Verano COO: The Real Cost of Cannabis Innovation Starts on the Factory Floor

Burn After Reading The 30-second intel for operators and investors ⏱ 0:30

Verano COO Trip McDermott says cannabis innovation succeeds or fails on the factory floor, where equipment output, labor costs and consistency decide margins, and where federal limits on interstate commerce force duplicated production in each state.

• Operators: Test equipment claims before committing, since advertised output rarely matches reality. Count labor, maintenance, training and downtime in the return, and weigh how many state facilities a new product would need.
• Investors: Verano builds possible future price compression into its R&D return analysis. Manufacturing consistency and a cost structure that can withstand falling prices may matter more than launching new product categories.
• Do now: Model one planned product at lower equipment output and lower selling prices, including labor and downtime in every state where you would make it, before approving the investment.

Short on time? You’re done. Want the numbers?Keep reading ↓

Trip McDermott explains why equipment investments, production consistency, labor costs, and fragmented state markets can determine whether a promising cannabis product becomes a profitable business.

For cannabis operators, developing a successful edible is only the beginning. The real financial test comes when that formulation reaches the factory floor.

Equipment investments, labor requirements, production consistency, and manufacturing capacity can determine whether a promising product becomes a profitable business.

For multistate operators such as Verano Holdings, the challenge is compounded by federal restrictions on interstate cannabis commerce, which require separate production operations across state markets.

In an interview with IgniteIt, Verano Chief Operating Officer Trip McDermott explained why the economics of cannabis innovation depend as much on manufacturing execution as they do on product development.

Why a Gummy Is Harder to Manufacture Than It Looks

Cannabis edibles share many production techniques with conventional confectionery, but consistency depends on precise control of variables that can change the finished product.

McDermott described how SOPs and cooking time, water content, and the behavior of ingredients like gelatin or pectin influence the texture and quality of a gummy.

“If you’re not following the SOPs correctly, especially around cook time, if you’re adding too much water in versus too little, it’s not evaporating,” he explained.

Those variables become more consequential when a manufacturer tries to replicate a formulation across facilities operating with different equipment and levels of automation.

Verano produces its gummies from scratch, according to McDermott, and follows standardized manufacturing procedures intended to maintain consistent results. For the company, this represents a significant investment in training and oversight to reproduce those processes across its manufacturing network.

Its benchmark extends beyond competing cannabis brands. McDermott said Verano also evaluates how its products compare with those sold in the conventional food market.

That comparison raises the bar for cannabis manufacturers.

Consumers may judge the flavor, texture, and overall experience of a gummy against established confectionery products, even though cannabis manufacturers face additional regulatory and operational constraints.

When Equipment Promises More Than It Delivers

But a new formulation can require more than an adjustment to a recipe.

McDermott described production systems involving cooking kettles, depositors, chocolate tempering equipment, wrapping machinery, and specialized processing tools. Different products require different manufacturing configurations, and equipment suitable for one facility may not be appropriate for another.

Before introducing a new product category, Verano conducts research and development, evaluates production equipment, runs test batches, and trains facility teams.

The company also distinguishes between relatively straightforward product extensions, such as new flavors, and entirely new categories requiring more extensive operational changes.

The financial risk begins when projected manufacturing capacity meets actual factory performance.

“Everybody promises you the world and that this piece of equipment is going to crank out this many units per hour; rarely does that line up,” McDermott said.

For operators, that gap between advertised capacity and realized output can materially change the economics of a new product.

Equipment costs are only part of the calculation. Labor, maintenance, training, production downtime, and the ability to reproduce a formulation consistently all affect the eventual return on investment.

A machine that produces fewer units per hour than expected can raise the cost of every finished product. A formulation that requires additional processing steps can increase labor requirements or reduce throughput.

These considerations become particularly important when operators are deciding whether a new product deserves investment across several state markets.

Can Ingredient Technology Reduce Manufacturing Costs?

Manufacturers can improve edible performance in several ways without rebuilding production lines: process optimization, better emulsification, pre-formulated cannabinoid ingredients, and alternative delivery systems.

Alianza’s DynaLipid is an interesting example of a lipid-based delivery technology designed to improve cannabinoid performance while accommodating existing manufacturing operations. Drawing on more than 80 years of food ingredient experience, the company says it works with manufacturers to adapt formulations to their equipment, ingredients, and production conditions.

This can involve adjusting mixing protocols, heating temperatures, and cooling times rather than redesigning an entire production line. Alianza also evaluates differences in cannabinoid inputs, product stability, flavor, and texture. For operators, the financial test remains whether improved performance justifies the cost of integration.

The Margin Test

For McDermott, innovation ultimately comes back to financial performance.

Verano evaluates equipment investments, labor requirements, production volume, margins, retail distribution, and repeat purchases when assessing R&D returns.

The company also considers how product economics may change as cannabis prices decline.

“Is this a low-margin product that we can crank out at high volume, or are we just making a few of these and selling these for a higher price?” McDermott said.

Rather than assuming today’s pricing will remain intact, Verano incorporates potential future price compression into its investment analysis.

That approach highlights an important distinction between a technically successful innovation and a commercially viable one.

A product can deliver faster onset, better flavor, or improved consistency and still fail to justify its production costs.

For cannabis operators facing constrained access to capital and competition across multiple product categories, the issue is whether it improves the economics of producing and selling the finished product.

Federal Restrictions Keep Manufacturing Fragmented

McDermott identified interstate commerce restrictions as one of the most consequential obstacles to manufacturing efficiency.

Conventional food companies can concentrate production in a relatively small number of large facilities and distribute finished products nationally. Cannabis operators generally cannot replicate that model for state-regulated marijuana products.

McDermott argued that the ability to manufacture centrally would improve consistency and make additional edible categories economically feasible.

He pointed to products such as potato chips, pretzels, and jelly beans, where specialized machinery and production scale can make state-by-state manufacturing prohibitively expensive.

The implications extend beyond the initial equipment purchase. Each additional production facility can require its own workforce, quality-control procedures, maintenance capabilities, and operational oversight.

That means the investment decision cannot be separated from the number of markets in which the product will be manufactured.

A concept that makes financial sense in a centralized national facility may be considerably less attractive when the same capabilities must be established independently in multiple states.

For now, operators must work within the existing regulatory structure, balancing innovation against duplicated infrastructure and the cost of maintaining manufacturing capabilities across separate markets.

Innovation Has to Survive the Factory Floor

The manufacturing challenges described by McDermott point to a broader question facing cannabis operators: how much additional complexity can a new product justify?

A promising formulation may offer consumers a better experience, but commercial success depends on whether production can be standardized, equipment can deliver expected output, and the resulting margins can withstand competition.

Ingredient suppliers offering faster onset or simplified integration may help address parts of that equation. Their commercial value, however, depends on demonstrated performance and measurable economics rather than laboratory claims alone.

For Verano and other multistate operators, the next competitive advantage may not come from introducing an entirely new product category. It may come from manufacturing existing products more consistently, reducing operational disruptions and building a cost structure capable of surviving continued price compression.

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Disclosure: This article is part of an IgniteIt editorial series supported by Alianza.

Manufacturing efficiency, capital allocation, and the economics of scaling cannabis businesses will be among the key conversations at IgniteIt’s Capital & Policy Summit in Washington, D.C., on November 18. Join industry executives, investors and policymakers to examine how regulatory changes, market pressures and operational decisions are shaping the next phase of the cannabis industry.