Grower success in the cannabis industry comes down to the value created through manufacturing and retail processes, Shaun Nugent, incoming CFO of grower Vireo Health, told CFO Dive last week.
Nugent is a veteran executive who previously served as president and CFO of AllOver Media, CEO of Contour Technology, joint CEO-CFO of Sun Country Airlines, CFO of Life Time Fitness, and CFO of Champps Entertainment. He was named CFO of the Year by Twin Cities Business magazine in 2014.
Nugent spoke with CFO Dive on Thursday about his new position and the ways in which the rapidly expanding cannabis industry represents a departure from his long CFO history.
“I’ve lived a fairly traditional CFO career," he said. "I started [as a senior audit manager] at Arthur Andersen, then became CFO [of Champps] shortly after. When [Vireo] called me, I wasn’t looking for anything, nor really looking at the cannabis space. But I was intrigued by the team; [they were] a very bright group. I was kind of expecting a bunch of stoners in suits, but I didn’t get that. I got a really professional team.”
Cannabis is a bigger industry than you think
Nugent said he was surprised by the size of the market and its presence in the medical space. “I knew the market was big, but I didn’t see a lot of traction with any one company,” he said. “It’s fairly regulated, too, so you have to be committed to organically growing, which requires a bit of sophistication.”
Having served as CFO in a variety of industries, cannabis is a new venture about which Nugent is eager to learn.
“What attracted me was the opportunity to look at the manufacturing side and retail side and find where the value is created, and build the model around that,” he said. “I thought my consumer-facing skill set would add a lot of value in expanding the modeling, and capitalizing on organic and profitable growth, especially in site-based expansion, consumer-level marketing, and creating business models around customer excellence and service. It’s all those things that kind of drew me to it.”
Business challenges stay the same
The more Nugent learned, the more fascinated he became. “As I started to really dig in and learn about the industry, it started to grow on me,” he said.
But cannabis, essentially, doesn’t require much of a different repertoire than does being CFO in any other industry. “I don’t see [Vireo] as substantially different [from my prior companies]. It’s a fairly known quantity,” he said. “I think it will be a little bit different [because] it’s so new. I think the business will reward those operators who know how to construct a business around profitability and scalability, things I learned early in my career.”
As in any growing industry, having a holistic understanding both of the market and the data is integral to successful expansion, Nugent said. “Firms that understand how to use data and technology have a strategic advantage as companies start to do the land-grab that is the cannabis industry,” he said. “In effect, [being CFO of a cannabis company] is the same job [as being CFO of an airline or restaurant chain].”
But unlike an airline or restaurant chain, Vireo must grapple with the illegality of its products at the federal level and in 17 states. Nugent calls that obstacle “certainly something to be considered” when thinking about scalability.
“A lot of the commercial variables are at the legislative level, and you don’t have a lot of control over that,” he said. “To a certain degree, preservation of capital is going to be critical. Being able to analyze investments, products and different business opportunities will take a fairly nimble management team.”
Nugent doesn’t see the slow-to-legalize status of cannabis as much of a damper on the market. “The speed and pace [of the cannabis industry] intrigues me. It’s going to move quickly,” he said. “Restaurants are restaurants, health clubs are health clubs. They already exist, and you can look around, and get best practices from them. But there’s only a handful of multistate cannabis operators out there.”
Looking back at his tenure, Nugent said he’s prepared and excited to get to work in a new industry. “I’ve spent the last 25 years running and managing fairly traditional businesses, even though I’m a fairly untraditional person,” he said. “I’m much more of an operating CFO, and I’m really looking forward to applying that nontraditional style to this open frontier, and really driving outcomes.”
Nugent starts at Vireo on Dec. 2.