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With cannabis legalization in full swing, it’s easy to forget there’s a big difference in how legalization is unfolding between US states and countries around the world.
Here to help us contextualize the difference between markets is Michael Mayes of Quantum 9, an expert cannabis consulting firm with one of the highest success rates in the industry.
Learn more at https://quantum9.net
- Michael’s background in cannabis and how he came to start Quantum 9
- An inside look at Quantum 9 and its mission to help maximize the potential of cannabis cultivation, control, and dispensary businesses
- Tips on how to successfully pursue a cannabis brand license and the common misconceptions Michael sees among new clients
- Exciting new developments taking place in the Michigan and Illinois markets
- Illinois’ social equity program and what it means for cannabis businesses
- How Michael believes cannabis will affect alcohol market shares over the next few years
- How Michael is working to help states create systems that help both businesses and patients
- Where Michael sees cannabis heading in Illinois and beyond over the next 3-5 years
Matthew: Hi, I'm Matthew Kind. Every Monday look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. That's cannainsider.com. Now here's your program. With legalization in full swing in the United States and around the world, it's easy to forget there's a big difference between states and countries with how legalization is unfolding. Here to help us contextualize the difference between markets is Michael Mayes, CEO of Quantum 9. Michael, welcome back to CannaInsider.
Michael: Thanks for having me, Matt.
Matthew: Give us a sense of geography. Where are you in the world today?
Michael: I'm calling you from Chicago, Illinois, right now, but just got back from a few trips from Georgia.
Matthew: Okay, and do you enjoy Chicago in the wintertime?
Michael: I don't think many people do enjoy Chicago in the wintertime. I think people enjoy leaving Chicago in the wintertime.
Matthew: Yeah, I agree with that. Okay, well, you were on the show a few years back for listeners that if they hear your name it sounds familiar, I think was 2018. And can you just remind new listeners what Quantum 9 is on a high level?
Michael: Sure. Quantum 9 provides consulting services primarily in the public policy and the licensing realm. We help businesses navigate through the licensing process from application preparation to final submittal of the application.
Matthew: Okay. And can you share just a little bit about your background and how you got into the cannabis space?
Michael: Sure. I actually started as a passive investor in cannabis, hoping to never really operate the business and reap the rewards. Unfortunately, this industry back in 2009 didn't really allow for that and I had to jump headfirst into some of our operations in Colorado, which really set the groundwork for a lot of the things that we do today. We probably made every single mistake possible to actually get to a point of profitability, but, you know, making all those mistakes was a great time to do it just because the margins were so high and we were able to right the ship before, you know, like a market like Colorado fell out. So we actually successfully exited out of that operation. We have some operations in Michigan right now. We have a brand licensing project in Maryland, and then primarily what a lot of us do on the Quantum 9 team is the consulting and the licensing work.
Matthew: Okay. Yeah. I've been involved in a little bit in the licensing or I should say just watching others be involved in it. And it's extremely detail-oriented work where you have to have the tactics and details right but also understand a larger strategy there. Can you just talk a little bit about that and how you'd think about the strategy and then go about the details of submitting the licenses?
Michael: Sure. So, really, the first thing you have to think about is the capitalization of the project. So, one of the unique differentiating points from one applicant to the next is the ability to execute on the plan which you are proposing. So, many of the companies that want to build out large facilities really need the access to capital either in the control of the applicant or secured by either contingent promissory notes or, you know, private placement memorandums to actually secure the funds. The next piece is building a world-class team. With all of the states that have had, you know, different levels of legalization from a medical round to a recreational round, you know, the losers from the states that have raised all this money, that have built these great teams, that have submitted applications, they're not just going to give up.
They're gonna go to another state in which they'll try again to, you know, do the same thing. They sharpen their pencils, they maybe secure some funding or whatever it is that they were deficient in the last submission. So, what you have now is, you know, quite a lot of interest in states like Illinois where, you know, it has Chicago and there's a fair amount of licenses. So you have all of these companies and all of these past losers going after this license. So interest and competition is fierce. So, it's one part navigating through the narratives in which the state's asking for, but also to complete the circle by having the qualified team and the finances to actually really bring it all together.
Matthew: Okay. And when you're talking with prospective clients that maybe were successful in other realms and they want to get into the cannabis space, what misconceptions do they have about pursuing a license?
Michael: Sure. So, you know, in recent we've been working with not only new businesses, but also multistate operators that, you know, may be just too busy doing other things. So our client base is vast, but the thing that most new, you know, businesses or companies or investors that are looking to get into this industry, the assumption is that you can just pay someone to do these things, and then they're off to the races, and you don't really have to do anything. Unfortunately, the reality is that all of the individuals that are part of the project will probably work extensively on the project to bring it to fruition because there's elements of the project in which we simply can't do for them.
For instance, you know, getting documents signed, collecting information about their backgrounds, doing background checks. We do assist some with meeting with the city and the local municipality to actually get approvals but you as a applicant have to be competent in the sense that you could have a conversation with city planning, you can have the conversation with the mayor of a particular city or, you know, a city administrator and really make that relationship. So, I think the piece that a lot of people are missing is the relationship-building aspect of it. You have to build a relationship with the consulting firm, all of the teammates, all of the municipalities. So, really, it's an effort from so many people.
I mean, on these projects, we have anywhere from 10 to 30 people that could work on the project, ranging from the technical writers to, you know, cultivation staff, extraction staff, infusion staff, security individuals, packaging design, so really, you have to build an entire brand company, packaging, you know, potentially the website and social marketing, some people do PR, so, all of that depending on how much time you have is the determining factor. I mean, if you're starting two weeks before the application is due, I would suggest, unless you have incredible resources, to either wait for another round or to look at another state.
Matthew: You mentioned resources there. When clients ask, what kind of budget do you tell them they need? I mean, I know it varies by geography, but how do you orient them into how much capital is needed?
Michael: Sure, that's a great question. And you're spot on. It really depends on the state, the number of licenses and the interest in obtaining those licenses. So, a smaller state with a smaller market with fewer licenses could be more appetizing than a larger state with unlimited licenses. So, on the licensing end, I would say that most people fall anywhere from the $350,000 to $1 million in pursuit capital, depending on state. As far as, you know, the build-out cost on the other end, it really depends on, you know, your method of cultivation, your type of extraction, you know, how ornate your dispensary you want it to be. So those on the back end can range anywhere from, you know, $500,000 all the way up to, you know, a $10 million to $15 million operation depending on square footage.
Matthew: Okay. So you're intimately familiar with Michigan and also Illinois being in Chicago. But can you just talk a little bit about some aspects of the Michigan market? Because a lot of people hear some things about Michigan, but they really have no sense of what's going on there. But it's an important market, it's just that it's a little bit dysfunctional, but we don't know how if you're looking in from the outside. How would you describe it?
Michael: Sure. So dysfunctional would be the best definition for the Michigan market because it had so much promise. The market started in 2008, which a lot of people don't know. And the caregiver model blew up. I mean, there was, at the height of the caregivership model as the transition into, you know, out of the black and into the, you know, the gray market, if you will, you had like 30,000 to 40,000 caregivers that were producing up to 12 plants for themselves and then you were able to grow for five other patients in one single facility. So, what happened here is that you have all these caregivers that are growing all of this product and, you know, the people that they knew or individuals that they were associated with getting that product.
Now, there was some loopholes, and some municipalities were favorable to dispensaries opening prior to the legalization or the medical program actually starting. So there was a grace period where you could get provisional licenses to operate like a dispensary. They call it a provisioning center in Michigan. So the state mandated that everyone had to get Step one approval, and then you had to get a local license as well as step two approval. Step one approval was really geared around the financial background and the actual backgrounds of the principals that would own the business. And there were capital requirements there too.
So, what happened was, in the beginning, LARA, the Michigan Licensing and Regulatory Affairs Department, they put together a commission and a board that was to review all the applications and pass or deny individuals to get through step one approval, which seemed like a very easy process. You either have the money and you have a criminal background or not. And that should have been it and then you could move forward with getting a local license and then step two approval once both the, you know, the facility is built out. So what happened here was there was a huge bottleneck in the passing of applicants through step one approval, because you had this very rich, you know, gray market that was operating in provisional licenses with the city, or just like, you know, straight black market stuff where individuals hadn't worked for seven years, but had no tax returns, and there was issues with that.
So they started to even go even deeper into each individual's background, and you had to produce three years of all transactions of all of your bank accounts in every account possible from your brokerage accounts, all the way to your personal accounts and all of your spouse's accounts too, which I personally had to go through and my wife was not happy about it. So, for every $1000 transaction, you had to give them a reason to why this money came either in or out of any one of your bank accounts. So this slowed the process even further. And then, you know, it was alleged that there was some corruption and that the liquor, you know, side of things were trying to slow things down.
So LARA started denying all types of people. We even got denied. And we, you know, as a licensing consultant, we were denied for step one approval, which obviously was a joke because what they denied us on was a financial piece, which we clearly had. So we spent a year fighting the state, and then finally a judge ruled in our favor and we passed step one approval. So, being one of the first people to submit and first to market, we went through every issue possible to actually get through step one approval and probably racked up quite a hefty legal bill in the process. So the LARA board was, you know, in many people's eyes, very, I don't want to say corrupt, but wasn't the best...
Matthew: I don't want to say corrupt publicly.
Michael: I don't wanna say corrupt publicly, but let's just say that it was dismantled due to the inefficiency of getting the job done. So, now you have, in the midst of all of this other medical stuff, Michigan went recreational. It's a ballot initiatives state where, you know, voters can vote things into law, you know, if you get enough signatures, which is 100,000 in Michigan, an item can be put on the ballot to be voted on by the voters. And then if it's enacted, it just goes through and that's what happened in Michigan, both in the medical and in the recreational end things, the adult use.
So as all of this crazy medical stuff was happening, then you got recreational, all of these new laws with adult use, and the process of approving things was slow, so cultivators were slow to get up and running, and the market was there. There was over 300,000 patients in the market and then slowly as, you know, things started ramping up, it was just so expensive for the normal patients or consumers to get product. So they just continued to get products from the black market, which was easier for them. So now you have a situation where the market is starting to slowly come up, but at the same time, you then had the entire stock market with all cannabis companies dropping 50% to 70%.
I mean, if you look at the stock market now, at the height of where things were around the time, you know, Canopy Growth and all these other companies like Tilray, you know, they're down 50 to 70% right now. So investor confidence in Michigan started dropping drastically because, number one, the public markets weren't doing great. Secondly, there's so much confusion and potential corruption that people were a little gun shy of doing anything in Michigan. And people are still doing deals, don't get me wrong, in the state, but there's just a little bit of confidence issues which has deterred, you know, a lot of big moves to happen.
Matthew: Okay. Let's pivot to Chicago. You're in Chicago, you're very familiar with the market there. There's a lot of excitement around Chicago right now. A lot of activity. Can you give us a high-level overview of where the market's at now and what changed on January 1?
Michael: Sure. So, you know, it is recreational adult use in Illinois right now. And all of the medical dispensaries which had to carry the burden of, you know, a dismal medical market. I think that, you know, there's only like 30,000 to 50,000 patients total. And it just, you know, there's problems in the initiating start of the pilot program that puttered a little bit, you know, we had a governor that didn't really approve of cannabis. And then, you know, now we have JB Pritzker as our governor and his campaign was to bring legalization to Illinois and by golly, he did it. And I'm a big proponent of it but the state had learned so much from the medical round that now we have these adult use rounds where dispensary and now the craft grower and infusers the...On January 2, the first wave of dispensary licenses came out and then now the first wave of cultivation licenses are coming out.
The first wave of dispensary licenses, there's 75 for new dispensaries and then if you add all of the additional licenses from the med, they were actually allowed to immediately co-locate their medical dispensaries. So most medical dispensaries chose also to do recreation or adult use in the same building. And then you can have a secondary location as well. And that's independent of the new dispensary licenses which are 75 and then for this wave of processing and infusion licenses, there's 40. And then those licenses will be awarded by May 1st, 2020 for the dispensaries and July 1st, 2020 for the infusers and craft growers. And then there's a second wave of licensing where there's 110 licenses for the new dispensaries that will be given out by December 21st, 2021. And then the second wave of craft growers and processors or infusers, there's gonna be 60 additional licenses and those are going to be given out by December 2021.
Matthew: Okay, interesting. You mentioned a craft growing license. What does that mean to be a craft grower?
Michael: Yes, so, there's some restrictions on the level, you know, how many square feet that you can actually build out. But also, so Illinois is a little bit different, and there was some confusion in what these licenses mean and what the differences of them were. And even reading the law and the original act, and then they published emergency rules, it was a tiny bit unclear until, you know, a couple weeks ago when we actually got down to a final answer. So the Craft Grower Licenses actually allow you to infuse and make all types of edible products, vape catridges. So basically with a Craft Grower License, you're relegated by a square footage and then also you can infuse products, where the Infuser License, you can only get extracted products, raw materials from a craft grower, and then infuse that into other types of products, whether it be baked goods, vape cartridges, or, you know, whatever other products that you'd want to make.
So, there's a distinction there and it's kind of weird because rarely do you ever see a grower license, especially labeled Craft Grower, that allows you to do both processing and cultivation, and then an infuser license, which you would expect to actually be able to extract but not able to actually do that. Although there are some provisions in the law that a supply study will be done and if the state determines that the infusers have an inadequate supply of licenses, there may be an opportunity for them to apply for a processing license, which would allow them to extract their own product.
Matthew: Okay. Wow, that's a lot of red tape. I can see why your business is doing well. So, okay. There's also a social equity program that has some unusual twist, and people are talking about those. What are those twists?
Michael: Sure. So in the dispensary round, 50 of the 250 points were allotted to social equity applicants, and there's four different ways that you could apply for social equity applicant status. And I will explain them in detail now. The first is that you have an expungable drug crime more than a year ago that you were negatively impacted by the drug law. The second is that you live in a disappropriately impacted area that has been negatively impacted by the drug law. So essentially, these are reparations for those that had been impacted by cannabis regulations that were "unfair." The third way of applying for social equity applicant status is that you have 51% or more employees and a minimum of 10 that either live in the disappropriately impacted areas, or have expungable drug crimes. So that's all four of the different ways. And to get all 50 points, you have to have those individuals or individual have 51% controlling interest of the company, in which you have to document through the operating agreement, and then any other contractual obligations from the company.
Matthew: Yeah, so that's kind of tricky here because you're forcing people to have equity ownership. Is that kind of an unintended consequence that you think is going to have some repercussions here?
Michael: Yeah. The intention was there, which was, "Hey, how do we get these licenses in the hands of those that have been negatively impacted by the drug law?" Or, in other words, you know, the ones that have been most affected in almost every state are those people of color. So how do we actually create a program to do this? And on the surface it seemed like a great idea, but in execution, there's some holes here because, you know, most of these individuals that have these drug crimes in their past, not all of them, but they may be inefficient at owning and running a company and also raising capital and, you know, having that amount of worth in an individual that, you know, may not have the background to do this.
So, even investors may have apprehension in trusting a company in the hands of an individual that has this 51% where you have to keep that to get all the points. So, if you drop under that, then a material of change happens within your project and, you know, if you drop under the 51%, then you have to pay back any discounts that you got on the licensing fee or the submission fees. So, the submission fees are $60,000 and they were $30,000 if you applied for social equity applicant status and, you know, the licensing submittal fees were cut in half. So from $5000 to $2500.
Matthew: Man, that's still expensive. It's just...It would be great to be able to have a business where you could force people to pay you. I'm a little jealous sometimes.
Michael: I'll tell you what, in 2011, we bought a dispensary license in Colorado for $5,000 and a pound of cannabis. And he gave us terms on it too, it was like $1,000 a month for five months.
Matthew: Oh, man.
Michael: Yeah, back in the days when you could get like 30% interest on your money.
Matthew: So, let's talk about the benefits of getting a higher diversity score for your business because that can open up some doors. You were mentioning a little bit how, you know, it's difficult for, you know, these social equity programs, but what are the benefits of getting a higher diversity score for a business that's applying for a license?
Michael: Yeah, it just depends on the way that the licensing process has been created. Like for instance, in Pennsylvania, the diversity piece of it was like 20% where in West Virginia, there was no area that even mentioned diversity. And even in Illinois, the only diversity aspect of things are geared around the social equity applicant status. But depending on where you're submitting, and where they're borrowing rules from, or even the application process, it may be a huge deal or it may be no deal at all. We as a company, Quantum 9, we are a minority-owned business and it took us over a year and a half to get certified by the City of Chicago to be, number one, we had to become a licensed expediter which is a license to actually do application submissions. So, you know, those out there that are doing application submissions on behalf of clients and aren't licensed expeditors there may be some liability there, but I digress.
So we became a licensed expediter and a minority-owned business, which in the submission of the diversity aspects, one of the pieces is vendor procurement, either on the front end of the app or on the back end. So if you're spending money with consultants, or you're running all of the third parties through the consultant, and then they pay the expenses, you can really have a great diversity score in like, you know, or a diversity percentage of spend on the front end, you know, in the 80% to 90%, which obviously help with the story that you not only are a diverse applicant, meaning 51% either minority-owned, or veteran or, you know, woman-owned. And the fact that you have goals, such that you wanted to keep a certain percentage of your staff diverse, which I believe is well needed in this industry, because it's very male-dominated and what we're missing out on is very diverse looks at different ways of approaching things.
Matthew: Sure. Okay. And do you see a dent in alcohol sales as a result of cannabis legalizations? I have, you know, that's one of the things I've put out there is that that's coming and in some places may be already there. What's your take on the ground level in terms of, you know, a dent in market share for alcohol sales because of cannabis legalization?
Michael: Yeah, it definitely has a big factor in it and we're seeing alcohol and spirits sales drop in the 10% to 20% when a particular market goes from either medical to adult-use or from nothing and a program just appearing. So I think that the alcohol companies are definitely worried so much so that you're seeing large beverage companies like, you know, Constellation Brands making substantial moves into companies like Canopy Growth, where they see the writing on the wall, and if those aren't familiar with Constellation Brands, they're the parent company of brands like Corona and such, but you're seeing a lot of alcohol and spirits companies looking at the cannabis industry, either from a CBD aspect or, you know, a THC co-branded product aspect.
Matthew: Okay. Now, you have some other states on your radar like Georgia, West Virginia, North Carolina. What do we need to know about there? What should we be watching?
Michael: I mean, all of these markets have the potential of helping patients, which is the part that excites me the most. And I really like helping states on the front end, just really navigate through, you know, creating a system that helps patients because, you know, sometimes when you read the laws, you're like, "Wow, this..." You can tell that this program was set up for business and really didn't take patients first as their approach where, you know, I believe that you can really set yourself up for success as a state or country by getting patients into the registry before the program even starts, and then having their, you know, one year of card renewal process starting when there's actually product available.
So you can actually start generating and creating a market for the businesses in the future by just simply opening up a registry prior to when all the rest of this stuff happens. There's also interesting ways in which states like Missouri, you know, created a system where you can early apply for your fees and your down payments to submit in the future, just to get a sense of where the largest population density of licenses are going to be submitted. So, there's a couple of different ways that you can jumpstart these programs so that, you know, those funds can be used to help further the grading process or getting the resources that the Department of Health may need to really help get this thing over the finish line.
Matthew: Okay. Michael, I'd like to ask a few personal development questions to help listeners get a better sense of who you are. And I know since we talked before the interview, that you have a book that you're really excited about. So, can you share what book that is and why you're so excited about it and what kind of impact it's had on your business?
Michael: Yeah, so, like most entrepreneurs, you get to a point where things are going a million miles a minute and the stress level increases. You know, the compensation may increase a little bit, but at what point is it not worth the compensation? Like, so if you have a level 10 stress and a level 7 compensation, is that better than a level 4 stress and a level 5 compensation? So I really started to work out where my personal happiness was in relation to business because you can't do well in business unless you're happy, right? So, what we started to do is figure out systematic ways in which we can move forward. And the first was to learn from others that have done this. And I recently joined the Forbes Chicago Business Council. So I'm actually a Forbes contributor now.
So I'm actually a writer for Forbes and I have an article published and I'm quoted in, like, four or five articles. But they have these amazing roundtables, where these giants of business sit around the table, and, you know, they talk about things that they're working on, and there's a moderator that asks a couple questions. And these guys were talking about EOS. And they were talking about it as in business as if, you know, it's a regular thing like, you know, you should know what IT means. And, you know, I'm by far the youngest guy in the room and I raised my hand and it was like one of my first council meetings, and I raised my hand and I was like, "Hey, guys, I'm so sorry, but what is EOS? I don't understand this. Sorry to be naïve." And no joke, they spent the next 40 minutes explaining what EOS was.
And what it is, is, it's from a book called "Traction." And EOS means the Entrepreneurial Operating System. And it's a book that tells a story of a development company that's going through troubling times, you know, they scaled, but they stalled a little bit, and they never knew how to get over the hump. And it is just so easy to digest the data. And essentially what it does and what it is, is it looks at your enterprise first and then deciphers all the roles and responsibilities and aligns to see if the person in those positions actually should own those processes. And if not, you get another person in there or move them in a way that pivots them so that they're more happy and more successful. So the first piece is that you look at the enterprise as a whole, figure out where you need these things, and then move the pieces in the right places.
The second is to create processes for every single thing that you do, and then put it down on paper, write the actual step by steps of it, solidify it, then delegate it. So then once the process is completed, you never have to worry about it again, because now you've set up an individual below you that's responsible for that. And they know what they're doing because they have the step by step procedures, and they even edit those procedures or you have meetings and, you know, decipher how you better these operating procedures. And then it just systematizes every aspect. And if the individual that's responsible for it just isn't getting it done, then maybe it's time to look for a new individual to fill that role. So just knowing these very simple aspects of business and how to, you know, essentially create less stress for me, I was able to kind of scale a little bit methodically.
It's not a way to scale like crazy because it teaches you the opposite. Like, you don't need to scale if you're doing things with your staff the right way, and only scale when it's so overfilled that you can't do it with contractors, that you actually have to have a full-time person and the cost analysis is there and then scale slowly. So, you know, when a company says that they have three to five employees, I look at that as, "Wow, that's a pretty big company to me," where, you know, on the smaller end of things, you know, people look at companies that may have 100 people, but it may be running inefficiently. So, there, again, goes the compensation to stress, but, you know, if you keep a lot of contractors busy and you have a really good core team, you can get quite a bit done.
Matthew: Okay. And since implementing this, what's been the biggest benefits for you both tangible and intangible?
Michael: I think I spoke to you a little bit about this last time. And I now see all of the processes in a Google Sheet that are linked to folders, docs, and videos of how to do those particular tasks. So whenever I forget, like, the path to do everything from start to finish, I just go back to this playbook and I just look at it and see, okay, well, I forgot that, you know, when we're working with the community, we need to hit like, these eight elements, one of them being job creation, the second being the security of the facility, the third being the tax revenue, you know, the fourth being the environmental impact. So, as we do these projects, you get better every single time.
Because, in the beginning, we were working so fast and so furious that it was from one project to the next with really no standardization, then when we added new staff it was like, "Okay, well, here's some content from here, here's some content from there," but there was never really a centralized location where you can really see everything top-down. And then we implemented base camp to augment that so it made things even cleaner, easier. New tech like Zoom was really also been a huge added value for all my consultants that work in different states and countries. And it really brought the enterprise to another level because just these, you know, three simple tools really helped drive change and helped all of us not stress out as much.
Matthew: Okay. What do you think is the most interesting thing going on in your field besides what you're doing at Quantum 9?
Michael: The most interesting, huh. In the sense, like, can you give me some context on that because it's so interesting.
Matthew: Like if you could do something else, you couldn't do anything that you're doing now, but you'd still be in the cannabis industry.
Michael: I think it would, I mean, I love what I do so it's so hard to look past the licensing and the public policy stuff. But I think that there's a lot of great tech out there and I love, you know, I'm a huge proponent of technology and software to make businesses better. I think that the interesting stuff may be technology with the integration of AI. And an example of this would be like a blog post that, you know, dependent on the cookies and the user data in your browser that is stored already, when you come to the site, the AI changes the content so that your on-page time is longer because it's more interesting to you because it reads in the way that you're used to reading. And that would interest you more than if it were written for somebody that was an academic that wanted, like, hard data and hard numbers. So I think that the AI aspect of it, we're just starting to scratch the surface on it but I think that that is what I believe is some of the more interesting stuff that's going on.
Matthew: Right. So you mean like someone who is searching for, let's say, pesticides to testing in cannabis, and you know from the data in your database that they only buy infused products, they don't buy flour, you can change the article around to not even talk about flour, but just about infused products because we know they're interested in that, and that makes it more relevant.
Michael: Yeah. So it's more like, think about it as like you're going to a concert. And, you know, before you enter the door, the bouncer looks you up and down and, you know, you may be either dressed like a punk rocker, you may be dressed like you're going to a rave, you may be dressed like, you know, you're going to a symphony. So, as you enter, the content changes so that it's more interesting for you. So the symphony guy goes into the theater and they see a Symphony, where the guy dressed like a raver goes into electronic, you know, rave thing. And then if you're a punk rocker, there's like heavy metal punk rock stuff going on. So, what that does is, you know, the Google Analytics and the way that content's served up and the way that rankings are done on your website, if a user comes to your site, they like what they see, they're on the page for while, they're scrolling down, they hit other links, you know, that creates a higher authority that your site is what it says it is, and what users are searching for is what they're finding on the other end.
So all those things bump your website up a little bit more. And if you do cannabis consulting, marijuana consulting, cannabis consultants, marijuana consultant, you'll see, you know, if you do it in an incognito window, that we rank in the top three for all four of those terms, because what we do is cannabis consulting. And the users that are looking for that data see our site, and then they're on it, and then they actually get the content that they're looking for. What I'm talking about is way more involved where, you know, the content, the words in the text on the page, even the visualization of how the text is laid out, whether it's on the left column or the right column, or like it's, you know, way more interactive, like, the content changes based on the user that's entering the site.
Matthew: Okay. Yeah, I could definitely see a future where that's happening just constantly because you want the person to stay on the page and feel satisfied they got what they came for.
Michael: Yeah, exactly.
Matthew: So, here's a Peter Thiel question for you. What is one thought you have that most people would disagree with you on?
Michael: Yeah, I mean, I think I look to the future a little bit more than most. Like, for instance, I'm investing heavily in space travel and space tourism right now where that's something that not a lot of people are even looking at or expecting, you know, flights in space to happen anytime soon, although there's a lot of media coverage with, you know, SpaceX and Virgin Galactic, even Blue Origin and, you know, some of these other giant companies. But I think that if you're not thinking about the future now, it's going to come and you're not going to be well prepared for it. So, if you're always looking to see, you know, what it is that's going to happen in the future, then maybe that you can make some predictions and then either organize your business or your finances in a way that is applicable.
Matthew: You know, that's funny you mentioned that. I was just watching Chamath Palihapitiya on CNBC yesterday, and he's now the chairman of Virgin Galactic. And he said that he has, I can't remember how many people it is, they've put down a deposit for a $300,000 spaceflight already and he's got billions in essentially in his pipeline if they'll come through and pay the rest for the deposit. I was like, "Wow, there's a massive pent up demand here." Because it's like where else can you get that experience? Right? Where else can you go to space?
Michael: Yeah. I think the down payment was like $80 million so far, and Jeff Bezos, his company, Blue Origin is funded solely by Jeff Bezos, where I think it's like 1% of his net worth is committed to space travel every year. So, that's a ton of capital for that. And it's growing, where, you know, Richard Branson's company is the first to go public, which is Virgin Galactic. And then obviously everyone knows of Elon Musk and SpaceX, which a lot of people don't know that Tesla, the publicly traded company, has no involvement whatsoever in SpaceX, other than the fact that they share Elon Musk.
Matthew: Yeah, I was wondering how SpaceX is going to make money, but now they're taking other people's satellites up and they're doing this Starlink where all the satellites will wrap around the earth and anywhere you go, you'll have high-speed internet connection if you're a Starlink customer. So that's really interesting stuff. Like, that is looking pretty far ahead, so that's interesting. Michael, as we close, please tell listeners how to find you and connect with Quantum 9.
Michael: Sure, our website is quantum9.net. It's quantum9.net. And you can write an email to us at email@example.com and then you can get a hold of us that way.
Matthew: Great. Well, thanks so much for coming on the show, Michael, you got a lot of interesting information wrapped up in your head there. I'm glad we got some of it out here for our listeners. Good luck with everything going on and come back and share what details you have for us in a year or two if you can.
Michael: I absolutely will. I love the show. I wish you the best, Matt.
Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher, or whatever app you might be using to listen to the show. Every five-star review helps us to bring the best guest to you. Learn more at cannainsider.com/iTunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at cannainsider.com/trends. Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at firstname.lastname@example.org. We'd love to hear from you. Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments.
Promotional consideration may be provided by select guests, advertisers, or companies featured at CannaInsider. Lastly, the host or guests on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions. Final disclosure to see if you're still paying attention, this little whistle jingle you're listening to will get stuck in your head for the rest of the day. Thanks for listening, and look for another CannaInsider episode soon. Take care. Bye-bye.
What will the cannabis industry look like in the next five years? CannaInsider host Matthew Kind reviews his past predictions and forecasts the five disruptive changes that will take place in the years to come.
Considering how many Matthew got right in 2017, you don’t want to miss this.
- Review of Matt’s previous forecasts from 2017
- Trend 1: AI-assisted product selection to improve significantly
- Trend 2: Fintech meets Cannabis
- Trend 3: Cannabinoid drinks put a double-digit dent in the alcohol market share
- Trend 4: Cost of cannabis flower decreases 50 to 80 percent
- Trend 5: Autonomous car delivery with biometric verification
Matthew: Hi, I'm Matthew Kind. Every Monday, look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly-evolving cannabis industry. Learn more at cannainsider.com, that's cannainsider.com. Now, here's your program.
Hi CannaInsiders, this is Matthew Kind. I have a little bit of a different episode for you is here today. So you may remember back in 2017 I did a check in on my five trends that will disrupt the cannabis industry in the next five years. Well, I wanna check in with some new trends and also see how I'm doing on those last trends. So let's jump right into them. So there was five trends for 2017 that I forecasted. We have two more years for them to complete before we can totally judge success or failure. But let's see where we're at.
One, blockchain tech to disrupt seed to sale tracking. So this has not happened yet. There's no clear winner. But I can say there's a number of companies working on this. And I don't wanna name any in particular to call them out because there's not one that's really doing a better job than the other right now. So there's no standouts. But I think this is a big driver because it just removes all the cost structure and complexity from the seed to sale tracking when there's really no legacy architecture. So I think we'll move into that. That's gonna fall into the not yet category, not a fail, but not a direct hit.
So number two is baby boomers embrace cannabis-infused products. So this one's a bullseye. We've got the cannabis-infused products they embrace, the flower power generation loves flower from way back then, so they still consume flower, but now they're consuming a lot of topicals too for arthritis and all their aches and pains as they move into their senior year. So that one's a bullseye.
Number three, dynamic terpene profiling based on individual preferences. So this is a semi hit, meaning it's kind of happened, but not totally how I envisioned it. So we're seeing things like the dosist pen and LucidMood and some drinks out there that have used custom terpene profiles to create more of an emotion or a mood. And they do that successfully. The second part that we're missing that we don't have yet is that it's based on your individual genetic makeup and neurophysiology. So as you've seen the price of like 23andMe and these genetics test just plummet, they're getting cheaper and cheaper and easier and easier to take. And so we'll see these two things come together. So based on our own individual body, we'll be able to get a super custom experience. So look for that by 2022. But we haven't totally got...we're about halfway there right now.
Number four, intravenous cannabis medical applications. This is a fail. This has not happened at all. So I'm gonna call that as straight up fail on that forecast. I envisioned this happening more, but I think people don't want to do anything intravenously unless it's a have to situation, usually involving a hospital. So there's gonna have to be more casual ways to have cannabis medical applications that are easier, that don't involve shooting something up in your arm. Because obviously there's a stigma there, a hassle factor, you know, hygiene factors. So I'm gonna say that one's just wrong.
Number five, autonomous cannabis deliveries. So we haven't seen that yet. I've seen some experiments, but nothing really there. But I'm gonna tell you why I'm still bullish on that one. And that leads us to my 2020 predictions, the five things that will disrupt the cannabis industry in the next five years. So here's my new ones or mostly new I'll say, and let's jump right into them.
Number one, AI assisted product selection becomes a lot better. So I'm gonna include a link in the show notes of Google's AI Assistant, and you can visualize that with machine learning. And basically what can happen there is that dispensaries and the apps that...like Eaze or different companies that provide delivery, they will be able to measure conversions, meaning what people looked for and then what they purchased. And dispensaries can do this too. What did prospects consider and what did they actually purchase when they pulled out their credit card or cash or whatever it may be? So as that data gets fed into machine learning and AI programs, these assistants, whether they be apps or in-store kiosks are gonna become so good at figuring out what you want that it's gonna really boggle the mind. Like, wow, this thing really knew me really well and I ended up really being delighted with what I picked. Now, one of the creepy factors, which I don't mind so much, but some people do, is that as you approach these kiosks or these apps, they start to make assumptions about you based on your age, gender, maybe some data points they have about your background to get some initial preferences. And then they validate those preferences to see like is it off base before extrapolating on those. Bottom line is that they're gonna get you to somewhere where you feel happy with what you purchased and that's coming. So look for a link in the show notes here with the Google AI Assistant to see how conversant and humanlike these artificial intelligence will be just conversationally with you back and forth.
Okay. Number two trend to watch is Fintech meets cannabis. So I don't know if you're familiar with his online brokerage called eToro. It's based in Israel, but has a footprint pretty much all over the world. It's huge. And one of the features they allow you to do is to follow someone else in their ecosystem. So it's more of a social network than a brokerage account, but you can follow people that post their trades on the eToro and you can see how well they've done over any period of time, whether it be a day, 90 days, a year, how much they're up or down. And so you'll be able to go ahead and mirror their trades, either for a fee or for free where you say, I want to mirror Jane Doe's trades or John Doe's trades and you can just link your account to what that person trades. And it mimics those trades. Now, the cannabis industry has not a ton of publicly traded stocks on...especially on the major exchanges. When that starts to change and open up, we'll see more people following some great, great traders in that way. Mostly young people are more comfortable doing things like this 'cause it's kind of a leap to follow someone trading like this. But when you can see the results so transparently measured by this third party, it's not so risky perhaps. Not investment advice, but just my opinion and for entertainment purposes.
Number three, cannabinoid drinks put a double digit dent and alcohol market share. So that means they would take at least 10% from liquor, wine, and beer. And so that is a pretty audacious goal but I think once we start seeing that product market fit and people realize like, "Hey, I don't have to waste my whole weekend or Sunday feeling hung over if I have a botanical." And, you know, we'll see more messaging like, "Hey, alcohol is actually, you know, ethanol and ethanol is essentially poison. Do we really wanna be drinking poison?" And people love their beer, love their wine, etc. But when they can see, they can make a leap over to a beverage that starts giving this predictable response, similar to alcohol, but better in the sense that there's no tradeoffs, I think we'll see more people making that tradeoff, especially since there's no stigma of smoke that people usually identify with not wanting to participate in. So look for that.
Second part of this forecast is I think we'll see a new kind of license that allows liquor stores and other kinds of, you know, fast convenient stores to offer low THC CBD beverages. So nothing high THC but low THC and with CBD in it perhaps too. But for example, when something doesn't pose a huge risk if it got into the wrong hands because there's only 2 milligrams of THC in each can, that might be a new category where a license allowed for a liquor store to sell some THC beverages. So look for that. Especially in certain markets where they realize the licensing has been, you know, just too onerous and too cumbersome and people want more options.
Okay. Number four, the cost of cannabis flour decreases 50% to 80% in North America over the next five years. This is bad for some and great for others. Who's it bad for? Well, it's bad...you'd think all cultivators? No, it's bad for the cultivators that don't have economics of scale on their side and don't have the capital to invest in massive production capabilities, especially some capability that gives them some edge. They have some special sauce. So this is great for consumers because it allows more products to be available to consumers for much cheaper. Right now, there's a huge premium still on cannabis products and that'll come down, come down, come down and we'll be able to have more access to a wider spectrum of products. So this is further gonna consolidate the industry, probably into kind of a Costco, Walmart type sellers that are just huge low budget sellers. Everything's gonna kind of gravitate into them as the industry consolidates. And then you'll have niche, high-end sellers that are luxury or have some spin or unique selling proposition where they attract a following, which leads to number five.
So you might remember in 2017, I talked about autonomous cannabis deliveries and I said they haven't come yet. I still think they're gonna come. And the reason why is that I think it's almost inevitable is for a few reasons. One is when you look at the cost of like an Uber driver, for example, the biggest cost there is the person driving the car. You know, their wages, make it a, you know, add the biggest expense. Number two, gasoline. And number three is maintenance of the vehicle. Because a lot of things can go wrong with all those moving parts. So when you have an autonomous electric vehicle, let's say a Tesla, that's an autonomous delivery vehicle, the number one expense, the person's wages are no longer there. That person could move on to do something they like better or higher skill or retrain or retool. So that cost is gone. Gasoline's eliminated with electricity, with, you know, there's no petrol or diesel to buy. So it's all just electric and the price of electric continues to go down in most markets.
Thirdly, the maintenance, so the maintenance goes down a ton because essentially electronic cars like a Nissan LEAF and a Tesla, although they're high tech and have cards that produce teraflops and all these things, they're almost more akin to a golf cart than a traditional internal combustion engine because an internal combustion engine has so many moving parts and liquids and things that can go wrong. So there's more entropy vectors on a internal combustion engine car versus an electric vehicle car. So this cost is just gonna bring down the cost of electric autonomous vehicles so much.
The final reason is that these cars can be used 24/7 so the more deliveries they can make throughout the day just going nonstop, that reduces the cost for your individual delivery because it takes the cost of the vehicle and divides it by how many deliveries there are, thus reducing the cost of your delivery. Plus, the overlay of intelligent software that makes the most, you know, efficient use of the vehicle's time and making deliveries.
For all those reasons, I think autonomous car deliveries are coming. But here's the final piece is what regulators get out of it. So regulators initially will say, we need some super like super way to make sure this is getting to the right person. So normally when you go to dispensary, you don't wanna have your... give your fingerprint or your iris scan. But for example, we saw this in Illinois, Illinois required a fingerprint to get a medical marijuana card. And for that reason, initially it wasn't widely adopted. Now that they've gone adult use, there's a lot more to...pent up demand that you can see. While the public wouldn't accept a biometric scan at a dispensary, they might be willing to make that tradeoff if they can have on autonomous electric vehicle come to their house. Inside that autonomous electric vehicle is a locker and they can only open that locker if they scan their iris or put their fingerprint down or maybe some speech. I don't think it'll be speech because that can be mimicked too easily. But then the locker would open and they would take out their order. And to the public, I think that will seem like a fair tradeoff. Like, "Hey, there is no person in the car. There's no way I can be verified unless I do this." So where they may have balked at doing this in store to dispensary, they wouldn't do it for a vehicle delivering to them. And this will give regulators the transparency and data and certainty to allow these autonomous car deliveries. And also I think the fact that everybody wants, you know, a lower carbon footprint and with an electric vehicle making deliveries all around a neighborhood, that's much more efficient and a win-win. So those are my forecasts for the next trends that will disrupt the cannabis industry in the next five years. Keep in mind, these are just my opinions.
Man: Yeah. Well, you know, that's just like your opinion, man.
Matthew: None of this is advice or financial advice. And I could be wrong about any of these and if you think I'm way off base or if you agree with me or if think there are some other trends that I missed that are more important, please tweet me your thoughts @cannainsider.
One more thing before we close. If you haven't given the podcast a review on whatever platform you're listening to, I would really appreciate it. It helps me so much to keep going, to know that people are enjoying it and listening to it. I mean I see the statistics of how many people download it, so forth, but when I get a direct feedback from you that you're enjoying the show, that really helps. And a five star review helps the most. It helps the most for people that are considering listening or for guests that are considering coming on the podcast. So a five star review helps the most. Please consider doing that on whatever podcast app you listen to, iTunes, Stitcher, or any others. Thanks so much for listening and look for another episode soon. Bye-bye.
If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher, or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at CannaInsider.com/ itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at cannainsider.com/trends. Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at email@example.com. We'd love to hear from you.
Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis for using it for medical treatment. Promotional consideration may be provided by select guests, advertisers, or companies featured in CannaInsider. Lastly, the host or guests on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions. Final disclosure to see if you're still paying attention. This little whistle jingle you're listening to the will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care. Bye-bye.
If you hand most people a cannabis drink, their first question is probably, “How high will this make me?”
This one unknown might just be what’s holding cannabis beverages back. Until now.
Listen in as Luke Anderson of Cann discusses the state of cannabis drinks and where he sees the category heading.
Learn more at http://www.drinkcann.com/
- Luke’s background in cannabis and how he came to start Cann
- An inside look at Cann and its mission to become the standard for cannabis-infused tonics
- Why Cann produces only low-THC tonics to target consumers that don’t wish to experience a high
- The type of effect consumers can expect from Cann’s social tonics
- Why Luke believes it’s important to take out the guesswork in cannabis beverages
- Cann’s social tonics versus beer and wine in terms of time and effect
- How Cann decided on its unique THC/CBD concentration profile
- How Luke and his team overcame challenges with emulsion and dispersion to ensure consistency in every sip
- Where Luke sees cannabis microdosing heading in the next few years
Mathew: Hi, I'm Matthew Kind. Every Monday, look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. That's cannainsider.com. Now, here's your program.
Imagine this, you're at a party this weekend and your friends hand you a can of a cannabis beverage that they are really excited about. If you're like most people, your first question is, "How high will this make me?" This one unknown may have been the thing stopping cannabis beverages from taking off until now. Here to tell us about the state of cannabis beverages is Luke Anderson, co-founder of Cann. Luke, welcome to CannaInsider.
Luke: Hello. Thank you so much for having me.
Mathew: Give us a sense of geography. Where are you in the world today?
Luke: I am in Venice, right outside of our office where we started the company about a year ago.
Mathew: Okay. And what is Cann on a high level?
Luke: Cann is a microdose THC beverage. We like to say it's the first ready to drink THC beverage that has a dosage of under 2.5 milligrams. And unlike other cannabis products, it aims to be a direct one for one replacement with alcohol. Now it's not aiming to replace someone's alcohol consumption entirely, but it aims to be pretty good at doing the job that alcohol does in social situations on a similar type of quantity and frequency that you would drink beer or wine.
Mathew: Okay. That's a big problem. So I'm glad you're trying to crack that nut. Can you share a bit about your background and journey and how you got into the cannabis space and started Cann?
Luke: Yeah, it's interesting. I had never been to a dispensary before starting the company with my co-founder Jake and had frankly always been a skeptic of the entire cannabis market. I felt like it was meant for stoners. It was not meant for people like me who didn't find pot leaves to be appealing and didn't know how to roll a joint, and whose only experiences with cannabis involved eating a weed brownie that got them too high in college and made them leave a party because they felt embarrassed for how they were acting or coughed on a joint too hard in a circle and became much too high to function.
But my co-founder, Jake, had actually been thinking about cannabis beverages for the better part of our friendship, which started at Bain & Company about seven years ago. And he grew up in Denver, Colorado, and looked at how legalization impacted his local community and had always been curious about THC and specifically microdoses of THC as a means to a better health and wellness picture for an individual who might be relying on alcohol as a social intoxicant of choice.
Over the seven years of our friendship, we'd be across from each other at a dinner table or during a weekend getaway and we'd be debating on opposite sides of the same issue, actually. He would say cannabis beverages are coming and they'll take a great share of what we know today as alcohol consumption. And I would yell back, alcohol does the job just fine. This is gonna be enough for me and I don't think that I would ever, if I were in my right mind, replace it with some novelty item that, you know, reminds me of bad experiences I had when I was younger.
And ultimately, as I got a little bit older and my hangover started getting worse, and I started physiologically feeling a need to try and replace some unwanted alcohol consumption with something better for me, and taking things like a 30-day break from drinking or a 2-week break from drinking and feeling really good about what my body did in that time period, I began to be interested and re-approached Jake about the concept he had been dreaming up, and eventually joined forces, put our heads together and said, "Let's design something that would be uniquely appealing to people like you who are familiar with cannabis and understand it and people like me who had maybe never been to a dispensary before ever in their life."
Mathew: Okay. Now I didn't know you had a background with Bain. I know it's kind of an interesting group over there. People may remember the name Bain from Mitt Romney debates and stuff like that. That's how he got really wealthy working at Bain. But I read a book, I think it was called "The 80/20 Principle," and they talked a bit about Bain in that book and how they have like a unique philosophy and way of doing things and methodologies to create really high impact outcomes for themselves and, you know, profits and so forth. Can you talk a little bit about how...you know, what lens you gained from working at Bain and how you still have it today or if you don't?
Luke: Yeah. Working at Bain was a tremendous experience. Jake left after just a couple of years and went to Bain Capital, which is also a Mitt Romney institution, but I ended up staying in the consumer packaged goods practice for a total of six years with a two-year break for business school in between. And like you said, the 80/20 principle governs everything that we do at Bain. It's how can we find 80% of the value from only 20% of the effort and then doubling down on that type of activity so that we can create more value overall in a shorter amount of time. And my role, in particular, of late had been helping big consumer packaged goods companies, big global organizations with many different brands and business units try and jumpstart their innovation cycles by learning from how startups launched new products.
And so by applying principles like agile ways of working and assembling cross-functional teams and rooms to crack problems over a sustained eight-hour time period rather than breaking it up with one-hour meeting here, one-hour meeting there over the course of a longer period of time, I became quite passionate about the power of focusing on a smaller number of issues and solving them really fast. And when I had done a few projects like that and Jake and I had been talking about this cannabis beverage concept, I felt like this would be a really great opportunity to apply that same framework. And ultimately that's how we ended up launching by picking one retailer in Southern California, one geography, and one skew, a six-pack three flavors of product.
Mathew: Okay. That makes sense. That's really interesting. I thought it was, you know, there's been so many high success events out of Bain that it's worth studying what's going on there exactly and how that methodology came to be and all the mindset. So it is interesting. So you've made it as simple as possible to, you know, create a success for yourself and see if...just test it and see how it works, and that way you're not spending a lot of time on elaborate different products and product lines. You just want to see, will this work quickly?
Luke: That's exactly it.
Mathew: Okay. So your minimum viable product is a six-pack in Southern California at one dispenser. That's pretty clean and simple.
Luke: That was it.
Mathew: So your target market, as you mentioned, is not the guy doing, you know, gram dabs. It's someone that's not saying, "How much THC can I get for my dollar?" It's someone more saying, "I want a controlled experience that's not gonna have me, you know, hallucinating or like so deep in a couch that, like, I need a crane to lift me out." And so you're kind of going for that kinda casual user that's a little bit skeptical, but also curious.
Luke: Yeah, we say we stretch from the can of curious all the way up to the can of casual. A lot of people, I think 10% roughly of people in the United States have purchased cannabis in the last year and 60% of people are interested in purchasing cannabis but have not purchased in the last year. And if you talk to that fifth percent Delta, a lot of them are people who have selected out of the category from a bad experience, like a pot brownie from college or coughing too hard from a bong hit that they were unprepared to take. And those people, they're used to buying alcohol as a social intoxicant of choice and you don't scan the craft beer aisle and look for a percentage AVB, excuse me, or look in the liquor section and ask where is all the Everclear because that's how I'm going to get my most bang for my buck.
You're looking for an experience and a brand and a product that resonates with you. So we're trying to buck the trend of dollar per milligram of THC, which is more prevalent in other categories, but we hope actually won't apply in the beverage space.
Mathew: This is interesting because, you know, most startups and entrepreneurs don't want anybody to be excluded. They feel like, "Oh, we're not being inclusive," but it can be one of the best things you can do for your target market so they know exactly what to expect.
I mean, I think about 7 Up, like the uncola, it's for someone that doesn't want a cola specifically. And so this is kind of what you're doing here. And it's interesting, but, you know, if you don't describe the beverage as, you know, how high it makes you, how do you describe its effect? Do you have to create a new language? How do you describe it to people who are curious for the first time and want to try it?
Luke: Yeah, it's we're creating a new language around it, for sure. Microdosing culture is becoming more popular and people are starting to use language to describe that experience, but there isn't much consistency around it. And so we find that we have to have a longer conversation with everyone who's interested. Some words that we really like now, lightly lifted does a pretty good job of describing the buzz that you feel. We say a mild uplifting social buzz, if we're being asked a more academic question. And one of our branding partners described it as feel a little good lately, which I'm quite enamored with. I think it's exactly how you feel. It's just a little bit of something. It's palpable, it's noticeable, it's undeniable, and it's pleasant.
Mathew: Okay. Typically we describe the effect of cannabis as onset, but similar to what we were talking about before where it's not high, you prefer a different way of thinking about it. Can you share what the description is instead of onset, you know, instead of how you've lightly lifted, but what about the way it comes on? How do you describe that?
Luke: So we do say the word onset so that we can relate to people who are already walking dispensary floors and have that as a key purchasing criteria, and we're proud that it's around a 10-minute onset time, which is how long it will take for you to feel the effects of the beverages.
There's something about the nanoemulsion and the sublingual absorption before it goes into your stomach that kickstarts that process for you. But what we're trying to train people is that it's not about the onset of your individual cannabis item. It's about how many of these products can you have in one given experience. So the sessionability of alcohol and how it has become very socially common for people to get together with a 6-pack of beer and, you know, you have 1, you wait 10 minutes, then you decide whether or not you want to have another, and then you decide whether or not you want to have the third is exactly what we're trying to do by selling our product primarily in six packs and encouraging people at the point of sale to think of how many they want to drink over the course of an experience.
Mathew: Yeah. This is really interesting. So you're borrowing aspects of alcohol kind of the framework. We think about alcohol, beer or wine, specifically more beer or wine, like one makes it feel this way, two makes it feel this way. Adopting kind of the metronome of how you'll feel from, you know, wine or beer onto cannabis, which is tricky because it requires some explanation to even think this is possible. Because most people, you think about the brownie experience you talked about, where it's like, "Yeah, I took a brownie and I didn't feel anything and I didn't... So I took another one, I didn't feel anything, and then I blasted off to another planet."
Luke: Yeah. Which is actually an unpleasant experience for somebody who is in that more can of curious demographic. It's you don't like sitting in waiting for a ticking time bomb to come and hit you and create an unsettling feeling. You're used to and you've trained yourself over years of consuming alcohol to drink something and slowly step up into an experience that your controlling. And that's exactly what we want to create with Cann.
Mathew: Okay. So how do we build a bridge from where we are now for people who don't know how they'll feel with a 2-milligram drink, to where they will know how they'll fell and they'll have confidence in it? Like for someone that, they'll say 2 milligrams, what's that? I mean, I usually say a rookie cookie is 5 milligrams. So if you've never had any kind of edible before, that's what would be considering a starter place. And so this is kind of less than half of a rookie cookie. I mean, did you experiment like one and three and or is this just like this came out of the gates that this is the right amount?
Luke: We experimented lot. And I think when we had an equal part group that said this is not going to get me high and another equal part group that said that I can't have more than one, that's when we know we landed on the right amount. And it's amazing how passionately people will argue on both sides. And it represents just how different people who are routine cannabis users are from people who are just exploring the category. People who are routine cannabis users will come up to me and say, "I would need to drink 50 of these before I felt anything," or, "Like, that's a punk amount of THC." And I just got a text message yesterday from one of my friends who is a skeptic, and after learning about the product digitally for six months approached the dispensary for the first time, got it, and then, and I said, "How did you feel?" She was, "They are so tasty, but I had two and that was beyond my limits. One is perfect for me."
Mathew: Oh, good.
Luke: Now we really want the both of these experiences to be in between where people feel comfortable having two to three, but it takes some time for somebody to step up from a 2.5-milligram experience to a 5-milligram experience. So your question was how do we bridge the gap between where we are today and where people become accustomed to and familiar with this 2.5 milligram and below sessionable cannabis drinking experience? And I think there really are five main things that need to happen that will evolve the category, and I think it's, first, more products that are dosed similarly.
So a suite of sessionable cannabis beverages that exist in the fridge will help make the category look more legitimate and less fringe and make dispensaries pay a little bit more attention to it as a growing category. Within that set of products you also need to have drinks that are formulated with better ingredients and that take after trends from today. All-natural, no sugar added, low-calorie, without artificial sweeteners. And, you know, there aren't enough that fit that kind of whole foods quality drink benchmark and we hope that more will come in.
The third is branding. I think there are a lot of drinks that use overt cannabis imagery to invite people in and remind them that it's cannabis drink. But we need a lot more drinks that don't have any overt cannabis branding because those will be inviting to the people who actually will enjoy that sub 2.5-milligram drink the most.
And the fourth is price. People who are doing that dollar per milligram calculation, those aren't the right people to buy the products, right? People who are spending $15 to $20 on a 6-pack of premium craft beer or a bottle of wine to bring over to a friend social gathering, when they look at cannabis beverages at $10 and above per unit, it doesn't become something that they can do the same thing with. So the price has to come down significantly, which means the whole industry needs to evolve. And, you know, all the way from manufacturing down to the point of sale, there needs to be better ways and fewer points in which money are changing hands before that final retail price is set.
And the last thing, and I know this is a long list, is availability. Even people in the Cann ecosystem who love the product and are comfortable with our price point and want to buy it often, their number one pain point is they just don't know how, and they find the existing cannabis channels hard to reach or stigmatizing, evoking fear, not knowing what to say to a bud tender, not knowing how to scroll through a menu with tons of pictures of clumps of weed on it. And so I think we need the channel to evolve and more premium points of sale that do not make somebody think back to a negative cannabis experience before this thing really takes off.
Luke: So it's fair to say that you're making the trade-off for consistency and experience over potency. Is there one or two demographic profiles that seem to want this consistency in experience the most? Have you seen an age or gender area where this time Cann seems to be the sweet spot or is it just all over the board?
Mathew: It's shocking to me, but we still maintain a 50/50 male and female consumer split. I think it's weighted because there are more males than females currently in the cannabis channel. So if we were looking at just a pure group of mainstream consumers, I think we may slant more heavily female, but we also surprisingly have a very even split of age ranges, making us feel like this product does have cross-generational appeal.
I think 30% of our consumers are between 20 and 29, 40% are between 30 and 39, and then another 30% are 40-plus. The one thing that everybody has in common, though, that loves the product, it's more of a need state than a demographic is a desire to drink less alcohol. And that can be something that appeals to people of any gender and of any age. It's 21 out of 25 adult drinkers will say, "Yes, I am actively trying to moderate or reduce my consumption of alcohol." It could be for health reasons. As a 60-year-old, your doctor's telling you, "You have to drink less." It could be as a 25-year old, you know, "I want to blackout less and drink less irresponsibly at parties." Or it could be a 32-year-old like me who's just like, "The hangover is untenable and I want to take back my Sundays."
Mathew: Yeah, that's true. You wake up and it's like you're eating fatty, salty foods and trying to just normalize, if you were having a botanical oil, you don't need to do that, but I mean really it's ethanol. Let's be clear. It's poison that our liver is processing. Now let's talk about the CBD aspect a little bit. We said 2 milligrams of THC. Can you talk about the CBD concentration and profile?
Luke: Yeah. We believe that a CBD dominant ratio with a microdose of THC gives people a more calm and less anxious peak of their THCI. The thing that turns people like me off from cannabis is when you hit that point where, "Uh-oh, I am too high to be here." And something, which is definitely part psychological and definitely part physiological from the entourage effect about having CBD on the label, gets people more comfortable with trying it and then also, in their high, they report less of an anxiety factor. And so I think we're still at the beginnings of figuring out how the variance in a THC and CBD ratio creates a different experience, but like you said earlier, we're trying to optimize for consistency and by making it with...as pure of a distillate, as we're able to find, we've found that people report generally similar feelings of that lightly lifted thing from each can that they drink.
Mathew: Okay. And you said this is available in six. Is it six-packs only or can you purchase one can?
Luke: We're starting to broaden our skew assortment to make it so that it's easier for people to try. We initially sold with just six-packs because we knew that if somebody had just one can, then we weren't giving them the full experience of drinking it with friends and replacing it with that six-pack of craft beer they would've had in the same occasion, which is truly where the product shines. But it's a hard hurdle to spend $24 on something pretax at $30 out the door on something you've never tried before. And so we are starting to sell in singles at $6 retail and then keeping the 6 packs at $24, and then starting to offer a 24-pack, which is a $75 price point and allows you to have significant savings if you're on a per can basis, if you're really in love with the product already.
Mathew: Okay. Any feedback from the dispensary in Southern California and customers, what they say or so forth? Or is it still too early?
Luke: So it was MedMen, and we picked four of their retail doors and we launched only with them for the month of June. And the feedback was tremendous. The product, even though it was only available in six packs, MedMen built its brand around attracting that premium kind of curious consumer and they gravitated toward its packaging in the fridge and its positioning as a cluster of drinks that I could enjoy socially.
And there's a very large percentage that go into stores like MedMen as an experience and walk out empty-handed, a cannabis tourist, if you will. And I think what we found was that a high percentage of the people that bought our product from MedMen were people who had no intention of actually buying anything, and that this was the most approachable product that existed in there. Something about a microdose edible, it was too much of a behavior change for them to switch from drinking something like they would alcohol to taking something out from under the table. And then flowers and flower-related skews and vapes were an entire league away from what they were comfortable with and they just wanted to be a voyeur. And so then we quickly expanded distribution to now, I think, we're in nearly 100 stores throughout the state of California. And in some stores like MedMen, the product just flies without any support, no marketing and no promotion.
And in other stores where you have a much higher concentration of people that are looking for flower, the product does not fly on its own, and we have to put somebody in the store and sample and do consumer education and often tell somebody, "Yeah, this isn't for you if you're doing 100-milligram plus products, but this might be something that you could share with your friend who is trying to drink less alcohol." And that way we're trying to be as much of a Trojan horse as possible. Get this in the hands of people who maybe haven't had a cannabis product they could share with somebody in their social circle because they found the other cannabis products to be too stigmatizing.
Mathew: Okay. And talk a little bit about your flavors. You have some interesting fun flavors. How did you arrive at those?
Luke: Yeah, this was one of the most fun parts of the entire process was formulating beverage. My dad has a long history in the food and beverage world, and when I worked at Bain and Company, I worked on a number of interesting brands that took an innovative approach to flavor profiles in the consumer packaged goods space. And through just relentless networking and trying to find, hey, for a certain type of ingredient, where's the best place to get it in the world? Like lemon juice, which turns out a small farm in Sicily or lavender, a European variety of the plant, or agave nectar for sweetness, get that from Mexico.
We did an exercise where we sourced the best quality ingredients that would make this product worthy of being on the shelf at whole foods and would be impressive to a national premium grocery retail category buyer. But then we also did some science. We looked at Google trends data, which is a completely underutilized analytical tool available to everybody where you can just see the search interest over a period of time by geography.
And we looked at how often people in the United States were searching for savory herbal ingredient profiles. And between 2004 and 2009, the search volume and growth was about half that as it is from 2009 to today. And so we look to capitalize on this growing demand for savory herbal products and just mix them with the guidance of a food scientist with a citrus fruit that pairs well and makes it so that the whole is greater than the sum of their parts.
We ended up launching...we've developed about 24 flavor profiles and loved them all, but we did some rigorous consumer testing and decided to launch with the three that were most approachable and least polarizing, so had the highest percentage of people that liked them. And those are lemon and lavender, grapefruit and Rosemary, and blood orange and cardamom.
Mathew: Okay. Very interesting. One problem many companies have making drinks is emulsion and creating a uniform dispersion of the active ingredients so we are getting an equal amount of, let's say, THC, CBD, or Rosemary in each sip. Can you talk about the kind of the challenges there and how you addressed them?
Luke: Yeah, the emulsion was the biggest issue in us getting to market. Lagunitas Hi-Fi Hops had been available in cans and switched to glass bottles, and our thinking was...and we had heard rumblings that a few other players in the industry were having trouble with maintaining a consistent potency in a non-glass container because the emulsion itself is highly reactive to the can liner.
Now it turns out, and I never thought I needed to know any of this, but there are 3 different can manufacturers and 12 different types of can liners across the 3 of them in the United States alone. And each one of those can liners has a different effect on pulling the agents that were used in the emulsion toward it or letting them remain equally dispersed in the liquid. And so what we did was we tested not only every can liner but also every type of emulsion on the market.
And it turns out that some emulsions had optimized for onset time. Like, let's get somebody to fill this within 5 minutes rather than 10. But in order to decrease the onset time, you need to use an agent that often has a very poor taste in it to accelerate that feeling you get from the THC. And we ended up using an emulsion that had a slightly slower onset time around 10 minutes, but that is probably indistinguishable to our target consumer who's just worried about getting too high. And because they use a different type of agent and made it optimized for tasteless and odorless and made it more reactive with the water than the can liners, we were able to prove out six-month minimum consistent potency in the cans.
And we loved the idea of being focused on the cans because it's just easier to carry a 6-pack of cans somewhere and you feel like each strength is something that you're consuming more casually, and we want to encourage people to drink 2 or 3 of them rather than savor each individual one. So it was a tough science challenge, but one that we felt was ultimately very important.
Mathew: Interesting. It's tough to kind of imagine how people react to it. Sometimes the market takes your product and likes it, but behaves differently with it than you'd like. So it's kind of like, for example, Red Bull and vodka. Like those two things aren't really supposed to go together, but the vodka or Red Bull manufacturers aren't complaining, but it's like, "Hey, this is not what we set out to do here." But then the market kind of takes its own way. So interesting. What question do you get asked by dispensary owners the most and how do you respond to those?
Luke: The number one question when I'm selling into a dispensary is, "Well, who's going to buy this?" And my answer, at this point, is the person who's gonna end up growing your business. It's the person who you may not even have access to today, but that who will become a cross-category cannabis purchaser. And it's, I think, especially at a time where the industry is in a lot of trouble and people aren't hitting their revenue targets and expectations for how many people were gonna be flower smokers were probably overblown. I think call for products like this that invite people into cannabis and then keep them there.
And my own experience as somebody who had never been to a dispensary before January of this year and now my own cannabis consumption patterns having evolved from designing this product that I would use as the first cannabis product I would ever pay money for, now I have four cannabis products that I pay money for. I have Mr. Moxey's microdose mints, I have some Kiva Camino gummies, and I have a Dosist sleep pen. And I wouldn't be surprised if over the next year I replace a greater share of my own alcohol consumption with something that's a little stronger or, you know, maybe a higher potency edible or maybe I get into pre-rolls at some point. I'm still a little nervous about the whole lungs thing, so maybe not, but by gradually stepping into the cannabis category and choosing experiences that don't make me feel overwhelmed. I have increased the amount of money I spend on cannabis significantly each month.
Mathew: You just gave a shot of terror to anybody from the alcohol industry listening. This is their worst-case scenario, listening to how you're replacing alcohol with cannabis products, but I love it now.
Luke: Or is it, though, because it's the same...the microdose THC drink is the same thing functionally as an alcoholic drink, which is like a microdose of alcohol. And I believe that the regulator...people who are making it so that cannabis is regulated as one entire bubble, I think, are doing it wrong. A microdose of THC, like you have to have 8,000 of my cans on your person in order to be over the personal use limit in California. And so I believe in a future where microdoses or THC actually get regulated more similarly to alcohol than the rest of cannabis and can get folded into the social spaces and purchasing channels that alcohol gets purchased from.
And ultimately the natural owners of cannabis beverage businesses, I think, are probably alcohol companies. They would want to acquire cannabis beverages and fold them into their distribution networks because that's the best way for them to offset the declines in beer sales as the world is falling a little bit out of love with irresponsible alcohol use.
Mathew: So we talked a little bit about microdosing and that seems to be the beginning of a new trend, especially in California because we can do other things while we microdose. Can you talk a little bit about where you think microdosing, in general, is going? Not just cannabis, but otherwise?
Luke: It's so interesting because microdosing is a trend within people that are accustomed to cannabis is something that you can do during the day and remain very functional. But for our target consumer, and for me personally, even though I have become used to my own product, I would never drink a can in the middle of the workday if I had something important to do within the next six hours. It does impact my ability to thin. And, you know, I think if I were in more of a routine type of job that I didn't have to go through some complex mental exercise every few hours to try and solve a problem, then maybe I could microdose throughout the day. Or if I were a purely creative person and I was drawing something or writing a script or conceptualizing of an idea, then a microdose would be additive to my creative process.
But for the majority of people that are going to explore cannabis, microdosing actually would be a lot like drinking. And I don't think people, even though it might make the creative process a little more fun or it may be possible to do for people during their work days, I don't think people in mass will drink alcohol during the day. And so I think that there's limits to this microdosing trend as we see it today as a way for people to functionally get through their daily experiences. And I hope that the more prevalent use case of microdosing becomes a social one as a mild intoxicant.
Mathew: Okay. And where are you in the capital-raising process?
Luke: So we have raised two rounds. We did a pre-seed led by Navy capital in December of 2019 and then we just announced our seed round which was a $5 million raise and was interestingly led by one New York City VC that focuses on really brilliant consumer packaged goods brands that we honestly pinch ourselves every day to be associated with, and that's called Imaginary Ventures. They were founded by Nick Brown and Natalie Massenet and have companies like Daily Harvest, and Glossier, and Dirty Lemon in their portfolio.
And then we have a cannabis co-lead in that round called jam 10 partners and that has helped us think about this from a one foot in and one foot out perspective. So how do we grow strategically within the cannabis channel given the way regulations are and how many points of sale exist today? And who should we partner with in the cannabis ecosystem to grow our presence throughout the country, but also how do we think about our business like a mainstream consumer brand and how do we market to people who have this real relatable pain point of, "I want to drink less alcohol but I don't want to be sober"? And so that has been a really dynamic duo for us and we think will help us catapult into the next phase of our growth.
Mathew: If for accredited investors that are listening, are you still looking for more accredited investors or not right now?
Luke: Not right now. Our philosophy is let's raise enough money that we can survive for at least 12 months because raising money is a full-time job and building a category and a tightening channel is like 10 full-time jobs. And so we really feel like we have to focus so much on the day to day and how to get this product into more paying consumers hands that we don't want to think about raising money until at least the end of 2020 but, you know, certainly will be added again then.
Mathew: Luke, I want to move on to some personal development questions to help listeners get a better sense of who you are as a person. With that, is there a book that's had a big impact on your life or way of thinking that you'd like to share?
Luke: Interesting. I have been obsessed with the book 1984 and have read it three times now and I am delighted by it each time. And it's a fiction book by George Orwell and it paints this dystopian future. And I think what it helps me do is continually think outside the box about a future world that does not exist yet and as a different set of problems than today's world. Now, obviously, creating a cannabis beverage and imagining that it can be on tap right next to a beer or a hard kombucha at a bar is not such a farfetched reality, but I often have to train myself to imagine things that don't exist in order to create them and wheel them into the world.
So, you know, "1984" is a pretty dark book and it's not that I'm trying to take a page out of it, but I find it to be just a beautiful piece of writing and really inspiring.
Mathew: Although it's a work of fiction, do you see elements of that in our modern society that give you pause at all?
Luke: Totally. But, you know, I assume often that privacy is something that we don't have and I live my life as publicly as I feel comfortable. And if I do something, I assume that everybody is watching and listening because who knows? They might be, but it makes it very easy to get through the day to day and the week to week knowing that I'm not hiding anything from anybody.
Mathew: Right. What is the most interesting thing going on in your field besides what you're doing?
Luke: I think that fifth frontier I called channel availability would be probably the hardest thing to crack in order for microdose THC drink to become mainstream. And so I think that the people who are creating innovative retail spaces and delivery platforms that do not smell or look like cannabis traditionally are the ones that are doing the work that will carry us into this next phase of growth for the industry.
And so I think I was really inspired by what MedMen did to create an Apple Store-esque user experience for somebody who frankly needs that consumer education to get welcomed into the category. And I think we'll need a whole new generation of businesses like that, that can figure out how to crack that can of curious target consumer without burning so much cash on marketing and being at risk of folding.
And I think that in delivery that's much more scalable. Eaze has done amazing things to give access to so many people to cannabis on-demand, but there's still something about easiest target consumer that is focused on high THC, low dollars, that prevents us from really saturating it as a channel. So, my money is on people who are building innovative and non-cannabis forward points of sale, whether digitally for delivery or a physical for retail.
Mathew: Okay. Here's a Peter Teal question for you. What very important truth to very few people agree with you on?
Luke: Wow. Well, you know, I guess that's a general question but I'm gonna give them a cannabis answer. The truth that people disagree with me on most vehemently is that the world is ready for a microdose ready to drink THC beverage and that it can be consumed similarly to alcohol. It's the fundamental, you know, thesis for our company's existence, but we experience so much pushback in the market in just casual conversations with friends.
And I used to be a naysayer, and when I was that person who vehemently disagreed with Jake about the need for a product like this and like why solve one substance issue like alcohol abuse with another substance? Like doesn't that feel silly? But, you know, after doing this whole exercise of quitting my job and starting the company and seeing our growing team of 12 people now also go through this exercise of sacrificing careers to build this. And in the hardest of days, we all look at each other and just hold the can in our hands and say it's a really good product. People just have to get used to it. And so as many naysayers as there are out there and as many people who vehemently disagree with what we're doing, we know it's just a matter of time before it inflex. And so in the meantime, just getting as many cans in hands as possible.
Mathew: Luke, as we close, how can listeners find your beverages and follow you online?
Luke: Our primary way of communicating to our consumer base is on Instagram, and it's @drinkcann. It's a highly irreverent and silly social media page. We say as a company that we want Cann to be your friend, not a brand that's pushing its product on you. So hopefully, those who follow it find it an entertaining and educational place to learn about what we're doing.
But we also have a great website that we're very proud of that tackles that consumer education more directly. That's at www.drinkcann.com. And we answer every direct message and every email to our company. And so if you are interested in learning more or just having a dialogue, reach out, somebody will reply.
Mathew: Luke, thanks so much for coming on the show. We really appreciate it. Please come back on and let us know how this all progresses, and good luck to you.
Luke: Thank you so much. Anytime.
Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher, or whatever app you might be using to listen to the show. Every five-star review helps us to bring the best guests to you. Learn more at cannainsider.com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at cannainsider.com/trends. Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at firstname.lastname@example.org. We'd love to hear from you.
Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Promotional consideration may be provided by select guests, advertisers, or companies featured in CannaInsider. Lastly, the host or guests on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions.
Final disclosure to see if you're still paying attention. This little whistle jingle you're listening to will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care. Bye-bye.
To know where the cannabis market is going, we need to examine where it’s been and where it is right now.
Here to help us is Cy Scott of Headset, a data-driven tech company that provides business intelligence for the cannabis industry.
Learn more at https://www.headset.io
- Cy’s background in cannabis and how he came to start Headset
- An inside look at Headset and its mission to help cannabis companies stay ahead of the curve
- Surprising trends Cy has observed in recent dispensary sales data
- How data can help inform an entrepreneur looking to bring a new cannabis product to market
- Valuable takeaways from purchasing behavior data that have proven to maximize visitor engagement and drive sales
- How different products sell better on different days of the week as well as morning versus evening
- How purchasing patterns differ between generations
- What to expect in cannabis over the next few years based on Headset’s real-time data and market intelligence
Matthew: Hi, I'm Matthew Kind. Every Monday, look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. That's cannainsider.com. Now here's your program. In order to know where the cannabis market is going, we need to examine where it's been and where it is right now. Here to help us is Cy Scott, co-founder of Headset. Cy, welcome to "CannaInsider."
Cy: Hey, Matt. Great to be here.
Matthew: Give us a sense of geography, where are you in the world today?
Cy: I am in Seattle, the Great Pacific Northwest here.
Matthew: Okay. And you've been on the show a few times before in the past. I think it's been maybe a year or so. And in those interviews, we covered your past co-founding Leafly and now you and your co-founder sold that company and you're involved in Headset, for the last, I don't know how years. Just give us a quick snapshot of what Headset is for new listeners.
Cy: Sure, it's been about a decade in cannabis for myself, as you mentioned starting back with Leafly in 2010 when we launched that service, having sold it to Privateer Holdings and moving on to Headset, a data analytics provider for the cannabis industry. So really at Headset you know, our mission is to enable the success of what we consider the greatest drug policy shift in our lifetime, which is cannabis legalization, which is, you know, something that you cover quite a bit on your podcast. And we do that by providing the analytics that organizations and cannabis operators need to make those informed decisions. The way we look at it is that if the operators are able to make better decisions based on data, then in turn, they'll be more successful, and if they're more successful then the cannabis industry overall will be more successful. And we're really motivated to see this great experiment work.
Matthew: Yeah, that's valuable information, and what markets are you providing the data for right now?
Cy: We're actually...we have a footprint in about 25 markets. So a variety of adult-use and medical. We're providing what we consider a full market measurement through a service we call Headset Insights in five markets at the moment, and we're looking to be expanding throughout the year here. So those five markets where you can see a full read, which is basically market intelligence data all the way from the category down to a specific product in the market. We provide that in California and Colorado, Nevada, Washington, and Canada, actually, as well, particularly Alberta at the moment with a few more provinces coming online this quarter.
Matthew: Okay. And do you remember the last thing that really just kind of slapped you in the face and surprised you in the data that you weren't expecting?
Cy: Sure, there's always something, we're always looking at new and interesting ways of slicing the data, looking for interesting patterns. I think most recently, we did a report on weekly sales. We really looked at were there any patterns week-over-week, were there any weeks that perform better than others, you know, outside of things like holidays, just kind of in a calendar week? And what we noticed is that the last week of the month actually has a pretty significant spike in sales, particularly in the more mature markets of like Washington and Colorado, the markets that have been online for some time at this point. Markets like California and Canada with our kind of high growth rates don't really show this pattern quite yet, but we expect to see it soon. But what's interesting is the last week of the month that sometimes bleeds into the first of the next month, we see a good size increase in not only transactions per day, but overall sales or revenue per day and units per day sold. So anywhere from, you know, 5% to 6.5% of growth on that last week.
And then the previous weeks of the month, actually sometimes you see a little negative growth. So if you're a retailer or dispensary and you're looking at your week-over-week sales in the beginning of the month or middle of the month and they're down, I wouldn't be too concerned because usually, it looks like it kind of comes up at the tail end of the month, which is just pretty unique. It could have to do with, you know, payroll cycles, people coming out at the end of the month, a bit better on budget looking to spend a little bit more money now that, you know, they've got all their bills accounted for. And I think it's a pattern that you see in traditional industries as well. So it's quite fascinating to see some of those same patterns emerging in this new cannabis market.
Matthew: I know in the past, we had talked about how when a new market comes online, it's usually strong with flower and then over time it moves more into concentrates and edibles and so forth. Is that trend continuing? Or are we seeing markets truly become kind of independent of each other and not, you know, converging around common themes?
Cy: You know, there's definitely convergence. I think you see that as markets mature, to your point, you're starting to see patterns where as far as market share by category, so you know, flower sales versus pre-roll versus edibles and beverages and so on, kind of start to look pretty similar, where you have, you know, flower in the mid 40% of all sales, things like edibles anywhere from 11% to 14%. It's kind of how it shakes out across most markets. Now, with the newer markets like California, you kind of see a different trend. And I think we'll probably get there and you'll start to see it kind of blend together across the different states. But in California, actually, flower sales are a bit less about 40% of sales.
And really the difference is coming from more vapor pen sales. So vapor pens in California, actually about 26% of category share, and that's in the last 90 days. And you compare that to a market like Colorado, which is about 16% or Washington about 13%. So in California, vapor pens do seem to resonate a bit better than some of the more mature markets and that could have to do with it being a new market, more vapor pen operators, people coming to the legal markets for the first time jumping in and, you know, getting exposure to vapor pens where, in a market like Washington, when it launched, there really weren't that many vapor pens in the beginning.
So kind of interesting to see some divergence there. But in general, it's converging. Canada is kind of a unique entity, it's got a bit of a different structure. You know, up until this year, it was exclusively flower, you know, capsules, some tinctures or oils, and pre-rolls. And so you see some different patterns there where flower is actually about 66% of sales. But we expect that to start to look more like the U.S. as these new formats come online and you start seeing them in more stores, which is just now starting to happen.
Matthew: Cy, where are we in this vape pen story though, because we had some deaths last year and some scary stuff going on. And it seems like we've kind of reached, you know, peak vape pen scare. Do you think that's true or it's still some pain left to come?
Cy: Yeah, it's a great question. So yeah, the Vapegate, as it's been dubbed, was pretty tough for the industry last year, obviously, a lot of news headlines and some unfortunate deaths. It sounds like it was mostly black market or exclusively black market products, so unregulated products. But it certainly did have an impact on consumer purchase behavior in legal markets and regulated markets, so both medical and adult use. What we saw was quite a bit of decline. So when you aggregate, you know, the vapor pen market share across those key U.S. markets that I mentioned before, it was about you know, 24%, 25% of sales going to vapor pen. And then after, you know, I guess, it was mid-August to mid-September, that's kind of when the news cycle was at its peak, you saw a pretty significant drop in market share, basically down to about 18% through the end of the year.
Now, the good news is that it has flattened out and it's kind of climbing back, I would say. So we're starting to see people going back to the vapor pen market. I think a lot of organizations have gotten in front of, you know, the crisis and talked about how they're providing tested products, regulated products that don't have any of the additives that the CDC was kind of pointing to as some of the reasoning for the illnesses. So you are starting to see some market share clawback. But during this period, what was pretty interesting was other categories, particularly edibles and pre-rolls, gained quite a bit of market share, edibles going from about 10% to close to 13%. So you know, consumers were still purchasing cannabis. They were just looking at alternatives of vapor pens, but I think that people are going back to vapor pens. In 2020, you'll start to see it hit those same market share numbers as we had before the crisis happened.
Matthew: Cy, if you were to use your data, all your Headset knowledge and insights, and you were forced to create a product that would do well, that's your goal, how would you use your data to come up with a product that has fit for the market now? And is there anything you do to add some special sauce to try to go where the puck's heading?
Cy: Yeah, certainly. So with our market intelligence services, a lot of our customers use the data to really understand the competitive landscape to really understand their brand ranking in market and find opportunity, which is kind of to your question there. And so to find opportunity, a lot of our customers use a variety of different dashboards that we provide, different analytics, but it really comes down to, you know, identifying potentially white space in the market. So those gaps where there might not be a product that's produced. You know, one interesting thing to look at is cross-market. So if you are an operator, say in California, you can look to markets like Nevada or to Colorado and see, are there products that sell really well there that might not be available in markets like California, the market that you're in, for example?
And so really identifying that white space where, you know, a product that resonates in another market, if you bring it to your market, it may do well, you know, consumers are pretty similar across markets. I think it just has to do with availability and the types of brands and the products that would be available in a particular market. And that has a lot to do with the legislation and fragmentation that we see in a cannabis industry where an operator in Nevada might not necessarily be an operator in California, for example, or Canada.
So you can look to other markets, look for that white space to really find opportunity. I think looking at the competitive landscape is another option as well. So you can look at brands that are performing well. Look at their product mix, see, you know, what's driving the majority of their sales. Look to things like pricing and margins to use in forecasting, you know, as you decide to develop a certain product, you're probably gonna wanna forecast sales. So you can use what's selling in your market comparatively from our data set to really understand and make those unit projections, or raw sales projections. And then on the secret sauce of the planning, we do some really interesting things around basket analytics or behavioral data so we can help inform our customers, you know, what types of products are purchased together? What kind of brands are purchased together? What kind of loyalty do customers have? And who are those customers through some of the demographic data. So, you know, what generation are they from, you know, what age resonates with maybe a brand that you're modeling your products on.
And so using all that information to kind of forecast products is critical. And we see a lot of people doing it in their own markets, but also like new markets that are emerging markets like Massachusetts, for example, are looking to markets in the West Coast that may have been around to kind of see where the market may go for them, you know, it won't always be exactly the same, kind of like what we're seeing in California with some higher vape pen sales, but I think you can use it as a good proxy. You know, it's a way to kind of take a good guess at the way it might shake out as your market matures. So there's lots of interesting data in there to explore. And I really think it does come down to making an informed decision around the product that you will be producing because shelf space is getting harder to come by these days, retailers are getting pickier, the markets maturing. So really coming with analytics first, I think, can give you a great competitive advantage.
Matthew: So you already spoke before about, kind of, how the different weeks in a month make a difference in sales, the last week being, kind of, the peak. What about the individual days? Like is there certain days if you are a dispensary owner, you'd say, "Hey, I would really target this today or send a text message promotion about pre-rolls on this day?" Is there anything that you see as, kind of, surgically tactical that you would recommend?
Cy: Yeah, certainly. So there are very interesting patterns that come from day of the week. Really, Fridays are the biggest driver of sales when we look at, you know, how Friday indexes over other days of the week, it's pretty incredible. You know, about 2% of all sales in the week go to a particular hour on Friday. So kind of between the hours of noon and 8 p.m, you know, you'd see about 15%, 16% of all sales for the week happening right then. So Friday's a great day just for sales overall. Saturday as well, as you can imagine, not as strong as Friday, but still a high amount of sales. The other days, there are sales, but not at the same level that you'd see on a Friday.
You know, I think that just points to kind of the recreational nature and adult-use markets, you know, people going on Friday and maybe purchasing products for the weekend and so on. But I will say there are patterns for earlier in the week, or even earlier in the day frankly, and a lot of that comes from the wellness-based products, products like topicals, capsules, tinctures, and sublinguals. We see sales patterns earlier in the week. So you know, Monday, Tuesday, Wednesday, more sales happening there and actually earlier in the day too. So when stores open at 10 a.m., 11 a.m., you're starting to see more of those types of products sold. So I think that, kind of, the wellness products going in the morning and then recreational type products and more in the afternoons, weekends, and so on.
So kind of using that information, a lot of brands will do in-store demos, you know, they'll have people there talking about their products. So if you're producing a wellness product, you're probably better off earlier in the day, you know, having one of those vendor days at a cannabis retailer. But if you're producing something that might be more recreationally consumed, you know, probably Friday afternoon, Friday evenings are your best bet.
Matthew: Oh, great. Now, your Headset data gives a lot of insights on what different generations like to purchase. And I want to just go into what those generations are for people who don't...I mean, everybody knows that the millennials and baby boomers, but there's the silent generation that was born between 1925 and 1945. The baby boomers post-World War II, which is 1946 to 1964, that's when they were born. Generation X born between 1965 and 1979. Millennials born between 1980 and 1994. And then Gen Z. Some people call them the homelanders, but Gen Z, 1995 through 2012 is when they were born. What kind of insights is there about generations because I mean, we all like to think we're so unique and everything but, you know, there is a lot to be said for where you are in your lifecycle as a human and what you, as part of a cohort, believe. Like, for example, Harley Davidson knows that most of their motorcycles are purchased by men between ages 45 and 48. You know, that's when the midlife crisis sets in for Harley Davidson. So there are these things we can draw from it. What do you have to say about generations and how to think about it with your data?
Cy: Yeah, great question. So, you know, all of our data is sourced from our retail and dispensary partners. And so we are able to see some interesting analytics around demographic data. We don't take any personally identifiable information, but we can get a sense of age and a good proxy for gender based on first name. And so for age and kind of to speak to those generations, you know, what I think historically was a very millennial-driven market, we're seeing some pretty incredible gains in the Generation Z demographic. You know, one interesting thing about Generation Z is that, you know, it's a generation that's continuing to age into cannabis. And so every day, new consumers are turning 21 in the U.S, you know, 19 in Canada that can go and then now purchase cannabis. So it continues to expand. So that's quite fascinating.
Also, this generation has grown up with a legal market. You know, when you think about cannabis legalization, and when that happened many years ago at this point, this generation, these 21-year-olds, you know, were in their teens, early teens. And so they've just been around cannabis has been normalized and legal potentially without the stigma for much longer than maybe baby boomers and so on. So, good adoption there, and actually, it's quite fascinating, we saw in 2019 Generation Z took about 3.5% of all sales in the market. And then at the end of the year, it was about 5.5%
Cy: Yeah, so two percentage point increase there and we expect that to keep happening. But also at the same time, we're seeing more older generations coming into the market. So the baby boomers, you know, the silent generation, which are the elderly, kind of coming into the market more, being more represented than they were before. And so while the industry continues to grow, and you know, Millennials used to take a very significant percentage of the market, now it's about 50% of the market. So their market share is dwindling, but at the same time, more people are purchasing cannabis, so the pool is getting bigger. And so it's quite an interesting pattern, you know, younger audience coming to the market and an older audience coming to the market where before it was very millennial-driven. I think it just had to do with normalization. And now that it's been around for so long, you have, you know, older people coming looking for those wellness products or, you know, coming around to this idea that cannabis isn't this taboo product anymore. As far as purchase patterns and behaviors, there are some differences. You know, one interesting thing is baby boomers, as far as percentage of sales that go to flowers, is actually the highest, could be that that's what they're used, to just having access to back in the day it was just flowers...
Matthew: The flower generation, Woodstock.
Cy: Yeah, there you go, exactly. And then, you know, most of the vapor pen sales are pretty equal across Generation Z, millennials, and Generation X, about 20% of sales, vapor pens, across those generations, and it shrinks at the baby boomer and silent generation. So much less than the vapor pen market. Pre-roll flower for the Generation Z and millennials. Pre-roll is about 12%, so the highest for those generations so they're really gravitating towards pre-rolls. I think a lot of that has to do with the low cost of pre-rolls, you can get individual, you know, single-gram pre-rolls for pretty cheap in a lot of the markets that we track as you're seeing a lot of unit sales going there. I think it's just the amount of wallet or purse they have to spend is a bit less than, you know, a baby boomer potentially. And then concentrates, concentrates kind of over-index on Generation Z, about 16% of sales go to concentrates, that's the waxes and the shatters, and compare that to something like the baby boomers where it's like 7%. So I think the younger generation is gravitating towards higher potency products, which concentrates tend to be.
So there are some, you know, unique sales patterns. The silent generation is definitely over-index on the tinctures and the capsules where you don't really see that going to Generation Z. Basically no market share in those categories for the younger generation, but it's tinctures, 14% of all sales to the silent generations at 74 years of age and older. So you can definitely see how that's more of a wellness product for the elderly, potentially, and driving sales for those categories. So pretty interesting if you're producing products to kind of understand, you know, who you're targeting, where the majority of your sales are going, and how that breakdown looks.
Matthew: Yeah. I mean, certainly if I was targeting the silent generation, I would be thinking about arthritis tinctures and topicals, knee replacement subjects, things like that. Baby boomers, you know, what kind of music was playing when they were in their peak teen years? Was it something for the Beach Boys or something like that kind of target, you know, perfectly exact match to what the imagery is they like, so this is super important to me. I mean, I read the book "The Fourth Turning" about different generations. It was written in the '90s by these two demographers from Yale, and there really is just so much you can do just by focusing on generation. So I'm really glad that you include that information. As we look back at 2019, what are kind of the 1, 2, or 3 bullet points you kind of think will stick out in people's minds in terms of what the Headset data told you? Like, if you were to sum it up in a nutshell, what was 2019?
Cy: 2019 I think was, well, certainly, the vapor pen issue.
Cy: Yeah, Vapegate was a big top-of-mind event that it did take quite a bit of, I'd say, Q3 attention this year. But I think there's some good stories on growth. You know, you look at a market like California, which is still growing, still maturing, and it's doing pretty well. You know, a lot of people would argue maybe it could do a lot better, and that's certainly true. But when you look at growth rates of a market like California, it is significantly higher than what we're seeing in some of the mature markets. So when we look at things like average daily sales comparing January of 2019 to December of 2019, California saw an increase of about 66% from January to December. And you can contrast that with a market like Nevada, which saw about 15% or Washington at 14%. So good growth coming out of markets like California, and the same story can be said for a market like Canada. You know, it seems to be kind of a pattern where, you know, markets will open up a bit of a rocky start, licenses getting issued, potential shortages of products. And so it takes some time for it to kind of get that momentum. And we're definitely seeing that happening in a market like Canada.
So Alberta is a good example. You know, kind of started with a handful of licenses, and now has hundreds of licenses, and it's a relatively small province by population but they've got great coverage. We kind of look at it like an S curve where, you know, it starts out kind of slow and then it ramps and your starting to see a lot of stores coming online and then it kind of tapers off as we kind of hit market saturation. And so California is very much in that ramp of the S curve at this point. So still a lot of growth. I know a lot of people wish it would grow a bit faster. You know, we all do, but it's definitely, getting there. So I think that's a good story for the year as well. I think we'll continue to see that in 2020. You know, with some new markets like Michigan and Illinois, you're gonna see that same pattern emerging and still some great growth coming out of Canada and California at the same time.
Matthew: Okay. Anything that you think is like a black swan in 2020 that you have your eye on or nothing right now?
Cy: You know, what would be interesting to see is in Canada the new format adoption, the beverages, the edibles coming to market. We're just now starting to see them pop up in our retail data. It's still pretty early days and we're at the tail end of January here. Everyone, again, would like that to move a bit faster as well, but we expect it to. I think that Canada is unique, you know, in the sense that there's been a lot of investment from the beverage industry, so more traditional, whether it's beverage alcohol or just traditional beverage coming in and making investments in the space. And so that could prove to be a unique a dynamic where, you know, a beverage category in any given kind of U.S. market that we track is 1% to 2% of sales, and so it's a pretty small category.
Now, in Canada, that could be different. It could be different because of the investment that's being made. The types of products coming to market, you know, there's relatively small amount of products that are available in the U.S. in any given market for beverage if you compare that to like flower production, or pre-roll, or any other category really. So that could be a black swan, it could be a new model, or it could end up being very similar to the U.S. where we see 2% of market share going to beverages. The jury's still out. But I think there are some unique dynamics in Canada that could potentially afford higher market share than we see in the U.S. So it'll be interesting to watch and see how that looks by the time we get to the end of this year.
Matthew: Cy, what is the ideal client that Headset can help?
Cy: Yeah, first and foremost, I'd say cannabis operators, and again, goes back to our mission, really help the operators make these informed decisions. It's quite a costly investment to produce a new product, to produce a new brand, and to get that on the retail shelf. So you wanna be armed with most up to date, most accurate information out there. And so if you're a cannabis operator, I think that we can be very helpful for you from an analytics perspective on those that are looking at the market as well. So maybe organizations that are thinking about jumping in, you know, can use our services to really better forecast what it might look like, what the landscape looks like. So that kind of audience, so maybe not an operator yet, but looking at maybe becoming an operator, or maybe investing, ancillary organizations, groups like investors that are making bets on the market, on brands in the market can leverage our data to really better understand, you know, how organizations are performing.
Like in Canada, for example, with our Canadian data, a lot of these Canadian companies that we track are publicly traded. You know, investors are making bets on these organizations and really see how these large LPs in Canada are selling products and what products are resonating with consumers and how they're trending. I think investors find a lot of value in that. So a variety of clients that can use Headset from the operators all the way to ancillary people outside the industry that just want data and analytics on the space.
Matthew: Yeah, and can you give me a sense of kind of the budget that's needed to access the Headset market data and intelligence?
Cy: Sure, you know, we have solutions for pretty much all budgets. You know, we price it in a variety of ways. For our market intelligence service, you can get a single category in a single market for a relatively reasonable rate, I would say. We have services that are priced less than $1,000 a month all the way to much higher pricing for organizations that might be multi-state or multinational that need full market reads across all the markets that we track. Contract value can get pretty high for those organizations, but they need the data across all that space. So really, you know, all shapes and sizes, we try and find solutions. The cannabis industry, we target it like a specific vertical and within that vertical, operators of all shapes and sizes from the small manufacturer, small grower all the way to the multi-state operators. So we need to make sure that we can provide services that, you know, fit budgets for all sizes.
Matthew: Okay, so if I'm a business owner listening right now, they're thinking, okay, I invest in Headset and I'm getting this market data, am I gonna need like some sort of data scientist or someone to help me interpret this or is it digestible? How does that work?
Cy: Yeah, we try and make it as digestible, as prescriptive as possible. You know, we understand that people's time is limited and to really dig in and understand what the data is trying to tell you could be challenging. So we try and make it pretty straightforward for organizations. So you don't necessarily have to be a data scientist, you know, you can get most of the information that you need with our dashboards, the way they're just kind of out of the box developed. Now, if you want something more specific, or like a deeper dive and you're not capable, potentially, of doing that and you don't have a data scientist on your team, we do provide services to be able to help with that. So some of the larger organizations, you know, like to have that extra support kind of just be told what trends are out there, where the opportunities are. So we do enable support for that. But not all organizations use that. And we try and make it as self-service as possible. And we're always trying to improve that prescriptive analytics so that you can just kind of plug in some metrics and get exactly what you need out on the other side.
Matthew: And the data is pretty fresh. How close to real-time is it, would you say?
Cy: Yeah, we publish data, new data, every day for the U.S. markets that we track, you know, timeliness of the data really does matter. New products come to market every day and new brands being launched constantly. Obviously, new legislation happening, you know, not to keep picking on the vapor pen crisis, but in the State of Washington here, where we're at in Seattle, we saw flavored vapor pens being explicitly banned. So you couldn't have, you know, non-terpene-based flavors or original terpenes, so anything that was candy-flavored and so on, and that impacted sales quite a bit. And so if you are looking at data that might be four to six weeks old, you could be at a significant disadvantage making investments in something that changes quickly. So looking at how sales are going in a timely manner matters. It doesn't mean you have to look at it every day, that probably would be too much to log in every day to see. But if you wanna look at the beginning of the month, we're almost in February and you wanna see how January closed out, you can do that, you know, February 1st. So real-time is important to us.
Now in markets like Canada and Alberta, we have a bit of a time delay on our read at the moment. And a lot of that has to do with that S curve I was talking about before where it's a bit harder to project when they're issuing new licenses. It's hard to know exactly how many stores are opening, how well those are doing to kind of project out, but as it starts to stabilize, we're able to provide a tighter and tighter read. So you'll see Canada kind of going real-time in just a few short weeks here now that we kind of have a better sense of how it's all shaking out. So we focus on real-time. We do start depending on how fast-growing the market is with the time delay but eventually, we get all markets to our real-time read.
Matthew: And how's the partnership with Nielsen going? Can you talk about that a little bit?
Cy: Yeah, certainly. So our Nielsen partnership is going great. You know, when we started Headset and we wanted to do market intelligence, we really looked at organizations like Nielsen as models and Nielsen's been doing it for close to 100 years at this point, you know, really one of the leaders in market intelligence. You know, they're very interested in the cannabis space, a lot of the consumer packaged goods industry was looking at the cannabis space kind of trying to understand not only the opportunity but risk to their business. Nielsen needed a way to be able to answer those questions. So they looked for market providers, market data providers in the cannabis industry and really liked what we're doing at Headset. Now we have a strategic alliance with them. We do a number of things, both in Canada and the U.S. Most recently, we launched a pet CBD report.
So one interesting thing with working with Nielsen is we're able to get a sense of the unregulated market, so CBD products that are sold outside of dispensaries and retailers, licensed retailers, the stuff that might be sold at Walgreens or other big-box retailers. So Nielsen does a great job of that measurement, that retail measurement. And we're able to bring that together with our retail measurement coming from regulated markets. So you can get a holistic view of the space, which is pretty important. So if you're making, you know, a topical or some sort of pet food product and you wanna know what's going on in the market, it's not ideal to just look at one side or the other, even if you're planning on just entering the unregulated market or maybe you're planning on entering the regulated market.
You really need to understand both sides because it could impact sales, could impact forecast, there could be cannibalization. In a market like California, say, if I wanted to purchase a topical, I could go to an adult-use location regulated store or I could go to Walgreens. The products are slightly different. But I can make that choice given that I'm older than 21. And so looking at the market holistically is critical, and Nielsen really enables us to do that, you know, tracking product sales and the unregulated market and those channels, the Walgreens of the world, is just something that we're not particularly interested in pursuing. We feel like Nielsen does a great job of that already. And so coming together is pretty powerful for our customers.
The pet CBD report is our latest, again, looking at both sides, kind of understanding brands on both the regulated and unregulated channel. So that's pretty cool. You'll see more services like that more integrated CBD product sets. We're also looking at, you know, outside of CBD, more just CPG trends. So for example, understanding beverage categories, so carbonated or even flavors and using that data that's from the CPG world, so the consumer packaged goods world, you know, what kind of drinks do consumers buy just non-cannabis, non-CBD, and taking that information and producing cannabis-based products that might model on that. So pretty cool stuff that we're able to do with them and kind of able to provide a nice holistic view of the market.
Matthew: So let's move on to some personal development questions. What do you like to do when you're not working?
Cy: Yeah, not much time for that these days, but I do try and get some downtime on the weekend. I am of the belief that you kind of need some downtime just to prevent burnout. You know, I'm a perpetual learner, and so I'm always trying to learn something new. Something I enjoy doing often are the massive open online courses. Things like Coursera, I enjoy taking classes there, they're pretty, you know, straightforward. Don't take too much of a time investment, but you get a bit more out of a minefield than just maybe reading a book on a particular subject. So I try and do one of those at any given time. You know, I'm kind of in between them at the moment.
One that I'd recommend for any listeners that might be interested in this type of thing is one I just finished, which was Model Thinking from the University of Michigan, Professor Scott Page, he also wrote a book called "The Model Thinker." It's pretty fascinating stuff, just kind of how we can better think in models. You know, there's a lot of material out there if you do some research on how model thinking can really empower decision making. So I found that pretty fascinating.
So always learning. You know, I come...originally computer science major, I started my career as a programmer, moved into product and moved into startups. And so I still enjoy programming from time to time. So I kind of try and do that as an enjoyable exercise. And I'm not programming in the day job anymore for some years at this point. So that's something that I like to keep doing, it just kind of keeps my mind sharp. And those are all kind of, you know, boring learning programming things.
So on the recreation side, just in general, I'm trying to play more guitar these days. I used to play quite a bit in my teens and 20s and kind of fell off as I got busy with the career stuff and family stuff, but kind of going back to that. I find it pretty rewarding to just kind of get better at that and going back to that. So that's been a new thing for me just trying to find an outlet, but it's kind of nice to go back to it. Haven't bought a Harley Davidson yet, but I'm not 45.
Matthew: It's coming then.
Cy: I'm on my way.
Matthew: Well, it's interesting that as a business, you know, startup founder, you can always do one more thing. It's like I can squeeze one more thing if you finish everything on your to-do list. So there's that temptation of just allowing the scope to creep, to creep, to creep because you want your business to do well. You want everybody, the investors, your employees, your other co-founders, you want everybody to do well, and so you can always do one more thing but then that's like throwing one more log in the fire that's gonna burn you out. So it's a delicate balance and I feel for you there.
Cy: Yeah, it always is. Time is the one resource that we never have enough of.
Matthew: What's the last product you purchased, cannabis or otherwise, that you can't see yourself living without?
Cy: Yeah, let's see, most recently, I guess one of the more recent product purchases is I just picked up an iPad Pro just a few weeks back now and it's my first iPad since not the original but the first retina iPad where it was like the higher resolution screens. But my first iPad, I guess probably in like, seven, eight years. Kind of fell off, wasn't using it much, the old one obviously, getting pretty old. So I got this new one and I find it pretty great. And actually, I think it's like the 10th anniversary of the iPad, which is crazy to think it's been 10 years. But the Pro, I do enjoy, you know, it's almost a laptop. I've tried to use it for work items like I can do email pretty easily on it, document editing and things like that. So it's got some productivity aspects but it's also just kind of a great device for other services like the Coursera stuff or reading on my Kindle or even guitar like I have some apps that help me just stay in practice there. So I kind of find it as this very flexible device.
So I can't live without it, you know, I'm getting there. I probably could live without it but it's trying to become more and more of my day-to-day. You know, the phone itself, my iPhone is certainly the product I can't live without. But I think the iPad is a bit more flexible, bigger screen, has more productivity, easier to do things on. So that's kind of my latest and greatest. I am enjoying it. iPad OS is a bit difficult. I haven't had a chance to use it, but the multitasking and stuff's bit cryptic. I'm still trying to get there. But so far, so good, and I'm a fan.
Matthew: Interesting. I know Apple's working on glasses is their next big thing. I think they're released in 2021 or 2022. And so we can even move from that iPad experience to something even more intimate right there with our eye movements and it's gonna be interesting to see how that happens because it's hard to be more addicted than all of us are to our smartphones. But I feel like the glasses is really gonna be like a merging of man and technology in some way.
Cy: Yeah, you know, it's interesting if you're an Apple person, but they have the screen time where it'll highlight on a weekly basis, you know, the screen time used. You know, you're in front of your screen an average two hours a day, or whatever it may be. And so with things like glasses, that's going to be perpetual screen-time potentially, and I know there's a trend, you know, people are trying to pull back. And I think it's great that it kind of highlights the screen time so you can kind of see it right in front of you. And kind of know, "Okay, well maybe I need to pull myself away from the screen," which is hard to do sometimes given that there's so much great material on a thing like an iPad. But it will be interesting to see the glasses and if that's gonna happen. I know that AR stuff, Apple's done quite a bit. I haven't used as much of it on the phone. But they've made a lot of investments and the augmented reality, I think, is where the glasses will go. And I think there's gonna be a lot of productivity that you're gonna get out of it, particularly for manufacturing, but as a general consumer, should be pretty cool to see, you know, how that all shakes out. Although, I'm still not wearing an Apple watch because I kind of wanna not have to look at something all the time.
Matthew: Yeah, I feel the same way.
Cy: Right, right. And it'd be too tempting. I'd like to think that I have more willpower, you know, I wouldn't look at my wrist buzz because I got a text. But right now, if my phone's on my desk and I'm in the middle of something, you know, I try to limit distractions to kind of get more of that flow state really some of the deep work and perpetual, like, dinging or texts coming in or emails flying in can be quite distracting for me. So, I don't know about glasses yet, but I'm sure if everyone's wearing them, I'll be right there with everybody else.
Matthew: So with your computer science degree, being in the tech field now for a long time, is there anything that you feel like is going to massively change or upgrade humanity? Apart from, you know, the Apple glasses we just talked about, that's kind of on your radar where you're thinking, "Wow, if this takes off, it's gonna accelerate a whole new technology cycle that most people aren't looking at?"
Cy: Yeah, I definitely think, you know, AI will still play a big impact or will certainly play a big impact on being quite disruptive for a lot of industries. It's not a new idea, certainly, and it kind of comes and goes in waves. You know, there was a big push, you know, decades ago and then it kind of cooled down and kind of came back around. And I feel like some cooling is starting to happen, you know, like self-driving cars, everyone thought would happen by now. And then it's getting closer and closer but there's certainly challenges with it. But I do think that for the near future, it's gonna be quite impactful.
We use it quite a bit at Headset, we use AI or deep learning for classification problems. So you can imagine we have connections to about 1000 retailers and dispensaries and in all those locations, products are coming in and we have to map those products back to products in our product catalog. So we've got a database, what we consider a canonical product, so all the products that are sold in any market that we track, and retailers are entering those same products with their own nomenclature. So maybe they're using acronyms for the names or maybe misspelling product names. You know, UPC hasn't been particularly adopted in the market quite yet. So there's no single key. So what we have to do is we have to normalize that data, we have to map that back. And machine learning, deep learning is really good at that, you know, to be able to do those classification problems.
And I feel like, we're doing it for this vertical. I can only imagine, you know, things that have a wider reach than the cannabis industry adopting a lot of this type of technology, and it just becomes easier for organizations to invest. And I think that there's just more people that have been, you know, putting time and mindshare towards this stuff. So I think we'll see more impact things like data processing, a lot of what we do, I think it's gonna end up automating out a lot of jobs and really not just like low paying jobs, not just like data entry jobs, but I mean, you're seeing trends like traders in New York, the banks, like big banks looking at, you know, coders instead of, you know, gut instinct-driven traders are more coveted by these groups. And so it's really to build these kind of algorithms.
So I think that it's gonna be a pretty big...have a big impact. You know, again, like mobility, self-driving cars, self-flying vehicles, it sounds crazy, but I think if we're talking in 20 years, I think we'll see that stuff. You know, we find a lot of value in it for the normalization. It's pretty magical when it works. So I think, you know, applying that to all sorts of industries, you're just gonna see that as a narrative for the decades to come.
Matthew: Great conversation, Cy. Thanks so much for coming on the show. We really appreciate it. So how can listeners find Headset and reach out to you if they're interested in getting access to data?
Cy: Yeah, yeah, certainly, just head over to headset.io. That's our website, you can learn more about our services. We published some great industry reports. There are no costs. They're just kind of interesting deep dives into the data. One of our more recent one I mentioned was looking at weekly sales, particularly the last week of the month sales. So if you wanna see those numbers, you can go, headset.io, and download that report. I also, like, publish blog posts. You know, one of the things given our mission is to enable the success of these operators is giving, you know, people access to data and no cost. You know, we hope that organizations find it helpful to kind of get a good sense. And if they wanna dive in more, we're happy for them to become subscribers, obviously. So encourage your listeners to go check us out, headset.io, grab some white papers and reach out and let us know if we can help you.
Matthew: Well, it's been so fun to watch the growth of Headset. Good luck to you and your team in 2020, Cy.
Cy, Thanks, Matt, we'll talk to you soon.
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