Berner's Billion-Dollar Blueprint
Discover more from ZOGBLOG by Zack O'Malley Greenburg
Berner's Billion-Dollar Blueprint
Thanks to his Cookies cannabis empire, Gilbert Milam, Jr. now ranks among hip-hop’s wealthiest acts. He could be the genre’s next ten-figure mogul—if he can weather the recent marijuana meltdown.
On an unseasonably warm October afternoon last year, the grand opening of the Cookies flagship store in New York felt like the Super Bowl of cannabis. And the company’s Herald Square space, across the street from Macys in a five-story building once occupied by Desigual, wasn’t even selling weed yet.
But outside, the line stretched two blocks down 6th Avenue before curling east along 34th Street toward the Empire State Building. Hundreds jockeyed for a chance to buy the latest Cookies gear—or perhaps catch a glimpse of the company’s founder, Bay Area rapper Gilbert “Berner” Milam. On the corner nearest the store, intrepid entrepreneurs hawked bootleg t-shirts and cannabis gummies to the revelers, a reminder of the gray market flourishing amid New York’s uneven legalization process. A giant bus emblazoned with the Cookies logo idled out front. To me, at least, the air smelled a bit like Christmas trees.
Inside, big names from Funkmaster Flex to John Gotti, Jr. joined a handful of lucky line-goers, elbow-to-elbow amid shelves of brightly-colored Cookies products: turquoise track pants and scarlet t-shirts and aquamarine basketballs. Berner emerged and ambled up to the front, clad in a letterman jacket with an image of New York State on the back and the words “Dapper Don” scripted underneath. He chopped a ceremonial ribbon as cameras clicked and the strains of Styles P’s “I Get High” blared in the background.
“Right now, we have the first old weed brand,” Berner told me, his manner both matter-of-fact and triumphant. “We have an identity, and that’s what was missing in the cannabis space.”
Despite the hoopla in Herald Square, Berner isn’t quite a household name in the music world. But he can earn six figures for a 30-minute live set and also boasts about 2 million monthly listeners on Spotify. As an independent artist who has recorded with stars from Snoop Dogg to Wiz Khalifa—and kept his own copyrights—he banks millions annually from his catalog. His Cookies clothing line did $58 million in revenue last year.
But the crown jewel of his empire is his Cookies cannabis business, which sells more than 70 different strains of weed and over 2,000 different marijuana-related products across 62 fully branded stores in seven countries and 23 U.S. markets. Berner is also the cofounder of a pair of cannabis venture funds which together boast roughly $100 million in assets under management. As Cookies’ largest shareholder with roughly one-third of its equity, he’s worth about $250 million—placing him among the five richest rappers on the planet.
“I could live off music if I had to,” Berner, 39, explained. “The only reason I’m in [the studio] is because I gotta keep the brand hot.”
There’s plenty of room to grow. Weed has been decriminalized in 31 states, but only 23 of them have fully legalized the plant. Officially, U.S. marijuana sales topped $20 billion last year, a figure that’s estimated to soar past $35 billion by 2026 as more of the $50 billion illicit market moves into the light. And, as the crowds cheered Berner’s Manhattan ribbon cutting last fall, it seemed that would happen sooner rather than later.
Fast forward a year, though, and Cookies is still waiting, at least in New York. On the front door in Herald Square, there’s a QR code and a notice: “Sign up to be notified when we bring THC to NYC.” According to Berner, that’ll happen sometime this fall. The delays are emblematic of a cannabis industry that hasn’t yet turned into the business bonanza many thought it would. The complexities of state-by-state legalization have slowed and limited the number of legal dispensaries in places like New York, and cannabis prices have cratered thanks to a stubbornly successful black market along with reduced demand as the pandemic fades.
Publicly-traded cannabis giants like Curaleaf are now worth one-third what they were at the height of the Covid-19 lockdowns. And Cookies hasn’t been immune from the downturn, either. A Canadian firm approached Berner three years ago and offered to buy him out for $800 million; he declined. Though he maintains he still wouldn’t sell the company for less than $1 billion, Cookies raised a Series A funding round at a valuation of about $300 million last March.
Still, even billionaires Jay-Z and Diddy—both of whom have attempted to gain a foothold in the weed business themselves—haven’t been able to match what Berner has already achieved with Cookies, even given the turbulent markets of the past year. Same goes for other stars across the entertainment spectrum.
“You certainly have seen a number of other celebrities try to launch brands,” said TD Cowen’s Vivien Azer, the first senior analyst on Wall Street to cover the marijuana industry. “I don’t know that any has achieved even close to the success that you’ve seen from Cookies.”
Berner’s secret sauce is his synergy: The clothing drives cannabis sales, the cannabis drives clothing sales, and he features both in his songs and videos. Berner has been amplifying his message by methodically collaborating with bigger and bigger artists over the past decade, starting with Bay Area favorites and working his way up to national names, whose star power in turn rubs off on Cookies. That formula differentiates the brand, appealing to even casual cannabis aficionados amid the chaos of the gray market and the lack of distinctive products released by the legal giants.
Berner has also built Cookies in a unique way that gives him an option to supercharge his empire when the time is right—like, say, in the event of federal legalization. And that structure is part of the reason he’s got as good a case as any artist to become hip-hop’s next billionaire. In order to fully understand his plan, though, one must begin at the beginning.
Across from a car wash on a dreary stretch of Hollywood’s Melrose Avenue sits Conway Recording Studios, a half-century-old factory for hit albums by artists ranging from Stevie Wonder to Avril Lavigne. Similar establishments tend to exude a drab office park feel, but when the big metal gate opens at Conway, it feels a bit like a tropical vacation: palm fronds here, terra cotta there, even a vending machine that dispenses free cans of La Croix sparkling water.
And then there’s the requisite aroma of marijuana, emitted by musicians in search of a vibe. On one particularly sunny Saturday, an unusually minty scent wafted from the direction of a suite rented by Berner, who was there to record his latest album. To him, the constant presence of cannabis isn’t just a lifestyle, but a lifeline. In a roundabout sort of way, if it weren’t for Cookies, Berner probably wouldn’t be alive today.
Back in 2021, a business partner referred him to a concierge doctor—one of the company’s investors—who gave Berner a comprehensive blood test that turned up concerning results. Upon further inspection, Berner learned he had Stage 3 colon cancer. Doctors rushed him into surgery and removed a foot and a half of his intestine before prescribing three months of chemotherapy.
“From what they told me, another six months without addressing it, I would’ve died for sure,” said Berner, who smoked copious amounts of Cookies’ BernieHana Butter strain to manage the intense nausea. “I had a lit joint in one hand and a ginger lemon tea in the other, from the time I woke up till the time I went to bed.”
That’s the Cookies formula. Berner’s audience believes he’s smoking the product when he delivers lines like “Really, I don’t care, I’m a millionaire / You smell the Cookies smoke all in the air.” And that makes them want to smoke Cookies, too. Of course, Berner is merely the latest in a long line of rappers to include product placement in verse. But he’s among the clever few who learned it’s better to start your own brand and rap about that rather than give free publicity to other companies.
Sugarhill Gang’s 1979 smash “Rapper’s Delight,” which is (arguably) the first hip-hop track on wax, included uncompensated mentions of Lincoln and Cadillac. By the mid-1980s, Run-D.M.C. had landed a million-dollar endorsement deal with Adidas. It wasn’t until the late 1990s that Jay-Z and Diddy perfected the formula by launching their own clothing companies and boosting them to nine-figure valuations.
Since then, hip-hop’s biggest stars have found ways to profit from mentioning the types of products most frequently referenced in verse: clothing, footwear, spirits, cars, and luxury goods, to name a few. The glaring exception, historically, has been marijuana.
The first lyrical weed references came from jazz musicians like Fats Waller, who name-dropped midcentury Harlem distributors such as Mezz Mezzrow. (As Fab 5 Freddy pointed out in his acclaimed Netflix documentary Grass Is Greener, the criminalization of cannabis has a deeply racist history, rooted in a fear of Black music and its influence on white youth).
More recently, hip-hop popularized another uptown entrepreneur, Branson Belchie, who supplied rappers with rare strains from Chunky Black to Acapulco Gold. Customers like the Notorious B.I.G. bragged about having “four pounds of weed plants from Branson,” who made his products pop by packaging them in distinctive triangle-shaped plastic bags; the marketing ploy helped earn him a mention in some 70 hip-hop tracks.
Branson is now what some in the industry call a “legacy cannabis entrepreneur.” Many in this increasingly legal profession are among the 600,000 annual marijuana arrests of the past half-century. And over much of that period, mandatory minimums led to lengthy sentences for even small-scale dealers, disproportionately affecting people of color. Scores remain locked up, or locked out: In some states, if you’ve got a criminal record, you’re barred from legally participating in the new green gold rush.
“The government is controlling and regulating, and they’re admitting to doing wrong to these people, [but] is it that simple?” said Branson, 65. “We didn’t have any say-so in what has been created.”
Full legalization came late to Branson’s stomping grounds in New York, but Berner grew up in California, where medical marijuana first went legal in 1996, when he was 16. Raised in San Francisco by an Italian mother and a Mexican father—now making him one of the few people of color running a cannabis company—he sold weed as a teenager before moving to Arizona with his family during high school. The desert proved to be a marijuana wasteland, and he made a name for himself by bringing the good stuff back from California.
Berner would load up on strains like Pineapple, named for its tropical taste, along with another from Canada codenamed Nade, which he’d acquire in the Hunter’s Point neighborhood out by the old Candlestick Park. Both options were a marked improvement from Arizona’s uninspired inventory, which mostly consisted of what Berner and his chums called “Mexican brick weed,” the herbal equivalent of Bud Light.
With his coffers regularly overflowing, Berner had cash to burn. So when a classmate told him he looked like a rapper—and offered to sell him a karaoke machine for $250 so he could record his own music—he pulled the trigger. Soon Berner was spitting freestyles into the contraption in his garage, undeterred by the desert heat, impressing friends with his laid-back flow and clever rhymes.
By the time he moved back to San Francisco at the turn of the millennium, California’s legal marijuana revolution was underway, and Berner landed a job at a local dispensary. One of his tasks was to write the titles of the various strains on little display cards. Rather than simply scrawl the letters, Berner drew the names of each strain in bright bubble fonts, often filling the background in a different color to make the name pop. His doodles helped popularize fan favorites, perhaps none more than a mint-flavored strain called Girl Scout Cookies, shortened to “GSC” or simply “Cookies.”
In the meantime, Berner was applying the same sort of marketing savvy to his burgeoning rap career, landing guest verses on the tracks of increasingly well-known rappers, many of them his customers. When he went to meet weed-obsessed rap star Wiz Khalifa at a 2010 concert at the Fillmore, Berner arrived with a six-foot-tall fully-budded cannabis plant in tow. Khalifa appreciated the gesture—and made sure to pick the Californian’s brain on marketing marijuana.
“Berner introduced me to the business side of the cannabis industry early, which helped me get where I’m at today,” Khalifa told me (his own Khalifa Kush is now available in nine states).
Two years later, when Khalifa came to San Francisco again, he invited Berner to perform as his opener in front of 8,000 people at the Bill Graham Civic Auditorium. Though Berner already had a strong following, this was a chance to break through to a mainstream audience, so he decided to order 3,000 t-shirts for the occasion. He ended up selling 12.
He soon realized that the tees, emblazoned with the words “Golden State Harvest Club,” were too obscure a reference for fans to tie back to him. So when a tech entrepreneur he knew suggested pressing a limited-edition run of black hoodies and charging $100 apiece for them, Berner gave his merch ambitions another shot, this time with what would become the Cookies logo in sky blue, accented with drawstrings in the same color. He donned the garment in the video for Khalifa’s song “Yoko Ono” and released the hoodies shortly thereafter; they sold out in minutes.
That’s when licensing opportunities started popping up. A San Jose businessman offered Berner $2,000 per month to put a Cookies logo on the wall of his cannabis club. Then another gave him $5,000 to do the same in Sacramento. Berner licensed the Cookies name to a San Francisco group for $25,000 per month as the word continued to spread, eventually quadrupling that sum for more stores throughout Northern California. By 2017, though, Berner realized that the bigger prize was to turn Cookies into a fully-fledged brand of its own. He brought on serial entrepreneur Parker Berling to be the company’s president and bring some structure to the business.
“That brown bag you’re getting is real cute,” he explained to Berner. “But if we build this right and we do it the right way, it’s gonna be a lot bigger later, and you have to understand the long-term play.”
With Berling on board, Cookies doubled down on its model, which operates at a remove from the greenery itself. The company essentially licenses its brand and its genetics; the latter come from a team led by Berner’s cofounder Lesjai Peronnet Chang, an expert cannabis breeder known simply as “Jai.” Licensees do the growing and distribution on a state-by-state basis. This strategy enabled Cookies to avoid the disadvantages of a tax rule called 280e, which stipulates companies that touch the plant aren’t allowed to deduct normal operating expenses. According to TD Cowen’s Azer, that can result in an effective tax rate of 60%.
Cookies managed to dodge some of the headaches associated with the patchwork of state regulations that exist in lieu of federal policy, but there were challenges even operating simply as a brand. In Florida, for example, graphics are forbidden on cannabis bags—so Cookies products can only be sold in plain white containers stamped with the state’s medical marijuana logo. A similar law in Nevada forced Berner’s company to remove an enormous colorful sign on the Las Vegas Strip.
The key to maintaining the same quality of product from state to state, according to Berner, is finding the right partners—and holding them accountable. In Illinois, for instance, Cookies did $1 million in sales its first day in the state. But something didn’t feel right to him when he took his first puff of the product.
“It smelled like wet hay,” Berner told me. “And that partner showed us a batch and another batch. And finally, we said, ‘You know what, guys … we’re gonna go ahead and just cancel our partnership. You can take these genetics. You can put ‘em in a bag if you want. But not our bag.’”
Like Mezz Mezzrow and Branson Belchie before him, Berner’s brand centers on having the good stuff, thanks to the genetics cooked up by Jai. For many smokers, finding top-notch strains has been difficult in years past, with most weed sold in interchangeable plastic bags. Cookies is at the center of a movement to offer a more nuanced array complete with “budtenders” in stores helping customers sort through the company’s vast genetic library.
“They’re starting with very high-quality flower, which is obviously attractive to a discerning cannabis consumer,” said Azer. “The other thing that I would say is different about Cookies is that they truly have taken a multinational approach.”
Indeed, Berling also helped Berner develop the unusual business model that’s key to Cookies’ long-term prospects, both at home and abroad. For the privilege of accessing Berner’s brand and genetics, Cookies has been taking somewhere in the neighborhood of 5% of sales from its partners. In every deal, the company also made a practice of including options to buy each business at market rate.
Through this arrangement, the company does somewhere around $500 million dollars in systemwide sales annually. Cannabis outfits are often valued at about two to three times their annual sales. So, in a back-of-the-envelope sort of way, if Berner were to raise enough money to buy out all his dispensary partners, Cookies could suddenly be a billion-dollar company—perhaps much more—even before any additional action in Washington, which could lead to much higher multiples.
Berner believes cannabis will be legal nationwide within five to seven years, and he envisions an initial public offering that could quickly raise enough money to exercise all those options, whether in cash or stock. And with companies like Curaleaf already worth billions on Canadian exchanges, Berner’s path to a ten-figure fortune starts to come into focus.
“If it goes federal, and the market wants to see us with all these stores and production, then we’ll roll ‘em all up,” explained Berner. “So we’re achieving what these other companies are doing without having to put up our own capital.”
On a muggy late summer afternoon back in Herald Square, I found myself getting a private tour of the entirety of the Cookies flagship store from Michael Cohen. Not that Michael Cohen. This one’s a commercial landlord who, with his partners, operates under a license from Cookies, just as the branded dispensaries in so many states do. They’re fine with focusing on Cookies clothing and CBD products while they wait for the green light to sell actual weed.
“We look at this as a regular retail business, a legitimate legal retail business,” said Cohen. “Our background’s not drug dealers. We’re retailers and real estate people. There’s an opportunity here to partner up with the best-in-class operator, and to make a real statement.”
The hope is the Cookies store will have its smokable cannabis products available by the time the Thanksgiving Day Parade passes by with its accompanying national television audience of millions. For now, the Herald Square mostly just serves Berner’s specialty: creating brand awareness.
Some observers attribute New York’s delays to a well-intentioned permitting process aimed at correcting historical injustices. Indeed, across the country, most of the individuals profiting from the legal sale of cannabis don’t look like those locked up for selling in years past. That’s why Berner and Cohen are devoting an upper floor to a program called Cookies University, which will train the next generation—particularly people of color—on how to operate a legal marijuana business from seed to sale.
Berner has also teamed up with Branson on a product line that will be sold in triangle-shaped bags, a nod to the Harlem legend’s heyday. It’s already available in New Jersey, with New York on deck. Similar to Berner’s own blueprint, the product is positioned to capitalize on years of free lyrical advertising.
That’s the advantage Cookies has in the weed world—a distinct brand that’s widely recognized in the cannabis community—and beyond. Berner just signed a deal with Snoop Dogg’s food company to create Cookies By Cookies, which will be carried in Walmart and elsewhere starting this spring.
“Nothing to do with THC or CBD, just a great fucking snack,” Berner told me. “We’ve just shown that we’re such a household name that things like that are truly possible.”
Plenty of challenges remain for Cookies, of course. In addition to the governmental complications around legalization in various states, the company has faced lawsuits from certain shareholders alleging kickbacks and intimidation. Berner has denied the accusations, blaming them on “a group of predatory investors” in a lengthy response on Instagram.
The biggest roadblock to Berner’s grand plan, though, has been the lack of movement toward federal legalization. The prospect, which had appeared within reach under the Obama administration, has seemed a distant dream in recent years as the most conservative Supreme Court in a century asserts itself.
Just before Labor Day, though, the Health and Human Services Department recommended that the Drug Enforcement Administration re-designate cannabis as a Schedule 3 substance. This would allow weed to be prescribed nationwide—like anabolic steroids or Tylenol with codeine—and potentially pave the way for broader legalization down the line. The news has caused some cannabis stocks to roughly double over the past two weeks.
“If DEA acts, it would be the most significant policy win at the federal level for cannabis since the initial Cole Memo, which is what paved the way for state legalization,” Jared Seibert of TD Cowen wrote in a late August policy note. “Yet this is not legalization. … This does not solve the banking or capital markets troubles for cannabis as state legalized businesses would still appear to be in violation of federal law.”
In the meantime, though Cookies’ value has likely risen quite a bit since its March fundraising round, Berner will have to keep storing cash through credit unions. With interest rates high and banks wary of doing business with companies peddling products that are still federally illegal anyway, his rollup dream remains on hold.
There has also been added scrutiny on the negative effects of habitual cannabis lately, especially given the arrival of new strains that pack a heftier punch than their forebears. The average THC content in smokable plants has risen from 1-4% in the 1970s to 15-30% more recently, sometimes even higher in the oils used for vaping. And studies have shown that heavy cannabis use at a young age can result in midlife cognitive impairment.
But experts also acknowledge that responsible use of the plant can offer significant medicinal benefits for everything from childhood seizure disorders to loss of appetite for HIV/AIDS victims—and relief from the sort of nausea and vomiting Berner himself experienced during his chemotherapy treatments. Those are some of the factors that fuel his passionate for the cannabis business.
“I’m doing it for a reason—because it really brings people together—and that shit’s really medicine,” said Berner, who’s been cancer-free for almost two years. “A lot of [people] don’t want to hear that, but that’s the truth. They might be like, ‘Oh, he’s being all hippie-dippy because he almost just died.’ Yeah, I am, that’s the facts. I’m a hippie dippy motherfucker, and I almost just died. And I’m glad I’m still spending my time with something that brings people together.”
Zack O’Malley Greenburg is the author of five books, including the Jay-Z biography Empire State of Mind. His work has also appeared in the New York Times, Washington Post, Rolling Stone, Vanity Fair, and Forbes, where he served as senior editor of media & entertainment for a decade.
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