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Cannabis Oil Extraction Technology with Andy Joseph

Andy Joseph

Andy Joseph is the founder and CEO of Apeks Supercritical. Apeks makes high quality CO2 extraction machines. These machines allow cannabis leaves and flowers to be broken down into the super valuable cannabis oil the market is demanding. In this podcast we’ll explore the technology and promise of cannabis extraction.

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

Key Takeaways:
[2:05] – What is Apeks Supercritical
[4:00] – Andy talks about how he got into the supercritical machines business
[5:49] – Andy explains different extraction techniques
[15:09] – Andy gives his opinion about the “art and science” of extraction
[17:11] – The most popular infused extracted products right now
[25:45] – How much oil can be derived from 10 pounds of sugar leaf
[29:45] – How long does it take to process the 10 pounds of sugar leaf
[32:14] – Andy discusses how long customer run their machines
[34:27] – How easy is it to operate Apeks Supercritical machine
[36:33] – Andy talks about the pricing of the different machines
[40:37] – Andy discusses the future of the extractions
[42:23] – Mistakes made when purchasing an extraction machine
[47:13] – Contact details for Apeks Supercritical

Read Full Transcript

Matthew: Hi, I’m Matthew Kind. Every Monday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you are an accredited investor and would like to join me as an ArcView member, please email me at feedback at cannainsider.com to get started. Now here’s your program.

We’ve all heard of the 80/20 principle. Applying the 80/20 principle to the cannabis industry one might say that 80 percent of the profits are attained by sales of 20 percent of the products. But Vilfredo Pareto who created the 80/20 Principle also said that the 80/20 principle can be taken further and that 4 percent of the products in a market can make up 64 percent of profit. I believe that extracted cannabis oil is the 4 percent of the cannabis marketplace that will make up 64 percent of the profit of that marketplace. Today we’re going to hear why from the founder of Apeks Supercritical Andy Joseph. Welcome to CannaInsider Andy.

Andy: Thanks Matt. Thanks for having me on. I appreciate the opportunity to speak to you and your audience.

Matthew: Sure thing. To give us a sense of geography can you tell us where you are in the world today?

Andy: We are in Johnstown, Ohio which is a suburb just outside of Columbus, Ohio.

Matthew: Okay. And what does Apeks Supercritical do?

Andy: We manufacture supercritical CO2 botanical oil extractions systems. And what that means is we use liquid carbon dioxide or sometimes called supercritical carbon dioxide as a solvent to extract oils from botanical plant materials.

Matthew: So supercritical has to do with the state of the carbon dioxide. Is that what that term means?

Andy: That’s right. Most people are familiar with kind of the three states of matter; liquid, solid and gas that a lot of materials, you know water obviously is probably the most common one that can be in CO2 at normal atmospheric temperature and pressure and basically in the environment around us as a gas. It wants to be in gassiest form. And if you take the pressure up high enough and control the temperature in a certain way, you can convert that CO2 either into a liquid, so you can have liquid carbon dioxide. You can also convert it into a solid. Most people are familiar with dry ice, and it’s basically a solid form of CO2. But if you convert the pressure and temperature up high enough, specifically above approximate 1100 psi and 90 degrees Fahrenheit, CO2 will become what’s called supercritical.

Basically that’s a combination of liquid and gas properties that in the extraction world is favorable because it allows the CO2 to diffuse in deeply into materials. So it can get into deep nooks and crannies to allow it to extract oil out of plant material. But it also acts like a gas in that it expands to fill the entire volume of a container so it can get good exposure throughout the volume without being affected by things like gravity.

Matthew: How did you get into the supercritical machines business?

Andy: You know I kind of fell into it. I actually started as a broke college student after I got out of the Navy. And I was looking for a few extra dollars to help pay for college, so I started a fabrication business. And you know found a couple of customers that were interested in extraction devices. The applications at the time were flavorings and natural products, natural nutriceuticals, things like that. But then in about, about the same time that California legalized or started having a lot of activity in the legalized marijuana industry, that’s when we started seeing activity with the extraction systems more geared towards marijuana rather than flavorings where we got started.

Matthew: Did you have some sort of skill set in fabrication or did you just say hey I’m going to jump into this?

Andy: Well in the Navy I ran nuclear submarines. I was a mechanical operator and a mechanic on nuclear submarines. So I had a decent amount of mechanical aptitude to begin with, but in college I was going, I was studying welding engineering. And so you know I had a couple of part time jobs while I was starting school and working in machine shops and welding shops. So kind of between the exposure that I had in the military and some of the exposure that I had as a machine shop operator, machinist and you now a welder, those kind of things combine together to give me the base experience that I needed to start the fabrication business.

Matthew: Can you help us understand at a high level the different types of extraction processes there are including CO2 that we talked about a little bit; ethanol, BHO and any others that might be out there?

Andy: Sure yeah, I like to break the different extraction categories up into kind of the different topical areas. One, and these are all specific to marijuana but they are used in other industries as well. You know kind of the first category of extraction is really mechanical, and there’s two probably commonly used mechanical extraction methods that you’ll see in the marijuana industry. One of them is going to be, you know, using just a standard sieve method or making kief where people will take either dry ice, usually it’s some kind of dry ice block and put it into a bucket with sacks that have different layers of micron ratings on them. The dry ice effectively does two things. It makes the trichomes on the marijuana plant very brittle. So it freezes them, and then the mechanical force of shaking the block around will break those trichomes off and they will get sorted out based on their particle size through these different bags and that’s how you make kief.

A similar method is another one called Bubble Hash. Some people will call it ice water, and it’s a very similar process except for instead of using dry ice, you use water ice and regular ice and water and the same thing happens. Basically the cold water causes the trichomes to freeze and become very brittle. And so another common method that can be used is called Bubble Hash or sometimes ice water extraction method. Basically that’s where people will take something that looks a lot like a washing machine and they’ll put the marijuana in ice water, you know, water with ice in it. And it functions very similar. It will freeze the trichomes causing them to be brittle. They will break off and then they’re generally filtered through some kind of a mesh system to get a similar product. It’s a little bit more automated because you can use things like a washing machine. There’s more complicated equipment out there to do it now, but both methods are mechanical in nature in that they really just freeze the trichomes, break them off and then filter them out. Bubble Hash method has the obvious drawback that you have to get the water out of the product once you’ve done the separation and extraction portion. Whereas the kief method doesn’t, but kief is a lot more labor intensive.

So those are two very common mechanical extraction methods that you will find in the marijuana industry. Both are very inexpensive. They’re very easy to do. They’re clean, you know, you’re only using water or a solid form of carbon dioxide being dry ice. So there’s no residual solvents or anything like that, but they’re not very efficient from the standpoint that they do nothing more than break the outer layer of available oils off of the plant. So you aren’t doing an extraction. You can’t run it on kief for instance, or I’m sorry you can’t run it on trim because it has no solvency power. It can’t get inside of the plant and start to dissolve the oils out of the plant material. And so the yields tend to be pretty low and you tend to not get complete extractions.

Moving to the next level of extraction that a lot of people will see, I call them solvent based methods. These are going to be things that use some kind of a solvent, some kind of a solvating liquid to be able to do it. There’s really kind of two categories of this. One’s going to be using alcohol or ethanol as an extraction. This is referred to, a lot of people call this Rick Simpson oil. It’s one of the methods that people will make. Rick Simpson oil is basically performing in an alcohol or an ethanol extraction. And it’s basically a two step process where you immerse your material in alcohol or ethanol, let it sit there for some period of time and there’s different things you can do. You can apply some heat or you can keep it cold depending on what you’re trying to do.

There’s quick wash methods where you run the alcohol through it and only allow the exposure time to be very short, maybe a few minutes. But basically you expose the material to alcohol. The alcohol leeches out or dissolves the oil from the plant and then you subsequently filter any particles or any material out of the alcohol and distill it off. Distilling it off can be as simple as literally evaporating the alcohol or going to something more complicated like a rotary evaporator. But the end result is the extracted oil that once all the alcohol has been distilled out or evaporated out, then you’re left with a alcohol free solvent. Some people will leave a little bit of alcohol in it and that’s generally referred to as a tincture, but that’s a typical solvent method that’s been around for a long time. Again used widely in the food processing industry as well. Most of vanilla extract is processed exactly the same way.

Another solvent process that’s typically found in the extraction world, again particular to marijuana is going to be using some kind of a hydrocarbon, and that can be butane, sometimes referred to as butane hash oil or BHO. Propane is commonly used or is becoming more common and hexane can also be used. Hexane is a little bit more similar to an alcohol extraction, whereas hydrocarbons like butane and propane tend to be a little bit more similar to CO2 from the standpoint that they tend to operate under pressure or at least close to pressure. Is if we look at propane and butane kind of as a similar animal, you know both of those methods are very commonly used primarily because two things. One, it’s cheap. You know the equipment tends to be fairly inexpensive. Even the closed-loop systems are you know can be 10 or maybe even 20 percent of the cost of a CO2 system. But it also is pretty effective. Butane and propane is a very strong, very powerful solvent. So the extraction efficiencies tend to be very high.

There’s drawbacks to using a strong solvent like that in that you don’t have any selectivity. It tends to want to extract out all of the available oils, waxes, paraffins available in the plant. And so there generally has to be some kind of a separation process within the extraction in order to keep the oils separate from the waxes. Particularly if you’re going to go and do something that’s going to vaporize it. Vaporizing the waxes can cause issues with, lung issues where you’re basically ingesting those waxes that have been vaporized as opposed to just the oil. So again butane and propane extraction methods are very popular, very common. The obvious drawback to both of those is the fact that they’re compressed, flammable gases. And so the explosion hazard can be a significant concern and can also be a significant cost.

I think a lot of people tend to underestimate the cost of a true hydrocarbon extraction facility and look at just the cost of the equipment and not the cost of the facility to operate it within. In order to be safe and legal it has to be an explosion proof facility that has monitoring, explosion proof switches and exhaust systems that are capable of being deenergized for switches and things like that. Also the evacuation system has to be able to evacuate the room in a certain amount of time. It has to all be integrated in there. It has to have alarming systems. All of these things are costs that have to be accounted for when you’re considering doing a butane or a propane operation.

Matthew: So doing a butane or a propane operation, do you think the costs are comparable once you take into effect that you have to make a blast proof room and create all these safeguards.

Andy: Yeah exactly and that’s moving on to the CO2 kind of comparison. When you look at the cost of a CO2 operation versus the cost of a butane or propane operation they start to become very similar if not the same depending on the size of the operation especially because of the fact that carbon dioxide is nonflammable. You don’t have to have the same explosion proof or blast room, as you said there, type of facility for a carbon dioxide operation. You really only have two safety concerns when you’re running the CO2 extraction system. The first is safe operation which is generally revolving around the pressure. So you have to make sure the operators are trained and understand and have the ability to see if there is pressure in the system and make sure the pressure is relieved properly before they try to open up vessels. Most of that is in design and training. But as far as the facility goes, you know the facility really just has to have a CO2 monitor in it. Basically it’s monitoring the level of CO2 in the room and it has to be able to alert or alarm any people or any operators who might be in the room to essentially exit the facility until the CO2 has gone away. So you know you don’t have to have an evacuation system. You don’t have to have explosion proof switches and all that kind of stuff. It’s much less expensive and much less complicated facility.

Matthew: Switching gears a little bit to the art and science question of extraction. There’s many people that say there’s an art and a science to extracting cannabis into concentrates. Do you agree with this statement and why or why not?

Andy: Well so I understand a lot of people refer to themselves as artisans or extraction artists. It’s great, but the reality of the situation is extracting is science. There is no art. There’s just science, and you know the application of temperatures, pressures, flow rates, time, pre-processing, post-processing, you know all of these things are all scientific in nature. They’re all application, you know, going through and making sure that you’re processing parameters are consistent. They’re being monitored, all of these things are just science. They’re engineering, they’re science. It’s not art. You know I tend to disagree with people who claim that they’re extraction artists because that would imply that they have some inherent ability to do an extraction, to perform some kind of an extraction that comes naturally to them, as though they’re an artist painting an art, you know, making a painting. Their inherent ability to see different things and create something on a canvas. That’s not necessarily even repeatable, that’s art right, and that’s not what an extraction process is, it’s certainly not what it should be.

To be a little bit harsh I think some people who refer to themselves as artisans or extraction artists are really just not being good scientists. You know they’re not tracking their parameters. They’re not paying attention. If they produce something that was by accident, then that’s great. I mean some of the best products in the world have been produced by accident. But turning that into a repeatable event is science. That’s not art.

Matthew: Okay. And maybe perhaps they’re referring to bringing products to market that people really want. In which case what do you see people using the Apeks Supercritical machine for the most in the cannabis industry to create what kind of products that eventually go to retail dispensaries?

Andy: Well so there’s really three products that the oil that comes from the Apeks Extraction Systems will be used in in kind of the marijuana marketplace. The first one is vaporizing pens. You know electronic cigarettes is kind of the public (17.27 unclear) the marijuana industry calls them vape pens or vaporizing pens. Oil that comes out of an extraction system, particularly a CO2 extraction system can come in a lot of different forms. One of the things we didn’t discuss as we were talking about CO2, supercritical CO2 before is the fact that CO2 is tunable. It has the ability to change its solvency power based simply on temperature and pressure. Competitive extraction methods like butane or propane don’t have that ability. They’re just on or off.

CO2 is unique because of the fact it can change it solvency power. What that means is you can actually extract out different portions or different molecular weights from the plant material. For instance you know there’s a range of molecular weights. People say oil kind of is, you know, what’s in the plant material, but the reality is there are light oils. There’s volatiles. There’s heavier oils. There’s light waxes, there’s heavy waxes. There’s paraffins. There’s a lot of different fats and lipids. There’s a whole range of molecular weights available inside of a plant. And each one of those molecular weights makes up the “total oil” or wax as sometimes people will call it. Using CO2 selectively changing the temperatures and pressures can allow you to bring out just the lighter oils or just the heavier waxes, depending on what your parameters are.

In the application of a vape pen generally people want to have the lighter oils. So you know there’s kind of two approaches that people will take with the CO2. One is to run parameters that produce just the lighter oils. You know those tend to be pretty lower pressures, colder temperatures. And the lighter oils that come out tend to be very fragrant, aromatic because they also have a lot of the volatiles intact. Those are all great things for a vaporizing pen. You need a oil that’s flowable. You need something that has a lot of flavor and taste which is generally the volatiles. The drawback to operating on that condition is that it’s generally slower. The solvency power is less, and so it takes a longer time to do the extraction, but the positive is you don’t have to do any secondary processing.

So you know a flipside or an alternate method that a lot of people will use with systems that don’t have the ability to run colder temperatures and pressures is they use a secondary process called winterization. And so they will take the extracted oil that generally has a lot more waxes and lipids present, they’ll winterize which is a secondary alcohol extraction to remove those fats and waxes. Then they’re left with just the oil. So the vape pens is kind of its own animal. It’s a very very popular product right now. Again our extraction systems can produce oil that is used directly in vape pens without any secondary processing at all. It’s also used sometimes in conjunction with the winterization process to produce a vapable oil.

Secondary or a second product that the marijuana industry sees a lot is what I would refer to as kind of the infused products market. These are going to be your edibles, your topicals, your lotions, things along those lines, cookies, elixirs, suckers, cakes, whatever, any kind of infused product. There’s really kind of two categories of infused products that people need to consider. And that really is it going to be activated or nonactivated meaning you know if you’re doing a chocolate for instance and you want to be able to have an activated THC content within the chocolate, generally the chocolate making process is at a low temperature. And so what you’ll have to do with your cannabis oil is you have to activate it before you put it into your chocolate. And when I say activate I mean decarboxylate or converting the THC acid into THC which is psychoactive.

And so the activation process is an important thing to consider especially if you’re not going to be baking or exposing your infused product to any kind of heat. Chocolate is a good example. And so activating the product prior to extraction is actually more useful because of the fact it will increase the yields with a CO2 extraction system. So a lot of our folks who have a topical or a lotion that doesn’t see any heat but they want an activated product or a chocolate or something like that, they’ll actually perform a prebaking process or decarboxylation process on the raw plant material prior to doing an extraction. Whereas materials like cookies or brownies that are going to be baked, they can use a nonactivated or nondecarboxylated extracted product in the cooking prior to baking and then the baking will actually do decarboxylation.

So you know it can get very complex and I guess kind of the point I’m trying to make here is that you know depending on what kind of product you’re going for, there’s a number of steps before the extraction and after the extraction that have to be considered in order to get the total product. I like to kind of say the corollary would be if you were going to go bake a cookie in your kitchen, you know, you wouldn’t just take the flour and expect a cookie to come out. You have to have the flour and the sugar and the vanilla extract and chocolate chips and all that kind of stuff in order to get the final cookie. Extraction is generally just one piece of the total process.

Now a bit of a corollary, a bit of a flipside I guess is a better way to say it is the third products category that people are using our CO2 extraction systems for and that’s the dabbing market. You know dabs are very very popular. It’s kind of a different form of vaporizing, generally very concentrated form. And the product types have many different names; Honeycomb, Crumble. I’ve seen muffins, you know, there’s just vaping oils, there’s waxes, there’s shatter. You know lots of different nicknames for what is all kind of this one product category called dabbing. One of the unique things about the Apeks CO2 system is the fact that it can run very very cold. We designed it originally to extract oils from botanical plant materials and you know plants aren’t designed to be, by mother nature they’re not designed to see temperatures above 100 or 110 degrees Fahrenheit. They start to have thermal degradation when they see that just because they weren’t designed that way if you want to call it that.

So we built our systems and we designed our systems to maintain very very low temperature exposure to the material. And you know the oil never sees a temperature above the extraction temperature in our systems which is an important concept because you know you can extract at a cold temperature, but if the separation vessel where the oil collects during the extraction process is heated, that if it sees a lot of heat during the extraction process, you can see thermal degradation even after the extraction has actually happened inside the machine. So we designed our systems around cold. One of the benefits that we found in the marijuana industry of being able to run cold like that is our systems can make a product that is referred to as crumble. It’s a very hard, very crumbly product that can be subsequently converted in a vacuum oven into a shatter or even a honeycomb type of product in a very very short amount of time; 10 to 15 minutes in a vacuum oven straight out of the extraction system.

The shatter that comes out is solvent free. You know the competitive process is going to be with butane or propane, and they’re have to do what they call a vacuum oven treatment of evacuate the propane and butane out of the extracted material. And sometime that can take three to four days in a vacuum oven and they have to flip the material over and it’s a lot of work. CO2 extracted crumble right out of our systems can go straight into a vacuum oven and be converted into a shatter product within a few minutes. And that product has become very popular here in the last three to four months.

Matthew: Now putting on the business owner hat or operations manager hat trying to understand how much oil or how much extraction I could do, let’s say I have 10 pounds of sugar leaf, which is not the flower but has the resinous THC sacs, trichomes on there. Is there a ballpark of how much oil I can get from that and how long it would take?

Andy: Sure so on a very very high level, 30,000 foot view a good rough number is 10 percent on trim. So you can expect to get about 10 percent yield of 10 pounds. So from your 10 pounds of sugar leaf you can expect to get about 1 pound of oil. Now here’s the problem with that statement. Number one, you’ll find that anyone who is familiar with a butane or a propane extraction will tell you that that’s ridiculous and they can get 15, 20 or even 25 percent yields from their butane process. So why would they ever use CO2? Well things you got to remember. Number one, if they’re pulling 25 percent from plant material using butane or propane, it’s going to have a lot of waxes in it. And so once those waxes have been removed, then the yield starts to become more in line. Number two it depends a lot on the parameters. Right so as we discussed before CO2 is tunable. So if you’re using subcritical or liquid, low pressure, low temperature CO2 extraction, you’re going to get a lower yield because you’re not bring out those waxes and resins. From a business standpoint that’s not good because you’re not maximizing the potential of the material. From a product standpoint it’s good because you’re getting oil out that you need for the vape pens.

The beauty of CO2 is you can actually do a two-step process. We call it fractional extraction where you can actually extract at a lower temperature and lower pressure to get the oil that would be preferable for a vape pen. And then you can come back and raise the temperature and pressure on the same material and subsequently extract out the heavier waxes and resins to get a complete extraction. So we generally will tell people that 10 percent is what you can expect, but the reality is the opportunity to get a much higher yield is there. And there’s two methods to do it. One is higher pressure, higher temperature going into the stronger solvency power of the supercritical CO2, realizing that the product you get is generally a very waxy material that’s not going to be desirable for vape pens, but is very desirable for an infused product. And in that scenario you can get 15, maybe even 17 percent yields if you’re doing a true supercritical extraction. Whereas you know 10 percent is more applicable to what you’re going to get that’s going to be useable for a vape pen application.

So it’ gets a little complex. We generally tell people 10 percent because it’s a conservative number that they can use in calculations and be confident that that’s what they’re going to get, but there are ways to get much higher extractions. One of those as I just said, a supercritical. Another method that a lot of people are using with our systems is they’re prebaking the material. And so they’ll bake the material, decarboxylate the material as we were talking about before in the activation process. And it does two things. One obviously it activates to convert the THC acid into the THC which is psychoactive, but it will also cause the yield to go up. It soften the waxes or converts some of the waxes into an oil that’s more soluble in lower pressure and lower pressure CO2, subsequently getting a higher yield and even in a shorter time. And so we see a lot of customers who will perform extractions subcritical extractions, low pressure, low temperature on decarboxylated or baked material getting extraction yields in the 15 to 18 percent range. Whereas the same material that’s been extracted under the same parameters that’s not decarboxylated will only give a 10 percent yield. So there’s a couple of different ways you can kind of manipulate the product even before the extraction that can produce either higher yields or a more favorable product if that meets all of your demands.

Matthew: Now back to the getting a pound of oil for 10 pounds of trim. How long would that process take, ballpark, to you know put all the trim in there and have it come out the other side as well. I guess it depends on the size of the machine that’s being used, but what can you tell us there?

Andy: Yeah again I’m going throw out some kind of ballpark numbers or rough numbers that people can use in their calculations. So you know a pound every one to two hours is pretty typical. Now again there are ways to speed that up and there are ways to make it longer. You know when you’re playing with a solvent that has tuneability you can change its solvency power. You can start to play a lot with those extraction times. You want to choose an extraction time that meets your production process. And what I mean by that is if there’s a diminishing return that comes from extraction times. And so as the process runs longer, you get less and less material for each hour that the material is exposed. And so there’s a point of diminishing returns, and that point is going to be different for everyone.

Some examples would be if you have an application or you have a situation where you’ve got unlimited material, you’re probably not going to want to try to squeeze the lemon as hard as you can, right, because the harder you squeeze it you get a lot of lemon juice first. But you know as you get to the point where the lemon juice is all gone, you have to squeeze harder and harder and harder just to get a little bit. It’s a very similar process here in that there’s diminishing returns depending on how hard you squeeze and your run time is effectively the squeeze. And so if you have unlimited material it may not make sense to run a full two hours or even three hours on the material because that additional hour, that third hour of extraction you’re going to get just a little bit of oil out of material as opposed to if you used that same hour for new material, you’re going to get a lot more the same amount of time.

Now if conversely you’re limited on the amount of material that you have available to, it makes a ton of sense to extend the extraction time even longer and squeeze that lemon as hard as you can so you can get the maximum return from your material. So again we generally will tell people a pound every one to two hours realizing that the times can be very flexible and you know tuned to match your actual operation.

Matthew: So back to the lemon analogy it makes sense to have fresh lemons all lined up, but sometimes you can’t have all those leaves or buds or everything you need right lined up as you need them, but that’s a great analogy to help us understand there. And it seems like in your experience most people are trying to keep the machines running 24/7, is that accurate?

Andy: You know it varies. We’ve really got quite a range of customers. You know some folks are definitely high production you know the thing runs, our systems will run literally 24/7. You know they’ve got contracts with you know as much material as they can get. These tend to be more the Northern California kind of guys and they’ve just got more material than they know what to do with, and they run the systems literally 24/7. And keeping that think running is very very important to them. And so you know just like any other good manufacturing process, an automotive supplier or whatever, they’ll have spare parts. They’ll have spare you know consumables laying around waiting so that if they do run into some kind of a hiccup or any kind of an issue, they can immediately get the system back up and running.

On the exact opposite end of the spectrum, and those tend to be our larger CO2 production systems that get used in those applications. Completely on the opposite end of the spectrum you know our smaller bench top systems get used a lot by what we call “club use”. It’s not so much personal use, but it’s usually a group of folks in a collective or a club that will get the system and they’ll have their small group of people kind of collaborate and you know put their material together, process it and use the oil specifically for the club. Those systems tend to run a few hours a day or maybe even a few hours a week, but allow the clubs to serve their patients with a clean, safe extracted oil that doesn’t have to be consumed. And you know they get a lot of control over the process in areas that aren’t as heavily regulated as California and, I’m sorry, as Colorado and Washington. You know there tends to be not as much testing and not as much scrutiny on the final product. And so there’s some concern especially from people who are using marijuana in medical applications that they want to know what is in their product, and the only way to really be sure is to do it their selves. So we will see a lot of people use our bench top systems to kind of get control of the medicine that they’re using for their patients.

Matthew: So the machines are pretty easy to use it sounds like if you can just get a bench top one for a collective and kind of figure it out or what kind of training is involved?

Andy: Yeah so all of our systems are all fully automated. Our bench top system does have a couple of manual valves so we tend to refer to it more as a semi-automated system in that the operator has to manipulate a couple of valves before the process is started, then it’s automatic from that point. Our larger production systems are fully automated in that they’ve got a touch screen where the user basically goes through and the machine will, once you push start, the machine will walk you through a series of prompts asking you for your temperature, your pressure, your time, and then it will do a couple of safety checks to make sure that the vessels are prepared to receive pressure, make sure that all of the vessels are closed properly, the hoses are connected. And from that point the system will take over and be fully automated.

That being said they are simple to operate from the standpoint that the CO2 system does all the work. However the operator still has to have some mechanical inclination. You know these are industrial pieces of equipment that are being used. They’re under high pressure. And the operator has to have some basic mechanical aptitude to be able to open a vessel, close a vessel, you know, to some degree even perform maintenance on the system; changing pump seals, changing o-rings, changing gaskets, things along those lines. So I wouldn’t say that you know just any, my mom will kill me for saying this, but I wouldn’t want my mom to operate the system because you know she’s not the most mechanically inclined. So you know it’s not for everyone, but the full automation and the automation of the system makes it much easier to operate compared to some of the other systems that you will see out there like the butane and propane systems that are all manually operated and even some CO2 systems that are out there today are still manually operated as well. The operator has to be significantly more skilled in order to know when to open this valve, when to open that valve, what pressure gauge to look at, when to do this, when to do that. All of those things go away for a fully automated system.

Matthew: Okay and what are the costs, the price points to get into different size machines?

Andy: Prices for our systems start at about $36,000. Our bench top system is $36,000, and that price includes training. Again it’s the full system. There’s no additional components you need for the extraction. Any secondary processing stuff would be additional obviously, but the extraction process is all inclusive there. And again training at your facility would be included in that price as well. That’s our bench top system. Our smallest production systems starts at about $86,000 and prices from the production systems go from $86,000 all the way up to about $190,000.

Matthew: Okay. Now there’s some young businesses out there that might have trim and they know they can get a positive ROI if they could just afford a system. So when they’re in that position what do you say?

Andy: We actually have a leasing program. We’ve developed a leasing program about three years ago, and it was in response to this exact problem. You know everybody in the cannabis industry was a startup three years ago. And so there was a lot of opportunity from a return on investment standpoint but not everybody had the cash. And so you know we developed a leasing program to basically allow folks to do exactly what you’re saying. You know our terms are generally 25 to 35 percent as a down payment and then the subsequent lease terms are going to be 10 to 20 percent interest rate over the course of 12 months for payments. You know it’s interesting we’ve had this program in place for about three years and you know depending on the credit worthiness that’s what’s really going to determine the down payment and the interest rate that we apply.

But I’ve had just about every one of the folks who’ve engaged us from a leasing standpoint or a financing standpoint, at some point in time during the process of the application they say yeah I intend to pay this thing off in a couple of months. And the reality is they can’t. You know the return on investment for these CO2 extraction systems, you know, it can absolutely be a matter of weeks. You know three to four weeks is very very reasonable number for return on investment. However, where people will generally get themselves in trouble is that assumes that you have a couple of things in place. Number one you’ve got a supply chain set. Right so you’ve got access to material and that material can come to you on a regular basis and you know you have the supply of material to be able to feed the extraction system. You also have to have some place for the oil to go, right, and this is where a lot of people get kind of hung up in the process. You know they’ll procure some material, they’ll have access to material, they’ll get an extraction system from us. They get the extraction complete and then they say well what am I going to do with this goopy peanut buttery looking stuff.

Three or four years ago people would just take that and they would smoke it and they would be happy with it, but nowadays you have to have a product. You have to have marketing. You have to have all the things that every business needs to have. You know you have to have an accounting system. You have to be able to pay your employees. You have to have a marketing and a brand that people can recognize and people are going to associate with. All of these things start to come into play in order to make that three to four week ROI on an extraction system actually reasonable and it happen. And so just about all those folks who’ve asked us for you know financing and taking on our leasing program say well I plan on paying this thing off in two months, and while it’s functionally possible I’ve had only one customer actually pay it off early. All of the rest of them have found that they need the cash to support the other portions of the operation or the other portions of the business in order to make the entire thing viable.

Matthew: Great points. Great points. Now looking to the future, 3, 5, 7, 10 years ahead where do you see the extraction and concentrate business heading and changing?

Andy: Well we’re already seeing concentrates. Again in the marijuana industry, we’re already seeing concentrates start to take over sale of flower. You know in some dispensaries it’s already taken over and in other ones it’s on its way to taking over from a percentage standpoint. So you know concentrates are very popular for a number of reasons. You know they’re just that. They’re concentrated so there’s higher potency levels for folks who have been consuming for a long time and have built up a tolerance level. You know they can start to actually get high again or be able to benefit from the medicine again. But there’s also a digression element to it. Vape pens in particular really help people be more digression, have more…

Matthew: Discreet.

Andy: Discreet thank you, that’s the word I’m looking for. It allows people to be more discreet in their consumption. You know the soccer mom kind of is always the quintessential example. You know she doesn’t necessarily want her kids to know that she’s medicating or enjoying marijuana recreationally, and vape pens allow her to do that. But the edibles I think that’s really the area where I think there’s going to be a ton of activity in the future. Vape pens have already become very popular, but I think the edibles are going to become even more popular. Just because one it’s obviously discreet, but there’s also the element of it’s so much easier to use. You know you don’t have to carry this product around. Once you’ve got like a vape pen, you don’t have to have a dabbing apparatus. You don’t have to have your electronic nail and all that kind of stuff. Cookies are really easy. You know you put it in your purse or put it in your cooler and you take it and then you enjoy it and it’s gone. You know it’s very simple. It’s very easy to use. It’s very inexpensive, and you know I really think that that’s where the big push in the industry is going to go.

Matthew: Now I’ve asked you a bunch of questions Andy. Is there any questions that I didn’t ask you that I should’ve that people should be thinking about when they’re evaluating extractions and concentrates for cannabis?

Andy: Yeah, you know, probably the one… I guess I will reword your question in a slightly different way which is what mistakes do people make when purchasing an extraction system. You know and it all comes down to common sense. It’s research. Make sure you do your research. You know unfortunately in an industry that’s developed itself from an underground position still has some unscrupulous players out there. And you know it’s really important when you’re doing any kind of research that you ask all the right questions and you know get the details behind the answers. Don’t just take a sales guy’s word that you know this system or the thing it’s going to do whatever it says it does. Make them show you the details. Make them show you the data to support it.

We talked a lot about yields. We talked a lot about the throughput and the return on investment. Get the numbers. Show proof. I had a professor in college who told me once said, “In God We Trust, all others bring data.” And you know I think that’s the way people need to consider, the things that people need to consider when purchasing an extraction system. The other thing is do your homework on all parts of the business.

Back a few years ago, I like this story because it’s applicable to my welding days, you know a few years ago the West Coast Choppers and Orange County Choppers TV show were very popular. And you know I was working in the welding industry as a consultant effectively. And so I would get a lot of people who would say hey I’m going to start a motorcycle business. What kind of welder should I buy? And you know the welder was the first thing that they were going to buy because it tends to be the biggest purchase and it’s also kind of the coolest thing. Well the welder is just one piece of a very large puzzle of building a motorcycle right. There’s not just building the motorcycle itself there’s also who are you going to sell it to, how are you going to sell it and who is going to design it, where are you going to get all your parts.

And so I would encourage people to you know reconsider before going and buying a welder how they’re going to do the rest of the business. And you know very very similar corollary comes from the extraction side of things. People who want to start a marijuana business tend to go extraction first. They tend to think that top of mind because it’s the most expensive piece of equipment and it’s kind of got a wow factor to it. But you have to realize when you’re considering this that it’s a much bigger puzzle not only from a business standpoint of who’s going to do the finances, who’s going to do the marketing. You know what’s your plan for branding, but there’s also the actual process of getting the oil out of the plant and into a saleable product. Right, and that into a saleable product is an important piece. How are you going to take the extracted oil and put it into a vape pen right? Are you going to winterize it? Are you going to cut it? What kind of vape pen are you going to get? Where are you going to get your vape pens from? Most of them are coming from China right now and I’ve heard some horror stories about importing vape pens from China and basically holding people hostage to get their vape pens. If you’re going to do an edible product, you know, what’s the product going to be like? How are you going to make sure that you homogenized, meaning that you get an equal distribution of your extracted oil throughout the entire baked product. The chocolate chips don’t necessarily evenly distribute themselves in a cookie, but you have to make sure that the THC is evenly distributed. That’s an important aspect.

Testing, especially with the more regulated states like Colorado and Washington, testing is extremely important in making sure that you have the proper dosing, especially on the infused products. Where are you going to get your testing? Is the testing provider reputable. You know there’s still some states that are pretty new and in their infancy and the testing houses don’t have a ton of experience. You know so there’s a number of things that go in there. We get a lot of, I’m going to call them, early stage players or people who have an expressed interest in the cannabis industry and they really kind of start with the extraction process. And you know it sounds a little bit harsh, but you know we tell people go back and do your homework before you’re ready to pull the trigger on this thing because we don’t want you to make $100,000 mistake.

Matthew: Right, great point. Now are you still looking for investors?

Andy: No, no. We are not looking for investors at the moment.

Matthew: Good, good for you.

Andy: We’re fortunate enough to be in a position where we don’t need funding.

Matthew: Great. And Andy in closing how can listeners learn more about Apeks Supercritical?

Andy: Our website has a wealth of information on it. It’s www.apekssupercritical.com and that’s www.apekssupercritical.com.

Matthew: Great. Andy thanks so much for being on CannaInsider today, we really appreciate it.

Andy: You’re welcome. Thank you Matt, 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 www.cannainsider.com/itunes. What are the five major trends that will impact the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. Have a suggestion for an awesome guest on www.cannainsider.com, simply send us an email at feedback at cannainsider.com. We would love to hear from you

Tech That is Changing Cannabis Cultivation with Greg Eisenbeis

Greg Eisenbeis

Do you know how healthy your cannabis plants are during the night? Do they have enough humidity? is the temperature perfect? GrowRemote.com is brining sensors and automation to the grow environment that will solve these problems.

Learn More at: http://growremote.com/

*Get the FREE CannaInsider Podcast for your smartphone, CLICK HERE.*

Key Takeaways:
[1:45] – What is Grow Remote
[2:09] – Greg’s background
[2:51] – Greg talks about the move to the cannabis space
[4:21] – What to automate first in your cultivation room
[8:28] – Greg talks about immediate results
[9:05] – How is the watering measured
[12:05] – Greg talks about how to make CO2 reach all plants equally
[12:49] – What are the results cultivators are seeing over a period of time
[13:43] – Greg discusses lighting
[15:07] – Greg talks about total dissolved solids
[16:37] – Does the temperature of the water affect plants
[17:45] – Ho Grow Remote data can help you make better decisions
[21:08] – Best practices for controls and automation in cannabis
[27:28] – Cost of retrofitting a floor to grow cannabis
[28:28] – Greg talks about pricing of the Grow Remote system
[29:54] – Contact details for Grow Remote

Read Full Transcript

Matthew: Hi I’m Matthew Kind. Every Monday look for a fresh new episode where I will take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView Group is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you are an accredited investor and would like to join me as an ArcView member, please email me at feedback at cannainsider.com to get started. Now here’s your program.

If you have read the free report from CannaInsider, The Five Trends That Will Disrupt the Cannabis Industry, you will know that it’s a theme of this show that automation and robotics will begin to be a standard practice in cannabis cultivation facilities. Greg Eisenbeis, founder of Grow Remote, is our guest today. Greg is going to tell us how automation and controls can help ensure healthy plants and a consistent healthy harvest. Welcome to CannaInsider Greg.

Greg: Hey thanks Matt.

Matthew: To give us a sense of geography can you tell us where you’re located?

Greg: We’re right, I don’t know if you call it the heart of Denver, Cherry Creek in Denver, Colorado.

Matthew: Oh sure, great area. What is Grow Remote?

Greg: Grow Remote is a company that really focuses on data collection and control systems. We market battery powered wireless sensors that are meant to collect timely data on a regular basis of anything in the environment really.

Matthew: Okay. And what’s your background? How did you get started in this field?

Greg: Well my background is controls and automation engineering. I’ve been doing that I guess over 15 years now. I started a company in that field when I was 26 and have been doing it for a long time now. Just building automated processes for companies that build, test or assemble whatever they manufacture. So I guess a good way to frame it is that TV show How’s That Made. We build those machines, like those kind of machines.

Matthew: Okay. And why pivot towards cannabis cultivation? What’s the interest there? What’s the problem you’re trying to solve?

Greg: Well initially I was not interested I guess because of ethics or whatever, but after viewing or talking to some other people that has changed. And it’s actually the most exciting industry I’ve been in ever. It’s just like, it’s like a Petri. At least in Denver it’s like a Petri dish. We’re in this amazing, exciting industry that really in my opinion has not been catered to on the tech side very much. I’m guessing because it’s mostly been in a basement until, you know, the last six years.

Matthew: Great point. It does feel like a Petri dish, and the exciting part is that really every business in Denver in the cannabis industry and also elsewhere is a startup to some extent at least coming out of the shadows and being a startup. So you don’t have any huge established entities. Everything is small and nimble. You can reach out to other founders and entrepreneurs and really make a lot of friendships.

Greg: Absolutely. I mean just in… I work at a co-op workspace and just in this office building alone you know there’s three companies that cater to the industry. And just in those connections along you know we’re doing fantastic.

Matthew: Yeah great point. Now let’s say I’m a typical cultivator growing cannabis in the conventional way. What are the problems there? If you could swoop in with your cape on and change a few things right away, what would be the first things you would do?

Greg: I think the biggest thing is really look at the environment. When I walk into a grow I can immediately tell if they have problems. You can just tell just by the air that’s in there. The weird part of this industry is they grow inside. I guess that’s not weird, this is where it came from. Most commercial buildings are awful. They’re completely just gigantic energy wasters and that really shows up in trying to control the environment. I would probably approach that first, but really the lowest thing is get the compass, where are you at.

Matthew: Yeah. So you measure a lot of different things, and I imagine that cultivators and business owners think one thing and then you come in there and show them something entirely different. What is it that they’re… is there a light bulb moment for them in terms of temperature, humidity and the things you’re measuring?

Greg: Absolutely. I mean it doesn’t take a lot of time, and we’ve been putting in, I guess, you know giving people a free system initially just to get into some of these places just to test it out. But in the first week, I mean, this has happened multiple times, they install the system which is like a sticky on a wall, plug it in and it runs and starts collecting data. But in that week, I mean, this particular client solved three major issues within the first week. Like for instance they didn’t know that their grow’s temperature was dropping 30 degrees every night.

Matthew: Oh, yeah that’s a big one.

Greg: Had no idea. I mean it was getting down to like the 50s. I mean in Colorado it’s like a yo-yo in terms of climate. And then no clue, I mean they had those, the cheesy temperature monitors that are on the wall. You know they do track high and low, but from which day? When was it reset? I don’t know. They don’t know. So when you start showing them the graphs after a week of collecting data it’s like holy cow tons of light bulbs start going off. Like oh my gosh our AC system completely sucks or I don’t know. There’s a lot of cool insights that are kind of funny to look at and we’re like okay well now we have some direction. We can solve these problems.

Matthew: So just out of curiosity what’s the quickest duct tape solution then that they implemented to solve the temperature issue? Was it just a humidistat change or I mean a temperature change? How did they do that?

Greg: Yeah so there’s a couple of things. One is like in these buildings that have really bad insulation some decide to put in like a blow, blown in insulation on the top. The problem with that is it has a lot of fumes and it shuts down your grow for a while. A better alternative is use, what I like to use is radiant barrier, a special type of type of it. And it’s the super reflective material. It looks like aluminum foil kind of. And with that it keeps all the heat out of the building or cold or keeps all the heat or cold in and it’s buffers it. And it’s 95% resilient to any kind of temperature thermal transmission.

Matthew: Oh wow.

Greg: So just putting that on the ceiling alone will button up that thing tight enough to where you’re not blasting your AC unit just 100% all the time because you can’t keep up. I mean another great insight, this is hilarious, so we have an output control. So a humidity sensor reads a reading. Says hey the humidity is too high, turn on the humidity fan. So the humidity fan starts running. Well through the software and stuff that we have and once they start tracking all that, they notice their humidity fan doesn’t do a damn thing. It runs all the time. Like they want to get it down to like 30% humidity, unattainable. Completely impossible based on their current set up.

Matthew: So temperature, humidity would you say overall in most cases that’s the lowest hanging fruit where cultivators and business owners get the biggest bang for their buck immediately?

Greg: I think so. I think those are two of the ones that can cause the biggest amount of stress. Humidity is variable because different grows use that factor kind of different. I know some that go up to 70%. I know a lot of the ones in Colorado like to stay really low. But the temperature for sure is a huge factor in reducing disease, creating stability in the crop so that they’re yielding the same amounts. And I think really the watering aspect is really, really needs a lot of attention.

Matthew: Talk about that. How do you measure the watering? How does that work?

Greg: Well it really comes down to application. We measure watering because we have a control system that will measure precisely exactly how much is being fed to every plant. We don’t allow a human per se to hold a hose and water or add nutrients for that matter because they don’t know when they added them, how much exactly they added them. They don’t have a way of tracking exactly how much they put on the plant. So with our nutrient injection system that’s something we provide is that measurable repeatable process to do those two things very very repeatedly.

Matthew: Okay so you can monitor on a 24 hour basis or a week basis you could say okay I delivered this many liters of water to this plant or this table of plants. Is there any discoveries when that happens? Do you find people were overwatering or underwatering?

Greg: Absolutely. Yeah and you can add sensors in there to even pull that. Some people are very good. They just know their plants very well. They know, they need about this much water, but with our software you just say, you set up a scheduling piece and it just says I want to put you know five gallons a minute and I want to water for five minutes. And every time that will come out as if you put it in a cup it will come out exact same amount almost on every head coming out.

Matthew: So the way I’m thinking about this and I could be wrong, is first you want to eliminate the problems and then you want to optimize your… you want to get rid of the painful problems and then optimize your plants. So I’m hearing temperature, humidity, watering, you know you got to get those right. So that’s just basic.

Greg: Yeah I mean with the air system I mean that’s always saying like you have the air, like the cooling part that’s great, but there’s also convection. How are you moving the air through the whole thing. A lot of people use CO2 and I have yet to see up until recently a really great CO2 distribution system. Usually they use these tiny little hoses. They string them for 40 feet, a total of 80 feet of hose. Those don’t work at all. And so if you’re trying to up the CO2, you know, and it’s a really great idea indoors, the distribution of it is awful. I mean it’s just awful. And so those are the big problems that need to be handled. Usually it comes down to distribution of the air. How are you doing that? And then how well are you containing the environment. Like how well can you keep the energy that you’ve put into it.

Matthew: So you’re saying it’s somewhat, if you do this the wrong way, you’re creating a micro climate that hey you’re getting CO2 to the far corner of your grow over there, but it’s not touching all the leaves of all the plants uniformly. So how do we do that? How do we make that happen.

Greg: A great way to fix that is instead of using like a little tiny tube that has little tiny holes and hope that a heavy air can promulgate. I mean this is just air flow. You know get a gigantic like 8 to 10 inch tube or hose, string that down and blow it down that and then get it to distribute. I mean look at greenhouses. I mean a lot of this stuff has already been done. Go to a greenhouse. They have solved this problem a long time ago.

Matthew: Yeah. So what are some of the typical results you see come in and what’s the business owners and cultivators most impressed with or happy with after a certain period of time?

Greg: I think fundamentally it’s really the feedback. When you’re running a grow and you don’t have the feedback, it’s like going on a hike and you’re going off trail without a compass or a map. It’s really flying blind in my opinion and I have lots of examples of other industries where you know like say an extruding process which is highly sensitive to temperature. They don’t have any feedback to regulate that and as a result they have massive amounts of scrap produced in the industry, massive amounts. And the same thing with a grow. Like you’ll just have wonky really crappy yields. Your results are all over the place. And they show that. You cannot generate the same crop with the same yield. It’s just hard.

Matthew: We haven’t touched on light yet. How do you think about that?

Greg: I think light is really important. I think by going indoors you’re really having, you know, the sun is an amazing thing and it does so many things. And with indoor lighting, like we try to fake it and do that as best we can and yeah it works. There’s just I think other things to be done indoors to make lighting where it really needs to be. I think there’s a lot of propagation problems with light. Most grows are top down. I think there’s a lot of research and development that needs to go into lighting that hits it really from all sides. I think if they did that there would be a lot bigger yields than currently what they do.

Matthew: Right because the sun moves across the sky and it hits different parts of the plant at different times of day. You know, most indoor grows if they don’t have a reflective surfaces or maybe like LED bars or something like that, there’s nothing happening on the side or underneath.

Greg: Yeah you’re wasting a huge amount of a plant that could be produced because you’re just not getting coverage. You know and sure the plants can grow big and they have huge canopies and that’s great, but what about all the other stuff underneath. It’s just a huge opportunity just sitting there being wasted.

Matthew: Now what about total dissolved solids? Can you tell us what that means and how we should be thinking about it?

Greg: So total dissolved solids is something like what we use to measure like after the fact, after a nutrient injection. So water comes in the straight pipe, no tank. Some clients filter it, some don’t. We inject nutrients and at the end of that cycle, because we do it at sub-second. We’re in the milliseconds, like 50 milliseconds or 20 milliseconds per ejection. We read on the opposite side of the injection really what the concentration of those nutrients are. So it’s a way of getting feedback of how much nutrient you’re adding to make sure that you’re not making that mix too hot or you know kind of teetering to one side that really could harm the plant or plants or the whole crop if you don’t do it right. So it’s the amount of I guess dissolved material in the water. I guess there’s a Wikipedia version I could read. It’s the combined content of all inorganic and organic substances contained the liquid in molecular, ionized or micro granular suspended form. So it’s the dissolved portion. It’s what can conduct electricity, and as you add more of that the more conductive it becomes.

Matthew: We talked about watering in terms of the volume of water, but what about the temperature of water and how that affects plants. Do you measure that or monitor that?

Greg: I mean we do track it just as a data point. I think unless your water is getting really really cold to the point where that definitely probably could shock the plant, I think it does matter. I don’t know how much of that would really affect it. I think when you have a very dialed on process you would definitely see a difference in water temperature what that would make. But with everything kind of being sloppy and stuff I don’t know if you would really notice a huge difference. Like what’s the problem, you know, I don’t know how much of the problem that would cause versus just bad nutrient mixing or the temperature being completely out of whack.

Matthew: You mentioned once you get the system, Grow Remote system in place you start to get this feedback and you’re not flying blind anymore. How do you see business owners using that information to change the course of the business now that they’re not flying by. They’re getting this data. What are they doing with the data to help their business?

Greg: I think that shows up in multiple fronts. One, it really creates the experimentation platform for iterating. So as you continue to grow and you want bigger yields and just higher quality product, you got to have that feedback to create those kind of decision paths. Once you have those paths you essentially can create recipes. This is how I grow this particular strain. This is how I grow this particular strain in Colorado, in North Carolina, in Texas and wherever. By having that data you can now react. So it’s, over and above that I think the biggest thing on top of that is scale. So there’s a decent amount of master growers out there but they’re a limited resource. They can only be so many places at one time, and you have labor problems like how do you train people to scale. So when you get the feedback and you get control systems and processes in place you immediately create the ability to scale and cookie cut your process across any state, any building, turn it on. It will immediately start self-adjusting to get you to the recipe that you determine through experimentation and tracking the first time.

Matthew: We as a society tend to look at all technology is good but if it’s misapplied then we can have a negative outcome. Is there anything in the world of automation and controls that you see being applied incorrectly?

Greg: I think one thing that would be done incorrectly is either not having enough data. So you’re taking like one point and not really understanding what the full picture is. That would be probably one mistake. Another mistake is not standardizing processes. So they try to automate something but they don’t standardize like they don’t have enough feedback to control it. So like a lot of them will do, they have the AC units that run. They blast them at… because you’re not monitoring temperature in various parts of that room, you actually don’t really see that the opposite corner which is on the outside wall is getting very very cold. And that is not even getting it. So not enough of that is one issue. Allowing simple processes to be run by humans, believe it or not, they’re not as dependable as the machine that you just set up I think to go. But relying too many on that. I know there’s a lot of guys that say ah we’re very hands on, we baby our plants and all that. And I’m like that’s great and that’s true but still parts of those processes can be standardized and it would serve and that attention that they’re spending on that stuff that really you know could be cloud sourced, it opens them up to do other stuff like how do we make this better instead of wasting time just standing or holding the hose.

Matthew: With your background in the controls and automation industry, what are the best practices that you see needing to be translated over or that have successfully been completely translated over or are there some that don’t translate all to the cannabis industry?

Greg: I think a huge majority of the things that we do in the automation industry translate over. I mean these guys are commercial and/or I call industrial growers. They all need processes. They all need very systemized ways of doing things to scale. I think best practices really are getting in the stage of collection with a lot of our competitors. I mean it’s an obvious point. It’s a big market. It’s very obvious just given the amount of competitors that are coming online that this is something of high value to really go after. Energy efficiency is a huge one. The amount of power these guys are sucking up is incredible and I don’t really see that being sustainable. So really taking that usage that they currently have and creating smarter systems that just really harness every ounce of energy that’s going into that place and either repurposing it for something else like preheating water. Say you are in a colder environment and the water is really cold and that is an issue for you. Well your lights are generating a lot of heat so why not just pump that heat across a heat exchange or preheat the water and now you’re not wasting money on a boiler to heat water that could be done in a different way. It’s just becoming smarter of how you use energy I think is going to be, for indoor growers, it’s going to be a big thing because there are lots of people coming in to start growing and those margins are starting to get smaller and smaller and that electricity cost is not going down.

Matthew: Great points. Now this isn’t a practical question at all, but I think all research and development begins with kind of dream scenarios or ideal scenarios. So I’m going to throw kind of a fictional left field question at you to see your answer. If you could wave a magic wand and get unlimited budget to create an absolutely ideal 30,000 square foot grow with no limitations, anything goes including inventing technologies that don’t exist what would that look like?

Greg: That’s a fun question. Man it’s a big question. I mean first and foremost to me it’s like the set up of the building. Like how are you going to… okay so if you want to go to super top dream it would be a replicator. You would hit a button, grow me some plants. You hit a button and two seconds later it pops out a plant. That’s pretty far off. So a notch below that. A lot of my other clients in other industries are like data centered. So I see how they kind of heat and cool things. I really believe in an under floor system, and this is something we really try hard to push. And that’s creating a subfloor so you’re basically creating an 18 inch gap underneath and all your plants and everything sit on that. You can condition the air and insert CO2 and all sorts of fun stuff underneath and distribute it and it leaks up. It’s a very amazingly controlled environment doing it that way and it doesn’t require heating the entire building to do it. So I would start with that first is the environmental control and reducing the amount of energy needed for that.

And then I would get into… I think it would be badass to develop some technology to harness that sun in an indoor way somehow. Like it’s such a powerful thing. Even if you’re in a building to somehow collected or routed through, I don’t know, route it through mirrors or somehow get that, harness it and get it into the building without having to go to a greenhouse, that would be amazing. And the yields, because you’re not subject to weather at that point, but you at least still get to harness the sun which I think is probably the biggest most valuable thing out there when it comes to growing plants. If you could somehow harness that with some black box technology that would just grab and spit it back out in whatever form you want inside, that would be pretty amazing.

Matthew: It would. I’ve always been interested in, you know, the data centers they have a raised floor and you’re saying the reason is so they can control the air in a more complete way instead of just pushing it down from above.

Greg: Yeah absolutely I mean think about this. Your 30,000 square foot grow you just told me about it’s probably going to have like a what, a 20 foot ceiling, maybe higher. So typical systems will put all the (25.52 unclear) back on top and they’ll push the air down and yeah cold air will drop. Great. Hot air, if it’s in the winter or you’re on the East Coast good luck getting it pushed down because heat rises. So right there there’s already issues with that. So now instead of doing that, take a floor and raise it 18 inches, seal it, pressurize it with a slight pressure and now you just push in generic air. Say it’s 70 degrees which requires probably a quarter or even less of the amount of air handlers you need to condition it. It pushes it now through that and now you have automated vents that kind of open and close, that control the volume and it leaks up at the ideal temperature plus or minus like three degrees and then insert CO2 injection inside that. So you’re literally putting like the most conditioned air you can have right on the plant, 7 to 8 feet in that zone and then above it you don’t really care. And you can just pull that back in and recycle it. But that alone will drop your energy cost in cooling by like 30 percent.

Matthew: Now there is a lot of listeners that are just coming online in Nevada and Oregon and other places, and they’re retro fitting buildings and so forth and they might be saying that sounds great. The raised floor, but does that add a tremendous cost per square foot when you’re retrofitting a space to grow cannabis or is it a pretty mild cost?

Greg: I think for the result you get it’s a pretty mild cost. I think, I don’t know if this is a more recent number or not, but think of it more like a $2 or less of square foot to add in a floor like that. And to me that’s not unreasonable. So take that and then add radiant barrier on the top and you’re again probably hitting maybe a $1 or $1.25 a square foot for that, but the combination of those two your temperature in that grow will be so consistent, so even to me it will blow things away completely just having that setup alone.

Matthew: Now in terms of cost for the Grow Remote system, how can a grower or a business owner out there think about hey I’m interested in these sensors and what Grow Remote can do for me. How do you introduce the cost conversation?

Greg: Yeah so we try to be very ala carte with our pricing and how we set up the system. We don’t believe in… well we probably will in the future, but currently we don’t really bundle things together because we feel like you need ultimate flexibility in where and what you want to do. So a lot of competitors they take a bunch of sensors and output controls, so they throw it all into one box and you have to buy that thing for $900 or $1500 or whatever and that’s all you get. With ours it’s really tailored to as much as you want to as little as you want. So you can buy one temperature sensor and the gateway, what we call the gateway, which is what it transmits to, and you can take that and build it to hundreds of sensors, tens of thousands of sensors. You just have multiple gateways. So it’s kind of ala carte in that regard. So just as like a starter system temperature and humidity and a base station which can go up 100 sensors or outputs is $403. So pretty reasonable even for the home grower who wants to do this. This isn’t just for commercial. We do have more commercial oriented products like industrial control systems that use industrial type controllers and that. You know they’re not off the shelf. They’re really meant for high reliability and high scale.

Matthew: Greg in closing how can listeners learn more about Grow Remote?

Greg: I think the best way is go to our website www.growremote.com. So that’s www.growremote.com. And we recently just launched a new site. It should be either alive now or in the next few days anyway. And it has lots of information, data sheets and all that. Give us a call if you have a question. I mean we have a consulting arm as well and a lot of it is about educating the customer just on possibility more than anything. Like there are other things out there that do really great that gives you high high value.

Matthew: Greg thanks so much for being on CannaInsider today. We really appreciate it.

Greg: Awesome. Thank you Matt this was fun.

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 www.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 www.cannainsider.com/trends. Have a suggestion for an awesome guest on www.cannainsider.com, simply send us an email at feedback at cannainsider.com. We would love to hear from you.

Some quick disclosures and disclaimers, me your host works with the ArcView Group and promotional consideration may or may not be given to CannaInsider for the ads placed in the show. Also please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. 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.

What is Selling in Cannabis Dispensaries with Roy Bingham

roy bingham

Roy Bingham or BDS Analytics describes how his point of sale data collection at cannabis dispensaries provides key benchmarks for dispensary owners. BDS also uses the data they have collected to create an analytics and insights platform for customers in the cannabis space that want to have a pulse on what is selling.

***Guess what? you could be listening to this interview while you are driving, excercising, or sitting on an airplane, etc.
Get the CannaInsider podcast for FREE –> CLICK HERE.***

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

Key Takeaways:
[3:24] – Roy’s background
[5:11] – Roy explains BDS Analytics
[9:52] – An example of what BDS Analytics does
[12:10] – Is the data private
[13:16] – Roy compares the cannabis market with other markets
[16:42] – Roy talks about surprises in data
[18:31] – Plans on expanding outside of Colorado
[21:41] – Roy talks about common questions
[23:54] – Other parties interested in data from cannabis sales
[25:03] – What is the pricing for the platform
[27:14] – Roy talks about going through Canopy Boulder
[29:15] – BDS Analytics contact info

Read Full Transcript

Matthew: Wow welcome to CannaInsider. This is Matthew Kind the host of CannaInsider where we interview the leaders of the cannabis industry, and I just want to stop and reflect a little bit because this is the 100th episode since the show started and I cannot believe we’re here already. When I started this show I really had no idea how many people would listen and I’m absolutely humbled by it. I thought it might just be a couple hundred people, but it’s exceeded my wildest expectations and I really appreciate you listening.

This 100th episode is a really special one with a gentleman named Roy Bingham who is the founder of BDS Analytics that provides an incredible service to companies looking to get into the cannabis industry or who are already in and they want to learn how to launch a new product that has a reasonable chance of success. So very important service he offers. I do want to also thank the ArcView Group for their sponsorship of CannaInsider, and I’d also like to ask you if you’re enjoying the show to please consider leaving us a review on iTunes. Every time I see a review it gives me a catalyst to keep going and keep enthusiastic about bringing you the best guests and the best topics. So if you have an opportunity and haven’t done so already, please consider leaving a review for CannaInsider on iTunes and we also love you on Stitcher. If you’re listening on Stitcher, we really appreciate you listening and of course the CannaInsider app on iPhone and Google Android. So with that I want to introduce you to Roy Bingham.

The legal cannabis market in North America is now in the billions and growing rapidly. With such a large and growing market it’s easy to get caught up in the excitement. Many new entrants assume anything they bring to market in this gold rush will sell. While the market is fragmented on a state by state basis, there will come a time when national players with a lot of capital and operational experience enter the market. That is why it is important to know what the marketplace really looks like before entering and to get some objective data about what is selling well now, but also what is emerging as a hot selling product category and what may be fading in interest among cannabis consumers. That is why I’m pleased to welcome Roy Bingham founder of BDS Analytics to CannaInsider today to tell us how to navigate through all the static and to find the hard data on what cannabis consumers are actually purchasing. Welcome to CannaInsider Roy.

Roy: Thank you Matthew. It’s nice to be here.

Matthew: Roy to give us a sense of geography can you tell us where you are in the world today?

Roy: Yeah today I’m actually about half way up the coast of Maine on a trip with my family to visit the in-laws.

Matthew: Great, and can you tell us a little bit about your background and why you decided to get into the cannabis industry?

Roy: Yeah sure. I grew up in the UK and worked in banking and finance in London for about ten years and then I came to the United States to go to Harvard Business School, did my MBA there. And then I worked at McKenzie the big consulting firm gradually becoming accustomed to the different ways that business works in the United States. And after that I started a firm called Health Business Partners and we focused on consulting, mergers and acquisitions and advisory work in the nutrition industry which really became anything that you could buy in a whole foods market.

After about ten years of doing that then I got the bug that so many consultants get and started building businesses and built a data business as well as a nutrition industry newsletter business and a conference business in that industry before getting into consumer products and creating a fish oil company and then eventually working in the team, executive team at a digestive care company based in Florida called Renew Life. And then about nine months ago I decided to leave Renew Life and started doing consulting again, and decided that this was really probably the time look at the cannabis industry again which I had become curious about about three years ago. And at that time I decided it was a little too early for me to get involved, but when I took notice again about nine months ago I realized wow it’s come a tremendous long way in two and a half years. And so eventually I decided to join the Canopy Boulder accelerator program and start my current company BDS Analytics.

Matthew: And what is BDS exactly?

Roy: So BDS Analytics is a business that my partner and I have done before in two other industries. Most everyone has heard of IRI and Neilson. They are the two big data analytics companies that focus on the consumer packaged goods industries and products sold in supermarkets. And what they do is they take point of sale information about which products sold yesterday, last week and last month and they break that information down into huge databases and provide the analytic information to the huge consumer packaged goods companies. Well what we did in the natural products industry is we created a company called Spins that was similar but very narrowly focused just on natural and organic foods, supplements, personal care products. And so we provided a set of data from the point of sale information that the people like Whole Foods were willing to provide to us so that they could then compare their performance relative to the averages in the market and that’s the key to retailers.

So having done that in the natural products industry my cofounder Liz (unclear 6.25) had done the same thing in the biking and outdoor industry with a company called (6.30 unclear) Trends where she worked her way up from entry level all the way to the head of business development. And we got together and decided that there was a tremendous opportunity and a lot of demand in the cannabis industry to do something very similar and that is the birth of BDS Analytics.

Matthew: So a company like Whole Foods or even a bike retailer you’re saying what they get out of it is they get some way to benchmark how they’re doing relative to the industry?

Roy: Yes. So a retailer like Whole Foods gets to figure out in fact how to layout their store, how much of their store to dedicate to which categories of products based upon sales data. So they get to actually see the totality of the demand in the market for the products that they provide and then they can choose what percentage of the store to dedicate to you know fresh produce for example and what percentage of the store to have in supplements. And then within those categories they use our data to figure out which brands to carry, which products are growing rapidly and therefore should have the best dedicated space so that they satisfy the customer demand. And the important thing of course in the cannabis industry is what we’re now seeing is the emergence of brands and consumers going into the dispensary and actually looking for a specific brand.

If you at that dispensary don’t carry that brand, you might lose that consumer for life and a lot of value walks out of the door. So what we help dispensaries do is make sure that they’re stocking their store with what’s really in demand in their state and whether it’s in the medical use or the adult use channels. Now thinking about brands, the other part of your question, brands want to know (A) which products to develop for the future, (B) which marketing strategies are working for them if it is discounting strategies or promotional strategies or buy one get one, and they want to know immediately. They want to know it from off the shelf sales data rather than sell into the store data so they can figure out which of those levers to tweak. And then perhaps the most important thing if you’re a brand is you want to be able to go to a new retailer who doesn’t already carry your products and show them that you have third party data that proves that yours is a major brand or a fast growing brand in your particular category or subcategory and therefore it would be good for the retailer to carry your product in their store.

Matthew: So bringing this home to a real world example, let’s say I’m a cannabis infused drink manufacturer. I notice after looking at some BDS data that 8 oz-10 mg drinks that are both have some spicy and sweetness to them are starting to sell really well. So you get that extrapolate like hey if we’re creating a new line within our brand that that’s something to really focus on because we can see that selling well at BDS.

Roy: Exactly yes it’s a very good example. It goes down to a very detailed level of data. In fact we track attributes as well so you might even know if it was an organic product or if it was super critically extracted with CO2 for example. That gives you a sense of what the consumers are going for now and that might be a tiny micro niche this month but in six month’s time that might one of the hottest categories in the industry.

Matthew: I imagine the retailers want the benchmarking but they’re not going to go into a tremendous amount of customization for you. They will throw you the data and say you figure it out. Is that pretty much how it works?

Roy: Yes it’s very easy really for the retailer. So everybody in the industry has a point of sale system and those point of sale systems all capture data into some kind of internal database. My technology team has worked with AT80 different point of sales systems in extracting data from those systems. Usually we can automate it. Probably over 90 percent of cases it can just happen automatically at the end of the day or the week or the month and our client barely even knows it’s happened. In some cases we have to ask them to manually create a certain format of spreadsheet. But once the spreadsheet is created we can swallow that data in all kinds of different forms and then we normalize it and standardize it which is very difficult actually. As you can imagine the descriptions in people’s computer systems depend upon who was typing it in on that day. And so there are hundreds of different descriptions in use that might be exactly the same product for example. So a big part of what we have to do is figure out how to normalize that data, but that doesn’t worry the dispensaries at all. They don’t need to be concerned with that.

Matthew: Now the retail dispensaries are, how does their data treated? Is it anonymized so it goes in and we don’t know actually who the retailer is just maybe either zip code or region or how does that work.

Roy: Yeah the first thing actually is we encrypt the data immediately. So we are very hacker proof. And then the second thing we do is we anonymize the data so nobody can use the data to look at their immediate competitor in any way. When they access the data through the portal they will be able to see their own information and we have very strict password protections on that data so that only the dedicated client can see their own data in comparison to the average of the market. So that’s really important. You’re not going to get to see competitive data. Nobody is sharing data that would be seen by their immediate rivals.

Matthew: You mentioned working in the grocery store vertical in the past and your partner working in the bikes and leisure trends industry. Is this just a matter of plugging and playing into the cannabis industry or are there unique considerations and nuances coming on to the cannabis market?

Roy: Will it has a lot of similarities to the natural products industry and the bike industry, but there are subtle differences . The similarities are that there are a lot of small, independent stores or small chains of stores, but in the natural products industry there is a lot more mom and pop type of operators who were (1) reluctant to share their data, (2) not as confident about the value of the data. What we’ve found especially in the Colorado dispensaries is a number of sophisticated management teams who are very data centric. They tend to be quite young. They realize that information is extraordinarily valuable.

So it’s been exciting to us to see how quickly people have embraced our technology much quicker than the penetration we achieved in natural products or in actually in biking and outdoors as well where you had companies that emerged as people like REI and Sports Authority eventually, but you had a lot of mom and pop small operators who felt that, who were skeptical about the value of data. They thought that they could decide which were the products they should carry in their store. And their customers would choose based on what was presented to them rather than having preconceived ideas from the customer about what they wanted. So those are some of the important differences.

Of course in the dispensary channel our clients carry HIPPA data, very secret information, very private information and it’s very important to us that we do not see that information. We’re not looking to touch any of that information. So that’s on subtle difference. And another one is that because this industry has different regulations state by state we’re building our databases state by state. So we will compare data within Colorado for example and we will be able to provide data about Colorado to people who are looking at Washington or Oregon for example, but we’re not going to generalize early on in this process that if you seen Colorado you know what it’s going to be like in Illinois because we all know that’s not going to be the case because of a different regulatory environment in different states. So therefore we’re building 50 different databases if you like as opposed to one big national database.

Matthew: That’s an excellent point. For example I know in Washington State there still is a higher percentage of people that prefer flower to edibles which leads to my next question. Is there anything that surprised you from your initial data? One thing that surprises me is that how fast the market is turning away from flower and turning towards the infused products of various kinds. I mean it seems logical in many ways, but it’s just happening so much faster than I thought would happen. Is there anything that surprised you from your initial data that you hadn’t anticipated?

Roy: Well I couldn’t agree with you more. I suppose I wasn’t that surprised given my background with packaged goods in other industries. I guess I wasn’t that surprised by the speed with which the infused products emerged and of course the power of branding that is driving that. And I think a lot of this is introductory products for people who were new to consuming cannabis as well. And many tend to prefer not to smoke for example so they’re looking for alternatives that are easy and that are perhaps a bit more medical or a bit more dosage controlled in their minds so that they can begin to learn what’s right for them. So we’ve certainly seen that in the data.

I think the other thing that we’ve perhaps been a bit surprised by is the speed with which concentrates and extracts have grown in the last 18 months as well. And a number of our clients have had tremendous growth in the extracts area for example. And then of course things like vaporizer cartridges as vaporizers become so popular. So we’re dealing with very rapid change in an industry that’s very new and very innovative at the moment. And the established patterns of consumer behavior haven’t really happened yet and we’re going to see very rapid change I think for the next several years both overall and on a state by state basis.

Matthew: So you mentioned state by state database. Are you starting just here in Colorado or is other states on the roadmap? What does it look like, your plans there?

Roy: Yes our initial focus is Colorado for the next several months. We already have had a lot of contact from other states as well. And what I’ve really said is after Colorado. And basically in Colorado we need to establish a panel that gives us statistically meaningful data which is 10 or 20 percent of each of the two markets in Colorado. Once we have a retailer panel of that scale we have a PhD statistician who works was us who will extrapolate that data to the size of the total market and we can be confident with a 99 percent accuracy that when we have 15 or 20 percent of the market that we know what the total market looks like as long as we have the right distribution of different types of dispensaries. At that point we will expand to Washington, Oregon and other states that have a market that has some maturity in scale and we can roll out in those markets relatively efficiently.

Matthew: That’s pretty fascinating. That’s all you need is 15 to 20 percent to extrapolate those numbers. So after a certain point…

Roy: Yeah you need 15 or 20 percent not concentrated. Like if it was all in one city, you know, one big city like Denver that wouldn’t be statistically meaningful. If it was all one type of store, it probably wouldn’t be meaningful either. So we do have to include independent and mom and pop stores in the database for example even if they may not be a massive percentage of the total. They can be very important because they have different characteristics, different consumers that still comprise an important percentage of the total market.

Matthew: Which is a good point. If I’m a manufacturer, a brand in the cannabis space and I’m looking to target let’s say you know people in their 20s that live in an urban environment, are you able to drill down to that level or is it higher up or you can’t really quite get that?

Roy: Yeah we’re not really drilling into individual cities for example. The problem with that is that there are a few cities that are very large to the point where competitive data might not be the objective there. So you need to have a significant number of retailers in any one area. And so we tend to look at the state level data.

Matthew: You mentioned HIPPA compliance. So there’s the opportunity then to segment a recreational sale from a medical sale?

Roy: Yes most of our clients have completely separate systems and databases between the two markets.

Matthew: Okay. Now I’ve witnessed some infused products companies showing interest in what you’re doing. What is the benefit they see working with BDS? I mean are they approaching you and kind of have similar questions as to what they want to do and how they want to work with you?

Roy: Yes the first one is usually how do I rank in the market? How am I doing? I know what my own sales are, but I don’t know how that compares with the overall marketplace. So they love to see data that shows their own ranking. The other thing is they know in aggregate how rapidly they’re growing based on their wholesale sales data, but they don’t know what the sell through rate is. So you can have this situation where you’re growing 100 percent based on the wholesale data, but only 50 percent based on the retail data. What that tells you is you’re filling up the channel and you might start, you know, and that might create a problem for you in the future.

And of course on the opposite side you might see a situation where your retail sales are going up twice as fast as your wholesales sales in which case you know that there’s a lot of demand and you better stock up some infantry fairly soon. So those are a couple of examples. And the big one really is to be able to go to a new chain of retailers that you don’t already work with and show them the data that says you’re the number three brand of this type or you are the fastest growing or the second or the third fastest growing and therefore it would be a good idea to carry that product. And that’s what I did in my previous job in the digestive care market. We started off in the independent health food stores and then we used the spins data to show Whole Foods market that they should carry more of our product in their stores. And then we showed the natural products industry data to Walmart, Walgreens, CVS, Rite-Aid, etc. and said okay if you’re going to have a natural digestive care section, you should have the number one brand in that section, and that’s how we grew from $40 million to $100 million in 5 years.

Matthew: Wow that’s great. Apart from infused products companies and different manufacturers and brands, are there any third parties, government or regulators that want to access this data or anybody that kind of surprised you that came out of left field.

Roy: Well certainly investors find this data very interesting indeed. Obviously when they’re looking at possibly investing in a company it’s very reassuring to see independent, third party data that shows how well that company is doing. So typically a manufacturer will come to us and start using our data and they may be showing that data to investors as well. So that would be a classic example. Then the other thing is that of course we can help regulators to focus their resources as well. They’ve got a massive data, imagine through the metric system the MED in Colorado has tons of data and we’re very experienced at figuring out what’s important about that data. So we do have a dialogue going with them and some of their advisors about how we might be able to help them to use their resources more efficiently and focus on the things that they’re most concerned about.

Matthew: What about price point? How much does it cost to access the BDS Analytics platform?

Roy: Yeah it varies depending upon the size of market that you’re interested in. So first if you’re a dispensary, it’s very economical. It’s somewhere between $50 a month and $200 a month if you’re a chain. At the moment as we’re expanding in Colorado we have a program called BDS Preferred for dispensaries which basically provides the service for free as long as you’re one of our beta testers who’s helping us to refine the system. For brands it could be as little as $500 a month if you were just looking at one subcategory that you are particularly interested in, and it could be many thousands of dollars a month if you’re looking for a large category. And of course as the categories grow as sales increase so the cost of the data on that category will increase as well.

At Spins we had customers who were spending well over $1 million a year with us on particular categories, and we had embedded staff who were working full time with our clients helping them to crunch data about new markets and market opportunities in competitive situations. So it’s really a matter of how much appetite and demand branding clients have for the data.

Matthew: What a great secret weapon here to have. I would not be telling my competitors or talking about using BDS that much if I was using it because it sounds like a great tool. Now you were part…

Roy: Yes I mean people become very used to this data. I used it for six year as I told you in digestive care and we could barely begin our product development process without studying the data intensively for several days actually.

Matthew: Great point. Now you were part of the first class of Canopy Boulder the first cannabis accelerator. For our listeners that are not familiar with Canopy Boulder, can you tell us what that was like going through that program?

Roy: Yes, yeah. Canopy Boulder was a very intensive program, extremely helpful to people starting a business. Of course you know I’m in my 50s. I’ve started several businesses so I had different needs from the program perhaps than some people. There were ten new companies that joined that program. My primary needs were for relationships so that I could validate the business model in the cannabis channel and compare it to what I had done in other industries and rapidly develop relationships. But many of the other people in the program were relatively new entrepreneurs. So they would have mentors who worked with them on marketing, sales, finance, accounting, the full range of capabilities that you need to start a business. And then Canopy Boulder helped those companies to raise capital and of course prepare for pitching which is a very important part of this process in order to raise capital through ArcView, through the Rockies Venture Club and from other angel investors.

Matthew: Are you still looking for investors for BDS Roy?

Roy: I’m not really, no. We were very successful. We originally intended to raise $900,000 and we’ve actually raised $1.4 million so far. And that’s actually about what we need to build this business. Originally I was going to do two raises, $900,000 and then another raise of something like a similar amount about a year later, but the appetite we’ve seen for investors has been great and so we’re at the point where we probably won’t need to do a second round.

Matthew: Roy in closing how can listeners learn more about BDS Analytics?

Roy: Well one thing is just to go to the website www.bdsanalytics.com and there is an opportunity there for you to register your interest. Go to the contact task page and send us a message of course. My email is just roy@bdsanalytics.com My cofounder (29.38 unclear name) she’s liz@bdsanalytics.com. And we’d be delighted to correspond with you and tell you what we’re doing and connect over when we’re going to be able to satisfy your needs as well. So that will be an approach to take initially.

Matthew: Great. Well Roy thanks so much for coming on CannaInsider today and telling us how this expanded, crazy market works. There’s so much intelligence we need to make great decisions here. And I’m glad you’re stepping up and filling that need in the marketplace. Good luck to you.

Roy: Thank you very much Matthew. It’s an honor and a privilege to be on your show and it’s really been fantastic for me to join this industry that’s so filled with vibrant exciting entrepreneurs with such positive attitude. I’m delighted to be here and look forward to helping people grow very successful businesses in the coming years.

Matthew: A very special thank you to Roy Bingham of BDS Analytics. If you want to know the future, look at the past and that’s what BDS Analytics helps to do. I really appreciate you sticking with us through 100 episodes and here’s to 100 more. Don’t forget there is now a full archive of 100 episodes you can listen to on iTunes, and in fact that’s all that iTunes store. So occasionally you’ll start to see a flashback episode appear on Wednesday because iTunes won’t even store all the episodes we have. So I’m going to have to bring some blasts from the past. There’s some great great interviews back there that can really help you understand and digest the rapidly evolving cannabis industry. So I encourage you to go back to the archives and listen to all the guests we have there. Again thanks so much for sticking with CannaInsider for 100 episodes and here’s to 100 more.

Cannabis Tourism with Bud and Breakfast CEO, Sean Roby

Sean Roby, Bud and Breakfast

Get a behind the scenes glimpse at the booming cannabis tourism industry with the CEO of Budandbreakfast.com, Sean Roby.

Visit:
https://www.budandbreakfast.com/

Key Takeaways:
[1:57] – Sean talks about his background
[3:52] – What is Bud and Breakfast
[4:25] – Sean talks about price ranges
[5:02] – Most popular destinations
[7:39] – Sean discusses the different experiences people are looking for
[10:56] – Sean talks about adding value and experience to a customer’s stay
[12:36] – Sean talks about the different ways to book with Bud and Breakfast
[15:11] – Sean discusses 420 week
[15:50] – Emerging cannabis markets
[17:07] – Is Alaska coming onboard
[19:07] – Sean talks about the medicinal tourism crowd
[21:09] – Sean discusses Ayurvedic doshas
[26:00] – Contact details for Bud and Breakfast

Read Full Transcript

Matthew: Hi. I’m Matthew Kind. Every Monday look for a fresh new episode where I will take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com . Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView Group is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you are an accredited investor and would like to join me as an ArcView member, please email me at feedback@cannainsider.com to get started. Now here’s your program.

Cannabis tourism is booming. Excited by the end of prohibition many travelers are choosing to spend their vacation dollars to experience cannabis where it’s legal and have fun while doing it. Entrepreneurs are popping up to serve that need. One of those entrepreneurs is with us today, Sean Roby of Bud and Breakfast. Welcome to CannaInsider Sean.

Sean: Hey Matt thanks for having me.

Matthew: Sure thing. Sean to give listeners a sense of geography, can you tell us where you’re located in the world today?

Sean: Sure, I live in Boulder, Colorado. Our website is international though. So I could be anywhere on the planet and still function pretty good.

Matthew: Good. You’re like the four hour work week guy. You can be anywhere.

Sean: I would say it’s a bit more than that.

Matthew: Especially with the beginning of a startup.
Sean: Exactly.

Matthew: Now what’s your background and how did you get into this business?

Sean: Sure so you know I started actually way back when in holistic medicine and I went to school for Ayurvedic medicine and acupuncture and things like that. I had moved over to Hawaii and my wife’s family was living in Napa Valley, and so they kind of you know had a really nice, they still do have a real nice winery over there. And we started getting people kind of coming to California and to Hawaii sort of simultaneously to stay at our places, and we kind of decided to come up with this business called Taste of Travel.

And so in Napa we were kind of doing you know wine to table or farm to table experiences I should say. And just kind of giving tours of the local area and everything wine related. And then over in Hawaii we would basically, people would come and we would take them to waterfall tours and take them to kind of ancient (2.52 unclear) was you know raising his children and farming ancient taro patches and whatnot. And we had a lot of customers that were really into that, and we kind of started thinking more globally. And you know my daughter was going to come over to see you, and she gave me a call one day and said hey dad cannabis has been legalized in Colorado. And I don’t know it just kind of clicked and you know we thought oh okay cannabis tourism, that’s the next one, and it was a smart move because now it’s definitely at the forefront of everything related to Taste of Travel.

Matthew: Yeah it’s amazing how fast in the last six months has come into the forefront of the public conversation. So good timing there. I am very interested in Ayurvedic medicine. I didn’t know you had a background in that so we might hit you with a couple of questions about that before the end of the interview. But give us a background, what is Bud and Breakfast? Who does it serve? Who’s using it now? What geographies?

Sean: Sure so www.budandbreakfast.com is an online reservations website for cannabis friendly accommodations worldwide. So I mean when you ask who’s using it I would have a really hard time to kind of profile that because we have everyone from doctors, lawyers to you know international travelers to Grateful Dead Heads to every person in between all of that. It’s a full gamut and it’s everyone.

Matthew: Wow and the price range, is it from really inexpensive all the way up to something quite expensive?

Sean: We have basically from tents to mansions. You know what I mean, it’s pretty full spectrum. I mean we have you know kind of like our B&B in the sense of you know people offer couches and a bedroom within their house and then people offer their whole house. You know we even have wilderness retreats where people can stay in teepees and kind of do a camping sort of climb the summit, stay in teepees you know kind of full excursion. We have tours, we have you know the full gamut.

Matthew: And what geographies or cities are the most popular right now?

Sean: By far nationally would be Denver. You know it was the first and probably has its roots in deepest. And the other cities in the rec states are coming onboard fairly quickly, but I would say Denver for sure is number one. And then internationally I would say it’s kind of a tossup between Uruguay and Jamaica. Jamaica is really coming on strong right now. We’ve been getting a lot of listings from there, and Uruguay is kind of an exotic location as well. You know we’ve been getting a lot of people that want to go down there and I want to go down there.

Matthew: Yes interesting what’s happening both in Jamaica and Uruguay. We have some Jamaican listeners so hello to you in Jamaica. What an awesome culture and history to now be legalizing cannabis and doing it legally. So that’s awesome. And Uruguay they’ve kind of got an interesting situation where they kind of are going back and forth with hey we want this to be a commercial market, and then saying no we don’t. We actually want to control it all, the government. And they kind of go back and forth with that. Every time they kind of surrender a little bit of the market to the commercial entrepreneurs. Then they say you know what to cultivate this all ourselves. So I hope that gets cleared up soon and I hope they let the commercial cultivators and entrepreneurs flourish instead of just having one source of cannabis.

Sean: Yeah it’s interesting you know I mean what I heard lately was $1 grams. And you know I mean that is hard for a cultivator to contend with. You know at the end of the day we deal more in the tourism. So for people to be able to go to a place like Uruguay and potentially land themselves a $1 gram and you know kind of have that experience, I think it’s going to be a plus for us either way.

Matthew: Right, to just people a sense of pricing here locally in Boulder you can see anything from $10 to $20 a gram, more like $15 to $20 a gram at some of the nicer dispensaries on some of the nicer strains. So that’s a huge huge dealt on price.

Sean: Sure. We were just up in Vail and you know they have a moratorium on dispensaries within Vail, but two miles down the road in Eagle Vail there’s quite a few. And you know Vail is pretty upscale, but I saw $37 grams in the dispensaries.

Matthew: There’s a markup for you. Now what are people interested in in terms of experiences when touring, doing cannabis tours or staying at someone’s residence. I mean is it simply hey I want to place to lay my head at night and fall asleep or they want to interact with the hosts, and if so in what way?

Sean: Yeah so you know a lot of people are coming just for a full out relaxation. You know they just want to sit in a hammock and partake of some herb and just kind of rest and heal from their long work week or whatever situation that’s going on in their life. But then yeah we do have, you know, a lot of the customers coming in from out of states are wanting the full experience. And a lot of our B&B accommodation owners do offer that. Such as you know they come in, they’ll pick them up at the airport and take them to a dispensary or just come back to their house and cook for them. Some people actually are cooking with infused edibles and whatnot.

That’s kind of a big thing. A lot of people like that, and then the wake and bake kind of, you know, bacon and eggs in a bowl waiting for you. And then you know potentially a show out at Red Rocks. There are restaurants now that are infusing or even just even cannabis theme you know kind of satirical names on food items and whatnot. It’s all just so new and for a lot of people that are coming in from more draconian [ph] states it’s a big deal. You know for those of us that live here it’s just kind of life every day, but it’s not so for the rest of the country.

Matthew: That’s true. Now is there one thing in particular you’ve seen a host do to stand out and create an experience that really said wow that’s creative.

Sean: Sure I guess I could kind of reiterate my last question answer was, you know, basically the ones that are the full Bud and Breakfasts are by far the ones that are getting the most bookings. A lot of our places are cannabis friendly, but smoke outside and you know get your herbs from down the way at the dispensary. And you know we get bookings on those, but by far the ones that are doing the best are the all inclusive bud and breakfast where you get there and like I said there’s a bowl burning, potentially infused foods that are all kind of moderated by, you know, I mean these guys are pros that do this. They might even have mip or a license to serve food or make food. They include those. But definitely the bud and breakfast, the all inclusive ones are the ones that are the hot commodity.

Matthew: They’re getting the most bookings I imagine.

Sean: Most of them are booked out. It’s hard to even get them at this point.

Matthew: Now are some of these hosts thinking like hey I can turn this into a full time or a heavy part-time gig with all the traffic I’m getting and all the bookings I’m getting here?

Sean: Oh yeah I think that many of them are, you know, have probably quite their day job at this point. I think short term rentals and whatnot, I think they don’t need to go outside looking for occupation anymore. I think that they’ve found their niche. And again this is exploding. I think it’s probably the fastest growing aspect in the hospitality and travel industry at this point.

Matthew: So is it far to say if you’re a host, if you go out of your way to add some value in terms of experience, it really makes up for how much you can charge?

Sean: Yeah you know I mean it’s definitely, they cannot sell marijuana. That is illegal, but you know a lot of people are basically within recreational states you’re allowed to gift. And so you know up to a certain amount per day. And so a lot of them will just have a couple joints on the pillow you know or a bowl or a couple buds sitting out. Some of them actually have like a small minibar set up where you walk in and instead of there being alcohol there there would be jars, you know, labeled O.G. Kush, Sour Diesel, Blue Dream, what have you. It’s a novelty and it’s a lot of fun for these folks. They said it’s the most fun they’ve ever had in any job they’ve done.

Matthew: Wow. Yeah you get to really express yourself too by the strains you select and kind of explain and why you enjoy them and everything. So that’s really cool. I know here in Colorado there’s kind of, you know, kind of how there’s the foodie scene, the cannabis scene there’s a whole new language and lexicon and you know a whole new psychology to it that’s kind of, I can only say akin to the wine industry in terms of people sitting around talking about the characteristics of different strains. It’s amazing to witness the creation of that. I’m sure it always existed. It just seems more public now.

Sean: Sure I mean Denver is absolutely the Napa Valley of cannabis. I mean 100 percent. Colorado is producing some of the finest in the world at this point. I think they’ve dubbed it the new Amsterdam.

Matthew: Are bookings happening 100 percent online or do they happen by phone? What are the different ways people can book with Bud and Breakfast?

Sean: Sure so you know we are an online reservations website. So generally a booking is made, and then our clients either manually sort of okay it or it just automatically goes through. They can set that in their settings when they first set up their account. You know when a booking gets made I automatically get notified and then call the customer within a short time after the booking and talk with them and kind of vet them and see what they’re looking for specifically in the booking. And you know we get to kind of know each other. It’s a real customer service orientated business. I spend most of my day talking with people all day long.

So I feel when a booking is made, I feel comfortable that by the time they kind of through our screening process that it’s good to go. So at that point once the booking is made then we have them directly contact the accommodation owner and they kind of take it from there.

Matthew: And how many people are booking now this year so far?

Sean: You know it’s interesting we launched officially on April 1st. It was interesting because we launched on April 1st and with the 420 holiday, you know, the cannabis holiday we thought oh you know we’ll have a couple bookings per day. When we went live we were in the Denver region in particular we were completely sold out. We did not have one place. I was directing people up to Boulder, to Vail, Pagosa Springs, Glenwood Springs to our other accommodations because we were just completely sold out. Things did calm down a little bit right after April 20th holiday, and that has a lot to do with just being able to advertise. You know Google sets limits on cannabis advertising. So we’ve had to get creative and get our brand out there. And now that we’re having a lot more success in that I would say we went from a couple per day up to about 10 to 15 per day now. Exponentially when you look at the graph it’s just going up, up, up. So it’s a positive thing.

Matthew: yeah it is kind of a crazy scene here in Colorado, the 4/20 week. We had the Cannabis Cup which was huge by itself, World Cannabis Week and a number of events there along Colfax, and I’m sure a lot of other things going on, parties and stuff. It’s amazing to see how this is growing and how 420 has just really taken off that week. What have you seen?

Sean: Yeah well you know I was down there at the Cannabis Cup which was an amazing event. We did a ton of networking. I must have talked to thousands of people that day. And then right around that time was the Marijuana Investors Summit which is out by the airport and then the music events that were all happening downtown. It was quite a weekend I must say. It was a lot of fun.

Matthew: Now which markets do you think will grow the most both domestically and internationally? We spoke a little bit about Jamaica and Uruguay. Are there any others that you think will be coming on board soon in a big way?

Sean: Sure well what we’re seeing now you know Oregon legalized quite a while ago, but they actually didn’t implement a legislation until July 1st. So it actually hasn’t been officially implemented. And so as we’re getting closer to July 1st where starting to notice our Oregon accommodations coming on board which is really exciting. I think that you’re going to see a lot more, you know, obviously in the recreational states; Washington, Oregon and Alaska, we’re starting to get a lot of accommodations from them. And you know D.C., D.C. is still kind of our hold out. You know it’s kind of a, I think people are not quite sure what to think there. You know the mayor legalized going against…

Matthew: Yeah that was pretty bold. They threatened him pretty hardcore.

Sean: They did, they did. We’re really, you know, now that that’s kind of official we’re starting to advertise pretty hard down in D.C. I think that it’s going to be good for, you know, all kinds of people really but you know lobbyists and whatnot that come into town, I think that they stress relief. And I think that they’ll appreciate our accommodations that are coming onboard down there.

Matthew: How about Alaska? I think there’s a lot of crazy opportunities there with fishing and nature, but I mean it’s not, they’re still creating the rules and guidelines there, but any interest in Alaska?

Sean: Oh yeah you know we’ve been marketing up there. We have quite a few accommodations in Alaska now on our site. And you know we’re working with Charlo Greene who is the director of the Alaskan Cannabis Club. And we definitely feel that Alaska is going to come on strong. You know they’ve always kind of been sort of on the forefront or on the front tier of this whole thing. I mean I think that they actually had legalized back in… don’t officially quote me on this, but I think it was the late 80s or sometime in the 90s where they actually had legalized and then they kind of went back on it, and it’s been going back and forth for quite some time. It definitely makes sense that they would have been on the forefront of the states to go ahead and legalize recreationally.

Matthew: That’s great. I’m so curious to see what all these interesting hosts will come up with in terms of creative ways that they’ll entertain and provide experiences for their guests. I’m curious what do the hosts or hotel that are part of Bud and B, what do they think about cannabis guests? Are they thrown off by them? What’s their general reaction?

Sean: Oh no in fact the contrary. I would say our hosts have found the cannabis clientele to be way more friendlier and easy to deal with. You know as quoted by our friends from the First Inn down in Pagosa Springs, this is the kicker, “these folks are way less likely to be throwing bottles of Jack Daniels through the window.” You know I mean honestly like when people are smoking cannabis they are, they’re wanting to relax. They’re just having a good time. They’re not binge drinking. They’re not trashing and destroying and vandalizing things. You know and this is going to, you know, at the end of the day this is going to make it so that cannabis travelers are way more desirable than your average traveler that just wants to drink and party and kind of come from that more aggressive standpoint.

Matthew: We’ve been talking about recreational tourism, but is there any medicinal tourism you see?

Sean: Absolutely. You know we’re working with the Charlotte’s Web crew. It’s CW Botanicals, and they’re kind of on the forefront of the CBD strains and providing medicine for children with epilepsy and you know people in general with autoimmune and inflammatory conditions such as Crohn’s, colitis, diabetes, I mean, even celiacs and whatnot. And so what we’re seeing now I wouldn’t say it’s the majority of our travelers, but we are definitely seeing an up tick in people coming to Colorado kind of as refugees you know looking for a place where they can safely and legally administer medicine for either themselves or to their loved ones. So we’re actually working with the realm of care folks to get in wellness baskets and whatnot that are going to have CBD tinctures and lotions and whatnot. Our accommodation owners are really excited about this.

Matthew: I particularly notice a lot of people from Texas fitting kind of that refugee status because they can’t really do anything or help their kids or help themselves in any meaningful way. So it seems like almost every day I’m bumping into someone from Texas. So there is a steady stream, and I hope their legislation changes down there soon which it looks like it might.

Sean: Yeah I keep hearing things. Little snippets of, you know, potentially even full legalization which would be amazing for Texas. I would say that for Colorado, specifically for our accommodations, Texas is our number one market.

Matthew: Wow, interesting. A lot of people are not familiar with this Ayurvedic diet or Ayurvedic medicine, and I just became familiar with it in the last couple of years. And there’s certain dosha types. Can you explain what doshas mean. It’s not every day I have someone on the show that understands this really well, the different doshas, what they mean and how to think about them?

Sean: Sure so you know I think a lot of people know probably a little bit more about Chinease medicine and the elements that go into that, and you know whether a disease or a medical history was based on too much dampness, too much coldness, too much heat and whatnot. In Ayurveda we have Vata, Pitta, and Kapha. And Vata is the element that represents or the dosha that represents air and ether. So it’s cold and dry. So for a person I mean this is a real quick sum up here, but if a person was cold and dry, you would treat them with the opposites. So like increases like and opposites treat each other. So in the case Vata air and ether is cold and dry so you want to treat them with warm and moist. Pitta is fire and water. So think steam, they’re the leaders. They’re the real direct kind of CEOs. You know physiologically they’re probably kind of musclely, maybe freckley, you know tend to be prone towards heat, but again really good at directing.

And so you know generally we, you know, if it’s moist and it’s hot we’re going to treat it with the opposite which would be dry and cool. Kapha is generally it’s going to be the thick boned, you know, kind of big teeth, slow, generally get things done. These all can be related to animals too. So Vata is like when you take the pulse of a person who’s Vata it’s going to be they kind of attribute it a snake. So it kind of jumps from finger to finger when you’re taking the pulse. It’s kind of sporadic, you know, maybe some palpations here and there like a flutter. And when you get into Pitta it’s going to be strong, steady, kind of like a frog jumping. And then a swan is going.. oh sorry, a Kapha is going to be more like a swan where it’s just kind of like a little slower, steady, not as intense as Pitta.

But generally the foundation of Ayurvedic medicine is you know going to the root of the disease. We call it dis-ease you know. Instead of covering up the symptoms Ayurvedic medicine is I think it’s the oldest known medical system on the planet. So a lot of, you know, when I lived in India and Nepal during my internship, a lot of Western style doctors actually go to school 50 percent for Ayurvedic and 50 percent for Western medicine to kind of give that well-rounded approach.

Matthew: It’s amazing too. When I first started learning about this I took a couple online quizzes, and I wasn’t expecting much. It’s so easy to identify what dosha you are, and some people kind of overlap maybe two, but it’s amazing. What’s your dosha?

Sean: You know actually it’s interesting. My professor told me that I was tri-doshic. So it’s really rare. You know that a person can be Vata, Pitta and Kapha in equal proportions. And so you know when I’m in Hawaii, you know, which is warm and moist, my Pitta and my Kapha come out. So I have to kind of like eat a little bit lighter and tend to be a little bit more active so I don’t kind of get into that sort of Hawaii lethargy because it’s so warm. When I’m in Colorado I tend to be drier, you know the upper elevation, my Vata comes out more so I have foliate myself a lot more. I have to eat a lot more sort of nutritive, moist foods.

You know per the season too, in winter I’m going to be eating a lot more warm foods, and in the summer I’m going to be eating lighter foods and cooler foods. The foundation of Ayurvedic medicine is opposites treat each other and like increases like. You don’t eat more of what you are. If you’re having a heat condition, you know, you’re not going to drink a bunch more alcohol and eat a bunch of hot food, that would be contrary to wisdom. So you’re going to be generally, you know, doing the opposite of the element that you’re existing in. And so that somehow runs contrary to a lot of Western thought, but it is kind of simple wisdom ultimately.

Matthew: I will try to include a quiz or a self diagnosis, something, a link in the show notes for people that are interested in this because I find it really fascinating and very helpful too. Once you understand your dosha or two doshas or in Sean’s case three which is really rare from my understanding, you can start to eat and treat yourself a little different and notice positive benefits. As we close how can listeners find Bud and Breakfast online?

Sean: Yeah so you know it’s real simple. You can do a Google search for Bud and Breakfast or you can just type in www.budandbreakfast.com. So www.budandbreakfast.com is our website.

Matthew: Sean thanks so much for being on CannaInsider and educating us. We really appreciate it.

Sean: Thank you Matt for the opportunity.

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 www.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 www.cannainsider.com/trends. Have a suggestion for an awesome guest on www.cannainsider.com, simply send us an email at feedback at cannainsider.com. We would love to hear from you.

Some quick disclosures and disclaimers, me your host works with the ArcView Group and promotional consideration may or may not be given to CannaInsider for the ads placed in the show. Also please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. 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.

Bringing the Cannabis Market to your Door with Healthy Headie

Healthy Headie

In this episode we welcome Holly Alberti-Evans, co-founder of Healthy Headie Lifestyle to CannaInsider. Healy Headie is the Mary Kay of Mary J and they bring the cannabis market to you with in-home shopping and education.

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

Get the Podcast
Get the free podcast for your iPhone or Android device, CLICK HERE

Key Takeaways:
[1:37] – Holly talks about her background
[3:17] – What is Healthy Headie
[5:21] – Holly talks about the stigma between the different ways to ingest cannabis
[5:53] – How customers are responding
[6:33] – Is there a specific demographic that asks for Healthy Headie services
[8:18] – Holly discusses what products get the most attention and questions about
[9:32] – What is the Magical Butter Machine
[12:17] – Holly explains the dynamic for an in-home session
[15:35] – Initiating an in-home presentation
[19:48] – Where is Healthy Headie available
[20:35] – Investment opportunities in Healthy Headie
[20:58] – Contact details for Healthy Headie

Read Full Transcript

Matthew: Hi I’m Matthew Kind. Every Monday look for a fresh new episode where I will take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView Group is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you an accredited investor and would like to join me as an ArcView member, please email me at feedback at cannainsider.com to get started. Now here’s your program.

As part of an ongoing series to chronicle the innovation that is occurring in the cannabis industry I will be profiling entrepreneurs from Canopy Boulder, the first cannabis accelerator here in Boulder, Colorado. I’m pleased to welcome Holly Alberti-Evans co-founder of Healthy Headie Lifestyle to CannaInsider today. Welcome Holly.

Holly: Thank you so much for having me Matt. I appreciate it.

Matthew: Sure. Before we get into Healthy Headie can you tell us a little bit about who you are and how you got into this industry, your background and so forth?

Holly: Sure. You know at heart I’m an activist and advocate and business creator. I worked in corporate for a while, but I knew that it wasn’t the right environment for what I was looking to do. And I actually started my first consulting company while at the same time becoming a flight attendant. There was great flexibility there.

Matthew: Oh wow.

Holly: We had a successful commercial, residential painting company as well that I started with my husband. So that’s two businesses under the belt I guess. Moved onto an executive board position for the Plymouth Chamber of Commerce. I received an award Forty Under Forty Award there. And then I got to this tipping point in Massachusetts where I started the petition for Question 3 which is the medical law there. And I knew the first hand I had seen the effects, the positive results that cannabis had brought, and too many people were afraid to speak up or they couldn’t speak up. And I couldn’t sit by any longer so that’s when I really started getting involved and did what I could to move along the process in the community. And of course, you know, there’s a little bit of politics that come with that. And after the law passed in Massachusetts we become more of a resource of friends and families and even strangers that wanted more information about the medical community. And that’s when my husband and I decided it was time to put everything we had behind something we felt so strongly about, and took that leap into the cannabis industry.

Matthew: All right I like to hear that. You pushed all the chips into the middle of the table, and you said we’re all in.

Holly: Yes, yeah absolutely.

Matthew: And you created Healthy Headie, and what is Healthy Headie?

Holly: Yeah so the easiest way to describe it, if you have any knowledge of the direct sales world, is we’re kind of like the Mary Kay for Mary J, but we don’t sell cannabis. It’s been a tag that we’ve gotten some great reception out of and people really seem to understand that model. So what that means is that Healthy Headie is an in-home, direct to consumer network of independent distributers that actually provide education and a hands-on demonstration as well as the sale of cannabis ancillary products.

Matthew: Okay.

Holly: And in layman’s terms kind of what that means is we actually bring the smoke store to the customer’s door. So in the comfort of the consumer’s home our independent distributer would provide an overview of cannabis and the many ways that you might consume your cannabis. We talk about methods of ingestion a lot and the different forms or how you might be able to ingest it. Our primary focus does land on the vaporizers which is a device that you can use to consume the cannabis itself.

Matthew: Yeah. I kind of liken it to the Genius Bar at Apple stores where they take something that there’s a lot of questions around and answer them in an easy and digestible way. Is that a fair comparison?

Holly: Yeah it is. We get a lot of questions, and of course everybody’s knowledge base is different. So we try to answer, you know, what is a vaporizer? What’s a transdermal? What are sublinguals? What are tinctures? And kind of give them a level playing field to then start their education base off of.

Matthew: This is just my opinion, but I feel like that there is still a stigma around the smoking but less so towards the vaporizer and then even less around tinctures and edibles is that the feedback you’re getting.

Holly: Yeah. I think that there is, you know, smoking is just unhealthy so people understand that. But they’re really confused about these other terms. What’s transdermal? What’s sublingual? What is a tincture? So that there’s less of a stigma, however, there’s still this fear associated with cannabis as a whole, and it probably comes with that federal legality.

Matthew: Yes that would be it, and what’s the response been so far from the people that had the in-home education?

Holly: You know it’s actually… the response has been really great. Our customers actually seek us out, and we have a lot of interest from people that are looking for that level of hands-on training, and as well as becoming part of the team. So they’re interested in becoming part of the community with Healthy Headie Lifestyle.

Matthew: Okay. Is there a certain demographic to the people that want the in home education and want to look at the vaporizers and the different things and talk about this, or is it really just a very broad spectrum.

Holly: You know there is a specific demographic that we tend to see a lot more of. My husband and I started this business in Massachusetts. Again that was a restricted medical market. We were surprised to find that the majority of people we were speaking with were my parent’s age. They were Baby Boomers, new retirees that maybe were looking for alternative healing. So we found that a lot of these individuals may have had previous knowledge or one time way back when had potentially tried it, but now they were more hesitant to just kind of go out on their own and experiment. They really had lots of questions and didn’t know where to turn to answer those.

Matthew: Do you feel like women in general are less likely to step into a dispensary? Is there a stigma there that seems to keep women away in particular?

Holly: Yeah I think as a whole, you know, I think women are still scared to really come out and talk about this. They’re absolutely fearful. They hear these stories about other parents losing their children, and that’s absolutely frightening in itself. So I think that most females are very cautious and hesitant when it comes to their consumption or even the discussion of a potential consumption.

Matthew: So in-home shopping, bring the store to your door, we talked a little about vaporizers and tinctures and so forth, but what are the one or two things that seem to get the most attention and the questions around that? How does a vaporizer work? Show me, you know, put it in my hand and show me?

Holly: Yeah so I mean aside from the vaporizers they really do like to try the device before they buy it, and that’s one of the benefits of having Healthy Headie provide that service is you can take it for a test drive, and it doesn’t happen online, clearly, and a traditional retail store. There isn’t that option. But we find that once we get through our in-home demonstration we talk about other devices such as like botanical extractors or a storage container. So we find, on in particular we carry a device. It’s a botanical extractor. It’s called the Magical Butter Machine. We find as soon as we show that device people are absolutely intrigued. They want to know more. It’s a really fun device, but they want to know more about the potential that they can create their own edibles, and this is really kind of an easy device to be able to use and have those edibles be created. So they get really excited about, you know, different items like that as well as accessories that we bring in for them to experience.

Matthew: How does the Magical Butter Machine work? I seem to see that here and there, but I don’t know myself. It extracts it into an oil of some sort? How does that work?

Holly: Yes, absolutely. So we will have to get Garin on the phone for you. So the Magical Butter Machine it’s a got a microprocessor and a computer built into it. So it’s actually regulating the temperature at which the cannabis is extracted. So there’s a process called decarboxylization , most people want it to be decarbed. Some people do not and that will create a psychotropic effect. So you really have the ability to take your cannabis and then infuse into a medium that works best for you.

So we talked about tincture. You can do a vegetable based glycerin tincture, or you can do an alcohol based tincture. You can also do butter or coconut oil which is great because it’s shelf stable and really easy to use. So depending on what you’re looking to treat and the medium that you want to infuse, you have the ability to do so in a very easy machine. It’s looks similar to a Cuisinart. You can put it right onto your counter. And there is cycles, you push the regulation for the temperature, and then you select what mode you would like. So if you’re making a butter, an oil or a tincture. And super, super easy. Yeah it’s got a built in light show as well. So you can actually turn the lights off and get super creative while you’re making your infused oils and butters.

Matthew: So the market for the Magical Butter Machine is for someone that wants to make a concentrate or extraction very easily, but then wants to customize their experience a little bit more, but they don’t want to become a scientist to do it.

Holly: Yeah the double boil method or the crockpot method is what’s been used in the past, and that is just time consuming. So you know going along the lines of that we don’t have a ton of time on our hands, this device really just makes it very easy for people to be able to make those edibles which can then be turned into other recipes or creations as well as the tinctures or suppositories if that’s something that you need for your treatment. So it really allows the consumer to put their health and healing in their own hands and decide what’s better for them. Of course here in Colorado the dispensaries have a wonderful selection of edibles, tinctures, different sublinguals and transdermals that in some areas you don’t have access to. So this allows the consumer to really have a broad approach for their healing.

Matthew: What’s the dynamic like for an in-home session?

Holly: So typically the in-home, it starts off, you know, people aren’t really sure what to expect. There’s different layers of knowledge. So you know there might be four people in the room and they all might have a different gauge or level of knowledge with cannabis itself. And so what we do is we try to take their nerves and you know uncertainly out of the equation. And we just have a quick overview to be able to get everybody on the same page of Cannabis 101. They’re very timid when we start out about asking questions. They feel very lost, but we provide just a quick summary at the beginning of our session. What we’re going to be covering, kind of a top-level overview, and in minutes you can see the consumer start to begin to relax. They feel more comfortable. They start asking questions, and then they frantically start taking notes. They get very excited and they know that the knowledge that they just received it really provides them with more empowerment for them to move forward. So we see that quickly change throughout the in-home session.

Matthew: So it starts maybe being a little timid to okay I’m getting some good education here with the Cannabis 101, then they’re kind of moved to ask questions and then does it kind of open up into a more social atmosphere by the end of it?

Holly: Yeah so when we’re actually letting them try the devices, you know, you’re getting them to relax and unwind even more. They really get a feel or a sense of how these different devices operate. So we let them open it, close it. How hard is it to grind the product and put it in to the device. They get to literally touch and feel and go through each of the components and how it’s going to work. I mean even simple questions such as maintenance. That’s a big deal for a lot of people. Many folks don’t want to have to maintain the device on a regular basis, and that’s something that you won’t have that hands-on training when it comes to an in-store experience. And that’s when you really start to see them get excited because now they’re touching it, they’re playing with it.

Matthew: Right and a vaporizer, the smell is much more contained compared to say a bong or something else, and that’s probably something they’re wondering about. Like hey am I going to stink up my whole neighborhood here if I take one hit off this thing.

Holly: It’s so true. I mean a lot of people don’t understand vaporizing and how it’s going to be different. So then they realize it’s a lower odor that’s really helpful for a lot of people who maybe sneak away and into the garage quickly. You know it allows them to have more flexibility when and where they can medicate. And again portable versus tabletop. I mean if you talk to somebody who doesn’t know what a vaporizer is, that doesn’t mean anything for them. So we have different devices for whatever the need may be. If they need something that is battery operated that they can take camping with them for several days when they won’t have access to electricity, we really can customize it depending on what the customer’s needs are.

Matthew: How does a in-home presentation get initiated? Who starts it?

Holly: That’s a great question. In Massachusetts we worked a lot with the doctors who were providing letters of recommendation. And so they were looking for an additional service and our information was actually given to the patients. So that’s something we’re going to be doing in every state that we roll out into, but for the most part we get phone calls from interested parties that would like to find out more information. So we give them the option to do a very private one on one in-home session or they can invite their friends, family, some other folks together and do a group party or setting. And it is similar to a Tupperware even where you would schedule the party. The host has the ability to make that as flexible as possible whether that’s nights, weekends. And we ask some specific questions to the host to customize it to their needs specifically. Then from there we’re off and running and in their home providing this great service.

Matthew: Now people may hear this and say is this multilevel marketing. What’s your answer to that?

Holly: That’s another great question. So when we designed this platform we actually took a boutique hybrid direct sales model. So we adapted some of the tride and true aspects of traditional network marketing, but our focus is on helping people and creating jobs in this budding industry. So our motives come from a place where we want to see people get the resources that they need and then we also have an opportunity to create many jobs in the cannabis industry. So we chose the direct sales model as it allows us to really provide that discreet, comfortable environment in the home that these consumers are looking for. That fear of being seen at the head shop or the dispensary, and of course the level of customer service was conducive for what we were trying to put together. And it became the perfect model for exactly what we were providing.

Matthew: Now the multilevel marketing thing, people get compensated if they bring people onboard who are selling. So that dynamic doesn’t exist at all here. This is a straight commission type sale.

Holly: Yeah and thank you for asking these questions because it’s really important for us to differentiate ourselves from the traditional multilevel marketing. So our independent distributers really are strictly sales commission based. They have the potential to unlock additional bonuses to increase their incentives. Think of it as a Mario game. If you collect certain amounts of point, you get a 1up. So there is a potential for them to have more incentive power, however it’s not about recruiting new team members. It really is about helping other people by providing this service and making a sales commission that’s attractive to somebody who wants to look at this as a sales opportunity.

Matthew: Okay. And so the host of the part in addition to helping friends and family, they get some little perks and gifts and possibly some sales commission type arrangement.

Holly: Yeah they do. They get some free gifts just for hosting the party, and then the way it works is that for every $100 of sales that are generated at that unique party, they would get $10 off of their purchase. So it really works for them to of course invite a few additional people. If those people are interested in purchasing, they’re clearly going to get a benefit from that sale. So it really comes down to fulfilling the educational side and then that quick, easy sale in the comfort and privacy of the customer’s home. And we bring all this together for them and be able to give them some incentive to holding it or hosting it at their home.

Matthew: Okay. So you’re here in Colorado now. You’re from Massachusetts. How is this going to roll out and which geographies?

Holly: So we are choosing to take a very strategic rollout. We do have traction and we began the company, as you mentioned, in Massachusetts. And we launched in Colorado a little bit over a month ago. And we’ll then expand into Arizona, California and Washington State. Ultimately our goal is to provide the service in every medical and retail state there is. So we’re going to do this in a very methodical way, but we will be coming to a town or city near you.

Matthew: Yeah. As soon as you legalize you’ll go out to them, okay. Are you still looking for investors for Healthy Headie?

Holly: Yes we just launched our seed round. We just opened that last week and we’re currently raising $500,000 for our program and the strategic rollout. And that’s been a great experience so far.

Matthew: And if there’s any listeners out there that are interested in becoming an investor how can they find you?

Holly: Oh of course they’re more than welcome. They can reach out to me directly. My email is holly@healthyheadie.com. And we also have a founders email, that’s founders@healthyheadie.com. Our main line, you can always get us through our direct corporate number, and the number for our corporate line is (617) 231-6363.

Matthew: Okay and for listeners that want to find you online can you say your URL one more time?

Holly: Of course. For anybody who wants to look at our website as well as anybody who may be interested in becoming an independent distributer, head over to www.healthyheadie.com. So it’s www.healthyheadie.com and right on the homepage actually there’s a great segment. CBS This Morning did a video on us and you can check that out. And right below there there’s a link that says “Click here to take the pilot program survey”, that will connect you to one of our team members. And if you’re interested in becoming an independent distributer, we’re happy to give more information.

Matthew: I feel like in every friend and family circle there’s someone that’s already kind of doing this. They kind of assume the educator role and demystify all these things about cannabis. So I feel like there’s natural sales force for you out there, and if you’re someone that’s listening that has those characteristic where you’re saying hey I’m already telling my friends and family about this stuff and they’re coming to me and asking me these questions anyway, this could be a great opportunity for you. So Holly thank you so much for being on CannaInsider today and telling us about Healthy Headie.

Holly: Thank you so much Matt. I really appreciate this opportunity.

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