Ep 290 – Real-Time Dispensary Data Is Revealing Surprising New Trends…

cy scott headset

To know where the cannabis market is going, we need to examine where it’s been and where it is right now. 

Here to help us is Cy Scott of Headset, a data-driven tech company that provides business intelligence for the cannabis industry.

Learn more at https://www.headset.io 

Key Takeaways:

  • Cy’s background in cannabis and how he came to start Headset
  • An inside look at Headset and its mission to help cannabis companies stay ahead of the curve
  • Surprising trends Cy has observed in recent dispensary sales data 
  • How data can help inform an entrepreneur looking to bring a new cannabis product to market
  • Valuable takeaways from purchasing behavior data that have proven to maximize visitor engagement and drive sales
  • How different products sell better on different days of the week as well as morning versus evening
  • How purchasing patterns differ between generations
  • What to expect in cannabis over the next few years based on Headset’s real-time data and market intelligence
Read Full Transcript

Matthew: Hi, I'm Matthew Kind. Every Monday, look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. That's cannainsider.com. Now here's your program. In order to know where the cannabis market is going, we need to examine where it's been and where it is right now. Here to help us is Cy Scott, co-founder of Headset. Cy, welcome to "CannaInsider."

Cy: Hey, Matt. Great to be here.

Matthew: Give us a sense of geography, where are you in the world today?

Cy: I am in Seattle, the Great Pacific Northwest here.

Matthew: Okay. And you've been on the show a few times before in the past. I think it's been maybe a year or so. And in those interviews, we covered your past co-founding Leafly and now you and your co-founder sold that company and you're involved in Headset, for the last, I don't know how years. Just give us a quick snapshot of what Headset is for new listeners.

Cy: Sure, it's been about a decade in cannabis for myself, as you mentioned starting back with Leafly in 2010 when we launched that service, having sold it to Privateer Holdings and moving on to Headset, a data analytics provider for the cannabis industry. So really at Headset you know, our mission is to enable the success of what we consider the greatest drug policy shift in our lifetime, which is cannabis legalization, which is, you know, something that you cover quite a bit on your podcast. And we do that by providing the analytics that organizations and cannabis operators need to make those informed decisions. The way we look at it is that if the operators are able to make better decisions based on data, then in turn, they'll be more successful, and if they're more successful then the cannabis industry overall will be more successful. And we're really motivated to see this great experiment work.

Matthew: Yeah, that's valuable information, and what markets are you providing the data for right now?

Cy: We're actually...we have a footprint in about 25 markets. So a variety of adult-use and medical. We're providing what we consider a full market measurement through a service we call Headset Insights in five markets at the moment, and we're looking to be expanding throughout the year here. So those five markets where you can see a full read, which is basically market intelligence data all the way from the category down to a specific product in the market. We provide that in California and Colorado, Nevada, Washington, and Canada, actually, as well, particularly Alberta at the moment with a few more provinces coming online this quarter.

Matthew: Okay. And do you remember the last thing that really just kind of slapped you in the face and surprised you in the data that you weren't expecting?

Cy: Sure, there's always something, we're always looking at new and interesting ways of slicing the data, looking for interesting patterns. I think most recently, we did a report on weekly sales. We really looked at were there any patterns week-over-week, were there any weeks that perform better than others, you know, outside of things like holidays, just kind of in a calendar week? And what we noticed is that the last week of the month actually has a pretty significant spike in sales, particularly in the more mature markets of like Washington and Colorado, the markets that have been online for some time at this point. Markets like California and Canada with our kind of high growth rates don't really show this pattern quite yet, but we expect to see it soon. But what's interesting is the last week of the month that sometimes bleeds into the first of the next month, we see a good size increase in not only transactions per day, but overall sales or revenue per day and units per day sold. So anywhere from, you know, 5% to 6.5% of growth on that last week.

And then the previous weeks of the month, actually sometimes you see a little negative growth. So if you're a retailer or dispensary and you're looking at your week-over-week sales in the beginning of the month or middle of the month and they're down, I wouldn't be too concerned because usually, it looks like it kind of comes up at the tail end of the month, which is just pretty unique. It could have to do with, you know, payroll cycles, people coming out at the end of the month, a bit better on budget looking to spend a little bit more money now that, you know, they've got all their bills accounted for. And I think it's a pattern that you see in traditional industries as well. So it's quite fascinating to see some of those same patterns emerging in this new cannabis market.

Matthew: I know in the past, we had talked about how when a new market comes online, it's usually strong with flower and then over time it moves more into concentrates and edibles and so forth. Is that trend continuing? Or are we seeing markets truly become kind of independent of each other and not, you know, converging around common themes?

Cy: You know, there's definitely convergence. I think you see that as markets mature, to your point, you're starting to see patterns where as far as market share by category, so you know, flower sales versus pre-roll versus edibles and beverages and so on, kind of start to look pretty similar, where you have, you know, flower in the mid 40% of all sales, things like edibles anywhere from 11% to 14%. It's kind of how it shakes out across most markets. Now, with the newer markets like California, you kind of see a different trend. And I think we'll probably get there and you'll start to see it kind of blend together across the different states. But in California, actually, flower sales are a bit less about 40% of sales.

And really the difference is coming from more vapor pen sales. So vapor pens in California, actually about 26% of category share, and that's in the last 90 days. And you compare that to a market like Colorado, which is about 16% or Washington about 13%. So in California, vapor pens do seem to resonate a bit better than some of the more mature markets and that could have to do with it being a new market, more vapor pen operators, people coming to the legal markets for the first time jumping in and, you know, getting exposure to vapor pens where, in a market like Washington, when it launched, there really weren't that many vapor pens in the beginning.

So kind of interesting to see some divergence there. But in general, it's converging. Canada is kind of a unique entity, it's got a bit of a different structure. You know, up until this year, it was exclusively flower, you know, capsules, some tinctures or oils, and pre-rolls. And so you see some different patterns there where flower is actually about 66% of sales. But we expect that to start to look more like the U.S. as these new formats come online and you start seeing them in more stores, which is just now starting to happen.

Matthew: Cy, where are we in this vape pen story though, because we had some deaths last year and some scary stuff going on. And it seems like we've kind of reached, you know, peak vape pen scare. Do you think that's true or it's still some pain left to come?

Cy: Yeah, it's a great question. So yeah, the Vapegate, as it's been dubbed, was pretty tough for the industry last year, obviously, a lot of news headlines and some unfortunate deaths. It sounds like it was mostly black market or exclusively black market products, so unregulated products. But it certainly did have an impact on consumer purchase behavior in legal markets and regulated markets, so both medical and adult use. What we saw was quite a bit of decline. So when you aggregate, you know, the vapor pen market share across those key U.S. markets that I mentioned before, it was about you know, 24%, 25% of sales going to vapor pen. And then after, you know, I guess, it was mid-August to mid-September, that's kind of when the news cycle was at its peak, you saw a pretty significant drop in market share, basically down to about 18% through the end of the year.

Now, the good news is that it has flattened out and it's kind of climbing back, I would say. So we're starting to see people going back to the vapor pen market. I think a lot of organizations have gotten in front of, you know, the crisis and talked about how they're providing tested products, regulated products that don't have any of the additives that the CDC was kind of pointing to as some of the reasoning for the illnesses. So you are starting to see some market share clawback. But during this period, what was pretty interesting was other categories, particularly edibles and pre-rolls, gained quite a bit of market share, edibles going from about 10% to close to 13%. So you know, consumers were still purchasing cannabis. They were just looking at alternatives of vapor pens, but I think that people are going back to vapor pens. In 2020, you'll start to see it hit those same market share numbers as we had before the crisis happened.

Matthew: Cy, if you were to use your data, all your Headset knowledge and insights, and you were forced to create a product that would do well, that's your goal, how would you use your data to come up with a product that has fit for the market now? And is there anything you do to add some special sauce to try to go where the puck's heading?

Cy: Yeah, certainly. So with our market intelligence services, a lot of our customers use the data to really understand the competitive landscape to really understand their brand ranking in market and find opportunity, which is kind of to your question there. And so to find opportunity, a lot of our customers use a variety of different dashboards that we provide, different analytics, but it really comes down to, you know, identifying potentially white space in the market. So those gaps where there might not be a product that's produced. You know, one interesting thing to look at is cross-market. So if you are an operator, say in California, you can look to markets like Nevada or to Colorado and see, are there products that sell really well there that might not be available in markets like California, the market that you're in, for example?

And so really identifying that white space where, you know, a product that resonates in another market, if you bring it to your market, it may do well, you know, consumers are pretty similar across markets. I think it just has to do with availability and the types of brands and the products that would be available in a particular market. And that has a lot to do with the legislation and fragmentation that we see in a cannabis industry where an operator in Nevada might not necessarily be an operator in California, for example, or Canada.

So you can look to other markets, look for that white space to really find opportunity. I think looking at the competitive landscape is another option as well. So you can look at brands that are performing well. Look at their product mix, see, you know, what's driving the majority of their sales. Look to things like pricing and margins to use in forecasting, you know, as you decide to develop a certain product, you're probably gonna wanna forecast sales. So you can use what's selling in your market comparatively from our data set to really understand and make those unit projections, or raw sales projections. And then on the secret sauce of the planning, we do some really interesting things around basket analytics or behavioral data so we can help inform our customers, you know, what types of products are purchased together? What kind of brands are purchased together? What kind of loyalty do customers have? And who are those customers through some of the demographic data. So, you know, what generation are they from, you know, what age resonates with maybe a brand that you're modeling your products on.

And so using all that information to kind of forecast products is critical. And we see a lot of people doing it in their own markets, but also like new markets that are emerging markets like Massachusetts, for example, are looking to markets in the West Coast that may have been around to kind of see where the market may go for them, you know, it won't always be exactly the same, kind of like what we're seeing in California with some higher vape pen sales, but I think you can use it as a good proxy. You know, it's a way to kind of take a good guess at the way it might shake out as your market matures. So there's lots of interesting data in there to explore. And I really think it does come down to making an informed decision around the product that you will be producing because shelf space is getting harder to come by these days, retailers are getting pickier, the markets maturing. So really coming with analytics first, I think, can give you a great competitive advantage.

Matthew: So you already spoke before about, kind of, how the different weeks in a month make a difference in sales, the last week being, kind of, the peak. What about the individual days? Like is there certain days if you are a dispensary owner, you'd say, "Hey, I would really target this today or send a text message promotion about pre-rolls on this day?" Is there anything that you see as, kind of, surgically tactical that you would recommend?

Cy: Yeah, certainly. So there are very interesting patterns that come from day of the week. Really, Fridays are the biggest driver of sales when we look at, you know, how Friday indexes over other days of the week, it's pretty incredible. You know, about 2% of all sales in the week go to a particular hour on Friday. So kind of between the hours of noon and 8 p.m, you know, you'd see about 15%, 16% of all sales for the week happening right then. So Friday's a great day just for sales overall. Saturday as well, as you can imagine, not as strong as Friday, but still a high amount of sales. The other days, there are sales, but not at the same level that you'd see on a Friday.

You know, I think that just points to kind of the recreational nature and adult-use markets, you know, people going on Friday and maybe purchasing products for the weekend and so on. But I will say there are patterns for earlier in the week, or even earlier in the day frankly, and a lot of that comes from the wellness-based products, products like topicals, capsules, tinctures, and sublinguals. We see sales patterns earlier in the week. So you know, Monday, Tuesday, Wednesday, more sales happening there and actually earlier in the day too. So when stores open at 10 a.m., 11 a.m., you're starting to see more of those types of products sold. So I think that, kind of, the wellness products going in the morning and then recreational type products and more in the afternoons, weekends, and so on.

So kind of using that information, a lot of brands will do in-store demos, you know, they'll have people there talking about their products. So if you're producing a wellness product, you're probably better off earlier in the day, you know, having one of those vendor days at a cannabis retailer. But if you're producing something that might be more recreationally consumed, you know, probably Friday afternoon, Friday evenings are your best bet.

Matthew: Oh, great. Now, your Headset data gives a lot of insights on what different generations like to purchase. And I want to just go into what those generations are for people who don't...I mean, everybody knows that the millennials and baby boomers, but there's the silent generation that was born between 1925 and 1945. The baby boomers post-World War II, which is 1946 to 1964, that's when they were born. Generation X born between 1965 and 1979. Millennials born between 1980 and 1994. And then Gen Z. Some people call them the homelanders, but Gen Z, 1995 through 2012 is when they were born. What kind of insights is there about generations because I mean, we all like to think we're so unique and everything but, you know, there is a lot to be said for where you are in your lifecycle as a human and what you, as part of a cohort, believe. Like, for example, Harley Davidson knows that most of their motorcycles are purchased by men between ages 45 and 48. You know, that's when the midlife crisis sets in for Harley Davidson. So there are these things we can draw from it. What do you have to say about generations and how to think about it with your data?

Cy: Yeah, great question. So, you know, all of our data is sourced from our retail and dispensary partners. And so we are able to see some interesting analytics around demographic data. We don't take any personally identifiable information, but we can get a sense of age and a good proxy for gender based on first name. And so for age and kind of to speak to those generations, you know, what I think historically was a very millennial-driven market, we're seeing some pretty incredible gains in the Generation Z demographic. You know, one interesting thing about Generation Z is that, you know, it's a generation that's continuing to age into cannabis. And so every day, new consumers are turning 21 in the U.S, you know, 19 in Canada that can go and then now purchase cannabis. So it continues to expand. So that's quite fascinating.

Also, this generation has grown up with a legal market. You know, when you think about cannabis legalization, and when that happened many years ago at this point, this generation, these 21-year-olds, you know, were in their teens, early teens. And so they've just been around cannabis has been normalized and legal potentially without the stigma for much longer than maybe baby boomers and so on. So, good adoption there, and actually, it's quite fascinating, we saw in 2019 Generation Z took about 3.5% of all sales in the market. And then at the end of the year, it was about 5.5%

Matthew: Wow.

Cy: Yeah, so two percentage point increase there and we expect that to keep happening. But also at the same time, we're seeing more older generations coming into the market. So the baby boomers, you know, the silent generation, which are the elderly, kind of coming into the market more, being more represented than they were before. And so while the industry continues to grow, and you know, Millennials used to take a very significant percentage of the market, now it's about 50% of the market. So their market share is dwindling, but at the same time, more people are purchasing cannabis, so the pool is getting bigger. And so it's quite an interesting pattern, you know, younger audience coming to the market and an older audience coming to the market where before it was very millennial-driven. I think it just had to do with normalization. And now that it's been around for so long, you have, you know, older people coming looking for those wellness products or, you know, coming around to this idea that cannabis isn't this taboo product anymore. As far as purchase patterns and behaviors, there are some differences. You know, one interesting thing is baby boomers, as far as percentage of sales that go to flowers, is actually the highest, could be that that's what they're used, to just having access to back in the day it was just flowers...

Matthew: The flower generation, Woodstock.

Cy: Yeah, there you go, exactly. And then, you know, most of the vapor pen sales are pretty equal across Generation Z, millennials, and Generation X, about 20% of sales, vapor pens, across those generations, and it shrinks at the baby boomer and silent generation. So much less than the vapor pen market. Pre-roll flower for the Generation Z and millennials. Pre-roll is about 12%, so the highest for those generations so they're really gravitating towards pre-rolls. I think a lot of that has to do with the low cost of pre-rolls, you can get individual, you know, single-gram pre-rolls for pretty cheap in a lot of the markets that we track as you're seeing a lot of unit sales going there. I think it's just the amount of wallet or purse they have to spend is a bit less than, you know, a baby boomer potentially. And then concentrates, concentrates kind of over-index on Generation Z, about 16% of sales go to concentrates, that's the waxes and the shatters, and compare that to something like the baby boomers where it's like 7%. So I think the younger generation is gravitating towards higher potency products, which concentrates tend to be.

So there are some, you know, unique sales patterns. The silent generation is definitely over-index on the tinctures and the capsules where you don't really see that going to Generation Z. Basically no market share in those categories for the younger generation, but it's tinctures, 14% of all sales to the silent generations at 74 years of age and older. So you can definitely see how that's more of a wellness product for the elderly, potentially, and driving sales for those categories. So pretty interesting if you're producing products to kind of understand, you know, who you're targeting, where the majority of your sales are going, and how that breakdown looks.

Matthew: Yeah. I mean, certainly if I was targeting the silent generation, I would be thinking about arthritis tinctures and topicals, knee replacement subjects, things like that. Baby boomers, you know, what kind of music was playing when they were in their peak teen years? Was it something for the Beach Boys or something like that kind of target, you know, perfectly exact match to what the imagery is they like, so this is super important to me. I mean, I read the book "The Fourth Turning" about different generations. It was written in the '90s by these two demographers from Yale, and there really is just so much you can do just by focusing on generation. So I'm really glad that you include that information. As we look back at 2019, what are kind of the 1, 2, or 3 bullet points you kind of think will stick out in people's minds in terms of what the Headset data told you? Like, if you were to sum it up in a nutshell, what was 2019?

Cy: 2019 I think was, well, certainly, the vapor pen issue.

Matthew: Vapegate.

Cy: Yeah, Vapegate was a big top-of-mind event that it did take quite a bit of, I'd say, Q3 attention this year. But I think there's some good stories on growth. You know, you look at a market like California, which is still growing, still maturing, and it's doing pretty well. You know, a lot of people would argue maybe it could do a lot better, and that's certainly true. But when you look at growth rates of a market like California, it is significantly higher than what we're seeing in some of the mature markets. So when we look at things like average daily sales comparing January of 2019 to December of 2019, California saw an increase of about 66% from January to December. And you can contrast that with a market like Nevada, which saw about 15% or Washington at 14%. So good growth coming out of markets like California, and the same story can be said for a market like Canada. You know, it seems to be kind of a pattern where, you know, markets will open up a bit of a rocky start, licenses getting issued, potential shortages of products. And so it takes some time for it to kind of get that momentum. And we're definitely seeing that happening in a market like Canada.

So Alberta is a good example. You know, kind of started with a handful of licenses, and now has hundreds of licenses, and it's a relatively small province by population but they've got great coverage. We kind of look at it like an S curve where, you know, it starts out kind of slow and then it ramps and your starting to see a lot of stores coming online and then it kind of tapers off as we kind of hit market saturation. And so California is very much in that ramp of the S curve at this point. So still a lot of growth. I know a lot of people wish it would grow a bit faster. You know, we all do, but it's definitely, getting there. So I think that's a good story for the year as well. I think we'll continue to see that in 2020. You know, with some new markets like Michigan and Illinois, you're gonna see that same pattern emerging and still some great growth coming out of Canada and California at the same time.

Matthew: Okay. Anything that you think is like a black swan in 2020 that you have your eye on or nothing right now?

Cy: You know, what would be interesting to see is in Canada the new format adoption, the beverages, the edibles coming to market. We're just now starting to see them pop up in our retail data. It's still pretty early days and we're at the tail end of January here. Everyone, again, would like that to move a bit faster as well, but we expect it to. I think that Canada is unique, you know, in the sense that there's been a lot of investment from the beverage industry, so more traditional, whether it's beverage alcohol or just traditional beverage coming in and making investments in the space. And so that could prove to be a unique a dynamic where, you know, a beverage category in any given kind of U.S. market that we track is 1% to 2% of sales, and so it's a pretty small category.

Now, in Canada, that could be different. It could be different because of the investment that's being made. The types of products coming to market, you know, there's relatively small amount of products that are available in the U.S. in any given market for beverage if you compare that to like flower production, or pre-roll, or any other category really. So that could be a black swan, it could be a new model, or it could end up being very similar to the U.S. where we see 2% of market share going to beverages. The jury's still out. But I think there are some unique dynamics in Canada that could potentially afford higher market share than we see in the U.S. So it'll be interesting to watch and see how that looks by the time we get to the end of this year.

Matthew: Cy, what is the ideal client that Headset can help?

Cy: Yeah, first and foremost, I'd say cannabis operators, and again, goes back to our mission, really help the operators make these informed decisions. It's quite a costly investment to produce a new product, to produce a new brand, and to get that on the retail shelf. So you wanna be armed with most up to date, most accurate information out there. And so if you're a cannabis operator, I think that we can be very helpful for you from an analytics perspective on those that are looking at the market as well. So maybe organizations that are thinking about jumping in, you know, can use our services to really better forecast what it might look like, what the landscape looks like. So that kind of audience, so maybe not an operator yet, but looking at maybe becoming an operator, or maybe investing, ancillary organizations, groups like investors that are making bets on the market, on brands in the market can leverage our data to really better understand, you know, how organizations are performing.

Like in Canada, for example, with our Canadian data, a lot of these Canadian companies that we track are publicly traded. You know, investors are making bets on these organizations and really see how these large LPs in Canada are selling products and what products are resonating with consumers and how they're trending. I think investors find a lot of value in that. So a variety of clients that can use Headset from the operators all the way to ancillary people outside the industry that just want data and analytics on the space.

Matthew: Yeah, and can you give me a sense of kind of the budget that's needed to access the Headset market data and intelligence?

Cy: Sure, you know, we have solutions for pretty much all budgets. You know, we price it in a variety of ways. For our market intelligence service, you can get a single category in a single market for a relatively reasonable rate, I would say. We have services that are priced less than $1,000 a month all the way to much higher pricing for organizations that might be multi-state or multinational that need full market reads across all the markets that we track. Contract value can get pretty high for those organizations, but they need the data across all that space. So really, you know, all shapes and sizes, we try and find solutions. The cannabis industry, we target it like a specific vertical and within that vertical, operators of all shapes and sizes from the small manufacturer, small grower all the way to the multi-state operators. So we need to make sure that we can provide services that, you know, fit budgets for all sizes.

Matthew: Okay, so if I'm a business owner listening right now, they're thinking, okay, I invest in Headset and I'm getting this market data, am I gonna need like some sort of data scientist or someone to help me interpret this or is it digestible? How does that work?

Cy: Yeah, we try and make it as digestible, as prescriptive as possible. You know, we understand that people's time is limited and to really dig in and understand what the data is trying to tell you could be challenging. So we try and make it pretty straightforward for organizations. So you don't necessarily have to be a data scientist, you know, you can get most of the information that you need with our dashboards, the way they're just kind of out of the box developed. Now, if you want something more specific, or like a deeper dive and you're not capable, potentially, of doing that and you don't have a data scientist on your team, we do provide services to be able to help with that. So some of the larger organizations, you know, like to have that extra support kind of just be told what trends are out there, where the opportunities are. So we do enable support for that. But not all organizations use that. And we try and make it as self-service as possible. And we're always trying to improve that prescriptive analytics so that you can just kind of plug in some metrics and get exactly what you need out on the other side.

Matthew: And the data is pretty fresh. How close to real-time is it, would you say?

Cy: Yeah, we publish data, new data, every day for the U.S. markets that we track, you know, timeliness of the data really does matter. New products come to market every day and new brands being launched constantly. Obviously, new legislation happening, you know, not to keep picking on the vapor pen crisis, but in the State of Washington here, where we're at in Seattle, we saw flavored vapor pens being explicitly banned. So you couldn't have, you know, non-terpene-based flavors or original terpenes, so anything that was candy-flavored and so on, and that impacted sales quite a bit. And so if you are looking at data that might be four to six weeks old, you could be at a significant disadvantage making investments in something that changes quickly. So looking at how sales are going in a timely manner matters. It doesn't mean you have to look at it every day, that probably would be too much to log in every day to see. But if you wanna look at the beginning of the month, we're almost in February and you wanna see how January closed out, you can do that, you know, February 1st. So real-time is important to us.

Now in markets like Canada and Alberta, we have a bit of a time delay on our read at the moment. And a lot of that has to do with that S curve I was talking about before where it's a bit harder to project when they're issuing new licenses. It's hard to know exactly how many stores are opening, how well those are doing to kind of project out, but as it starts to stabilize, we're able to provide a tighter and tighter read. So you'll see Canada kind of going real-time in just a few short weeks here now that we kind of have a better sense of how it's all shaking out. So we focus on real-time. We do start depending on how fast-growing the market is with the time delay but eventually, we get all markets to our real-time read.

Matthew: And how's the partnership with Nielsen going? Can you talk about that a little bit?

Cy: Yeah, certainly. So our Nielsen partnership is going great. You know, when we started Headset and we wanted to do market intelligence, we really looked at organizations like Nielsen as models and Nielsen's been doing it for close to 100 years at this point, you know, really one of the leaders in market intelligence. You know, they're very interested in the cannabis space, a lot of the consumer packaged goods industry was looking at the cannabis space kind of trying to understand not only the opportunity but risk to their business. Nielsen needed a way to be able to answer those questions. So they looked for market providers, market data providers in the cannabis industry and really liked what we're doing at Headset. Now we have a strategic alliance with them. We do a number of things, both in Canada and the U.S. Most recently, we launched a pet CBD report.

So one interesting thing with working with Nielsen is we're able to get a sense of the unregulated market, so CBD products that are sold outside of dispensaries and retailers, licensed retailers, the stuff that might be sold at Walgreens or other big-box retailers. So Nielsen does a great job of that measurement, that retail measurement. And we're able to bring that together with our retail measurement coming from regulated markets. So you can get a holistic view of the space, which is pretty important. So if you're making, you know, a topical or some sort of pet food product and you wanna know what's going on in the market, it's not ideal to just look at one side or the other, even if you're planning on just entering the unregulated market or maybe you're planning on entering the regulated market.

You really need to understand both sides because it could impact sales, could impact forecast, there could be cannibalization. In a market like California, say, if I wanted to purchase a topical, I could go to an adult-use location regulated store or I could go to Walgreens. The products are slightly different. But I can make that choice given that I'm older than 21. And so looking at the market holistically is critical, and Nielsen really enables us to do that, you know, tracking product sales and the unregulated market and those channels, the Walgreens of the world, is just something that we're not particularly interested in pursuing. We feel like Nielsen does a great job of that already. And so coming together is pretty powerful for our customers.

The pet CBD report is our latest, again, looking at both sides, kind of understanding brands on both the regulated and unregulated channel. So that's pretty cool. You'll see more services like that more integrated CBD product sets. We're also looking at, you know, outside of CBD, more just CPG trends. So for example, understanding beverage categories, so carbonated or even flavors and using that data that's from the CPG world, so the consumer packaged goods world, you know, what kind of drinks do consumers buy just non-cannabis, non-CBD, and taking that information and producing cannabis-based products that might model on that. So pretty cool stuff that we're able to do with them and kind of able to provide a nice holistic view of the market.

Matthew: So let's move on to some personal development questions. What do you like to do when you're not working?

Cy: Yeah, not much time for that these days, but I do try and get some downtime on the weekend. I am of the belief that you kind of need some downtime just to prevent burnout. You know, I'm a perpetual learner, and so I'm always trying to learn something new. Something I enjoy doing often are the massive open online courses. Things like Coursera, I enjoy taking classes there, they're pretty, you know, straightforward. Don't take too much of a time investment, but you get a bit more out of a minefield than just maybe reading a book on a particular subject. So I try and do one of those at any given time. You know, I'm kind of in between them at the moment.

One that I'd recommend for any listeners that might be interested in this type of thing is one I just finished, which was Model Thinking from the University of Michigan, Professor Scott Page, he also wrote a book called "The Model Thinker." It's pretty fascinating stuff, just kind of how we can better think in models. You know, there's a lot of material out there if you do some research on how model thinking can really empower decision making. So I found that pretty fascinating.

So always learning. You know, I come...originally computer science major, I started my career as a programmer, moved into product and moved into startups. And so I still enjoy programming from time to time. So I kind of try and do that as an enjoyable exercise. And I'm not programming in the day job anymore for some years at this point. So that's something that I like to keep doing, it just kind of keeps my mind sharp. And those are all kind of, you know, boring learning programming things.

So on the recreation side, just in general, I'm trying to play more guitar these days. I used to play quite a bit in my teens and 20s and kind of fell off as I got busy with the career stuff and family stuff, but kind of going back to that. I find it pretty rewarding to just kind of get better at that and going back to that. So that's been a new thing for me just trying to find an outlet, but it's kind of nice to go back to it. Haven't bought a Harley Davidson yet, but I'm not 45.

Matthew: It's coming then.

Cy: I'm on my way.

Matthew: Well, it's interesting that as a business, you know, startup founder, you can always do one more thing. It's like I can squeeze one more thing if you finish everything on your to-do list. So there's that temptation of just allowing the scope to creep, to creep, to creep because you want your business to do well. You want everybody, the investors, your employees, your other co-founders, you want everybody to do well, and so you can always do one more thing but then that's like throwing one more log in the fire that's gonna burn you out. So it's a delicate balance and I feel for you there.

Cy: Yeah, it always is. Time is the one resource that we never have enough of.

Matthew: What's the last product you purchased, cannabis or otherwise, that you can't see yourself living without?

Cy: Yeah, let's see, most recently, I guess one of the more recent product purchases is I just picked up an iPad Pro just a few weeks back now and it's my first iPad since not the original but the first retina iPad where it was like the higher resolution screens. But my first iPad, I guess probably in like, seven, eight years. Kind of fell off, wasn't using it much, the old one obviously, getting pretty old. So I got this new one and I find it pretty great. And actually, I think it's like the 10th anniversary of the iPad, which is crazy to think it's been 10 years. But the Pro, I do enjoy, you know, it's almost a laptop. I've tried to use it for work items like I can do email pretty easily on it, document editing and things like that. So it's got some productivity aspects but it's also just kind of a great device for other services like the Coursera stuff or reading on my Kindle or even guitar like I have some apps that help me just stay in practice there. So I kind of find it as this very flexible device.

So I can't live without it, you know, I'm getting there. I probably could live without it but it's trying to become more and more of my day-to-day. You know, the phone itself, my iPhone is certainly the product I can't live without. But I think the iPad is a bit more flexible, bigger screen, has more productivity, easier to do things on. So that's kind of my latest and greatest. I am enjoying it. iPad OS is a bit difficult. I haven't had a chance to use it, but the multitasking and stuff's bit cryptic. I'm still trying to get there. But so far, so good, and I'm a fan.

Matthew: Interesting. I know Apple's working on glasses is their next big thing. I think they're released in 2021 or 2022. And so we can even move from that iPad experience to something even more intimate right there with our eye movements and it's gonna be interesting to see how that happens because it's hard to be more addicted than all of us are to our smartphones. But I feel like the glasses is really gonna be like a merging of man and technology in some way.

Cy: Yeah, you know, it's interesting if you're an Apple person, but they have the screen time where it'll highlight on a weekly basis, you know, the screen time used. You know, you're in front of your screen an average two hours a day, or whatever it may be. And so with things like glasses, that's going to be perpetual screen-time potentially, and I know there's a trend, you know, people are trying to pull back. And I think it's great that it kind of highlights the screen time so you can kind of see it right in front of you. And kind of know, "Okay, well maybe I need to pull myself away from the screen," which is hard to do sometimes given that there's so much great material on a thing like an iPad. But it will be interesting to see the glasses and if that's gonna happen. I know that AR stuff, Apple's done quite a bit. I haven't used as much of it on the phone. But they've made a lot of investments and the augmented reality, I think, is where the glasses will go. And I think there's gonna be a lot of productivity that you're gonna get out of it, particularly for manufacturing, but as a general consumer, should be pretty cool to see, you know, how that all shakes out. Although, I'm still not wearing an Apple watch because I kind of wanna not have to look at something all the time.

Matthew: Yeah, I feel the same way.

Cy: Right, right. And it'd be too tempting. I'd like to think that I have more willpower, you know, I wouldn't look at my wrist buzz because I got a text. But right now, if my phone's on my desk and I'm in the middle of something, you know, I try to limit distractions to kind of get more of that flow state really some of the deep work and perpetual, like, dinging or texts coming in or emails flying in can be quite distracting for me. So, I don't know about glasses yet, but I'm sure if everyone's wearing them, I'll be right there with everybody else.

Matthew: So with your computer science degree, being in the tech field now for a long time, is there anything that you feel like is going to massively change or upgrade humanity? Apart from, you know, the Apple glasses we just talked about, that's kind of on your radar where you're thinking, "Wow, if this takes off, it's gonna accelerate a whole new technology cycle that most people aren't looking at?"

Cy: Yeah, I definitely think, you know, AI will still play a big impact or will certainly play a big impact on being quite disruptive for a lot of industries. It's not a new idea, certainly, and it kind of comes and goes in waves. You know, there was a big push, you know, decades ago and then it kind of cooled down and kind of came back around. And I feel like some cooling is starting to happen, you know, like self-driving cars, everyone thought would happen by now. And then it's getting closer and closer but there's certainly challenges with it. But I do think that for the near future, it's gonna be quite impactful.

We use it quite a bit at Headset, we use AI or deep learning for classification problems. So you can imagine we have connections to about 1000 retailers and dispensaries and in all those locations, products are coming in and we have to map those products back to products in our product catalog. So we've got a database, what we consider a canonical product, so all the products that are sold in any market that we track, and retailers are entering those same products with their own nomenclature. So maybe they're using acronyms for the names or maybe misspelling product names. You know, UPC hasn't been particularly adopted in the market quite yet. So there's no single key. So what we have to do is we have to normalize that data, we have to map that back. And machine learning, deep learning is really good at that, you know, to be able to do those classification problems.

And I feel like, we're doing it for this vertical. I can only imagine, you know, things that have a wider reach than the cannabis industry adopting a lot of this type of technology, and it just becomes easier for organizations to invest. And I think that there's just more people that have been, you know, putting time and mindshare towards this stuff. So I think we'll see more impact things like data processing, a lot of what we do, I think it's gonna end up automating out a lot of jobs and really not just like low paying jobs, not just like data entry jobs, but I mean, you're seeing trends like traders in New York, the banks, like big banks looking at, you know, coders instead of, you know, gut instinct-driven traders are more coveted by these groups. And so it's really to build these kind of algorithms.

So I think that it's gonna be a pretty big...have a big impact. You know, again, like mobility, self-driving cars, self-flying vehicles, it sounds crazy, but I think if we're talking in 20 years, I think we'll see that stuff. You know, we find a lot of value in it for the normalization. It's pretty magical when it works. So I think, you know, applying that to all sorts of industries, you're just gonna see that as a narrative for the decades to come.

Matthew: Great conversation, Cy. Thanks so much for coming on the show. We really appreciate it. So how can listeners find Headset and reach out to you if they're interested in getting access to data?

Cy: Yeah, yeah, certainly, just head over to headset.io. That's our website, you can learn more about our services. We published some great industry reports. There are no costs. They're just kind of interesting deep dives into the data. One of our more recent one I mentioned was looking at weekly sales, particularly the last week of the month sales. So if you wanna see those numbers, you can go, headset.io, and download that report. I also, like, publish blog posts. You know, one of the things given our mission is to enable the success of these operators is giving, you know, people access to data and no cost. You know, we hope that organizations find it helpful to kind of get a good sense. And if they wanna dive in more, we're happy for them to become subscribers, obviously. So encourage your listeners to go check us out, headset.io, grab some white papers and reach out and let us know if we can help you.

Matthew: Well, it's been so fun to watch the growth of Headset. Good luck to you and your team in 2020, Cy.

Cy, Thanks, Matt, we'll talk to you soon.

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