Roy Bingham or BDS Analytics describes how his point of sale data collection at cannabis dispensaries provides key benchmarks for dispensary owners. BDS also uses the data they have collected to create an analytics and insights platform for customers in the cannabis space that want to have a pulse on what is selling.
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[3:24] – Roy’s background
[5:11] – Roy explains BDS Analytics
[9:52] – An example of what BDS Analytics does
[12:10] – Is the data private
[13:16] – Roy compares the cannabis market with other markets
[16:42] – Roy talks about surprises in data
[18:31] – Plans on expanding outside of Colorado
[21:41] – Roy talks about common questions
[23:54] – Other parties interested in data from cannabis sales
[25:03] – What is the pricing for the platform
[27:14] – Roy talks about going through Canopy Boulder
[29:15] – BDS Analytics contact info
Matthew: Wow welcome to CannaInsider. This is Matthew Kind the host of CannaInsider where we interview the leaders of the cannabis industry, and I just want to stop and reflect a little bit because this is the 100th episode since the show started and I cannot believe we’re here already. When I started this show I really had no idea how many people would listen and I’m absolutely humbled by it. I thought it might just be a couple hundred people, but it’s exceeded my wildest expectations and I really appreciate you listening.
This 100th episode is a really special one with a gentleman named Roy Bingham who is the founder of BDS Analytics that provides an incredible service to companies looking to get into the cannabis industry or who are already in and they want to learn how to launch a new product that has a reasonable chance of success. So very important service he offers. I do want to also thank the ArcView Group for their sponsorship of CannaInsider, and I’d also like to ask you if you’re enjoying the show to please consider leaving us a review on iTunes. Every time I see a review it gives me a catalyst to keep going and keep enthusiastic about bringing you the best guests and the best topics. So if you have an opportunity and haven’t done so already, please consider leaving a review for CannaInsider on iTunes and we also love you on Stitcher. If you’re listening on Stitcher, we really appreciate you listening and of course the CannaInsider app on iPhone and Google Android. So with that I want to introduce you to Roy Bingham.
The legal cannabis market in North America is now in the billions and growing rapidly. With such a large and growing market it’s easy to get caught up in the excitement. Many new entrants assume anything they bring to market in this gold rush will sell. While the market is fragmented on a state by state basis, there will come a time when national players with a lot of capital and operational experience enter the market. That is why it is important to know what the marketplace really looks like before entering and to get some objective data about what is selling well now, but also what is emerging as a hot selling product category and what may be fading in interest among cannabis consumers. That is why I’m pleased to welcome Roy Bingham founder of BDS Analytics to CannaInsider today to tell us how to navigate through all the static and to find the hard data on what cannabis consumers are actually purchasing. Welcome to CannaInsider Roy.
Roy: Thank you Matthew. It’s nice to be here.
Matthew: Roy to give us a sense of geography can you tell us where you are in the world today?
Roy: Yeah today I’m actually about half way up the coast of Maine on a trip with my family to visit the in-laws.
Matthew: Great, and can you tell us a little bit about your background and why you decided to get into the cannabis industry?
Roy: Yeah sure. I grew up in the UK and worked in banking and finance in London for about ten years and then I came to the United States to go to Harvard Business School, did my MBA there. And then I worked at McKenzie the big consulting firm gradually becoming accustomed to the different ways that business works in the United States. And after that I started a firm called Health Business Partners and we focused on consulting, mergers and acquisitions and advisory work in the nutrition industry which really became anything that you could buy in a whole foods market.
After about ten years of doing that then I got the bug that so many consultants get and started building businesses and built a data business as well as a nutrition industry newsletter business and a conference business in that industry before getting into consumer products and creating a fish oil company and then eventually working in the team, executive team at a digestive care company based in Florida called Renew Life. And then about nine months ago I decided to leave Renew Life and started doing consulting again, and decided that this was really probably the time look at the cannabis industry again which I had become curious about about three years ago. And at that time I decided it was a little too early for me to get involved, but when I took notice again about nine months ago I realized wow it’s come a tremendous long way in two and a half years. And so eventually I decided to join the Canopy Boulder accelerator program and start my current company BDS Analytics.
Matthew: And what is BDS exactly?
Roy: So BDS Analytics is a business that my partner and I have done before in two other industries. Most everyone has heard of IRI and Neilson. They are the two big data analytics companies that focus on the consumer packaged goods industries and products sold in supermarkets. And what they do is they take point of sale information about which products sold yesterday, last week and last month and they break that information down into huge databases and provide the analytic information to the huge consumer packaged goods companies. Well what we did in the natural products industry is we created a company called Spins that was similar but very narrowly focused just on natural and organic foods, supplements, personal care products. And so we provided a set of data from the point of sale information that the people like Whole Foods were willing to provide to us so that they could then compare their performance relative to the averages in the market and that’s the key to retailers.
So having done that in the natural products industry my cofounder Liz (unclear 6.25) had done the same thing in the biking and outdoor industry with a company called (6.30 unclear) Trends where she worked her way up from entry level all the way to the head of business development. And we got together and decided that there was a tremendous opportunity and a lot of demand in the cannabis industry to do something very similar and that is the birth of BDS Analytics.
Matthew: So a company like Whole Foods or even a bike retailer you’re saying what they get out of it is they get some way to benchmark how they’re doing relative to the industry?
Roy: Yes. So a retailer like Whole Foods gets to figure out in fact how to layout their store, how much of their store to dedicate to which categories of products based upon sales data. So they get to actually see the totality of the demand in the market for the products that they provide and then they can choose what percentage of the store to dedicate to you know fresh produce for example and what percentage of the store to have in supplements. And then within those categories they use our data to figure out which brands to carry, which products are growing rapidly and therefore should have the best dedicated space so that they satisfy the customer demand. And the important thing of course in the cannabis industry is what we’re now seeing is the emergence of brands and consumers going into the dispensary and actually looking for a specific brand.
If you at that dispensary don’t carry that brand, you might lose that consumer for life and a lot of value walks out of the door. So what we help dispensaries do is make sure that they’re stocking their store with what’s really in demand in their state and whether it’s in the medical use or the adult use channels. Now thinking about brands, the other part of your question, brands want to know (A) which products to develop for the future, (B) which marketing strategies are working for them if it is discounting strategies or promotional strategies or buy one get one, and they want to know immediately. They want to know it from off the shelf sales data rather than sell into the store data so they can figure out which of those levers to tweak. And then perhaps the most important thing if you’re a brand is you want to be able to go to a new retailer who doesn’t already carry your products and show them that you have third party data that proves that yours is a major brand or a fast growing brand in your particular category or subcategory and therefore it would be good for the retailer to carry your product in their store.
Matthew: So bringing this home to a real world example, let’s say I’m a cannabis infused drink manufacturer. I notice after looking at some BDS data that 8 oz-10 mg drinks that are both have some spicy and sweetness to them are starting to sell really well. So you get that extrapolate like hey if we’re creating a new line within our brand that that’s something to really focus on because we can see that selling well at BDS.
Roy: Exactly yes it’s a very good example. It goes down to a very detailed level of data. In fact we track attributes as well so you might even know if it was an organic product or if it was super critically extracted with CO2 for example. That gives you a sense of what the consumers are going for now and that might be a tiny micro niche this month but in six month’s time that might one of the hottest categories in the industry.
Matthew: I imagine the retailers want the benchmarking but they’re not going to go into a tremendous amount of customization for you. They will throw you the data and say you figure it out. Is that pretty much how it works?
Roy: Yes it’s very easy really for the retailer. So everybody in the industry has a point of sale system and those point of sale systems all capture data into some kind of internal database. My technology team has worked with AT80 different point of sales systems in extracting data from those systems. Usually we can automate it. Probably over 90 percent of cases it can just happen automatically at the end of the day or the week or the month and our client barely even knows it’s happened. In some cases we have to ask them to manually create a certain format of spreadsheet. But once the spreadsheet is created we can swallow that data in all kinds of different forms and then we normalize it and standardize it which is very difficult actually. As you can imagine the descriptions in people’s computer systems depend upon who was typing it in on that day. And so there are hundreds of different descriptions in use that might be exactly the same product for example. So a big part of what we have to do is figure out how to normalize that data, but that doesn’t worry the dispensaries at all. They don’t need to be concerned with that.
Matthew: Now the retail dispensaries are, how does their data treated? Is it anonymized so it goes in and we don’t know actually who the retailer is just maybe either zip code or region or how does that work.
Roy: Yeah the first thing actually is we encrypt the data immediately. So we are very hacker proof. And then the second thing we do is we anonymize the data so nobody can use the data to look at their immediate competitor in any way. When they access the data through the portal they will be able to see their own information and we have very strict password protections on that data so that only the dedicated client can see their own data in comparison to the average of the market. So that’s really important. You’re not going to get to see competitive data. Nobody is sharing data that would be seen by their immediate rivals.
Matthew: You mentioned working in the grocery store vertical in the past and your partner working in the bikes and leisure trends industry. Is this just a matter of plugging and playing into the cannabis industry or are there unique considerations and nuances coming on to the cannabis market?
Roy: Will it has a lot of similarities to the natural products industry and the bike industry, but there are subtle differences . The similarities are that there are a lot of small, independent stores or small chains of stores, but in the natural products industry there is a lot more mom and pop type of operators who were (1) reluctant to share their data, (2) not as confident about the value of the data. What we’ve found especially in the Colorado dispensaries is a number of sophisticated management teams who are very data centric. They tend to be quite young. They realize that information is extraordinarily valuable.
So it’s been exciting to us to see how quickly people have embraced our technology much quicker than the penetration we achieved in natural products or in actually in biking and outdoors as well where you had companies that emerged as people like REI and Sports Authority eventually, but you had a lot of mom and pop small operators who felt that, who were skeptical about the value of data. They thought that they could decide which were the products they should carry in their store. And their customers would choose based on what was presented to them rather than having preconceived ideas from the customer about what they wanted. So those are some of the important differences.
Of course in the dispensary channel our clients carry HIPPA data, very secret information, very private information and it’s very important to us that we do not see that information. We’re not looking to touch any of that information. So that’s on subtle difference. And another one is that because this industry has different regulations state by state we’re building our databases state by state. So we will compare data within Colorado for example and we will be able to provide data about Colorado to people who are looking at Washington or Oregon for example, but we’re not going to generalize early on in this process that if you seen Colorado you know what it’s going to be like in Illinois because we all know that’s not going to be the case because of a different regulatory environment in different states. So therefore we’re building 50 different databases if you like as opposed to one big national database.
Matthew: That’s an excellent point. For example I know in Washington State there still is a higher percentage of people that prefer flower to edibles which leads to my next question. Is there anything that surprised you from your initial data? One thing that surprises me is that how fast the market is turning away from flower and turning towards the infused products of various kinds. I mean it seems logical in many ways, but it’s just happening so much faster than I thought would happen. Is there anything that surprised you from your initial data that you hadn’t anticipated?
Roy: Well I couldn’t agree with you more. I suppose I wasn’t that surprised given my background with packaged goods in other industries. I guess I wasn’t that surprised by the speed with which the infused products emerged and of course the power of branding that is driving that. And I think a lot of this is introductory products for people who were new to consuming cannabis as well. And many tend to prefer not to smoke for example so they’re looking for alternatives that are easy and that are perhaps a bit more medical or a bit more dosage controlled in their minds so that they can begin to learn what’s right for them. So we’ve certainly seen that in the data.
I think the other thing that we’ve perhaps been a bit surprised by is the speed with which concentrates and extracts have grown in the last 18 months as well. And a number of our clients have had tremendous growth in the extracts area for example. And then of course things like vaporizer cartridges as vaporizers become so popular. So we’re dealing with very rapid change in an industry that’s very new and very innovative at the moment. And the established patterns of consumer behavior haven’t really happened yet and we’re going to see very rapid change I think for the next several years both overall and on a state by state basis.
Matthew: So you mentioned state by state database. Are you starting just here in Colorado or is other states on the roadmap? What does it look like, your plans there?
Roy: Yes our initial focus is Colorado for the next several months. We already have had a lot of contact from other states as well. And what I’ve really said is after Colorado. And basically in Colorado we need to establish a panel that gives us statistically meaningful data which is 10 or 20 percent of each of the two markets in Colorado. Once we have a retailer panel of that scale we have a PhD statistician who works was us who will extrapolate that data to the size of the total market and we can be confident with a 99 percent accuracy that when we have 15 or 20 percent of the market that we know what the total market looks like as long as we have the right distribution of different types of dispensaries. At that point we will expand to Washington, Oregon and other states that have a market that has some maturity in scale and we can roll out in those markets relatively efficiently.
Matthew: That’s pretty fascinating. That’s all you need is 15 to 20 percent to extrapolate those numbers. So after a certain point…
Roy: Yeah you need 15 or 20 percent not concentrated. Like if it was all in one city, you know, one big city like Denver that wouldn’t be statistically meaningful. If it was all one type of store, it probably wouldn’t be meaningful either. So we do have to include independent and mom and pop stores in the database for example even if they may not be a massive percentage of the total. They can be very important because they have different characteristics, different consumers that still comprise an important percentage of the total market.
Matthew: Which is a good point. If I’m a manufacturer, a brand in the cannabis space and I’m looking to target let’s say you know people in their 20s that live in an urban environment, are you able to drill down to that level or is it higher up or you can’t really quite get that?
Roy: Yeah we’re not really drilling into individual cities for example. The problem with that is that there are a few cities that are very large to the point where competitive data might not be the objective there. So you need to have a significant number of retailers in any one area. And so we tend to look at the state level data.
Matthew: You mentioned HIPPA compliance. So there’s the opportunity then to segment a recreational sale from a medical sale?
Roy: Yes most of our clients have completely separate systems and databases between the two markets.
Matthew: Okay. Now I’ve witnessed some infused products companies showing interest in what you’re doing. What is the benefit they see working with BDS? I mean are they approaching you and kind of have similar questions as to what they want to do and how they want to work with you?
Roy: Yes the first one is usually how do I rank in the market? How am I doing? I know what my own sales are, but I don’t know how that compares with the overall marketplace. So they love to see data that shows their own ranking. The other thing is they know in aggregate how rapidly they’re growing based on their wholesale sales data, but they don’t know what the sell through rate is. So you can have this situation where you’re growing 100 percent based on the wholesale data, but only 50 percent based on the retail data. What that tells you is you’re filling up the channel and you might start, you know, and that might create a problem for you in the future.
And of course on the opposite side you might see a situation where your retail sales are going up twice as fast as your wholesales sales in which case you know that there’s a lot of demand and you better stock up some infantry fairly soon. So those are a couple of examples. And the big one really is to be able to go to a new chain of retailers that you don’t already work with and show them the data that says you’re the number three brand of this type or you are the fastest growing or the second or the third fastest growing and therefore it would be a good idea to carry that product. And that’s what I did in my previous job in the digestive care market. We started off in the independent health food stores and then we used the spins data to show Whole Foods market that they should carry more of our product in their stores. And then we showed the natural products industry data to Walmart, Walgreens, CVS, Rite-Aid, etc. and said okay if you’re going to have a natural digestive care section, you should have the number one brand in that section, and that’s how we grew from $40 million to $100 million in 5 years.
Matthew: Wow that’s great. Apart from infused products companies and different manufacturers and brands, are there any third parties, government or regulators that want to access this data or anybody that kind of surprised you that came out of left field.
Roy: Well certainly investors find this data very interesting indeed. Obviously when they’re looking at possibly investing in a company it’s very reassuring to see independent, third party data that shows how well that company is doing. So typically a manufacturer will come to us and start using our data and they may be showing that data to investors as well. So that would be a classic example. Then the other thing is that of course we can help regulators to focus their resources as well. They’ve got a massive data, imagine through the metric system the MED in Colorado has tons of data and we’re very experienced at figuring out what’s important about that data. So we do have a dialogue going with them and some of their advisors about how we might be able to help them to use their resources more efficiently and focus on the things that they’re most concerned about.
Matthew: What about price point? How much does it cost to access the BDS Analytics platform?
Roy: Yeah it varies depending upon the size of market that you’re interested in. So first if you’re a dispensary, it’s very economical. It’s somewhere between $50 a month and $200 a month if you’re a chain. At the moment as we’re expanding in Colorado we have a program called BDS Preferred for dispensaries which basically provides the service for free as long as you’re one of our beta testers who’s helping us to refine the system. For brands it could be as little as $500 a month if you were just looking at one subcategory that you are particularly interested in, and it could be many thousands of dollars a month if you’re looking for a large category. And of course as the categories grow as sales increase so the cost of the data on that category will increase as well.
At Spins we had customers who were spending well over $1 million a year with us on particular categories, and we had embedded staff who were working full time with our clients helping them to crunch data about new markets and market opportunities in competitive situations. So it’s really a matter of how much appetite and demand branding clients have for the data.
Matthew: What a great secret weapon here to have. I would not be telling my competitors or talking about using BDS that much if I was using it because it sounds like a great tool. Now you were part…
Roy: Yes I mean people become very used to this data. I used it for six year as I told you in digestive care and we could barely begin our product development process without studying the data intensively for several days actually.
Matthew: Great point. Now you were part of the first class of Canopy Boulder the first cannabis accelerator. For our listeners that are not familiar with Canopy Boulder, can you tell us what that was like going through that program?
Roy: Yes, yeah. Canopy Boulder was a very intensive program, extremely helpful to people starting a business. Of course you know I’m in my 50s. I’ve started several businesses so I had different needs from the program perhaps than some people. There were ten new companies that joined that program. My primary needs were for relationships so that I could validate the business model in the cannabis channel and compare it to what I had done in other industries and rapidly develop relationships. But many of the other people in the program were relatively new entrepreneurs. So they would have mentors who worked with them on marketing, sales, finance, accounting, the full range of capabilities that you need to start a business. And then Canopy Boulder helped those companies to raise capital and of course prepare for pitching which is a very important part of this process in order to raise capital through ArcView, through the Rockies Venture Club and from other angel investors.
Matthew: Are you still looking for investors for BDS Roy?
Roy: I’m not really, no. We were very successful. We originally intended to raise $900,000 and we’ve actually raised $1.4 million so far. And that’s actually about what we need to build this business. Originally I was going to do two raises, $900,000 and then another raise of something like a similar amount about a year later, but the appetite we’ve seen for investors has been great and so we’re at the point where we probably won’t need to do a second round.
Matthew: Roy in closing how can listeners learn more about BDS Analytics?
Roy: Well one thing is just to go to the website www.bdsanalytics.com and there is an opportunity there for you to register your interest. Go to the contact task page and send us a message of course. My email is just firstname.lastname@example.org My cofounder (29.38 unclear name) she’s email@example.com. And we’d be delighted to correspond with you and tell you what we’re doing and connect over when we’re going to be able to satisfy your needs as well. So that will be an approach to take initially.
Matthew: Great. Well Roy thanks so much for coming on CannaInsider today and telling us how this expanded, crazy market works. There’s so much intelligence we need to make great decisions here. And I’m glad you’re stepping up and filling that need in the marketplace. Good luck to you.
Roy: Thank you very much Matthew. It’s an honor and a privilege to be on your show and it’s really been fantastic for me to join this industry that’s so filled with vibrant exciting entrepreneurs with such positive attitude. I’m delighted to be here and look forward to helping people grow very successful businesses in the coming years.
Matthew: A very special thank you to Roy Bingham of BDS Analytics. If you want to know the future, look at the past and that’s what BDS Analytics helps to do. I really appreciate you sticking with us through 100 episodes and here’s to 100 more. Don’t forget there is now a full archive of 100 episodes you can listen to on iTunes, and in fact that’s all that iTunes store. So occasionally you’ll start to see a flashback episode appear on Wednesday because iTunes won’t even store all the episodes we have. So I’m going to have to bring some blasts from the past. There’s some great great interviews back there that can really help you understand and digest the rapidly evolving cannabis industry. So I encourage you to go back to the archives and listen to all the guests we have there. Again thanks so much for sticking with CannaInsider for 100 episodes and here’s to 100 more.