Being Brooke Gehring

Features - Cover Story

How a former corporate banker jumped some serious upstart hurdles and built an $11 million cannabis cultivation and retail business.

June 7, 2016

Photo: Brian Kraft Photography

Brooke Gehring sat behind a desk at her corporate banking job as the foreclosures piled higher. It was 2009 and, with a background in loan compliance, her days were unenviably spent handling dashed dreams and financial ruin during the saddest days of the Great Recession.

But the economic collapse seemed to have a silver lining as her downtown Denver phone rang repeatedly with inquiries about large, bank-owned properties that could be used for cannabis businesses.

“Marijuana wasn’t on my mind. I hadn’t even been in a dispensary,” she recalls. “It wasn’t like my goal that year was to leave an opportunity where I could climb the corporate ladder and get into marijuana.”

But the inquiries set off a light bulb. As Colorado prepared to regulate its medical marijuana market, she decided to leave the corporate gig and create her own job description.

At first, the plan was to offer consulting services to cannabis entrepreneurs who needed insights into banking, real estate and regulatory compliance. Seven years later, Gehring is CEO and co-owner of a 100-employee, multi-million-dollar cannabis business within Colorado’s thriving cannabis industry.

Along for the exciting and at times bumpy journey to a stable, mid-sized, seed-to-sale enterprise has been Kelly Whyman, one of Gehring’s closest friends since they both were assigned to the same freshman hall at Miami University of Ohio.

Whyman first heard of Gehring’s consulting plan in July 2009 at about the time Gehring gave notice to the bank she was leaving. “She was like, 'That's it, I’m done,’” says Whyman, who trained horses professionally in South Florida before selling three of them so she could join Gehring’s consulting business and move to Colorado in early 2010.

“I said if you’re going to go into marijuana, I’m going … into marijuana with you,” she says. “We knew it was worth jumping. What was the worst thing that could happen at 28 or 29 years old if we failed? Neither one of us was scared of that.”

Soon, an unexpected opportunity presented itself for Gehring, who had set up shop under the name LiveGreen Consulting. An out-of-state businessman she was advising on how to enter Colorado’s regulated medical marijuana industry offered to sell her his grow and medical dispensary licenses.

“I had less than 48 hours to make a decision,” Gehring says, and she waited until the 11th hour before officially accepting.

In Ohio, Gehring had worked for large retailers, including Abercrombie & Fitch, then one of the hottest teen clothing brands, and helped lay out the company’s first Hollister test store. Years of retail experience, and years more of regulatory and banking experience, she says, seemed to provide a springboard for success. She signed the forms.

“I was really torn, [but] I felt I would be able to raise the capital and pay the original owner back,” she says. “There wasn’t a million dollars sitting in my bank account. I was really driven and focused.”

The deal wasn’t a dream, but it offered a solid start. Along with the licenses came a large warehouse, but it wasn’t built out for a grow operation, so Gehring decided to add to her collection of state licenses in a second deal, through which she gained an operational indoor garden.

Intense networking yielded financing, but soon disaster struck. The operational grow facility was leased, and the landlord was, unbeknownst to Gehring, in financial trouble. The building suddenly was repossessed, and the lessees locked out.

Intent on adhering to state rules — then silent on what to do with crops in such a situation — Gehring walked away from hundreds of plants at a major financial loss. She remains frustrated she wasn’t told in advance about the landlord’s troubles, and views the episode as one good example of why companies should own rather than rent properties.

“It was catastrophic,” Whyman recalls. “You needed cash to go out and buy [marijuana] to have inventory,” and every penny mattered.

Hard work running the dispensaries and careful accounting kept the business afloat, and Gehring was able to make repayments on a loan of about $250,000 from an initial investor.

In 2011, Gehring’s company merged with Patients Choice of Colorado, ending her need to buy from other growers to stock dispensary shelves. She became CEO and co-owner of the merged company FGS Inc., which has two grow sites in Denver, Colo., and four storefronts — two in Denver and one in Lakewood under the brand Patients Choice, and one in Edgewater under the banner of LiveGreen Cannabis.

Flower drying at Patients Choice and LiveGreen’s primary cultivation facility, a more than 25,000-square-foot former furniture warehouse in Denver, Colo.
Photo: Brian Kraft Photography

A Market Shakeup

As the business stabilized, a political earthquake struck in November 2012, when Colorado voters, by passing Amendment 64, made their state the first (along with Washington) to legalize a regulated market for recreational marijuana.

Gehring recalls that night well. She was attending an election results watch-party. Though she supports legalization of marijuana for recreational use, she was nervous about what the resounding victory would mean for her livelihood.

“Legalization being on the ballot was very scary, and it’s not because I don’t believe in personal rights and states’ rights and legalization. I do,” she says. “It was, ‘How would the federal government react?’”

For nearly a year, it was unclear if the Obama administration would seek to block the opening of regulated recreational marijuana markets. An unfavorable decision could have had broad consequences, as marijuana remains federally illegal (no secret to anyone in this industry).

“Everyone who had been working toward [passing Amendment 64] was celebrating. I was at an election night party and said to myself, ‘We have some serious work to do.’ The next morning was nose to the grindstone,” Gehring says.

Ultimately, the Justice Department said it would not interfere with state-legal pot markets, so long as enforcement triggers such as widespread underage sales or interstate smuggling were not tripped. Gehring reoriented her business, which she co-owns with two partners, and three of the company’s four retail locations now offer recreational sales, with the exception of Lakewood.

One Foot on Regulatory Ground

Throughout her career, Gehring has made a point of being fluent in regulations, helping to shape them, understand their implications and ensure compliance. When legalization happened in Colorado, in fact, she got herself selected for a working group advising the state on rule-making.

Brooke Gehring in her primary nursery and vegetation room.
Photo: Brian Kraft Photography

“The decisions we would make in 2013 have an impact today,” she says.

Blake Brower, director of retail operations under Gehring, says constantly changing rules make Gehring’s regulatory know-how essential to the success of the business. “It’s a huge asset to our company that she’s involved in the politics side,” he says, speaking as he prepares mock-ups of a new state-ordered THC symbol. “Everyone looks to her, even the other owners.”

In addition to overseeing the business, Gehring is involved heavily in industry and advocacy groups. She’s chairwoman of the board of the Marijuana Industry Group, a large Colorado trade organization, and is a founding member of the groups Women Grow and the Council for Responsible Cannabis Regulation.

Inside the Live Green Cannabis dispensary in Edgewater, Colo. LiveGreen Cannabis is ramping up for its new retail flagship store opening this fall and previewing its ‘Elevate Your Life’ marketing campaign.
Photo: Brian Kraft Photography

But the job is not all tedious rules-reading.

Recently, Gehring attended a brand launch party DJ’d by rapper, entrepreneur, and cannabis business owner and investor Snoop Dogg, and then boarded a plane to Jamaica the next day, where she and Brower helped judge a locally grown cannabis competition organized by High Times.

Growing Cultivation Know-How

The very essence of Gehring’s business is, obviously, cultivation, an area in which she had no prior expertise when she entered the industry.

The company now is using almost 100 percent of built-out grow space at its two grow facilities, jointly comprising 35,000 square feet. But key to cultivation success was finding the right person to lead the endeavor. And that was no easy lift.

“It’s been a learning curve and a very costly one,” Gehring reflects. “We’ve had four people prior to our current director of cultivation. … Learning from our past challenges and mistakes, it’s finding someone who has the right combination of hands-on experience, a strong work ethic, and the ability to manage and lead the team. We have finally, after five-plus years, reached a healthy balance.”

The current director of cultivation, Dustin Siegel, is someone Gehring says she’s known for a decade, a relationship that provides a foundation of trust. She describes him as having large-scale, corporate cultivation experience since 2010, but says he, more importantly, has the company’s best interests at heart, reflected in completely open dialog on all aspects of the grows’ operation.

“Unfortunately because of ever-changing regulations, growing in these indoor environments and having to create consistency in what you’re doing in order to comply, you’re going to have to have a cultivator who can be open and honest with you, even if what they’re telling you isn’t good news,” she says.

Supplementing the director of cultivation — who supervises the crop, grow-site staff and on-site processes — is a director of cultivation operations, who is primarily responsible for plant count allocations, seed-to-sale systems and data collection. The data is, in essence, the virtual tracking of the physical plants and inventory. The weights and measures are taken at various stages of the plants’ production cycle, explains Gehring, and overall yields of each harvest batch are looked at in correlation to the demand of the company’s retail outlets — all of which provide valuable information used for improving the company’s well-established protocols and processes.

Five employees work full-time on data collection, tracking plants from seed to sale and serving as essential cogs in regulatory compliance. “They could easily work 60 to 70 hours a week,” Gehring says, “... because product is always moving.”

While learning the cultivation ropes, Gehring leaned on the services of Kenneth Morrow, a leading cannabis consultant who founded Trichome Technologies (and also a columnist for Cannabis Business Times). She says his guidance helped her adopt a framework for thinking about large-scale cultivation. “He has an eye for process, and this is true: You have to make this a machine, and all of the parts need to work together,” she says.

Five years ago, “there wasn’t a lot of comparison out there” from which the company could borrow best practices, she says, and despite expert advice, “a lot of this was learning through the hard knocks of our own grow. It comes down to cultivating healthy plants and a healthy environment, and being able to establish that core value and mindset in every employee, from the person who scrubs buckets every day to the person who manages harvest schedules” she says.

Since the cultivation facilities opened, Gehring’s company has poured over $3 million into upgrades, on top of the expense of buying the buildings — a 10,000-square-foot former print shop and a more than 25,000-square-foot former furniture warehouse.

The facilities were reequipped with pricey HVAC systems, power upgrades, new lighting and other technologies to optimize plant growth.

The larger facility serves as the primary grow, with the smaller site used for experimenting and testing of seed-grown plants and soils for possible later use at the larger facility.

“We’re constantly evolving and finding optimal strains for our genetic library,” she says, important because state-legal growers generally “have somewhat incestuous genetics because of regulation.” Originally, growers traded authentic genetics and came up with unique hybrid strains from those phenotypes, she explains; now growers are restricted to purchasing seeds or clones from other licensed businesses, which sometimes means buying from your competitors.

Everything is running smoothly now, Gehring says, thanks to a large and cohesive team. “Cultivation is not just a head grower and someone who trims; these are sophisticated and well-managed departments,” she says.

Banking on Banking Troubles

Despite her background in banking, Gehring says one particularly challenging aspect of the business (and she’s certainly not alone here) has been trying to figure out the magic recipe for bank account retention, saying her business has lost about 34 bank accounts since 2012. Her current bank account has lasted over two years.

To other business owners who ask for advice, she suggests, “Always work with banks that know you’re a marijuana-related business.” Full transparency makes for a more durable relationship, she says, even though banks often require significant oversight and intrusive business vetting, as well as steep fees, if they know cannabis is involved.

Gehring says the company’s current focus is improving upon what it already does well, and that she expects industry consolidation in the future. “We’re in a stage of overregulation right now, [and] with the increasing costs of being in compliance 100 percent of the time, eventually some of the small businesses will be purchased by the larger conglomerates,” she says.

Until the next development, Gehring and her associates are grateful for their good fortune and are committed to staying the course.

Steven Nelson covers legal affairs and drug policy for U.S. News & World Report. He lives in Washington, D.C., where a green thumb would be useful.