Ep 288 – Cannabis Customers Crave In-Store Experiences, He Delivers…

jon avidor shryne group

With online shopping at an all-time high, dispensaries are looking for more and more ways to create retail experiences that inspire customers to shop in-store.

Today’s guest is Shryne Group Executive Chairman Jon Avidor, who will explain why customers line up for his cannabis dispensaries AND what experiential retail means for cannabis.

Learn more at https://shrynegroup.com

Key Takeaways:

  • Jon’s background as a business attorney and what inspired him to enter the cannabis space
  • An inside look at Los Angeles-based cannabis holding company Shryne Group Inc.
  • Ways in which California’s cannabis market affects the rest of the country
  • Why Jon believes it’s important for Shryne Group to be a vertically-integrated company in the cannabis industry
  • How Jon has created experiential retail experiences so successful that customers line up at his dispensaries
  • Jon’s advice on how to spark excitement in customers with fun attractions like Instagram pods, art murals for photo-taking, etc.
  • The types of people dispensaries need on their team to achieve an exciting in-store environment
  • Exciting things to expect from Shryne Group in the next 12 months
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-store retail is getting harder and harder for merchants unless you're one of the few that creates an incredible experiential retail environment that excites, inspires, and creates an X factor consumers can't get shopping online. Our guest today is going to share why customers line up for his cannabis dispensaries and what experiential retail means for cannabis. I am pleased to welcome Jon Avidor of Shryne Group to the show. Jon, welcome to CannaInsider.

Jon: Hey, Matt. Thank you for having me.

Matthew: Give us a sense of geography. Where are we in the world today?

Jon: I'm joining you today from downtown Los Angeles, sunny California, and our operations are primarily located in the state of California.

Matthew: Okay. Well, give us a little overview, and what is Shryne Group on a high level for people that aren't familiar?

Jon: Sure. So Shryne Group is a vertically-integrated cannabis company with assets ranging from cultivation as far North as Humboldt County in California and as far south as Palm desert with retail locations there. We've got manufacturing, distribution, and cultivation just about everywhere in between up and down the state as well. Our operations are the result of a consolidation of some of the highest performing assets in the industry that has taken place over the past two years since I've been involved. Our main hubs are in Los Angeles and Oakland. We've got vertically-stacked licenses in downtown Los Angeles and in Oakland where we do our manufacturing and distribution, and we have retail locations as well.

Matthew: Okay. Can you share a little bit about your background and journey and how you got into the cannabis space?

Jon: Sure. So I'm a mergers and acquisitions attorney. I worked at big law firms for my entire career. Started at Sullivan and Cromwell in New York and then practiced at Goodwin Proctor in Silicon Valley. And it was a bit of a deal junkie doing a lot of mergers that were hundreds of millions of dollars big or all the way up to billion-dollar transactions of selling companies to large tech buyers or to consolidated companies in various industries, pharma, big tech, etc.

And, at some point along the road in 2016, I decided I liked working with entrepreneurs so much that I wanted to become one myself. And I launched my own legal practice and a venture capital fund early that year that I used as a springboard to work on projects that excited me. So I would work with founders and entrepreneurs who had exciting businesses, technologies, projects ideas that they were really passionate about, and that made me really passionate about them. And the venture fund was a project that I created so that I could invest alongside of these businesses that I was helping on the legal side.

So what grew out of that was the ability and the freedom to really do add value to companies and to projects that really excited me. One of those projects was a business out of Northern California that was run by a good friend of mine of 15 years who had been amassing a set of cannabis assets in Northern California that were ranging from farms to retail locations and everything in between. In 2018, I started working with this particular client and friend to develop the assets and to assist with potentially raising money, and creating partnerships, and consolidating assets into a top company that we could use to leverage and raise additional capital.

So that project kind of snowballed in late 2018. And we had created a couple of brands, used to be known as FX, and we'd started consolidating all these assets together, and that process grew into consolidating one of the largest companies in the state. And that's how Shryne Group was born, and that's how I ended up getting involved. I joined the company after having put together this legal transaction that created the Shryne Group. I joined as executive chairman in July of 2019 and have been basically merged my law practice in New York into another firm and moved to LA and jumped headfirst into the cannabis industry in 2019.

Matthew: So you've chosen California as kind of your primary focus, at least initially. That probably means you're really bullish on that geography. Can you talk a little bit why California at least is your initial focus?

Jon: Yeah. California is the largest legal market for cannabis in the world. It's not rocket science. It accounts for 25% of all the U.S. sales in the cannabis industry. It's also the epicenter of culture. We have Hollywood where influencers were born. The Kardashians came from Southern California. Style music, fashion all come from California and influence the way that people think and act across the globe. And so, California, both from a market-size standpoint and from a cultural relevance standpoint, seems like the best market to be setting trends in the cannabis industry.

Matthew: Okay. So the vertical integration there, was that part of the consolidation, or was there more of a strategy around that? Or do you feel like it was necessary if you were gonna thrive? What's the thought process there?

Jon: Yeah. So vertical integration is a product of, I think, necessity in the cannabis industry. If you look at the way that cannabis evolved as an industry over the past decade, and if you'll recall, California is probably the oldest legal market for cannabis in the world in that it's been legal since 1996, at least in the medicinal context. But in the shadow of federal regulation where it's still illegal at the United States level, the necessity grew to do business with a select few group of people who you could trust and who you could use cash with.

I mean, remember that you can't do credit card payment processing. Or, at least up until recently, you couldn't have access to banking. So this was a cash industry. And I think what ended up growing out of that is you have a very small subset of people with whom you can do business. So fast forward to recent years where the way that we do business is in this bubble of people with whom we trust.

And so the consolidation of assets across the different verticals in the industry grew out of this necessity to work with only people you trust so you can hand a bag of $1 million cash, you know, in exchange for a bag of flour sort of the old school way really had an impact on the way this industry developed. Now, from an economic perspective, it also makes sense, right? Our focus is on the bottom line.

I think Shryne Group wants to be a profitable company. It has been a profitable company since its inception, and the underlying businesses have always had a focus on generating bottom-line EBITDA so that it could sustain distributions to the partnership. And that focus on the bottom line really led us to say that vertical integration is the best way to go. And now add on top of that, from a business perspective, vertical integration just makes good sense.

You have a consistent supply of product with consistent quality, and you can trust the folks you're working with because they're your partners and you're all aligned in generating profits for the consolidated business. So that's how it came about. I think if you fast forward to the future and think about what the industry is gonna look like in 5 years, in 10 years, I don't think vertical integration is where cannabis will be. I think cannabis will look a lot like every other industry. The beverage industry is a good example where you will have distributors and brands who will be capturing a lot of the value of the profit. And you'll have commoditization at the productions and agricultural levels.

So you'll still have that sort of craft beers of cannabis where there will be, you know, growers who are maybe smaller and less large in terms of the amount of product that they can pump out on an annual basis. But for the most part, you'll have large farms that are run by conglomerated agricultural companies that are producing at the highest level and at the lowest cost. For now, though, it makes sense for us to have our own cultivation and to have our own manufacturing because those are processes that we like to control, and it just adds to our bottom line.

Matthew: To your point in the near future, interim future, there's gonna be some sort of commoditization with cannabis flour. You're combating that with strong brands and what I would call immersive experiential retail. Can you tell people a little about your recent retail opening and why customers were waiting in line?

Jon: Yeah. So retail's a major focus of ours for a number of reasons. And the first of that is there haven't really been a ton of established brands that have broken out of the camp out of California or out of any other state in which they currently operate. There's a handful of them, but the competitive landscape has not been fully set. So retail for us is really the opportunity to have a direct connection with our consumers and be putting products into their hands, hopefully, our products into their hands and really getting direct and immediate feedback as to what products are selling, what people are saying about the products, what they will come into the store to buy, and how they're interacting with those products. So retail for us is just a necessity of building brands and being at the cutting edge of the consumer's interaction with those brands.

Now, how have we executed our retail strategy? So, we were fortunate, as part of the consolidation of Shryne Group, to roll in one of the most popular and most emotionally-connected brands to its consumers in STIIIZY. And STIIIZY was born from the cannabis culture and made for the cannabis culture and so really hit...struck a chord, let's say, with consumers since it was developed really with consumers in mind. So our retail is simply a physical manifestation of the brand, STIIIZY, so far. So when we opened our downtown Los Angeles retail location, which was the first STIIIZY-branded retail location that opened, we had 4,000 people show up on the first day.

Matthew: Wow. That's great.

Jon: Of those people, about 500 waited in line overnight. So, by the time we came in in the morning, there were over 1,000 people when I arrived at 9 in the morning standing in line, you know, and we had to sort of audible at that point. We didn't realize so many people would show up, but what we did is, you know, we had to turn it into an event. So we had to bring tents, and bathrooms, and water and all the things that go along with having that many people waiting around in your parking lot.

Matthew: Yeah, that's kind of a high-class problem, but a problem nonetheless. I mean, if you and I were walking to this latest opening, could you just describe, you know, visually what people would be seeing, what the interaction would be like, and so forth so they get a flavor for that?

Jon: Yeah. And we took...there's some great video from this that we can share.

Matthew: Yeah. I can include your Instagram feed in the show notes so people can get a sense, and I'll try to get it exactly down to the open so people can see the open. Because I really want people to get a picture of this because as you were talking about how, you know, California's culture moves westward but also internationally, like, if you just have a plain old dispensary, that's not gonna fly after a while unless you live someplace where there's just such limited licenses that you get business. But that's really something I wanna get across to people, and I'll be sure to include that in the show notes. But go ahead, tell us what it'd be like to be a fly on the wall on opening day.

Jon: Yeah. So, for the first one, we kind of went a little over the top and had some fun with it. So, we had smoke machines at the front. And when we finally went to open the glass doors to the front of the dispensary, which also happens to be co-located with our corporate headquarters. So you have our sort of corporate people coming in at 9:30 in the morning to start their day walking through this line of people waiting outside and, you know, heavy security presence with, you know, armed guards around because it still is the cannabis industry and still a lot of cash that's floating around the environment here. But you would've seen basically all these employees walking upstairs going, "What is going on here?" You know, they all had an idea, but the excitement was really cool.

There was definitely a momentum in the air of the company, you know, executing on its goals and really succeeding and bringing people into our retail location. Now, what you would have seen if you were on the wall inside the dispensary was we actually had patient appreciation days, they call them PADs, where we brought representatives from many of the top brands that we sell in our dispensery to give out various promotional items and talk about their products and try to sell their products into the hands of the consumers.

So we were basically running, you know, thousands of people through the store on that first day, and people had an opportunity to speak directly with the representatives from some of the major brands so that they can get more information about the products that were being sold. So it was a riot. It was a lot of fun. But add on top of that, you know, we've done a lot to make our retail locations experiential as well. So there were certain things that were draws for people in addition to the free bongs we gave away and the discounted product that we offered, which is, I think, let's say the loss leader of bringing people in that door the first time.

Matthew: Yes. You do a lot of things. You have Instagram pods for customers in the store to take photos with kind of interesting backdrops. You mentioned the bong giveaways, huge art murals. There's kind of an element of showmanship and creating that event that you were talking about, an event-like atmosphere. What kind of people do you need on your team that kind of create this event environment that have a background in that that are capable of doing that? Because a lot of people don't even know how that's done.

Jon: Yeah. So this team has been really remarkable in that it's very gorilla in nature. So we do have top marketing professionals from some of the major brands across big beverage, big pharma, big tobacco that have added a really solid and diverse set of backgrounds to help shape what is cannabis marketing. But the core of let's say, building the STIIIZY brand, for example, came from the consumers. I mean, this came from our co-founders who were so tapped into the cannabis culture in LA because they lived it, right. I'll give you an example.

Our co-founder, James Kim, is a military veteran. He got back from his tour of duty in Iraq. And the PTSD was so heavy for him, and the VA and conventional medicine wasn't really giving him a whole lot to work with. So he turned to cannabis and created...he was also in the vape industry and had sort of built a business around nicotine-based vape back before Jewel took over the entire market and had an understanding that there was a desire to create a product similar to a vape product in the cannabis industry.

And only a few folks were doing it at the time, this is a few years ago, and so he created a vape pen that had cannabis oil in it that hit well, that also made you cough just a little bit because that was what cannabis smokers were used to. And also, it sort of made you know that you were actually still smoking cannabis. And he created a product for cannabis culture and really targeted, let's say, the 80% of sales that come from 20% of the consumers in the market. This wasn't your soccer mom's product. This was something for really the heavy cannabis users who used it to either manage anxiety or just get through life or used it recreationally to, you know, further their own personal goals, whatever those may be.

And because the focus was so heavy on the consumer, on creating a product for consumers, we were left with...really just needed to get the product into people's hands. So our marketing was simple. It was going out to the beaches, storming the beaches on weekends in Southern California and giving out merch and encouraging people to go to the local dispensaries where they could buy the product, which was rolled out to about 60 or 70 dispensaries at one time through a concerted marketing effort to get on the shelves.

And then these guys would fly, eventually when the money started being there from sales, would start flying airplanes across the beaches at the same time that they had these teams of models and cannabis users go to the beaches and give out towels, and give out beach balls, and give out tee shirts and hats and the like. So it was really this high-touch guerrilla marketing tactics that got the product into people's hands. And this team knew that once the product was on people's hands, because it was developed for the cannabis consumer by the cannabis consumer, that it would catch on. And sure enough, it did.

So Instagram followed and people started engaging with the brand. And really, it's that authentic connection more than any professional who came from Altrea on our team, or came from Red Bowl, or Shooting[SP] Preme, or wherever who, you know, are bringing us an air of sophistication to our marketing. It was really just the fact that the product was focused on what consumers wanted. And that's what I think gave us the leg up in creating at least the STIIIZY brand, and that we're trying to recreate for some of the other brands that we're building as well.

Matthew: As you look ahead the next 12 months, what excites you the most for Shryne Group?

Jon: We've got a lot of really interesting initiatives. One is, I earlier talked about retail and how big a part of our strategy that is. So, we are intending to open dozens of stores in the coming 12, 18, 24 months. We have four currently open in California. We should have another four by the end of Q1. I'd hope by the end of 2020, we'd be somewhere in the range of 20 stores or 30 stores if we really hit our numbers.

So that's an initiative that we're spending a lot of time and effort on. And, as I explained, having that direct connection to consumers where we can put our products in their hands knowing that our products are good and really are a reflection of what they want, built with consumers in mind, I think is a very high priority for us.

Secondly, I think the way that retail is going eventually for cannabis is the same way that retail went with the rest of the world, and that is people buy online. So delivery services are very exciting for us, and I think you'll see Shryne Group make a move in the delivery space sometime in 2020 and really take, I think, a piece of that market and help develop that piece of the market as well. And I think those are the two major initiatives for us as we look ahead to the next 12 months.

Matthew: I wanna ask a couple of personal development questions, Jon, to help listeners get a better sense of who you are personally. With that, is there a book that's had a big impact on your life or way of thinking that you'd like to share?

Jon: So I've read a lot of great books over the years. The one that really stands out for me when you ask this question is ''The Alchemist.'' It's not a book about business, it's not a book about management, but it's a book about your personal journey. And, for me, what I consistently remind myself throughout my career is that there's no real endpoint, right? This isn't about making a certain amount of money or achieving a certain status.

This is really about the journey and staying grounded with the reminder that life and your career are the daily decisions and the daily interactions you have with your team, and with your family, and with your friends rather than some pie in the sky goal of creating, let's say, $1 billion company, or selling a company, or any of the other goals that I think drives people.

It's really about the journey along the way. And what ''The Alchemist'' teaches you is that finding your personal legend as the author, Paulo Coelho, says in there, is really not the goal. It's really the adventure that you embrace as you are searching for that legend. So that book really stands out as one that I read when I was much younger, and I try to read at least once a year to keep me grounded and as a reminder that it's the journey, not the end.

Matthew: What is the most interesting thing going on in the cannabis field besides what you're doing at Shryne?

Jon: So I think if you fast forward 10 years, cannabis is going to be at least 50% run by the big pharma companies. And the cannabinoids that come from the hemp, from the cannabis plant, can be created in a lab. So I think one of the most exciting innovations and developments in cannabis is going to come from the companies that are viewing this from a big pharma lens and creating and taking forward the initiative to figure out how those compounds, how the various cannabinoids actually interact with the human body and what the effects are.

So there's a company that my good friend, Mike Gorenstein, who runs Cronos Group, I used to practice law with, that Cronos Group is working with, called Ginkgo Bioworks. And Ginkgo is making strides in really isolating the compounds that are in the cannabis plant and how those affect human behavior, and human moods, and all the cool things that come out of either smoking or ingesting cannabis.

And if you can boil down, if Ginkgo is able to boil down to a very molecular and cellular level, the compounds and how they interact, I think what you'll see is a drastic reduction in the cost of producing cannabis or producing the oil that goes into all the products that are not smokable flour. So that's the most exciting thing from my perspective, at least through a business lens, in terms of really innovation and changing what the market's gonna look like in the next 10 years.

Matthew: I have a Peter Teal question for you. What is the one thought you have that most people would disagree with you on?

Jon: So I happen to think that states that are limiting the amount of licenses in their locations are not necessarily the best breeding ground for profits for cannabis operators. I think there are a lot of cannabis investors and operators out there who would say that Massachusetts, and Illinois, and Florida where there's really a limited amount of licenses are great places to invest and build companies. I would say that the states that are focused on building an industry that looks and feels more like the other industries that it mirrors, for example, tobacco or beverage, I think those states are where you wanna put your investment dollars.

And the reason for that is the states with the more developed infrastructures and the more support, both at the state level and at the local levels, are going to be the ones that create the most value and innovation. And, at the end of the day, we're just at the very beginning of a decade's long industry growth, and you wanna be aligned in markets that are supporting new entrepreneurs that are taking innovation to the next level.

Matthew: Oh, that's an interesting take on it. Well, final question here, unplanned. Since you've spent time in the New York City area, I think you went to law school outside Chicago, and now you're in California, what's your favorite food at those three places? So when you go back to New York or Chicago, what's one thing that you have to have, and then what's your favorite food in Los Angeles?

Jon: Yeah. So, Chicago, I didn't love the food that much. I think that might be a controversial statement in itself.

Matthew: I'm gonna have to edit that out being a Chicago native, Jon. I'm kidding. Go ahead.

Jon: The deep-dish pizza really doesn't do it for me. I like a slice of Joe's from New York above all and a nice New York bagel from Marie's. But LA is really interesting in that it's got an amazing array of diverse foods like...you know, the Mexican food and the Thai food here is really something special. I actually think... I remember in Chicago when I was in law school, we couldn't find a place to get a great burrito. And, I think the same thing goes for New York. So, LA's just got hands far and above the selection of amazing Mexican food, and that's what I love about LA.

Matthew: Jon, as we close, can you tell listeners how to find out more about your cannabis brands and interact with you?

Jon: Yeah, I think anyone who is a connoisseur of brands and wants to learn more about our main brand, STIIZY, should follow us on Instagram. Just @stiiizy, which is, S-T-I-I-I-Z-Y. And if you're interested in Shryne Group and what we're doing on the corporate level, our website is shrynegroup.com.

Matthew: Great. Well, Jon, thanks so much for coming on the show and talking with us, and good luck to you in 2020. You got a lot of moving parts here. We're interested in what's gonna happen and, hopefully, you'll come back on and tell us how all this has evolved.

Jon: Thanks, Matt. Look forward to continuing to grow and keep our heads down and build something special. And thanks to you for being a good conduit of connecting with the industry, and look forward to working with you in the future.

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