Learning from Jay Z’s $575M Monogram Meltdown
Wine making is really quite a simple business,” Baroness Philippine de Rothschild used to quip at her famous Bordeaux winery, Chateau Mouton Rothschild, “Only the first 200 years are difficult.”
This week, Lester Black from #SFGATE penned a terrific article on one of the biggest cannabis implosions (and possible investor scams) to date: the virtual demise of Jay Z’s Monogram brand and its backer, The Parent Company (TPCO).
For background, Monogram burst on the California cannabis scene in 2020 with Jay Z as its Chief Visionary Officer. Monogram was extravagantly launched as an ultra-premium flower brand featuring among other things a $50 hand-rolled blunt (for perspective, this was 10x the price of a comparable pre roll).
Jay Z was slavishly promoted as a loyal consumer and investor in the company. And TPCO bragged about “dominating” and “consolidating” the market.
Unsurprising given its lofty claims and steep pricing, Monogram has floundered failing to come anywhere close to its revenue promises. Jay Z is long gone and the Monogram brand and TPCO parent now appear to be on life support as part of another sickly California weed company, Gold Flora.
What can we learn from this debacle?
At least 5 things according to my reading of the situation, a review of their early investor materials and conversations with former consumers:
1. Too much money, too soon, is a curse
Being flush with cash makes it hard for management not to chest-thump. It also increases the likelihood of them making stupid operating decisions, neglecting financial controls, and frivolously overspending in areas like SG&A and capacity.
2. Most celebrity endorsements don’t work from a consumer and ROI perspective
Add Jay Z to a long list of expensive and failed endorsements. In cannabis, authenticity is what matters, and this billionaire didn’t have it in the cannabis community.
3. Product-market fit is key
The $50 hand rolled blunt with middling quality and genetics. Who thought a product like this could generate sufficient revenue and volume in a small, connoisseur-driven, and price sensitive segment?
4. When you see titles like Chief Visionary Officer, run
Cringey roles like a CVO don't signal a seriously run nor financially prudent company. There is a broader watch out: go easy on the hype (i.e. bullshit) and remember that many people have long memories.
5. Winning in cannabis is a marathon
It should have been apparent when they launched - 4 years into the legal California market – that a ‘swing for the fences’ approach wouldn’t work. Cannabis is a long game of singles & doubles – and strike and foul outs.
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