MJBizMag July 2020 - 44

RECESSION ROAD MAP
sets that have been lost. There are people
from packaging who have never filled
vape carts before, " Whitney said. " People
who do it regularly can do 500 per hour,
but the new ones are getting about 75 to
80 per hour. But with training, they can
get close to 500 per hour.
" Figuring out those gaps and how to
make it easy on people has been a big
challenge. We don't want anyone beating
their head against a brick wall all day, "
Whitney continued. " You're going to find
ways to get them up to speed quickly and
efficiently. So, being patient, offering the
right training, offering support, offering
encouragement, I think, are all very
important things. "
8
Renegotiate bills
and contracts.
Another way to save money is
renegotiating and delaying bill payments.
For example, Vertosa roughly halved its
rent by renegotiating its lease with the
landlord. Specifically, the firm decided
to keep the lab portion of the space that
it rented but directed front-office staff to
work from home, allowing the company
to eliminate the office part of the space.
" We had a really good landlord and
said, 'Hey, we only need half this space,' "
noted Austin Stevenson, Vertosa's chief
innovation officer. The company also
has taken advantage of a reduced-rate
offering from its utility company,
PG&E Corp. These cuts, in addition to
a relatively small number of furloughs
and layoffs (less than 10% of the overall
workforce, Stevenson said), have helped
the business cut 20%-30% of its costs.
Nug also benefited from renegotiation
" on all sides, " Whitney said. For example,
although Nug is vertically integrated,
it still needs to buy biomass wholesale
from other cultivators for its concentrate
production.
One cultivator with whom Nug
has a good wholesale relationship is
essentially fronting biomass to the
company for its concentrates and giving
buys cannabis oils and other extracts
in bulk. Stevenson said that since well
before the recession, there has been
excess extract inventory on the market,
resulting in lower extract prices. The
recession has pressured those prices
downward even more.
And since concentrate can have a long
Erich Mauff
Nug 30 days-sometimes 60 days-to
pay for the biomass.
" We've been able to get good credit
terms. We can basically finance some of
our buys. We're able to move the material
through, sell it and relay money back up
to them, " Whitney said. " They've been
really good about helping us out in terms
of getting biomass on terms that work
with our business model, and we get
them pricing that works for theirs. So we
might pay more than best deal, but it's
worth it for us because it's not putting us
into a cash-flow crunch. "
9
42 Marijuana Business Magazine | July 2020
Leverage recessionary
discounts into bulk buys
and higher margins.
To create the emulsions that it sells to
infused product companies, Vertosa
shelf life relative to flower, Vertosa has
been buying much more extract than
usual but at deeper-than-usual discounts.
The company is buying enough input
inventory to sustain it for up to 12
months of production, Stevenson said.
" We've been able to procure inputs
at a lower cost, hold on to them and
then, because of the lower costs, sell
(our products) at a higher margin than
when the cost of the inputs was higher, "
Stevenson said. Vertosa also aims to lock
in a preferred purchase-price rate for six
to 12 months. So, if extract prices go back
up, Vertosa has locked in the lower price.
" What we commit to them is an order
volume. And that helps us with continuity
through the foreseeable future, or
hopefully throughout the recessionary
period before the market rebounds, "
Stevenson said.
Vertosa's procurement manager keeps
a running list of extractors in all of the
company's markets-California marijuana
extractors and U.S. and international
Austin Stevenson
MJBizMag July 2020

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