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Ep 321 – Cannabis Drinks Are Hot, But Only If The Formulation Is Perfect

jonathan schultz backyard soda

Are cannabis and hemp beverages on the verge of explosion? It all comes down to the fickle whims of beverage consumers. Here to tell us more about it is Jonathan Schultz of Backyard Soda.

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

Key Takeaways: 

[2:09] An inside look at Backyard Soda, a Denver-based startup creating all-natural, non-alcoholic, CBD-infused sodas and cocktail syrups

[3:28] Jonathan’s background and how he came to start Backyard Soda

[9:36] What beverage consumers are looking for in cannabinoid beverages right now

[14:44] Why Backyard Soda chooses to use whole ingredients even though this drives up price points for customers

[21:10] How Backyard Soda is partnering up with restaurants and hotels looking to add CBD cocktails to their menus

[23:46] Why Backyard Soda uses full-spectrum CBD unlike most other cannabis beverage brands that use CBD isolate

[29:03] The challenges of distributing CBD beverages and how Backyard Soda has overcome them

[37:38] Where Backyard Soda currently is in the capital-raising process

Click Here to Read Full Transcript

[music]

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-AInsider dot com.

Now here's your program. Are cannabis and hemp beverages on the verge of explosion. It depends if you can understand the fickle whims beverage consumers. Here to tell us more is Jonathan Schultz of Backyard Sodas. Jonathan, welcome to CannaInsider.

Jonathan Schultz: Matt, thanks so much for having me. I'm excited to talk to you for a little bit.

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

Jonathan: I am, in Denver, Colorado. We are at our office, which is based here in the RiNo neighborhood, chatting with you from there.

Matthew: I get a lot of people moving to Denver from other areas because of COVID.

Jonathan: It's such a hot area right now. I think Colorado has done a great job of really mitigating and managing, and things, and people want to be outside. This is a great spot to do that. We're seeing a ton of influx, good for real estate. Not probably so great for everything else as far as resources and things, but people need the sun and people want to be outside and play.

Matthew: Good points. Well, I guess for Colorado size and how cool a state it is, it was just a matter of time before-- it's like 5 million people, it's going to just probably double.

Jonathan: In the last probably 10 years, and I will count myself as one of it where I'm not a native. I moved here from Ohio about 10 years ago with my family. We did it for the same reason that everybody else did, which is just the beautiful scenery outside. Yes, I think people are going to continue to make their way here.

Matthew: Great. Well, give us a sense of what Backyard Sodas is on a high level?

Jonathan: I like to tell people, Backyard Soda is at heart a simple syrup company. We like things simple. [chuckles] Simple syrup is one of those things that people know about. They've probably used or said, "Oh, I've got to make some for a mint julep," but don't realize how versatile it can be, especially with making drinks. Our whole idea around Backyard Soda was to make gourmet drink simple. We want people to think and to feel that they can create the drink that they go out and spend $14 or $15 for if they're at a high-end cocktail bar or they're out to dinner, and then they could do that at their house in their own backyard.

Now they have the opportunity to do it both with an infused a full spectrum CBD version, in addition to our regular non-fused syrups. Then we also have a line of ready-to-drink CBD-infused sodas and mixers. We're pretty simple company and that's the way we want to keep it.

Matthew: Can you share a little bit about your background and journey? Jonathan, you mentioned you're from Ohio, but give us some more sense of what you were doing before, where in Ohio are you from by the way?

Jonathan: I grew up in central Ohio. We actually lived in Cleveland for about 15 years. That's where I went to a business school. I got my MBA from Case Western. Prior to that, we've lived in New York, we'd lived in Boston, and then my wife and I both graduated from Colgate University in upstate New York, so that's where we met. I've had a pretty varied background when it comes to positions and career. Everything was mostly in financial services. I was working for financial companies, banks, and ultimately, I just decided that after several years of that, I wanted to work for somebody that was a smaller company.

It was still in the financial services, but it was a pet insurance company. It was a brand new startup, and I really got the feel for what a startup is like to work for when you're the third or fourth person hired. Ultimately, I went on and decided that that was the path I wanted to take, but I think I wanted to start it myself. I've done a couple of startups and mostly in the technology world, but I'm a big fan of cold beverages.

Matthew: Well, you picked the right field.

Jonathan: Exactly. When we have the opportunity to take over Backyard Soda we saw just a huge opportunity from not only the beverage world, but what was coming down the line in the cannabis world with the passing of the Farm Bill, and just something that was going to be a lot of fun. I don't program software, but I can make a drink or a cocktail. [laughs]

Matthew: I'm a big fan of the nitro coffee. I think the first time I had that it was in around Boulder at 2014 and that has really added something. I feel like that just it's so flavorful and effervescent. It's like, "What else can we be doing here with drinks?" There's just crazy time to be experimenting. People are pretty open to experiment. Tiger Claw and these types of drinks too, is kind of really eaten a hole in beer and wine probably. People are saying, "You know what, I'm going to rewrite my whole idea of what an adult beverage is and what coffee is, what everything is like, I'm going to expand my palette of what I drink." Would you agree with that?

Jonathan: It has. I think I didn't actually drink coffee until I really figured out cold brew. Again, I've got a weird quirk of I don't really like hot drinks, so coffee was never really my thing [laughs] until I could put it on ice. I guess I could have put coffee on ice, but the cold brew was great because it took a lot of the acid out, things like that. I think with the drinks, you're absolutely right. There's people that really want to be that home mixologist at this point, they're open to experimenting. I think they've been out and about now that they're in a situation where, I won't say locked down because I feel like the country's just moved a little bit out of that, but there's still a lot of places that are open.

It just the world obviously isn't the same. Being able to create really interesting drinks and play around and experiment with this, I think is a ton of fun and gets people to be creative. I think the use of things like soda stream, where you can carbonate your water and now add our syrups to make your own CBD drink at home or soda at home. That has been something that people are starting to realize, "Hey, I can do this myself." It's been interesting.

Matthew: You're in the space before you don't like warm drinks. It's a little unusual, but I like guests that have a little strange edge to them, so we'll keep going.

[laughter]

Matthew: You had a skill set making drinks, and then you're like, "Hey, what the cannabis space sounds interesting, hemp CBD. Do you remember the moment where you were just had the idea?

Jonathan: I do actually, and it was back in summer of 18, and a friend of mine who we had been discussing just extraction, and CBD and what can be done and things like that. To me, I found that consuming CBD, vape pen, that's not my interest. It seems weird to be you don't pull out a vape pen at a social party or at least maybe some people do that but I don't and taking tinctures and things just didn't have a very, what I'll call, social norm to it. I said, "What's more normal than cracking a can of soda or making a cocktail? Why wouldn't we create a CBD-infused ingredients that you would put into this?" That ingredient was our simple syrup. It allowed people who are maybe moving towards the non-alcoholic side.

In general, the market is saying, "Hey, less alcohol is being consumed, but we still want something." This allows an interesting mocktail that has the benefits of CBD without necessarily having to just drink seltzer water or wine.

Matthew: When you decide then to go into the cannabinoid beverage market, how do you orient yourself in terms of what you think drink consumers want from a cannabinoid beverage? How do you dial that in?

Jonathan: Well, I tell you first and foremost, they want something that tastes good. [chuckles] I know that sounds counterintuitive a little bit to where-- come looking at it from a cannabis world. At the end of the day, people buy anything once but if you want them to buy it a thousand times, it has to taste good. I think that was the first and foremost thing that we looked at and said, "If we're going to create a cannabis beverage, it has to taste good. It can't taste like basically drinking cannabis. There's a little bit of taste there. You want them to know it, but you don't want that to be the overpowering flavor.

CBD can be very bitter, especially if you're just utilizing an oil or things. There's blockers to mask some of those taste but first and foremost it has to taste good. Next, we want to make sure that we were looking at this from a daily user that isn't looking to necessarily manage something. Obviously, if you're managing some sort of ailment or illness with CBD, and there's some incredible stories out there of what it can do, you're probably not going to go out and drink a bunch of sodas and cocktails to manage that.

Our look at it was what's that daily use number and things that people might want to have a drink with some benefits. If you're going to have a soda at lunch, if you're going to have a cocktail after dinner, this is a great way to consume a daily dose of CBD from that standpoint. We wanted to balance those two. I think we've done a pretty good job with that.

Matthew: Okay. When you have a prospect that says, "Hey, I like the idea of a CBD beverage, how much CBD should I be consuming?" I'm sure that's a question you get all the time and what do you say to that?

Jonathan: Yes, it's probably the number one question. The problem is that the answer is I can't tell you the answer. Everybody's body a little different, everybody processes a little bit different. It depends on the CBD itself. We utilize a full spectrum, we take the whole plant and that goes along with our ethos of using whole ingredients because we believe there's an entourage effect that works when you have not only CBD but CBG and CBN and some form of-- or minimal amount of THC. It all works together from that standpoint.

It's really hard to say. I know that's not a good answer that anybody wants to hear but somebody that consumes 20, 15 milligrams of a full spectrum CBD that's 6'2 and 220 pounds is going to have a very different effect probably than someone that is 5'2 and 105 pounds. It just tends to be a tough question to answer and I think it's something that hopefully we'll get dialed in as an industry of, "Hey, this is the right amount and we believe that somewhere between 10 and 25 milligrams per day."

Matthew: Okay. Each can has how many milligrams?

Jonathan: 15.

Matthew: Okay. How you get the water solubility right for the CBD because I know if it's not soluble it coagulates in the liquid and it's not a pleasant experience? How do you work that?

Jonathan: Luckily, we've got a partner that is the extractor that we utilize here in Colorado. All the industrial hemp that we utilize is grown here in Colorado and extracted here. Luckily, they've been able to put together a great water-soluble product for us. Really what our focus is on the taste and sort of our formulation of what are the ingredients that we are utilizing, and then we have the CBD in that water-soluble form that allows us to just add a theme as we're making our batches. It's great to talk to them and it's great to understand their process. It's complicated so I won't get into it but they do a great job. That is a really important piece in this.

Matthew: You mentioned whole ingredients earlier. Is it difficult to use whole ingredients more than artificial ingredients? Are there any whole ingredients you're particularly excited about right now?

Jonathan: Yes, whole ingredients to us is incredibly important. I think that most companies out there if you look at the back of a can or you look at a lot of ingredients labels, it will say “natural flavors.” To us, it's like if you've got something that's strawberry flavored or watermelon flavored and you don’t actually see watermelon or strawberry on the ingredient label, you just see natural flavors, that’s a turn off at least to me and I think that's where the world is going. We take our ginger for our ginger lime and we take whole ginger and press that to a hundred percent juice. We use a hundred percent fresh lime juice. The lavender is lavender flower that's grown in a single farm out in Palisade, Colorado.

Home mangoes for our mango jalapeno. We use whole vanilla beans, which is unheard of to be quite honest because vanilla is very expensive, most people will just use an extract. But we also believe that there are really great properties of utilizing. People drink ginger ale for when their stomach is upset so that they're probably just reviewed Canada Dry. It's not really doing a whole lot.

When you actually consume the whole ginger, it really does have that effect, lavender, all of those ingredients have terpenes and they also have their own, I won't call it necessarily medicinal, but effect of whole ingredients is much different than just a flavor. We believe in that wholehearted. Like I said, we use that across the board, including, the CBD and the cannabis so that we have used all of the terpenes and cannabinoids in the plant.

Matthew: Now, it's a tricky balance because you want to use the best ingredients possible, but you want to keep your price point reasonable. How do you balance those two things? you are?

Jonathan: That's a great, great observation. It definitely costs more. I think what we have done, we have been able to control our costs but I think we're also talking to people about why you might want to spend a little bit more in order to have that type of whole ingredient. I think people are realizing, the market in general is realizing that the natural and organic is here to stay. It's not going anywhere. People don't want to see red dye number whatever or words they can't pronounce on their labels.

I think as people look at their health and they look at what they put into their bodies they're willing. If it costs a few cents more or it costs 50 cents more but it is something that is truly all-natural, I think people are not only willing to pay for it but are starting to seek it out because of the fact that they've heard just don't want those chemicals in their system.

Matthew: What are the retail prices for your drinks? Do you sell them four packs or singles? How does that work?

Jonathan: We leave that up to the stores. Most of them are selling individual cans. We sell a six-pack on our site. That six pack goes for 24.99, and then we will see most stores selling an individual can anywhere from 3.99 to 4.49. It just depends a little bit on the retailer and it depends a little bit about the location. We, I think, hope that those prices do come down right now. I think that the market is interested in. They're finding benefits of consuming it then they're willing to pay but ultimately I'd love to see those prices down in the 2.99 a can 3.49 a can, very similar to Kombucha that you might see many of the grocery stores. Being aligned with that product, I think is the right place to be.

Matthew: What's the conversation like with the retailers? Is there picking your brain, learning about backyard sodas and how it fits into their lineup?

Jonathan: It's also new to them. This isn't like an entirely new category so it's true, they are really learning. I think most see that there's a huge opportunity that truly is about to explode, and it is one of the fastest-growing categories. Even though it's a brand-new category and so that's exciting for them. I think their biggest question is where do I put it. Do I put it in the soda aisle? Do I put it in the beer aisle? If you are a liquor store, do I put it in the mixer aisle? Those are the things that need to be worked out a little bit. Just what's going on? As people walk in and start asking for it, "Where is it?" They'll start to be like, "Oh, we need to put this in the mixer aisle,” or something to that effect but everybody is a little bit different from there. Other than that, at least here in Colorado, the education level's pretty high. As other states allow and legalize the industrial hemp to be put into food and beverage in their own state, the education of retailers will become easier.

Matthew: How about-- is there any restaurants, or hotels that'd be CBD Mocktails or anything like that? Can you talk about that?

Jonathan: Yes, actually there are. We're really excited about it. We have multiple places here in Denver that are utilizing our syrups and our sodas for CBD cocktail menu. Lustre Pearl in RiNo is one of them, Charcoal Bistro in Park Hill is another. We had a great opportunity with one of the music venues here in town, Cervantes, that did some signature cocktails for an event when they were having events. That has been actually a really interesting place that we would like to be once the music venues start to come out because we are what I call mixer focus. They can create a CBD cocktail or a mocktail. Now you've got for folks that may be driving or aren't drinking that night, they've got something interesting for folks that are looking to add to the alcohol. they can now have that CBD Moscow mule or that CBD margarita, things like that.

I think that the mocktail menu is something that people and restaurants are really starting to want to put out there. As I mentioned before, there is a trend going towards less alcohol. But when you can create an interesting drink that's truly made for someone that isn't interested in consuming alcohol, but it has a fun feel and you don't have to compromise that taste, or that feel, that's important. Bars and restaurants can probably charge almost as much for a great mocktails they do for an alcoholic cocktail. That drives some great business. If somebody isn't drinking, it's just like, "I'll just stick with water," because it really isn't anything on the menu that they want or they have an opportunity to say, "Oh, really? Love the looks of that nonalcoholic cocktail. That looks delicious." Why wouldn't you want to sell a mocktail to someone that isn't planning to drink alcohol that night?

Matthew: Right. What are your feelings in terms of using CBD isolate versus full spectrum? I know you said you like whole ingredients, but the masking which you talked about a little bit earlier, the full spectrum oils, you really notice that taste. It can stand out. How do you try to determine what the right balance is there?

Jonathan: Yes, it's difficult. Like I said, that whole idea around a beverage is that taste is always number one no matter what. It is important, but for us, there is no question, full spectrum is the way to go. The CBD isolate is certainly easier to work with, but I'm not sure it really necessarily provides all the benefits. There is probably some question around whether or not if it is used in the pharmaceutical, which I believe there have been a couple of-- maybe just one pharmaceutical products that have come out that are for, I want to say epilepsy utilizing the Isolate. The question really becomes around whether they'll allow beverages and food to introduce just an isolate into it. The FDA will have their ruling of that at some point down the road.

I think they've got a lot on their plate right now. [laughs] But there's been a lot of waiting around for the FDA to give a ruling one way or the other. States are making those rulings on their own. As I said, I think the FDA has a lot on their plate right now and are probably worried a lot more about finding a vaccine for COVID versus making rulings on CBD at this point. It'll be interesting to see what happens and where it goes. We are hoping that that is something that they rule on soon. For now, we are excited about what we utilize in our drink.

Matthew: Talk a little bit about your Backyard Cocktail Kit? What is that and who's that for?

Jonathan: Yes, back in March when things really started to close down, we started to look at what are the opportunities here because our business was really based around walking into a restaurant or a bar or a liquor store and saying, "How do we get this on the shelf? How do we get this on the menu? You’ve got to try it, you’ve got to taste it." Well, if you don't have customers coming in, and tastings have really been shut down, what's the next best opportunity here until things get back to normal? Really our focus turned to online. Sorry, this might be a little bit longer answer but to get to it I just want to give a little bit background. We did a bar attender contest because all the bars were basically shut down. We provided the bartenders with product. We said, "Create your best drink with our products."

We got some phenomenal, phenomenal recipes. We were really excited about it. We started to think about just, "What are people missing?" They are not really excited of walking to stores, places we are not seeing the foot traffic. They weren't going to bars because they were closed, but they wanted to be able to make something at home that, "Where can I get this ingredient, or I got to go to four different places to pick up things?" We looked at it and said, “I think there's a great opportunity here. Just similar to Hello Fresh, or Home Chef and Blue Apron where you're getting your meal kits in a box. Why wouldn't you get a cocktail kit in a box?”

It's delivered through a delivery partner. They provide the spirit, they provide the syrup, they provide any of the [unintelligible [00:28:09] need to go with it as far as whether that's citrus, whether that's bitters, things like that. There is a recipe card that tells you step by step how to make it. It comes with typically 8 to 12 servings. If you're having a party. You can say, "Hey, I've got this really cool cocktail that I want to make." We partnered with different distilleries around Denver and let their bartenders create the drinks. We partnered with Pete's Beverage here in Denver as a delivery partner and a company called Handoff, which is a Drizly like startup where you can just order what you want on the app. We think it's a perfect opportunity for people to stay home and have gourmet cocktails in the backyard.

Matthew: What's it like trying to navigate the distribution? How do you get into retail stores? Was that difficult?

Jonathan: It's very difficult. [chuckles] It is probably one of the more difficult things there is to do. Retail stores, they want to see traction immediately. They are not really interested in taking up shelf space to prove whether or not you can sell a product or not. It's not easy. They've got a lot of products that are coming at them every day. You've got to be the right price points, you've got to have the right marketing, you've got to have the right branding, you've got to have the right messaging. That's even for them to just consider taking a look at you. Then you hope they'll taste it. It's not easy. We have been really exciting and lucky that our products were in Wholefoods, are [unintelligible [00:30:07] in Wholefoods, and getting into some of the liquor stores and the bars and restaurants has been challenging, but we've been doing it. I think our key is getting people to taste the product because once people taste it, I think people typically are like, “Wow, this is really great, this is way better than I was expecting because I've had other CBD stuff and it does doesn't taste that great.” I think it's all a combination of that and it takes a long time. It doesn't happen overnight but as you build relationships and continue to work on social outreach and messaging, I think they're more inclined to try you out.

Matthew: Well, you mentioned a few of the flavors, mango jalapeno, can you talk about some of the other flavors?

Jonathan: Yes, so, we do five main flavors at our retail for our SERPs. We have mango jalapeno, again, whole mangoes, we do a whole dried jalapeno to basically even out the flavor. If you just throw a jalapeno in there, you don't know whether it's going to be hot or whether it's going to be mild and, so if you dry them and get them chopped up and infused that way, you tend to even out the heat. We do a Madagascar vanilla and that's made with whole vanilla beans. We do a ginger-lime like I said, we press that ginger, the whole 100% juice.

We have a lavender lemon. That lavender's grown out in Palisade, and then we do what we call true grenadine. We've actually changed the naming of it to be pomegranate orange blossom. The reason that we did that as most people think of grenadine, they think of cherry. Real grenadine, the true original recipe of grenadine is actually using pomegranates, which is why we do a pomegranate orange blossom. We just saw those as great flavors for making drinks. We actually do a few other flavors and we've just recently introduced our CBD root beer. Our root beer is very, very unique and it's awesome.

We love it. It's made with whole cherry bark and Sarsaparilla and a whole vanilla. We call it a 7-spice root beer and it's really-- we introduced it this summer as a test. It went well. I think we'll be bringing it out here very soon as a full-time product.

Matthew: That's what [unintelligible [00:32:58] Sarsaparilla, is that what you said?

Jonathan: Yes.

Matthew: Because I think I've tasted like, is it Sarsaparilla root or it's like a little piece of-- it looks like mulch or something you put in your mouth? [crosstalk]

Jonathan: Yes, exactly, it looks like mulch or birch, yes.

Matthew: Yes. Okay. Yes, that's an interesting experience the first time you tried that.

Jonathan: Yes. It's-- but it's the-- for us, it's fair, it goes back to whole ingredients and how root beer was originally made. Root beer was very medicinal when it was first brought out. Not that we're looking for our root beer that tastes like medicine, that is not the case, but we wanted to infuse all those ingredients to make that original root beer taste. This is not your-- this is not A&W or it’s Dad’s. [laughs]

Matthew: Yes. Originally, back in the day, people would say that's a tonic, like a health tonic in there, sometimes talking about drinks like this, like Sarsaparilla root tonic and it helps you feel-- it makes your general wellness feels better after consuming it.

Jonathan: Exactly. Again, that all goes back to consuming whole ingredients. You're not going to get that effect from a heavy corn syrup, lead root beer syrup that just has a bunch of artificial flavors and things like that in there. There's a way to make root beer and make it taste like that, but actually utilizing, like I said, barks and leaves and things like that, and that's what we do.

Matthew: Gosh, I really would hope we stop using corn syrup all together for drinks and in treats and stuff like that. I just don't know who wants that. Anybody [unintelligible [00:34:48]. I don’t know why that is.

Jonathan: Yes, I don't either. We use pure cane sugar from our standpoint. Yes, I don't get-- corn syrup must be very cheap or something, but it's the base of so many drinks right now and it really is-- it's pretty gross. [laughs]

Matthew: Well, you were in the Canopy Boulder cannabis accelerator program. Can you talk about that a little bit and your experience there?

Jonathan: Yes, it was a fantastic program. If most people or I should say most of them if people are familiar with the concept of a business accelerator, it really started in the tech industry. You have Techstars and Y Combinator. They basically take small companies with an idea or maybe they're just getting to a prototype or something, they set them up with mentors, they set them up with being able to create models and help really from marketing standpoint and bounce ideas off them. It's sort of a basically like a mini MBA. I was lucky enough that I had already gotten my MBA so now this was really concentrating on getting product to market.

They typically have about 250 applications from all over the world, they pick 10 companies to be a part of their cohort. We were one of those 10 companies last summer. We went in with this idea for them and we said, “Look, we've got this syrup and want to be doing an infused CBD syrup and we also want to bring this [unintelligible [00:36:34]. In 16 weeks, we started and by the end producing cans and putting them on shelves. It was truly a phenomenal experience and truly an accelerated experience

Matthew: It sounds like the accelerator did its job.

Jonathan: Exactly. There's no way we would've been able to do that by ourselves. We would eventually have gotten there, but certainly, it helped, and having those resources helped. They put in an investment, they've got a great opportunity to be pitching in front of different investors and other networks, it was just a fabulous experience. I couldn't tell you how happy we were to be a part of it and to be an alumni and still be working with them on a regular basis to bounce. Eventually, you can call up any time, you can send an email, you can go up to the office, you're really part of a great network.

Matthew: Where are you in the capital-raising process now?

Jonathan: We're basically raising seed right now. Our goal was-- we're raising $750,000. We have taken a little bit different approach but I think it's because we're a CPG and that takes a lot of branding. We look at it a couple of different ways. You can obviously do that by buying as much placement as you can, except it's very, very expensive to build a brand from scratch and just try and place things and put your brand out there. Really where does branding come from? In my opinion, it comes from having people try it and be evangelists and telling people about it. My philosophy is you don't have a brand until somebody walks out of store because your product wasn't on the shelf.

What we wanted to do was raise through a crowdfund. We've actually done that twice now. Our first crowd fundraise was back last fall with a company called Micro Ventures and we raised our goal in 45 days. That was fantastic. We were approached by multiple other crowdfund sites and we actually decided to do another one. We've been very successful there. It's actually about to close in about a week, so there's still opportunity to get in, but we look at that is having now 500 to 1,000 people that not only are trying our product, they're telling people and they're evangelists, they're part of the company, they own-- they're going to own equity from that standpoint.

They want to tell people to use the product and that's what we need right now. It's hard to do that with a couple of salespeople, but you've got a thousand people, we've got some great stuff. We have an investor that came through the crowdfund and he's making all kinds of introductions to distributors and sending out product to people that he knows all over the country who may have some interest in, “Oh, wow, this is really great.” I feel somebody that would be great to distribute this in Illinois or whatever the case might be. It's really interesting. I think at our next round of financing, I do hope to go with the more traditional VC, angel kind of group and bring in then kind of a larger check to allow us now then to start to really build the brand out so that not only the people can see it, try it, but are starting to see it mentioned places and on shelves.

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

Jonathan: I'm an avid reader. I like to read a lot of articles. I like to be very current. I think the book that probably, if I'm thinking about a business book that's really been one of the guiding principles is Good to Great, Jim Collins. It's not necessarily something that is brand new. It's been around for a long time, but just sort of the case studies and the examples of leadership and how companies evolve through the growth process, I think has been something, it's hard, don't get me wrong, to emulate. Especially when you're as small as we are, we try.

Matthew: What is one thing that you believe to be true that most people disagree with you on?

Jonathan: I would say not getting too overly political here, especially in the current times, I actually believe that we're putting ourselves in a lot of stress around education and how people are focused on it. I have two kids. One of them is a sophomore in college. She ended up going to school, was there for three weeks and they said, “All right, we've got a bunch of cases and we're sending everybody home.”

My opinion is there's a lot of people out there that are scared and are worried, and we’re putting kids and teachers and things. I wish they just said, “We're just not going to have school anywhere for the next year. No one is going to fall behind. If you graduated '19 instead of '18-- Just let's get through this without having to put any undue pressure on children and teachers.” I would say it's probably not the most common thing to hear.

I think people really liked the fact that my kids are going back to school, but there's just so many schools that are finding that it's just really difficult, having a model of hybrid where somebody goes two days a week and somebody goes three days a week, and then two weeks online and then you're back in school. It's just so confusing. It just seems like we all could have taken a year and just figured it out, and then come back and started where we left off.

Matthew: Good point. I don't know if the revenue models support that, so that could be the reason.

Jonathan: Maybe, but revenue and education aren't exactly two peas in a pod.

Matthew: Well, you said that in a very nice kind way, you must have had a few CBD beverages before. One other question, Ohio question for you, I've gone to Ohio twice in the last couple of years to check out Cleveland and Columbus. I feel like the center of the country is starting to become cooler again. What do you think?

Jonathan: It's funny because we lived in Ohio. I grew up in Ohio. I grew up in central Ohio. My father's side of the family is all from Ohio and Cleveland. I always will be an Indians and a Browns fan. I think that there's just a lot of Midwest value and just kind of people really are down to earth. I think as people leave and go into school and maybe live on the coast of New York and LA and San Francisco, and then they realize, “Oh, my God, it costs a fortune to live here. The quality of life and I can spend $2 million for a bungalow in Los Angeles or I can spend $200,000 and have a nice big home in Cleveland, Ohio, what am I doing?”

You're seeing a little bit of a renaissance from food and cocktail bars and just things like that happening in some of these Midwest places where you couldn't necessarily get that a few years ago, but now it's way cheaper to open up a restaurant or a bar in Cleveland than it is in San Francisco or in Seattle or DC, and things like that. I think that I'm excited. I love it here. I probably I'm not moving back to Ohio anytime soon because they don't get enough sun, but I'm excited for the folks, all my friends that are there, to be experiencing it.

Matthew: That's true there. I remember it was like a couple of years ago, I think Ohio had like a hundred straight days of no sun.

Jonathan: It’s impossible. It can get pretty depressing, at least for me it was, in the dead of winter where you might not see the sun from Thanksgiving to spring. Don't get me wrong, you get a few of those days, but, yes, the sun makes a huge difference to be but there probably is no better month in Ohio than September, it is absolutely glorious there.

Matthew: You're not kidding about the values there. I was in an area of Cleveland called Hingetown. There was these doctors from the Cleveland clinic that were buying these brownstones that had like a view of the lake there. I couldn't believe, I can't remember how cheap they were, but they did need a little work, but I was thinking, this is still a major metropolitan area, has a lake view. It's like cool coffee shops around.

I just couldn't believe how cheap they're buying them for and gentrification full force. I'm rooting for it because I hope it'd be fun to have some cool cities in the middle of the country and there already are cool, but it's this fun to see like some places in the Midwest people want to go to.

Jonathan: I agree. I think the cool part is that a lot of those places have these older buildings that are total blank canvases. Somebody can come in and say, “I've got a building and I want to turn it into a cool office or I want to create an apartment or condo, or even like the brownstone and really just kind of put the modern touches that you want and you see coming from the design centers that are out there, and applying them to these places that you can pick up for incredible steel and then all of a sudden you've got what would be in a magazine in New York, or like I said, San Francisco or something in Cleveland or in Columbus or Cincinnati or Pittsburgh or Milwaukee.

They're all very similar cities. That is pretty cool. I think those cities are going to see some growth.

Matthew: Jonathan, give out your website and let people know how they can contact you and learn more about Backyard Sodas and everything you're doing

Jonathan: Our site is www.backyardsodas.com, that’s plural, sodas is plural. We've got all of our products on there. First-time customers have an opportunity to utilize a discount code that you can sign up for and it gives you a chance to try some products. We've got all kinds of recipes on the website. We have new recipes that we try and put up monthly. As I mentioned before, everything's about of keeping it simple.

These aren't recipes that are outrageous or I've never heard of that ingredient. They're just really tasty and easy to make, and allow people to kind of play mixologist on their own.

Matthew: I'm toasting you right now virtually you can't see it, but toast you. Great job building this company and everything you're doing. It's really cool. I wanted to try one of these drinks soon and I'll give you my feedback.

Jonathan: We'd love to have you do that. Let me know. Love to have you try out the product and make some of those drinks for you and your friends.

Matthew: Cool. Jonathan, thanks a lot. Thanks for coming on the show. Good luck.

Jonathan: Hey, man, thanks so much. I really appreciate it. It's been great to talk with you, and I look forward to our paths crossing down the road at some point.

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 guest 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 on CannaInsider. Lastly, the hosts 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.

[00:51:56] [END OF AUDIO]

Ep 320 – Cannabis Skincare With THC Is Changing The Market

bridget may green bee botanicals

We’ve seen some hemp skincare products, but now entrepreneurs are developing skin and beauty products with THC above the 0.3% threshold.

Here to tell us about it is Bridget May of Green Bee Botanicals.

Learn more at https://greenbeebotanicals.com 

Key Takeaways:

[1:10] An inside look at Green Bee Botanicals and its mission to revolutionize the beauty and wellness industries

[2:27] Bridget’s background in the biopharmaceutical industry and how she came to start Green Bee Botanicals

[7:37] Why Bridget decided to formulate Green Bee’s products with more than 0.3% THC

[10:14] The most popular products at Green Bee Botanicals

[11:00] Why Green Bee creates “clean” products and how this sets the company apart from other skincare brands

[13:47] How Green Bee’s serums and lotions nourish skin from the inside out

[16:45] What customers are saying about Green Bee’s THC products

[24:04] Why skincare products with THC do not produce a high when applied to the skin

[25:27] Bridget’s advice to entrepreneurs on how to distribute their products

[28:11] What research is saying about CBG and its benefits for the skin

[29:49] Where Bridget sees the cannabis skincare space heading over the next 3-5 years

Click Here to Read Full Transcript

[music]

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. 

We have seen some hemp skincare products but now entrepreneurs are offering cannabis skin and beauty products with THC above the 0.3% threshold. Here to tell us more about it is Bridget May of Green Bee Botanicals.

Bridget, welcome to CannaInsider.

Bridget May: Hi, Matt.

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

Bridget: Well, I'm in San Francisco. I've lived here for many years, but I grew up in San Jose, California which is just about 50 miles south. I'm actually sitting in my bedroom, which is my office these days working from home COVID style. Also being a business owner, I'm not paying for an office space, so this is where I am all the time, mostly [chuckles].

Matthew: Well, smart move. What is Green Bee Botanicals on a high level?

Bridget: Green Bee Botanicals, we make cannabis skincare and topicals for the body. These are products that, yes, like you said, do contain THC, so you have to buy them in a dispensary here in California, and they're all vegan. We make products for the face and the body. We use organic essential oils, organic plants and flowers, and clean full-spectrum cannabis, so that does contain THC as well.

More than just a skincare brand, I didn't really intend to be a beauty brand, but that's what it's turned out to. We're really about wellness and we try to educate people about the benefits of cannabis, and then just the benefits of self-care in general and taking care of yourself, the full body, and not just your face, not just your skin. It's not just about being beautiful from a external point, but beauty from within, so getting enough sleep, number one [chuckles].

Matthew: I would be happy just to settle for the veneer of beauty at this point, Bridget. 

Bridget: We take what we can get.

[laughter]

Matthew: Well, tell us a little bit about your background and journey and how you came to start Green Bee Botanicals and what you were doing before.

Bridget: Yes, I came to it in a roundabout way. I actually studied art in school. I come from a family of artists, and I didn't really know what I wanted to be when I grew up, but art was just an easy way to get a degree oddly enough. I didn't have to write too many papers, but then after I graduated, immediately, I realized that it wasn't how I was going to make a living, or how I would want to try to because I've known so many starving artists in my life.

My second love was always science and the environment, and I really wanted to make a difference in the world, and so I went straight back to school and studied biology and chemistry, emphasizing botany really was where my main focus was. Then out of school from that, with a science degree, the jobs were in the biotech industry, so I started working in pharmaceutical companies. I really loved working in a lab and working with instrumentation.

I did a ton of analytical chemistry for different biotech companies and learned a ton. Going to school is one thing, but on the job training is really where I learned the most. Then in my off times, I also did a lot of volunteering in nurseries with plants because that's actually still where my love was, is with plants. Even though I was having fun in those jobs, it never was my calling to work at a pharmaceutical industry because I feel strongly that the industry is really about making money, and not so much about healing people.

I know there's a lot of good science and medicine going on in Western medicine, but there's a lot missing as far as holistic healing and using plants, using natural remedies, stuff like that. I was always a little bit one foot outside, not really wanting to be there, and then one day I actually was having trouble sleeping. I know we were talking about insomnia earlier and someone recommended cannabis.

There were some new strains out that weren't just 100% THC, there was CBD in them, so they didn't get you quite as high, and they didn't give you that paranoia. Once I learned about CBD, I was mesmerized and did a bunch of studying and read a bunch of scientific papers and started realizing that the cannabis plant just has so much to offer that's not about getting high.

I always thought it was like, "Oh, it's for people with serious illnesses who are dying from cancer et cetera," and that it's super helpful for them as well, but it also is helpful for everyone more on a daily basis and more like a vitamin. There's so much to it. I got so involved in the science that I thought I really wanted to do something in that field. That's just how the impetus started, and then I just started fooling around in my kitchen, making stuff, making salves, and balms. One thing led to another as far as the idea.

I'd make products, give them to my friends, and everyone was like, "Oh, you really should start a business." Around the time when I was doing all these experimentations and starting to think about starting the business, I met Andrea from Sava who, I think introduced you and me, Matt, and she was just starting her business, and so it was just kind of a serendipity.

I met her just as I was launching and she was launching and I got on her menu. It gave me a lot of confidence to keep going, so that's how it started [chuckles]. I don't know if that's--

Matthew: Great connection.

Bridget: A really great connection. That's actually one of the things about this business, this industry that has spurred me on is all the connections I've met, especially women who have introduced me to other people who get me to the next step right when I need it, so I've been really lucky.

Matthew: I mentioned in the intro that we've seen some hemp skincare products, but why go over the 0.3% THC that requires someone to purchase your skincare products in a dispensary? I would think you're probably like, "Well, that limits the audience I can sell to," but gives you something extra. What's the thought process there?

Bridget: Yes, of course. Like I said, when I started, the very first product I made was a massage oil which was for pain and inflammation. Knowing that THC and CBD are both great for pain, and THC is actually especially good for pain, it made sense. The importance to me was getting the product that was going to help people, and because in order to sell THC you're required to sell it in a dispensary, that's where I started.

It does seem strange to start selling skincare products in a dispensary, but that's what my customers were asking for. That's what my accounts were asking for, and because it was a new and exciting product. Because of the science, I just kept thinking, "Well, THC is good for inflammation and as your skin ages, the inflammatory response is part of the issue with aging." It made sense to keep the THC in there. THC and CBD actually work better together because of the entourage or ensemble effect.

The other thing is that THC and CBD are actually really great antioxidants, which is another thing that people are constantly wanting in their skincare products such as vitamin C and vitamin E. The cannabinoids are actually even stronger antioxidants than vitamin C and vitamin E. THC is a very valuable cannabinoid, and I didn't want to water down the products by taking the THC out just because of legal requirement. I'm hoping and hopeful that people are going to start going to the dispensary to get their skincare products.

The other thing which I've learned through being in the industry is that because we have to test our products so thoroughly, anything you're going to buy in a dispensary is going to come with a C of A, it's going to be proven clean, free of pesticides and heavy metals, and that's something you can't say about the cosmetics and beauty products you find in the drug store.

Matthew: Yes, that's a good point. They are rigorously tested and everybody looks for those testing results. Is the massage oil the most popular product then?

Bridget: It's actually our second most popular. Our bestseller is our eye cream, which won second place in the Emerald Cup last year. We're super excited about that.

Matthew: Oh, congratulations, that's great.

Bridget: Thanks [chuckles]. Part of it is it's a very different kind of product and it's an emulsion, a lot of topicals there are just balms or oils. It's a little more difficult to make an emulsion and so it's really nice, this silky moisturizing lotion for under your eyes.

Matthew: I noticed that a lot of skincare products they have ingredients that sound like they're made in a lab and I don't understand them, but then you're saying that your products, "Hey, these are clean and simple ingredients and stuff like that." When people say they're clean, what does that mean? Is that free of the heavy metals like you were saying and pesticides and stuff like that?

Bridget: The clean beauty industry is really booming right now and there's a definition of clean beauty in that. It's free of certain banned chemicals or banned in the European Union. We don't ban hardly anything here in the United States [chuckles], so free of phthalates, free of parabens, free of formaldehyde forming ingredients, stuff that can be androgen disruptors or carcinogens, stuff like that.

That's one side of clean beauty, that's the general notion, but we take it one step further because we have to in the California Cannabis market, we have to test everything for pesticides and heavy metals, et cetera, and processing chemicals. Not only do we say our products don't contain these things that you can see on the label, but we also test for contamination, which is actually really common in products. You'd be surprised how easy it is for lead or pesticides to get into your skincare products.

We test for over a hundred processing chemicals, pesticides, and microbes, and even the most well-intentioned brands on the market may have these lurking in their organic products without even knowing it. I would say, especially in the hemp market, in your general hemp market out there, you should be especially careful of that because hemp [unintelligible [00:13:04] cannabis is a bio-accumulator, which means that it pulls toxins out of the soil and it's actually been used for bioremediation of toxic cleanup land that needs bioremediation.

So, your hemp seed oil or CBD that comes from industrial hemp could very likely have lead or pesticides in it and you wouldn't know it. That's why we test now because we have to in California, but when we do go into the hemp market and make hemp-based products, we will also test everything there as well.

Matthew: With your eye cream and serums, how exactly do those interact with the skin to reduce inflammation and rejuvenate the skin?

Bridget: [clears throat] Cannabis has cannabinoids in it, THC CBD, CBG. Those are some of the most common or popular ones right now, and those interact with the skin. We have receptors all of our body, in our skin as well in the epidermis and the dermis called endocannabinoid receptors, and these receptors are created in the body to interact with our own endocannabinoids that we create in our body and it's part of this whole balancing system that we've just discovered just really recently and it affects every other system in our body.

THC and CBD are analogs for those endocannabinoids that we produce and they interact with those receptors in our body [clears throat] the same way. They help balance pain and inflammation like we were talking about, they balance the hormone response and the oil production in your skin. For example, cell turnover, all these things that need to be constantly regulated in your body, THC and CBD help keep that all in balance.

Plus the fact that they're antioxidants so they're helping fight free radicals and any kind of environmental toxins or sun damage, they'll help remediate or keep that system in balance and keep things healthy.

Matthew: Free radicals, these are the things that shoot at our telomeres, the caps on the end of our DNA, I think-

Bridget: Oh, yes.

Matthew: -and make us a copy of a copy, so that's why someone you haven't seen in seven years looks like a copy of their previous self, less vivid, maybe a little bit less vital because they're moving this direction of becoming a copy of a copy of themselves and those free radicals are the agent for that.

Bridget: Exactly, and in general, they oxidize the cells. They're causing cell damage even on a more basic level, not to mention the DNA, but yes, so all that oxidation over time builds up and causes extrinsic aging that's happening. We're always aging all the time, but because of outside forces that we're fighting against, we age quicker. We always need help with antioxidants [chuckles].

Matthew: When I hear oxidized, I always think of rust, that's the process of [crosstalk]-

Bridget: Exactly. Exactly.

Matthew: -so it's like human rusting.

Bridget: Exactly, slow degradation [laughs].

Matthew: When you give out samples or you have customers come back to you that say, "Hey, I tried Green Bee eye serums," what do they say? What's their feedback to you?

Bridget: Well, people love our products. Number one, I create them to smell and feel really good. I want them to be a great experience. The ingredients I use, they would be great products even without the cannabis, but the cannabis, it's like an extra active ingredient that really gives you a boost of, like I said, antioxidant benefit, but people love them because of their moisturizing benefits.

The eye cream people rave about how it helps with dark circles and puffiness and oddly enough, this is not why I intentionally made the eye cream, but people often say that it helps them with their acne or a pimple. They say they put it on a pimple and then the next day it goes away, which is just like, "What? Oh, wow, okay, great." I'm not going to say this eye cream is for acne, but [chuckles] anecdotally it's helped people with that and one of our favorite accounts society, Jane Sharon, they used to have parties, this is back in the day.

They'd have people coming to the party that everyone put eye cream around one eye and then walk around and then come back in five minutes and then show them the difference between each eye and people would be surprised, they can really see a visible difference between each eye just in that small amount of time. I think that's partially because of the caffeine I put in there which has this depuffing effect that happens pretty instantaneously. Caffeine is also a great antioxidant so it adds to that whole antioxidant blend.

Matthew: Oh, that's interesting. Inflammation seems to be on everybody's mind these days. We talked a little bit about oxidation, but why are we also inflamed? I feel like a pufferfish right now just thinking about it.

Bridget: I know.

Matthew: What is it?

Bridget: Well, inflammation is part of the natural defense system of your body. It's totally necessary for healing and protecting you. It's like your immune system's response to an irritant. It's sending increased blood and immune cells and that's all good if you have an acute injury, you need the inflammation to heal it, and the pain comes there as well to help you protect it.

If you feel pain in your foot because you twisted your ankle, you're going to protect it by not walking on it for a while, but what you're talking about, feeling like a pufferfish is more like chronic inflammation, which is bad and causes all kinds of long-term problems and I frankly think it's our go-go-go society, we don't rest, we're always on our screens, we're just always tired. Maybe we're not eating right.

All those things add up to this chronic systemic inflammation. In the skin, that can cause a rash or acne or psoriasis or rosacea and it's all just this imbalance. Cannabis, actually, can be part of the help to keep that system in balance.

Matthew: I was just reading yesterday that Americans spend half as much on their foods as the French and the Japanese, I think it said the Italians too. I thought, "Oh, that's so sad." When I go over to France, I noticed, first, they really pay attention to their ingredients. It's not uncommon to be at a dinner table and people are talking about the soil that the asparagus are grown in and it comes from this farm and this is how they get their soil quality. That's not a fringe thing, they're really into it.

They eat so slow. You can have a three-hour dinner. The first time I encountered that, I'm like, "I can't believe we're sitting here this long. Am I on candid camera?" It's three hours.

Bridget: [laughs] That sounds lovely.

Matthew: Yes, it's lovely. By the end, you're hungry again. I think about the pace. They don't have any screens going on, the pace of eating and stuff. Us, it's like, "I got to wolf it down and then get over here." That's not good for digestion. Just the contrast between how they do it in France and here. They're eating rich stuff. It's stuff that we call unhealthy. They're eating gobs of cheese, they're having fresh pastries, they're eating a ton of bread and I'm like, "They're not puffy or inflamed at all."

What's the difference? I don't know. That I think could be a great show, just eating with the French. Six months of eating with the French, how will your body composition change.

Bridget: Oh yes, like a Super Size Me kind of thing [laughs]?

Matthew: Yes, the reverse of Super Size Me.

Bridget: Well, I think it's complicated. I think it's not just our food, but it's everything about our society that is stressful. Any stress is going to cause an inflammatory response in the body. I don't know how to fix that, except take more cannabis, I guess that's helpful [chuckles].

Matthew: Some people say playing in the dirt, getting some dirt on your skin is helpful too to get-- I don't know. You probably know more about that than me, getting, I don't know, microbes and stuff [crosstalk]--

Bridget: Oh, the microbiome?

Matthew: Yes.

Bridget: Yes, absolutely. I played in the dirt when I was a kid [chuckles]. You see people now just constantly slathering their children with hand sanitizer. I don't think that is really good for the immune system.

Matthew: Yes. There's a lot of alcohol in there too, drying you out too.

Bridget: I've read horror stories about these contaminated hand sanitizers that have all kinds of toxins in them that are actually killing people, literally killing people, methanol-tainted hand sanitizer. Which reminds me, we are going to make a hand sanitizer someday and it'll be tested, so you know there won't be methanol in it [chuckles].

Matthew: That's good. Then will it also have something in there to hydrate as well, sanitize and hydrate?

Bridget: Yes, I think I'd put aloe in there or something moisturizing. I don't know about CBD. I don't know if that's a useful ingredient for hand sanitizer, but I'd consider it. It might help moisturize.

Matthew: Now, imagine that since your products contain over 0.3% THC, people ask, "Hey, Bridget, will this make me high if I rub this on my skin?" Do you get that question a lot? What do you say?

Bridget: Oh my God, that's the first question everyone asks me. The answer is no. THC is a huge molecule and the skin is a very effective barrier. It's actually quite difficult to get THC through to the blood vessels. There are patches you can get that have skin penetration enhancers in them, but none of our products have that in them. Our products are actually intended to work on the receptors in the epidermis and dermis, the top layers, and they don't penetrate to the blood vessels.

On top of that, even if a tiny bit got through, it would be such a small concentration that it wouldn't have a psychoactive effect. I use myself as a guinea pig. I've slathered these products on myself for years and I'm a super lightweight. I think I told you, I'm a two-milligram girl. Two milligrams of a gummy is going to get me high and I've never gotten high from any of our products.

Matthew: It's difficult to get on retail shelves. You mentioned Andrea from Sava, she has a delivery business, and that was helpful in getting your product on shelves. For people out there listening, that's one of the things that seems to be a huge barrier like, "Even if I create a great product, how do I get it out there? How do I get it distributed? How do I find retailers that want to carry it?” Can you talk a little bit about how you've done that? How many stores are you in right now?

Bridget: We're in about 60 stores throughout California. I don't know if you know this, but in California, a distributor is required by law. Part of the system, because we have a distributor, they actually help us get into accounts. They have relationships with accounts, so part of it is through that system. Although, I don't love it.

Matthew: How do you get top of mind with them? Obviously, they have some preferential treatment maybe or they maybe like some products more or they talk about other products more. How do you make sure that you're doing it the right way?

Bridget: It's so hard, Matt. I swear. The California system is almost impossible with the distribution and being able to communicate directly with accounts is also difficult sometimes. Actually, some of our best accounts have just reached out to us directly through our website, so I feel really lucky that way. Then also, I feel like networking is really important, like going to events. These days, there's online events. We just went to MJ Unpacked.

We actually didn't meet very many buyers there, but we met other people who were really helping us raise money, getting into other States. I think networking is just the way to go, that's how you're going to find the right people. Then we have a great salesperson who also has a lot of connections just because she's been in the industry for so long. She's like an OG kind of person.

She was working in a dispensary doing medical marijuana in California. This has been really helpful. I think it's all about the people. Also, I go door-to-door. I go to dispensaries, I walk in, I say, "Hi, my name is Bridget. I'm from Green Bee Botanicals and here are the products I make." Little by little, it's just very time consuming and it's hard, but I think that's really the way it is making connections through people.

Matthew: We've talked about THC and CBD and a few other cannabinoids, but CBG seems to be gaining popularity or I should say, awareness. Can you talk a little bit about how you think about CBG?

Bridget: Yes, CBG is one of the newer cannabinoids. People are talking about CBN as well. CBN is really good for sleeping. CBG is my new favorite one. I just started reading scientific papers about it. It's a little different than CBD in that it seems to be affecting the sebaceous gland in a different kind of way. CBD, it appears from the science, has an effect of controlling oil production in the face.

Whereas CBG appears to be improving the production of sebum, so encouraging your skin to create its own moisture, to secrete a little bit more oil. This could be really great for super dry skin. That's something I'm really excited about and we're going to be putting that in our newest product that will be in our hemp line that's coming. [inaudible [00:29:31] want to say soon because things take forever, but coming soon.

[laughter] 

Bridget: That will be able to be sold everywhere, not just in a cannabis dispensary. We are expanding into the hemp side as well.

Matthew: When you pull out your crystal ball and look ahead the next three to five years, don't worry if you're wrong but just guess, where do you think it's all heading in the skincare cannabis hemp space? Where's it all going?

Bridget: Well, there's a few things. One is I actually have heard recently a few dispensaries have told me that customers have been coming in asking for skincare products, which I think is really unusual, like that I feel like, "Oh, the tide is turning," that people are actually going to dispensaries to look for their skincare, and especially because of the Clean Beauty Movement, which is really taking off, young people especially who are really concerned about [inaudible [00:30:31].

They're concerned about impurities and contamination in their skincare. They're going to start looking for test results, and knowing that if you buy stuff in a dispensary you're going to get those test results that will show that the product is clean and free of pesticides and heavy metals. That's just one thing. That's like a small crystal ball idea but the other one is that I feel like a stigma, this is related, but the stigma around cannabis is softening, especially as the more science comes out that proves the medicinal and health benefits.

That's going to change the way people think about cannabis in general. It's becoming more about health and wellness than it is about just getting high. Then the last thing is I really hope that on a national level, we get some decriminalization and expungement of people who have been unjustly put in jail for cannabis that is now legal in many States and hopefully we'll have full-on federal legalization.

I think it's about time we truly end the racial discrimination and acknowledge the role that that's had on our country as it relates to the war on drugs and our broken criminal justice system. That's my crystal ball is the future of cannabis is everyone out of jail and maybe some people making money off it [laughs].

Matthew: Bridget, I’d like to ask a few personal development questions to give listeners a sense of who you are as a person. With that, is there a book that's had a big impact on your life or way of thinking that you'd like to share?

Bridget: It's funny. One of the most recent books I read is A Really Good Day by Ayelet Waldman. Have you heard of it?

Matthew: No.

Bridget: Ayelet Waldman is an author, she suffered from some depression and this book, A Really Good Day, is her journal of taking micro-dosed LSD to help with her depression. It not only tells her own personal story of how that helped her, but it also goes into the history of psychedelics and the studies that were done early on and then how they became illegal and became Schedule One drugs and how--

I find that it's just fascinating how these drugs can help with depression, anxiety, PTSD, and how their study was used. Their studies that happened in the 50s and 60s, even the studies that were done by the government was then suppressed and then added to part of the war on drugs. It's totally fascinating. I recommend everyone read it. It will change your mind [chuckles].

Matthew: I keep on hearing like this great discovery and then it's suppressed. I’m like, "What is going on here?"

Bridget: Right. Same with cannabis.

Matthew: [crosstalk] behind the scenes?

Bridget: Exactly. Yes, if you look at our history, the history of our government, it's shocking and kind of depressing that the people in control they're misguided, if not downright corrupt really.

Matthew: Well, what's the most interesting thing going on in your field besides what you're doing with Green Bee?

Bridget: Well, I’m really thrilled to be partnering with The Galley. They're a contract manufacturer for cannabis in Santa Rosa. Getting a manufacturing license in California is a very difficult and expensive process. There's a lot of small brands like myself and others that aren't even on the shelf anymore who through The Galley are going to be able to get back on the shelf. They're helping facilitate that. I think this model is amazing.

Annie Holman who runs the place, she's such a people person and a great connector and has helped me in so many ways. I think that's really exciting and I hope that other brands are able to get back on the shelf. These people are like OGs that made stuff back in medical times and are really great brands, but they just didn't have the capital to get their own license and their own manufacturing space.

Matthew: What's one idea that you believe to be true that very few people agree with you on?

Bridget: [chuckles] I think this is changing, but we touched on this before about holistic health and the food and chronic inflammation, but I really believe in the mind-body connection as far as illness is concerned. The way stress not only causes this inflammation in the body, but it also can cause pain, can cause illness. Even just thinking a thought, a negative thought can actually make pain in your body worse.

I think people don't want to believe that because there's this whole it's not okay to call in sick, or it's okay to call in sick to work but it's not okay to call in and say, “I feel sad today, I can't come in.” [chuckles] It should be the same thing if you've got PTO, right?

Matthew: Yes.

Bridget: I think this is changing, but I just started reading this book called Unlearn Your Pain by Dr. Howard Schubiner. It's another book that's changed my life. It's really about how your emotions and stress can affect how your body feels and that pain is actually produced by the brain, like that notion it's shocking, and I think most people don't believe it. I'm not saying if you cut yourself, the pain it's made by the brain.

I mean, it is made by the brain, but say, for example, you're sitting on the couch and your ankle is twisted and so you can't walk. But a tiger comes into the room, you're going to get up off the couch and run away, and you probably won't feel any pain until you stop running again. That's like the brain has turned that pain off momentarily so that you can save yourself, so it's a defense mechanism.

Then once you stop, then you're like, "Oh, I have to stop because my ankle is broken."

[laughter]

Bridget: Anyway, it's just that whole mind-body connection, I think, is most people are not quite ready to believe that yet. Part of Green Bee Botanical's education and mission is to help people heal themselves in addition to a little help from plants, but a big part of that is self-care and listening to the body and try not to overextend yourself. All that wellness and self-care stuff is more our whole ethos. It's not just about skincare, it's about healing yourself and listening to your body.

Matthew: Well, Bridget, thanks for coming on the show. We really appreciate it, and good luck with everything you have going on. For retailers out there listening or for people that would like to try Green Bee products, how can they find out more about your brand?

Bridget: You can always email me on bridget@greenbeebotanicals.com. For right now, you have to be in the California market to purchase us at licensed cannabis dispensaries in California. We are actually in talks with a woman-owned business in the Midwest about expanding into her State. We're always looking for other States to partner with. If anyone out there is in another State with a manufacturing license, and then in addition, we'll be launching our hemp line really soon, and that will be available everywhere.

We're always committed to test every batch. Even when our products are available in stores across America, they'll come with a C of A, so you can see for sure that there's no pesticides or lead in them.

Matthew: Okay. Good luck with everything, Bridget, and keep us updated.

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Bridget: Thanks, Matt. I appreciate it.

Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher, or whatever app you might be using to listen to the show. Every five-star review helps us to bring the best guests to you. Learn more at cannainsider.com/iTunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at cannainsider.com/trends.

Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at feedback@cannainsider.com. We'd love to hear from you. 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. Emotional 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 and look for another CannaInsider episode soon. Take care. Bye-bye.

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[00:40:51] [END OF AUDIO]

Ep 319 – Cannabis CEO Says Sleep Aids Are the Next Big Thing

peter barsoom 1906

Can you mix together compounds like caffeine and THC to create a thriving new market category? Here to help us answer that question is Peter Barsoom of 1906.

Learn more at https://1906newhighs.com 

Key Takeaways:

[00:48] An inside look at 1906 and its mission to redefine the edibles category with better-tasting, more effective products

[1:28] Peter’s background and how he came to start 1906

[3:19] How cannabis use changed after the Pure Food and Drugs Act of 1906

[4:12] 1906’s unique “drops” and how they’re formulated to meet different needs

[6:29] 1906 versus other wellness experience brands like LucidMood and Dosist

[11:15] Why Midnight Dark Chocolate for Sleep is the number one product at 1906

Editors note: See our top pick for the best CBN oil for sleep

[13:29] How the products at 1906 provide a quicker onset than competing edibles

[16:48] 1906’s plans to create an extended-release formula of Midnight to help consumers not only fall asleep but stay asleep

[20:55] Where Peter sees the cannabis wellness experience category heading in the next 3-5 years

[24:28] Peter’s plans to expand 1906 beyond Colorado and Oklahoma

[25:57] Where 1906 currently is in the capital-raising process

Click Here to Read Full Transcript

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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. Can you mix together compounds like caffeine and THC to create a new market category that consumers will want to adopt? Here to help us answer that question is Peter Barsoom of 1906. Peter, welcome to CannaInsider.

Peter Barsoom: Thank you, Matt. A pleasure to be with you today.

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

Peter: I'm in New York. I'm in SoHo in Manhattan.

Matthew: Okay. What is 1906 on a high level?

Peter: 1906 is one of the leading cannabis edibles company. It's the company that I co-founded back in 2015. Our name comes from the year that the Wiley Act was passed, which effectively started the prohibition of cannabis. Our mission is to bring cannabis back to its pre-prohibition status as a mainstream substance that was used in medicine and by individuals, and also to highlight the failed century of the war on drugs.

Matthew: Okay. Can you share a bit about your background and journey and how you got into the cannabis space and started 1906?

Peter: Yes, absolutely. I had a 20-year career in finance here in New York where I was in a number of leading roles at institutions like American Express, Merrill Lynch, Morgan Stanley, and their parent company, the New York Stock Exchange. I left the industry to found Nuka in 2015 because while working in the financial industry, I felt a yearning for a greater human connection and a personal purpose, and a strong pull to help others live a better life.

When I quit and then started to look at potential entrepreneurial opportunities, cannabis at the time had just been legalized by Washington and Colorado. As I started to dig into the history of the plant, I grew obsessed with its beneficial powers and felt certain that building a business around cannabis was my calling. We started on the belief that cannabis is one of the most versatile plant medicines that's known to man and really could play a big role as a potential alternative to alcohol or pharmaceuticals for people as they look to manage the demands of daily life.

In order to discover the plant's true potential as a daily tool for self-care, we'd have to transform much of the way people were experiencing it, and so that's what led me to the mission which is on a mission to revolutionize self-care, utilizing cannabis and other plant medicines in a very functional way.

Matthew: You mentioned you've got the name from prohibition 1906. How are people using cannabis pre-prohibition?

Peter: Pre-prohibition, you could walk into an apothecary and you would find cannabis compounds and cannabis mixed with other plant medicines. It was part of the arsenal of medical professionals back at the time. We can go back to 1906 or we can go back to hundreds of years even before that where cannabis has been one of the most widely used plant medicines. If you look at the history of how it's been used, people have used it for pain, for anxiety, for sex, for energy, so truly, we've had a relationship with cannabis probably since the beginning of human history.

Matthew: Now, you have six categories of tablets you call drops. What do the six different drops do for you?

Peter: Yes. One of the things, Matt, that we looked at as creating the brand 1906 is around understanding what people's needs are in creating products to meet those needs. In other words, it's not about getting high, it's about feeling a particular way. Relief from pain, help with anxiety, getting a good night's sleep, and so we looked at the major use cases that people use cannabis for, and we created a set of products that meet that specific need by utilizing specific cannabinoid ratios, but also by utilizing other plant medicines in order to give that effect.

For instance, we have Midnight which is for sleep, Genius which is for cognitive focus, Love which is for sex and arousal, Bliss which is for mental well-being and happiness, Chill for anxiety and relaxation, and Go which is for energy.

Matthew: When I take something, let's say Bliss, how much does this actually elicit that experience of Bliss, like how much does that get drawn out?

Peter: If you look at the testimonials and the following that we have, so if you take a look at Bliss, for instance, Bliss uses a plant from South Africa called sceletium tortuosum, also known as Kanna. That has a serotonin-boosting aspect to it. Similar to how SSRIs which are widely used as antidepressants give you that overall feeling of happiness because it floods your system with serotonin, sceletium works the same way but in a more natural fashion. We've had thousands of people tell us that they either use it in addition to or in replace of other medications that they've been using as antidepressants.

Matthew: We've had the founders of Lucid Mood and the dosist pen on the show, and they create products also that dial in the mood. This genre is becoming really popular. How would you compare and contrast what you're doing with, let's say, like Lucid Mood or dosist?

Peter: I love what Lucid Mood and dosist are doing because it's a recognition that what consumers and patients are looking for are specific states. I want to feel a particular way, I don't want to just feel a generic high. I would say two big differences between us and Lucid Mood and dosist, one is the category. They've been focused on smokables, whereas we focused on non-smokeables, edibles, and ingestibles because we believe that's especially in light of the vaping crisis and COVID which is a respiratory disease, I don't think we need to negatively impact our lungs anymore.

The second way in which we're different from them is that we utilize other plant medicines in order to deliver the effect. Lucid Mood and dosist focus on the terpene profile. The fact is that the science behind cannabinoids and terpenes is really, really premature to be able to tell us that this combination of terpenes will give you energy. We have some good guesses, but there really is very little science.

We're a science-driven company, and we utilize all of the clinical research on other plant medicines and on supplements that have been done across the world in order to deliver a specific effect. As an example, our Go product is a combination of four stimulants that have been well researched across the globe that would give you a clean boost of energy starting with caffeine, which is one of the best central nervous stimulants, and then we pair that with other plant medicines, L-theanine, theobromine, and alpinia galanga, and all those have been well studied, so we can deliver a very specific experience that is around giving you a boost of energy based upon real science.

Matthew: When you take Go, what kind of activities do you typically like to associate with that to give people a sense of real-world combination?

Peter: Think of it as a replacement for a Monster Energy or a Red Bull, or a 5-hour energy drink, except that first, you don't have all the sugar that's typically associated with those energy drinks. What we've done there is caffeine is the best central nervous stimulant that we have. It is the most popular drug globally, but caffeine also has some negative side effects for it, and so we've paired three other plant medicines with caffeine in order to mitigate those side effects.

One, for instance, is the jitteriness that sometimes you get with caffeine. When paired with L-theanine in a specific ratio, that eliminates that jitteriness. The second issue with caffeine is the crash. You get this boost, but an hour, two hours later, all of a sudden, you feel totally depleted and you're crashing. We utilize alpinia galanga which is a plant that works on your adenosine receptors to keep the caffeine in your system longer so you don't experience that same crash and you have a longer duration of energy.

The third side effect of caffeine is accelerated heart rate and blood pressure. Theobromine is an amazing natural vessel dilator that lowers your blood pressure and increases blood flow to your brain and body. What does all that do? That gives you a boost of sustained energy so that you feel like you can push your mind and your body further. Then, the low dose of THC and CBD allows you to be in a much more relaxed mental state, although you may be stimulated. For instance, we have a strong following with athletes. We've got numerous testimonials from people who will say things like, "I just ran a 6K in 5k time and I feel as great as ever," for instance.

Matthew: Which of the products is the most popular?

Peter: Midnight is the most popular. That is the number one selling sleep aid in Colorado, and it's our number one selling product. The lack of sleep, Matt, it's of major epidemic proportions. 70% of Americans today say that they haven't had at least one night of difficulty sleeping in their most recent history. We also know that the lack of sleep is one of the biggest contributors to poor health outcomes.

If there's one thing you could do to improve health outcomes, it's to give people an extra hour of sleep. That's the situation that most of America is in, that we don't get enough good quality sleep. Then, secondly, many of the products that are out there to help us sleep either don't work or have a lot of negative side effects, whether that be Ambien, melatonin, or chamomile tea.

People are looking for something to help them get that high quality, easy, restful night of sleep and wake up feeling fresh. That's what Midnight does so well, is it gets you to sleep fast in under 20 minutes, it promotes a healthful architecture of sleep, so you actually get REM sleep and all the different stages of sleep, and you wake up feeling really refreshed and able to get on with your day.

Matthew: Do people take it typically like an hour before they go to sleep or what's the time frame?

Peter: Typically 20 to 30 minutes. We always tell people get ready for bed, this is fast-acting, because if you have trouble sleeping, you don't want to wait an hour to fall asleep. It's like I either have chronic insomnia or acute insomnia or whatever it might be. When you want to sleep, you want to sleep now. We've engineered Midnight to deliver on that. Typically, like I said, it's within 20 minutes that you are fast asleep in a beautiful, dreamy place.

Matthew: That's great. That's pretty fast onset. Can you talk a little bit about how you look at onset and how you make that happen quickly?

Peter: When we started the company, Matt, we set about a number of non-negotiables as we looked at particularly the edibles market back in 2015. It's still largely true today. We saw three major problems with the edibles. One is that you have no idea how it's going to make you feel. At best, these products are labeled indica-sativa hybrid, which most of us know those distinctions are not very meaningful or helpful.

Second is that it takes way too much time to feel the effects. I'm a New Yorker. I believe impatience is a virtue, and we shouldn't have to wait 60-90 minutes for anything to kick in. Third is the poor quality ingredients and bad taste that's associated with many edibles, high fructose corn syrup, lots of sugar, or just things that taste bad. 1906, foundationally, is all of our products have to satisfy all three of those demands.

It has to give you a specific effect, it has to be fast-acting, and it has to be as good tasting and as healthy as possible. The fast-acting areas is one of the areas that we have really innovated since our launch. There were no fast-acting edibles on the market back in 2015. I would venture to say that there are still, unfortunately, very few fast-acting edibles on the market today. We have a patented lipid micro-encapsulation process that we utilize in order to allow you to feel the effects in under 20 minutes.

The way that works is it joins the cannabinoids with a medium-chain fatty acid. I think of the medium-chain fatty acid as like a bullet train with the THC and CBD as passengers. When you ingest, it allows it to go through your intestinal system much faster. You get a faster effect and you get higher bioavailability. Our five milligrams typically feels like a seven or eight milligram because it bypasses the gut, gets into your bloodstream and into your brain faster than any other edible in the world.

Matthew: That makes sense, which our liver recognizes that medium-chain triglyceride oil. It allows it to go through. It's like a Trojan horse that lets the cannabinoids in.

Peter: Exactly. It even bypasses much of the liver. It just goes through the intestinal wall. That's part of the problem with other edibles, is that it doesn't get into your bloodstream until it gets processed by the liver. This allows you to bypass the liver, permeate the intestinal wall, like you said, I love the Trojan horse analogy, and you start to feel it quickly.

Matthew: You mentioned that the most popular product is the sleep product and it helps you get to sleep 20, 30 minutes before you want to. You take a tablet. What about staying asleep? I know that's a stubborn problem for a lot of people. What can you tell us there? Is there anything, any hope?

Peter: Yes, that's a really good observation, Matt. There are generally two types of people. There are people who have trouble falling asleep and there are people who have trouble staying asleep. There are some people who have trouble with both. Midnight is superb at solving the first problem of getting you to sleep quickly. We are in development right now with an extended-release version of Midnight that would kick in a few hours after you fall asleep to help you sustain your sleep.

What's amazing is that there are very few products, pharmaceutical, definitely none in cannabis, supplements that actually specifically address this problem of helping you stay asleep through the night. We expect to launch that product in the coming months. We're currently in a trial right now getting feedback from consumers. As soon as we get through that trial period, we'll be launching that market. We think there will be millions of consumers around the US and around the globe who are clamoring for help staying asleep.

Matthew: Gosh, this market is really just by itself, just the sleep market, is going to be enormous. It probably already is. Do you know of any customers that use something like an Oura Ring or any kind of quantified self-technology in conjunction with the sleep product to optimize their sleep?

Peter: We were about to launch a sleep study that would actually be using a Fitbit that would be measuring sleep onset, sleep duration, sleep architecture, and how you feel when you wake up in the morning. This was a blind clinical study that would have recruited participants in Colorado to take Midnight. Their Fitbit was connected to servers that would automatically upload data on sleep performance. Every day, they'd be filling out a questionnaire to see how well they slept for more subjective measures.

We hired one of the leading pharmacologists in the world to design the study, a doctor by the name of Dr. Ethan Russo, ready to go out with the study. Part of what you need to do in any clinical study is go through what's an Institutional Review Board, an IRB. Because of the federal prohibition on cannabis and on the challenges of cannabis research, the IRB didn't approve us to go forward with our study. That's really unfortunate.

We're still fighting it because we believe that's the wrong approach and that we have to open this market up to research. What we have gotten is more anecdotal evidence from folks who will send us their Fitbit or send us their Oura Ring reports that show, in fact, that they're getting more sleep and they're getting higher quality, more efficient sleep on Midnight.

That's our theory. Like I said, we've gotten a lot of anecdotal data, and as soon as we can get an IRB approval, we'll be one of the first companies to do serious clinical research using a widely available cannabis product like Midnight in a scientific way.

Matthew: Where do you think this market is all headed in 3 to 5 years in terms of using cannabis and other natural products to get this specific emotion or outcome dialed in at a predictable way?

Peter: This is what people want. What they really want are low-dose cannabis products that are not damaging to your lungs and that meet the specific needs of what we have. If COVID has shown us anything, it's that, one, there is an incredible amount of increased anxiety in today's world. We've seen that in prescription drugs going up for antidepressants, antianxiety meds, sleep meds.

It's through the charts how much more prescriptions we've seen in the last couple of months due to COVID. People want something to help them manage daily life better. Cannabis could be part of that toolkit, but we have to continue to innovate as an industry to create better and better products for people that deliver on that. The direction is going to be in more microdose, low-dose products that help do that.

Especially as we have more seniors, more women, and others coming into this market, they're not looking to get blasted, they're not looking to get really high or get out of control. They're looking for just a little bit of help.

Matthew: What's the suggested retail price for the drops?

Peter: It's about $25, and that gets you 20 nights worth of sleep. For a little more than a dollar a day, you can have a great night's sleep.

Matthew: You've got a good distribution system set up it seems in a few states at least. What's it been like to having started a new brand and then get distribution? Is that difficult, or can you share a little bit about your journey there and how you made that happen?

Peter: It's been a very humbling, great story. We launched in Oklahoma on September 1st. This is our first new market outside of Colorado. We have a partnership with an amazing company, Stash House Distribution, and 24K Labs in Oklahoma as local operators. They've got a 10-person sales team with a wide distribution across the state. In literally just the last two weeks, we've gotten into 75 dispensaries so far.

We've had a massive uptake from consumers because this is what they're looking for. We've really been very fortunate at how Oklahomans have embraced 1906 in the last couple of weeks. Part of it is having a really good distribution partner. The stars aligned for us and I would say for Oklahoma patients that they now have access to one of the best cannabis products in the market.

Matthew: You're in Colorado and Oklahoma. Any other expansion plans?

Peter: Massachusetts, Maryland are up next, and we'll be continuing to expand it into other markets. Our strategy, unlike many other cannabis brands, is to focus eastward from where we are. A lot of brands are pushing into California or are already in California or started in California. Our focus has been on East Coast markets where our stated goal is to be the number one brand east of the Mississippi.

Matthew: Population density, that's where all the people are.

Peter: Population density and also the lack of available products. If you are in California, you not only have great legal products, but as you know, there is still a lot of illicit usage there. There are some great products. It may not be tested as well, but people feel like they're getting their needs met in the illicit market. In the Northeast, it's a bit of a different situation because we haven't had a legacy of dispensaries or easy accessibility to a lot of products there. I think we can be more successful on the East Coast, and I think there is frankly more demand for the legal market to provide great products here.

Matthew: Where are you in the capital-raising process? Did you raise capital or can you tell us more details there?

Peter: In October last year, we closed on an $18-million round of financing. We've been very fortunate to have an amazing group of investors from institutional investors, family offices, high net worth individuals that have supported 1906 over the years. This is a capital intensive business and we're constantly raising money. We're currently raising another round. We're about halfway through that round of financing right now and it's been very well received by investors. Our hope is that we close that round around the end of September or so.

Matthew: Are most investors in the Tri-state area there?

Peter: I'd say a disproportionate amount is in the Tri-state area. That probably reflects the fact that our focus is eastward reflects my personal networks having been in New York for my adult life, and then, frankly, there's a lot of capital here in the Tri-state area.

Matthew: [inaudible 00:27:15]. Peter, I'd like to ask a few personal development questions to help listeners get a better sense of who you are as a person. With that, is there a book that's had a big impact on your life or your way of thinking that you'd like to share?

Peter: I recently read a book on the Netflix from-- I don't read many business books, maybe one to two a year, but I came across a Netflix book on culture which really impacted the way I think about things. The gist of the Netflix book on culture was about how to create a culture where people can take risks, that people are performing at their best, and unleashing that inherent talent that you have in your employees. That's helped me evolve my thinking about our culture and our employees in a big way.

Matthew: Besides what you're doing with your brand, what do you think the most interesting thing going on in the cannabis ecosystem is?

Peter: One of the most interesting things is the increased focus on social justice. The protests of the summer and the Black Lives Matter Movement have hopefully continued to raise our awareness about institutional racism, one, and, secondly, how much the drug war was tied into institutional racism as well, that it really was a war not on drugs, it was a war on people, and particularly Brown and Black people and communities of color.

The amount of money and resources that have been wasted on prohibition around this plant and the number of lives that have been destroyed by that unjust war on racism, we still have a long way to go. Unfortunately, recently, as you may have heard, Florida, and this is unbelievable that we're in this area, but the Florida voters overwhelmingly voted a few years ago to allow felons to vote. Florida has one of the worst histories of felony disenfranchisement.

If you're a felon and even if you served your sentence, you are deprived of the right to vote. A couple of years ago, Florida voters voted overwhelmingly to reinstate that. The Republican-led legislature and the governor decided to require that if you want to vote, you have to satisfy all of your back fines and everything else before you actually can get the right to vote. That is another form of poll tax, unfortunately.

The courts did not agree with that interpretation and allowed the Florida legislature's actions to stand. Today, we have 800,000 plus felons who are out of jail, who have satisfied and fulfilled their sentence, but they still can't vote today. Two-thirds of that 800,000 are people of color. In order to continue to get change, we as a community, as voters of people, as society have to stand up and say, "This is wrong."

Matt: Final question. Many are calling for the end of New York City. You mentioned you live in SoHo which is a fun, cool neighborhood. What are your thoughts? Is it going to bounce back? If so, when? How will it look when it does bounce back or if it doesn't? What are your thoughts there?

Peter: How many people have called the demise of New York? Whether it be the end of the great depression or whether it be after 9/11, people have been calling the end of New York since probably the beginning of New York. There is a strong human need that we have for connection, for community, and for diversity. That's what keeps New York alive. New York will change. SoHo artists left SoHo years ago. Maybe this moment in New York will help to do a reset and will bring in artists back and new blood back.

Maybe we need to see rents decreased a little bit to make New York City affordable. I'm a diehard lover of New York. New York will emerge hopefully stronger and better. I was out last night. We've got outdoor dining, so there's no indoor dining allowed in New York. We have outdoor dining. It was a beautiful evening and it felt like I was in a wonderful European city with people sitting outside and having a nice meal. Car traffic wasn't around.

We have a moment in our life right now, and who knows if we'll ever get this moment again in our lifetimes, to ask ourselves, those of us who live in an urban environment, how do we want life to be here in our urban jungle and consciously create that vision?

Matt: Do you feel like your boots on the grounds sense is that the leaders are responding? Are they responding and adapting to try to make this a successful effort or did it seem a little bit behind?

Peter: As with most politicians, they're a little bit behind. It's the power of people and the power of voting and the power of our voices, that's what's going to bring about change.

Matt: Peter, thanks so much for coming on the show and educating us. This is a really interesting thing you're doing here with your 1906 brand. Tell listeners how they can find the brand. Also, for accredited investors that are interested in learning more about investing, how can they do that?

Peter: Thank you, Matt, for the opportunity to share this with your listeners. I encourage you all, you can follow our brand on Instagram. It's at 1906 New Highs, N-E-W H-I-G-H-S. Our website is 1906newhighs.com. If you're interested in learning more and participating on this journey with us and joining our investor team, feel free to email me directly, or if any of our listeners want to email me directly, I'm peter@1906newhighs.com.

Matt: Peter, thanks so much for coming on the show. We really appreciate it. Keep us updated on everything you have going on.

Peter: Thank you, Matt. It's really been a pleasure and an honor to be a part of your show. I'd love to be on again in the future. If there's anything that I can be of help, please let me know.

Matt: 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 here. 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 or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions. Final disclosure to see if you're still paying attention, this little whistle or 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 episodes soon. Take care. Bye-bye.

Ep 318 – How To Advertise Your Cannabis Brand Legally

chad bronstein fyllo

Advertising cannabis is banned in most of the US, so how can a cannabis company get the word out? Here to help us find solutions to this problem is Chad Bronstein of Fyllo.

Learn more at https://hellofyllo.com 

Key Takeaways:

[00:56] An inside look at Fyllo, the world’s first single-solution regulatory technology for cannabis

[2:25] Chad’s background and how he came to start Fyllo

[3:53] How Fyllo’s data ecosystem helps cannabis companies streamline regulatory tasks and target customers legally

[9:51] What different cannabis companies can expect when using Fyllo

[13:07] Success stories Chad has seen so far and how clients are using Fyllo to advance their companies

[15:04] Chad’s advice on how to determine a good marketing budget for your brand

[16:34] How Fyllo provides direct access to cannabis audience data through the Lotame, the world’s largest marketplace for second- and third-party data

[19:35] Requirements companies must meet before working with Fyllo, including becoming CCPA compliant

[20:25] Chad’s tips on how to build a dynamite marketing team for up-and-coming cannabis brands

[23:55] Where Chad sees customer acquisition and brand awareness evolving in cannabis over the next 3-5 years

Click Here to Read Full Transcript

[background music]

Matthew: Hi, I'm Matthew Kind. Every Monday, look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at CannaInsider.com. That's C-A-N-N-A Insider dot com. Now, here's your program.

Advertising your cannabis company is banned in most of the US, so how in the world does a cannabis company get the word out? Word-of-mouth is great but can be slow. Here to help us find solutions to problems like this is Chad Bronstein of Fyllo. Chad, welcome to CannaInsider.

Chad: Thank you, Matt, for having me. I'm really excited to be on CannaInsider with you.

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

Chad: Today, I'm out in Oak Brook, Illinois, where I reside, so my new home office.

Matthew: Cool.

Chad: Chicago. Yes.

Matthew: Cool. What is Fyllo besides a thin, Greek dough? Can you tell us what Fyllo is at a high level?

Chad: Yes, I'll tell you a backstory if you don't mind.

Matthew: Sure.

Chad: When I started this company, I brought together a lot of people that I wanted to start the company with and one of our co-founders, his name is Aristotle. He's a Greek guy, obviously, you can get by Aristotle, the name. We were at an off-site when we first started just thinking of names. Fyllo, people think of it as a dough but it actually means friend, family and has a core-root of leaf. We figured it, incorporated everything we want to be which is working with people that we really like to work with, as well as starting off from cannabis, so that's how Fyllo came about.

Matthew: Okay. What is it that Fyllo does? Can you just give us your quick elevator pitch? When you meet somebody, what do you tell them?

Chad: Yes, so Fyllo has a couple of different audiences but what I say is Fyllo, its core is around compliance that evolves into other areas which is advertising. We work with both brands, agencies. Then, on the other side, we work with law firms, as well as GCs and compliance departments, and companies that either use us for our understanding of hyper-regulatory law or if you're a brand, really putting together the right strategy. Like you said in the beginning, word-of-mouth is great but how do you put together a strategy that advertises to the masses and that's what Fyllo does.

Matthew: Yes, those are some sticky problems here and we'll get into more of what Fyllo does but give us a little sense of your background and journey, and how you came to start Fyllo with Aristotle.

Chad: Yes, I founded Fyllo a year and four months ago. Prior to that, I was the CRO of a company called Amobee which is in the marketing technology. I was there for about eight years, started from the ground up and we had a lot of fun, built it to a very sizeable company. I was just at a crossroads at the time as, "Do I want to go be an entrepreneur again or continue in the corporate environment?"

I saw cannabis being a huge opportunity so I started thinking of that idea probably in 2019 and around, call it January timeframe, and then started putting together the actual story and the vision, and went out to Aristotle, Erik Shani, and some other people and said, "Hey, I'm going to start this company and cannabis would love for you to be a part of it." They jumped on blindfolded and we went full-blow at it. Now, here we are at this point a year and a half later, we've got 75 employees and we have a technology, like I said, that encompasses a lot of things, but my backstory really is in brand and marketing before I jumped into this over the past 15 years.

Matthew: Let's get into a specific example here. Let's say I'm a cannabis retailer or a cannabis brand and as we were mentioning before, I wanted to get the word out, word-of-mouth is slow, I know I've got a great product. If you were sitting down with me, having a cup of coffee, say, "Okay, here's what you need to do. Here's how Fyllo can help."

Chad: Yes, but first, you really want to understand the cannabis retailer. Obviously, their footprint in terms of, if you have this 10-mile radius, but let's just say with multiple other stores in different states, just really understand the brand equity and like who knows about them and what the audience thinks of them, right? Then we would really go from there, our team would put together a strategy based off of their footprint and what footprint they're trying to accomplish in terms of scale and we build a very targeted strategy within that 10-mile radius of who their consumers are.

How do we reach those consumers? We can reach them not just in-- Back a year ago, billboards were the only way you can really reach a cannabis consumer. I think that's how most people use it. You go to California, you saw a billboard every two steps you walked. In this scenario, we're really putting together a hyper-targeted strategy to drive consumers into the store but using more of a digital side of it versus a billboard-approach that was cannabis a year ago. Does that make sense?

Matthew: Yes, it makes sense. What do the specifics look like, then? We have that 10-mile radius, it's more than billboards, it's digitals. What else is it like? How does it actually manifest?

Chad: Really, when you're a brand and you have an audience, and obviously, we know that your audience is 21 and up if it's a THC audience. Is it a [unintelligible [00:05:35] audience you're trying to target? Is it the medical audience? What we've done over the past year is, really, we've developed a data ecosystem and that's something you've probably seen lately that we're obviously pushing it quite a bit out nationally, but we've developed a data ecosystem. If you are called Aristotle, which you brought up earlier, you're an entrepreneur, you're doing all these things and you are in the same radius every day because of the Coronavirus.

Now, you're working from home, you're going to the local grassroots dispensary, but what's really important is we've created a data ecosystem that's not just targeting cannabis brands, but really focused on the mainstream brands as well, because if you're a mainstream brand, let's call it McDonald's, and you know that Aristotle smoked weed or bought weed at a local grassroots dispensary. If you dayparted Aristotle, there's a good shot that you could actually target Aristotle with what is in market for a Big Mac, let's call it.

There's a lot of different ways you can use different examples but we're really evolving an industry to target both correlated data from both cannabis and mainstream. Does that make sense?

Matthew: Yes.

Chad: What I'm getting at is if you are a dispensary and you have a target list of customers, we can actually use our data as well to generate new customers into your dispensaries and, like I said before, that's using foot traffic studies, data, and inventory, proper advertising inventory sources, which we all have quite a bit of background in, to really bring that whole marketing plan together to drive that return on ad spend that they're looking for which is sales.

Matthew: How do you measure that sale? Is there a conversion marker of some kind? How does that work?

Chad: There's plenty of different methods. It just depends on what system the dispenser is using to actually track it. The good news is it's even easier to track in this day and age because most people go online now and do pre-orders before they actually go to the store, right? For us, it's very easy to track and I think, before Coronavirus happened, everyone was obviously trying to understand how would it impact cannabis but we are fortunate in a sense that it has impacted cannabis across the board in a positive way, which is obviously not for a lot of other vertical [unintelligible [00:08:09] extremely upsetting. From the cannabis perspective, it has helped the vertical across the board.

Matthew: Gosh, this is crazy. You can't really advertise on Facebook, I don't think, or YouTube, but there are third-party sites. Let's say you go to some website to learn about a strain or something like that, and the next thing you know, you see an ad for a local dispensary that just happens to be a couple of miles away from you. That's allowable, right? That's not forbidden [unintelligible [00:08:42].

Chad: Right. Actually, not to name names because, obviously, people get upset but in the sense of publishers, all of your mainstream publishers are getting more. Part of what we set out to do, if you look at my team, I brought on Nicole Cosby who was the head of Publicis for Precision which was working with all Fortune 100 brands on establishing partnerships and standards for billions of dollars worth of advertising.

Then, Jessica Kerwin is on her team, ran the publisher business at Publicis as well, and what we wanted to do when we set off to do this, which is really important from our backstory, was to really go and create more credibility and make it more mainstream and get people to understand the value of a cannabis consumer, and I think we've done that very successfully. We've gotten a lot of mainstream publications to actually accept THC, as well as CBD advertising prior the year, your typical places would be where you would guess which is cannabis inventory, so like a site that's focused on cannabis only and hasn't have any mainstream population. Does that make sense?

Matthew: Yes, yes. Now, what if I'm listening right now and I'm a dabbing brand and I want to get the word out about my brand of oils or shatter wax, whatever it might be, and how would I do that? How can I create an audience that's just of dabbers of let's say 25 to 35-year-old males, is there a way to do that?

Chad: There is a way to do that. It's a great question. Back to what I was referring to earlier, is we developed the data ecosystem, partnering with a lot of the POS e-com retail loyalty providers, where we actually have data, whether you're a dabber, edible, flower, Sativa, Indica, we have a lot of different segmentations that we can build.

What we would do is we'd start building an audience based off of what we think, what our audience, what our data's telling us what dabbers do as well as how do we accentuate that model look like audiences that are also dabbers. We build a whole segmentation around the dabbing audience to target dabbers. Does that make sense? You have a lot of data from that standpoint, so you start off with infused segment around dabbing and then you accentuate it with more scale and infuse it and enrich it so you have a much larger dabbing audience.

Matthew: That makes sense. I would think then when prohibition ends nationally, there'll be a ton of expanded opportunities and probably room for national brands more. We have brands that go state by state and license their name and so forth, but do you see that as really when you can use advertising to create kind of like a Coca Cola of a cannabis brand? Is that kind of the ignition for takeoff then?

Chad: I think it depends, like from the data perspective, we think we have initiative to take off because brands can advertise targeting cannabis consumers. They do not have to raise their hand and say, hey, I'm going to run a creative campaign with a person smoking a blunt on a piece of creative. They can run a campaign for a mainstream brand, knowing that-- I think what Fyllo has set out to do is really to make sure that people understand cannabis audiences are also your normal audience of your consumers.

What we're showing is different behaviors that you may not be thinking about and abilities to target a consumer based off of some of the data that we have around a cannabis consumer. Like I said, if I go to the local dispensary, Chad Bronstein and I have a lot of different data that would say I'm maybe not a smoker, there's just a new data set that you learned about me that you didn't know before.

Our core focus is to reach a consumer in a different mindset than you used to reaching them and procreating scale for not just cannabis brands, but for mainstream brands because of the value of these consumers today, and that there's this so much reach for a brand to target in the cannabis space because technically 98.6% of the US has the ability to buy some sort of cannabis, whether it's CBD or THC.

Matthew: You're looking at a lot of data, you're working with a lot of customers. Is there an example without naming names of one that really gets it, that is getting good results that you could talk about?

Chad: I can't name names, but we work with quite a bit of them in the space, both from cannabis and now having brands actually testing the data, but I, unfortunately, can't name names.

Matthew: Can you tell us anything without naming names about how they're [inaudible [00:13:36]?

Chad: Of course, it's all different use cases. If you're a law firm, you'll be using our platform right now to understand licensing, taxation, zoning, et cetera and you'd be using the platform specifically for that perspective and when we launched our raise there were law firms that publicly gave us permission to use them like a Shepherd Mullins or DLA Piper, which use our platform currently. From the other standpoint, if you are a brand, call it a cannabis company, there's a couple of different aspects you can use this from.

If you're a CBD brand, you'd want to be, we've had a lot of success with the brand that we have driven a ton of DTC sales for. Their core focus is driving sales online. They use us to obviously find the proper inventory matched with the proper data, which is in our ecosystem. We've had a successful relationship with this brand for seven months and have been able to drive them incremental growth month over month.

Then we have your dispensaries that are in Michigan or Ohio or Illinois, California, that their core purpose and goal is to drive more sales and incremental sales month over month and like we talked about earlier in this podcast is really focused on that hyper-local strategy and finding the right consumer that's going to purchase, and so driving them down the funnel and driving incremental sales lifts. Suspensory is our core focus for those brands.

Matthew: A lot of brands and retailers, they raise money to start their business and when they're breaking down their budgets, they have a marketing budget. How much should a dispensary or a brand allocate for this type of thing, if that's reasonable? I think a lot of, to say individual cannabis retailers spend, let's say between three and seven K a month on just Leafly alone, to get foot traffic in the door, what should they be allocating for something about like working with Fyllo, just so they can get an idea.

Chad: It's a sliding scale and it depends on the size of the brand. If you look at [unintelligible [00:15:49] and where they're headed to the size of them, they need to be looking at it more like you mentioned earlier is like what it like MillerCoors or a Anheuser Busch spend at full scale of building their sizable brands that they've built. They should be more looking at the future for that for them, but for a local dispensary, it's a sliding scale.

It depends on the size and the sales before I'd give them a recommendation because we've learned very quickly in this space that each group is an anomaly and they have their own different strategies. It'd be hard for me to give an exact amount just because we've learned so quickly that everyone's so much so different in this space compared to my old background.

Matthew: Talk a little bit about Lotame solutions, and is that what you were talking about before with the direct to consumer CBD brands?

Chad: Yes, we announced a partnership with both Lotame and IOTA, where we syndicated a lot of our audiences to multiple different platforms. What that means for us now is that if you're a major demand DSP, we call it, which I come from an MOB and you want to go buy a CBD segment or a THC segment from Fyllo, you can plug into quite a bit of the multitude of different platforms and you would see Fyllo's data available, and then you can purchase that data in real-time.

I want to target Matt, obviously PI limitation is scrubbed with partnerships, so call it one, two, three, because I know he's a consumer of this brand and also he would be a consumer of call it a QSR brand. They would buy that data in their platform and target that data within their advertising campaigns. Does that make sense? Lotame and IOTA allow us to do that.

Matthew: That makes sense. It sounds like extending an existing profile for a prospect to a larger geography or something, a larger digital geography perhaps, is that right?

Chad: It's basically extending it to everybody in the mainstream landscape that buys data on behalf of brands, Fyllo has now made their data accessible to the mainstream marketplace at scale.

Matthew: This is really kind of opaque for people outside of this industry to understand all that's going on. There's all these invisible marketing efforts going on and math and conversions and databases and it makes sense once you have someone explain it to you but it doesn't necessarily make sense before that. It's interesting to hear how this invisible world kind of works and what can be done and how it's measured and so forth.

Chad: I'd say for us, we brought in the right people for the past year and a half and you can imagine we've had quite a bit of challenges but we've executed, I think, seamlessly in this specific area because we knew what we were walking into and like you said, it takes a lot of coming from our backgrounds to really understand how to set this kind of business up, and also educate the marketplace both from the cannabis perspective and the mainstream.

You're educating two different people, you're educating like we said, the cannabis vertical, but also the mainstream vertical on this data and it takes a lot of work. I would agree it's, once you walk through it, it's pretty easy to understand, but at first, you may not understand all the behind the scenes work that we've been doing over the past year and a half.

Matthew: Are there any cannabis companies that you won't work with or any ads that aren't allowed at all?

Chad: Everyone that we work with has to be CCPA compliant, meaning they have to define there's specific privacy policies that you have to work with. If they follow those guidelines, then we'll work with them from a data perspective. From a brand perspective, we work with all brands that want to market, but we have to make sure that if we take on an opportunity that we know we can succeed on it and just managing those brands expectations, because a lot of times we're educating people on something totally new. We want to make sure that we are properly setting them up for success. If we don't feel like we can do that, then obviously we'd walk away from that opportunity.

Matthew: I think there's a lot of people that have been successful in other business domains that come into cannabis, they raise capital, they get licenses, and so forth, but they may not have the skill set of a marketing team that's as deep as what you're talking about. If you and I were just sitting over coffee and I'm starting a brand or a dispensary, and you were just telling me like, "Look, man, this is who you need on your marketing team." Someone with this kind of skill set that can use tools like Fyllo and understands this and this, what would you tell me, who do I need on my team?

Chad: It's a broad, there's a lot of people you need on your team to build it a full marketing approach, but use us as an example. You have our chief commercial officer, Jeff Ragovin, who comes from a long pedigree of successful marketing businesses. He had an exit with this co-funding Buddy Media and he's very great at commercial strategy and leading revenue operations. He's great from building the team from a sales perspective to market properly.

Then, Nicole Cosby, she's very focused on legal and partnerships and standing up the data business for us and just making sure we're properly, if you're a cannabis company with data, you'll need a legal component to it to make sure you're following all the rules and guidelines. Then you need brand marketers if you're building a marketing team. People that understand how to market brands and get it out there. The brand marketers working with then the next step is people that execute from the plan to the execution. Working with the proper technologies to actually execute your brand strategy.

Depending on the size of the brand, you need a decently sized team, but it just depends, it's give or take who we're talking to in the audience.

Matthew: Okay. What questions do you feel like people have the most for you when you're talking with new prospects, either cannabis brands or retailers, and they're like, "Hey, this sounds like an interesting business, Chad how do I get started? How does this help? How can you help me?" What do they ask you?

Chad: I think a lot of people just, when they first hear about us, they just want to understand, like you asked in the earlier part of this podcast was what can you do for me? What does Fyllo do that's going to really help me get to the next level. We hear that a lot. If you're not dealing with the marketer and you're dealing with call it like a real estate background or a banking background, you have to educate them from one on one to how we can actually build this process for them and alk them through how we do that.

The biggest thing we've seen is a lot of brands aren't set up for what we do, so we have to get them set up for it so then they can start building the process and implementation to do what Fyllo technology does.

A lot of the questions we get is like what inventory do you guys have? Where does your data come from? How do you actually drive sales for me? Like you asked earlier, how do we track it from a compliance perspective? Do you have scale in a specific Michigan area or can you track all applications? There's a lot of questions you get because we're a three-prong technology that does three different things. Your audience skews different, but you get quite a bit of questions for each part of it.

Matthew: Okay. How do you think this is all evolving? The customer acquisition, brand awareness, where do you see it going in the next three to five years? How's it going to evolve and change?

Chad: I think that as the market continues to evolve and more people come into play, there's going to be a lot of consolidation and there's going to be players that really understand how to help these brands scale. I think for Fyllo, what's really important is we don't just look at it from a cannabis perspective, we are really heavily focused on bringing mainstream brands into targeting cannabis audiences.

I just think that evolution is going to be fun to watch over the next three to five years, but there's going to be a lot of opportunity to scale with you're going to see a lot of bigger brands continue to grow and the vertical as it gets, like you said, call it federally legalize more so and becoming more open to cannabis as a vertical holistically. I think it's just going to scale tenfold. I think there's a lot of opportunity over the next three to five years and we're seeing the market kind of show that with the recent upticks for the cannabis stock market.

Matthew: Okay. Now we've really focused mostly on advertising, but in marketing, can you just talk a little bit more about the regulatory side of things too for listeners that are interested in that?

Chad: Yes. We purchased a company called Canada Rags about six months ago. We actually recently just built out the version two of the technology. From a regulatory standpoint, I would say that call it 90% of the space uses our platform. It's used mostly from legal and from compliance teams, GCs and law firms, like I mentioned earlier, and each one has a different use case.

If you're an SSO, which we call a single state operator and you really want to understand each local municipality, you'll use our platform to really understand when the meetings are happening, if you should attend that meeting, after the meetings happened, what actually was talked about the meeting, applications that were submitted. You really can understand if you can submit an application or when applications are going to be available to submit for those, taxation.

If you're trying to get a piece of real estate, understanding zoning and regulatory regulations around the real estate. If you're running packaging and labeling, and want to understand the regulatory guidelines on packaging labeling, you would use our platform. Same with advertising limitations that as well as digital creative, you would want to use our platform to make sure you're compliant specifically by that hyper, with that local government.

Most of our regulatory software is used by legal and it's been what we do is we've been able to help a lot of the MSOs and law firms save quite a bit of time with having this aggregated database and our technology that allows them to automate a lot of the work that's being done manually for them within their internal organizations. Does that make sense?

Matthew: Yes, that's the kind of real nitty-gritty stuff that's not sexy, but is super important you know, just foundationally important to get that. You provide that in a kind of easy to digest way that's super valuable.

Chad: Yes. It's been pretty, we've had, we're excited about the new launch of it and it's in October we're launching, so we've built technology on top of that technology, which automates, like I said, packaging labeling. You can upload your packaging and labeling and not your actual digital asset or creative asset. The system will audit it within a second and tell you if it's compliant or not and why it's not compliant. It's doing that both for digital as well as packaging labeling, which we're really excited about and something that as our vision grew as we evolved the technology. Something that you'll see coming soon.

Matthew: Now, you recently finished a big capital raising round. Can you talk about that a little bit?

Chad: Yes. We were lucky enough to close around with some of our current investors, as well as some new investors, but Jason Wilde has been an unbelievable investor for us, let our first round and let our second round with also having other investors like K2, Arcadian, Salvio, Panther, Fido, Fountain, and other funds join us throughout this process.

It was definitely before, we started raising capital right before Coronavirus, literally right before and then Coronavirus hit and definitely stalled out the process because people are just seeing where the market's going ahead and we were lucky enough to great supporters and people that are close to the state close to our business to know the opportunity. They came in for this round. We were able to raise a significant round that's going to help us continue our hyper-growth.

Matthew: Okay, great. How big was that around? That's public, right?

Chad: Yes, it was 10 million.

Matthew: 10 million, great. Okay. Chad, I like to ask some personal development questions to help listeners get a better sense of who you are personally. With that, is there a book that's been particularly meaningful for you in your life that you'd like to share?

Chad: Yes, that's a tough question actually because I've read a lot of books that have been not meaningful to me. I just say really for me, I like to read books that people, even just like Shoe Dog, which is Nike's story. Just really seeing people go through adversity. I like to read a lot of books that more so show me other entrepreneurs and how they became successful and really hearing their true nitty-gritty story. That stuff really gets me excited and teaches me something because I'm learning through trial and error and reading other people's trial and error. I'm a true entrepreneur, that stuff really excites me.

Matthew: Okay. VC, Peter Teal has a famous question, he asks entrepreneurs. It is what do you know to be true that very few people agree with you on?

Chad: What do I know that to be true that very few people agree with me on? You're asking me some tough questions. I don't even know how to answer that one. That's a tough one. Like give me an example.

Matthew: What would you be scared to bring up at a dinner table with people that have diverse backgrounds and different ideas of the way the world works? You say, if I bring this up, this is going to be controversial, but I know that.

Chad: Politics. Easy one, don't bring up politics.

Matthew: You know it's true. Not to bring up politics, but that's not very controversial.

Chad: Yes, that's true. I don't know. It's a tough question. I don't know how to, I really don't. Can you ask me a different one?

Matthew: Well, I'll tell you, I do have a different question for you. Here we go. It's a Chicago question. Which Chicago restaurant are you missing the most since so many restaurants have closed because of COVID-19?

Chad: Another good question. I would say probably because our offices in the West loop and it's going to be a people, foodies, like probably you're going to be like what? Because we go to the same, we go to the same spots over and over again, because it's right by our office but Bavette's.

Matthew: Okay. What kind of food is that? I haven't been there?

Chad: It's all it's like steaks and burgers and stuff like that.

Matthew: Yes. I'm really familiar with the West Loop and not one of my favorite place is actually, favorite coffee shop ever is Sawada Coffee in Green Street.

Chad: Oh wait, ask me a question again because I forgot about Sawada. Sawada is literally lived and breathed Sawada. We went to Sawada every single day. Now that you brought that up, that's been the worst thing for us that shut down.

Matthew: Yes. The military lattes are so good, which is like a latte with matcha powder in them. They're so good. That place is awesome. I'm like I'm bummed. Once a week, I check out on Google maps if they're still closed because I'm just so bummed about it.

Chad: That's hilarious you brought that up. Yes. Sawada that's our favorite spot. Like we literally are friends with the staff and we went every single day, twice a day. That's honestly, that's been the saddest thing for us out of everything. We go to Beatrix now but Sawada was our spot.

Matthew: Yes. I really hope they come back. We'll end there, but Chad, for listeners that want to get ahold of Fyllo and see how they can work together, they're in the cannabis space and they want to know more. How can they reach out and connect with you or with Fyllo at large?

Chad: Yes. They can always go to our site and fill out a specific form for what they need or they can just reach out to me directly at Chad@hellofyllo.com and I would send them down the right path.

Matthew: Great. Well Chad, thanks so much for joining us. We really appreciate it. Good luck with everything you have going on. Great timing with that capital raise. That's very fortuitous for you. We'll be watching and hopefully, come back on in a little bit and tell us how things are progressing.

Chad: Yes, man, this has been great. I really appreciate you having us on and look forward to doing it again with you.

[music]

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