Our guest this week is Christopher Melillo.

Chris is the Senior Vice President of Retail at Curaleaf, a leading U.S. cannabis operator that has recently been named the world’s biggest cannabis company by revenue.

Chris formerly served as the Senior Director of Stores North America for Nike, and Vice President of Stores for DTLR/Villa, a leading footwear and apparel retailer.

Join us as Chris shares insights from his 20+ years of experience in retail leadership and store operations, COVID-19’s impact on the cannabis industry, and how Curaleaf is rethinking the cannabis retail experience.

Episode 94 of the RETHINK Retail Podcast was recorded on August, 6. 2020 

 


Hosted by Julia Raymond
Researched, written and produced by Gabriella Bock
Edited by Trenton Waller

TRANSCRIPTION

Julia Raymond:
Hi everyone and welcome to the RETHINK Retail show. Our guest today is Chris Melillo. Chris is the Senior Vice President of Retail for Curaleaf, a leading US cannabis operator that has recently been named the world’s biggest cannabis company by revenue. Curaleaf currently operates in 23 States with 88 dispensaries, 22 cultivation sites, over 30 processing sites and employes over 3,000 people in the US.

Julia Raymond:
Chris formerly served as the Senior Director of Stores, North America for Nike and Vice President of Stores for DTLR VILLA, a leading footwear and apparel retailer. Chris has more than 20 years of experience in retail leadership and store operations, and I am so happy to have you on the show today.

Chris Melillo:
Julia, thank you so much for having me.

Julia Raymond:
It’s great to have you on. You were in retail and now you’re in cannabis retail. So, a bit of a switch from apparel to cannabis and you are actually essential now. So how does that feel?

Chris Melillo:
It’s pretty outstanding. I’ve been in cannabis retail now for just about two years. My three year anniversary is coming up and it has been absolutely exciting.

Chris Melillo:
I can say that over my 20 years of holding retail leadership positions at companies like Home Depot and Nike and VILLA DTLR and PetSmart, Equinox, this has been the most incredible two years, probably in my retail career. It has been a lot of fun and a lot of challenges and it continues to be a lot of challenges, but all of which are very positive as you’re building this Curaleaf brand and company while you’re building an industry and watching it unfold. It’s pretty cool to be out front.

Julia Raymond:
Mm-hmm (affirmative). Absolutely. You said two years, so congrats on your anniversary. Coming into this year, with the pandemic and everything that’s been going on, what are some of the changes that you and your team have faced? I mean, all of a sudden you’re essential and you’re still remaining open, but then we have all these new rules. What’s that been like?

Chris Melillo:
Yeah. You touched on it at the beginning, being deemed essential, that designation is such a key moment for the timeline of Curaleaf in the cannabis history. Five years from now, you’re going to look back and look at being deemed essential as probably one of the most pivotal moments in Curaleaf’s history.

Chris Melillo:
It brings incredible responsibility for us as a company, to change the way we do business and act responsibly and take that challenge on. And really, you have to quickly adapt everything you do.

Chris Melillo:
Regular in-store retail was turned on its head and we were asked to implement so many new ways of operating. We can get into some of the specifics in a little bit, but I just think at a high level, I believe Curaleaf took a leadership position in adapting to the way that we had to operate in COVID.

Chris Melillo:
We had to quickly roll out new technologies. We had to enhance our website and our bandwidth and our ability to communicate with our customers at a distance now. We had implemented curbside pickup and delivery options and implement things like handheld debit machines or handheld ATM machines to reduce the interactions. We had to stand up cleaning protocols and increased hygiene standards and implement breaks for our employees that were in high touch areas, to consistently make sure that we were washing our hands and changing out pens and changing gloves and face masks and creating social distance.

Chris Melillo:
So, the entire way we did retail as we knew it was reinvented. I think we did a really good job. The entire Curaleaf team buckled down and we figured out how we’re going to do it. We worked with the states and not only met the new criteria, we help build some of the new criteria. And I think we, like I said, took a real good leadership position in doing that.

Julia Raymond:
Mm-hmm (affirmative). You mentioned being deemed essential was perhaps one of the most pivotal moments and Curaleaf’s history, and looking back on that, time will tell. Do you think it’s one of the most pivotal moments for the cannabis industry in general, at least in North America or in the US?

Chris Melillo:
Yeah, absolutely. I think that recognition shows how far the industry has come and how quickly it’s happened. It’s now being accepted as a mainstream business.

Chris Melillo:
Now, I know that’s not everywhere, in every town or every county or every state. There are different levels of acceptance, but the conversation is on the table and the line in the sand was being deemed essential.

Chris Melillo:
This is a wellness product, a medical product that people have come to use to support whatever their qualifying condition is, but this has really put a flag in the ground around, we are as cannabis, as Curaleaf, a mainstream business. And that moment in time, I believe really was a challenge for us to rise to that challenge. There was a lot of uncertainty about whether we were going to be deemed essential, but once we got it, we were off and running and never really looked back.

Chris Melillo:
When you take a moment like this, to think back of the uncertainty of that middle of March, but reality is, when we got it there was no time to enjoy the … It was, you have to figure out how to make this successful in a way that is above and beyond any other business, because there were skeptics looking at us, asking why were we essential.

Chris Melillo:
But really when you talk to our patients and our customers, they rely on this wellness product to make them feel better, to help them sleep, to get out of pain. That’s a huge responsibility that we took at Curaleaf. I’m super proud to be leading a team out in front of the patients and customers at retail to provide this service. And honestly, in my opinion, provide it really well.

Julia Raymond:
Mm-hmm (affirmative). You mentioned some of the things you had to quickly jump on and deliver while maintaining operations and staying open, like curbside delivery. You said the handheld debit.

Julia Raymond:
Touching on payments actually for just a quick second, because I’ve visited some dispensaries in Colorado in the past where it was cash-only, but then there are some other ones in recent years that have been accepting cards. So what is that environment? Does that differ by state or what does that look like?

Chris Melillo:
The reality is we can not accept credit cards at Curaleaf. We have figured out a device, worked with some vendors that have provided a handheld … It’s basically a handheld ATM. It works the same as your pin debit solution at an ATM, but just think of when you go to a restaurant and they now bring you the credit card machine to your table. It’s that size of a machine, that transacts that debit.

Chris Melillo:
Think of this scenario. You’re standing up delivery. A patient that may be in pain or may be immobile, we’re now bringing the ATM to your front door with your medicine. So, we save you a trip to an ATM. We bring it to you. Plus we bring your medicine.

Chris Melillo:
I mean, talk about service. Talk about involving the cannabis industry through the evolution of working and teaming with the state regulators to help us push this forward and bring service and reliability to our patients.

Chris Melillo:
So that’s just one instance of where I think of, we made a huge leapfrog into the future, which quite frankly isn’t good enough, but we will continue to push. But I think this moment in time, of being deemed essential, created a lot of streamlining thought process, working closely with the states.

Chris Melillo:
You did mention some of the tools. We implemented curbside delivery. We implemented mobile ordering or mobile reservation. So you can reserve your product online, come into the store and pick it up or wait in a curbside car and have it dropped in your car.

Chris Melillo:
We have express pickups in states where they were still operating in brick and mortar. We had express pickup windows where it was already ordered, just grab and go.

Chris Melillo:
We adopted technology like the Waitlist Me app, which the best way to describe that as a virtual waiting room. So, we could manage our crowd and our waiting rooms virtually. We text you when it’s your turn to come into a dispensary, your turn to get online and come grab your order. We could digitally drive social distancing and two-way communication.

Chris Melillo:
And then things like forcing us to quickly upgrade our website. We may get into our website a little bit later. But we’ve just launched our new website, but really our website was a tool to communicate and retrain our patient base and our customers, how we have to operate tomorrow, which is very different than how we operated yesterday and constantly training our team.

Chris Melillo:
You can hear my excitement. I’m really proud of the team that executed this and all the work that went into it, but as COVID goes and unravels, what the future brings, none of us know. But I can say, I know we can run our business uninterrupted in a myriad of different ways, depending on whatever’s thrown at us.

Chris Melillo:
So, I’m excited by what we learned and how we fast-forwarded how we do retail because we can always fall back on brick and mortar. That’s the easy thing to do. Whatever comes down, whatever’s presented to us in the future, we are nimble enough to adapt to whatever we have to in order to continue to serve our patients and customers.

Julia Raymond:
Mm-hmm (affirmative). That’s another question that you just mentioned, patients and customers. I mean, as a cannabis operator, I think you guys are in such a unique position to run a business where you have one side that’s patients and medicinal and then one side that’s recreational with the customer.

Julia Raymond:
How do you differentiate those two segments at the company level, when you’re talking about informing people of mobile reservations and virtual waiting rooms? Is it separated or is it all sort of bundled together?

Chris Melillo:
Well, while state regulations sometimes mandate they be treated slightly differently, there’s really not a big departure in how you operate the business. There are some nuanced differences in allowable quantities to buy and again, depending on the state, but if you really think about it, most people are buying the product for the same reasons.

Chris Melillo:
There are just some people that are more comfortable being in a state-controlled system, where their name is tracked and it’s understood what they’re purchasing. They’re more comfortable with that.

Chris Melillo:
Then there were some people, like our veteran population, that don’t want to be in a database.

Julia Raymond:
Mm-hmm (affirmative). Interesting.

Chris Melillo:
I think it is. It’s very interesting. I think it’s one of these things that we are still unraveling as we’re walking through this journey of the end of … I use air quotes here, prohibition for cannabis, but as this thing’s unraveling and it’s starting to become more mainstream, there are little nuances about why people want to be in the program or be a little bit more anonymous in the program.

Chris Melillo:
There are people that just don’t want to … it’s not something that they care to share with anyone else. And then there are people who, it’s part of their everyday regimen. It’s what they need to help them sleep at night because they had a hip replacement or they have arthritis or whatever it may be. But at the end of the day, the product is treating the same types of issues, whether you’re a patient or whether you’re somebody that chooses to be in an adult-use market.

Chris Melillo:
Are there variations there? Absolutely. There are people that are using it a little bit more recreationally. There are people who are using it much more medicinally. But when you look at it, the service proposition, the way we handle them, the consumer experience, the way that we preach, you can ask us anything, depending if it’s your first time with the plant or you consider yourself an expert with the plant. Or if you just want to have a discussion with a professional in the industry that you haven’t really been able to talk about in the mainstream, in the past, we’re here for you. It’s an ecosystem you get to plug in wherever you’d like.

Julia Raymond:
Mm-hmm (affirmative). I like how you said that it’s an ecosystem. You worked for Nike, which is one of the premier retailers for innovation and what that means. You also worked for DTLR VILLA. Is there a similarity when you think about how you were running apparel and footwear across the stores, with those brands versus now with cannabis?

Chris Melillo:
It’s amazing. I’ll step back for a second. I’m coming close to, I think 25 years in retail. Over that time, I have seen the evolution of retail and experience trends continue to evolve and upgrade over the course of time.

Chris Melillo:
When you look back at my time at Nike, or I give a lot of credit to the foundational training and skills I have to the long, 15 plus years I spent at Home Depot, really building my retail acumen and just my ability to understand commerce and trade and experience. And then all the experiences I’ve gotten through my different various leadership roles at different companies, but there are a lot of similarities.

Chris Melillo:
The similarities are, it’s not just retail, it’s retail experience. You heard me say ecosystem. I love to think about the consumer at the center. If a picture them a circle in the middle and then there’s layers or a circle around the outside of the consumer. In each one of those quarter units or pieces of the pie around that consumer, insulating that consumer, are different offerings.

Chris Melillo:
Whether it be information or delivery or in-store experience or Curaleaf budtender relationship or a varied assortment, or just knowledge, so there’s this whole ecosystem that surrounds the consumer. And like I said, you let them plug in where they want, just be there for them.

Chris Melillo:
What’s the experience? Do they feel like they’re in a modern environment, that’s keeping up with the times, that’s changing with the times and that’s allowing them to plug into your company wherever they want, where they want, how they want and to have the information that they want at their fingertips at any given time? Whether that’s online, mobile ordering, express, or just information or storytelling, or maybe you want to learn how to cook with cannabis. These are all the things that we are responsible to deliver. It’s your job to pick and choose what you’d like. Our job is to offer.

Chris Melillo:
Hopefully that answers a little bit of how I see retail going forward, where it is today and how it continues to evolve. We have to continue to evolve with our consumers.

Julia Raymond:
Mm-hmm (affirmative). Absolutely. You said it’s not just retail, it’s the retail experience. That is across all retail, whether you’re in apparel or like you said, Home Depot or home improvement, all the way to cannabis.

Julia Raymond:
For retailers, when we talked about all of the different delivery options and conveniences that you guys added for your customers because of COVID, I mean, selling more online does mean taking on more work, whether that’s the picking, the packing and then delivering on curbside or to the customer’s home or by mail. Is this a factor for cannabis retailers as much as it is for grocery and apparel, in terms of how that impacts margin?

Chris Melillo:
For me, it’s just a different way to fulfill the same exact transaction. To me, when you have an online consumer, a couple of things had to go really right. They had to have a great online experience. They have to feel connected with the brand. They have to have the products that they love and have become accustomed to, that are high quality at a fair value, and they need to feel connected to your brand.

Chris Melillo:
So, whether that’s through you and I talking and me selling to you belly to belly, or is that to an online experience, where you still feel connected to a Curaleaf because you can get the information and the product you want? Both of those are the responsibility of Curaleaf to connect with that consumer or patient.

Chris Melillo:
So to me, it’s the same transaction. So whether you’re standing in front of me and I fulfill, and I talk to you about what you used last time and what might be a similar item to it or something you might want to try in the future, or if you loved it and that’s where you want to be, great, just great to see you. Or if you have that confidence in us, and you can just click, reserve, show up, grab and go about your day, we were there where you wanted us. We met you where you needed us to be.

Chris Melillo:
I think that’s so critical because you may do that for three months straight. Twice, three times a month, four times a month, you come in once a week and that’s the transaction you want.

Chris Melillo:
But you know what? Maybe you’re in Nevada with a relative and they’re there for the first time and you trust Curaleaf, so you go to Curaleaf in Nevada with your friend. You’re on vacation, and you want that experience in-store, with somebody else who has a million questions. You want to bring them into a location and introduce them. “This is the Curaleaf I know,” that’s a whole different experience.

Chris Melillo:
We need to meet that same customer who only shops online in-store at that moment and deliver that same expectation. So, to me, that’s a great challenge. It’s a great responsibility. And I think we’re continuing to build out that ecosystem to make sure that you can do that wherever you are in the country shopping.

Julia Raymond:
Mm-hmm (affirmative). Meeting the customer where they are. I like what you mentioned about online. You have to have the great experience. They have to be connected with the brand. And of course you have to have the products that the customer is looking for.

Julia Raymond:
That applies across industries or categories in retail, should I say, but as marijuana becomes more mainstream … you mentioned cooking classes, are there trends that have accelerated because of COVID or just accelerated in the past few years that you’re seeing?

Chris Melillo:
I think smokable Flower is still the leading category at Curaleaf. I think it’s still the leading category in the industry.

Chris Melillo:
That said, there was and still is a slight movement towards discretion. So vape could be a little bit more discrete than smokable flower. And quite frankly, edibles can be a lot more discrete than vape and/or flower. Tinctures can be more discreet. So there’s a lot more form factors that can be more discreet in your consumption.

Chris Melillo:
As people are home more, they’re cooking more, oils that can be used in cooking, making butter, making whatever you decide or whatever you explore. People are anchored home more. That means your kids are around you more. You just might need to be a little bit more discreet.

Chris Melillo:
So, there’s been a slight uptick in some more discretion, or at least that’s what we’re hearing and seeing. At the same time, we’ve also launched during COVID some new gummy lines that have also taken off and done really well with our Select line of gummies and our Curaleaf line of gummies, depending on the state you’re in. That too has also taken off.

Chris Melillo:
So, there’s some blended information there, both the new lines are accelerating as well as discretion. So as you unpack that, I think that there is absolutely the convenience of some of these products that are accelerating because of the new world we’re living in today.

Julia Raymond:
Mm-hmm (affirmative). But I wonder, because you said that discretion seems to be important in the consumption of consumers, but as it becomes more mainstream and then more culturally accepted, do you think discretion will be as important?

Chris Melillo:
That’s a hard one to say. My initial gut would be, yes, it’ll get more lenient. I still think it’s a personal choice. There are people that go home and enjoy cannabis at night and don’t speak about it because it’s a personal preference, or there still could be some stigma where people or peers or colleagues may think that they’re being judged by this. So, I think it’s a personal decision, and I think it’s okay to be a personal decision.

Chris Melillo:
I think in certain groups, people are more comfortable to talk about it, which to me brings you back to that experience in a store. Here is somebody that may want to talk about it, but doesn’t feel comfortable in certain circles, where they know they can come into a Curaleaf and have a great, robust dialogue around cannabis, around turpines, around THC, around CBD. They can just have an honest dialogue without judgment because there are no dumb questions.

Julia Raymond:
Well, do you see a day when we might even see cannabis in the grocery store, just right next to the alcohol, or do you think that’s decades away?

Chris Melillo:
Wow. It’s interesting. You’ve already got CBD in grocery stores and convenience stores, CBDs or hemp-derived CBD. So, you got to think that that’s the first tipping point of starting to see a more national acceptance.

Chris Melillo:
At Curaleaf, we support adult use, we support medical use. I think what’s paramount there, in that question is safety and regulatory guidelines. How do we as Curaleaf, the leading cannabis company in the United States, how do we help lead the effort around safety, safe consumption, awareness and work with the states and the government in order to create the right regulatory environment to let that happen?

Chris Melillo:
Maybe I didn’t answer your question. Maybe a dance around it a little bit. I think safety is first and foremost in that. But like alcohol, that is sold in different variations, whether it’s a state run store or if it’s even allowed in a supermarket, or if it’s only allowed in a convenience store, where wine and beer is only sold, but hard liquor elsewhere, I think there’s going to be needed to be regulatory bodies that get together and work with the cannabis companies and figure out the best way to do that. But I think longterm, I can see, absolutely.

Julia Raymond:
Mm-hmm (affirmative). So safety is paramount, for sure. I haven’t been in a Curaleaf store myself, but I did see some photos of, I think one of the new stores you opened, beautiful, absolutely gorgeous.

Julia Raymond:
I wanted to ask you just about the evolution of the store itself, the cannabis stores in general, because I remember years ago, visiting one that felt sort of like a jail. I mean, there was a guard, they take your ID and like a holding cell, and then you go in. But I’ve visited a store tour in Canada, where it’s much more lax, in Toronto and it felt like an Apple store. So where are things changing or how is that evolving?

Chris Melillo:
Yeah. I’ve taken about a year to do some research and really unpack where we were, what got us to today and then where we need to go and how do we evolve cannabis? I think really, if you think about reinventing retail cannabis, it’s just becoming more welcoming. Creating a format that’s a little bit more modern, a little bit warmer, making it personalized, using technology. So it’s not so overt, but it’s woven into the experience.

Chris Melillo:
I think really, when you look at cannabis, what got us to yesterday was a very medical feeling environment. Like you said, they put you in a holding tank. They stare at you and your ID to make sure that it’s the right person. It’s a dated feeling.

Chris Melillo:
Where we’re going is a lot more inviting. You check in quickly and now you wait in the same area that you shop. So, where states allow, we’re going to create a lounge. That’s where you can mill around and look at products while you wait for your turn to talk to somebody.

Chris Melillo:
We can talk to you about our grow facilities, about our manufacturing facilities, about Select or one of our brands, our national brands that’s is launching currently across the states we operate in. So we can now inform you and speak to you more informally, where you can, again plug in, get some bits of information, understand where our local farms are that we’re growing and how do we grow.

Chris Melillo:
It’s an opportunity to immerse yourself in Curaleaf so that you feel like part of a greater cause. You’re not just walking in, sitting in a holding tank and going into a store, putting it in a white bag and being shuffled out a secret door.

Chris Melillo:
This is just a much more immersive experience. Just really softening it and appealing … What I like to say is, “How do you appeal to from age 28 to age 78?” To me, that should be a little earthy, a little spa, a little progressive retail, digitally-enabled, but not too digitally-enabled so it intimidates people, because you’ve got such an age range that shop our stores. And I think we’ll continue to evolve based on those cornerstones.

Julia Raymond:
Mm-hmm (affirmative). I love your description. That really did paint a picture. A little bit earthy, a little spa and digitally-enabled, finding a balance of course.

Julia Raymond:
You did mention using digital to connect customers to the source. Where did it come from? Where are the growers? That’s a big trend we’ve seen outside of cannabis, just with consumer goods and food. Is that something that was disrupted during COVID or is that done on a very local level? Is the supply chain kept pretty local across your operations?

Chris Melillo:
As you know, we’re widely vertically integrated. Meaning, we grow, manufacture and retail all in the same states in which we operate. That said, I would say we were well ahead of the curve of COVID. We heeded the warning, and we got out in front of creating separation of staff and looking at our supply chain, knowing that if our supply chain goes down, you close the doors.

Chris Melillo:
I mean, that’s the cornerstone of what you need to do is continue that supply chain going. So, we took every precaution behind the scenes with our cultivation and our manufacturing facilities, to spread teams, extend hours, create cleaning protocols, create sanitation protocols, PPE, personal protective equipment, and really ramped that up early and often before COVID really hit, so that we were in front of and protecting our supply chain.

Chris Melillo:
So I would say we have not experienced any interruptions in our supply chain, nothing of any significant nature. We still have to operate within the state guidelines, and again, having to work with the state and stretch hours and do some unique things. Those are all partnerships with the state, where they want you to continue to provide product and service. Therefore, you have to work together and start to make these changes.

Chris Melillo:
But it’s a highly regulated market and we always have to maintain the highest levels of compliance and quality control. So, it’s a balancing act, but I think we’ve done a phenomenal job.

Chris Melillo:
And again, both the front end at retail and behind the scenes in cultivation and manufacturing, I think we led the industry in how to do the right operations going through the COVID era. We continue to be in it and we continue to accelerate.

Julia Raymond:
Mm-hmm (affirmative). Chris, I would like to just wrap up our discussion today by asking a really broad question. And that’s, what are you most excited about when it comes to the future of the cannabis retail industry?

Chris Melillo:
I’m super excited about Curaleaf. I think as you started this conversation, maybe prior to our coming online here, we have just been told we’re the largest cannabis company in the country and possibly even the world. That’s a huge responsibility to continue to charge forward in a progressive way.

Chris Melillo:
I think there’s some really critical things at Curaleaf that are paramount to our growth in the future and that’s what really excites me. If you let me go through the four real quickly, I think we’re launching Cura labs and investing in research and development, R & D as one of our core focuses as we look forward.

Chris Melillo:
The next one to me, I think it probably should be number one and most important, which is building brands and scalable brands nationwide. Our Select brand and Curaleaf, the brand new Curaleaf are two things that I think will lead the forefront in being national cannabis brands, which is a very fragmented market as we speak right now. Not just medical, but also adult use, like I said, with Select and Curaleaf as the banner.

Chris Melillo:
We talked about reinventing retail. I think that’s the third piece, is that experience, both online, in store and connectivity in between the both, half digital, half physical is continually evolving that process.

Chris Melillo:
The last one is investing in eCommerce. COVID helped eCommerce come to the forefront for cannabis, but it’s still not where traditional retail is. Perfect example is not being able to transact with a credit card to complete an online order. That’s a huge hurdle, but we’re working through those challenges.

Chris Melillo:
But those four bullet points, of investing in R & D, building national brands, reinventing retail and investing in eCommerce in platform and the infrastructure, to me are the four things that get me most excited.

Chris Melillo:
The professionals at Curaleaf, a lot of us have come here with different backgrounds, and we’re all bringing that all together to propel those four things as we go into the balance of 2020, into 2021 and maintain our leadership position and provide wellness across the country. So, that is what really excites me.

Julia Raymond:
Excellent. Well, those are some high goals, so I really enjoyed hearing all four of them. It sounds like you guys have your vision set. And like you said, you guys are the biggest in terms of revenue for cannabis globally right now. So, I’m excited to see as you charge ahead.

Chris Melillo:
Thank you so much for your time. I appreciate it.

Julia Raymond:
Thank you, Chris. Thanks for coming on the show.