting it as an unavoidable risk.
  • The criticism of Cookies' business practices could be a reflection of broader systemic issues within the cannabis industry that need to be addressed, such as the need for more comprehensive regulations and oversight.

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The Sunday Read: ‘How Do You Make a Weed Empire? Sell It Like Streetwear.’

The growth and branding strategy behind the cannabis company Cookies

Gilbert Milam, known as Burner, has transitioned from a rapper and black market cannabis dealer to the CEO of Cookies, one of the most renowned legal cannabis brands in the U.S.

Burner's background as a rapper and black market cannabis dealer

How Burner used rap music to market and spread awareness of cannabis strains like Girl Scout Cookies

Burner began releasing music in 2007 that revolved around the life of a smoker and dealer, intertwining his passion for hip-hop with the cannabis culture. Known for his role as a rapper and dealer, he leveraged both professions to amplify his success. His music was a promotional tool for his cannabis dealing and vice versa.

How Burner's personal brand helped build hype and status around Cookies

Burner closely worked with Bay Area grower Jai Chang to cultivate unique cannabis strains, including the now-famous Girl Scout Cookies. To create a buzz around this new strain, he gave out free samples to notable dealers, utilizing a strategy of limited supply to stimulate demand. His association with iconic rappers like Wiz Khalifa and Snoop Dogg helped spread awareness and indirectly promoted the strain.

Cookies' branding inspired by streetwear and the romance of the black market

The Cookies brand combines the allure of streetwear with the mystery of black market cannabis, resonating with a heavy consumer base that appreciates the subcultural status of illicit weed. The branding echoes subcultures like the Juggalos or Deadheads, signifying a staunchly dedicated following. The clothing line of Cookies plays not just a commercial role but also serves as a lifestyle emblem for cool, cannabis-friendly affiliation, challenging the uncool stoner stereotype.

Grand opening events and promotions with legendary dealers like Branson to embody illicit market roots

Events like the company's grand openings become subcultural spectacles, with fans lining up to interact with Burner and buy merchandise. The grand openings and store promotions, including partnerships with legendary figures like Branson, m ...

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The growth and branding strategy behind the cannabis company Cookies

Additional Materials

Clarifications

  • Juggalos are fans of the music group Insane Clown Posse, known for their distinctive face paint and loyalty to the group's subculture. Deadheads are devoted followers of the band Grateful Dead, known for their communal spirit, tie-dye clothing, and love for the band's improvisational live performances. Both subcultures have strong identities and communities centered around music, lifestyle, and shared values.
  • Milam's connections in the music industry were instrumental in promoting his cannabis brand. Through his relationships with iconic rappers like Wiz Khalifa and Snoop Dogg, he was able to organically integrate his products into hip-hop culture, gaining exposure and credibility for his strains. These connections helped spread awareness of his brand and products to a wider audience, leveraging the influence and reach of the music industry. Milam's ties to the music world provided a platform for his cannabis business to intersect with popular culture, enhancing its visibility and appeal.
  • Burner, also known as Gilbert Milam, started Cookies SF as a brand that initially focused on selling streetwear and smoking accessories. This line of products served as a foundation for the Cookies brand, which later expanded into the cannabis industry. By establishing a presence in the streetwear and smoking accessories market, Cookies SF laid the groundwork for its transition into the cannabi ...

Counterarguments

  • The strategy of using rap music and celebrity associations to market cannabis strains could be criticized for potentially glamorizing drug use to young and impressionable fans.
  • The romanticization of the black market may overlook the negative aspects and consequences of illegal drug trade, such as legal repercussions and the impact on communities.
  • While the branding strategy is unique, it could be argued that it perpetuates stereotypes about cannabis users and may not appeal to a broader demographic that includes more casual or health-conscious consumers.
  • The use of controversial THC alternatives to enter restrictive markets might raise concerns about the safety and regulation of these products, as well as the ethical implications of circumventing local cannabis laws.
  • The focus on streetwear and lifestyle branding could be seen as a diversion from the quality and medicinal benefits of the cannabis products themselves.
  • The narrative of transitioning from the black market to a legal enterprise, while compelling, might not acknowledge the challenges and barriers that other black market operators face in making a similar transition due to systemic issues.
  • The emphasis on subcultura ...

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The Sunday Read: ‘How Do You Make a Weed Empire? Sell It Like Streetwear.’

Lawsuits and scrutiny facing Cookies around business practices and involvement in the black market

Cookies, a company well-known in certain markets, faces legal challenges and public scrutiny over its business practices and alleged involvement in the black market.

Accusations of self-dealing with construction firms and balance sheet manipulation

Shareholders have raised accusations against Cookies' management, particularly targeting company practices related to dealings with construction firms. An outstanding shareholder claim accuses Burling of compelling Cookies' licensors to contract a specific construction company known for charging exorbitant prices. Adding to the controversy is the fact that Burling's brother holds an executive position within this construction firm, raising questions of self-dealing.

Another serious allegation involves balance sheet chicanery, with Cookies being accused of rapidly depleting its cash reserves. The claims suggest Cookies is making payments to companies where Milam and Burling, two individuals associat ...

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Lawsuits and scrutiny facing Cookies around business practices and involvement in the black market

Additional Materials

Clarifications

  • Self-dealing with construction firms occurs when a company's management engages in transactions that benefit themselves or their related parties, rather than acting in the best interests of the company and its shareholders. In this case, the accusation is that Cookies' management may have directed business towards a specific construction company, potentially overpaying for services, which is concerning because the brother of a key executive at Cookies holds a high-ranking position in this construction firm. This situation raises suspicions of conflicts of interest and unethical behavior, as the company's decisions may not be solely based on what is best for the company and its stakeholders.
  • Balance sheet manipulation involves intentionally altering financial records to misrepresent a company's financial position. This can include inflating assets, understating liabilities, or misreporting revenues to create a false impression of the company's financial health. Such manipulation can deceive investors, creditors, and other stakeholders about the true financial condition of the business. It is considered unethical and illegal, as it distorts the true picture of a company's financial standi ...

Counterarguments

  • Accusations of self-dealing may be based on incomplete information, and the relationship with the construction firm could be coincidental or the result of a competitive bidding process.
  • The construction company in question might offer specialized services that are particularly suited to Cookies' needs, justifying the choice irrespective of familial connections.
  • Balance sheet management practices could be in line with legal accounting standards, and the depletion of cash reserves might be part of a strategic investment plan rather than manipulation.
  • Payments to companies where Milam and Burling have interests could be legitimate transactions for services rendered or investments in line with company growth strategies.
  • The production of hemp-derived intoxicants might be operating within a legal gray area due to evolving regulations, and Cookies could be ...

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The Sunday Read: ‘How Do You Make a Weed Empire? Sell It Like Streetwear.’

Challenges growing a national cannabis company

The efforts to grow a national cannabis company are fraught with legal and financial challenges due to the complex landscape of marijuana legality in the United States.

Inability to transport products over state lines

Forcing establishment of independent supply chains everywhere

Because marijuana remains illegal at the federal level, it cannot be transported over state lines. This forces cannabis companies to establish independent supply chains in each state where they operate, adding complexity and cost to their operations.

Thin margins from high taxes and lack of banking access

Furthermore, the high taxes levied on cannabis businesses, combined with their exclusion from the federally regulated banking system, create thin margins for those in the industry. Because marijuana's federal status prohibits these companies from using traditional banking services, they become cash-heavy and in ...

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Challenges growing a national cannabis company

Additional Materials

Clarifications

  • Marijuana legality in the United States is complex due to the conflict between state and federal laws. While many states have legalized marijuana for medical and/or recreational use, it remains illegal at the federal level. This discrepancy creates challenges for businesses operating in the cannabis industry, as they must navigate differing regulations and restrictions depending on the jurisdiction. The federal illegality of marijuana also impacts various aspects of the industry, such as banking access, taxation, and interstate commerce.
  • Transporting marijuana over state lines is prohibited due to federal laws, even though some states have legalized it. This restriction forces cannabis companies to set up separate operations in each state where they want to do business. The federal illegality creates a complex regulatory environment that hinders the seamless movement of cannabis products across state borders.
  • The high taxes on cannabis businesses are primarily due to the federal government's classification of marijuana as a Schedule I controlled substance, which leads to additional taxes imposed on these businesses. This classification restricts the ability of cannabis companies to deduct normal business expenses from their federal taxes, resulting in higher effective tax rates. Additionally, states often levy excise taxes on cannabis products, further contributing to the overall tax burden on these businesses. The combination of ...

Counterarguments

  • The legal landscape is evolving, and some states are creating more business-friendly environments for cannabis companies, which could mitigate some of the challenges mentioned.
  • Technological innovations and private sector solutions may offer alternative financial services to cannabis businesses, reducing the reliance on traditional banking.
  • The establishment of independent supply chains in each state could lead to more localized economic benefits and job creation.
  • High taxes on cannabis businesses can be seen as a contribution to state revenues, which can be used for public services and infrastructure, potentially offsetting the criticism of thin margins.
  • Some cannabis companies have successfully navigated the complex legal environment and have become profitable, suggesting that while challenging, it is not impossible to grow a succ ...

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