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Ep 344 – Midwest Cannabis Company Thrives In a Difficult Market

tim schuler detroit edible

We hear a lot about what’s going on in the west coast cannabis market, but what about the midwest? Here to fill us in is Tim Schuler of Cannalicious and Detroit Edible Company.

Learn more at:

http://www.cannaliciouslabs.com 

http://www.detroitediblecompany.com 

Key Takeaways:

[1:09] An inside look at Cannalicious and Detroit Edible Company, two of Michigan’s most successful cannabis businesses

[2:00] Tim’s background working for Anheuser Busch and how he got into the cannabis space

[3:42] How the cannabis market in Michigan has evolved over the last ten years

[8:35] How Tim and his team decide the best cannabis extracts to produce at Cannalicious

[11:23] The types of products sold at Detroit Edible Company, from gummies to brownies

[17:44] Detroit Edible’s latest partnership with Eaze and why the California-based delivery app is expanding into Michigan

[21:31] How Tim manages his inventory using LeafLink, cannabis’ largest wholesale management platform

[25:51] Where Tim sees the cannabis market in Michigan heading over the next 3-5 years

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 @cannainsider.com. That's C-A-N-N-A insider dot com. Now, here's your program.

[music]

Matthew: We hear a lot about what is going on in the west coast cannabis market, but what about the midwest cannabis market. Here to tell us what business is like for a cannabis operator in Michigan is Tim Schuler of Detroit Edible Company and Cannalicious. Tim, welcome to CannaInsider.

Tim Schuler: Matt, thanks for having me today.

Matthew: Give us a sense of geography. Where are you sitting today?

Tim: Ann Arbor, Michigan. We call it the cannabis capital of Michigan. They've been doing that annual hash bash for more than 50 years. When adult use or recreational cannabis came to being a little over a year ago, the first provisioning centers were in Ann Arbor. Now, we have over 220 here in Michigan.

Matthew: What is Detroit Edible and Cannalicious on a high level?

Tim Schuler: Detroit Edible Company is a truly an Edible Company. We make everything from fudge to brownies, to chocolate bars, which we call Barracuda bars, and then we have honey peanut butter. Then we have variants of gummies as well. We just launched our Guppy gummies. That's a five to one THC to CBM line, and then Cannalicious it's in a different location.

It's actually in Pinconning, Michigan, which is up North here in Michigan and it's a pure extractor and concentrate company. We do everything from hydrocarbon to ethanol washing. Then we obviously make distillate after we do both of those processes.

Matthew: Tim, can you share a little bit about your background and journey and how you came to start these two companies and got in the cannabis space?

Tim: Well, do you have an hour? No, I'm kidding. [chuckles] It's an interesting story. I started my career through Anheuser-Busch and working for one of the largest brewers in the world. Learned sales, marketing, and distribution, and worked for them for more than 15 years. The last five of those years, I was a state sales director here in the state of Michigan.

It's a three tier system. A brewer, then a wholesaler and then a retailer. We moved about 48 million cases of beer in Michigan on an annual basis. That's where I got or cut my teeth, at least, in sales, marketing, and distribution. Then I launched into the supply chain here in Michigan about three years ago to start one of the first secure transport companies here. Along the way, I met my current partners and decided to get out of secure transport and jump into the processing game. We launched Cannalicious about two and a half years ago. Then Detroit Edible Company started about a year and a half ago. We're progressing well as a processors here in the State. Then we also have one retail location in Ann Arbor as well.

Matthew: You have two businesses then. You've got Cannalicious, the extraction concentrate company and Detroit Edibles Company.

Tim: That is correct.

Matthew: We hear a ton, as I mentioned in the intro, about California, Oregon, Colorado, but we just don't hear that much about Michigan. It's just not talked about that much in the bigger markets. Can you just orient us in terms of what the background or the Michigan markets like in the past and what it's like today?

Tim: Sure. A little over 10 years ago, there was what was created the caregiver network here in the State of Michigan, which made it legal for an individual to grow up to 12 plants for him, or herself and five other patients. That individual, the caregiver could supply those products, whether it be a flower, pre-rolls, tinctures, edibles whatever variant of cannabis that they could come up with.

Along the way, through some various loopholes, various dispensaries started popping up across the State, where caregivers could bring their overage to that dispensary, and then that dispensary would sell it to medical cardholders who didn't have a caregiver to go find. The medical cardholders grew to nearly 300,000 medical cardholders here in the State. It became a little unwieldy because caregivers were doing things a lot different across the State. The State enacted a new supply chain, which essentially meant growers, processors, a safety and compliance.

They added a different wrinkle that most states don't have, and that's a secure transporter, to move the product between the different entities. Then of course the provisioning centers. That was implemented in late 2018 when it was all medical. Then the state voted by a margin of 58 - 42 to go adult use, and that started last January. All of those various medical license had been applied for adult use. We completed our first year in Michigan at 2020 and did almost $1 billion of retail sales.

Matthew: Wow. Let's dig into your business a little bit. Cannalicious, the extraction and concentrates company, and then Detroit Edible Company where you have one retail store and you also have all the edibles. How does the revenue breakdown between these two companies?

Tim: It's about 53% on the Edible side and 47% on the concentrate side to various stores. It varies by month and it also varies by areas preference. We obviously distribute across the state and that includes the UP. There's over 325 different provisioning centers. We have to call on each of them and we deliver from each one of those two facilities on a daily basis.

Matthew: For people not familiar with the Midwest, the UP is the Upper Peninsula,

Tim: The Upper Peninsula it's connected to both Wisconsin and Minnesota. It's a vast amount of land. If you're in Detroit, you can get to Washington DC quicker than you can leave the state of Michigan, if you were to go all the way up to the UP across the Mackinac bridge and then all the way to a place called Ironwood, which is where coach Tom Izzo at Michigan State's from.

Matthew: What kind of extraction equipment do you use for your business? Just curious there.

Tim: We started with hydrocarbons. We extract with both a combination of propane and butane and we use XT70 made by ETS to do that. Then, just recently about eight, nine months ago, we purchased an ethanol skid. We do ethanol washing, and then we take that ethanol product or by-product, and then run it through an HPE thin film separator to create distillate. We're one of the largest producers of distillate in the state of Michigan and do it for ourselves as well as there's a few other growers that also have processing license, but don't have the ability to extract so we do some toll processing for them to get raw distillate for them.

Matthew: How do you arrive at what kind of extracts you want to make at Cannalicious.?

Tim: I tell you what, we take the Amazon model from 20 years ago with Jeff Bezos, and that is that you have to change and adapt to what the marketplace may want or need. We've always rooted ourselves with a product called Rick Simpson Oil. We make the most RSO in the State and make a few different varieties of RSO.

As we look at live resin or shatter darts, distillate carts, we try to round out a menu so that our customers are, if they need a concentrate, we're a one-stop shop for them. As our inventory, we try to keep anywhere from a four to six-week inventory amount on our shelves so that PCs know that they can come to us and rely on a consistent product that's always there for them. We just build our inventory based on those levels of different products that are on the concentrate side of the business.

Matthew: A lot of people are familiar with RSO or Rick Simpson Oil, particularly if they know someone that's a medical patient using cannabis oil, but can you just go into what Rick Simpson Oil is?

Tim: Sure. Rick Simpson Oil he's a Canadian, so he's right across the border from us here in Michigan. He discovered almost nearly 50 years ago that the cannabis plant has some ability to either stop or retard the growth of cancer cells in most peoples' bodies. He started an extraction process where you basically get to a crude, and then you eliminate the fats and lipids. The product itself is not a pretty-looking product, but we put it in a one gram syringe and recommend to people to put about a rice-sized droplet on a cracker or mix it with some peanut butter or whatever they want to do because it's an ingestible concentrate that helps relieve a lot of different ailments.

It's not just cancer. We have a lot of research that shows that it helps in the relief of pain. We've mixed it with some CBN, so you can take it and have a good effect to be able to sleep at night. We call it a Rest RSO. Then, we've also flavored it with some natural terpenes, both cherry, grape, and wine, like RSO. For those who haven't had it, it's not the most flavorable concentrate out there. We tried to make it a little more appeasing to the palate.

Matthew: That's great. I'm really happy to hear that you're making that for patients. Then, we've talked about how you've picked extracts and you're trying different things. Is it the same way then with the Edibles Company or are you just trying different things? How do you think about that?

Tim: We're Detroit Edible Company now, but we used to operate as Detroit Fudge Company and made the best fudge on the marketplace. Since we're going in a direction of having multiple different variants of edibles, we changed it to Detroit Edible Company. We've always rooted ourselves in having great fudge, great brownies that are nice and moist for the consumer.

A fudge only has a lifespan of about three months of shelf life after it leaves our facility. Brownies have six months. Then, chocolate bars, honey, peanut butter, guppies, they all have 12 months. We have to do a nice job of working with our retailers to not over order and make sure that they have plenty on hand, but not too many because the last thing we want is any product going out of date.

Matthew: Balancing act there.

Tim: It is a balancing act.

Matthew: What does the illegal market for cannabis look like in Michigan or unregulated, some say? How would you describe it?

Tim: Unfortunately, too big. The caregiver model lasted here for eight or nine years, and there's a lot of caregivers that grow a lot of great product out there. The way the rules are written, caregivers can still exist. They can grow up to 72 plants. Because we're in a COVID situation, nobody's really monitoring how many plants that these individuals are actually growing. Then, obviously, their distribution chain is such that they have the ability to penetrate quite heavily. Whether it's 30%, 40%, or even 50% of the actual market, there's really no way to tell, but we definitely know that it exists out there because many of our retailers share with us what their customers are coming in and saying that they can buy from various sources. At one point, there was 40,000 caregivers here in Michigan. It's now down to registered 30,000. The caregiver network has the ability to grow up to 2.1 million plants. The licensed market only has the ability to grow about 700,000.

Matthew: Wow. I'm interested in how you brand with the edibles. You seem to have chosen a fish theme. Talk about that a little bit.

Tim: Sure. Michigan is surrounded by four of the five Great Lakes and we pride ourselves on being a great state to be in enjoying water. Barracuda is our chocolate bar. It comes in two different levels, 100 milligrams for adult use and 200 milligrams for medical use. We want to pay attention to the microdosing market out there because we believe there's a lot of canna-curious, that if they take too much at one point, like any other consumer product good, if somebody has a bad experience with that product, you may never get them to try it again.

We brought out a 10-milligram Minnow bar, which Minnow, obviously is a lot smaller than a Barracuda and allows people to microdose 10 milligrams. It comes in four distinct rectangles that they can break off so they can get it down to 2.5 milligrams per dosing, which we think is a great thing for the consumers because we recommend, "Start slow." Everybody has a different tolerance. Everybody has a different metabolism. We want people to have a great experience with our products.

Then, we've just launched our gummy line. Staying with that fish theme, we launched our gummies to be called Guppies, close to a gummy-sounding name. We found some white space in terms of what we believe is a great seller in California, Oregon, Washington, and that is a THC to CBN combination. There's so many of those canna-curious or myself, I'm a 54-year-old male that has problems sleeping at night, I can take one of those 45 minutes to an hour, and I'll sleep all night and fall asleep very easily.

It's better than taking a melatonin or Diazepam or any other sleep aid, in my opinion.

Matthew: Just take one of your gummies?

Tim: Exactly.

Matthew: How many milligrams is your magic number?

Tim: I stay with 10. I don't need to go much further than that to fall asleep and have a very restful night of sleeping.

Matthew: Wow. With a 100-milligram gram bar-- I know around 420, sometimes you see a 420-milligram chocolate bar. How do you orient someone that might be new to cannabis and they're going to take this, and like, "Oh, I eat the whole thing." Is there something on there that says like, "Hey, you might only want to take a nibble of this to start out or you're going to blast off to another planet."?

Tim: [laughs] That's one of the things that the MRA, which is the Marijuana Regulatory Authority has recommended and made sure that everybody follows, and that is a dosing amount on each package. For the adult user, the most amount of milligrams we could put into a chocolate bar is 100. Then, each serving size can be no more than 10. We recommend to people that, if you need an entire chocolate bar, that's going to be the entire bar and it's 100 milligrams. All of our bars have lines, a mould that it comes out of, so there's 20 triangles of five milligrams each. If they took half the bar, they would know they'd be getting 50 milligrams.

Matthew: You're going to start partnering with Eaze, the delivery app for home delivery. Can you talk about that a little bit?

Tim: Sure. We're really excited about Eaze. Eaze is obviously the leading home delivery company in California, potentially the largest retailer now in all of California through their home delivery depots. They made a concerted effort to want to expand out of California and they saw what was happening in Michigan in terms of $1 billion of retail sales. They've entered the market with us and we're going to launch next week Thursday, I believe it is, April 1st to be the first depot delivering out of about a 45-mile radius of Ann Arbor.

We believe that home delivery is going to be here to stay. COVID's obviously accelerated that with DoorDash or Uber Eats or any other restaurant or any other delivery service that's out there. What better way to allow people to bring things straight to their house to try. Cannabis and pizza has always been two of those things that have been home delivered. We believe Eaze is going to knock it out of the park here.

Matthew: How many adults in Michigan are not cardholders? I'm trying to get a sense of what the opportunity or the blue sky is for you going forward.

Tim: The state of Michigan is about 10 million people, last census, which is a little over 10 million. There's 7 million of those are over 21, and there's 300,000 cardholders in the State of Michigan. Now, you can be a cardholder and still be under 21, but most are over 21. The blue sky of adult use, we believe is somewhere between 6.7 and 6.8 million people. Another thing that's great for Michigan is Michigan is a tourism state.

Like I said earlier, it's surrounded by four of the Great Lakes. It has a number of different lakes. Tourism is one of the major industries here in Michigan and we lost out on that all of last summer with COVID. We believe there's still another level of consumption that will go on once people are vaccinated, COVID comes back down and people are now more apt to travel. Our surroundings state Indiana has zero cannabis sales. Ohio has medical only and a very difficult one at that.

Illinois is adult-use and medical but again their supply chain is not built out. Then Wisconsin is not either cannabis-friendly. When you look at those five states surrounding us, that's about 46 million people that are within a five to six-hour drive of the State of Michigan. We think Blue Sky Michigan has a great opportunity yet.

Matthew: For international listeners or people who have just never been to the mid-West, it's hard to understand the vastness of how big the Great Lakes are. They're just absolutely enormous. I brought a friend over from Germany once and he thought it was the ocean. I said, "I thought you guys were supposed to be good at geography, better than us." He goes, "You're in the middle of the country here." It's so big. You can't see the other side. I think it's a wonder of the world actually, the Great Lakes. They're just so big.

Tim: It is. You can stand on pretty much any shoreline, whether it's up in Port Huron, up north on Lake Superior, or on the left side of the State of Michigan. On a rough day, you would think you're on the shores of both the Pacific or Atlantic Ocean.

Matthew: One thing in talking with you that I was really interested in is that you use the B2B platform called LeafLink that's in the cannabis space. You use it in some interesting ways. Can you talk about that?

Tim: Yes. LeafLink, when we started this journey, we had a lot of inventory. How do you manage inventory and make sure that sales were actually not stepping on one another in terms of the amount of products that they have or selling on a basis. We went looking for one. I had used Salesforce in the past and Salesforce is a great tool, cloud-based but extremely expensive. There's another one out there called Sugar, it's good but again pricey.

I was introduced to LeafLink as a CRM or a consumer relationship marketing tool. We found it to be outstanding from a control of inventory. PCs can go on at no charge. Shop your menu as you keep it updated. We put up great pictures, test results, case quantities, all of those important things that a customer would need, and they can click and order. As we learned and dealt with LeafLink, they're a great company. We have a great relationship with probably more than half of their 100 employees now.

They wanted to bring to us some various tools. They have myBI which is my My Business Insight so that we can have a nice deep dive into our own analytics of when people are ordering, what are they pairing with each order, things like that. Then they also have another platform called MarketScape. Everyone that's on the LeafLink platform here in Michigan, we can now run reports to say, "Okay. How much RSO are we selling compared to the market? Where are our price points at? Where are other competition basically?" That helped us from there.

The other area that we've always wanted some help in is cannabis is a cash business. They brought out LeafLink Financials. We're their launch partner here in Michigan for it. Essentially, what it does is it provides to the retailer not have to pay on delivery it's net 30 terms and we don't have to deal in cash. That's really important to us because Matt, I don't know if you've every tried to count $70,000 at one time. It's dirty, it takes long, and there's a lot of risk. 

Matthew: I can barely count my fingers, Tim.

Tim: Exactly. If we can get out of that, we felt we'd have more time and more resources to put in other directions. We're a big believer in that. Now, we're in about 86% of all the provisioning centers in the State of Michigan and I want to say about 80% of those use LeafLink Financial, which makes it a whole lot easier on our comptroller to be able to monitor cash flow as well as understand he doesn't have to get his hands dirty or worry about safety.

The third platform that they've instituted is what's called LeafLink Logistics. Secure transport is one of the supply chain that we have to use here in the State of Michigan. What they've done is they've simplified it down to where we can click on a delivery, put in the date, and they arrange all of the logistics to get it from our facility to a PC. Why I say PC, it's not politically correct, it's provisioning center.

We've again, found them to be great partners. They're very knowledgeable about the industry itself. They helped people understand how to use the power of terms to be able to buy, sell, and then be able to buy some more products through that 30 days we've been running out. They've been a great help to our industry here in Michigan.

Matthew: Tim, how do you see the cannabis market changing in Michigan in the next three to five years?

Tim: Right now, there's 1,400 and fifty-something different cities and townships in Michigan. Only 400 of those have opted in to allow retail sales. There's big hot pockets of where retailers are centered whether it's Bay City, or Lansing, or Ann Arbor, or Kalamazoo, or Detroit, all the way up to Traverse City, things like that. We believe that as more cities understand the value of what cannabis can bring to the market and that it brings reputable people jobs and tax revenue, that we'll see as many liquor stores in the State of Michigan as we'll see cannabis stores. We as a manufacturer have to be ready for that and we have to work with companies as they grow. There's not going to be urban centers with a hundred stores, there's going to be a store in every different municipality. We believe there's a wide-open growth there.

Another level of adult use that's out there is called consumption lounges. We believe that that's another [unintelligible [00:27:11] for people to instead of going to a club and dancing and buying alcohol, they are going to be able to go and enjoy cannabis, which again would provide another opportunity whether that's through an edible line or a concentrate line for us.

Matthew: Tim, I'd like to ask you a few personal development questions to help listeners get a better sense of who you are. 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?

Tim: Sure. I do love to read. Thomas Edison's biography is incredible. The preamble talks about how the time he was 18 to the time he died, he averaged filing a patent every six days. [chuckles] It's just incredible. He just didn't invent the light bulb. He did so much with plants. He figured out how to make a synthetic rubber for the tire manufacturers. He was very influential. Steve Job's autobiography was also another all-encompassing how do you control where you're going in life.

Then my very first autobiography I ever read was Lee Iacocca. Never knew it at the time that I'd be living in Detroit but what he did with the Ford Mustang and then latter-day with running Chrysler, the ability to lead and to adapt and change every day is so important for personal, and obviously, a company's development. You need to have a vision of where you want to go and how to get there but also, the fortitude to change when something is not going the way you want it to.

Matthew: What do you think the most interesting thing going on in your field is besides what you're doing with Cannalicious in Detroit Edible Company?

Tim: I think it's the marketing of the cannabis itself. Obviously, every one of us believes we have some idea of what and how to market things. I believe, cannabis, when you walk into a store, you're now competing with Heinz, and Clorox, and every other food product out there that's a consumer product good. Our packaging has to be spot on, it has to be consistent, it has to represent and speak to the consumer.

If individuals are wanting to find different niches of where to go, it's not always how do I get in and run a grow facility? How do I process, but how do I market, handle, or do public relations around the industry itself? Much of it is currently ignored. We've talked to a couple of different agencies here that don't even want to deal with cannabis right now because they're afraid they're going to upset other clients. The individuals that jump on and take this from--

I equate it similar to prohibition, that people are hesitant to do it to where it's going to be mainstream is going to really help us grow as an industry. Then hopefully, as our company, rises along with the tide that comes with that.

Matthew: Here's the Peter Thiel question for you. What is one thought you have that most people would disagree with you on?

Tim: In this particular industry, people disagree with me on moving to what I consider the 95s or the 45s. Most people that sold cannabis in the past sold it as zeros, so $15 grams, or $40 eighths or candy bar for $20. If we're going to truly elevate us, we need to be more aligned with other consumer product goods and we need to price it at $14.95 $13.45 and be able to take price increases as we go because right now, the supply and demand makes pricing fluctuate so greatly, that the consumer gets a little confused at, one day I can buy a gram of live resin for $75, and the next day, it's $35. That doesn't make sense to the consumer.

Matthew: Tim, as we close, can you tell listeners how they can find your business and connect with you, the businesses?

Tim: Yes, businesses. Eaze obviously, if you're going to do a home delivery, and you're going to be anywhere in the lower half of Michigan, which is where they're going to launch first, go to the Eaze platform, which is www.eaze.com. Secondly, we're big believers in Leafly. A lot of retailers push people toward WeedMaps and it sounds WeedMaps. Oh, okay. How do I find my weed on a map?

Leafly does a much better job of educating the consumer, providing the exact same information, or geo-targeting to the location where they're at to find the store that has their products that they're interested in. We're listed on both Leafly and Eaze to be able to help people find where their location. Then, obviously, we have our own website, which you can obviously go on it and it'll show you where our retailers are as well as ask us where to find the closest retailer for them.

Matthew: Well, Tim, thanks so much for coming on the show. We really appreciate it and good luck surviving the winter here as we turn into spring, it shows you should be getting happier every day now.

Tim: Spring has sprung. It was 70 degrees here yesterday in Michigan.

Matthew: Great.

Tim: When it gets over that number, people start to move around a lot more.

Matthew: [laughs] Great. Thanks, Tim.

[music]

Tim: Thanks a lot for the interview, 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 in CannaInsider. Lastly, the host or guests on CannaInsider may, or may not invest in the companies, 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. Look for another CannaInsider episode soon. Take care. Bye-bye.

[00:34:36] [END OF AUDIO]

Ep 343 – Here’s What Cannabis Consumers Are Purchasing in 2021…

cy scott headset

The products being purchased in cannabis retail stores are changing, and this leaves cannabis companies with two options: adapt and look ahead…or get left behind. Here to help us stay on the right side of that equation is Cy Scott of Headset.

Learn more at https://www.headset.io 

Key Takeaways:

[00:55] An inside look at Headset, the leading cannabis data analytics company

[1:34] Cy’s background as a co-founder of Leafly and how that led him to start Headset

[3:43] The fast-evolving cannabis beverage market

[11:16] Cross-category attachment rates for cannabis drinks and the product categories that sell most frequently with beverages

[14:59] Why the California vapor pen market is becoming more and more popular among younger generations

[20:24] How new celebrity-led cannabis brands could influence the industry

[25:44] Cy’s advice to new brands trying to get shelf space in an increasingly competitive market

[30:26] How Headset helps businesses leverage real-time cannabis market data to grow and stay ahead of the curve

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. The products that are being purchased in cannabis retail stores are changing. The most successful cannabis companies will adapt and look ahead or be left behind. To help ensure we stand the right side of this equation. I've invited on Cy Scott co-founder of Headset to give us a briefing on what is selling in cannabis dispensaries right now. Cy, welcome back to CannaInsider.

Cy Scott: It's great to be back.

Matthew: Give us a sense of geography. Where are you sitting today?

Cy: I am in Sunny Seattle today. Actually, we've had three days of sunshine, which is pretty rare for this part of the world.

Matthew: Oh, that's great. For new listeners, can you tell us what Headset is on a high level?

Cy: Sure. We're a data and analytics company focused on the cannabis industry, primarily retail-derived data. We work with retailers and dispensaries all over the US and Canada to score and sort data. We normalize it and provide it in an aggregate format to deliver market intelligence to customers so that they can make informed decisions around the cannabis category, whether that's really understanding the opportunity in the space, finding what the competitive landscape looks like, or their brand position. If they're in the market with a brand, they can really measure how they're performing and make sure they maintain that spot that they have.

Matthew: You have a really interesting background as originally a co-founder of Leafly and now co-founder of Headset. How have you seen the industry change since you co-founded Leafly?

Cy: Well, it's certainly night and day. Just to give you a sense of time, we're here in 2021. We started Leafly back in 2010, down in California. It was medical at the time and really saw this proliferation of dispensaries popping up and different strains being available and not a lot of good information out there for consumers to really understand the differences between the variety of strains.

We created that platform to help demystify cannabis for more of a mainstream audience. That was 10 years ago, 11 years ago soon. It was certainly very different. Just the fact that it was a medical-only market and there were no adult-use markets is probably the most notable change at the time. Now, we've got a large number of adult use as well as more medical markets. You've got more sophisticated operators, you've got more investment capital that's coming to the category than ever before. You've got smarter and smarter people coming in. It certainly is just very, very different than when we started.

Matthew: Now, there was probably still a stigma back then a little bit. Was there stigma in 2010?

Cy: Yes, certainly. When we would talk about Leafly, myself, and my co-founders, we would say, "We're in the cannabis industry, but we're not doing any plant-touching work." A lot of that was because of the stigma. We'd really emphasize we're a technology company that just so happened to be targeting this category of products, but not, again producing any--

Matthew: Qualify it.

Cy: Always qualifying, exactly.

Matthew: I'm on the squeaky clean end of the spectrum.

Cy: That's right and a lot of the feedback was that's interesting. Now, I can see why that might be something you're thinking about. Then you fast forward to today when I mention the cannabis industry, there's no qualification needed, and people want to know how to get involved.

Matthew: It is a huge change. Cannabis beverages have been talked about for a long time, but now, it seems like they might be having their breakout moment. Where are we? What's changed there?

Cy: Cannabis beverages are a relatively small category when you look at your total dollar sales in the cannabis industry, but it is growing. I think its start is that it's a very complicated product to produce. When you think about the cannabis categories, you've got things like flower and pre-rolls that people are very familiar with. You just tried flower, you purchase it in a certain weight for a certain strain. It doesn't take a lot of production. It is a packaged good, but it's not a package good in the sense of something like a beverage. I think it's harder for brands to come to market with a beverage.

Edibles, people are pretty familiar with edibles. Then beverages are similar to edibles in the sense that that's a familiar format. There weren't very many beverage companies really playing in the category in the different markets. I think that's partly why the sales are relatively a small percentage of the total dollar spent. Now, it is changing. You're getting a lot of interesting things happening, whether that's perhaps Blue Ribbon branding a cannabis-infused seltzer in markets like California. You've got Lagunitas branded Hi-Fi Hops. Just to name a couple commonly associated with the beer industry coming into the cannabis category.

You also have other cannabis first brands that are really taking a unique look at the category. I think it is bringing some people in to cannabis that might have not come in because the things like flower, pre-rolls might not resonate with a new consumer. When they see a beverage that looks like something like a seltzer, like a White Claw or a Truly that they're used to seeing and purchasing at the grocery store, that's a more gentle entry into the cannabis space than maybe something like a pre-roll or a vapor pen, or even an edible.

With some of the stigma, everyone has this story of eating a brownie that's too potent. Having beverages is a nice way to bring people into the category. I think the people that are already in the category, already purchasing cannabis, I think having more options in different types of beverages is really driving some of the growth that we're seeing.

Matthew: You talked about a tonic there or a seltzer. I'm thinking of Cann, the brand Cann, C-A-N-N and we've had the founder, Luke Anderson on the show. Really popular cannabis beverage in California. I think there's two milligrams per can. Gwyneth Paltrow just made an investment in them and now the multi-state operator or MSO GTI, Green Thumb Industries has made an investment in Cann. What do you think about a big MSO making an investment in a brand like this?

Cy: I think it's very interesting and pretty clever. GTI in particular didn't have a beverage in their brand portfolios. They work closely with other types of product manufacturers, whether it's edibles or vapor pen companies. This was their first play into beverages. Cann was an excellent choice I think for them. The two milligram per drink approach, Cann has really positioned as something like a lifestyle consumption where you can maybe have one, two, or three even, and really socially enjoy this versus maybe 100-milligram beverage, which can be quite intense for a lot of people.

100 milligrams beverages sometimes in the past, even came with things like a medicine topper where it's like a medicine cap. You could pour out just the right amount of dosage. That's not really a social experience if you think about it compared to something like Cann. I think it's very clever for GTI to make that arrangement. Now, another challenge in the cannabis industry is the state-by-state fragmentation and GTI, as a multi-state operator, has a footprint in a large number of states with production capabilities, retail capabilities, and so on.

Cann is able to leverage that network and really get in front of a lot of consumers in a relatively straightforward way. If they were to do it on their own, they'd have to find different license holders in those markets that have the production capability and the consistency. You see companies do that with different operators in different markets and they're licensed to different players. The nice thing for Cann is that GTI is one operator and has one footprint. You can get that consistency and you can also get that exposure.

I think a lot about the companies that are going to be around for the decades to come. The brands that everybody is familiar with and Cann could very well be that brand because of the access that all of a sudden you can have [inaudible [00:08:42].

Matthew: I lost you, Cy. You still there?

Cy: Oh, no, I'm here.

Matthew: Keep going, sorry about that I'll edit it out.

Cy: If you think about asking a consumer at any different markets about what brand do you think about when you think about alcohol or seltzer? You'll probably hear White Claw, you'll probably hear Truly, and that's because it's available everywhere. Now, if White Claw wasn't available, if it was only available in one state and you have someone outside of that state, they wouldn't know that brand. I think Cann has a real opportunity to become synonymous with the cannabis beverage category, through a partnership like GTI and GTI gets access to a brand that is really doing very well in its own state of California and is well-positioned for a broad consumer audience.

Matthew: I think about Cann specifically in that they're priced pretty high, like a luxury good, but they have a low THC concentration. I'm like, "Is this accessible to everybody, or is it more like an iPhone where the iPhone represents a tiny sliver compared to Google Android, and the whole world, but they make almost all the profit." They're a minority of the market share, but they make almost over 80% of the profit compared to Google what they make on handsets. Do you think that's what's happening here? They have maybe not the biggest market share, but they have the biggest profit margin. What do you think about that?

Cy: Yes, I think Cann is quite an expensive product on a per milligram of THC basis. A lot of that has to do with when you look at equivalized pricing which is just a per-milligram price point for cannabis, Cann because they're two milligrams per can, you have to have the can. There's the cost of all the liquid and the ingredients that go into it where you get a similar beverage that might come in 100 milligram, but it's one can or one bottle. Price is just inevitably cheaper.

Now, with someone like GTI, they can probably get economies of scale and drive that price down. I don't know how competitive some of those GTI markets that they're in are. California is a very competitive market, a lot of retailers, a lot of brands, but some of the markets that GTI is in are relatively limited license and not competitive. An Apple model where they are premium priced might make a lot of sense.

Matthew: Now, let's talk about, I'm on a drink fixation here, Cy, you'll have to bear with me. Now, when someone does buy a cannabis drink at a retailer, what other things are in their basket?

Cy: Yes, it's a great question. I mentioned cannabis beverage sales are about 1% of total sales. Now, when you look at, actually, total percentage of customers, about 6% going on 7% of customers have purchased a cannabis beverage. That's close to 1 out of 10 people have purchased a beverage. Now, they might not be purchasing it very frequently. They might be purchasing other products with more frequency, so it's a great question when you think about the basket, what does the basket look like? It's a great way to think about you're at the grocery store and you're purchasing your milk and your eggs, and maybe you throw in a Coke at the checkout or a pack of gum, what have you.

We find that beverages is very similar to that, so when we look at what's called cross-category attachment rates. That's a fancy way of saying what else do people purchase when they purchased those beverages? When they purchase beverages in that basket, one out of five baskets are beverage only. That means about 20% are only purchasing a beverage. Now, when you look at other categories, the product category that sells the most frequently with beverages is edibles.

Out of every basket that has a beverage, about a third of those baskets have an edible product, which makes sense. They're very similar formats, a very much a consumer package good format, a drink and a candy, it could be a chocolate, it could be a gummy type edible product. After that, you get flower in about 25%, 26% of baskets that have a beverage include flower. It's not surprising, flower does 40%, 50% of all cannabis sales and so it's the most popular format.

I can imagine a scenario where someone is driven into the category for flower and as they're at the checkout, the beverage could be a throw-in. They might want to try something because they see a Lagunita, so they see a [unintelligible [00:13:29] or a Cann beverage on the shelf and they say, "Why don't I try that?" That's the common frequency. Every category is in these baskets in some capacity, but really most often, beverages are sold with edibles, flower, and pre-rolls usually when people purchase those beverages.

Matthew: It's a good impulse purchase. You have it right there, maybe buy cans and refrigerators as you're checking out or even not in a refrigerator. I guess you probably have them in the fridge, but what else is an impulse buy? Do you think of anything else like a Dogwalker? You can't really have those out. I'm trying to think what else are impulse purchases.

Cy: I think the Dogwalker is a good example like a low-price pre-roll. Single pack pre-rolls are often the most frequently purchased by a younger consumer and that's really because of price pressure, so when I think about throw-ins, usually it's not a big decision. It's a few dollars here or there, so I could see something like that being a throw-in to your purchase, where beverages are less of a throw-in, they're a bit more expensive, but it's something that people might want to try, especially with these new brands like Cann coming to market.

You can see that being may be less of a financial reason to try, "It's cheap and I don't have to think about it," but more of a, "Hey, this is an emerging category within cannabis, let's see how this is and what that's like, so I'll throw in a beverage."

Matthew: Now, let's turn to another super popular category, vapor pens, and specifically in California, it seems like it's a huge business, but it's not equally represented by all generations or age cohorts. Can you just talk about that a little bit?

Cy: Yes, the category of cannabis that is vapor pens in California actually do really well. I think they're the number two selling category. First, you have flower and then you have vapor pen. It's pretty interesting. In other markets, I think generally the number two category is pre-roll. Vapor pens aren't that far behind, but they seem very popular in California and I think that's driven by a couple of factors. One, it's a newer market, a newer adult-use market than maybe some of the more mature adult-use markets like Colorado and Washington.

When California legalized, you had a situation where brands, the vapor pen companies had a good head start looking at Washington and Colorado and they came to market right away, wherein a market like Washington State, where I'm at here in Seattle, the vapor pen category is pretty small when the stores started opening up. It took a while for them to start appearing. It's still a growing category. With California, it was day one great representation of vapor pens. That's one, I think reason. Another is generation. I think you mentioned not all vapor pens consumers are the same.

I think vapor pens really seem to resonate with a younger audience, particularly millennials and younger, so millennials and Generation Z, although millennials aren't as young as they used to be. I think the oldest millennials are turning 40 this year, which is crazy to think about, but they do seem to resonate with that category a bit more than some of the older generations, like Generation X and baby boomers, and so on. I think the Generation Z, in particular, seems to really resonate.

Now, the problem with that is that vapor pen cartridges may be a bit more expensive than other categories. For Generation Z that are so, as I say, wallet-conscious, just have so much they can spend on cannabis, vapor pen may be a luxury item for them now. That's changing in California. Actually, relatively recently just last week, the parent company which you may be familiar that was a recent publicly listed company. One of these cannabis SPACs that came to market with Jay-Z's involvement introduced a new $25, a single gram cartridge, which is extremely inexpensive when you think about single gram cartridges for vapor pens.

Normally, single-gram cartridges go between $45 and $60. To come to market with a $25 product, I think is going to be really interesting. You may see even more growth in that younger category in a market like California, where products like that are being introduced. Expect to see these numbers change and it'd be great to look back if we do a conversation like this a year from now, what the landscape looks like at that point.

Matthew: Now, how about 4/20 this year? What are you expecting? Anything different from previous years?

Cy: Yes, I think 4/20, being the biggest sales day of the year for the cannabis category will be, again, pretty unique this year. I think we'll see a lot of the same patterns that we saw last year, particularly around it being spread out over a number of days. I think at this time last year, we were worried that the stores, whether adult-use cannabis retailers or medical dispensaries were even going to be allowed to operate. They were deemed essential businesses in all markets, which is fantastic. Certain markets like Nevada really had a slowdown because of tourism impact and all that, but just the fact they were able to stay open was huge, especially the pandemic was really just ramping at this time.

This is the biggest sales day for a lot of these retailers. What we ended up seeing last year is I think what we're going to see a lot of this year, which is spreading out the 4/20 sales day across an entire week. A lot of that has to do with social distancing and making sure that you don't over-exceed capacity at these retailers. No one wants to be in a big crowd these days especially in maybe a small retailer store or waiting in line. They have been spreading these deals out quite a bit. I think we're going to see the same thing. When you look at the total sales data, every year it continues to grow.

Last year I think was a little lighter than the year prior, but some of that was due to some of the pandemic purchasing patterns that happened in the beginning when we weren't sure if the stores were going to be open, a lot of people rush to the cannabis retailers and purchased a significant amount of products to make sure that they had enough supplies, should everything gets shut down, so people probably had a lot rolling into the April 20th holiday.

This year may be a bit different. I think if they spread it out over a number of days like they did last year, I think you're going to see just increased sales. Market over market, every market that has the legal cannabis framework, we saw growth in 2020, and I expect no different in 2021, even while we're still in the midst of this unfortunate pandemic.

Matthew: You mentioned Jay-Z and I know actor Seth Rogen has created a brand called Houseplant. How much do you think these celebrity-led brands actually boost sales? Is that a thing?

Cy: Maybe not so much. It maybe varies on the brand. When we look at the data for brands like Marley Natural or Willie's Reserve, they do fine, but it's not like they're outperforming a lot of the other brands. Often, they're not the number one best-selling brand in the markets that they're in. In that capacity, maybe not the biggest driver of sales. I think a good marketing exercise and a good way to differentiate, it is getting very crowded out there. There are a lot of brands being introduced every day. Having a celebrity behind your brand could be a way to cut through that noise a bit more, especially if the celebrity is really tied to the brand and passionate about the brand.

With Jay-Z and The Parent Company, Jay-Z is associated more or less with their monogram product line and the Fun Uncle brand, which was part of Caliva. It's a retail group in California that became part of The Parent Company in this merger of different brands, really runs Fun Uncle. I don't know how much impact Jay-Z has on that. Maybe had a lot, maybe didn't, but very different than the monogram positioning. In that sense, not totally sure, the jury's out. Now, I would say there are exceptions. Houseplant and Seth Rogen made a big splash a couple of weeks back. Houseplant's been available in Canada through Canopy Growth for some time.

Canada, for those that aren't in Canada, has very restrictive packaging restrictions or requirements I should say around the size of the logo, and how you can position it, and the amount of THC that can be in the different edibles, and so on. It did okay up there. Canopy Growth was really responsible for the flower quality and all that. Different people have different opinions on the brand now. Houseplant's coming to California. It's going to be a bit different.

That's for a couple of reasons. One, Seth Rogen and his group seem very involved in the rollout in California, even talking about going with a direct consumer model where in California there is delivery and you can order online and get it delivered, which is really great. Direct to consumer, when we think about just retail in general is becoming a bigger and bigger channel. People are purchasing brands that are sold direct to consumer. Houseplant being direct to consumer with a good delivery network is nice advantages there. Seth Rogen is particularly passionate about cannabis.

If you look at any of his Twitter posts around his Houseplant introduction, he says, "It's the greatest thing he's done in his life." He's a well-accomplished actor and producer and writer, and to come out and say that this is the thing he's most proud of is pretty incredible. I think some of the time, that passion comes through, hopefully, that comes through into the product and comes through into their success. I think that's a big reason why they'll be successful. Also, they're doing something interesting and they're introducing a house line of products, a house goods line of products. Things like lighters, things like ashtrays that they can sell anywhere. They're all very high-design, mid-century modern design.

Matthew: It's like restoration hardware meets cannabis accessories

Cy: Exactly, exactly. They even did some vinyl LP records that were for sale. When you think about brand building and you think about trying to create a mass-market brand in cannabis, it's hard because of the fragmentation and the availability. Houseplant is available in Canada and it's available in California, and that's it. A consumer in Colorado, a consumer in New York soon won't have access to Houseplant flower, but what they can do is buy all the Houseplant accessories. When the Houseplant team does go to New York and start selling their products, they have a customer base that already exists, that has just been waiting patiently for these products.

I think you're going to see a lot of success from that strategy. They're not the first one to do it. The Marley Natural did it long, long ago in California with different types of accessories that were very high-end, which was their play at the time. Marley Natural brand is positioned as a high-end brand. I don't know, the Bob Marley audience, if they're more of the high-end audience, I'm sure there are people that have more high-end tastes with these things. They're very expensive products. I think it did okay. Now, that's all part of The Parent Company, the Jay-Z Group that we're talking about.

Houseplant, I think the time is right. They're very motivated. They're very passionate about the category. They care about the strains. They care about the flower quality that they're bringing to market. This house good line, I think that's a great example of a celebrity brand that is going to do very well.

Matthew: You mentioned earlier about the market, there's a lot of competition. How hard is it for brands to get shelf space at a cannabis retailer? Do you hear complaints from a lot of brands, or do you hear interesting tactics or strategies?

Cy: Yes, it is harder and harder. It's shelf space and it's share of sales and what's called skew rationalization. Really, that's the next phase of the battle here for these brands, these product manufacturers. It used to be, just a handful of years ago, you'd produce a new product, and you could get it on the shelf. You could get it carried by the retailer, and you'd have some success. It's very different now. The industry is maturing. It's getting more competitive out there and more challenging for brands to come in and get that shelf space. I think it's harder to create a new brand and come to market than it's ever been. It's still a great time.

I always joke, there's never been a better time to come into the cannabis industry. I still believe that. I think it's still wide open. We're talking about beverages and 1% to 2% of the category's sales that gets still wide open. When you look at a beverage like Cann, it over-indexes to female consumers and to millennial females. It's very much like a Gwyneth Paltrow brand. I think White Claw was very similar when it first started, very female attractive product. It's seltzer, it's not a beer. White Claw was very clever in some of their marketing. If you remember any of that, the no Laws When Drinking Claws ridiculous campaign, but it worked.

It shifted this perception of this drink is more of a feminine product to attract a female audience and this can be consumed by guys just as easily. A brand like Cann has an opportunity there. Certainly, males are purchasing Cann, but it definitely over-index female. When we talk about a new brand coming to market, I think there's room there for that to be more of a White Claw, more of a brand that is attractive to both and is a low dose, two milligram. You can have two or three of them at a party and so on. The book is still being written and I think there's still opportunity, but it is harder.

For brands that are in market now, what they're doing and what's really important for them to do is to go to new retailers. If they're trying to get more distribution or take their success from their current retail distribution and move into other retailers, really bring the data with them and say, "When I am at this store, this is how our brand performs." Working with your store, having a relationship with the stores that you're in to really understand that, and that's critical. They're already working with the stores with things like in-store promotion, where they'll go in and they'll set up and they'll educate consumers as they come through because marketing in cannabis is hard. These channels are limited.

Advertising is limited. So often, you have to meet the consumers where they are. Many of them have relationships with retailers, really understanding how your product is performing at those retailers and taking that data with you. Coming from a data and analytics business and working with a lot of retailers and a lot of brands, we see this happening now. It's powerful. If you walk into a retailer and you said, "When I'm at this store, their sales increased by X," and it was expansion revenue, not cannibalization of these other skews that you might carry. Then it makes it easy for the retailer to say, "Well, I will take a bet on this brand and I'll bring you in."

Then you measure that. You show them how it is performing and then you get more and more shelf space, and you create further relationships. That's something they can advantage, the brands that are in market might have versus brands that are just coming to market. That's a bit harder when you're just getting started. Even when you're just getting started, find those stores that are willing to carry your products and really start with how you position your new product and market and how it's different and how it's either priced differently or positioned differently, marketed differently. That may open some doors because there's still a lot of white space, plenty of white space.

Then once you open those doors, look at the data, look at the numbers, and look at how you're performing at retailers versus the overall category that you're in versus competitive brands. Then take that data to other stores and go get that shelf space.

Matthew: Yes, this is so fun because most of the things I talk about are subjective, but this is actually objective. We have data we can look at. We could say, "This is what's actually happening, boots on the ground in certain markets." This is probably a good time to talk about the benefits of using Headset because there might be some business owners out there or some investors that are saying, "Hey, if we're moving forward with this brand, we need to know where the puck is headed, what's going on? What the market share is, and what the competition's doing, and all those things." Why don't you just mention the primary benefits for brands, investors, whoever might use Headset to using it?

Cy: Yes, absolutely. We have a couple of different services split into our retail and dispensary services, and then our market intelligence services. For the retailers and dispensaries, in particular, we provide a lot of tools, primarily business intelligence and analytics around their own data. As well as market data in the context of benchmarking we do layer that in, but really to help with optimizing those stores to understanding the thing we were just talking about, like your skew assortment. Are you carrying the right products? When you carry 20% of your brands or driving 80% of your store sales? What brands should you divest from? What brand should you continue to invest in?

Tools around, marketing, so you can measure your marketing ROI. When you are spending marketing dollars out there, is it driving new customers? What are those customers look like? What's their lifetime value for those customers. Helping you with customer retention, being able to text consumers that might be your most loyal consumers that are going to churn out and move on. That's all tools that Headset provides based on the analytics that we have that can really help businesses like retailers and dispensaries, in particular, optimize and just be more successful by leveraging their data.

We try and make it really easy. Really going beyond just kind of your top line sales and digging in and understanding how can you really make your brand perform. Our mission is to have cannabis be an ultimately successful category by empowering the operators to make more informed decisions and ultimately be more successful. This industry won't be successful if the retailers and dispensers aren't successful, or the brands aren't successful. We're very motivated to bring the tools to enable that success.

Cannabis operators and retailers and dispensaries are a spectrum, you have the mom-and-pop small businesses, and you have these MSOs like, GTI, and we work with all of them. That's a great thing. If you're a smaller store, our tools work just as well and are leveraged by some of these big multi-state operators. It really helps level the playing field a bit, as you're looking at the cannabis industry and what's ahead, and all this potential consolidation that may be coming as some of these bigger operators grow.

If you're a bigger operator trying to do a lot of this with your own teams, building out analytics teams is very costly. Our tools really streamline a lot of that, so you can spend your money on marketing, and driving more customers, opening more stores, less on having to analyze all your data because it is pretty time-consuming. That's on the retail side, the dispensary side. Then our market intelligence side, this is where we see the percentage of female consumers that are purchasing Cann. We provide a service called Headset Insights.

our customer base is really made up of cannabis operators, so the brands, product manufacturers, distributors that want to understand the competitive landscape, that want to find that opportunity if they're going to introduce a new beverage, how to position it by looking at the data. It's a very powerful tool for them there. We also have a lot of non-endemic clients as well. Clients that aren't license holders in the cannabis space, so financial services companies like hedge funds and banks that are making investments into the cannabis industry and really need to know what they're investing into. They leverage our market data for that.

Other types of companies like consumer-packaged goods, companies, beverage alcohol, or tobacco companies buy our data as well. It's a broad spectrum of types of companies that can get some great insights from our market intelligence data. That's how we look at it. A lot of the market intelligence data is freely available on our website. I encourage people to visit us at Headset.io. You can sign up for what we call Insights Pulse, which is a higher-level market data but you can get insights into most adult-use and medical markets in the US and Canada at no cost.

You can understand these category trends like how our beverage is performing in Canada versus the US, where they're actually selling a bit better in Canada, all at no cost. We've got great industry reports as well. About once a month, we publish something interesting. We actually recently did a beverage report that covers a lot of this on Cann and Lagunitas and others that goes into some depth, all freely available. I encourage all your listeners to go check us out at Headset.io.

Matthew: Great. Cy, just a few personal development questions before we wrap. What is one time waster that still goes on in business that you would love to stop doing?

Cy: I hope we don't have too many of them here at Headset. For me personally, when I think about a time waster, something that just seems to take a lot of time for something that's so simple is scheduling, sounds ridiculous, but it does. In this remote world that we're all in, just scheduling calls even internally and externally, and when you have to have multiple people from your team, it can be quite challenging to do the scheduling. That's something that is tough. There are tools out there that will help with that, where you can share calendars and people can block time.

There is also etiquette and there are some strong opinions around things like usage of tools, where it's like, "Drop something on my calendar." I do think it makes a lot of sense too. The amount of time I have to spend in a day just looking at my calendar, looking at other's calendars trying to find time is crazy. We're a 50-person company, growing quickly, and I don't have an admin. I don't think I need an admin, but sometimes with scheduling, I feel like I could use an admin. I know that's a lot of the pain and love with what admins help out with, but it does seem like it's a small enough problem, doesn't warrant it, so I continue to have this problem.

It's one of those things I'd love to stop doing, but I just don't think I should stop doing yet. I really wish the world would just embrace some of these software tools. It really is a funny etiquette thing. Just the etiquette thing, it's so ridiculous. Some people get really, really frustrated if you just send a link to a calendar and say put something on my calendar versus the back and forth, three emails with time frames and all the above. In the virtual world, you'd think we'd get there but still a ways to go. Kind of a goofy thing, but for sure one of those things I'd love to stop doing.

Matthew: What's one song that makes you sing out loud when it comes on the radio or whatever on Spotify?

Cy: All right, radio, that's funny. I'm not one to belt out singing. Good question. I think sometimes, a good old David Bowie classic. I find myself singing along maybe someone like The Clash, same thing I can't think about a singular song. Some of the probably notable hits, I might find myself doing that. It's kind of top of mind. Somehow, within Spotify, I ended up down this rabbit hole of the '70s Road Trip playlist somehow. I really have been enjoying that. I don't know where it comes from. I didn't grow up in the '70s, was born in the very end of the '70s. For whatever reason, that's top of mind some of the David Bowie stuff. I might catch myself singing into some of those classics like Ziggy Stardust.

Matthew: Yes, mine, any Lionel Richie song that comes on, instances. Not only do I sing it but then it's stuck in my head for the rest of the day.

Cy: That's a good one, Lionel Richie, maybe Hall & Oates. There's probably some '80s ones too that are good. Maybe, that's my next, '80s Road Trip playlist. I need to look up on Spotify as I go through the decades.

Matthew: There you go. Final question here, Cy. If you could construct a day of just fun activities that have no constructive, or educational, or business value whatsoever, just for fun. What would that day look like?

Cy: Yes, those days are a dream.

Matthew: Your mind can't even wrap around answering a hypothetical about it, it's so far from reality.

Cy: I know. I know. It's all balance. You got to make time for that stuff. I think probably right now maybe with the pandemic and everything, just going to museums. Here in Seattle, we've got a great assortment of museums, whether it's the Seattle Art Museum or the Museum of Flight, really cool stuff. I just love spending a day, an afternoon wandering around, looking at the exhibits, gives you something to focus on and takes your mind off other things.

Frankly, I didn't do it enough in pre-pandemic times. Now, that it's just not available. Although, they are starting to open up on a limited scheduling, so might have to go do that. I think something like that would certainly be what I would like to do, good way to spend the day, no business value, maybe constructive educationally, but yes, just a nice day. I'll have to look into that.

Matthew: Cy, you mentioned Headset.io is your website, you also are writing on Medium now. Where do we find you on Medium?

Cy: Yes, that's a new thing for me. I've been writing essays on Medium at medium.com/cannabis-packaged-goods. You might be able to search my name and cannabis packaged goods. It's planned consumer packaged goods. I do think there's a lot of interesting stories, like the Cann GTI story, the Houseplant story. These are the things that I've written about recently. I think it's a really, really interesting thing that we're seeing develop, this emerging cannabis category and particularly the CPG overlap or the consumer-packaged goods overlap.

Now, it's turning into, very similar to an alcohol-type industry or grocery-type industry. If you ever go to a Total Wine or a Beverages and More, BevMo!, that's what cannabis will be in the not too distant future. Writing about that on Medium, it's really been fun. I like to think that I'm documenting the emergence of brands that we will be talking about decades from now, like if this was the '20s and I was writing about Anheuser-Busch and Budweiser. Really cool and really cool to see how they're leveraging the playbook, for value creation for consumer-packaged goods, and how that can be utilized in cannabis.

At the same time, CPG industry is really struggling with some growth challenges, the traditional CPG industry. A lot of that's due to different reasons, like Generation Z having a different mindset around the brands that they choose. They're not looking for the tried and true brands, a little more disruptive. I think some of these disruptions that are happening in CPG are actually accelerants for cannabis.

I'm covering that on a weekly basis. Check it out there, take a look. I always welcome any feedback, leveraging Headset data and some insights into the CPG world and marrying those two things together. You'll find me there on Medium, cannabis packaged goods, and also, Headset.io where you can get access to a lot of our market intelligence that we talked about in this conversation.

Matthew: Cy, thanks so much for coming on. Please make time to go to the museum next year when we have you on the show. We'll do a scorecard, see how you did with your 4/20 estimations and celebrity estimations and see if you went to the museum and had a fun day. Thanks for coming on the show, thanks for educating us, and good luck with the rest of 2021.

Cy: Thanks for having me.

[music]

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 for using it for medical treatments. 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 entrepreneurs profiled on the show. Please consult your licensed financial adviser 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. Look for another CannaInsider episode soon. Take care. Bye-bye.

Ep 342 – Cannabis Extraction is Booming – Largest Extraction Company Reveals Trends

nick tennant precision extraction

With extracted cannabis-derived products making up about 50 percent of all cannabis products sold, extraction equipment is in high demand. Here to tell us more is Nick Tennant of Precision Extraction.

Learn more at https://precisionextraction.com 

Key Takeaways:

[00:52] An inside look at Precision Extraction, the industry leader in cannabis extraction equipment, C1D1 lab planning, and extraction training

[1:40] Nick’s background in cannabis and what led him to start Precision Extraction

[4:28] Biomass and why it’s a critical component of cannabis extraction

[9:04] How Precision Extraction’s diverse line of equipment is designed to accommodate different production needs

[13:14] Shifting consumer trends in cannabis-derived products and how Precision Extraction’s clients are able to adapt more quickly 

[22:34] Why Precision Extraction freezes biomass before the extraction process

[25:09] The most common mistakes Nick sees new business owners make when trying to develop cannabis-derived products 

[27:32] How Precision Extraction’s premade C1D1 lab containers known as “Extraction Pods” are saving businesses time and money

[29:35] How Nick sees the cannabis extraction market evolving over the next 3-5 years

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. With extracted cannabis derive products making up about 50% of cannabis products sold, cannabis extraction equipment is in high demand. Here to tell us more about the state of cannabis extraction is Nick Tennant, CTO of Precision Extraction. Nick, welcome to CannaInsider.

Nick Tennant: Thanks for having me. Pleasure to be here.

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

Nick: Our headquarters is outside of Detroit Michigan, in a suburb called Troy and that's where I'm at.

Matthew: What is Precision Extraction on a high level?

Nick: Precision Extraction is the end-to-end solutions provider for anybody that's going to create any sort of extracted product. When we say end-to-end, we mean you can bring basically a piece of dirt to us, and we can outfit you with not only all of the engineering, all of the design, but we have partnered construction firms. Obviously, all of the equipment, the equipment setting, and integration of that equipment, the design of the lab in terms of workflow and efficiencies. Then ultimately, training the staff, getting the SOPs implemented, and assisting the client with bringing online a production facility that does exactly what they want.

Matthew: Nick, can you share a bit about your background and journey, and how you got into the cannabis space and started Precision Extraction?

Nick: Yes, absolutely. I've been in cannabis now for about 17 years. I was in it since 2006. I had some family that was in California and Colorado. I began traveling and meeting with them, and looking at the space. I've always been an entrepreneur. In 2008, Michigan passed their law for medical use. I was the 40th person to get licensed here in Michigan under medical use. We did a lot of different niches for the following five years after Michigan passed their law.

We've operated dispensaries, we've done a commercial grow, we've done analytical laboratory. Pretty much everything under the sun, you name it, I've operated in the space. About seven or eight years ago really started to saw the trend go towards extraction. Looked at the technology at the time, it was very primitive. Really tried to engineer a better mousetrap, so I taught myself how to engineer pressure vessels, and manufacture, and develop a global supply chain, so did all that. Went to market. First 90 days, did about a million dollars in sales, and the rest is history.

Now, Precision is the largest extraction equipment solutions provider in the world. We operate in-- Over 20 different countries, we've got installation, so we're a global company. Really have a footprint in terms of the best clients in the world meaning if you've heard about of a publicly-traded company, or a blue-chip cannabis MSO, they're likely our client.

Matthew: I'm not playing around with pressure vessels and the side here. You obviously have a background in like-- What is this metal fabrication? What do we even call this? I don't know.

Nick: Yes, so pressure vessel fabrication would be the proper terminology. It's regulated by something called the American Society of Mechanical Engineers, ASME. Similar to basically nuclear submarines, and pressure vessels for boilers, and things like that because you are using pressurized components to do what we're doing here in many instances. Yes, it's a combination of technology and manufacturing.

We always say that we're ultimately in the end. We're a cannabis technology company because the form of the equipment always follows the methodology and the process. What are we trying to do from a technological standpoint? How are we trying to isolate these high-value molecules from the cannabis plant? How can we do that in the most efficient, effective manner?

Matthew: One thing I want to talk about is biomass because it's a key variable that you hear tossed around a lot when you're discussing extraction. Can you just talk about why biomass is one of the critical variables when you're talking about extraction and what it means to you?

Nick: Yes. To be more politically correct, I'll say it's poop in, poop out. The term in the industry. The biomass is very important. When you think about what you're trying to do. The biomass is creating these molecules THC, CBD, the other cannabinoids, the terpenoids, and flavonoids, and things that you're trying to extract. Ultimately, you're trying to get the native essence of that plant.

Anything that's going to disturb that native essence is going to effect your ability to create a very good extraction or a very good extracted product. Some of these things can be environmental issues. Ultimately, all of these molecules, the cannabinoids and terpenes, and so forth, they can all oxidize. The more oxidation, the more degradation they have, the biomass has been sitting if it's been overdried if it's been exposed in too much heat. These are all things that degrade the natural essence of a plant.

Therefore, we need to be super conscious about how we're handling biomass. Also, super conscious about our practices for harvesting and preparing the biomass in order to prepare for the extraction.

Matthew: Now, some people consider different things part of biomass like the stems and so forth. What do you consider part of biomass and not part of biomass? At least in the cannabis industry.

Nick: Technically, biomass is a blanket term. It can be used interchangeably through many industries. It really depends. Typically, what we try to isolate our biomass to is the cannabinoid-rich areas of the plant. The cannabinoid-rich areas of the plant are the flowers, of course, and what we call the sugar leaves. The leaves that are directly adjacent or part of the flowers have a pretty high concentration of cannabinoids.

The rest of the plant really doesn't have a high concentration of cannabinoids. When we talk about the roots [unintelligible [00:06:45] the stems, what we call the fan leaves, those are kind of like the solar panels of the plant for it to photosynthesize. Generally, most of that is discarded. Now, in instances when there's high volume, for example, if there's acreage of cannabis or acreage of hemp, some of that stuff becomes combined harvested. The combine actually just mills everything together, and that leads to a much lower quality of biomass.

It leads to a much lower concentration of cannabinoids in the actual material. Ultimately, it leads to more work in extraction and generally a less pure-- Less artisanal product. To the prior point, the preparation in harvest, in how it's grown, how it's stored, how it's prepared in order to go into the extraction device is very important.

Matthew: There's really either cost on the front end or the back end, whether if you're using a combine to cut down on cost. On the back end, you don't have that surgical precision to pick out the parts of the plant that you want to gather.

Nick: Yes, that's exactly right. There's a lot of different ways to skin that cat whether you're using mechanical. Large scale people use just a large workforce. It's very laborious. We've got a technology that we've implemented which is a-- It's called a CryoCan system. That system actually uses liquid nitrogen in order to flash freeze and sublimate the water out of a freshly harvested plant. It also uses an agitation system to separate those cannabinoids and purify those cannabinoids into what we call a sift.

A sift is just really a purified pile of cannabinoids. It looks like sand almost. Where the trichome heads, they look like little mushroom heads coming off of the buds and sugar leaves of the plant. Plus trichome heads are snapped off due to low temperature and separated, which is a very, very efficient way to harvest, so that technology. Again, when I say that ultimately Precision is a technology company, these are the types of examples that can be had. The way that we think about how to isolate these molecules really drives the future of the innovation of the company.

Matthew: Can you give us a sense of how much cannabis biomass your extraction equipment can process in an hour? It seems like that's one of the first questions that comes up like, "If we're trying to fit into one of Precision Extraction's machines extraction equipment, then we need to know how much product you have going in and how much oil you want out." Give us an idea of your line up on a small end and then in a high end.

Nick: Yes, absolutely. Our smallest equipment starts about five pounds a run. A run typically taking 30 to 40 minutes. We like to say conservatively, it's around 40 pounds a day. We're not catering to home users. That's our lowest size of our commercial equipment. Just to give you an idea of scope on that. If somebody's using a hydrocarbon piece of equipment to make artisanal products, and they're processing 40 pounds a shift in an eight hour period, that could be something that's potentially $7 to $12 million a year revenue business.

Now, our equipment goes all the way up to 10,000 pounds+ a day in our industrial line of extractors which is our KPD series. That KPD series is, again, that's more think about combine, think about high volume, lower quality oil that needs to be refined and distilled, and so forth. Any range in between there, we can accommodate. Typically, at every processing throughput, Precision has a solution. Depending on what product you're going to make, our team and our specialists can absolutely consult and advise you on what combination of equipment's going to be most effective for your potential production and business plan.

Matthew: I noticed that there's this lingo in the industry. It makes sense just how we use horsepower for cars. We still use some legacy ideology with eight-hour shifts because that's how humans work. Are some of the machines you have now going to transcend this idea of working in eight-hour shifts where you can put all the biomass in one area and it gets processed for you over a greater or shorter period than eight hours?

Nick: Yes, absolutely. All of the machines are capable of running 24 hours. Let's start by putting context around that. It really depends on when you cross the inflection point. Really, at around 2,000 pounds a day, you start crossing an inflection point where it doesn't make sense to do batch processing anymore because of the overly burdensome labor costs.

What that translates to is more of an automated feed and automated discharge system like you see with our KPD series of extractors. These are typical to either large THC players that are consolidated and have a massive amount of greenhouse space or to the CBD players because the CBD players are really extracting a large amount of acreage.

With that in mind, you really can process 24 hours a day absolutely. With anything in a batch form, you have to have the human power really robust in order to meet those high throughput-processing demands in that short period of time with minimal downtime and with the automated system. Obviously, the machines do a lot more work for you. Extraction really is an art. It really is artisanal. You can think of it almost like cooking or making any artisanal product. Cannabis very much is an artisanal product itself. You can think of that like microbrews, you can think of that like artisanal wines.

A lot of this stuff, even as the industry grows, there's going to be a lot of small-batch production, and we see that obviously in our business. 2,000 pounds a day is a lot of biomass. Then, you can still do that on batch production. We call that high-volume batch production. It just gives an overview of the trend of the industry and throughputs and automation versus batch equipment and time frames for processing.

Matthew: You get the inside scoop from all these companies that are doing extraction for their business. They really tell you the truth because they need your solutions. They want to tell you exactly what they're doing. Without naming names, can you just give us an idea of what the trends are in terms of what manufacturers are making, the most popular products that they're using the extraction equipment for?

Nick: Yes, absolutely. A good way to really look at this too is what are the consumer trends? I think we talked about this a little bit before. Every state has its own micro-demographic, micro-economy, and micro-consumer trends. The patterns of production are a little bit different from state to state. One state may be more dominant on vape pens. One state may be more dominant on edibles that might be a particular sub-segment like gummies. We really see it all over the place. It's really a result of the level of maturity in the market. As consumers become more educated, they realize that there's a multitude of different ways to ingest cannabinoids.

As they understand that, they'll explore more products and gravitate towards perhaps newer, more innovative products. Most of those products, of course, come from extraction. What we see is we see a shift generally from flower consumption to extract consumption, the more mature a market gets. In terms of our clients, they have a different strategy on a state-by-state basis. Typically, what we're building is a very diversified lab where that lab has the capability to do pretty much every product whether that's distillate, whether that's isolate, vape pens, live resin, shatter, butter, wax, sauce, whether that's high-volume crude for resale and separate processing or Rick Simpson Oil.

Typically, what we see is these labs being extremely diverse and the ability to produce these products because the consumer trends do shift. What's hot today is not necessarily hot tomorrow. The market is extremely dynamic in that regard.

Matthew: I'm sure you get a lot of questions about whether hydrocarbon extraction, for example, using butane or propane is dangerous. When people ask that, how do you respond?

Nick: It's funny because a lot of competitors, they tend to mark it off of fear and things like that, especially the CO2 guys. I always ask myself a question, "If somebody's negative-selling, what does that say about their company, or what does that say about their technology?" When we think about hydrocarbon, hydrocarbon really is a technology that's been around for a very long time. On a day-to-day basis, you can't go a day without eating something that was extracted with hydrocarbon whether that's canola oil or soy-product derivative, or natural flavoring. Those are all extracted with hydrocarbon.

Hydrocarbon is flammable, of course, as is ethanol. The key thing to remember is we're working in a controlled environment. We're working with a piece of, no pun intended, Precision-engineered equipment. These are the same types of codes and regulation that you would operate in any controlled laboratory environment. You'd operate in any environment like an oil rig or refinery where you're dealing with things that are potentially flammable.

The same type of controls that you potentially put into anything where fuel is stored in terms of even your vehicle or a gas station. A gas station has controls in it for anti-static. It's a Class I, Division 2 area. Ultimately, these technologies are extremely safe. In our almost decade of operating history, we've never had a single client have any instance of accident. That just puts the context around, "It's a lot of fear-mongering."

The reality is hydrocarbon as a molecule, we think about it as this lock-and-key analogy. There's always going to be a perfect solvent for an individual molecule that we're trying to extract or we're trying to dissolve. These solvents vary in terms of, what we call, polarity, and they vary in terms of their chemical structure. What's important to understand is that hydrocarbon is almost the perfect chemical structure to extract cannabinoids and terpenes. It gives the most efficient, the most effective-- It picks up all the stuff that we want while leaving behind the cellular structure, the chlorophyll, the cellulose, the phospholipids, all the things that we don't want, that the hydrocarbon leaves behind. All the things that we do want, it brings to us.

Ultimately, that leaves us with a very, very, very high-quality extract in almost all circumstances relative to the other technologies in the market. Now, the other technologies are applicable. We sell ethanol equipment as well. Ethanol is less artisanal. It has more of a broad range of extraction. It does pick up quite a bit of chlorophyll. It does pick up waxes and fats. You have to run it very, very, very cold in order to be effective at any artisanal product. It's really good for high volume.

As we previously drove this conversation, it's an artisanal market. Ultimately, that translates into the majority of people using hydrocarbon equipment. It's ultimately why our flagship models have been so successful over the last seven years.

Matthew: It sounds like there's a lot of nuance there. It's not as simple as like, "Hey, CO2 or ethanol is better than butane or propane." There's trade-offs and nuance that you really have to dig deeper to uncover.

Nick: At the end of the day, it all goes back to your product strategy and your product plan, and your throughput. What are you trying to make, how much you're trying to make of a particular product, that's really what we do here at Precision. It's very much a consultative process when somebody buys equipment for us because there is nuances. It is a very technical sale. There is a lot that goes to standing up a production line to making these particular products.

Ultimately, it's what has given us a tremendous amount of success because it's not only myself that has been in the industry for the amount of time that I've been in it, but we've got a very experienced staff. I've personally handpicked most of our technical team over the last five years. They've grown with us and a lot of these guys have been in the industry for a decade-plus and running extractions.

We've got thousands of installations of our equipment. We've seen it all. We're consultants and advisors, as much as we are a company that's going to sell you something. We're always the company that's going to stand there, and make sure that you're meeting your production goals.

Matthew: Some of these multi-state operators or MSOs are raising a lot of money, they have a lot of capital, I'm sure they deploy a lot of it into high-end equipment with you. Do you have a recent install with an MSO that you can think of, and what kind of solution they put in?

Nick: Yes, I have many. Unfortunately, discussing the details of individual clients' MSOs, in particular, their production plan is just probably not the best thing for me to do. I think they'd get a little upset with me. If somebody is curious is listening to the podcast, we have a public disclosure memorandum or whatever you want to call it with this particular client. If you want to look at a Free As Diamond facility, they've put on a new facility, it was several 100 million dollar bills. They put a really diverse line of extraction equipment in there. While I don't think that anybody will be able to see the details in the public domain, they can see the facility. It gives you the type of idea and scope of infrastructure that's being built by these large companies.

If you think about the amount of revenue, just think about their amount of revenue, half of that revenue is coming from extracted products. If these companies are growing to multi-100 million dollar companies, and in some cases, I do believe that these companies will get well over a billion dollars in revenue as the market continues to grow. Just remember, half of that is coming from extracted products. Those extracted products all require a robust infrastructure in order to be created. That infrastructure is created by companies like Precision.

Matthew: Just a question about back to biomass here. I noticed on one of your extraction machines, there's an area that cools down the biomass before it goes into solvent. Can you talk about why that is and what happens if it doesn't get cooled down?

Nick: Yes, absolutely. It's a pretty common practice to freeze biomass and in some instances, deep freeze biomass prior to extracting. What we're really trying to do there, depending on what type of organic solvent we're using, the idea is to really freeze out the water especially with polar solvents like ethanol, you're going to pick up water out of the biomass. In many cases, the biomass that's fresh frozen, it's actually harvested while it's still alive. It's never dried.

If you think about a growing plant, this is how you make live resin. You actually harvest the plant while it's alive. It goes immediately into a vacuum-sealed deep freezer, and that could be anywhere between -10 to -40. In some cases, people are even freeze-drying. What that does is it doesn't allow any of that oxidation to take place with these cannabinoids. It's going to preserve all those terpenes, all those cannabinoids. There's going to be zero degradation.

If you think about it, almost like a banana. The longer you let a banana sit on the counter, the more that oxidative degradation process takes place and the more that the compounds are turned into glucose, the more it degrades, et cetera. The same principle happening with cannabis. Now when it's fresh frozen, you're preserving that. It's just like frozen fruit. You're putting it into the machine and ultimately extracting it in the same manner that would be if it was completely fresh.

It could be ostensibly sitting for 50, 60 to 100 days in the freezer vacuum-sealed, but it's going to give and yield the same result as if it was completely fresh. The other side of that is freezing it in order to bypass any sort of water. Any sort of polar solvent, ethanol, methanol, things like these, they're going to pick up water really, really easy. It's just the nature of the molecule. It likes to grab onto the water while hydrocarbon is more hydrophobic. Ethanol, methanol, and things like that are not. They tend to pick up water. If we keep it very, very cold, the water stays frozen and we can bypass that.

Matthew: Can you tell us some of the most common mistakes you see from business owners just getting into the space in terms of lack of understanding and what's needed and what they could do to get on the right track more firmly earlier on?

Nick: Absolutely. I think that probably the comments in the discussion and just the narrative that we've had thus far, I think it's starting to paint a picture that there is a lot of nuances. There is a lot that goes into this business in terms of extraction. I think that the number one mistake that people make is that they don't have somebody on their side that really knows what they're doing. Now, they hire somebody, and maybe that person knows what they're doing, maybe they don't. It's hard to find people that are really, really good in this industry.

The people that are really, really good, all have jobs at MSOs or the top tier talent always goes to the best places. Somebody that's starting out, their best bet is to find as good as talent as they can, but to really find somebody that knows what they're doing, somebody like at Precision, or hire a consultant that really has a strong history and reputation in the industry because there are so many pitfalls.

The second thing I would say is it's kind of common sense, but budget, making sure that the budget is accurate and planning accordingly. Then the third thing I would say is understanding your market. We talked about each state and each individual market being its own micro-economy and having individual consumer niches within each of these individual marketplaces. That's extremely, extremely important to understand because from day one, you're planning your production and sizing your equipment according to what you think you can sell, obviously. What product is your business going to make?

With that being said, it requires a substantial amount of due diligence. We see that a lot of people, they don't really understand their market as well as they should. We give them advice, of course, on what products to make, how to make them, and bring the production online in the proper manner, but really doing the due diligence around the consumer trends in your state, that's huge. Absolutely.

Matthew: What are your extraction pods? Can you talk about those a little bit? Who buys them and what are they for?

Nick: The extraction pod is a-- Think of it as a pre-made lab in a box. Ultimately, what it is, it's an ocean container that's been outfitted with all the appropriate controls, meaning ventilation, electrical, Class 1, Division 1 equipment placement, et cetera, that's pre-listed. What that translates to is no build-out in your facility. It's something that can be dropped on site and be used pending the approval of the municipality because it is a temporary structure.

It saves our clients from doing a very labor-intensive, robust build-out. Alternatively, if they are doing a build-out, this gives them the option to bring their facility online faster, so long as the municipality that they're operating in is okay with these types of structures being placed on the property.

Matthew: Is it also used as a supplement when they're between different sized extraction equipment, they say, "Okay, let's supplement with a pod until I get to a higher level, or is that not really the case?

Nick: Yes, it can be. A lot of people, they get into a facility, they're in there for two years, they need their production ramped up, their new facilities coming online, but they need excess capacity. Yes, they can bring that online. It's extremely universal. It's meant to be not necessarily an ad hoc solution because I don't really think that's the proper terminology, but it's supposed to be a quick response type of solution where it's saving the client 90, 120, 180 days, on going through permitting, going through build-out, going through plan comments, and all the stuff that it takes in order to build out one of these facilities and bring it online.

Matthew: Where do you see the extraction business changing and evolving in the next three to five years?

Nick: I think the big thing that's going to happen is we're going to get CGMP standards. CGMP means Current Good Manufacturing Practices. When we look at any nutraceutical or supplement or anything like that, all of the manufacturing of supplements in the United States is subject to FDA regulation. It's subject to CGMP standards. We're starting to see that inch into the edibles market in certain municipalities and we're starting to see that inch into the production of CBD-based products.

Ultimately what you're going to see is you're going to see blanket CGMP compliance across the entire cannabis space. We're obviously advising our clients that they need to prepare for that and build for that and plan for that. Our equipment is already CGMP certified. Certified is really not the right nomenclature. It's CGMP compliant or CGMP ready because the equipment is only one part of the GMP process.

You have quality management systems and personnel training and quarantine processes and facility cleanliness standards and all these sort of things that go into CGMP. In terms of where the industry's going, 100% that's where it's going on a compliance standpoint. On a standpoint of product, the industry is going to trend towards all these other minor cannabinoids. We really just know about a few of these cannabinoids, or I would say that the public domain knows about a handful of them, maybe they heard a CBD or CBG or CBN. Obviously, they've heard of THC. Maybe they've heard of Delta-8 THC, which is an isomer of Delta-9 THC or isomer of the acidic version of THC.

What most people don't know is there's over 100 of these cannabinoids in the plant and each of these cannabinoids has a unique molecular structure. Based upon the molecular structure of each of these cannabinoids, it binds to what's called your endocannabinoid system within your body. Your endocannabinoid system is an endogenous system that actually regulates many things within your body. For example, your sleep, your mood, your fight or flight response, your nervous system moving you out of parasympathetic into sympathetic nervous system activity in certain scenarios.

The bottom line, without going into all the robust medical details, is that these cannabinoids, the way that they interact with your body, they have tremendous, tremendous promise. We've seen that with CBN, with CBG, with CBC. We've seen it with CBD obviously. We've seen it with THC, but all of these have a little bit of a different effect. In some cases, they have a profoundly different effect. CBD doesn't get you high. THC gets you high. They all are going to have a very distinct and very robust therapeutic benefit. In a lot of cases, these will be made into products that are multi multi-billion dollar products. We've got 152 clinical trials going on right now with different cannabinoids.

We're really just beginning to scratch the surface of what we know is available and where this technology of isolating these molecules and using them to improve quality of life. We're just beginning to understand what we can do right now.

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

Nick: Oh, many books. I'd read probably, I would say 50 books a year, usually about one a week. I think there's a few whether it's from an investment standpoint or a health standpoint but some of the ones that I really, really liked, I like Benjamin Graham's work. I think that it teaches you how to think about the fundamentals of business. From a business standpoint, I think it's a really good book from investing also, but thinking about the fundamentals of what creates a successful business. These guys have invested in businesses and created businesses and helped to advise the management of businesses for a very, very long time.

From a standpoint of business, I really like most of Benjamin Graham's work. From a health standpoint, I like Dr. Ben Lynch's work. He does a lot of work on the human genome. It's interesting because I had my genome mapped and a lot of other people have their genome mapped. You understand that you're a very unique individual. People push a certain diet or certain lifestyle or any number of these different things but ultimately the research shows that it's all genetically specific.

Some people can tolerate things while others can't. The more that you understand about your personal genome and the more that you understand about how to provide your body nutrition, I think that that gives you a tremendous leg up in whatever you want to do in life because everything on a molecular and cellular level in your body is operating in an optimal scenario. From a health standpoint, I really, really like that.

Matthew: Okay. I haven't heard of that one. What's the most interesting thing going on in your field besides what you're doing?

Nick: Again, I think the most interesting thing goes back to the cannabinoid research because we're a fraction of 1% into that. Ultimately, it's just an endless black hole of unknowns, but the little that we do know is so overwhelmingly positive for humanity, that it just becomes so exciting to be able to continue on that research. To be able to make money from that also it's amazing.

I'm super excited to see where the rest of the industry goes in terms of being able to, again, use these mystical compounds, if you will, within the cannabis plant to treat, cure and prevent human disease.

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

Nick: Oh, boy. I think I have a lot. In terms of a contrarian, I think that when you look at a particular situation or a particular person or a problem, you have to look at it holistically. I've always tried to do that. Well, not always, but in my more recent years, I try to look at it holistically. What are all the variables top to bottom end to end? To analyze anything like that gives you I think a greater benefit of your desired outcome. Whether that's hiring somebody within your organization, whether that's making a particular investment into a particular asset.

These are all kind of on the same theme, whether it's your personal health, looking at it holistically, and understanding the truth of whether it's the root cause or in some cases, it could be characterized as the fundamentals. It takes a deep level of analysis to do that. It's on the line of the thinking of a researcher or a technologist. Some people think that that's completely crazy but whenever I make big decisions, that's how I think about them anyways.

Matthew: Final question about Michigan. Obviously Detroit kind of got its lunch eaten when foreign auto manufacturers came in and displaced a lot of American jobs, but is there a Renaissance at all? Obviously, you're a specific example of using manufacturing skills and engineering skills and creating jobs there in Michigan. Apart from what you're doing, are you seeing a broader trend of retooling going on in Michigan?

Nick: Yes, particularly as it pertains to cannabis, I'd say Michigan's economy is generally in an uptrend. The way that people have perceived Detroit for a very long time is probably not what you would anticipate when you come here. When you come here, it's actually really nice. Everything's new, everything's clean. It's not the typical perception, I guess, is what I would say.

Now, cannabis in Michigan is actually booming. Some of the numbers out of BDS and these other publications are anticipating that the Michigan cannabis market is going to be upwards of a 3 billion dollar industry within the next few years here. It's ultimately translated into a lot of jobs being created and a lot of dollars being materialized into the economy here. I think that Michigan has a lot of resources, obviously in terms of engineering and so forth.

I don't know if that directly translates into cannabis specifically. I know that a lot of people from automotive have come into cannabis. The majority of our staff, our engineers, our project managers, and so forth and so on. A lot of them have come out of automotive. Automotive is still, obviously one of the dominant industry sectors here, but Michigan as a whole has diversified economically away from being pigeonholed into one industry also. I think, all in all, it's a positive trend for the state.

Matthew: Well, that's a great note to end on, Nick. As we close can you tell listeners how they can find out more about Precision Extraction and how to reach you or connect with you or salesperson or someone to learn more about your solutions?

Nick: Sure. Absolutely. They can find me on LinkedIn. Just type in my name Nick Tennant, Precision Extraction you'll find me. If you want to talk to anybody about our products or strategy regarding your extraction, we're happy to help. We're in Monday through Friday [9:00] to [5:00] and we've got a robust staff of extremely intelligent and experienced people that can help you out. Our website is precisionextraction.com. You can give us a ring at 855-420-0020.

Matthew: I love the 420 in there.

Nick: We always had to sneak that in. We got to remember our roots, right?

Matthew: Great. Well, Nick, best of luck to you. It sounds like you don't need any luck. Things are just blooming. Well done in creating your business and good luck in the rest of 2021.

Nick: Thank so much. It's been a pleasure speaking with you and I look forward to doing it again.

Matthew: If you enjoy the show today please consider leaving us 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 forward/iTunes. What are the five disrupted trends that will impact the cannabis industry in the next five years? Find out with your free report at cannainsider.com forward/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 for CannaInsider or discuss as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Promotional consideration may be provided by select guests, advertised [unintelligible [00:42:10] companies featured the cannabis [unintelligible [00:42:12].

Lastly, the host or guest on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial adviser 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.

[00:42:47] [END OF AUDIO]

Ep 341 – Social Equity Initiatives Spark a Cannabis Incubator in N. California…

amber senter breeze distro

The Congo Club is one of the only places that carry the Red Congolese, an heirloom strain of cannabis that provides an electrifying, thought-provoking, and optimistic high. Here to tell us more about it is Amber Senter, founder of The Congo Club, Breeze Distro, and EquityWorks! Incubator.

Learn more at https://www.breezedistro.com

Key Takeaways:

[1:11] An inside look at The Congo Club and Breeze Distro, a distributor of high-quality cannabis products in California

[2:31] Amber’s background and how she got into the cannabis space

[5:18] Unique characteristics of the Red Congolese strain and why it’s gained so much popularity

[11:04] Why California’s regulated market is struggling to compete with the unregulated market and what it will take to change that

[15:04] Amber’s latest venture EquityWorks! Incubator, one of Oakland’s first publicly-funded social equity manufacturing facilities

[19:23] The many different cannabis licenses required in California and the challenges they pose to everyone from cultivators to distributors

[25:40] How Amber sees the California cannabis landscape evolving over the next 3-5 years

Click Here to Read Full Transcript

Matthew Kind: Hi, I’m Matthew Kind. Every Monday, look for a fresh new episode where I 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.

Today, we’re going to hear from Amber Senter, founder of the Congo Club. The Congo Club is one of the few places that carry the Red Congolese. An heirloom strain of cannabis which provides an electrifying thought-provoking and optimistic high. We’re going to hear more about that and also what Amber is doing with Breeze Distro, a distributor of high-quality cannabis products. Amber, welcome to CannaInsider.

Amber Senter: Thanks for having me today, really excited about our conversation.

Matthew: Me too. Give us a sense of geography, where are you sitting today?

Amber: I am in Oakland, California right now. A bit chilly than it usually is, it’s 48 degrees.

Matthew: That is pretty chilly.

[laughter]

Amber: Yes. It’s 35 this morning when I woke up, like, “Oh my gosh, this is not what I moved to California for.”

[laughter]

Matthew: Tell us what is the Congo Club and Breeze Distro.

Amber: The Congo Club is a cannabis brand, a brand of African land raised sativa genetics. We’re dedicated to really bring in some of the highest-quality African cultivars that we find as well as crosses that we make. Really bringing those, as you mentioned the electrifying type of sativas to the market which there’s a gap because people don’t really want to dedicate that all that time that goes into growing sativas. That’s what we do with the Congo Club and Breeze Distro.

Breeze is about creating an inclusive supply chain for black and brown cannabis brands. We source the highest quality, really black and brown cannabis brands and products throughout the state and make sure that they have visibility on retail shelves.

Matthew: Can you share a little bit about your background and journey and how you got into the cannabis space and started the Congo Club and Breeze Distro?

Amber: Yes, sure. I moved to California from Chicago in February of 2014. Moved out here and got a job working for an edibles company. I moved here because I was suffering from lupus. Those winters in California are extremely harsh. [crosstalk]

Matthew: You mean the winters in Chicago are harsh.

Amber: Yes, in Chicago, that’ what I meant. We were experiencing one of those polar vortex winters where it was like-- [laughs] [crosstalk]

Matthew: Oh my God. That sounds like something that’s made up in a comic book movie or something.

Amber: Right, The Day After Tomorrow type of stuff. That winter, we had wind chills of 40, 50 below zero and I just couldn’t take it anymore. I moved to California, I got a job working as a sales and marketing director for an edibles company. Really, worked very hard. At the time, when I was brought on, we had four accounts and by the time I left, we had over 50 accounts. Really hustled throughout the state to expand our business, but at the same time, I was also really building up my network. That’s how I got to meet so many people in cannabis.

Really since then, I’ve just been hustling, working. I had a job working for a consulting company, writing, winning applications for different groups really throughout the United States. Also, worked for a little while at a West Oakland Dispensary as a COO for a couple of years and got my experience and running multi-million dollar retail operation.

From there, my experience really at the dispensary taught me a lot about customers and customer trends, products and really what products do well in the dispensaries and what people are looking for. After I left the dispensary, I started Breeze, manufacturing products, making products and distributing them.

Matthew: What do you think it is about this particular strain with the Congo Club? We talked about it being electrifying, thought-provoking, optimistic high, but what is it that’s really captured people’s imagination?

Amber: It’s a unique strain, it’s spicy, it’s cheesy, it’s very clear-headed kind of high, but at the same time, there’s no paranoia. People really like that. Some folks love Jack Herer’s and Trainwreck’s and those type of cultivars, but those tend to really get your heart rate going, maybe give you heart palpitations. I know it does that for me. I’m very sensitive to cultivars and things like that, any kind of stimulant whatsoever. I can’t even drink coffee. I would really love to enjoy the buzz and the kick that you get from those kinds of things.

That’s really what’s very unique about the Red Congo is that you get that energetic feeling without the jitteriness and the heart palpitations. That’s really due to the myrcene content.

Matthew: Talk about the myrcene a little bit. Could you just mention what myrcene is first?

Amber: Yes, sure. It’s a terpene that’s found in cannabis, a number of different cannabis strains, primarily found in indica-dominant strains or strains that are really relaxing. It’s more of a sedative type of property that’s found in cannabis. It’s found in a number of different plants, thyme, mangoes, lemongrass, but also, found in a number of cannabis strains, Granddaddy Purp, Blue Dream, OG Kush also has a pretty high myrcene content, not very common that it’s found in sativa type of strains.

Matthew: It’s really calming, it really tempers that paranoia and heart palpitations, which who doesn’t want that on a Saturday night, extreme paranoia and heart palpitations.

[laughter]

Just heavy myrcene and that tempers that and offsets it so you get a more pleasant high without those things?

Amber: Yes.

Matthew: I’m always curious how people get their product into dispensaries the first time and then how do they grow the network of dispensaries that will create demand for your brand?

Amber: That wasn’t the easiest thing. It’s also a very big challenge for really black and brown brands to get shelf space. We just don’t really have the networks a lot of time, the connections, and can’t make that connection to get on the shelves. We got out first big break with the Congo Club through Harborside. Harborside has carried the Red Congolese for a very long time. They actually worked with our cultivator.

Once our cultivator got licensed, he was really trying to figure out his way and just wanted to focus on growing. We partnered up. He’d known me before, I had helped him with a previous brand that he was associated with. We were really looking to continue to build a relationship together.

I had an idea of creating a brand that centered African genetics and African cultivars and he loved the idea. We partnered up together and we approached Harborside, had a meeting, let them know what we were up to and what this new brand, what’s focus and represented and they loved it. They brought it on and they’ve really been in our corner ever since then.

The market share and visibility that we got from Harborside, just really reverberated across the California cannabis scene to other places. Now we’re in a serious demand really across the state. Harborside was really where we got our first big jump off.

Matthew: It’s the sales and marketing background that you had when you first came to California. It sounds like you leverage that skillset to get meetings and things like that.

Amber: Absolutely, definitely.

Matthew: I think people underestimate the midwestern hustle. I’ve got the midwestern hustle too, where we’re like, silently just going at it and it’s underestimated, I think.

Amber: You’re absolutely right. We have a very, very strong work ethic in the midwest. Very blue collar, just get it done. I definitely applied that out here.

Matthew: [laughs] That’s great. With a large unregulated market side by side, with the regulated and tax market, I know different communities are being served here, but how does that when you have that lens on, you’re looking at the landscape of California’s cannabis market, and you’re saying, “Hey, there’s an unregulated market,” and they don’t get taxed. They don’t have the same regulations. They don’t have all these lab tests. They have to pass all these things. Then I’m involved in the regulated taxed market.

Do you just accept it or are you looking for ways to get the Sacramento to be more adaptive and how they deal with the regulated market? What are your general thoughts here?

Amber: It would be great if we had less taxes, obviously, taxes are killing regulated operators. It’s quite extremely burdensome, really hard to navigate, really hard to deal with. Especially here in Oakland, we have some of the highest cannabis tax rates in the state, if not the highest, I believe we are actually the highest at 10%, which is unbelievable for a city tax on top of all the other taxes.

We’ve been working really hard to advocate for lower taxes at both the city level and at the state level. We were successful at the city level here. The tax rate has been lowered and will continue to go lower over the next couple of years from 10% down to-- It’s all dependent on revenue and also your status if you’re an equity operator or not. Equity operators pay as little as 0.12% city tax. If they generate that. [crosstalk]

Matthew: What’s that? Because I don’t know what an equity operator is.

Amber: Oh, yes. Social equity programs were designed to lower barriers of entry for communities that have been disproportionately affected by the war on drugs. There’s parameters that you have to qualify for in order to qualify for this program.

When you do there’s a number of different incentives and different types of breaks and programs that you’re able to be involved in. One is a special tax program for social equity operators here in Oakland, where if they generate 1.5 million in revenue or less, they’re put in a special tax bracket of 0.12%, which is quite different from 10%. It’s there to help people create a sustainable business, give them some runway to allow them to get on their feet and generate some revenue.

These types of programs or actually what would be quite helpful in helping folks transition from the unregulated market to the regulated market. A lot of the unregulated operators and traditional market operators don’t want to cross over because of the taxes. I can’t say that I blame them because taxes make it really hard to run a sustainable business. I think the state looking at programs like that, which Oakland has implemented would be the way to go about it versus enforcement. We can’t do enforcement, we’ve got to figure out pathways in which to get folks licensed.

Matthew: Amber, can you talk a little bit about what you’re doing with EquityWorks! Incubator? What that is and what you have going on there?

Amber: Yes, sure. EquityWorks! Incubator is a publicly funded, shared social equity of manufacturing facility located here in Oakland. It is a first of its kind in the country. What we do is we help social equity operators. We currently have six in the incubator, we help them create products really that makes sense for the market, for the cannabis market.

We’re doing things like analyzing data, we’re helping folks come up with formulations, helping them do R&D, we’re helping them look at branding, helping them create and build their brand and create a brand story. Then, me, as a distributor, we’re distributing it to retailers throughout the state here. It’s really very much a mentorship program helping people from concept to the shelf.

Matthew: That is super helpful. You said there’s six startups in there right now?

Amber: Yes.

Matthew: I can imagine, just getting some words of wisdom like, “This doesn’t work and this does work.” [laughs] You just don’t know when you’re getting started and it’s like, “Yes, I’ll tell you why.” It was like, “Wow, that just saved me months of banging my head against the wall.”

Amber: Especially as a manufacturer, getting into these products and making a product that might be off compliance wise or the dosing is not right, the formulations not right, that’s costly. Not only is it costing you money by going and getting these things tested, but it’s costing you time. I’m really happy that we’re able to assist operators like this really, just bringing in our knowledge, our backgrounds, our experience, and helping folks mitigate some of these pitfalls.

Matthew: You make introductions then for distribution and imagine these alumni, once they’re alumni will probably help each other too.

Amber: That is the goal. Once you make it, you reach back and you help others that were in the position that you were in. We definitely not just make introductions, we’re actually distributing these products, and we’re doing it to some of the largest retailers in the state, MedMen, East, Harborside really the big guys.

Matthew: Wow, that’s great. Of the six startups, how does it break down and what they’re interested in making specifically product wise? Are they still working that out?

Amber: Yes, they’re still working it out, but a lot of them have their concepts created and it’s been really exciting to be a part and watch and give feedback. We’ve got folks, making gummies and really also bringing in their cultural backgrounds, influencing the flavor profiles of products, and really also even the choices of the products.

We’ve got some folks making gummies, we’ve got some folks making tinctures, some interesting topicals too. One of our manufacturers is making a hair oil, but very specific to course hair. Black hair certain Afro-Latina hair, so really, really interesting stuff coming out of there. I’m really excited to see what else folks come up with, someone’s got hibiscus type of lemonade. Really exciting things coming out.

Matthew: There’s a lot of different kinds of licenses in California. People in California are familiar with it, but can you just go through a few of the licenses of the big kinds, because it’s quite a few compared to other States anyway?

Amber: Yes. Let’s see, you’ve got a number of different cultivation licenses. There’s indoor cultivation, there’s outdoor cultivation. There’s even mixed-like cultivation, greenhouse cultivation. All the different types of cultivation licenses.

Then you’ve got your distributor licenses, which there’s even different kinds there. There’s a transport only license where you just literally logistics and moving things around the supply chain by transport.

There’s the overall arching distribution license where you can distribute your own products, and other people’s products and actually take them to the retailer. You also serve as quality assurance by being the one that’s in charge of collecting the taxes and testing. I feel a lot of liability falls on distributors.

Then there is the self-distribution license. Then there’s a few different types of processing or we call it here manufacturing licenses, there is a type six license, which is nonvolatile. There is a type seven which is volatile. Then there are a few others that are very specific, there is a packaging license, there is an infusion license. Really, really interesting there. Then, of course, you’ve got your testing license, and then your retail licenses, which there is a few categories there. You have storefront and your non-store front which would be delivery licenses.

Matthew: What do you think, here, some of these be consolidated or do you think it’s helpful having it fragmented like this?

Amber: Tricky question. I was operational prior to legalization. I was a manufacturer that self-distributed my own products. Since legalization I’ve had to-- obviously, I’m a manufacturer, but then now I’ve taken it a step further and had to get my distribution license. I did like the way it was before, where manufacturers and cultivators could go straight to retailers to sell products, and really just do business however they wanted.

Now with the framework, it does make it a lot more costly, because now not only do we have the taxes and everything to deal with, we’ve got all these licensing fees, and different licenses that we have to have. Then, of course, the cost of compliance around each of these licenses. It’s made it quite burdensome with all these different license types, and the hoops that we have to jump through to stay compliant.

Matthew: In California right now, there’s roll-up of the industry. There is a lot of mergers and acquisitions going on, what do you think about that? Can social equity companies participate in that?

Amber: M&A activity is high right now, all over the industry, especially here in California. The cost of compliance has been a lot and people are seeing this looming hopefully the scheduling that’s going to be happening in the next few years. Folks are starting to prepare for that, and kind of coming together like Voltron. [laughs] It is one of the ways in which to really get a leg up on the flood of capital that’s going to happen when some descheduling happens.

I think the mergers and acquisitions are great. They make a lot of sense. I’m really glad to see people coming together because they’re realizing that they can’t get as big as they want to on their own, and they’ve got to consolidate in order to really have a presence, and make an impact, and gain market share.

There is a group that’s being left out, and that is social equity operators. It’s a huge problem because we’re seeing all these companies around us being able to come together and form much bigger entities, whereas, the social equity operators are forced to stay small. Really, how can they compete against companies that are merging when they don’t have that option? That’s something really that the regulators are going to have to fix as quickly as possible.

Matthew: Are they getting feedback on that or they’re not in touch with it?

Amber: Yes, we’ve been giving them quite a bit of feedback, but really, we’ve been giving them feedback since they came out with the rules and regulations around which ownership is defined in social equity businesses. This has been a looming problem, and now that the M&A activity is really up it’s becoming amplified.

A lot of these smaller operators-- that’s what you do, you come together so you can be bigger. The fact that that’s being blocked because the definition of a social equity business is compromised at that point, it’s just not okay. It’s really limiting the ability of these businesses to grow.

Matthew: Nos, how do you see the California cannabis landscape changing in the next three to five years?

Amber: It’s a great question. I see the M&A activity continuing. I see a flood of capital coming in hopefully from descheduling.

I see if interstate commerce becomes a thing which hopefully it will. I see California cannabis being king as it has been, and will continue to be. California being, which it already is this jewel in the United States, but that just being amplified with interstate commerce.

I’m really excited to see what’s in store for California. We continue to be trendsetters here with products and infusion techniques, and all these things. I see us continuing to be that leader, and not just in the United States but in the world, and very excited to see what’s to come here in the cannabis scene in the next five years.

Matthew: Me too. Amber, I want to move to some personal development questions, to help our listeners get a better sense of who you are personally. Is there a book that’s had a big impact on your life or your way of thinking that you would like to share?

Amber: Definitely, I don’t get a whole lot of time to read for pleasure I should say. A lot of my reading is professional development, personal development. I went to school to be a meteorologist. I went to school for physics. Now, I’m business role and [laughs] I really needed to step my game up there.

I read a book called The Personal MBA. It’s lengthy but so worth it. I read it several years ago, five, six years ago. This book helped me out tremendously on the business side of things, and really helped me with my crash course in business school, navigating running a business in cannabis.

Matthew: What do you think the most interesting thing going on the cannabis field apart from what you’re doing?

Amber: Social equity programs have been really fascinating. I’m so glad that it’s a topic of conversation because it deserves to be. We have to give opportunities to those that came before us and really paved the way for this to be an industry as it is today. I really appreciate what has happened around that. Also, I’m really fascinated about beverages, in the beverage category. I was always very skeptical being an operator that operated since 2015, 2014. I’ve always really been like, “Oh, drinks, no, I don’t know about that.”

Really the technology around it, the bioavailability that they have been able to really create with an absorption rates with beverages and edibles even has been so interesting, where we can really now create these fast onsets, instead of waiting an hour for an edible to kick in, it kicks-in, in 15 minutes. The [unintelligible [00:29:55] is short-lived but strong.

This has been fascinating to me. I’m really, really excited to see how far the envelope gets pushed there. How much they can tweak it? Very exciting to me.

Matthew: In fact, it was the drink manufacturer that introduced us, Luke, from Cann. [crosstalk] Those are very popular, Luke. Well done if you’re listening.

Amber: I love Luke. Luke is an incredible human being and a really awesome person and he’s made an amazing beverage and its awesome branding. I just love it. Everything about it.

Matthew: Luke, you can just record that and put it on loop, whenever you’re feeling down.

[laughter]

Amber, what one song immediately comes to mind that makes you sing along as soon as you hear it?

Amber: This was a funny question. Most of the music I listen to is rap. Lots of rap and hip-hop, so very much not safe for work. [laughs] That’s my answer. A lot of the music that I love, not safe for work, but one of my favorite artists did win a Grammy on Sunday night, Megan Thee Stallion. [laughs]

Matthew: Amber, as we close, can you tell listeners how they can follow you and connect online and learn about all the different businesses and projects you’re a part of?

Amber: Yes, definitely. You can actually go to my website, amberesenter.com. You can find Breeze Distro on the web as well at breezedistro.com. You can find us on Instagram as well or look me up on LinkedIn.

Matthew: Amber, best of luck to you. You got a lot of exciting things going on and I hope we can check in again soon.

Amber: Yes. Thank you so much, Matt. Thanks for having me on today. I really enjoyed this conversation.

[music]

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 at 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 treatments. Promotional consideration may be provided by selected guests, advertisers, or companies featured in CannaInsider.

Lastly, the host or guests on CannaInsider may or may not invest in the companies, 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.

[music]

[00:33:35] [END OF AUDIO]