Muha Meds Marries Opportunity and Efficiency

Muha Meds is a Los Angeles-based cannabis MSO that was started in 2015 as a “traditional” market delivery service by entrepreneur brothers Ali and Muhammad Garawi, who went legal a few years later with a collection of vape cartridges. Building on their early success, the brothers eventually added disposables, solventless vapes (Mavricks), edibles, and prerolls to a fast-growing vertical enterprise that now includes retail along with an expanding portfolio of products available in four states – California, Michigan, New Mexico, and Missouri – with more on the way.

Born and raised in Downey, California, Ali, the elder brother, who serves as CEO and CFO of Muha Meds, and Muhammad, the company’s CRO and CMO, are two of five offspring of first-generation Iraqi-American parents. As they explained during a recent call with Cannabis Business Executive, the seeds of their success were planted years ago, when they were still teens. “We come from a background of aggressive entrepreneurship, starting from ages 16-17, to support ourselves in high school and through college and to help our parents,” explained Ali.

They were precocious and ambitious in their interests. “We were very aggressive in e-commerce on eBay, we were also doing real estate, and we even had an auto dealer license at one point, so we were constantly dabbling. And then, at one point, our bestselling product became the vape accessory, vape hardware, different vape batteries. Those products started blowing up on our e-commerce side as an accessory to other companies and brands that we imported from China. That’s a niche that we mastered in college and high school, finding different suppliers in China, bringing in the best shit, whether it’s vapes or beauty accessories or whatever.”

It was a very timely skill-set to have. “At that time, 2017-18, half the hurdle was having hardware that wasn’t going to leak, and we had that down to a tee. The products started selling by the thousands, just a crazy amount that we didn’t expect, to people making cannabis vapes and CBD vapes and all types of stuff.”

It didn’t take long for the obvious next move to take shape. “We figured, we’ve got the entrepreneurial stuff down, we’ve got the business stuff down, so let’s move into starting a business with manufacturing and vertically integrating what we’re doing by importing the vapes and filling them, selling, and branding them ourselves. That’s how it started, and 2018-19 was the threshold of when we went from importing the vapes and selling them to importing the vapes, filling them, branding them, packaging them, and selling them to distributors and retailers.”

Selling picks and shovels and touching the plant are different businesses, of course. “When you talk about hardware and accessories and merchandise that you need to run a cannabis company, that’s a separate business and one that we were specialized in,” noted Ali. “Finding the factories, finding the manufacturers, using the companies to import quality products for different kinds of companies and cannabis manufacturers. That’s one aspect of the business that we had down based off customer data, customer reviews, and our experience QCing manufacturers overseas. By the way, during this time we were very intertwined with the weed industry. We also ran a delivery service for a short amount of time in 2017-2018, so we were familiar with the cost of weed, different types of extracts, etcetera.”

Ironically, integrating weed meant that their business had to focus on a single market. “When we were selling the accessories online on websites and reselling platforms, those were being sent everywhere,” explained Ali, “but once we got into the cannabis space, it was strictly California, and that’s when we combined the two businesses. We found the right extract to put into the vape, and then QC tested it, which isn’t necessarily rocket science. It’s the cumulative harmony of everything happening, from importing your stuff on time, getting the right quantities, the right branding, the right designs, the right flavors, getting them filled, and then packing stuff the right way, properly distributing them, and dealing with buyers and customers. What differentiates the person starting a legitimate cannabis company that’s becoming vertically integrated in four states is the harmonious transition of things that have to happen.”

Those things included finding the right source material and committing to consistency and  quality. “It was always quality over everything,” said Muhammad. “We always made sure to have the absolute best quality product in the market, period. That was objective A. Objective B was to get our costs down to where they need to be to supply the market with affordable, safe vaping options. As we were moving toward that goal, we became vertically integrated over time. First, find the best distillate supplier. Now we had the capacity to make the oil ourselves, so we got into the extraction part of it, making the distillate oil ourselves, bringing our costs down even further while controlling the quality behind the oil.”

Growth was via an interesting combination of happenstance and structure. “When we launched the brand, we were in the Prop 215 space between medicinal and recreational, and we were kind of navigating that legal ground,” said Muhammad. “As we were navigating it, we were applying for recreational manufacturing licenses and distribution licenses to launch the brand. Those are the two key components that we felt we needed to control the quality of the products, bring our costs to the lowest level and self-distribute and control where our supply goes to the retail store. That was the first order of business as far as getting our licenses in 2019-20. After that, we became more and more vertically integrated, growing the company, growing the SKUs, getting into extracts and hash rosin and prerolls, and all kinds of ready-to-go consumer products.”

Over time, the company has also expanded manufacturing capacity and locations. “The Downtown LA location is our non-plant touching corporate office, where we do our marketing and sales and brainstorming and packaging, hardware, stuff like that,” said Muhammad. “We have our extraction facility in LA, we have our product production facility in Costa Mesa, and we have our third product reduction facility now in Van Nuys.”

Adding Stores

Muha Meds now also includes retail, a move brought about by market forces as much as anything else. “It wasn’t really a decision or a vision that we had planned, but retail operators were beginning to fail at many points in California and Michigan,” explained Ali. “There were a lot of distressed assets available in the market, and we saw it as an opportunity to increase the exposure of our brand through these stores, so that’s why we got into retail.”

The plan, he added, is to replicate their unique model market-by-market. “We’re working on getting California and Michigan up and then we will essentially copy-and-paste it in Missouri and New Mexico.”Until that happens, it’s products-only in the latter two states. “We have partners in New Mexico that we launched with, and it’s strictly manufacturing and distribution of our products right now,” said Ali. “In Missouri, we independently operate that facility, and it’s just manufacturing and distribution as well. Our first order of business in launching into a new state is manufacturing and distribution. At some point later on, depending on the overall environment of the state, we will choose to either expand into retail or expand into growing or something else.”

The pace of that expansion is determined by one basic factor, added Muhammad. “It all falls back to the singular issue of money making the world go round. Money makes the company go around, and if you’re not positioned in a way where you can fund the growth of the company, it’s going to be a very, very tough road for you,” he stressed. “That’s been where our heads have been at since we started the company, to make sure that whatever state we’re in, we’re positioned in a way where the margins are there and we’re able to make money to keep the company growing into a bigger and bigger MSO.

“I guess where we’re at right now is continuing that strategy and that business plan,” he added. “We don’t have any intention to sell the company in the near future. We are fully independently operated between just me and my brother, and we are building out a turnkey MSO company that’s fully automated and operational in multiple states, with a bulletproof blueprint of how a successful cannabis brand should operate.”

I inquired about the company’s finances. “We’re profitable,” said Ali. “We definitely do more revenue in Michigan, which is a much bigger market; so, we do about 60-70 percent of our revenue there, with the remaining 30-40 percent split between California, New Mexico and Missouri.”

Each market presents its own unique issues, of course. “Michigan has always been a very massive market,” said Ali. “It’s the only recreational state centrally located in the Midwest, so they drive a lot of traffic from those bordering states, and that’s a big contributor as to why it’s such a massive market. For the past three years in that market, it’s been a very, very aggressive bloodbath, with MSOs and different companies trying to squeeze everybody out by driving prices down to nothing. It is extremely saturated, and we went in knowing that which is why we vertically integrated right away with a 39,000 plant grow, manufacturing, and distribution.”

Currently, Muha Meds products can be found in over 300 Michigan dispensaries. “There’s a total of about 600, so we’re in the majority of them,” he added. “We’ve definitely become a staple brand there in just three years.”

California is another story altogether. “We were really excited to hop in once we got licensed, but as we entered the market, many retailers were going through it,” said Muhammad. “One of the reasons we started buying stores is because so many weren’t able to make the tax payments, and the way the licensing was structured put them in a very tough position while they were also competing with the traditional market. As we entered that market, we learned early on which shops to work with and which not to work with. As a result, it did take us a little longer to grow, but it has kind of plateaued at this point because of where the market is going and how retailers are closing-up shop. But it’s definitely been a struggle to navigate through, along with all the government regulations and the tax structure that’s held it back.”

A House of SKUs

As a manufacturer first and foremost, Muha Meds is all about the products. “Disposables and cartridges are definitely our number one selling SKUs,” said Muhammad when asked. “Apart from that, we have really good hash rosin gummies that we launched that are doing really well, and we also have prerolls that do really well.” Their menu is rounded out with flower, an assortment of concentrates, and their two-gram, disposable “All-in-One” line.

To bring it all to market, they have a veritable army of employees. “Nationwide, we are right at the cusp of 500 employees,” said Muhammad. “Our extraction departments employ 40 to 50 employees between the states, we have product production staff, which is the majority of our staff between the states, and we have our marketing staff, our sales staff, our order fulfillment staff, and we have inventory, packaging, hardware, allocation staff, so it’s a lot of different departments.”

The brothers have managed this without the help of a top-heavy C-suite. I asked them how their skills had developed to meet those sizable demands. “I want to say our skills have developed across the board to a certain degree over the course of the past five, six years,” responded Ali, “but if I were to point out some key skills that I think we’ve really had to sharpen up, it would be the ability and capacity to incentivize people and provide a motivating environment and structure where people can contribute to the growth of the company.

“When you’re growing really fast,” he added, “that’s probably one of the key components that you need to be good at. Also, responding to the market, knowing when trends start to pop up, or certain SKUs or product lines seem to be doing well, and adjusting your menu line and SKUs to what the people want in response to those demands, to stay relevant in the market.”

Their sense of independence extends to partnerships, which they value, to a point. “We’ve always kind of steered away from that,” said Muhammad about partnerships in general. “My brother and I operate pretty much the entire company. The partners that we do find and who work with are obviously very important to us, but we like to make sure our exposure is limited and that our commitment is also limited, so we’re not tied down.”

Becoming fully vertical was a process that took time. “We run our own cultivation, our own manufacturing, and our own distribution and sales, but it didn’t start that way in Michigan. We entered the market essentially as operators for a distressed cultivator and manufacturer. We entered the market finding this person in need of an operator and a need to recover his assets to help pay back the investors that helped launch his business. And as we became the operating partners, we essentially bought out the businesses, and now we’re fully independent.

“But yes,” he added, “finding good partners that you trust and who you can work with in good faith without having to go back to a contract every week when something happens, is definitely major for cannabis, especially because it’s not the most regulated market, and not many governments respect the contracts associated with cannabis transactions. There are no escrow companies, banking is really limited, and the laws around it are not in your favor, so it’s kind of every man for himself.”

More Muha Meds

As Muha Meds moves into new markets, it is counting on its alphabetical approach to business to ensure the brand stands out from the crowd. “We will set Muha Meds apart by making sure that we’re always providing the best deal possible to the customer, the safest, most reliable medicine for the patient at the best price, just the best-looking shit, and quality control over every aspect that goes into it from A through Z,” insisted Muhammad. “Not many companies have that capacity. They don’t know what goes into some of their products, they don’t know how it’s distributed, and they don’t really have much control over it.

“And I think as time goes by, operators who can’t operate like the way we do are going to get weeded out,” he added. “The customer is very demanding. They’re very demanding of quality, they’re very demanding of perfection, they’re very demanding of price. As a company, if you can provide that for the customer, which is who we visualize as our boss, you’ll be okay.”

That said, they refuse to be bullied by the market. “We’re not a slave to the market’s pricing and, ‘Oh, this guy’s going down in price, so now we have to go lower,’” said Ali. “We provide the best price for the quality of product that goes into our finished goods, we wait for the feedback loop from the customer to dictate whether or not we’re right, and we see that with just our growth in revenue and sales. Obviously, we adapt to the market if it’s truly becoming more saturated, which we have done for the past three years, but we’re not going to just chase brands down the rabbit hole because they’re trying to grab market share.

“Instead,” he added, “we adapt to the local economy and the overall cannabis market to keep providing an affordable price for the end consumer, though we do have SKUs that are priced relatively higher, like our indoor flower or hash rosin, for the connoisseur who wants more exclusive quality strains, strain-specific genetics, and all that kind of stuff. So, we do have different types of options on our menu that cater to different consumers.”

As far as imminent moves go, “Missouri is definitely on the timeline and coming up pretty quickly, and we’re really excited about that specific market,” said Muhammad. “There is talk of other states that we will be hopping into, but I don’t want to speak on those yet. As far as new SKUs are concerned, there’s a line of preroll SKUs that we’re going to drop with bubble hash infusion and live resin and melted diamonds infusion of different sizes that we’ve seen a lot of consumers gravitate towards and love. So, we’re definitely expanding our menu.”