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Ep 294 – Dispensaries Are Re-Engaging Old Customers Thanks to This New Platform

andrew watson happy cabbage

A big problem for cannabis retailers is how to re-engage once enthusiastic customers.

CEO of Happy Cabbage Andrew Watson tells us how dispensaries are using his platform to rekindle customer relationships.

Learn more at https://www.happycabbage.io 

Key Takeaways:

  • Andrew’s background in cannabis and how he came to start Happy Cabbage
  • An inside look at Happy Cabbage, a data analytics and insights platform for the cannabis industry
  • Ways Happy Cabbage re-engages previous dispensary customers with highly targeted, personalized messaging
  • Analytic tools Happy Cabbage provides dispensaries that enable them to measure the success of their campaigns
  • Generating customer excitement through experiential events
  • Similarities between stripper economics and the economics of dispensary product placement
  • Dispensaries currently working with Happy Cabbage and how they’re using the platform to re-engage their customer base
  • Andrew’s experience with CanopyBoulder, a business accelerator and venture capital fund for the cannabis industry
Click Here to Read Full Transcript

Matthew Kind: 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 C-A-N-N-A-insider dot com. Now here's your program.

A big problem for cannabis retailers is how to reengage once enthusiastic customers. Andrew Watson, CEO of Happy Cabbage is today's guest and he's going to tell us how dispensaries are using his platform to rekindle customer relationships. Andrew, welcome to Canna Insider.

Andrew Watson: Hi, Matt. Thanks for having me.

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

Andrew: Right now I am in Boulder, Colorado, but Happy Cabbage Analytics is based out of San Francisco, California.

Matthew: Okay. What is Happy Cabbage on a high level?

Andrew: On a high-level, Happy Cabbage Analytics is a integrated data platform that is really empowering cannabis business owners, particularly small cannabis business owners, with how to target their customers and revolutionize the insights that they're able to garner from their point of sale data.

Matthew: Andrew, how did you get into this crazy world? What's your background and journey like and how did you come to start Happy Cabbage?

Andrew: I come from a background of actually corporate finance, data science. I spent many years at Salesforce. I spent a few years at One Medical and I actually started getting involved in cannabis in about mid-2017 in which I started doing analytics consulting for a small delivery service out of Oakland that was doing maybe 30 orders a day. Started to do some very basic prelim analysis like said, "Hey, you know, you have these opportunities with your customers. Hey, you have these opportunities with your pricing." By implementing those insights, that customer was able to take his business from doing about 30 orders a day to about 110 orders a day, in a six-month time-frame.

It was a really wild ride, a really exciting time, and with that, we managed to see and my co-founders got involved in that process, and we managed to see how successful a cannabis business can be even a small cannabis business, who doesn't necessarily have a very technically adept business owner can be empowered by analytics and can be empowered by data if it's given to them in a very simple way. We took the software and the stuff that we started built with that owner, and we packaged it together into Happy Cabbage Analytics about a year ago and I've been going to market with it ever since.

Matthew: Okay, let's dig into this a little bit here and set the stage. How often do customers visit dispensaries right now based on your data, what's the average?

Andrew: A regular customer and that's someone we define as having ordered three or more times, orders on average every 20 days is what it looks like.

Matthew: In the intro, I mentioned rekindling customers who are once enthusiastic but have not been back to the dispensary lately. That's a really frustrating thing for a retail owner because it's like you have this relationship that's like what happened? What went wrong? Why did the enthusiasm fade? How do you reengage them and make them excited about the dispensary again?

Andrew: That's a core opportunity that we see a lot in our data is how cannabis business owners will have cannabis consumers, cannabis customers, who had been engaged, had been enthusiastic, hadn't come back in a long time, right? First, what we do is we empower with that business owner with being able to even know who those people are, and then we empower them with the ability to segment and target those customers with very personalized messaging, right? If I purchase edibles, right? I'm a regular edibles consumer, and I haven't come back to the store in many days and I get a text blast of advertising like we have discount ounces of flower, that's not going to be relevant for me. I'm going to feel as if, "Oh, this is just a robot texting me. I don't vibe with this. This doesn't mean anything important to me."

If that message says, "Hey, I miss you. I know you used to come in. I know you prefer edibles and because of that, I'm launching a really great new brand on my shelves that I think you'll like." That's a lot more personal and that'll resonate with me as a consumer in a much bigger way, and that's the kind of messaging that we out of the box empower these cannabis business owners with.

Matthew: Okay, so you mentioned this can really easily turn people off as well as turn them on depending how customized it is and understanding what the most important top of mind thing is for the person that's getting that text message. Everybody's gotten some of those and it's like, "Oh, man." In fact, I'm on somebody's list for the person that the cell phone number before me seven years ago, and I still get text message. That's very top of mind for me, how off-putting that is. It can be a really two-edged sword here if you use the wrong way, so you got to respect it like the force, dark side and the light.

Andrew: Now, I would say that makes a lot of sense. A key thing about us is that we see customers who start like that, they're like blast, blast, blast, blast. What we found is that we can drive a lot of ROI for our customers like tens of thousands of dollars of return on investment in a month. The average consumer in their customer base will receive a single text message that month, just one per month. It can be really impactful if you're doing it in a really targeted impactful way.

Matthew: Okay, so if you were looking over the shoulder of one of your dispensary customers who are using Happy Cabbage, how will they actually see how successfully an SMS campaign or text message campaign was, how is that measured? How does that look to them after it's sent out? Let's say it was sent out two days ago, and we want to take a look at what happened. How is that actually measured, it's like a conversion and see how successful that was?

Andrew: We surface it back up as a very simple UI, a very simple table where you can see hey, here's my messages that I sent. Here's how many customers I sent per campaign, what the opt-out rate, what the delivery rate was basic SMS numbers everyone's used to seeing. Then we have the actual impactful numbers which are 24 hour ROI, seven day ROI, 30 day ROI, and then we then service up the sum of all the ROI that they've gotten within the month.

The mechanism we use is the same thing that Google uses. When you see how much your paid Google searches drive last touch attribution. What we do is we see whether or not somebody went into the store after receiving a message. Did they go into the store? Or did they go online and order delivery within 24 hours, 36 hours, seven days, 30 days, et cetera?

Matthew: That's interesting, keep going.

Andrew: Well, in particular, then what we're also able to do is then if you talk about, okay, what segment did we go after? If we went after a segment that hasn't ordered in 90 days and then we see, "Oh, wow, we were able to generate thousands of dollars from that in 24 hours." That is a very impactful, very clear ROI to the end-user, and those are the ones that we try to focus them in on in terms of articulating our value prop.

Matthew: Even when you get an SMS message and it's the exact fit for your needs, the first time you might be like, "Yes, I'm coming in, and this is a exact fit, I'm going to buy some flowers, some edible, some infused products, some vape cartridges." Then there's this really fine line where it's, even though you know my psychographic profile, it's one message too many. How do you get right up to that where you're delightful and don't cross the line to pain in the ass?

Andrew: Yes, that's a great question. Making sure that we're not really texting more than one a month per consumer, I think is really important. Making sure that the messaging is actually powerful and impactful. Everyone has the right to opt-out, right? It's all based on opt-in opt-out behaviors. If they've joined the list, and they've said I'm willing to be on the list, I'm willing to receive this information, it generally means that they're more inclined to want to receive messaging.

That being said, we're a data-first company. We're constantly learning from what our customers are doing with our platform, and with that, we can start to actually build predictive models around these customers and say, "Hey, customers who have these attributes need only this amount of engagement in order to come back. Customers who receive too much engagement are likely going to drop off. Let's predict that utilizing our machine learning that we have the ability to embed into the platform."

Matthew: What kind of customer data do you wish you could get that maybe it's not accessible now. Would you like political preference? Maybe you probably already have age but I'm just thinking for a political campaign the day after the presidential election, if you know someone wanted a liberal candidate and that candidate won, you could say, "Let's celebrate." If you knew someone who was a conservative candidate, then you could say, "Let's lick our wounds with this discount on a pre-roll." Is that getting too personal? Where's the line and what kind of data do you really want to get to complete that profile?

Andrew: Yes, that's a great question. I come from I mentioned a background doing data at health care companies. In a healthcare company I worked at, we had the same issue when it came down to thinking about what data do you need to understand whether or not somebody is going to go into the doctor. You gather so much information in healthcare.

You gather so much information about people's healthcare conditions, age, demographics, diagnoses and still it's not enough. What I find is that demographics, although they are the known knowns, although we can say like age does this, gender does this and although they are predictive most of the time, you can find out a lot about what you need to know based on just observing the behavior of what they're doing.

Going back to the healthcare standpoint, we didn't really need to know a lot of that extraneous information if you were able to just describe a model that really understood some of the causal factors that you're able to observe that lead to healthcare behavior, same thing in cannabis. Cannabis usage cuts across income, it cuts across demographics, it cuts across political preference based on the surveys that we've been doing.

What we can really start to see is let's describe people who are purchasing edibles on Friday at 12 and let's observe their pathway through their purchase and let's start describe them as a group, let's start to try to predict their behavior as a group. Ignoring necessarily, maybe inserting any other demographic information or other sort of things that we think are causal but focusing on the actual outputs of what they're doing if that makes sense.

Matthew: Yes.

Andrew: I think that's where really impactful, really good models come from is not throwing too many variables in, focusing just on the outcomes and similarities amongst people that are producing the outcome you're focused on.

Matthew: I feel like we're kind of reaching peak concern in privacy or people want a transition to something else and we're right now even talking about data points for customers, it's because we don't have specific examples that we can say, "Jane Doe or John Doe." I feel like sometimes data is like this impersonal thing and if there's some way to make it, treat the person like a person, how do you have that discernment to figure out how to treat the person like an actual person while still having a mass message?

That seems like a really tricky thing but are you really looking at what the headlines and the text message should be and the content of the message like is it fun? Is it playful? Are you relating as a human? Or is it more just get right to the point like "Hey, this much off, you come in today for this product."

Andrew: What it comes down to is a lot of understanding the business context from the business owners about what a certain group of customers, how that business owner believes that they behave, believes what they want, believes what they are. I can come in as the data person and I can say, "Here's a segment of people who order in eight every 14 days who are probably likely to purchase another eight at this point in time."

To that business owner, they go, "I've interacted with the people who purchase an eighth every 14 days. I know that resonates with me as people. I know because I've been in the store every day and I think that they would like this kind of messaging." Let's implement that messaging and let's see how it works. Okay, that messaging really worked, let's replicate that for other people that look like they would also like that same messaging.

That messaging didn't work? Now that we know that, let's test and let's figure out what messaging will work.

All basically using really the business brain of a small business owner, a dispensary owner who knows their customers the best. We do not know their customers better than them. We just have the ability to describe and segment the customer base in a way that makes it resonate with them as opposed to just having a list of 10,000 people you're texting every day.

That's I think how we can inform really personalization of messaging as opposed to just making it seem like a robot is sending you messages.

Matthew: You told me earlier there are creative ways you can make in-person events based on customer preferences. Right now we've been talking about sending text messages to get people into the dispensary just to purchase product but there is ways to generate excitement, an experiential event around a brand, can you talk a little bit about that?

Andrew: Yes, that's great. We have a retailer in San Francisco who-- One thing that he does is bring brands in for promotional events, set up a booth. I'm sure you've seen them if you've been into the dispensary. They set up a booth, offer to demo the product and everything like that but if that's between 4:00 and 7:00 PM on a Thursday, who's to know who's going to show up in the store?

What we're able to do is we're actually to take our platform, identify people who are likely to let's say that it's Canndescent in the store. Identify people who are likely to purchase Canndescent or people who really love Canndescent say, "Hey, look, we know that you really like Canndescent or we think that you're probably going to like Canndescent. In order to help you through your consumer cannabis journey, we're bringing them into the store so you can go to them and talk to them and ask them specific questions about the Canndescent products so that you can observe and learn more about CCanndescent."

With that, we're able to drive meaningful results of-- It's not going after a lot of people, it's maybe only going after a few hundred at a time bringing them into the store and actually having them engaged and then both the brand and the dispensary then make an ROI on the investment of having someone in the store for a few hours promoting the brand.

Matthew: That's really helpful. Now, let's talk about delivery. We already talked about people coming into the store and you mentioned delivery but how is delivery different in ways that are important for listeners to understand and what you can do in creating a campaign for delivery?

Andrew: California is a really interesting market when it comes to delivery. Most if not all of the four walls of recreational licenses also give you the ability to do delivery. Every dispensary, brick and mortar, technically also has a delivery business that they can run out of the back of the business. It's good for those businesses because as long as they make a margin on each individual delivery, it helps increase their profit because it helps get them more sales out of the same fixed costs of the store.

One thing we found that's very impactful a lot again with the tool is our geographic capabilities. We can say, "Hey, we know our competitor is opening up a brick and mortar store in the west side of the city." I live in San Francisco, I'm thinking like out by the ocean but we have customers who live on the west side of the city, out by the ocean. Now, they, because of the convenience, might get brought into that competitor store.

It would be really awesome if we could engage those customers with our delivery offering so we can actually compete in convenience against that competing store that's opening out. What we do is we find the geographic segments, say to those customers "Hey, what's it like living out by Ocean Beach? We know it's a hike for you to get downtown and purchase at our store, did you know we offer delivery? For you, we're offering 20% off, et cetera, et cetera, et cetera."

With that, you can actually seed an entire delivery business from your existing customer base and get a really great revenue stream without having to pay $5,000, $10,000, $20,000 a month to get on weed maps, to try to acquire new customers. We've seen that be very, very impactful and a very, very good thing for businesses in California to do if they're trying to get that extra amount of profit at the end of the month to keep their business afloat.

Matthew: What's the price points for people that are listening that might be interested in being a Happy Cabbage customer?

Andrew: We price competitively to other SMS products on the market right now. I like to say that we're not an SMS product full and through, we are a data product and we incorporate an SMS feature in order to action upon the data. That results in us being more affordable and we try to price it therefore more affordably than some other usage-based products.

In particular, we have no hidden fees, no upfront fees, no over [unintelligible 00:19:26] It's just fixed flat month to month. We price it at about $1500, gets you about 50,000 customer engagements.

Matthew: You often compare the economics of dispensary placement of products and brands to stripper economics. Can you talk what that means?

Andrew: [laughs] Yes. For the listeners who are not aware so strip club economics, the stripper economics as I like to call it refers to the fact that in a strip club because there really aren't a lot of labor protections around the strippers, they're contract laborers and they're forced to rent the stage they perform on. Then after they're done performing, they pay the rent and then they also have to pay the bouncer, pay the DJ, and essentially, it's a big pay to play market.

Shelving space in a dispensary is basically the exact same model. If a brand wants to be prominent and get a really good time slot or really good placement on a premium shelving spot, they have to or more and more dispensaries are asking them to pay to get into the store. That's hard.

It's good for the dispensaries because they are saying, hey, look, our shelving space is valuable. It's limited. It's good for the brands because if they believe that they'll get more traction they can pay, but both of them are going to feel a little bit like, okay, how much ROI am I really getting from this? The dispensary is going to say what if I had given that to a different brand and the brand's going to say I'm paying a few grand a month to be able to do this. Am I seeing results?

What we're able to do is bridge the information asymmetry and bridge the gap, and basically say to the dispensary owner, hey, if you want to prove out to that brand that their investment on your premium shelving unit was worth it, let's start driving that brand campaigns to people who we know via our recommendation engine or via just like they're purchasing these products a lot, people who would like to purchase that premium.

We say to the owner, hey, you can even go back to the brand, and we would love to be able to work with more brands with this and basically say, hey, I can guarantee your investment. I'm still going to need it but I can guarantee return on it because I have a tool and I have the capability to drive customers to that shelf. That's a big thing that we work on with our dispensary clients.

Matthew: Happy Cabbage is a pretty young company at this point, but you're already in some dispensaries in California as you mentioned. Can you talk about who you're working with and how they're using the software right now?

Andrew: Yes. Actually, most of our clients are now actually our delivery businesses, and then we have a dispensary in San Francisco. Each client is very different. The dispensary in San Francisco is catering to a more affluent client base. Generally speaking, more premium products, we can see that they're really big on how to do different brand promotions, how to do in-store traffic, bounce their delivery business. We also have a delivery client out of Oakland who actually has a geography that spans all of Sacramento, Tracy Stockton, lot of Central Valley, much more lower-income, but actually higher engaged population. They are really keen on making sure that they are making sure they're going geographies that may have lower retention, and they're re-engaging those geographies. They're really keen on making sure their VIP customers are constantly getting discounts.

When they do bring on name brands, they're also keen on making sure that those name brands get traction by promoting them through a tool before they invest necessarily in more upfront inventory for that brand.

We see it's clients of all shapes and sizes of populations that are all shapes and sizes. That's a really key interesting thing we see is just how different demographics across the Bay Area behave associated with cannabis.

Matthew: You’ve an interesting way to visualize cannabis flower on a cost per gram basis between markets in California. Can you talk a little bit about that and maybe where the price points are at right now?

Andrew: That's a really great point. One thing we do as a data company, we are always out there collecting information, collecting data. One thing we do is we mimic how Google collects information about what pages to search. We use that to collect pricing information available on different menus basically of dispensaries. We target some dispensaries and we monitor what they're advertising, so we can monitor price changes across the whole state and really, we have thousands of them across the country that we're looking at.

With that, we've been able to observe this really fascinating trend with flower in California, which is commodity pricing. Effectively, a unit of flower, an ounce of flower, a gram of flower, an eight of flower is all priced pretty much the same in a price per gram ratio. This is not true when you get to like vapes, concentrates, edibles. Basically brands there are able to ink a margin and they’re basically able to price a premium for smaller quantities. In flower, it doesn't matter. Basically an eighth is 3.5 times more than a gram and a ounce is eight times more than an eight. What that means is it's becoming a commodity. What that means is it's getting priced down to the way apples are priced and potatoes are priced.

It means that it's really great for consumers because they're getting some of the best prices we've ever seen in the open market. It must be much harder for brands and wholesalers because it means that it's very difficult to ink a margin on flower, and particularly if you think of like the vapor crisis and stuff, there's not a lot of other avenues for them to go to, to make sure that they're inking a margin and that they're actually getting a premium, as opposed to like I mentioned flower where pretty much they must be selling it at cost, given these price dynamics that we're observing.

Matthew: I'm not sure if you're in CanopyBoulder now or you are alum. For people that aren't familiar, CanopyBoulder is a seed-stage cannabis accelerator focused on ancillary cannabis startups. Can you talk a little bit about your experience there, Andrew?

Andrew: We are currently in the winter 2020 cohort, about halfway through it, which is why I'm out here in Boulder, Colorado. It has been an amazing experience. For us as a smaller company, we were able to gain revenue, gain traction before we took the investment from Canopy, which made us feel as if we are actually really well set up for a program like Canopy because we're able to go into it and really have intentions about what we're trying to achieve. Where before maybe it would have taken us time to maybe iterate and market test an idea with advisors, mentors, major players in the industry. Now we're able to talk to folks across brands, across retailers, across investors, and very quickly gain feedback, gain understanding and get some rapid iteration on our product and our sales cycle that is really helping supercharge our business.

It's been fascinating. It's also really fascinating to see how cannabis out here in Colorado is performing how different than it is in California. The ability to branch out and see how different markets are working are very valuable as well.

Matthew: What is your perspective being from California and Colorado right now? How do you compare and contrast the two markets just from being a visitor?

Andrew: I like this. I always like to put this point about how we really need to put the size of California into context. Colorado, I agree. It has become a more "mature" market. It is more vertically integrated. You have multi-franchise things. You have more corporate operations in place. The entire state of Colorado has fewer people than the San Francisco Bay Area, and the San Francisco Bay Area is less than half the size of Southern California. California is the sixth-largest economy on the planet.

It is so large, so vast, and so wealthy really in a lot of ways economically that it's really difficult to make equivalencies across smaller markets like Oregon, Washington, Colorado, with the entire state of California. I think that there's a mentality that California is a little bit more of the Wild West, that things are a little bit more nascent, things are a little bit more hectic, things are a little bit more mature and calmed down and stabler here in Colorado. There's truth to that. Again, because of the size, let's say San Francisco managed to be a solid consolidated market like Colorado, and the rest of the state is Wild West.

We would still think of the whole thing as Wild West simply because of the relative sizes. Because of that, I do think that there's a huge opportunity in California for people who are willing to go for the ride, but there's a lot of learnings in Colorado about what this business is able to achieve that we need to take back there, but really do them at scale.

Matthew: I also read that I think it's Los Angeles County consumes more cannabis than all of Colorado. Colorado is such a big state but not densely populated that sometimes it's hard to visualize how the different populations are. There is a California vibe in Boulder, and also now in Bozeman, Montana, which feels like it's becoming like Boulder-like. Interesting things happening there. Where are you in the capital raising process? You mentioned you took investment to be part of Canopy Boulder, do you have other investors? Where are you at right now?

Andrew: CanopyBoulder was our first outside investment outside of our founding team. We are actively in the program seeking to raise our next round. If there are any investors listening and they would like to get in contact with me, please do, but we're pulling that together. Our hope is to be able to raise some capital by the end of June.

Matthew: We'll get your contact information out there for listeners at the end. Let's go to some personal development questions here to help listeners get a better sense of who you are personally, Andrew. Is there a book that's had a big impact on your life or your way of thinking that you'd like to share?

Andrew: Yes, I went to Reed College, studied economics there. One thing at Reed is that you have to write a year-long thesis to graduate, which is the most intense and rewarding experience I've ever had, I guess outside of founding a company. [chuckles] One book that was published that was relevant to my thesis at the time was Thomas Piketty's Capital in the Twenty-First Century, which actually was published the second semester of my senior year. It was relevant because I was writing a thesis on income inequality in the United States and that book fundamentally changed my view and understanding of how one can take a very data-driven approach, a really thorough look at historical data, a really thorough look at even sparse data sets, things that we didn't really have. He goes back to the early 1800s, early mid-1700s to pull together and weave a strong story about data, but then also to lead it to easy- not easy, but powerful conclusions, I would say, an understandable conclusion about society.

That book was really impactful for me because it taught me how one can use data and information to describe society. Then one can go one step further and also use that data information to advise and how we can improve society. That was really impactful.

Matthew: Now, what kind of results does Piketty promote? I'm trying to remember, is it more of like socialism or what is his endgame in his mind?

Andrew: He's a prominent economist at the Paris School of Economics. What he points out is if the return rate on capital, the rent that people make on capital is higher than the GDP growth rate, so if you make 5% interest rate on a loan, but GDP growth is 3%. That means that that extra 2% you have to be taking from somewhere.

What he points out is that the majority of human history that was society. He said that look, feudalism has lasted a lot longer than the Industrial Revolution, and based on the data, feudalism is probably returning. The conclusions he makes is we've seen in a few times if you basically just make sure that your GDP growth, you stimulate growth, and you do it in such a way that you make sure that the capital is flowing throughout all parts of society, then it can increase and so to that aim, I think in America we have probably labeled a few of those policies probably like "socialists." It's capital taxes. It's making sure that we're redistributing wealth appropriately, but what he points out and what he correlates to other studies that have been done is that if you don't do that your overall growth of a society, overall growth of a country is probably going to lag and stutter as a result. It's very data-driven and I would encourage it for anybody who wants a really good understanding of just how modern economic analysis and modern economics, macroeconomics is working.

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

Andrew: I would describe my field as the intersection between cannabis and data science. One interesting thing that's going on in data science is the concept of machine learning fairness, which is a concept pioneered really by the Google AI folks, and I recently sat through a keynote talk at a Data Science Conference with them and it's really fascinating. What machine learning fairness comes down to is if you have a machine learning model that's trying to predict something like probability of repayment on a loan, and that machine learning model has the ability to observe certain factors of people. For example, it can observe race, it can observe income, it can observe gender.

That machine learning model is likely to inherit the biases that we as human society have into its own model in its ability to predict the outcome because the majority of people who get loans and have been able to repay back loans come from a certain segment of society, and the machine learning model is probably going to say that qualities of people from that segment of society are more likely to repay back loans and therefore that machine learning model's going to recommend if you have a bank, that only people of a certain race and class receive loans.

This is a concept of fairness. Basically, what it comes down to is if the society has biases and racism, the machine learning model will also have it. There's entire departments at Google who are responsible for making other models to check whether or not the models that they're making are racist at the end of the day. In cannabis, we have all of this great data and there's all of this movement into saying, okay, let's like start applying ML. Let's start applying AI to cannabis data. One thing I'm very conscious of with that is hey, wait a second, where are the majority of all the cannabis data? If we talk about all the major market research providers, where are they getting their data from? It's not from the smaller kind of gray market retailers who are serving maybe lower-income communities. It's from the nice stores in San Francisco that are serving higher-income communities, which means that if you start building models around people's cannabis preferences and predictions about their cannabis usage and stuff like that, you'll start going to actually do the same thing, you're going to inherit the bias of the society of the data that you're selecting from and start to use that to predict certain things and start to use that to serve that community.

That's something I'm very conscious of. It's something I'm already starting to see in our own data when we look at different cuts I mentioned in the city of San Francisco versus the Central Valley. Just I think it needs to be more upfront and talked about the fact that hey, this industry is inherently political. What we're doing here is inherently comes on the heels of years and years and years of a relatively messed up society. As we're producing data, and as we're producing insights, and as we're empowering people with data and insights, we need to be really careful that we're not propagating biases in society because data can do that.

Matthew: Good point. Here's a peer review question for you. What is one thought you have that most people would disagree with you on?

Andrew: As it relates to cannabis, I would say the one thought that I have a lot of people disagree with me on is the power of the black market in California. I think that the concerns about the black market are valid. I think that they're a little bit overblown. I think it's blame every problem with the fact that the black market or the legacy market still exists. Just say that that's the reason why things aren't successful. I think that when you look at the pricing behavior I just described, if you had a legacy business who survived for years off of the fact that a gram of flower cost $20 to the cannabis end user, and all of a sudden, everybody can go online and search cannabis prices and they can see that oh, I can get a gram for 15. I can get a gram for 10, I can get a gram for five because of the legal market bringing on that amount of information, that's going to compete prices downward.

Unless your legacy organization can survive and thrive despite the falling price, your legacy organization is going to go under. In Oregon, the price of an ounce went from a few hundred dollars to $50 because of the supply. There's no way that that didn't impact these long stronger legacy businesses, particularly those ones that basically need to price a risk premia if they're operating in the black, or I guess in the illicit market price a risk premia at every step of the way. It'd be very difficult to compete against delivery that can give me an ounce for, I guess like $50 in an hour.

I think that there's a lot to be said about how to price economics can really turn an entire market around in that maybe the gray market is still a large problem where people are taking it out of the legal market at the last step of the way, but I think that the black market is definitely struggling due to the competition for the legal market in California.

Matthew: Now, final question. You mentioned you went to Reed College, and that's where Steve Jobs went before he dropped out I believe.

Andrew: Yes.

Matthew: In his Stanford commencement address, he talked about how you can't see how the puzzle pieces fit while they're going on, but he took a calligraphy course there and just because he had an interest in it, not because it was requirement or anything and that was directly responsible for the ability to change fonts and personal computers and most listeners may not remember, there was only one font in early PCs. Did you take anything at Reed that just for the love of it to calligraphy or otherwise that you felt, hey, this was just for fun, but it really enhanced my life?

Andrew: Yes, I was a very serious theater kid at Reed. I study economics, data science, and theater. Theater changed my life. I cannot stress it enough. If you've ever wanted to do an acting course, you ever wanted to try theater out, you got to try it. I think what I enjoy about it is the parallelisms between putting on a play and founding a company. Where what it comes down to is this notion of you create something from nothing. When you make a play, when you put on a Shakespeare production, you're taking a blank stage, and you're pulling together a whole bunch of people and you're pulling together a script, which is just a few pieces of paper, really, and you're building something and you're training people and you're creating life, really and then you're getting people to cry and laugh at it and then you tear it down at the end of the day.

That experience of creation and that joy from creation is something that I feel passionately about, and something that I always wanted in founding a company and then led me to entrepreneurship because it's a lot of the same ways. You start with just an idea and you really build it into something, something that can add a lot of value to people's lives. You go from there.

Matthew: Andrew, as we close, how can people that are interested or dispensary entrepreneurs that are interested in using Happy Cabbage reach out to you and also how could accredited investors reach out to you that if they're interested in investing?

Andrew: We have a website, happycabbage.io which you can go to to check out some of the information and then I encourage you to email me directly. I'm Andrew, A-N-D-R-E-W @happycabbage.io if you have any questions, accredited investors, potential customers, let me know and I'm happy to answer them.

Matthew: Andrew, thanks so much for coming on the show. We really appreciate it. You've got great traction, you're still in the accelerator, and you've got traction. That's awesome. Congratulations, and we look forward to hearing more.

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Andrew: Thank you so much.

Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher, or whatever app you might be using to listen to the show. Every five-star review helps us to bring the best guest to you. Learn more at cannainsider.com/itunes.

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Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at feedback@cannainsider.com. We'd love to hear from you. Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments.

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Thanks for listening and look for another CannaInsider Insider episode soon. Take care. Bye-Bye.

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Ep 293 – Winning A Cannabis License + Update on IL and MI Markets

michael mayes quantum 9

With cannabis legalization in full swing, it’s easy to forget there’s a big difference in how legalization is unfolding between US states and countries around the world.

Here to help us contextualize the difference between markets is Michael Mayes of Quantum 9, an expert cannabis consulting firm with one of the highest success rates in the industry.

Learn more at https://quantum9.net 

Key Takeaways:

  • Michael’s background in cannabis and how he came to start Quantum 9
  • An inside look at Quantum 9 and its mission to help maximize the potential of cannabis cultivation, control, and dispensary businesses
  • Tips on how to successfully pursue a cannabis brand license and the common misconceptions Michael sees among new clients
  • Exciting new developments taking place in the Michigan and Illinois markets
  • Illinois’ social equity program and what it means for cannabis businesses
  • How Michael believes cannabis will affect alcohol market shares over the next few years
  • How Michael is working to help states create systems that help both businesses and patients
  • Where Michael sees cannabis heading in Illinois and beyond over the next 3-5 years
Click Here to 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. With legalization in full swing in the United States and around the world, it's easy to forget there's a big difference between states and countries with how legalization is unfolding. Here to help us contextualize the difference between markets is Michael Mayes, CEO of Quantum 9. Michael, welcome back to CannaInsider.

Michael: Thanks for having me, Matt.

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

Michael: I'm calling you from Chicago, Illinois, right now, but just got back from a few trips from Georgia.

Matthew: Okay, and do you enjoy Chicago in the wintertime?

Michael: I don't think many people do enjoy Chicago in the wintertime. I think people enjoy leaving Chicago in the wintertime.

Matthew: Yeah, I agree with that. Okay, well, you were on the show a few years back for listeners that if they hear your name it sounds familiar, I think was 2018. And can you just remind new listeners what Quantum 9 is on a high level?

Michael: Sure. Quantum 9 provides consulting services primarily in the public policy and the licensing realm. We help businesses navigate through the licensing process from application preparation to final submittal of the application.

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

Michael: Sure. I actually started as a passive investor in cannabis, hoping to never really operate the business and reap the rewards. Unfortunately, this industry back in 2009 didn't really allow for that and I had to jump headfirst into some of our operations in Colorado, which really set the groundwork for a lot of the things that we do today. We probably made every single mistake possible to actually get to a point of profitability, but, you know, making all those mistakes was a great time to do it just because the margins were so high and we were able to right the ship before, you know, like a market like Colorado fell out. So we actually successfully exited out of that operation. We have some operations in Michigan right now. We have a brand licensing project in Maryland, and then primarily what a lot of us do on the Quantum 9 team is the consulting and the licensing work.

Matthew: Okay. Yeah. I've been involved in a little bit in the licensing or I should say just watching others be involved in it. And it's extremely detail-oriented work where you have to have the tactics and details right but also understand a larger strategy there. Can you just talk a little bit about that and how you'd think about the strategy and then go about the details of submitting the licenses?

Michael: Sure. So, really, the first thing you have to think about is the capitalization of the project. So, one of the unique differentiating points from one applicant to the next is the ability to execute on the plan which you are proposing. So, many of the companies that want to build out large facilities really need the access to capital either in the control of the applicant or secured by either contingent promissory notes or, you know, private placement memorandums to actually secure the funds. The next piece is building a world-class team. With all of the states that have had, you know, different levels of legalization from a medical round to a recreational round, you know, the losers from the states that have raised all this money, that have built these great teams, that have submitted applications, they're not just going to give up.

They're gonna go to another state in which they'll try again to, you know, do the same thing. They sharpen their pencils, they maybe secure some funding or whatever it is that they were deficient in the last submission. So, what you have now is, you know, quite a lot of interest in states like Illinois where, you know, it has Chicago and there's a fair amount of licenses. So you have all of these companies and all of these past losers going after this license. So interest and competition is fierce. So, it's one part navigating through the narratives in which the state's asking for, but also to complete the circle by having the qualified team and the finances to actually really bring it all together.

Matthew: Okay. And when you're talking with prospective clients that maybe were successful in other realms and they want to get into the cannabis space, what misconceptions do they have about pursuing a license?

Michael: Sure. So, you know, in recent we've been working with not only new businesses, but also multistate operators that, you know, may be just too busy doing other things. So our client base is vast, but the thing that most new, you know, businesses or companies or investors that are looking to get into this industry, the assumption is that you can just pay someone to do these things, and then they're off to the races, and you don't really have to do anything. Unfortunately, the reality is that all of the individuals that are part of the project will probably work extensively on the project to bring it to fruition because there's elements of the project in which we simply can't do for them.

For instance, you know, getting documents signed, collecting information about their backgrounds, doing background checks. We do assist some with meeting with the city and the local municipality to actually get approvals but you as a applicant have to be competent in the sense that you could have a conversation with city planning, you can have the conversation with the mayor of a particular city or, you know, a city administrator and really make that relationship. So, I think the piece that a lot of people are missing is the relationship-building aspect of it. You have to build a relationship with the consulting firm, all of the teammates, all of the municipalities. So, really, it's an effort from so many people.

I mean, on these projects, we have anywhere from 10 to 30 people that could work on the project, ranging from the technical writers to, you know, cultivation staff, extraction staff, infusion staff, security individuals, packaging design, so really, you have to build an entire brand company, packaging, you know, potentially the website and social marketing, some people do PR, so, all of that depending on how much time you have is the determining factor. I mean, if you're starting two weeks before the application is due, I would suggest, unless you have incredible resources, to either wait for another round or to look at another state.

Matthew: You mentioned resources there. When clients ask, what kind of budget do you tell them they need? I mean, I know it varies by geography, but how do you orient them into how much capital is needed?

Michael: Sure, that's a great question. And you're spot on. It really depends on the state, the number of licenses and the interest in obtaining those licenses. So, a smaller state with a smaller market with fewer licenses could be more appetizing than a larger state with unlimited licenses. So, on the licensing end, I would say that most people fall anywhere from the $350,000 to $1 million in pursuit capital, depending on state. As far as, you know, the build-out cost on the other end, it really depends on, you know, your method of cultivation, your type of extraction, you know, how ornate your dispensary you want it to be. So those on the back end can range anywhere from, you know, $500,000 all the way up to, you know, a $10 million to $15 million operation depending on square footage.

Matthew: Okay. So you're intimately familiar with Michigan and also Illinois being in Chicago. But can you just talk a little bit about some aspects of the Michigan market? Because a lot of people hear some things about Michigan, but they really have no sense of what's going on there. But it's an important market, it's just that it's a little bit dysfunctional, but we don't know how if you're looking in from the outside. How would you describe it?

Michael: Sure. So dysfunctional would be the best definition for the Michigan market because it had so much promise. The market started in 2008, which a lot of people don't know. And the caregiver model blew up. I mean, there was, at the height of the caregivership model as the transition into, you know, out of the black and into the, you know, the gray market, if you will, you had like 30,000 to 40,000 caregivers that were producing up to 12 plants for themselves and then you were able to grow for five other patients in one single facility. So, what happened here is that you have all these caregivers that are growing all of this product and, you know, the people that they knew or individuals that they were associated with getting that product.

Now, there was some loopholes, and some municipalities were favorable to dispensaries opening prior to the legalization or the medical program actually starting. So there was a grace period where you could get provisional licenses to operate like a dispensary. They call it a provisioning center in Michigan. So the state mandated that everyone had to get Step one approval, and then you had to get a local license as well as step two approval. Step one approval was really geared around the financial background and the actual backgrounds of the principals that would own the business. And there were capital requirements there too.

So, what happened was, in the beginning, LARA, the Michigan Licensing and Regulatory Affairs Department, they put together a commission and a board that was to review all the applications and pass or deny individuals to get through step one approval, which seemed like a very easy process. You either have the money and you have a criminal background or not. And that should have been it and then you could move forward with getting a local license and then step two approval once both the, you know, the facility is built out. So what happened here was there was a huge bottleneck in the passing of applicants through step one approval, because you had this very rich, you know, gray market that was operating in provisional licenses with the city, or just like, you know, straight black market stuff where individuals hadn't worked for seven years, but had no tax returns, and there was issues with that.

So they started to even go even deeper into each individual's background, and you had to produce three years of all transactions of all of your bank accounts in every account possible from your brokerage accounts, all the way to your personal accounts and all of your spouse's accounts too, which I personally had to go through and my wife was not happy about it. So, for every $1000 transaction, you had to give them a reason to why this money came either in or out of any one of your bank accounts. So this slowed the process even further. And then, you know, it was alleged that there was some corruption and that the liquor, you know, side of things were trying to slow things down.

So LARA started denying all types of people. We even got denied. And we, you know, as a licensing consultant, we were denied for step one approval, which obviously was a joke because what they denied us on was a financial piece, which we clearly had. So we spent a year fighting the state, and then finally a judge ruled in our favor and we passed step one approval. So, being one of the first people to submit and first to market, we went through every issue possible to actually get through step one approval and probably racked up quite a hefty legal bill in the process. So the LARA board was, you know, in many people's eyes, very, I don't want to say corrupt, but wasn't the best...

Matthew: I don't want to say corrupt publicly.

Michael: I don't wanna say corrupt publicly, but let's just say that it was dismantled due to the inefficiency of getting the job done. So, now you have, in the midst of all of this other medical stuff, Michigan went recreational. It's a ballot initiatives state where, you know, voters can vote things into law, you know, if you get enough signatures, which is 100,000 in Michigan, an item can be put on the ballot to be voted on by the voters. And then if it's enacted, it just goes through and that's what happened in Michigan, both in the medical and in the recreational end things, the adult use.

So as all of this crazy medical stuff was happening, then you got recreational, all of these new laws with adult use, and the process of approving things was slow, so cultivators were slow to get up and running, and the market was there. There was over 300,000 patients in the market and then slowly as, you know, things started ramping up, it was just so expensive for the normal patients or consumers to get product. So they just continued to get products from the black market, which was easier for them. So now you have a situation where the market is starting to slowly come up, but at the same time, you then had the entire stock market with all cannabis companies dropping 50% to 70%.

I mean, if you look at the stock market now, at the height of where things were around the time, you know, Canopy Growth and all these other companies like Tilray, you know, they're down 50 to 70% right now. So investor confidence in Michigan started dropping drastically because, number one, the public markets weren't doing great. Secondly, there's so much confusion and potential corruption that people were a little gun shy of doing anything in Michigan. And people are still doing deals, don't get me wrong, in the state, but there's just a little bit of confidence issues which has deterred, you know, a lot of big moves to happen.

Matthew: Okay. Let's pivot to Chicago. You're in Chicago, you're very familiar with the market there. There's a lot of excitement around Chicago right now. A lot of activity. Can you give us a high-level overview of where the market's at now and what changed on January 1?

Michael: Sure. So, you know, it is recreational adult use in Illinois right now. And all of the medical dispensaries which had to carry the burden of, you know, a dismal medical market. I think that, you know, there's only like 30,000 to 50,000 patients total. And it just, you know, there's problems in the initiating start of the pilot program that puttered a little bit, you know, we had a governor that didn't really approve of cannabis. And then, you know, now we have JB Pritzker as our governor and his campaign was to bring legalization to Illinois and by golly, he did it. And I'm a big proponent of it but the state had learned so much from the medical round that now we have these adult use rounds where dispensary and now the craft grower and infusers the...On January 2, the first wave of dispensary licenses came out and then now the first wave of cultivation licenses are coming out.

The first wave of dispensary licenses, there's 75 for new dispensaries and then if you add all of the additional licenses from the med, they were actually allowed to immediately co-locate their medical dispensaries. So most medical dispensaries chose also to do recreation or adult use in the same building. And then you can have a secondary location as well. And that's independent of the new dispensary licenses which are 75 and then for this wave of processing and infusion licenses, there's 40. And then those licenses will be awarded by May 1st, 2020 for the dispensaries and July 1st, 2020 for the infusers and craft growers. And then there's a second wave of licensing where there's 110 licenses for the new dispensaries that will be given out by December 21st, 2021. And then the second wave of craft growers and processors or infusers, there's gonna be 60 additional licenses and those are going to be given out by December 2021.

Matthew: Okay, interesting. You mentioned a craft growing license. What does that mean to be a craft grower?

Michael: Yes, so, there's some restrictions on the level, you know, how many square feet that you can actually build out. But also, so Illinois is a little bit different, and there was some confusion in what these licenses mean and what the differences of them were. And even reading the law and the original act, and then they published emergency rules, it was a tiny bit unclear until, you know, a couple weeks ago when we actually got down to a final answer. So the Craft Grower Licenses actually allow you to infuse and make all types of edible products, vape catridges. So basically with a Craft Grower License, you're relegated by a square footage and then also you can infuse products, where the Infuser License, you can only get extracted products, raw materials from a craft grower, and then infuse that into other types of products, whether it be baked goods, vape cartridges, or, you know, whatever other products that you'd want to make.

So, there's a distinction there and it's kind of weird because rarely do you ever see a grower license, especially labeled Craft Grower, that allows you to do both processing and cultivation, and then an infuser license, which you would expect to actually be able to extract but not able to actually do that. Although there are some provisions in the law that a supply study will be done and if the state determines that the infusers have an inadequate supply of licenses, there may be an opportunity for them to apply for a processing license, which would allow them to extract their own product.

Matthew: Okay. Wow, that's a lot of red tape. I can see why your business is doing well. So, okay. There's also a social equity program that has some unusual twist, and people are talking about those. What are those twists?

Michael: Sure. So in the dispensary round, 50 of the 250 points were allotted to social equity applicants, and there's four different ways that you could apply for social equity applicant status. And I will explain them in detail now. The first is that you have an expungable drug crime more than a year ago that you were negatively impacted by the drug law. The second is that you live in a disappropriately impacted area that has been negatively impacted by the drug law. So essentially, these are reparations for those that had been impacted by cannabis regulations that were "unfair." The third way of applying for social equity applicant status is that you have 51% or more employees and a minimum of 10 that either live in the disappropriately impacted areas, or have expungable drug crimes. So that's all four of the different ways. And to get all 50 points, you have to have those individuals or individual have 51% controlling interest of the company, in which you have to document through the operating agreement, and then any other contractual obligations from the company.

Matthew: Yeah, so that's kind of tricky here because you're forcing people to have equity ownership. Is that kind of an unintended consequence that you think is going to have some repercussions here?

Michael: Yeah. The intention was there, which was, "Hey, how do we get these licenses in the hands of those that have been negatively impacted by the drug law?" Or, in other words, you know, the ones that have been most affected in almost every state are those people of color. So how do we actually create a program to do this? And on the surface it seemed like a great idea, but in execution, there's some holes here because, you know, most of these individuals that have these drug crimes in their past, not all of them, but they may be inefficient at owning and running a company and also raising capital and, you know, having that amount of worth in an individual that, you know, may not have the background to do this.

So, even investors may have apprehension in trusting a company in the hands of an individual that has this 51% where you have to keep that to get all the points. So, if you drop under that, then a material of change happens within your project and, you know, if you drop under the 51%, then you have to pay back any discounts that you got on the licensing fee or the submission fees. So, the submission fees are $60,000 and they were $30,000 if you applied for social equity applicant status and, you know, the licensing submittal fees were cut in half. So from $5000 to $2500.

Matthew: Man, that's still expensive. It's just...It would be great to be able to have a business where you could force people to pay you. I'm a little jealous sometimes.

Michael: I'll tell you what, in 2011, we bought a dispensary license in Colorado for $5,000 and a pound of cannabis. And he gave us terms on it too, it was like $1,000 a month for five months.

Matthew: Oh, man.

Michael: Yeah, back in the days when you could get like 30% interest on your money.

Matthew: So, let's talk about the benefits of getting a higher diversity score for your business because that can open up some doors. You were mentioning a little bit how, you know, it's difficult for, you know, these social equity programs, but what are the benefits of getting a higher diversity score for a business that's applying for a license?

Michael: Yeah, it just depends on the way that the licensing process has been created. Like for instance, in Pennsylvania, the diversity piece of it was like 20% where in West Virginia, there was no area that even mentioned diversity. And even in Illinois, the only diversity aspect of things are geared around the social equity applicant status. But depending on where you're submitting, and where they're borrowing rules from, or even the application process, it may be a huge deal or it may be no deal at all. We as a company, Quantum 9, we are a minority-owned business and it took us over a year and a half to get certified by the City of Chicago to be, number one, we had to become a licensed expediter which is a license to actually do application submissions. So, you know, those out there that are doing application submissions on behalf of clients and aren't licensed expeditors there may be some liability there, but I digress.

So we became a licensed expediter and a minority-owned business, which in the submission of the diversity aspects, one of the pieces is vendor procurement, either on the front end of the app or on the back end. So if you're spending money with consultants, or you're running all of the third parties through the consultant, and then they pay the expenses, you can really have a great diversity score in like, you know, or a diversity percentage of spend on the front end, you know, in the 80% to 90%, which obviously help with the story that you not only are a diverse applicant, meaning 51% either minority-owned, or veteran or, you know, woman-owned. And the fact that you have goals, such that you wanted to keep a certain percentage of your staff diverse, which I believe is well needed in this industry, because it's very male-dominated and what we're missing out on is very diverse looks at different ways of approaching things.

Matthew: Sure. Okay. And do you see a dent in alcohol sales as a result of cannabis legalizations? I have, you know, that's one of the things I've put out there is that that's coming and in some places may be already there. What's your take on the ground level in terms of, you know, a dent in market share for alcohol sales because of cannabis legalization?

Michael: Yeah, it definitely has a big factor in it and we're seeing alcohol and spirits sales drop in the 10% to 20% when a particular market goes from either medical to adult-use or from nothing and a program just appearing. So I think that the alcohol companies are definitely worried so much so that you're seeing large beverage companies like, you know, Constellation Brands making substantial moves into companies like Canopy Growth, where they see the writing on the wall, and if those aren't familiar with Constellation Brands, they're the parent company of brands like Corona and such, but you're seeing a lot of alcohol and spirits companies looking at the cannabis industry, either from a CBD aspect or, you know, a THC co-branded product aspect.

Matthew: Okay. Now, you have some other states on your radar like Georgia, West Virginia, North Carolina. What do we need to know about there? What should we be watching?

Michael: I mean, all of these markets have the potential of helping patients, which is the part that excites me the most. And I really like helping states on the front end, just really navigate through, you know, creating a system that helps patients because, you know, sometimes when you read the laws, you're like, "Wow, this..." You can tell that this program was set up for business and really didn't take patients first as their approach where, you know, I believe that you can really set yourself up for success as a state or country by getting patients into the registry before the program even starts, and then having their, you know, one year of card renewal process starting when there's actually product available.

So you can actually start generating and creating a market for the businesses in the future by just simply opening up a registry prior to when all the rest of this stuff happens. There's also interesting ways in which states like Missouri, you know, created a system where you can early apply for your fees and your down payments to submit in the future, just to get a sense of where the largest population density of licenses are going to be submitted. So, there's a couple of different ways that you can jumpstart these programs so that, you know, those funds can be used to help further the grading process or getting the resources that the Department of Health may need to really help get this thing over the finish line.

Matthew: Okay. Michael, I'd like to ask a few personal development questions to help listeners get a better sense of who you are. And I know since we talked before the interview, that you have a book that you're really excited about. So, can you share what book that is and why you're so excited about it and what kind of impact it's had on your business?

Michael: Yeah, so, like most entrepreneurs, you get to a point where things are going a million miles a minute and the stress level increases. You know, the compensation may increase a little bit, but at what point is it not worth the compensation? Like, so if you have a level 10 stress and a level 7 compensation, is that better than a level 4 stress and a level 5 compensation? So I really started to work out where my personal happiness was in relation to business because you can't do well in business unless you're happy, right? So, what we started to do is figure out systematic ways in which we can move forward. And the first was to learn from others that have done this. And I recently joined the Forbes Chicago Business Council. So I'm actually a Forbes contributor now.

So I'm actually a writer for Forbes and I have an article published and I'm quoted in, like, four or five articles. But they have these amazing roundtables, where these giants of business sit around the table, and, you know, they talk about things that they're working on, and there's a moderator that asks a couple questions. And these guys were talking about EOS. And they were talking about it as in business as if, you know, it's a regular thing like, you know, you should know what IT means. And, you know, I'm by far the youngest guy in the room and I raised my hand and it was like one of my first council meetings, and I raised my hand and I was like, "Hey, guys, I'm so sorry, but what is EOS? I don't understand this. Sorry to be naïve." And no joke, they spent the next 40 minutes explaining what EOS was.

And what it is, is, it's from a book called "Traction." And EOS means the Entrepreneurial Operating System. And it's a book that tells a story of a development company that's going through troubling times, you know, they scaled, but they stalled a little bit, and they never knew how to get over the hump. And it is just so easy to digest the data. And essentially what it does and what it is, is it looks at your enterprise first and then deciphers all the roles and responsibilities and aligns to see if the person in those positions actually should own those processes. And if not, you get another person in there or move them in a way that pivots them so that they're more happy and more successful. So the first piece is that you look at the enterprise as a whole, figure out where you need these things, and then move the pieces in the right places.

The second is to create processes for every single thing that you do, and then put it down on paper, write the actual step by steps of it, solidify it, then delegate it. So then once the process is completed, you never have to worry about it again, because now you've set up an individual below you that's responsible for that. And they know what they're doing because they have the step by step procedures, and they even edit those procedures or you have meetings and, you know, decipher how you better these operating procedures. And then it just systematizes every aspect. And if the individual that's responsible for it just isn't getting it done, then maybe it's time to look for a new individual to fill that role. So just knowing these very simple aspects of business and how to, you know, essentially create less stress for me, I was able to kind of scale a little bit methodically.

It's not a way to scale like crazy because it teaches you the opposite. Like, you don't need to scale if you're doing things with your staff the right way, and only scale when it's so overfilled that you can't do it with contractors, that you actually have to have a full-time person and the cost analysis is there and then scale slowly. So, you know, when a company says that they have three to five employees, I look at that as, "Wow, that's a pretty big company to me," where, you know, on the smaller end of things, you know, people look at companies that may have 100 people, but it may be running inefficiently. So, there, again, goes the compensation to stress, but, you know, if you keep a lot of contractors busy and you have a really good core team, you can get quite a bit done.

Matthew: Okay. And since implementing this, what's been the biggest benefits for you both tangible and intangible?

Michael: I think I spoke to you a little bit about this last time. And I now see all of the processes in a Google Sheet that are linked to folders, docs, and videos of how to do those particular tasks. So whenever I forget, like, the path to do everything from start to finish, I just go back to this playbook and I just look at it and see, okay, well, I forgot that, you know, when we're working with the community, we need to hit like, these eight elements, one of them being job creation, the second being the security of the facility, the third being the tax revenue, you know, the fourth being the environmental impact. So, as we do these projects, you get better every single time.

Because, in the beginning, we were working so fast and so furious that it was from one project to the next with really no standardization, then when we added new staff it was like, "Okay, well, here's some content from here, here's some content from there," but there was never really a centralized location where you can really see everything top-down. And then we implemented base camp to augment that so it made things even cleaner, easier. New tech like Zoom was really also been a huge added value for all my consultants that work in different states and countries. And it really brought the enterprise to another level because just these, you know, three simple tools really helped drive change and helped all of us not stress out as much.

Matthew: Okay. What do you think is the most interesting thing going on in your field besides what you're doing at Quantum 9?

Michael: The most interesting, huh. In the sense, like, can you give me some context on that because it's so interesting.

Matthew: Like if you could do something else, you couldn't do anything that you're doing now, but you'd still be in the cannabis industry.

Michael: I think it would, I mean, I love what I do so it's so hard to look past the licensing and the public policy stuff. But I think that there's a lot of great tech out there and I love, you know, I'm a huge proponent of technology and software to make businesses better. I think that the interesting stuff may be technology with the integration of AI. And an example of this would be like a blog post that, you know, dependent on the cookies and the user data in your browser that is stored already, when you come to the site, the AI changes the content so that your on-page time is longer because it's more interesting to you because it reads in the way that you're used to reading. And that would interest you more than if it were written for somebody that was an academic that wanted, like, hard data and hard numbers. So I think that the AI aspect of it, we're just starting to scratch the surface on it but I think that that is what I believe is some of the more interesting stuff that's going on.

Matthew: Right. So you mean like someone who is searching for, let's say, pesticides to testing in cannabis, and you know from the data in your database that they only buy infused products, they don't buy flour, you can change the article around to not even talk about flour, but just about infused products because we know they're interested in that, and that makes it more relevant.

Michael: Yeah. So it's more like, think about it as like you're going to a concert. And, you know, before you enter the door, the bouncer looks you up and down and, you know, you may be either dressed like a punk rocker, you may be dressed like you're going to a rave, you may be dressed like, you know, you're going to a symphony. So, as you enter, the content changes so that it's more interesting for you. So the symphony guy goes into the theater and they see a Symphony, where the guy dressed like a raver goes into electronic, you know, rave thing. And then if you're a punk rocker, there's like heavy metal punk rock stuff going on. So, what that does is, you know, the Google Analytics and the way that content's served up and the way that rankings are done on your website, if a user comes to your site, they like what they see, they're on the page for while, they're scrolling down, they hit other links, you know, that creates a higher authority that your site is what it says it is, and what users are searching for is what they're finding on the other end.

So all those things bump your website up a little bit more. And if you do cannabis consulting, marijuana consulting, cannabis consultants, marijuana consultant, you'll see, you know, if you do it in an incognito window, that we rank in the top three for all four of those terms, because what we do is cannabis consulting. And the users that are looking for that data see our site, and then they're on it, and then they actually get the content that they're looking for. What I'm talking about is way more involved where, you know, the content, the words in the text on the page, even the visualization of how the text is laid out, whether it's on the left column or the right column, or like it's, you know, way more interactive, like, the content changes based on the user that's entering the site.

Matthew: Okay. Yeah, I could definitely see a future where that's happening just constantly because you want the person to stay on the page and feel satisfied they got what they came for.

Michael: Yeah, exactly.

Matthew: So, here's a Peter Thiel question for you. What is one thought you have that most people would disagree with you on?

Michael: Yeah, I mean, I think I look to the future a little bit more than most. Like, for instance, I'm investing heavily in space travel and space tourism right now where that's something that not a lot of people are even looking at or expecting, you know, flights in space to happen anytime soon, although there's a lot of media coverage with, you know, SpaceX and Virgin Galactic, even Blue Origin and, you know, some of these other giant companies. But I think that if you're not thinking about the future now, it's going to come and you're not going to be well prepared for it. So, if you're always looking to see, you know, what it is that's going to happen in the future, then maybe that you can make some predictions and then either organize your business or your finances in a way that is applicable.

Matthew: You know, that's funny you mentioned that. I was just watching Chamath Palihapitiya on CNBC yesterday, and he's now the chairman of Virgin Galactic. And he said that he has, I can't remember how many people it is, they've put down a deposit for a $300,000 spaceflight already and he's got billions in essentially in his pipeline if they'll come through and pay the rest for the deposit. I was like, "Wow, there's a massive pent up demand here." Because it's like where else can you get that experience? Right? Where else can you go to space?

Michael: Yeah. I think the down payment was like $80 million so far, and Jeff Bezos, his company, Blue Origin is funded solely by Jeff Bezos, where I think it's like 1% of his net worth is committed to space travel every year. So, that's a ton of capital for that. And it's growing, where, you know, Richard Branson's company is the first to go public, which is Virgin Galactic. And then obviously everyone knows of Elon Musk and SpaceX, which a lot of people don't know that Tesla, the publicly traded company, has no involvement whatsoever in SpaceX, other than the fact that they share Elon Musk.

Matthew: Yeah, I was wondering how SpaceX is going to make money, but now they're taking other people's satellites up and they're doing this Starlink where all the satellites will wrap around the earth and anywhere you go, you'll have high-speed internet connection if you're a Starlink customer. So that's really interesting stuff. Like, that is looking pretty far ahead, so that's interesting. Michael, as we close, please tell listeners how to find you and connect with Quantum 9.

Michael: Sure, our website is quantum9.net. It's quantum9.net. And you can write an email to us at info@quantum9.net and then you can get a hold of us that way.

Matthew: Great. Well, thanks so much for coming on the show, Michael, you got a lot of interesting information wrapped up in your head there. I'm glad we got some of it out here for our listeners. Good luck with everything going on and come back and share what details you have for us in a year or two if you can.

Michael: I absolutely will. I love the show. I wish you the best, Matt.

Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher, or whatever app you might be using to listen to the show. Every five-star review helps us to bring the best guest to you. Learn more at cannainsider.com/iTunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at cannainsider.com/trends. Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at feedback@cannainsider.com. We'd love to hear from you. Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments.

Promotional consideration may be provided by select guests, advertisers, or companies featured at CannaInsider. Lastly, the host or guests on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions. Final disclosure to see if you're still paying attention, this little whistle jingle you're listening to will get stuck in your head for the rest of the day. Thanks for listening, and look for another CannaInsider episode soon. Take care. Bye-bye.

Ep 292 – Five Trends That Will Disrupt Cannabis In The Next Five Years

matthew kind five trends disrupt cannabis

What will the cannabis industry look like in the next five years? CannaInsider host Matthew Kind reviews his past predictions and forecasts the five disruptive changes that will take place in the years to come. 

Considering how many Matthew got right in 2017, you don’t want to miss this.

Key Takeaways:

  • Review of Matt’s previous forecasts from 2017
  • Trend 1: AI-assisted product selection to improve significantly
  • Trend 2: Fintech meets Cannabis
  • Trend 3: Cannabinoid drinks put a double-digit dent in the alcohol market share
  • Trend 4: Cost of cannabis flower decreases 50 to 80 percent
  • Trend 5: Autonomous car delivery with biometric verification
Click Here to 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.

Hi CannaInsiders, this is Matthew Kind. I have a little bit of a different episode for you is here today. So you may remember back in 2017 I did a check in on my five trends that will disrupt the cannabis industry in the next five years. Well, I wanna check in with some new trends and also see how I'm doing on those last trends. So let's jump right into them. So there was five trends for 2017 that I forecasted. We have two more years for them to complete before we can totally judge success or failure. But let's see where we're at.

One, blockchain tech to disrupt seed to sale tracking. So this has not happened yet. There's no clear winner. But I can say there's a number of companies working on this. And I don't wanna name any in particular to call them out because there's not one that's really doing a better job than the other right now. So there's no standouts. But I think this is a big driver because it just removes all the cost structure and complexity from the seed to sale tracking when there's really no legacy architecture. So I think we'll move into that. That's gonna fall into the not yet category, not a fail, but not a direct hit.

So number two is baby boomers embrace cannabis-infused products. So this one's a bullseye. We've got the cannabis-infused products they embrace, the flower power generation loves flower from way back then, so they still consume flower, but now they're consuming a lot of topicals too for arthritis and all their aches and pains as they move into their senior year. So that one's a bullseye.

Number three, dynamic terpene profiling based on individual preferences. So this is a semi hit, meaning it's kind of happened, but not totally how I envisioned it. So we're seeing things like the dosist pen and LucidMood and some drinks out there that have used custom terpene profiles to create more of an emotion or a mood. And they do that successfully. The second part that we're missing that we don't have yet is that it's based on your individual genetic makeup and neurophysiology. So as you've seen the price of like 23andMe and these genetics test just plummet, they're getting cheaper and cheaper and easier and easier to take. And so we'll see these two things come together. So based on our own individual body, we'll be able to get a super custom experience. So look for that by 2022. But we haven't totally got...we're about halfway there right now.

Number four, intravenous cannabis medical applications. This is a fail. This has not happened at all. So I'm gonna call that as straight up fail on that forecast. I envisioned this happening more, but I think people don't want to do anything intravenously unless it's a have to situation, usually involving a hospital. So there's gonna have to be more casual ways to have cannabis medical applications that are easier, that don't involve shooting something up in your arm. Because obviously there's a stigma there, a hassle factor, you know, hygiene factors. So I'm gonna say that one's just wrong.

Number five, autonomous cannabis deliveries. So we haven't seen that yet. I've seen some experiments, but nothing really there. But I'm gonna tell you why I'm still bullish on that one. And that leads us to my 2020 predictions, the five things that will disrupt the cannabis industry in the next five years. So here's my new ones or mostly new I'll say, and let's jump right into them.

Number one, AI assisted product selection becomes a lot better. So I'm gonna include a link in the show notes of Google's AI Assistant, and you can visualize that with machine learning. And basically what can happen there is that dispensaries and the apps that...like Eaze or different companies that provide delivery, they will be able to measure conversions, meaning what people looked for and then what they purchased. And dispensaries can do this too. What did prospects consider and what did they actually purchase when they pulled out their credit card or cash or whatever it may be? So as that data gets fed into machine learning and AI programs, these assistants, whether they be apps or in-store kiosks are gonna become so good at figuring out what you want that it's gonna really boggle the mind. Like, wow, this thing really knew me really well and I ended up really being delighted with what I picked. Now, one of the creepy factors, which I don't mind so much, but some people do, is that as you approach these kiosks or these apps, they start to make assumptions about you based on your age, gender, maybe some data points they have about your background to get some initial preferences. And then they validate those preferences to see like is it off base before extrapolating on those. Bottom line is that they're gonna get you to somewhere where you feel happy with what you purchased and that's coming. So look for a link in the show notes here with the Google AI Assistant to see how conversant and humanlike these artificial intelligence will be just conversationally with you back and forth.

Okay. Number two trend to watch is Fintech meets cannabis. So I don't know if you're familiar with his online brokerage called eToro. It's based in Israel, but has a footprint pretty much all over the world. It's huge. And one of the features they allow you to do is to follow someone else in their ecosystem. So it's more of a social network than a brokerage account, but you can follow people that post their trades on the eToro and you can see how well they've done over any period of time, whether it be a day, 90 days, a year, how much they're up or down. And so you'll be able to go ahead and mirror their trades, either for a fee or for free where you say, I want to mirror Jane Doe's trades or John Doe's trades and you can just link your account to what that person trades. And it mimics those trades. Now, the cannabis industry has not a ton of publicly traded stocks on...especially on the major exchanges. When that starts to change and open up, we'll see more people following some great, great traders in that way. Mostly young people are more comfortable doing things like this 'cause it's kind of a leap to follow someone trading like this. But when you can see the results so transparently measured by this third party, it's not so risky perhaps. Not investment advice, but just my opinion and for entertainment purposes.

Number three, cannabinoid drinks put a double digit dent and alcohol market share. So that means they would take at least 10% from liquor, wine, and beer. And so that is a pretty audacious goal but I think once we start seeing that product market fit and people realize like, "Hey, I don't have to waste my whole weekend or Sunday feeling hung over if I have a botanical." And, you know, we'll see more messaging like, "Hey, alcohol is actually, you know, ethanol and ethanol is essentially poison. Do we really wanna be drinking poison?" And people love their beer, love their wine, etc. But when they can see, they can make a leap over to a beverage that starts giving this predictable response, similar to alcohol, but better in the sense that there's no tradeoffs, I think we'll see more people making that tradeoff, especially since there's no stigma of smoke that people usually identify with not wanting to participate in. So look for that.

Second part of this forecast is I think we'll see a new kind of license that allows liquor stores and other kinds of, you know, fast convenient stores to offer low THC CBD beverages. So nothing high THC but low THC and with CBD in it perhaps too. But for example, when something doesn't pose a huge risk if it got into the wrong hands because there's only 2 milligrams of THC in each can, that might be a new category where a license allowed for a liquor store to sell some THC beverages. So look for that. Especially in certain markets where they realize the licensing has been, you know, just too onerous and too cumbersome and people want more options.

Okay. Number four, the cost of cannabis flour decreases 50% to 80% in North America over the next five years. This is bad for some and great for others. Who's it bad for? Well, it's bad...you'd think all cultivators? No, it's bad for the cultivators that don't have economics of scale on their side and don't have the capital to invest in massive production capabilities, especially some capability that gives them some edge. They have some special sauce. So this is great for consumers because it allows more products to be available to consumers for much cheaper. Right now, there's a huge premium still on cannabis products and that'll come down, come down, come down and we'll be able to have more access to a wider spectrum of products. So this is further gonna consolidate the industry, probably into kind of a Costco, Walmart type sellers that are just huge low budget sellers. Everything's gonna kind of gravitate into them as the industry consolidates. And then you'll have niche, high-end sellers that are luxury or have some spin or unique selling proposition where they attract a following, which leads to number five.

So you might remember in 2017, I talked about autonomous cannabis deliveries and I said they haven't come yet. I still think they're gonna come. And the reason why is that I think it's almost inevitable is for a few reasons. One is when you look at the cost of like an Uber driver, for example, the biggest cost there is the person driving the car. You know, their wages, make it a, you know, add the biggest expense. Number two, gasoline. And number three is maintenance of the vehicle. Because a lot of things can go wrong with all those moving parts. So when you have an autonomous electric vehicle, let's say a Tesla, that's an autonomous delivery vehicle, the number one expense, the person's wages are no longer there. That person could move on to do something they like better or higher skill or retrain or retool. So that cost is gone. Gasoline's eliminated with electricity, with, you know, there's no petrol or diesel to buy. So it's all just electric and the price of electric continues to go down in most markets.
Thirdly, the maintenance, so the maintenance goes down a ton because essentially electronic cars like a Nissan LEAF and a Tesla, although they're high tech and have cards that produce teraflops and all these things, they're almost more akin to a golf cart than a traditional internal combustion engine because an internal combustion engine has so many moving parts and liquids and things that can go wrong. So there's more entropy vectors on a internal combustion engine car versus an electric vehicle car. So this cost is just gonna bring down the cost of electric autonomous vehicles so much.

The final reason is that these cars can be used 24/7 so the more deliveries they can make throughout the day just going nonstop, that reduces the cost for your individual delivery because it takes the cost of the vehicle and divides it by how many deliveries there are, thus reducing the cost of your delivery. Plus, the overlay of intelligent software that makes the most, you know, efficient use of the vehicle's time and making deliveries.

For all those reasons, I think autonomous car deliveries are coming. But here's the final piece is what regulators get out of it. So regulators initially will say, we need some super like super way to make sure this is getting to the right person. So normally when you go to dispensary, you don't wanna have your... give your fingerprint or your iris scan. But for example, we saw this in Illinois, Illinois required a fingerprint to get a medical marijuana card. And for that reason, initially it wasn't widely adopted. Now that they've gone adult use, there's a lot more to...pent up demand that you can see. While the public wouldn't accept a biometric scan at a dispensary, they might be willing to make that tradeoff if they can have on autonomous electric vehicle come to their house. Inside that autonomous electric vehicle is a locker and they can only open that locker if they scan their iris or put their fingerprint down or maybe some speech. I don't think it'll be speech because that can be mimicked too easily. But then the locker would open and they would take out their order. And to the public, I think that will seem like a fair tradeoff. Like, "Hey, there is no person in the car. There's no way I can be verified unless I do this." So where they may have balked at doing this in store to dispensary, they wouldn't do it for a vehicle delivering to them. And this will give regulators the transparency and data and certainty to allow these autonomous car deliveries. And also I think the fact that everybody wants, you know, a lower carbon footprint and with an electric vehicle making deliveries all around a neighborhood, that's much more efficient and a win-win. So those are my forecasts for the next trends that will disrupt the cannabis industry in the next five years. Keep in mind, these are just my opinions.
Man: Yeah. Well, you know, that's just like your opinion, man.

Matthew: None of this is advice or financial advice. And I could be wrong about any of these and if you think I'm way off base or if you agree with me or if think there are some other trends that I missed that are more important, please tweet me your thoughts @cannainsider.

One more thing before we close. If you haven't given the podcast a review on whatever platform you're listening to, I would really appreciate it. It helps me so much to keep going, to know that people are enjoying it and listening to it. I mean I see the statistics of how many people download it, so forth, but when I get a direct feedback from you that you're enjoying the show, that really helps. And a five star review helps the most. It helps the most for people that are considering listening or for guests that are considering coming on the podcast. So a five star review helps the most. Please consider doing that on whatever podcast app you listen to, iTunes, Stitcher, or any others. Thanks so much for listening and look for another episode soon. Bye-bye.

If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher, or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at CannaInsider.com/ itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at cannainsider.com/trends. Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at feedback@cannainsider.com. We'd love to hear from you.

Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis for using it for medical treatment. Promotional consideration may be provided by select guests, advertisers, or companies featured in CannaInsider. Lastly, the host or guests on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions. Final disclosure to see if you're still paying attention. This little whistle jingle you're listening to the will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care. Bye-bye.

Ep 291 – These Low-THC Cannabis Drinks Are Disrupting The Alcohol Industry

luke-anderson-cann

If you hand most people a cannabis drink, their first question is probably, “How high will this make me?” 

This one unknown might just be what’s holding cannabis beverages back. Until now.

Listen in as Luke Anderson of Cann discusses the state of cannabis drinks and where he sees the category heading.

Learn more at http://www.drinkcann.com/

Key Takeaways:

  • Luke’s background in cannabis and how he came to start Cann
  • An inside look at Cann and its mission to become the standard for cannabis-infused tonics
  • Why Cann produces only low-THC tonics to target consumers that don’t wish to experience a high
  • The type of effect consumers can expect from Cann’s social tonics
  • Why Luke believes it’s important to take out the guesswork in cannabis beverages 
  • Cann’s social tonics versus beer and wine in terms of time and effect
  • How Cann decided on its unique THC/CBD concentration profile
  • How Luke and his team overcame challenges with emulsion and dispersion to ensure consistency in every sip
  • Where Luke sees cannabis microdosing heading in the next few years
Click Here to Read Full Transcript

Mathew: 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.

Imagine this, you're at a party this weekend and your friends hand you a can of a cannabis beverage that they are really excited about. If you're like most people, your first question is, "How high will this make me?" This one unknown may have been the thing stopping cannabis beverages from taking off until now. Here to tell us about the state of cannabis beverages is Luke Anderson, co-founder of Cann. Luke, welcome to CannaInsider.

Luke: Hello. Thank you so much for having me.

Mathew: Give us a sense of geography. Where are you in the world today?

Luke: I am in Venice, right outside of our office where we started the company about a year ago.

Mathew: Okay. And what is Cann on a high level?

Luke: Cann is a microdose THC beverage. We like to say it's the first ready to drink THC beverage that has a dosage of under 2.5 milligrams. And unlike other cannabis products, it aims to be a direct one for one replacement with alcohol. Now it's not aiming to replace someone's alcohol consumption entirely, but it aims to be pretty good at doing the job that alcohol does in social situations on a similar type of quantity and frequency that you would drink beer or wine.

Mathew: Okay. That's a big problem. So I'm glad you're trying to crack that nut. Can you share a bit about your background and journey and how you got into the cannabis space and started Cann?

Luke: Yeah, it's interesting. I had never been to a dispensary before starting the company with my co-founder Jake and had frankly always been a skeptic of the entire cannabis market. I felt like it was meant for stoners. It was not meant for people like me who didn't find pot leaves to be appealing and didn't know how to roll a joint, and whose only experiences with cannabis involved eating a weed brownie that got them too high in college and made them leave a party because they felt embarrassed for how they were acting or coughed on a joint too hard in a circle and became much too high to function.

But my co-founder, Jake, had actually been thinking about cannabis beverages for the better part of our friendship, which started at Bain & Company about seven years ago. And he grew up in Denver, Colorado, and looked at how legalization impacted his local community and had always been curious about THC and specifically microdoses of THC as a means to a better health and wellness picture for an individual who might be relying on alcohol as a social intoxicant of choice.

Over the seven years of our friendship, we'd be across from each other at a dinner table or during a weekend getaway and we'd be debating on opposite sides of the same issue, actually. He would say cannabis beverages are coming and they'll take a great share of what we know today as alcohol consumption. And I would yell back, alcohol does the job just fine. This is gonna be enough for me and I don't think that I would ever, if I were in my right mind, replace it with some novelty item that, you know, reminds me of bad experiences I had when I was younger.

And ultimately, as I got a little bit older and my hangover started getting worse, and I started physiologically feeling a need to try and replace some unwanted alcohol consumption with something better for me, and taking things like a 30-day break from drinking or a 2-week break from drinking and feeling really good about what my body did in that time period, I began to be interested and re-approached Jake about the concept he had been dreaming up, and eventually joined forces, put our heads together and said, "Let's design something that would be uniquely appealing to people like you who are familiar with cannabis and understand it and people like me who had maybe never been to a dispensary before ever in their life."

Mathew: Okay. Now I didn't know you had a background with Bain. I know it's kind of an interesting group over there. People may remember the name Bain from Mitt Romney debates and stuff like that. That's how he got really wealthy working at Bain. But I read a book, I think it was called "The 80/20 Principle," and they talked a bit about Bain in that book and how they have like a unique philosophy and way of doing things and methodologies to create really high impact outcomes for themselves and, you know, profits and so forth. Can you talk a little bit about how...you know, what lens you gained from working at Bain and how you still have it today or if you don't?

Luke: Yeah. Working at Bain was a tremendous experience. Jake left after just a couple of years and went to Bain Capital, which is also a Mitt Romney institution, but I ended up staying in the consumer packaged goods practice for a total of six years with a two-year break for business school in between. And like you said, the 80/20 principle governs everything that we do at Bain. It's how can we find 80% of the value from only 20% of the effort and then doubling down on that type of activity so that we can create more value overall in a shorter amount of time. And my role, in particular, of late had been helping big consumer packaged goods companies, big global organizations with many different brands and business units try and jumpstart their innovation cycles by learning from how startups launched new products.

And so by applying principles like agile ways of working and assembling cross-functional teams and rooms to crack problems over a sustained eight-hour time period rather than breaking it up with one-hour meeting here, one-hour meeting there over the course of a longer period of time, I became quite passionate about the power of focusing on a smaller number of issues and solving them really fast. And when I had done a few projects like that and Jake and I had been talking about this cannabis beverage concept, I felt like this would be a really great opportunity to apply that same framework. And ultimately that's how we ended up launching by picking one retailer in Southern California, one geography, and one skew, a six-pack three flavors of product.

Mathew: Okay. That makes sense. That's really interesting. I thought it was, you know, there's been so many high success events out of Bain that it's worth studying what's going on there exactly and how that methodology came to be and all the mindset. So it is interesting. So you've made it as simple as possible to, you know, create a success for yourself and see if...just test it and see how it works, and that way you're not spending a lot of time on elaborate different products and product lines. You just want to see, will this work quickly?

Luke: That's exactly it.

Mathew: Okay. So your minimum viable product is a six-pack in Southern California at one dispenser. That's pretty clean and simple.

Luke: That was it.

Mathew: So your target market, as you mentioned, is not the guy doing, you know, gram dabs. It's someone that's not saying, "How much THC can I get for my dollar?" It's someone more saying, "I want a controlled experience that's not gonna have me, you know, hallucinating or like so deep in a couch that, like, I need a crane to lift me out." And so you're kind of going for that kinda casual user that's a little bit skeptical, but also curious.

Luke: Yeah, we say we stretch from the can of curious all the way up to the can of casual. A lot of people, I think 10% roughly of people in the United States have purchased cannabis in the last year and 60% of people are interested in purchasing cannabis but have not purchased in the last year. And if you talk to that fifth percent Delta, a lot of them are people who have selected out of the category from a bad experience, like a pot brownie from college or coughing too hard from a bong hit that they were unprepared to take. And those people, they're used to buying alcohol as a social intoxicant of choice and you don't scan the craft beer aisle and look for a percentage AVB, excuse me, or look in the liquor section and ask where is all the Everclear because that's how I'm going to get my most bang for my buck.

You're looking for an experience and a brand and a product that resonates with you. So we're trying to buck the trend of dollar per milligram of THC, which is more prevalent in other categories, but we hope actually won't apply in the beverage space.

Mathew: This is interesting because, you know, most startups and entrepreneurs don't want anybody to be excluded. They feel like, "Oh, we're not being inclusive," but it can be one of the best things you can do for your target market so they know exactly what to expect.

I mean, I think about 7 Up, like the uncola, it's for someone that doesn't want a cola specifically. And so this is kind of what you're doing here. And it's interesting, but, you know, if you don't describe the beverage as, you know, how high it makes you, how do you describe its effect? Do you have to create a new language? How do you describe it to people who are curious for the first time and want to try it?

Luke: Yeah, it's we're creating a new language around it, for sure. Microdosing culture is becoming more popular and people are starting to use language to describe that experience, but there isn't much consistency around it. And so we find that we have to have a longer conversation with everyone who's interested. Some words that we really like now, lightly lifted does a pretty good job of describing the buzz that you feel. We say a mild uplifting social buzz, if we're being asked a more academic question. And one of our branding partners described it as feel a little good lately, which I'm quite enamored with. I think it's exactly how you feel. It's just a little bit of something. It's palpable, it's noticeable, it's undeniable, and it's pleasant.

Mathew: Okay. Typically we describe the effect of cannabis as onset, but similar to what we were talking about before where it's not high, you prefer a different way of thinking about it. Can you share what the description is instead of onset, you know, instead of how you've lightly lifted, but what about the way it comes on? How do you describe that?

Luke: So we do say the word onset so that we can relate to people who are already walking dispensary floors and have that as a key purchasing criteria, and we're proud that it's around a 10-minute onset time, which is how long it will take for you to feel the effects of the beverages.

There's something about the nanoemulsion and the sublingual absorption before it goes into your stomach that kickstarts that process for you. But what we're trying to train people is that it's not about the onset of your individual cannabis item. It's about how many of these products can you have in one given experience. So the sessionability of alcohol and how it has become very socially common for people to get together with a 6-pack of beer and, you know, you have 1, you wait 10 minutes, then you decide whether or not you want to have another, and then you decide whether or not you want to have the third is exactly what we're trying to do by selling our product primarily in six packs and encouraging people at the point of sale to think of how many they want to drink over the course of an experience.

Mathew: Yeah. This is really interesting. So you're borrowing aspects of alcohol kind of the framework. We think about alcohol, beer or wine, specifically more beer or wine, like one makes it feel this way, two makes it feel this way. Adopting kind of the metronome of how you'll feel from, you know, wine or beer onto cannabis, which is tricky because it requires some explanation to even think this is possible. Because most people, you think about the brownie experience you talked about, where it's like, "Yeah, I took a brownie and I didn't feel anything and I didn't... So I took another one, I didn't feel anything, and then I blasted off to another planet."

Luke: Yeah. Which is actually an unpleasant experience for somebody who is in that more can of curious demographic. It's you don't like sitting in waiting for a ticking time bomb to come and hit you and create an unsettling feeling. You're used to and you've trained yourself over years of consuming alcohol to drink something and slowly step up into an experience that your controlling. And that's exactly what we want to create with Cann.

Mathew: Okay. So how do we build a bridge from where we are now for people who don't know how they'll feel with a 2-milligram drink, to where they will know how they'll fell and they'll have confidence in it? Like for someone that, they'll say 2 milligrams, what's that? I mean, I usually say a rookie cookie is 5 milligrams. So if you've never had any kind of edible before, that's what would be considering a starter place. And so this is kind of less than half of a rookie cookie. I mean, did you experiment like one and three and or is this just like this came out of the gates that this is the right amount?

Luke: We experimented lot. And I think when we had an equal part group that said this is not going to get me high and another equal part group that said that I can't have more than one, that's when we know we landed on the right amount. And it's amazing how passionately people will argue on both sides. And it represents just how different people who are routine cannabis users are from people who are just exploring the category. People who are routine cannabis users will come up to me and say, "I would need to drink 50 of these before I felt anything," or, "Like, that's a punk amount of THC." And I just got a text message yesterday from one of my friends who is a skeptic, and after learning about the product digitally for six months approached the dispensary for the first time, got it, and then, and I said, "How did you feel?" She was, "They are so tasty, but I had two and that was beyond my limits. One is perfect for me."

Mathew: Oh, good.

Luke: Now we really want the both of these experiences to be in between where people feel comfortable having two to three, but it takes some time for somebody to step up from a 2.5-milligram experience to a 5-milligram experience. So your question was how do we bridge the gap between where we are today and where people become accustomed to and familiar with this 2.5 milligram and below sessionable cannabis drinking experience? And I think there really are five main things that need to happen that will evolve the category, and I think it's, first, more products that are dosed similarly.

So a suite of sessionable cannabis beverages that exist in the fridge will help make the category look more legitimate and less fringe and make dispensaries pay a little bit more attention to it as a growing category. Within that set of products you also need to have drinks that are formulated with better ingredients and that take after trends from today. All-natural, no sugar added, low-calorie, without artificial sweeteners. And, you know, there aren't enough that fit that kind of whole foods quality drink benchmark and we hope that more will come in.

The third is branding. I think there are a lot of drinks that use overt cannabis imagery to invite people in and remind them that it's cannabis drink. But we need a lot more drinks that don't have any overt cannabis branding because those will be inviting to the people who actually will enjoy that sub 2.5-milligram drink the most.

And the fourth is price. People who are doing that dollar per milligram calculation, those aren't the right people to buy the products, right? People who are spending $15 to $20 on a 6-pack of premium craft beer or a bottle of wine to bring over to a friend social gathering, when they look at cannabis beverages at $10 and above per unit, it doesn't become something that they can do the same thing with. So the price has to come down significantly, which means the whole industry needs to evolve. And, you know, all the way from manufacturing down to the point of sale, there needs to be better ways and fewer points in which money are changing hands before that final retail price is set.

And the last thing, and I know this is a long list, is availability. Even people in the Cann ecosystem who love the product and are comfortable with our price point and want to buy it often, their number one pain point is they just don't know how, and they find the existing cannabis channels hard to reach or stigmatizing, evoking fear, not knowing what to say to a bud tender, not knowing how to scroll through a menu with tons of pictures of clumps of weed on it. And so I think we need the channel to evolve and more premium points of sale that do not make somebody think back to a negative cannabis experience before this thing really takes off.

Luke: So it's fair to say that you're making the trade-off for consistency and experience over potency. Is there one or two demographic profiles that seem to want this consistency in experience the most? Have you seen an age or gender area where this time Cann seems to be the sweet spot or is it just all over the board?

Mathew: It's shocking to me, but we still maintain a 50/50 male and female consumer split. I think it's weighted because there are more males than females currently in the cannabis channel. So if we were looking at just a pure group of mainstream consumers, I think we may slant more heavily female, but we also surprisingly have a very even split of age ranges, making us feel like this product does have cross-generational appeal.

I think 30% of our consumers are between 20 and 29, 40% are between 30 and 39, and then another 30% are 40-plus. The one thing that everybody has in common, though, that loves the product, it's more of a need state than a demographic is a desire to drink less alcohol. And that can be something that appeals to people of any gender and of any age. It's 21 out of 25 adult drinkers will say, "Yes, I am actively trying to moderate or reduce my consumption of alcohol." It could be for health reasons. As a 60-year-old, your doctor's telling you, "You have to drink less." It could be as a 25-year old, you know, "I want to blackout less and drink less irresponsibly at parties." Or it could be a 32-year-old like me who's just like, "The hangover is untenable and I want to take back my Sundays."

Mathew: Yeah, that's true. You wake up and it's like you're eating fatty, salty foods and trying to just normalize, if you were having a botanical oil, you don't need to do that, but I mean really it's ethanol. Let's be clear. It's poison that our liver is processing. Now let's talk about the CBD aspect a little bit. We said 2 milligrams of THC. Can you talk about the CBD concentration and profile?

Luke: Yeah. We believe that a CBD dominant ratio with a microdose of THC gives people a more calm and less anxious peak of their THCI. The thing that turns people like me off from cannabis is when you hit that point where, "Uh-oh, I am too high to be here." And something, which is definitely part psychological and definitely part physiological from the entourage effect about having CBD on the label, gets people more comfortable with trying it and then also, in their high, they report less of an anxiety factor. And so I think we're still at the beginnings of figuring out how the variance in a THC and CBD ratio creates a different experience, but like you said earlier, we're trying to optimize for consistency and by making it with...as pure of a distillate, as we're able to find, we've found that people report generally similar feelings of that lightly lifted thing from each can that they drink.

Mathew: Okay. And you said this is available in six. Is it six-packs only or can you purchase one can?

Luke: We're starting to broaden our skew assortment to make it so that it's easier for people to try. We initially sold with just six-packs because we knew that if somebody had just one can, then we weren't giving them the full experience of drinking it with friends and replacing it with that six-pack of craft beer they would've had in the same occasion, which is truly where the product shines. But it's a hard hurdle to spend $24 on something pretax at $30 out the door on something you've never tried before. And so we are starting to sell in singles at $6 retail and then keeping the 6 packs at $24, and then starting to offer a 24-pack, which is a $75 price point and allows you to have significant savings if you're on a per can basis, if you're really in love with the product already.

Mathew: Okay. Any feedback from the dispensary in Southern California and customers, what they say or so forth? Or is it still too early?

Luke: So it was MedMen, and we picked four of their retail doors and we launched only with them for the month of June. And the feedback was tremendous. The product, even though it was only available in six packs, MedMen built its brand around attracting that premium kind of curious consumer and they gravitated toward its packaging in the fridge and its positioning as a cluster of drinks that I could enjoy socially.

And there's a very large percentage that go into stores like MedMen as an experience and walk out empty-handed, a cannabis tourist, if you will. And I think what we found was that a high percentage of the people that bought our product from MedMen were people who had no intention of actually buying anything, and that this was the most approachable product that existed in there. Something about a microdose edible, it was too much of a behavior change for them to switch from drinking something like they would alcohol to taking something out from under the table. And then flowers and flower-related skews and vapes were an entire league away from what they were comfortable with and they just wanted to be a voyeur. And so then we quickly expanded distribution to now, I think, we're in nearly 100 stores throughout the state of California. And in some stores like MedMen, the product just flies without any support, no marketing and no promotion.

And in other stores where you have a much higher concentration of people that are looking for flower, the product does not fly on its own, and we have to put somebody in the store and sample and do consumer education and often tell somebody, "Yeah, this isn't for you if you're doing 100-milligram plus products, but this might be something that you could share with your friend who is trying to drink less alcohol." And that way we're trying to be as much of a Trojan horse as possible. Get this in the hands of people who maybe haven't had a cannabis product they could share with somebody in their social circle because they found the other cannabis products to be too stigmatizing.

Mathew: Okay. And talk a little bit about your flavors. You have some interesting fun flavors. How did you arrive at those?

Luke: Yeah, this was one of the most fun parts of the entire process was formulating beverage. My dad has a long history in the food and beverage world, and when I worked at Bain and Company, I worked on a number of interesting brands that took an innovative approach to flavor profiles in the consumer packaged goods space. And through just relentless networking and trying to find, hey, for a certain type of ingredient, where's the best place to get it in the world? Like lemon juice, which turns out a small farm in Sicily or lavender, a European variety of the plant, or agave nectar for sweetness, get that from Mexico.

We did an exercise where we sourced the best quality ingredients that would make this product worthy of being on the shelf at whole foods and would be impressive to a national premium grocery retail category buyer. But then we also did some science. We looked at Google trends data, which is a completely underutilized analytical tool available to everybody where you can just see the search interest over a period of time by geography.

And we looked at how often people in the United States were searching for savory herbal ingredient profiles. And between 2004 and 2009, the search volume and growth was about half that as it is from 2009 to today. And so we look to capitalize on this growing demand for savory herbal products and just mix them with the guidance of a food scientist with a citrus fruit that pairs well and makes it so that the whole is greater than the sum of their parts.

We ended up launching...we've developed about 24 flavor profiles and loved them all, but we did some rigorous consumer testing and decided to launch with the three that were most approachable and least polarizing, so had the highest percentage of people that liked them. And those are lemon and lavender, grapefruit and Rosemary, and blood orange and cardamom.

Mathew: Okay. Very interesting. One problem many companies have making drinks is emulsion and creating a uniform dispersion of the active ingredients so we are getting an equal amount of, let's say, THC, CBD, or Rosemary in each sip. Can you talk about the kind of the challenges there and how you addressed them?

Luke: Yeah, the emulsion was the biggest issue in us getting to market. Lagunitas Hi-Fi Hops had been available in cans and switched to glass bottles, and our thinking was...and we had heard rumblings that a few other players in the industry were having trouble with maintaining a consistent potency in a non-glass container because the emulsion itself is highly reactive to the can liner.

Now it turns out, and I never thought I needed to know any of this, but there are 3 different can manufacturers and 12 different types of can liners across the 3 of them in the United States alone. And each one of those can liners has a different effect on pulling the agents that were used in the emulsion toward it or letting them remain equally dispersed in the liquid. And so what we did was we tested not only every can liner but also every type of emulsion on the market.

And it turns out that some emulsions had optimized for onset time. Like, let's get somebody to fill this within 5 minutes rather than 10. But in order to decrease the onset time, you need to use an agent that often has a very poor taste in it to accelerate that feeling you get from the THC. And we ended up using an emulsion that had a slightly slower onset time around 10 minutes, but that is probably indistinguishable to our target consumer who's just worried about getting too high. And because they use a different type of agent and made it optimized for tasteless and odorless and made it more reactive with the water than the can liners, we were able to prove out six-month minimum consistent potency in the cans.

And we loved the idea of being focused on the cans because it's just easier to carry a 6-pack of cans somewhere and you feel like each strength is something that you're consuming more casually, and we want to encourage people to drink 2 or 3 of them rather than savor each individual one. So it was a tough science challenge, but one that we felt was ultimately very important.

Mathew: Interesting. It's tough to kind of imagine how people react to it. Sometimes the market takes your product and likes it, but behaves differently with it than you'd like. So it's kind of like, for example, Red Bull and vodka. Like those two things aren't really supposed to go together, but the vodka or Red Bull manufacturers aren't complaining, but it's like, "Hey, this is not what we set out to do here." But then the market kind of takes its own way. So interesting. What question do you get asked by dispensary owners the most and how do you respond to those?

Luke: The number one question when I'm selling into a dispensary is, "Well, who's going to buy this?" And my answer, at this point, is the person who's gonna end up growing your business. It's the person who you may not even have access to today, but that who will become a cross-category cannabis purchaser. And it's, I think, especially at a time where the industry is in a lot of trouble and people aren't hitting their revenue targets and expectations for how many people were gonna be flower smokers were probably overblown. I think call for products like this that invite people into cannabis and then keep them there.

And my own experience as somebody who had never been to a dispensary before January of this year and now my own cannabis consumption patterns having evolved from designing this product that I would use as the first cannabis product I would ever pay money for, now I have four cannabis products that I pay money for. I have Mr. Moxey's microdose mints, I have some Kiva Camino gummies, and I have a Dosist sleep pen. And I wouldn't be surprised if over the next year I replace a greater share of my own alcohol consumption with something that's a little stronger or, you know, maybe a higher potency edible or maybe I get into pre-rolls at some point. I'm still a little nervous about the whole lungs thing, so maybe not, but by gradually stepping into the cannabis category and choosing experiences that don't make me feel overwhelmed. I have increased the amount of money I spend on cannabis significantly each month.

Mathew: You just gave a shot of terror to anybody from the alcohol industry listening. This is their worst-case scenario, listening to how you're replacing alcohol with cannabis products, but I love it now.

Luke: Or is it, though, because it's the same...the microdose THC drink is the same thing functionally as an alcoholic drink, which is like a microdose of alcohol. And I believe that the regulator...people who are making it so that cannabis is regulated as one entire bubble, I think, are doing it wrong. A microdose of THC, like you have to have 8,000 of my cans on your person in order to be over the personal use limit in California. And so I believe in a future where microdoses or THC actually get regulated more similarly to alcohol than the rest of cannabis and can get folded into the social spaces and purchasing channels that alcohol gets purchased from.

And ultimately the natural owners of cannabis beverage businesses, I think, are probably alcohol companies. They would want to acquire cannabis beverages and fold them into their distribution networks because that's the best way for them to offset the declines in beer sales as the world is falling a little bit out of love with irresponsible alcohol use.

Mathew: So we talked a little bit about microdosing and that seems to be the beginning of a new trend, especially in California because we can do other things while we microdose. Can you talk a little bit about where you think microdosing, in general, is going? Not just cannabis, but otherwise?

Luke: It's so interesting because microdosing is a trend within people that are accustomed to cannabis is something that you can do during the day and remain very functional. But for our target consumer, and for me personally, even though I have become used to my own product, I would never drink a can in the middle of the workday if I had something important to do within the next six hours. It does impact my ability to thin. And, you know, I think if I were in more of a routine type of job that I didn't have to go through some complex mental exercise every few hours to try and solve a problem, then maybe I could microdose throughout the day. Or if I were a purely creative person and I was drawing something or writing a script or conceptualizing of an idea, then a microdose would be additive to my creative process.

But for the majority of people that are going to explore cannabis, microdosing actually would be a lot like drinking. And I don't think people, even though it might make the creative process a little more fun or it may be possible to do for people during their work days, I don't think people in mass will drink alcohol during the day. And so I think that there's limits to this microdosing trend as we see it today as a way for people to functionally get through their daily experiences. And I hope that the more prevalent use case of microdosing becomes a social one as a mild intoxicant.

Mathew: Okay. And where are you in the capital-raising process?

Luke: So we have raised two rounds. We did a pre-seed led by Navy capital in December of 2019 and then we just announced our seed round which was a $5 million raise and was interestingly led by one New York City VC that focuses on really brilliant consumer packaged goods brands that we honestly pinch ourselves every day to be associated with, and that's called Imaginary Ventures. They were founded by Nick Brown and Natalie Massenet and have companies like Daily Harvest, and Glossier, and Dirty Lemon in their portfolio.

And then we have a cannabis co-lead in that round called jam 10 partners and that has helped us think about this from a one foot in and one foot out perspective. So how do we grow strategically within the cannabis channel given the way regulations are and how many points of sale exist today? And who should we partner with in the cannabis ecosystem to grow our presence throughout the country, but also how do we think about our business like a mainstream consumer brand and how do we market to people who have this real relatable pain point of, "I want to drink less alcohol but I don't want to be sober"? And so that has been a really dynamic duo for us and we think will help us catapult into the next phase of our growth.

Mathew: If for accredited investors that are listening, are you still looking for more accredited investors or not right now?

Luke: Not right now. Our philosophy is let's raise enough money that we can survive for at least 12 months because raising money is a full-time job and building a category and a tightening channel is like 10 full-time jobs. And so we really feel like we have to focus so much on the day to day and how to get this product into more paying consumers hands that we don't want to think about raising money until at least the end of 2020 but, you know, certainly will be added again then.

Mathew: Luke, I want to move on to some personal development questions to help listeners get a better sense of who you are as a person. 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?

Luke: Interesting. I have been obsessed with the book 1984 and have read it three times now and I am delighted by it each time. And it's a fiction book by George Orwell and it paints this dystopian future. And I think what it helps me do is continually think outside the box about a future world that does not exist yet and as a different set of problems than today's world. Now, obviously, creating a cannabis beverage and imagining that it can be on tap right next to a beer or a hard kombucha at a bar is not such a farfetched reality, but I often have to train myself to imagine things that don't exist in order to create them and wheel them into the world.

So, you know, "1984" is a pretty dark book and it's not that I'm trying to take a page out of it, but I find it to be just a beautiful piece of writing and really inspiring.

Mathew: Although it's a work of fiction, do you see elements of that in our modern society that give you pause at all?

Luke: Totally. But, you know, I assume often that privacy is something that we don't have and I live my life as publicly as I feel comfortable. And if I do something, I assume that everybody is watching and listening because who knows? They might be, but it makes it very easy to get through the day to day and the week to week knowing that I'm not hiding anything from anybody.

Mathew: Right. What is the most interesting thing going on in your field besides what you're doing?

Luke: I think that fifth frontier I called channel availability would be probably the hardest thing to crack in order for microdose THC drink to become mainstream. And so I think that the people who are creating innovative retail spaces and delivery platforms that do not smell or look like cannabis traditionally are the ones that are doing the work that will carry us into this next phase of growth for the industry.

And so I think I was really inspired by what MedMen did to create an Apple Store-esque user experience for somebody who frankly needs that consumer education to get welcomed into the category. And I think we'll need a whole new generation of businesses like that, that can figure out how to crack that can of curious target consumer without burning so much cash on marketing and being at risk of folding.

And I think that in delivery that's much more scalable. Eaze has done amazing things to give access to so many people to cannabis on-demand, but there's still something about easiest target consumer that is focused on high THC, low dollars, that prevents us from really saturating it as a channel. So, my money is on people who are building innovative and non-cannabis forward points of sale, whether digitally for delivery or a physical for retail.

Mathew: Okay. Here's a Peter Teal question for you. What very important truth to very few people agree with you on?

Luke: Wow. Well, you know, I guess that's a general question but I'm gonna give them a cannabis answer. The truth that people disagree with me on most vehemently is that the world is ready for a microdose ready to drink THC beverage and that it can be consumed similarly to alcohol. It's the fundamental, you know, thesis for our company's existence, but we experience so much pushback in the market in just casual conversations with friends.

And I used to be a naysayer, and when I was that person who vehemently disagreed with Jake about the need for a product like this and like why solve one substance issue like alcohol abuse with another substance? Like doesn't that feel silly? But, you know, after doing this whole exercise of quitting my job and starting the company and seeing our growing team of 12 people now also go through this exercise of sacrificing careers to build this. And in the hardest of days, we all look at each other and just hold the can in our hands and say it's a really good product. People just have to get used to it. And so as many naysayers as there are out there and as many people who vehemently disagree with what we're doing, we know it's just a matter of time before it inflex. And so in the meantime, just getting as many cans in hands as possible.

Mathew: Luke, as we close, how can listeners find your beverages and follow you online?

Luke: Our primary way of communicating to our consumer base is on Instagram, and it's @drinkcann. It's a highly irreverent and silly social media page. We say as a company that we want Cann to be your friend, not a brand that's pushing its product on you. So hopefully, those who follow it find it an entertaining and educational place to learn about what we're doing.

But we also have a great website that we're very proud of that tackles that consumer education more directly. That's at www.drinkcann.com. And we answer every direct message and every email to our company. And so if you are interested in learning more or just having a dialogue, reach out, somebody will reply.

Mathew: Luke, thanks so much for coming on the show. We really appreciate it. Please come back on and let us know how this all progresses, and good luck to you.

Luke: Thank you so much. Anytime.

Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher, or whatever app you might be using to listen to the show. Every five-star review helps us to bring the best guests to you. Learn more at cannainsider.com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at cannainsider.com/trends. Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at feedback@cannainsider.com. We'd love to hear from you.

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