Most Recent Interviews

  • Master Grower Shares Secrets of World Class Cannabis Cultivation and More (Encore)
  • Adina Leifer
    Ep 374 – Surging New Interest in CBD for Pelvic Pain, Physical Therapist Explains…
  • Jeff Sampson
    Ep 373 – The Rise of Cannabis Dark Stores
  • Cooraez Keshvani
    Ep 372 – Is Crypto the Answer to Our Cannabis Banking Problems? He Says Yes…
Browse All

Cannabis After Covid

7 ways the cannabis industry will change after covid-19 Read more
 

What is CBD

(Cannabidiol)? What is cbd cannabidiol See more
 

The Hottest Jobs

in the Cannabis Industry Read more
 

 

Ep 339 – GrowGeneration: Consolidating The Market For Cannabis Grower’s Supplies

michael salaman grow generation

How do you take the fragmented cannabis retail supply business and consolidate it to provide both commercial and home-growers with everything they want under one roof?

Here to help us answer that is Michael Salaman, president and co-founder of GrowGeneration.

Learn more at https://growgeneration.com

Key Takeaways:

[00:50] An inside look at GrowGeneration, the nation’s largest chain of specialty hydroponic and organic garden centers

[1:33] Michael’s background and how he got into the cannabis space

[6:48] How GrowGeneration decides which states and cities to place their grow stores

[15:10] The difference in purchasing patterns between average customers and MSOs (multi-state operators)

[20:13] How GrowGeneration has created a resilient supply chain that can withstand market disruptions

[26:26] The fastest-evolving product categories at GrowGeneration and why Michael believes they’re gaining traction

[32:24] How former Home Depot CEO Bob Nardelli has helped GrowGeneration as a strategic advisor

[34:48] What cannabis banking could mean for the industry over the next few years

Click Here to Read Full Transcript

Matthew Kind: Hi, I'm Matt Kind. Every Monday, I look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. That's C-A-N-N-A insider dot com. Now, here's your program. How do you take the fragmented cannabis retail supply business and consolidate it to provide both commercial and home growers with everything they want under one roof?

Michael Salaman, co-founder of GrowGeneration is going to help us answer that question today. Michael, welcome to CannaInsider.

Michael Salaman: Thank you, Matt. Glad to be here.

Matt: Give us a sense of geography, where are you sitting today?

Michael: Actually in my home office in Gladwyne, Pennsylvania.

Matt: What is GrowGeneration on a high level?

Michael: GrowGeneration at a high level is the largest chain of hydroponic garden centers in the United States. Founded in 2014 with a vision to really professionalize and aggregate the existing fragmentation of the hydroponic retail operations that have existed for many, many years. Professionalize and create a national chain, a national brand, a national supply chain to take advantage of what is occurring today, which is the cannabis legalization and the GreenWave that we're seeing here state by state.

Matt: Michael, can you share a little bit about your background and journey and how you got into the cannabis space and co-founded GrowGeneration?

Michael: I'm a serial entrepreneur. I've been in multiple startups with a brand marketing background and a retail background, product development, venture capital, and really saw back in 2014 the fragmentation of the hydroponic space. Everything was hydro this, hydro that. There was no national chain, no national supply chain that we saw, and no national brand. We believed back, my partner Darren Lampert, and I felt that we could professionalize, organize, and design and develop a national chain that didn't exist.

There was several local and regional change that were out there, but nothing on a national scale. We believe very early on in legalization, we saw what was happening in Colorado. We started the business in Colorado with a four-store chain that we acquired the summer of 2014. They were doing a million dollars of business that year, and we've been growing ever since.

We learned the business, really immersing ourselves in the stores, meeting customers, meeting the product owners, and really getting to a deep understanding of how this marketplace was structured, and where we can bring value, and where we could start to nationalize it. That's what we've done. You fast forward today, we have 50 locations in 11 states, well over $200 million of business trailing in 2020 with tremendous trajectory in 2021, and more states coming on, more acquisitions that the company is executing on. We're just really excited about where we're going.

Matt: Do you remember the exact moment of ignition? You mentioned your co-founder Darren, where you said, "Okay, we've been talking about it, now, we're actually doing it." Do you remember that exact catalyst, what you were doing, where you were?

Michael: Great question. [chuckles] First, we said, "You know what, cannabis is going to legalize, how do we participate?" Darren's an NCC attorney, I've been involved in multiple public companies. We always wanted to do it in a public format, and we realized very early on that we couldn't touch the plant. That led us down the path of the picks and the shovels.

Doing some research, we landed on some articles and some information online about the hydroponic retail space. What we really figured out very early on back in 2013, 2014, is that it's completely fragmented, but there's thousands of these stores in every state that are servicing different types of growers. We felt at that moment in time that we could raise some capital, and really prove out the concept. The concept was, from day one to build the largest chain of hydroponic garden centers in the country. We stayed true to that mission from the minute that we made our first acquisition, which we found in Pueblo, Colorado was a four-store chain that we bought in that summer of 2014.

From there, we said, "How do we get into a multichain environment?" We had to go to another state, so we did our next transactions some more in Colorado, but then we went to California, and we extended into Washington and Nevada, and the rest of the states that we're in today. We're very focused on the ancillary side of the marketplace related to what we saw as the emerging cannabis marketplace. That's how we set our mind, we came up with the name GrowGeneration from the old Pepsi generation commercials, where we believed that a society that we're in today, we're going to be a bunch of growers.

Whether you're growing cannabis at home or you're growing tomatoes, or you're growing, commercially hydroponically vertical farming, environmental control, growing indoors.

We realized very early on in the development of GrowGeneration that there was a paradigm shift. There was this green wave at a very core cultural level within the United States. We felt that we could take advantage of that, and we named the company GrowGeneration because we saw this generation of growers that have been really weaned on whole foods and eating organic.

Certainly now, being part of the cannabis paradigm legalization process, that we felt that we could build a great company and leverage the emerging growth across all these different types of vertical markets that were all geared around growing. That's what we did.

Matt: I'm really fascinated in the process of where to locate the stores. I remember years back, someone educated me on how McDonald's picks its locations of where to put their restaurants and then Burger King doesn't do any of the research and just says, "We're locating near McDonald's." Then Whole Foods does research, and then Trader Joe's just says, "We're going to locate in your Whole Foods."

I was like, "I don't know which strategy is more genius, those both are pretty clever." You know that there's a lot of research, there's data you try to absorb, but at the end of the day, where you pick, there's some luck to it, how do you go about that process? Because arguably after you decided you want to be in this business, that might be what, the second or third biggest decision you make.

Michael: Yes, there's a couple of things that we look at and you got to remember, GrowGeneration is growing through an M&A strategy and a greenfield strategy. A big part of the growth is coming from existing stores, the best of breed. These are locations that have been servicing cultivators for many, many years in great locations, where the growers are with longstanding relationships, and we're buying and aggregating and rolling those companies up.

You see, we just made an acquisition of the longest standing four-store chain in Southern California, San Diego Hydroponics, which we acquired a couple of weeks ago. We're looking at those types of opportunities where there's an established base of business and a customer base. In addition, we do greenfield and we did that in the emerging markets like Michigan and Oklahoma.

We're certainly looking at other States that have just legalized, New Jersey, in particular, Mississippi, and Montana, ultimately, New York, Pennsylvania, where we are waiting to see how the license process is being deployed and where those licenses are going to be position on a County by County basis. Our strategy is really to invest in the local communities to be where the growers are, and whether it's a large MSO or in a lot of cases, we're seeing these new laws, which are going to be focused on social equality and craft licensing and micro-businesses, which is great for GrowGenerations business, we want to be where they are.

We want to be just in time and we want to invest locally, not just from a staffing perspective, but in terms of knowledge and education and demonstration and new products and technologies, and all the things that we do as a corporation, as a company, we want to bring that to the local community. We just got involved with Whole Foods. We want to give back. Whole Foods has a wonderful charity called Whole Cities which is a foundation just about opening up urban gardens in local markets. We just helped to finance something in Newark New Jersey, we're doing that on a nationwide basis.

We're always looking at ways where we're not just coming in and we're not just a selling organization. We want to be a knowledge base, a creative local, immersed where the communities of growers are and really provide value to them where they can come in and can learn from our cultivators that have many many years of experience. Growing plants is not that easy, particularly at a commercial level when you start talking about thousands of plants, vertical gardens, indoor environments, return on investment. A lot of these, certainly, these are commercial operations.

There's a lot at stake and GrowGen is the company to turn to provide end-to-end solutions, cost-efficient models, LED lighting, a big part of the movement in the marketplace today. Everyone is looking for ways to create automation, energy-efficient ways to grow and GrowGen certainly is studying and bringing those kinds of products and investing in those products to bring to our customer base.

Matt: Give us a sense of what the stores are like and how big they are, can you just take one in your mind and say, "Hey, if you walked in, this is what you'd see and this is how big it would feel."

Michael: Yes. The ideal store right now, they've gotten bigger. We've found that the best footprint for us is between 20,000 to 30,000 square feet. High ceilings because we triple palate stack our products. We have a front counter which is our will call cash counter for customers that are transacting coming into the stores and then we have a warehouse for pick pack and shipping and fulfillment and delivery. That acts more of a pro service, a business to business operation. We're able to really leverage a 30,000 square foot facility, open it up to the public whether you're a hobbyist or a commercial grower, you're coming in. You're able to shop and buy from multiple millions of dollars of product.

All departmentalized. Your lighting, your nutrients, your environmental controls, your additives, your medium, your soils, all of that is stocked within the four walls. Also, a lot of commercial customers want us to dropship. We have an online business that's very robust. We have a commercial division that's more of a white-glove customer service division that allows us to drop ship and manage the multistate operators, the single state operators at a little bit more of a higher level, more customer service, credit. We offer financing for those types of customers and that's a pick pack and ship.

We're able to build a [unintelligible 00:13:04] logistics and fulfillment model where we can take a location, Tulsa, Oklahoma, Grand Rapids, we're building out Miami right now, we're building out LA, we're building out in Phoenix where you're going to see these sturdy 50,000 in some cases size super hydroponic garden centers that act in these multifunctional manners that creates tremendous efficiencies for the company. That's the new model, it's a buy online pick up model. It's a pick pack and ship model, it's a direct to the cultivator enterprise model.

It's also a model that opens up the four walls so that there's education and training and products that anyone who wants to come in can see and talk to a Growpro, a professional. GrowGeneration is now made up of over 500 employees of which 450 of the 500 are really agronomous and professional growers that have tremendous knowledge and expertise. We see that as the specialization. What separates us from everybody else is the fact that we understand how the plant grows. You have an integrated pest management issue, you have a canopy issue, you have a lighting issue.

You're not getting the yields that you want, you can come to a GrowGeneration location and we will have answers and solutions for you. We will give you the right formulation to fix any problem that you have and to give you a solution whether you're growing 100 plants or 1,000 plants or 10,000 plants, we can service any size and give you exactly the type of product for that particular environment. We're very customizable and we personalize these solutions for these growers and that's why customers are coming to us and coming back to us time over time.

Matt: MSOs or multistate operators are customers viewers and you also have your typical customer, actually I say typical but kind of like a hobbyist or a home grower. How do their purchasing behaviors differ? I imagine just the cart size is very different but apart from that, how do they consume differently?

Michael: The sizes are much different, it's much more of a sophisticated sale. It's two-fold, you have their buildouts. We're helping the large MSOs build out their facilities as they get license, they're building out CapEx, benching, lighting, irrigation, [unintelligible [00:15:53]. We help provide environmental control systems designed. GrowGen is providing all of those products and services in addition to the consumable side which is what the client is consuming on a recurring basis, which is about 60%, 65% of the overall business comes from the consumables.

It's really a combination of size, scale, and also the kinds of automation, environmental control products that are really geared more towards the commercial grower. They're not buying quartz in gallons, they're buying 55 gallons. It's a different type of sale, they're also looking for a business-to-business relationship. They want credit, we'll do some financing, particularly for the large MSOs, we'll finance their CapEx. It's a different kind of relationship than a typical hobbyist or a smaller crop grower that's coming in and buying product for a smaller grow.

We've created and we really have a lot of pride in the way that we handled the MSOs. We realized very early on that the MSOs have to be treated differently, they're not a retailer, they're not a small operation. They need to be treated with a dedicated team approach. Dedicated account managers, dedicated customer service reps, dedicated quotas, where we're quoting our product, consolidated financial statements. These multistate operators have multiple locations.

They want to know at the end of the month, how much did I buy from Grow 1, 2, 3, 4, 5, 6. We can do that from an accounting department, we consolidate that bill, we drop ship. We provide, we think we're a very integral part to their overall supply chain that becomes very important to them. We provide all of those value add services. We're constantly looking at product, ways to improve their grows at a commercial level. How do we further their return on investment? How do we create efficiencies? Everyone is moving now to LED lights so there's a big transformation because they're just more efficient.

That means the design of the facilities are going to go more vertical versus horizontal, more vertical farming versus horizontal farming which is creating tremendous demand for benching and airflow and environmental control systems, data. We're looking at a company right now that's one of the foremost experts in the collection of data. We're getting much more intelligent. Artificial intelligence, we're learning through this technology platform and we're looking at it from a potential acquisition where when this gets installed into a grow, there's sensors at every level.

Humidity, the nutrient uptakes, the pH levels, the lights, how everything is being operated and that system is getting intelligence every minute. That intelligence is going into a central repository that has an AI and an advanced learning capability. That's the kind of technology, that's the kind of creativeness that GrowGen wants to provide to these large commercial growers. You're seeing much more standardization and also cost controls, inefficiencies. We believe we have solutions that are unique and proprietary to what we have designed.

One of the unique parts of GrowGen, we're in 11 states, we see it all. We see what's happening in California, in Michigan and in Nevada and Colorado, and Washington. We see what's happening across thousands of commercial growth. We have tremendous insight to what's working, what's not working. We certainly, see it from the product side and we pass that knowledge on to our customers.

Matt: Most listeners have heard of the supply chains, they know what that means vaguely, but with COVID-19, a lot of supply chains were disrupted. I know I tried to purchase a car at three different times during COVID-19, the order got canceled. Eventually, it got through, but I just never experienced anything like that before. When you think about creating a resilient supply chain, one that can handle shocks, how do you think about that?

Michael: Well, the way you have to think about it's control. What GrowGen has built is 50 locations that are fulfillment centers. They're open to the public, we get 30,000 people a week, but they're fulfillment centers. I can drop inventory into any one of those locations. Those locations are where the growers are. In addition, we're building out these super hydroponic hubs that are, 30, 50, 60,000 square feet, that allows us to land our private label containers.

We have the resources and the capital to get ahead of, and we did that in 2020 with COVID. We got ahead of the curve, we saw the issues that were coming. We see it with the ports and the lock jam, we get ahead of it. We're predictable. We understand our inventory, we understand our customers, what they're buying. We're able to get ahead of that, because of the fact that we're well-capitalized, we have close to $160, $170 million of cash in the bank with no debt.

We can really manage a national supply chain, a just-in-time supply chain, that allows us the control to never be out of stock. [coughs] That's really the secret. The secret is, getting ahead, having the right inventory, having enough of the right inventory. Look, we're not perfect, we certainly are working through some supply chain issues, but really, we've been really good at getting ahead of soil and lighting and things that are coming from overseas and being fully stocked and having the ability to control the customer.

One of the things, we're not a wholesaler. When you really dissect GrowGen, we're an acquire of customers and a curator of the relationship with those customers that allows us to really have a deep-rooted relationship with that customer. We know exactly what they are buying, we know exactly what they're rebuying, the recurring nutrients and additive side of their business. We get involved as I mentioned in their expansion plans. We have the ability to really stock what our customers need and be just in time with the 50 locations. Ultimately, we'll have seven distribution hubs, the super hydroponic operations across the country, geographically that really creates a national supply chain. In our opinion, is the best, because of the way that we build it. Where the growers are in the local markets that are tied to our spokes, which is our sales and marketing. Building that out on a national level, then tying together our marketing and our bio line and our pickup and our Instagram to constantly drive more traffic into the store, onto our online business, and through our commercial division. I think that's why you're seeing such growth and such success coming to GrowGen.

Matt: What about white label brands? You mentioned you're an acquire of customers. Do you see that as a way to acquire more customers? Can you talk about white label there?

Michael: Brands, brands, brands, very, very important. Brands, but not brands for brand's sake, brands that are disruptive, brands that are what the growers are looking for. We just picked up a company called PowerSi. It's a mono-silicic acid product that the growers want. One of the great parts about GrowGen, we see what is being bought at the cultivation level. We have a little bit of a competitive advantage to everyone else's, we see what the growers are buying.

We see the trends, we see the products that are being bought, and those are products that we want to bring under the umbrella of GrowGen. We're looking at disruptive, proven technology and products that we can acquire and put them under a private label or GrowGeneration, owned and operated portfolio brands, as well as developing product internally. We just recently brought in ION light to be competitive in the LED lighting business. That's a light that's very cost-efficient.

We're seeing just tremendous uptake to that particular brand. We're able to source product from really everywhere around the world and because we have all these brands. Actually, in 2019, we bought a portfolio of trademarks from a company called BWGS, and we're now populating those trademarks with product, bulbs and soils and nutrients and water pumps and all kinds of different, fans. All those kinds of really accessory type products that there's really no brand allegiance that we can pick up margin.

More importantly, control the supply chain, control the inventory and make sure that we're always in stock, make sure that our customers, when they come to a GrowGen location, they have all the products that they need complete and all the time.

Matt: Now, I'm sure there's a lot of different product categories you keep abreast of, but is there any in particular that you're just shocked by how much it's changing or evolving on a monthly or quarterly basis?

Michael: From a product perspective?

Matt: Yes.

Michael: It's interesting, the LEDs I tell you, you think about LED lighting from a couple of years ago, it was a very nascent small market. We did some real business in the first two months and we're bringing in plenty more and we saw all the leading brands, Gavita, and Fluence. All the leading LED products that are out there, we saw them all. We're seeing tremendous uptake. What it's telling me is that you have a regulatory environment that is really defining on a state-by-state basis, and you also have a return on investment.

If you can save, 20%, 30% in your energy costs, think about that over time, what does that really mean to a cultivator? The cost of the LED lights have come down dramatically. Think of it like the big-screen TVs, you were paying $5,000 for a big-screen TV several years ago. Today you can buy a big screen TV for $500. Same thing is happening in the LED lights, two years ago, you're paying 1500, today, we're in the market right now with our LED lights, in the $700, $800 range. The pricing has come down, making it much more assessable, the return on investment, the energy savings.

All the utility companies are giving rebates to incentify the cultivators that to go into LED lights because it's just energy efficient. I would say that's probably one of the really big categories that have emerged in 2021. You're seeing, a movement to vertical farming. I think that's probably the other big one, where you're seeing more cubic square feet versus square feet in terms of the way the growth. I think that's the way that all future grows. Then lastly, the environmental controls, having the intelligence, having the data is where all these MSOs are going.

They want to control all the inputs that control all the outputs so that they have a predictable yield and that's getting very sophisticated. GrowGen is absolutely participating in all these areas, whether it's through partnerships or through acquisitions that we're looking at, we have solutions for all those different categories that I just mentioned.

Matt: Michael, you have no debt on your balance sheet, do you think a little bit of debt might be a good thing to see if interest rates are so low like they are right now? They’re rising a little bit, but they're still pretty low historically.

Michael: My partner and I, and I think the board of directors, we like the fact that we have no debt. We raised capital at $30 a share recently, stocks trading much higher. We've institutionalized the business with some of the largest institutional investors that now have bought, I think we have 50- 60% institutional ownership, which is tremendous. A year ago, we had 5%. We have a tremendous following at the institutional level. Again, for us, debt is certainly available to us. I wouldn't say that we would never do a debt deal but we've been very creative relative to these private placement deals that we've been able to do with our banking relationships and doing them at tremendous appreciation from the previous round.

We've kind of been moving the ball. As we continue to execute and take the capital, we raised over $200 million last year, that capital is being deployed. The one thing I can tell you about GrowGen, we don't sit on capital. We're a transactional company, we're very focused on utilization and return on capital and putting that capital to use. Our investors gave us the capital to put it to use, and we're buying the best of breed hydroponic operators. We're buying the best-of-breed product companies that are out there and we're growing. We see just tremendous growth as we've demonstrated year over year, we're fiscally very disciplined, quarter over quarter year over year, head down, we have a mission.

That mission we're still in the early innings, we're only in 11, states. There's plenty more states to go. We're only in 500 locations. There's plenty of locations that this company will open, and acquire. We feel that we're so early in this development of this new market. Our development even though we've been at it this is going to be really our seventh full year, it's still very early in what's happening in this economy, that's going to be bigger than beer, wine. Certainly, we feel that we're going to be the leader on the supply side chain.

Matt: I see that Bob Nardelli, former Home Depot CEO is a strategic advisor to GrowGeneration. Can you tell us a bit about how his retail experience has helped you?

Michael: Bob is such a wonderful addition to the board of advisors. We met Bob a couple of years ago and we spoke to Bob. Darren and I had a lunch. We were telling him about things that we're doing earpiece systems, opening stores, and how do we work together omnichannel, and all the things that Bob did, when he grew Home Depot. Certainly his career at GE and Chrysler, and now one of the top CEO voices, regular on CNBC and Fox Business. He's been a tremendous sounding board, a guy with his experience, it's hard to replicate and our access to him and the ability to just bounce ideas.

Darren and I talked to him on a regular basis, just to get his thoughts, just to get his advisement has been just a tremendous help. I think what he got attracted to, is that he saw some similarities with Home Depot. When he was running it, and growing it at a rate similar to what GrowGen. We're growing 100%, 150% year over year. He was a little faster in terms of he was opening up a store every day at Home Depot. We're opening up probably 20 or so 25 a year, but we're on a similar trajectory and a similar path, in the way that we're operating the business with a retail business, a specialty, a pro service part of the business with their pro servicing, and certainly combining it with the online.

I think Bob saw a lot of synergies, and he felt that with his experience, the years that he spent at Home Depot, that he could bring value to GrowGen. He jumped all in and it's been just a great sounding board for us to really have access to him, and he's just a wonderful human being as well.

Matt: Well, since you're in the picks and shovels, business, as you mentioned, you can have a bank account and accept credit cards and so forth but there's a lot of your customers that can't still. Do you think when we get some federal legislation passed that will allow for banking of cannabis cultivators, for them to accept credit cards and that type of thing? How much do you think that will pick up just the velocity of transactions in the cannabis ecosystem?

Michael: Oh, I just think it's going to be tremendous the access when the banks figure it out, and the government figures it out, you have say Banking Act, and you have federal legalization at some point. The amount of capital that's going to come into this industry is going to be unprecedented. That's just going to get the MSOs, and the single state operators, the cultivators, the vertically integrated companies just access the capital. It's going to make it easier for them to transact getting rid of [unintelligible 00:35:47] makes no sense can't operate a business that way.

All these things are really upon us. It's going to make it easier for GrowGen to interface with these guys. It's going to be more business-to-business. I think it's really coming within the next year, maybe even sooner under the Biden administration, who certainly has vocally been very pro-Cannabis, and moving forward, these initiatives to just make business easier, paying taxes. The governments of the states where are they going to pay for the COVID bill? They have to legalize. That's the only area that I can see where they can generate revenue.

That's why you're going to see more and more of these states come on board. That has to be interrelated with a federal policy that allows for tax dollars to be banked at a basic level. Banks need to be uncapped so that they can start getting deposits, and operate without the overhang of the federal roles so that this business can continue to grow. Look, they've done a pretty good job working on a state-by-state basis, dealing with credit unions, but it's certainly not efficient. I think that is going to change in the very near future.

Matt: Michael, I'd like to move to a few personal development questions now. Is there a book that's had a big impact on your life or way of thinking that you'd like to share?

Michael: I read a lot of the industry publications. A lot of times I read any real books, but I read a tremendous amount of industry-related magazines and newsletters. My consumption of content really is coming primarily from our industry and studying where the industry is going. I read some of the books related to Salesforce came out. He came out with an interesting book never compromise in the middle. There's some interesting business-to-business folks that have been out there. Things that are motivational books that we share with the staff, particularly my commercial division they're pretty active in self-improvement.

Certainly, we cultivate a culture of self-improvement. We cultivate a culture of self-empowerment. You're running your store, you're running your gardens, you are the president, you are an owner of GrowGeneration and that's a respect. You need to bring your own personal work ethic. I think our team works harder than anybody else in this industry. The dedication, that they have had during COVID is second to none. We reward our staff with very competitive salaries and 401k plans and stock options, and ownership in a publicly held company,.

That's the culture that we want to pontificate that we want to encourage as we continue to build. I believe the largest moat against competition is the staff. We have 500 people. We'll have 1000 over the next several years, of which the majority of them come from the cannabis space. They've been growers. They've been in a homegrown market. They've been migrated and they have moved up the chain to a license market. They're in a professional environment with GrowGen. Those are the kind of people that you can't find on LinkedIn.

They have a passion for the cannabis plant and growing in general. We've been able to bring together not only the best to breed companies, but the best to breed people that have had years of experience in the hydroponic space. Bringing them together with one voice, one vision, one team, that's why GrowGen is winning. We're going to keep doing it. We're going to continue building through this best-of-breed strategy. You're going to see a thousand growers under the umbrella of GrowGen that's very hard to duplicate.

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

Michael: [laughs] That's a good question. That is an interesting question. What would they-

Matt: Let's look at it this way? You're at a dinner table with 10 of your friends and you're like, "I really believe in what I'm going to say, but I know six or seven of the people are going to disagree with me fervently.

Michael: They don't believe in growth. I can tell you guys are shocked. Sitting at the dinner table or sitting at dinner, no one ever anticipated and I pitched myself too. We have a multi-billion dollar company, our sales are growing over 100% year over year. We did almost 200 million this year, last year. No one would have ever have guessed that this company could be of that size and it's just starting. I think what I see is that the market has underestimated GrowGen's ability to integrate, GrowGen's ability to acquire from a transactional perspective, and also the size.

When we look at what's happening whether it was driven by COVID or just the fact that there's more dispensaries, more consumption, I think these markets are maturing and opening up. I think the markets are growing at a much greater rate than people ever anticipated. That's a wonderful utter and facilitator of the picks and shovels side of the business, which is fueling GrowGeneration of business. I think no one would have guessed or believed that this company could be on a path to a billion dollars. If I talked to them a year ago, "What are you crazy?" We're on a path and we're going to be there in the next couple of years. No one really would have anticipated that.

Matt: Michael, as we close, can you tell listeners how they can find GrowGeneration's stock ticker, or actually what the stock ticker is and how to find GrowGeneration online to find out where the stores are, et cetera.

Michael: The stores are@growgeneration.com. We list all of the addresses, phone numbers, store hours. We also have e-commerce sites so you can actually transact and see the products on that site. We also have all of our investor relations information located in all of our press releases, stock quotes. The stock symbol is G-R-W-G. We trade on the NASDAQ stock exchange, which was a wonderful experience back in December of 2019. We were up-listed to that stock exchange and one of the few ancillary companies to actually achieve that goal of being a NASDAQ listed company.

That was a milestone because it fueled the institutions to come in, the capital to come in and that certainly gave the company the ability to continue to execute its plan. Being listed on NASDAQ was a milestone event for the company. Those are the two areas growgeneration.com, the stock is traded under the symbol GRWG.

Matt: Well Michael, thanks so much for coming on the show, we really appreciate it. Congratulations on the success so far, I am really anxious to see how far you can hit this ball out of the park. How big you can grow this thing.

Michael: Well Matt, I think we're unstoppable. It's all about focus, staying in your lane, doing what we do, and continue to execute. I think you're going to see just tremendous results quarter over quarter, year over year. I thank you for the kind words, and I appreciate the time you spent with us today.

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

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

Ep 338 – Only The Cleanest Cannabis Grows Past Government Tests

shawn grey gardnclean

For cannabis cultivators, failing microbial and pesticide testing can be a death sentence. Here to show us how to pass these tests with flying colors is Shawn Grey of Gard’nClean.

Learn more at https://gardnclean.com

Key Takeaways:

[00:47] An inside look at Gard’nClean, the world’s most user-friendly, point-of-use biocide for environmental sanitation

[1:18] Shawn’s background and how he got into the cannabis space

[4:33] The different government tests cannabis cultivators are required to pass

[6:53] Why so many cultivators fail these tests

[8:16] The most common mistakes cultivators make when trying to create a clean growing environment

[13:21] Chlorine dioxide and how it’s different from other cleaning agents

[16:10] How Gard’nClean yields pure chlorine dioxide to safely protect a grow environment with their just-add-water sachet technology

[21:46] The step-by-step process of cleaning a grow with Gard’nClean

[29:51] Shawn’s biggest takeaways for business owners and cultivators on how to keep grows clean and pass tests every time

Click Here to Read Full Transcript

Matthew Kind: Hi, I'm Matthew Kind. Every Monday, look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. That's C-A-N-N-A insider dot com. Now here's your program. For a cannabis cultivator, feeling microbial and pesticide testing can be akin to a death sentence. Here to help us understand how to ensure you pass these tests is Shawn Grey of Gard'nClean. Shawn, welcome to CannaInsider.

Shawn: Matt, thank you so much for having me.

Matt: Give us a sense of geography, where are you in the world today?

Shawn: Today I am in currently sunny, Denver, Colorado.

Matt: Okay. What is Gard'nClean on a high level?

Shawn: Gard'nClean is a fully customizable surface and three-dimensional environmental disinfection, sanitation and deodorization system designed for cultivators by cultivators.

Matt: Good. It sounds like it could be used in college frat houses too. That's immediately what came into my mind.

Shawn: It can be used really everywhere, every indoor environment where we want to manage pathogens, especially occupied spaces, whether those spaces are occupied by people or plants or animals.

Matt: Shawn, can you share a little bit about your background and journey and how you got into the cannabis space and became involved with Gard'nClean?

Shawn: Yes, absolutely. Cannabis has been a big part of my life. I was involved in a series of unfortunate events in Florida that led me to the ends of what the medical establishment could really provide for me there. I moved to Colorado where the medical cannabis program was having some great success with people like me. In doing that, I started out in the dispensary side and was working in a dispensary up in Central City, Colorado up in Annie Oakley's is the license number 00002.

They got the first recreational license in Colorado, as far as being open right on January 1st, back in 2014 as just this tiny little shop up in Central City and is a really cool place. It happened to be with a company that was quickly growing at that time in this market and was building out some large cultivations and was having more product than they knew what to do with for the store. They involved me because of my background in the traditional business side of things and other personal experiences of mine to do a wholesale program for them.

In getting into wholesale at that time, it gave me a really good window into the operations of commercial cannabis, as that was becoming a thing, being a part of the first thousand light grow that was a legal grow built here in Colorado. I was seeing some of the inherent issues that scaling cultivation at that scale and at that speed. It really gave me a window into how things were operating as the advent of microbial testing came into play and all the other parameters of regulated cultivation. It really was a wonderful way to see how things were going and what was being done here.

Through that, I was introduced to actually one of the guys who, that had a part in building out that facility and started really branching and diverging into the cultivation aspect of it. It was something that had always interested me and stuff that I had done myself at my house, but that gave me the ability to jump right into what he was doing, which was at the time, working in multiple states and being a part of multiple operations.

With doing so and seeing it and with the changes in regulations state-to-state, we were confronted by a problem which was how do we manage and maintain pathogens and these other pathogen related issues in a cultivation environment while maintaining the quality of our cannabis as people who love the plant and were benefited by it.

With that, he was actually the first person to start using this type of chlorine dioxide product within commercial cultivation spaces. Then, we've just really taken off from there at really being at the forefront of using this amazing molecule to manage these issues and really give it another tool in the vast toolkit for commercial cultivators.

Matt: I mentioned just a minute ago about failing a government required testing. This can really be terrible for cannabis businesses. Can you just first quickly tell us what are the tests that most cultivators are worried about?

Shawn: The biggest ones are the microbial testing for most of them. That is the ones, because this is what you can't see. The problem with it and what the cannabis industry is really just starting to understand is this is an invisible enemy, and those are the hardest ones to fight because you can clean things to the best of your ability, and if you're not really looking at it in a three-dimensional sense, you're missing things.

With the increased scrutiny and the heavy scrutiny on our industry and the higher regulatory and microbial standards than most other industries have to adhere to, we have to be very, very vigilant about it. That's the one that keeps most cultivators up at night, because that can be the most expensive. Failing a batch can cost you depending on batch size, in a place like Nevada or California, where you have £5 batches, depending on market rate, you could be anywhere from $10,000 to $15,000 that is out with every £5 batch of flower that sales. That could be a very, very costly mistake.

Matt: Not only that, it's like, "Hey, that's your cost of failing the test immediately," but it's like, "Hey, my grow has been infiltrated here and who knows how deep this problem goes beyond this £5 testing batch," right?

Shawn: Absolutely. If you have clientele that are waiting on product and you have manufacturing schedules, or you have delivery schedules and timetables to adhere to, that's never a good conversation you have to have with the dispensaries, whether that is vertical and it's just something within your own network or it's going out to your clientele.

When it's going out to clientele, that is going out to the open world, so that can even be more damaging. It can be a very, very costly issue. As you said, once it's there, you have to do what you got to do to get it out of everything that could further cross-contaminate that environment.

Matt: If you were just to summarize quickly why do some cultivators not pass this test, or what are the top one or two reasons why they-- aside from the presence of a pathogen, what led up to that point?

Shawn: Just the environmental stresses and swings that we experienced within indoor or within controlled environment cultivation, it puts a lot of stress on environments. It's also something where cultivators they spill water, you have pipes that break, you have people with overflow rises. You have all these different things, and even if they don't happen often, that they still do happen.

We see the cumulative effect of just the stresses of doing so, of cultivating happening within that environment, leading to the further cross-contamination and a feedback loop so to say, a negative feedback loop of reinoculating crops. Then I'd say the second would be the cross-contamination of people and not having adequate things in place to limit the spread of these pathogens and other organisms through the movement of people and air and equipment throughout the facility.

Matt: Okay, because you have a specialization in this, but a grower or business owner, they have a different mindset of what their day-to-day life is and what their goals are. When you go in and talk to them, what are they missing in their mindset in order to have a clean pathogen-free grow so they can pass the test? Is there any blocks that you see where there's one or two things that are ignorant about, they haven't learned yet where it's like, "Hey, let me help you take the square peg out of the round hole and put a round peg in here and think with me on this?"

Shawn: Yes, so we have, and the cool things about our products is there's so much information that does so many different things. It's easy to get lost in the details. It's easy to get lost in how it works and why is it do the things that it does. We really tried to condense what it is that we're doing, and what is that change in mindset.

We've really simplified it into a two-dimensional and a three-dimensional outlook on your facility, where all commercial cultivators at this point understand they need to be cleaning in the two-dimensional. They need to be cleaning all the surfaces, that is standard operating procedure in every commercial cultivation facility. With the step that they're missing is that those pathogens and especially spore-forming pathogens and organisms, they are three-dimensional.

They do not just say, "Oh, I'm only going to land on the surface," or, "Hey, that's your ballast, I'm not going to get inside of it," or, "Hey, that AC duct that you're just constantly cycling me through, it's a great place for me to live." There's all these different areas within the cultivation environments that you need to be able to successfully and easily eliminate these issues without worrying about it having a negative impact on that equipment.

You need to-- if it kills the pathogens, but it then go aheads and it decreases the lifespan on your equipment the way that a lot of things can do, then, is it really a benefit? It's something where looking at it in that sense and having an easy to implement and easy to use system for anybody to effectively eliminate those items and those concerns really opens up the-- it's a really great tool to have in their toolkit.

Matt: Now, how has just the general attitude and mindset around keeping AgroClean evolved around the-- over the let's say two or three years? Is the bar being raised gradually, or is it only under threat of not passing a test that anybody comes to you?

Shawn: I will say that there's always people that want to be ahead of the curve. There's always a segment of the industry that wants to excel and wants to go above and beyond to make sure because what it really focuses around is that the tests aren't there to make things hard for cultivators. They're there to make sure that people don't get sick. They're there to make sure that these types of issues aren't prevalent in a product that could be used by somebody even in a recreational market, that it could be being used medicinally and self-medicating.

You're wanting to make sure that you have that state level of cleanliness for anything that goes to market. What I will say is that the mass adoption of protocols like this only take place under the threat of that new level of microbial testing. You can see in each state, depending on which level of testing that they fall under and what the testing protocols are, and you will see an increase in the use of these types of real disinfectants and even in the things that are traditionally being used are very caustic, both to the environment, both to the people using them.

If you have used a product that's a peroxyacetic or a peracetic acid and hydrogen peroxide and you fogged it and you've unfortunately lifted your mask up or unfortunately come in contact with it, you know how caustic that is. Being able to perform that high-level of disinfection to the point of sterilization if necessary, just by dosing correctly with a compound that is an organic product that is not a dermal sensitizer, it doesn't damage people's skin.

Even if they came in contact with extremely high concentrated stock solutions that they wouldn't have no reasonable reason to come in contact with, still not have any issue like that. It's a very, very great to be able to provide to them. Seeing the change from state-to-state as testing regulations roll-out, it's always a very interesting process because it does take typically someone not just having the testing roll-out, but somebody within that marketplace falling victim to that new testing, or that new requirement, and then people seeing the actual fallout and outcome of that. That's what really makes people start operating in the new compliant manner.

Matt: Let's talk about the Michael Jordan of cleaning agents here, chlorine dioxide. Most listeners are probably - their hard drives are spinning trying to remember their high school chemistry like, "Chlorine dioxide, do I know what that means?" Just give us a basic introduction of what chlorine dioxide is and why it's such an awesome cleaning agent.

Shawn: Chlorine dioxide for most people, they would not have heard about it in their high school chemistry class. It is a unique molecule, but because of some of its properties, it's not something that's very, very prevalent. Up until recent times, you needed very big infrastructure, very expensive equipment to generate it. It was reserved for like municipal water treatment systems, large paper mills and things like that where very, very large infrastructure, so it justified the millions of dollars to install and operate that equipment.

Then there was the rise of the stabilized chlorine dioxide, which was a part A and a part B solution, whether it's liquid or tablets or anything like that, and marketed as chlorine dioxide because when you mix those two compounds together, there's some chlorine dioxide that's generated. What you're also generating is the mixture of those two products, which typically one is a sodium chloride or sodium hypochlorite, and the other one's an acid. You have all these dissolved acids and dissolved chlorine compounds, and all the really weird stuff that it makes during the reaction process.

It's sold as chlorine dioxide. Some people who have used that type of product in traditional agriculture or in some other type of space, they might go, "Oh, chlorine dioxide, that's weird stuff." Where our chlorine dioxide is different is we have the-- our partner on this is the inventor of the sachet method for generating ultra-pure chlorine dioxide. It is a pharmaceutical and hospital grade.

We have products that are used in a tremendous amount of pharmaceutical manufacturers for very, very large-scale pieces of manufacturing equipment that they then sell out and use our product for the disinfection for those pieces of equipment, because it has the highest material compatibility.

A fancy way of saying that it is very safe for surfaces, so it won't pit stainless steel. It won't break down your plastics. It's a much, much safer product to use for your infrastructure and for people than your traditional disinfectants. By having this technology, we can produce just chlorine dioxide with none of those byproducts which opens up this really, really cool molecule.

Matt: Just so we can visualize, what does it look like, this sachet, so people can get a sense?

Shawn: It looks like a little white pouch, almost like a like a really, really crazy teabag. Maybe that would be a good way to visualize it. It's just a pouch. One of the great things with our liquid products is they're actually generated on site, so we save a tremendous amount of resources in the shipping process. We ship our largest pack, which makes 30 gallons is about the size of a large postcard and about a half-an-inch thick. It is much, much more cost effective for shipping and transport and storage, especially for your larger scale facilities.'

Matt: Okay, so a postcard-sized tea bag that you then put in a container of water to create the chlorine dioxide, is that right?

Shawn: Correct, just in a sealed container. We do offer the generation equipment, dispensers, and stuff like that, but it can be done with any sealed container and water. It really opens up the possibilities of using this everywhere without needing even electricity.

Matt: Is this dangerous for my skin, or if I fill up a beer bong full of chlorine dioxide water and drink it, what would happen? Let's go there.

Shawn: It is not damaging to the skin, so it's not a skin irritant, or what they refer to as a dermal sensitizer. It is safe for contact. Well, one of the great things is is our full-strength disinfection, which is 100 part per million. We actually require no PPE to use, even in an occupied space, if you're using it out of a normal sprayer, like out of a pump sprayer or hand, like a little one-liter spray bottle at a table, or out of a backpack sprayer.

It requires no PPE, so you can achieve a full disinfection while maintaining OSHA compliance without needing to have any type of protective gear on whatsoever. That disinfection level is actually registered for use against SAR COV2, so you can know that you're getting rid of any viruses as well as eliminating any of these other pathogens that affect us on the cultivation or processing side.

Matt: Just help us out here, what's the actual process that is taking place on a chemistry level to create this cleaning? What's going on with this sachet and the chlorine dioxide and the water. 

Shawn: We refer to the sachet as a micro reactor because we have some really cool things that are taking place. Once that sachet is placed within the water, water vapor goes into the sachet, it mixes with the sodium chloride and the citric acid that's inside. That reaction produces, as we talked about before, chlorine dioxide as well as some of these other compounds. Now what that membrane is doing is it's only letting pure chlorine dioxide gas out of that sachet.

The chlorine dioxide molecule is very tiny, it's about 0.124 nanometers. It's smaller than any virus or bacteria, any spore or anything like that, so it gives us some really cool properties. With our product, unlike any other chlorine dioxide product, even other sachet based products out there, our product is only letting that pure chlorine dioxide gas out.

From there, like with our liquid product, if we do it in a sealed container, we have a liquid product, which we can use at a number of different concentrations to achieve a number of different things from disinfection, sanitation, deodorization, irrigation, cleaning, things like that. We have a couple of gas direct, gas phase products as well. We have a fast-release product. We're releasing just that ultra pure chlorine dioxide direct gas, dry gas fumigation.

We use that for getting into all those very, very microscopic openings inside of your HVAC and ducting, inside of dehumidification, and in all those unsealed places. Then, we have an extended release product which has one other compound, another proprietary compound with inside of that sachet, and that one is a humidity-activated.

This one, as long as you're above 25% humidity will just react with the humidity in the air and it produces a very low-- It's OSHA and EPA compliant for chronic exposure level of chlorine dioxide with into that environment over the course of 30 days. It gives us some really cool ways of taking advantage of this molecule, which does some really, really cool things at the molecular level when it comes to operating as a biocide.

Matt: Wow, that sounds clever. A good idea, you just let it do its work over 30 days in the air. It gets into every little nook and cranny, huh?

Shawn: Yes. We call it the guard in Gard'nClean. It's really something that with the chlorine dioxide, that leaves no residue. We wanted a product that gives us some protection over the course of time. The fact that the chlorine dioxide molecule does not leave any residue behind, we developed this product so that it will provide that level of protection in between your traditional cleaning times.

Matt: Okay, so what does cleaning grow look like? How do you go about it step-by-step?

Shawn: We would be looking at it in a couple different ways. The basic way to do it with just speaking on the terms of a single environment, what we refer to as our room reset protocol. That is a use of our chlorine dioxide liquid spray to spray down all of the surfaces within that room that could get wet, followed by a treatment with our fast-release product to eliminate any of those additional items that are within that space.

The real step-by-step with that is that this is the final cleaning step, so you'd want to first physically clean it. If you have any debris, any soil, anything that's left on it, so that's the first step would be to clean everything, and then this is the last step you'd go through. We use our liquid at a 100 part per million concentration, and spray everything that we can get wet. It is a very, very easy-to-do process, and follow it up with the fast-release treatment, which will typically do overnight.

That's a really good way to just let it sit for that 10 to 12 hours, and come back in the next morning, take the fast-release, the liquid can be dumped down in any drain, the sachet can be discarded in any receptacle. At that point, we'll deploy the extended releases, and then reload the room. This is the treatment that we do for the cultivation rooms or really any space when you're trying to reset it, whether that's in between harvests or at what other interval that you'd like to do it.

Matt: Shawn, chlorine dioxide seems like it would be a helpful cleaning agent for not just the grow rooms, but the actual water that's coming in. Water comes in from your municipal source, and it needs to be cleaned before it goes to the plant, can you use chlorine dioxide in that case?

Shawn: Yes, absolutely. Chlorine dioxide is something that is NSF certified for water consumption for people, animals and plants worldwide. It is something that can be used with great success, not just for purifying water and for eliminating inherent pathogen pressure within it, but when looking at a cultivation facility, as you said, even if you're on municipal water supply, you're still at the mercy of that municipal water system to be operating at full 100% efficacy. In this business with all of the things that we see, we have to have plans in place for anything that we cannot control.

We actually had developed a system, we call it the Guardian Aqua, and what we're doing is we're injecting a very low dose amount of chlorine dioxide. This can be done two different ways, it can be done with the proper water testing and things like that. The other way to do it is because of chlorine dioxide's really cool properties where it actually breaks down as it's working, you can actually, just by dialing in the residual amount of chlorine dioxide within a system, you can establish that you have eliminated any inherent pathogen pressure, or pathogens within that water source, without having to do all that kind of testing because the amount of chlorine dioxide necessary depends upon the amount of issues that are within that water.

We've had some facilities that were having issues with fusarium, pythium, and other root fungal issues, and they really couldn't trace it back to anything within their systems. We have this system that we had previously deployed within livestock and other agricultural areas. Within cannabis, it has been an absolute wonderful implementation, not just for dealing with the issues with municipal or the source water, but also with maintaining a very, very clean system. These systems, when you have this low amount of chlorine dioxide within them, it eliminates bio-slime from being able to form there. It really keeps systems in almost a brand new state once implemented.

Matt: Could someone use that for a swimming pool, then? If I were to have a home swimming pool, is there a way to get around using that powder chlorine then, and just use chlorine dioxide, and so you don't have all that chemical residue on your skin?

Shawn: You absolutely could. It's not a system that we've commercialized yet, but I can say that we have a few people within the company who do use chlorine dioxide within their own pools. This really is a pharmaceutical-grade product. What we're doing now is as we're continuing to scale into, not just within cannabis, but within a lot of different other markets is just consistently working to help reduce the cost of this product, so that it can become the norm really everywhere that traditional chlorine products or traditional disinfectants are being used.

Matt: I'm just thinking out loud here about, what are the best practices for a cultivator, how to treat the water? I'm thinking here's chlorine dioxide, reverse osmosis, Ph testing. What are the kinds of things that you would say like, "Hey, this is what you want to think about when you're getting your water ready for your plants."

Shawn: Reverse osmosis is still a system that would be used to eliminate the dissolved solid compounds that were within that source water. What might be referred to as hard water or high calcium, whatever it might be, based on that. An RO or another filtration system to deal with those total dissolved solids and other impurities within the water would still be step one. Then, managing this where you have traditional chlorine dioxide that's not a membrane-based, you have ozone, you have a number of other solutions, so they call it.

A lot of times, you have groups that are just injecting amounts of these acid-based peroxyacetic and peracetic acid and hydrogen peroxide-based line cleaners into these systems. What those tend to do is those actually create micro-fissures. They actually create holes within those irrigation and fertigation systems that they are molecularly too big to fit within. You have this tiny little hole, and then you have bio slime which lands on it, and then you have this encapsulation effect that takes place.

It's why as systems get older, you see a need in uptaking the amount of these products that are being used because A, they are creating a problem that they are too big to solve, and then secondly, they are not a mechanical kill. Chlorine dioxide is a mechanical kill. It cuts through bio slime like nothing else. We are also molecularly small enough to fit in that hole.

By using chlorine dioxide as an initial treatment for any type of irrigation system will eliminate really anything with inside of it, get the system back to essentially brand new. Then, by implementing an injection of it, either with a dosing pump or even added into the system manually, you can prevent that bio-slime and algae deposits from building up in the first place and then ensuring that you have pathogen-free water making it to everywhere throughout that facility.

Matt: Great stuff. Man, I could just come up with heavy metal rock band names just listening to you all day, bio-slime, mechanical kill. I mean these are cross pathogens. 

[laughter] 

Anyway, so for business owners and growers listening, what are the biggest takeaways here about keeping their grow clean, passing tests, and just having great protocols in general?

Shawn: Well, there's really a number of things there. First is throughout the cultivation cycle itself. The field microbial testing or even visible issues are the symptom of a deeper root cause. Those causes are actually impacting the health of the plant, the yields of that plant. First and foremost, you're suffering from lost or decreased yield throughout the cultivation cycle itself.

Then, as you work your way through that process, you have the potential cross-contamination every time that product is handled through harvest processes, through trimming, through packaging, all of those different processes. Having something in place to essentially erase any potential cross-contamination really goes a very long way in maintaining the sellability of your product and maintaining having a consumer health products that is safe to market.

Matt: Shawn, I want to move to some personal development questions to help listeners get a better sense of who you are personally. Before I ask those questions, you're traveling around a whole bunch of states. You told me you've been in, before we started, just a whole bunch of states recently. How do you see different states handling these lockdown procedures? Is there some that are doing it better than others? Are the vibes different in each state?

Shawn: They are very, very different. You get to see just how different the country is. Truthfully, when you operate in a lot of states in cannabis, you've seen that from the get-go when you see just how vastly different the regulations are within cannabis, it makes you understand just how separate and different all of our states really are. That's what makes them great, but it also leads to a lot of confusion as far as what's acceptable practices and what needs to be done to maintain compliance. That, I think, speaks equally for cannabis as it does for the situation that we're currently going through.

Matt: Back to those personal development questions, is there a book that's had a big impact on your life or way of thinking that you'd like to share?

Shawn: Yes, absolutely. It's really two books. I think I got the second one, and then I got the first one. The first one was The Hidden Messages in Water, by Masaru Emoto. He did these really interesting studies. Filming and photographing water at a very, very, very high level. The way that water could impact, and the way that just by speaking in the vibrations of what was said to this water, what it was exposed to, and what impact it had on it structurally. I think that book may have had one of the greatest impacts on the way that I think about things because it really shows some tangible evidence of what we say and what we think really having a big effect on the world around us.

Matt: What is the most interesting thing going on in your field besides what you do day-to-day?

Shawn: I would say the most interesting thing is just seeing the cannabis industry grow so quickly, and see where a few years ago, it was still taboo, even though it was regulated and taxed and acceptable in a few states. I've been watching that transition to being something that is, your grandma's like, "Hey, you should buy stock in this company." It's pretty crazy to see it.

A lot of us who have had some existence within cannabis for a long time, you see it and it's cool to have the penetration into the psyche of the country. It's also watching it transition into something that is federal decriminalization or regulation of some sort, looks and appears closer than ever before.

In some of the other areas that we operate where we are working with the FDA and these other federal agencies and knowing how they operate and having a foreshadowing of what I personally think the cannabis industry is going to be going through over the next couple years as we get closer to and eventually achieve that. It's just got me thinking about that and I'm glad to be where I'm at and I'm really grateful to the founder of our company for finding this. When he told me about chlorine dioxide, I was against it just to be completely honest. It sounded scary. Chlorine dioxide doesn't sound like something safe and gentle. When you're talking about using it around the cannabis plants, it's like, "Oh, whoa, whoa, whoa. What do you want to do here?" It was really like something where I was like, "Yes, right. That doesn't work." Then when I saw what he did with it, I was really blown away.

At that point that he really showed me everything that I needed to know because having the background that I did and seeing all the different places around the country and how they were operating, knew what the inherent level of cleanliness was within the industry and knew that it needed to increase in order to be able to stay relevant.

Matt: Final question. What is your favorite comfort food?

Shawn: I would have to say chicken parmesan. Those what my mom would always make for me when I was down when I was a kid.

Matt: Oh, that's a good one.

Shawn: It's not good for you, man. It's not good for you.

Matt: I don't know about that. Food made with love, I think there's something to be said for that.

Shawn: I will agree with you 100%. Love makes everything better.

Matt: That's one of those foods where if it's not made well, it can really stink. I've had a lot of bad chicken parm, but when it's made well, it's almost like-- The same with eggplant parm. It's like a religious experience if it's made just perfectly.

Shawn: I think Italian food, it really sucks in the love and helps it to come across as a good medium for that, but I think that's the same for all food. All food really does that. It's a good medium for exchange.

Matt: Well, Shawn, thanks so much for coming on the show. Tell listeners how they can connect with you and learn more about Gard'nClean.

Shawn: Our website, Gard'nClean, www.gardn, G-A-R-D-N. There's no E in garden. G-A-R-D-N-C-L-E-A-N.com. We're on Instagram @gardnclean, Facebook. They can also email us hello@gardnclean.com and reach out through the website as well. We'll be more than happy to talk to anybody.

Matt: Well, very fascinating stuff here and I'm sure this is going to help a lot of people think differently about how they can pass these tests and just have a better process for keeping their grow clean. Thanks so much for coming on, Shawn, and have a great rest of the year.

Shawn: Thank you so much for having me. It was a pleasure to be here.

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

We'd love to hear from you. Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Promotional consideration may be provided by select guests, advertisers or companies featured in CannaInsider. Lastly, the host or guests on CannaInsider may or may not invest in the companies entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions.

Final disclosure to see if you're still paying attention. This little whistle, jingle you're listening to will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care, bye-bye.

Ep 337 – Silicon Valley Switching Focus to the Cannabis Dispensary

barry saik greenbits

How do you take lessons learned from Silicon Valley and apply them to cannabis POS software to help retailers save time and money? Here to help us answer that question is Barry Saik, CEO of Greenbits.

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

Key Takeaways:

[00:53] An inside look at Greenbits, a cannabis retail POS software solution that provides compliance and marijuana inventory management

[1:07] Barry’s background working for Intuit and how he got into the cannabis space

[2:19] Greenbits versus other POS systems for cannabis retailers

[5:54] How Greenbits automates different workflows within a cannabis dispensary

[8:26] The types of platforms Greenbits integrates with, from online menu companies to delivery services

[9:31] Intuit’s “follow me home” strategy and how Barry is using it to optimize user experience at Greenbits

[15:18] Scaling challenges POS systems often face on 420 and how Greenbits has overcome those challenges

[19:42] How Covid-19 has changed how cannabis retailers use tech

Click Here to Read Full Transcript

Matthew Kind: Hi, I'm Matthew Kind. Every Monday, look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. That's C-A-N-N-A insider dot com. Now here's your program. How do you take lessons learned from Silicon Valley and apply them to cannabis POS software to help cannabis retailers save time and money? Here to help us answer that question is Barry Saik, CEO of Greenbits. Barry, welcome to CannaInsider.

Barry Saik: Thanks. Glad to be here.

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

Barry: I am in Silicon Valley. Our company has a few people in Silicon Valley. Then we have some people in the Pacific Northwest and spread out all over the world actually.

Matthew: What's Greenbits on a high level?

Barry: Greenbits is a point of sale and inventory track and trace system for cannabis dispensaries to use to run their operations.

Matthew: Barry, can you share a little bit about your background and journey, and how you got into the cannabis space and started Greenbits?

Barry: Sure. I spent a long time working at a company called Intuit that makes TurboTax and QuickBooks, and spent a good amount of time in TurboTax in the product management organization there and once had a product at TurboTax for a time. Then I became a general manager running businesses at Intuit, but all those businesses were focused on either personal finance or small business accounting and finance.

Then later in my career as I was moving on from Intuit and some other businesses, I've maintained that theme of focusing on businesses that really were trying to solve problems for small business owners. When I came across the Greenbits opportunity, it really was a great fit for me given my background in small business accounting, and also coupled with my background in compliance and with filing tax returns with the government.

There's a similar problem in the cannabis space in terms of filing all of your cannabis reporting with the various state entities. It was a really good fit for me when I learned more about Greenbits in this space.

Matthew: Barry, there's a few POS systems or point of sale systems for cannabis retailers. Where do you think Greenbits strength is relative to the competition out there?

Barry: Yes, you're right. There are quite a few of them although we're starting to see it consolidate into a few of the bigger players, but where Greenbits really stands out is we early on focused on compliance. We really work hard to ensure that our customers are 100% compliant with their state rules regulations in terms of all their filings and we make it really seamless and easy to stay compliant.

As you're using the product, selling products, and taking inventory, we've worked hard to make it so that you just have to use the system and we do all the filing in the background. That's one big string. The second one is we've really focused on ease of use of our point of sale registry system. We're the only one in the market that has an app-based system that ensures a high degree of usability, really speedy operation, and a user interface that's really designed for a tablet so that bartenders can really work effectively.

Overall, this translates into time savings for the dispensary. You don't want to spend time as a dispensary owner or manager training people or having to go back and do a bunch of catch-up filing or building your own Excel reports to send to the state filing agency. We make all that go away so that you can spend more time figuring out how to grow your business, get more customers, and sell more product.

Matthew: It's just super boring. Let's be honest, Barry.

Barry: It is. It's a little boring to be working in spreadsheets and doing accounting stuff. That's what software is for, that's why companies like Greenbits exist is to make all that easy so you can spend time doing things that are more enjoyable, more fun.

Matthew: How does it work then with these state regulators? Do you apply as a partner to get an API to their compliance system, or how does that work?

Barry: Our customers actually do get the keys. We are filing on behalf of them, but we work closely with the various providers and have an API that we use with them. We definitely have a lot of communication with the various filing agencies to work out how best to solve the problems for our customers together.

Matthew: Which of the states do you think are doing the best job in just creating a nimble, effective software for compliance? Like I said, it's not fun, but which state's doing a good job would you say, the top one or two?

Barry: One point of clarification too is that almost all the states outsource the filing to three companies. There's Metric, Leaf and BioTrack. Metric is the leading company, they have the most states under contract. Then a lot of it is affected by the rules the states put in place, then Metric implements those rules.

From a rule standpoint, I would really look at Oregon as being a leader. They've been out early and figuring out how to make everything work, but the legislature and the rules have really taken an approach of enabling the market and making it easy for both Metric and the dispensaries to understand what the rules are, and then stay compliant with the rules.

Matthew: When you think about the process that a worker in a dispensary has to go through, an employee there, how do you think about workflows and automating that? We talked about with the regulation piece and making sure you're compliant with reporting, but what other workflows are there?

Barry: There's many. Intaking inventory is a big deal. Making sure you've got the inventory set up properly, and then intaking the actual products, counting them, and then making them available for sale. Conducting sales is the most important one, making sure that you can actively process sales. We actually have an emergency mode so that if the network goes down, we allow our customers continue processing sales because that's such an important workflow.

Then there's stuff that starts to get much more complicated and nuanced. Customers that have more than one store will need to split inventory and transfer it between locations which requires some special work. Then another example would be managing deliveries and setting up deliveries in a good way.

Matthew: One frustration I know that's out there is sometimes, let's say you run out of flour of a particular strain or a vape cartridge or an edible, and then the third party live menu or review sites show that they're in stock even though they're not in stock, and the end-user gets frustrated. Do you think there's progress being made there? Can you talk about that at all?

Barry: There is, and that's a result of the menu and online menu companies being separate companies from the point of sale. There's definitely progress in partnership. We're working closely with the menu providers. I'll mention Dutchie as one that we've worked with quite a bit, and we're just working on how to figure out the right way to make sure they're up to date with current inventory and representing products in the right way.

There's a lot of detail there and a lot of rules. Again, you get back in the compliance aspect of what pricing and what products you show, but we're making a lot of progress. It really does require a partnership between the companies.

Matthew: A lot of retailers want to be able to integrate with other software packages that do different things so everything talks together. What's being asked for the most and what do you integrate with now?

Barry: Well, we integrate with, we call them online menu feeds. The online menu companies is a big one. The other one is loyalty points. Cannabis is a pretty competitive retail space, and just as you see in some of the other competitive retail segments where the retailers are trying to drive loyalty points and other programs, couponing and reaching out to customers with marketing programs to try to bring customers back to their store, you see that in the cannabis space as well and loyalty points is a key feature that allows that.

Those are I think the two big ones that we've seen. The third I'll mention is then delivery integration. That's something that the COVID pandemic has certainly raised in importance, there's a lot more emphasis on delivery these days.

Matthew: Now you mentioned that you worked at Intuit, which most people heard of TurboTax, and then most business owners have heard of QuickBooks. One of the things that really set Intuit apart especially in their early days was making it usable for their clients. I had read about this, I can't remember which book. One of the ways that Intuit make sure the software products were usable for the way that the users actually used them, not this pie in the sky idea of how they should use them was they would watch them use that. Can you talk about what that is and if you use that at all with Greenbits?

Barry: Sure, yes, at Intuit we call those follow me homes. It's a technique that the Intuit founder Scott Cook developed when he was building the very first versions of Quicken, which is a personal finance software. He brought over some techniques from the consumer packaged goods space, he was a Procter & Gamble alumni.

When you're selling consumer goods like cake mix or something, the way you test it is you would totally bring people in, because you can set up an environment and have them make cakes, but one of the things Procter & Gamble learned is that, it's better to go out and see what people are doing in their house. Scott applied the same techniques. In software, it's even more important, because you're doing so much and there's so many workflows that then affect real life that are outside of the product, if you will. The only way you can really see those unexpected things is if you're there actually watching.

If you try to do a lot of stuff remotely and in today's world, you have the internet doing like a FaceTime interview with a customer. The problem is they're filtering whatever they tell you. You can't break through that unless you're actually there and able to see something they do or pick up a piece of paper you go, "Why don't you pick that up?" That's the spirit of it is being able to observe the things that may get filtered by the respondent if you're actually asking them to tell you what's going on.

Now at Greenbits we did the same thing. We do a lot of store visits and spend time with our customers watching how the store operates, understanding why they're asking for certain features or functionality or extensions, and also looking at how we're doing on the key workflows. That's just a key piece of how we conduct business and how we get inputs from our customers about how to make software work for them.

Mathew: Was there any one specific thing that stood out to you in the Follow Me Homes to the dispensaries?

Barry: I don't know if there's one specific thing. I think the thing that stands out for me is the number of different workflows and the difficulty that then creates with managing the dispensary. There's because of the compliance aspect and the high number and variability of the products that are actually being sold, which was a surprise to me, I thought it would be much more like, there's like 15-20 different kinds of things you're buying. But most stores have hundreds of products available. Different strains and different cartridges and vapes and different mechanisms for dispensing. It creates quite a lot of variability.

Then you've got the other dynamic of a retail environment where you're hiring help that has a high degree of turnover. There's a need to keep them trained and up to speed with how the store operates. My main takeaway was, wow, there's a lot going on. This is a difficult business for a manager to really manage and run effectively.

Mathew: Yes, indeed. How do you think about the user interface? Because as you mentioned, there's a lot of different workflows, there's a lot of different types of inventory, you have to do complex things like split inventory between different retail shops. I mean, how do you make a user interface that is approachable, because I know when you're working on software, there's a tendency to get like so deep in the weeds, it's hard to have a beginner's mind as to what the end user is looking at.

Barry: Well, yes, that's a challenge. I mean, that's why we have designers that think a lot about user experience and how to design an experience that allows the user to have the right capabilities and easily understand the options, but also doesn't overwhelm them with a bunch of features and functions that just make it more complicated and difficult to know what to do. It's a tough balance. It's something that all software companies have to deal with, especially if you're tackling difficult user problems. I saw this in the tech space for years where you have this challenge of how do you would take this complex problem and digest it down so that a regular average person can operate software.

The other thing I think people don't always appreciate is that you have users that have very different skill levels and knowledge levels about the space you're working into. It can be really tricky to figure out how do I present the right interface to a user based on what type of user they are? How do I give them an option? How do I give a pro user a way to not have to go through a slow, more helpful interface and let them have an expert mode that they can kind of quickly go through. It's always a balance of trying to figure out exactly how much do your customers know, how experienced are they? How much help do they need? Then what's the right way design the software to allow them to accomplish the task as quickly as possible.

Mathew: On 4/20 and 7/10, maybe there's those are, or maybe and also right around Christmas time, I know, there's huge demands on kind of the network or server architecture. Can you talk about just some of the scaling issues around 4/20? I know, some of the POS software providers have had difficulties around maintaining services and software connections during that time, but can you just talk a little bit about that generally, and then your server architecture and your emergency mode?

Barry: Sure. Actually, emergency mode is a little unrelated, but I can talk about it a little bit. But on scaling of 4/20 has been historically a challenge in the industry, a lot of industries that I've been in have a cyclical nature, a season where there's more sales, and actually, the 4/20 spike is not particularly larger than I've seen in other industries, particularly the tax industry, tech software, and tax prep is very spiky, and more so even actually, when you get down to April 15, where you see more like, five, six X times traffic. In the cannabis space we see kind of 50% more so you know-

Mathew: Okay

Barry: -maybe half an X to one X on time the size of normal processing. It's a challenge, Greenbits historically, before I joined did have some [unintelligible [00:16:54] But it's really, when you have an average like that it's really just a lack of focus and planning in today's world, like building out systems that can scale, all the companies have access to cloud based infrastructure. It's not an issue anymore, like you need to rack servers and make sure that servers are up and running, it's really just an issue of spending time focusing on it and figuring out how to do load testing that actually is a real load test, and not some sort of fake test that's not really representative of what your production environment is like.

Because the thing about scaling and handling a lot of load is that oftentimes you're surprised as you scale up with which piece of the system starts to fall down. It's not always immediately obvious which piece is going to be your bottleneck. The best way to tell is to exercise it and get comfortable with the traffic you can handle. At Greenbits since I've been there we've been focusing a lot on scalability and reliability for just that reason, because it's completely unacceptable to go down on peak selling days, I mean, we're running the sales, and you've got a bunch of stores and the customers in the store and the last thing would have happened is your point of sale system crashes or has a problem.

That's why we're super focused on that, we had an extremely clean 4/20 this year with no issues at all and we expect the same going forward because we've been spending a lot of time on our architecture and a lot of time testing. We run load tests against our production environment, and we can get comfortable with how much traffic we can handle. You mentioned emergency mode. emergency mode is really there for a lack of connectivity. We've seen a need for this, because people's Wi-Fi and internet connections depend upon the provider and depending upon their Wi-Fi setup. We've seen some of our customers have challenges with keeping that connectivity running. The emergency mode is great, because when you do lose connectivity to the backend service, you can keep selling product and operate your store.

Mathew: Okay, so it's like the local client has the client software has the ability to run things locally. Then once the cloud connects again, it syncs?

Barry: Yes, you can think about it like a sync architecture. The nuance there, though, it's not an easy thing to do is that all of our registers sync with each other too. Because we can't, we have to track everything. We can't allow the registers to both try to sell the same product. We do have sync between the registers on the LAN as well.

Mathew: Okay. There's a lot going on behind the scenes you have to think about.

Barry: Yes

Mathew: Okay. Just from your perspective, how has COVID-19 changed how cannabis retailers work and function in their care abouts?

Barry: Well, I mentioned the focus on delivery, which is one key one. There's other things though too that have come up. Like curbside pickup and ordering in advance and pickup. You do see just this emphasis on more COVID socially distant workflows, if you will. That makes sense and it's pretty obvious. I think the other thing we've seen is that they're all of our customers are selling a lot more. Their sales have been up pretty much 30% above what they were tracking before the COVID pandemic. That's just been an interesting thing for all of our customers to deal with and account for.

Mathew: Okay. No one has a crystal ball here, but how do you think the cannabis retail space is going to change and evolve over the next three to five years?

Barry: I think it's a classic example of an industry that is figuring out things and was early and there was a lot of disparate companies trying to attack problems in different ways. It's natural as the industry matures to see some of that stuff consolidate. It's like Darwinism natural selection. The things that work well people will gravitate to you and that means the things that aren't working well in the companies that aren't doing quite as well are going to struggle to keep up.

We're seeing some consolidation and in the industry across the various different tech providers. I think that's something that you'll see continue a little bit just through the natural choices that the company, the dispensers are making on who they want to use to provide their software and services.

Mathew: Well, I know a lot of cannabis retailers and delivery companies have come up with clever ways of being able to accept debit cards and different things. When we get a full legalization of banking opportunities for cannabis retailers, how do you think that's going to affect the retail environment?

Barry: The big one is that you'll be able to pay with your credit card, which is what every consumer wants. I've spent a lot of time with payments solutions over the years, working on accounting and personal finance. There's a lot of alternative payment vehicles out there and companies trying to do other alternatives. I've seen time and time again now that overall consumers want to pay with the thing that's already in their wallet. Credit card payments is a key enabler.

I think from a standpoint of a consumer experience, it's going to feel very natural. It'll be like paying for anything like paying for coffee. You tap your card or use your phone for a contactless payment. That part won't feel the different what's interesting for the retailers though is there's really good data that shows that using credit cards increases sales in two ways.

You can process more volume because it speeds up the transactions and everybody just knows how to pay and it's very comfortable and familiar. Then people tend to buy more when they're using credit cards than when they're using cash or other systems. I'm excited about those two factors of being able to increase the throughput and increase the basket size of sales.

Mathew: Do you think we'll see some sort of cannabis rewards credit card that's cross dispensary?

Barry: Possibly. I think when you think about those kinds of things, I think it's important to ask, why is that a good thing for what type of people? I think we'll see some of that, but I believe that it'll be more of a niche offering for probably for people on the heavier use side of things. Typically cards like that with credit cards, there's a set of complicated economics behind credit card offerings. The reason you see cards that are affiliated with a certain brand or entity is usually because there's some type of points kickback to the end consumer that's related to the backend economics.

That might make sense. I have a one from REI the more I spend I get points credits that I can spend at REI for future products. You could see something like that happening in the cannabis space, but those tend to be for the higher consumption heavy users. We'll definitely see them.

Mathew: The way the crypto space is evolving it reminds me of the early internet. I remember the first time I used Quicken, it was a CDROM. It wasn't even connected to the internet, I don't think. Now we have these edge use cases of digital assets and cryptocurrencies. Do you see a similar arc to the internet and ways that's going to be integrated into people's lives?

Barry: I think crypto will eventually transform how we do payments. I think the challenge with crypto is that the interesting thing from a payment standpoint is if you can clear payments very inexpensively and quickly, then it's valuable from a transactional payment standpoint, but we haven't seen any of the crypto platforms actually fulfill on that promise of providing really cheap and quick clearing of transactions. Coupled with that is most of the crypto platforms are pretty complicated and difficult to set up and people aren't familiar with them.

People have been treating them more as an investment vehicle, like buying gold or something. Then that's the other piece of crypto that's been difficult for people to really get their heads around is that cryptos and the whole digital coin thing it's a digital Fiat currency as well as a transaction mechanism combined into one. There's actually two different benefits out of those things. The Fiat currency alone is an interesting thing and it can, because you can invest in and where it can change value, but then the transactional capabilities are a different thing to think about.

I think both will have an effect on how we buy things in the future. It just isn't easy enough to use them right now and there's just too much uncertainty. People will I think largely gravitate in the near term back to credit cards and the US dollar until something that's a better alternative comes around.

Mathew: Okay. Where are you in the capital raising process?

Barry: We completed our latest capital raise back in the fall. We are building the company right now, so we're just a hundred percent focused on our customers on building out the software and investing that capital wisely for our investors.

Mathew: Okay. For accredited investors that are interested in investing, is there a way they can reach out or is that on hold for now?

Barry: Well with us, that's on hold we've closed our round and we are pretty set on capital.

Mathew: Okay, good. I want to ask a few personal development questions, Barry, to help listeners get a better sense of who you are. Is there a book that's had a big impact on your life or your way of thinking that you'd like to share?

Barry: Well, the one I always go back to and it's not actually a business book but there's a book called The Power of One by Bryce Courtenay and they actually made a movie out of it but the book is as usual way better than the movie. That's all about perseverance and about pushing through adversity. It's just a very inspiring book about a boy growing up in Africa and the gold mines and how he struggles to find himself and develop and grow up.

It's just a really great book and it's reinforced for me the importance of knowing that when things get tough, you can push through them. The book talks about you need help sometimes, and it's important to look for that help, but ultimately you got to also think deep and push through things and you'll find a path through the problems.

Mathew: Besides what you're doing at Greenbits, what do you think the most interesting thing going on in the cannabis industry is?

Barry: Well from a business standpoint, I think the continuing legalization across the country it's pretty obvious, but that's huge. Just the more and more States that legalized, I think it's just better for everybody. It makes the space safe. Both in terms of the quality of the products and in terms of the banking side of it and the purchasing experience. I think that one's really, really interesting and then we mentioned and talked a little bit about the financial aspect and the federal endorsement of banking is a big one. The lack of the banking infrastructure and real digital payments happening in the space creates all kinds of weird things and unsafe issues for people in industry. Those two I think are the most important enablers of the industry.

Mathew: Okay. What is the one thought that you have that most people would disagree with you on?

Barry: That's a tough one. Right now we're all embroiled in the COVID space, I guess right now I think we're going to get through the COVID thing in another month or two. I really have a lot of faith in science. I'm impressed with it. It's just amazing how fast these companies were able to make vaccines and get them out. We're all talking about the distribution issues and how fast can it get out and what are the rules around who gets it first but I'm in the mindset of like, just keep pushing on, guys. [chuckles] Get the shots in people's arms and you know what? We're going to be through this, I think.

People are going to be surprised and then all of a sudden you have to figure out like, you come out of the light on the other side of the tunnel, and it's bright light, you're like, "Okay, now what?" I think that's going to happen pretty soon that we're going to be on the other side and feel like, "Wow, I'm glad that is over with."

Mathew: Well, Barry, as we close, how can listeners find out more about Greenbits and for retailers that are interested in coming on and giving your software a try? How can they find you?

Barry: Sure. Well, just go to greenbits.com. We've got contact info up there, information about our products and offerings. That's the place to start.

Mathew: Great. Well, thanks so much for coming on the show. We really appreciate it.

Barry: Thank you. It's been a lot of fun.

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

We'd love to hear from you. Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Promotional consideration may be provided by select guests, advertisers or companies featured in CannaInsider. Lastly, the host or guests on CannaInsider may or may not invest in the companies entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions.

Final disclosure to see if you're still paying attention. This little whistle, jingle you're listening to will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care, bye-bye.

[00:32:32] [END OF AUDIO]

Ep 336 – Cannabis Jobs Are Booming, CEO of Leafly Gives The Details

yoko miyashita leafly 1

Covid-19 has not only accelerated advancements in technology but also the types of jobs needed to support the cannabis industry. Here to tell us more is Yoko Miyashita, CEO of Leafly.

Learn more at https://www.leafly.com 

Key Takeaways:

[48:11] An inside look at Leafly, the world’s largest cannabis information resource

[1:41] Yoko Miyashita’s background as a lawyer and how she got into the cannabis space

[4:20] How consumer behavior has shifted in cannabis over the last five years and where Yoko sees it heading

[5:37] How dispensaries leverage Leafly to increase foot traffic and drive sales

[9:41] Leafly’s partnership with Jane Technologies to create the most comprehensive and customizable product catalog in cannabis

[13:20] Leafly’s annual jobs report and how it’s making jobs in cannabis more accessible

[15:39] How cannabis jobs have exploded over the last few years to outstrip professions in dentistry, electrical engineering, and more

[23:04] The most hirable skills in cannabis right now and Yoko’s advice for those looking to enter the space

Click Here to Read Full Transcript

Matthew Kind: Hi, I'm Matthew Kind. Every Monday I 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.

COVID-19 has massively accelerated advancements in technology and the types of jobs needed to support the cannabis industry. Here to tell us more about it is Yoko Miyashita, CEO of Leafly. Yoko, welcome to CannaInsider.

Yoko Miyashita: Thanks for having me. Great to meet you, Matthew.

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

Yoko: I am in my bedroom today in Seattle, Washington.

Matthew: Great. What is Leafly on a high level for people that aren't familiar?

Yoko: Leafly is the world-leading cannabis information resource and consumer marketplace. We've been around for about 11 years, and we started as a strains database. If you think about the cannabis world 11 years ago, no information, no information online, no data, no science. We started as essentially an Excel spreadsheet where consumers could share information about strains and the different effects it had on them.

Being able to bring that critical information to consumers, which we've then added over the years with news and additional lifestyle coverage on cannabis, and then connect to them with licensed retailers in North America, that's just proven to be a really critical tool to help consumers navigate their cannabis journeys.

Matthew: Can you share a little bit about your background and how you got into the cannabis space and joined Leafly?

Yoko: Yes. Like many others in the space, I'm actually a lawyer by training. I spent 14 years prior to joining Leafly in the digital media space. For me, I'm a policy junkie. I love meeting policy issues where the legal and policy issues are at the center of a business. For me, that was IP in my previous career. When I was looking to make a change coming to Leafly, that brings together both this highly regulated industry, cannabis plus media, where I have a deep experience, was just this amazing opportunity to pursue both of those interests. I started here at Leafly as the general counsel and took over the role of CEO in the summer of last year.

Matthew: Yoko, just so to give people a sense of what Leafly apps like, if they were looking over your shoulder the first time they open it up the app, what would they see?

Yoko: They'd find a search box. This idea here is to be able to answer consumer's questions about cannabis. I just found this strain in the store, and I want to learn more about it, or I'm looking for this product, or I'm looking for this dispensary or brand. We start your journey with the questions that you have and navigate you to the information you need.

Matthew: Why explore strains at all? Why is that important?

Yoko: I think that strains are fascinating, thousands of strains, and we've got about 5,000 in our system, but we look at this-- This is where I think cannabis gets super interesting because prohibition has prevented so much research from being done. As we've seen legalization come through, what we have now is so much lab data to inform our understanding of cannabis, and that's the root of our strains information. We take strains information that have different cannabinoids, different terpene profiles, that complexity within the plant itself, informs the cannabis consumers experience.

If you're talking about I'm trying to use cannabis for this reason, whether it's recreational or for a medical application, this idea that you can actually dial into the experience you're looking for, that's why strains are so important. It's not just indica, sativa, hybrid. You have to go the next layer deeper of understanding cannabinoid profile as well as terpenes to get to the effects you want.

Matthew: Great point. When we first had Cy Scott, co-founder of Leafly, I think six or seven years ago, back then, it was really a lot more about the THC level of a flower. There was some talk about the CBD-THC ratio, but it was still very early. How much is the influence of cannabinoids and terpenes really influencing purchasing decisions for people in the Leafly app?

Yoko: We think so much about how to bring consumers and the millions in the wings waiting to try this into the world of cannabis. We actually look at that experience and say, "The idea of bringing new people in is all about making sure we help them find the products and strains that are right for their intended uses." If you look at the Leafly app, we talk at a strange level. We have the world's largest database of consumer aggregated effects.

Consumers tell us, "Did this particular strain-- Did it have the intended effects? What were some of the negative effects?" This idea of being able to help consumers pick and choose and find the strains and products they want are all tied to breaking down the science of this plant.

Matthew: A lot of retailers in the cannabis space dispensaries, they rely on Leafly to get customers in the door, the foot traffic. The customer start on Leafly. They're exploring, they start to decide on a strain. If you were to stop and just visualize one dispensary in your mind that does a really good job of leveraging Leafly in the best way possible to create a holistic market plan, what are they doing? How are they using Leafly? How do they leverage it to get more revenue and happy customers?

Yoko: I love that question. It really goes to what can Leafly do for this community, this ecosystem of everyone playing in the cannabis space. I go back to the complexity of the plant, and that's a high barrier to entry. It's not you just go and pick a red or white and pick your flower, but because of this inherent complexity of the plant, if we can help break that down for consumers, get them in the door, give them a basic understanding of the plant, how the plant works on your own individual biology, and then take them through the selection process. That's key.

We consider this as the top of the funnel. We bring more consumers into cannabis. This idea then of being able to bring them into the doors of retailers ties directly to how retailers show up on the Leafly website. We've been able to break this down as to what makes a retailer successful on Leafly. It starts with having a robust profile, your address, your business hours, what services you have available, and that can all be managed on the back end on the weekly platform.

The second thing is making sure their menus are up to date. You can update your menu through Leafly menu solutions, leveraging our 30 POS systems integrations, or you can manually manage your menu.

But this idea of managing your menu, one of the issues we have in this space is that inventory. Inventory and supply chains are complicated, so products aren't always on the shelves when you go into your store. If you think about the consumer experience, this is a situation where we have some online, but a lot of these transactions have to be concluded in the store. If that's going to happen, and if that's going to happen in a way that's going to be beneficial to the consumer, you got to make sure when they place a reservation on our site, that product is on your shelves when that consumer comes in. Part of that is maintaining your menu and keeping that up to date to ensure that consumer knows what is or is not available into your store.

Reviews. Reviews on Leafly are huge. Again, I think a lot about what is this experience-- It's one thing for a seasoned cannabis consumer to come in and shop, but if you're really new to this, and you're one of these new people who are like, "This looks really interesting. I've heard a lot about cannabis. I think this can help me," Again, you need additional information to make you feel confident in your purchase. Reviews do that.

The other thing we see a lot of is our deals. Consumers like deals. Think about what we see in our regular experiences, e-com shoppers. We want to see if there's something on sale. We've been able to dial into all of these ways to manage your profile on Leafly to make sure you're the most welcoming and efficient place for consumers to come in and conclude their purchase.

Matthew: If you were upgrading a dispensary, what kind of promotions would you create and entice people, free dogwalker? What would you say?

Yoko: In markets where you can offer deals, people love percent off, BOGOs. BOGOs are huge. [laughs] The hard part about this is it's a market-by-market variation depending on what the regulations allow.

Matthew: Leafly recently partnered with Jane Technologies, we've also had on the show. They offer a lot of different tools for retailers. Can you talk about that partnership and the synergies either?

Yoko: Yes. For us, this was an opportunity to combine the education and know-how of Leafly with the best in class product catalog experience of Jane. Maybe we could go back with our previous question around how can retailers make sure their presence on Leafly is optimized. I talked about the Jane product catalog because that goes to the core of this experience, which is the menu. What Jane has been able to do-- I got to back up two steps to talk about some of the challenges with product catalog that you'll see in this space. Product catalog is each individual store uploads their products into their POS systems to essentially drive their menu.

The problem is because you don't have any standardized product descriptors, like a UPC that's widely adopted in this industry, you end up with the same product being uploaded by different retailers to their menus with different metadata. It might be called differently. You might have a variation in the name of the product. You'll have a variation in THC content, or CBD content, or you may have some fields empty. What happens if you don't cleanse that data is that, on a site like Leafly, where you show a ton of different menus, the same product can manifest in totally different ways.

If you're a consumer-- I have a favorite topical balm. If product catalog data is not cleansed, that same balm that I know I've bought looks a particular way shows up with different kind of information across different menus. Then as a consumer, you're left wondering, "I really liked this product. I have it here. I know what it looks like, but is this the exact same thing that's showing across from this store to that store to the third store?" That really undermines consumer trust in shopping.

What Jane has done is cleanse the product catalog, so that when they're seeing menus for multiple retailers with these products that look similar, they can match, cleanse, and align to a single description of the product with a great product image, so when the consumer sees that product manifested on menus and platforms like Leafly, they say, "That's it. That's what I wanted, looks exactly like the product I bought. I know this is the one I want to order."

That's a very long-winded description of what they've been able to do, but when that powers menus across retailers, what we've done is then taken that menu and integrated it into the Leafly platform. If you're a Jane customer, and you're a Leafly customer, you can basically update your menu in one spot that's on Jane and push that through Leafly.

Without that integration, they would have had to maintain two separate menus. You can imagine what kind of duplication and potential opportunity for mistakes that that situation poses.

Matthew: Do you think there's going to be some consortium in the future of big players that get together and say, "Hey, let's standardize some things here?" Just the naming of it.

Yoko: I think that would be a fantastic idea. Ultimately, if you think about this is an exercise in building consumer confidence in the cannabis shopping experience, that is absolutely where I think we should go as an industry.

Matthew: Now, you recently launched a jobs report. Can you talk a little bit about that?

Yoko: Oh, yes. Let me talk about the genesis of the jobs report. This is something that Leafly has been publishing since 2017. We published this because the federal government doesn't. Think about that for a second. Your job, my job and any other industry would be counted in Federal Labor Statistics, but because of federal prohibition, there's no separate next code. There's no separate categorization for jobs in cannabis. That's where the jobs report came out of.

What we've been tracking now is jobs created in the US from legalization, and those numbers are massive. This year's report covering 2020, we've got 321,000 jobs in cannabis across this country. That's 32% year-over-year growth from 2019. I want to go back to how you started this. COVID-19 has had a devastating impact on our economies and our jobs, but this sector, this is a shining light in our economy.

Matthew: Agreed. I wish we could talk about that more on a national level, but hopefully, that's going to start to happen here. I noticed that there's, I think, three senators pushing for some legislation that's hopefully going to move this ball down the field a little bit, but cautiously optimistic.

Yoko: It's interesting. We had with the green wave in November and New Jersey going wreck, we'd made some statements around that's the dominoes falling, and you just see the eastern seaboard lighting up.

This morning, I read about Connecticut. Virginia's legislature has moved legislation so quickly through their both chambers. I think when you see that kind of momentum, you see massive population areas basically saying, "We don't want to miss out on this," this is something that the federal government needs to listen to. We've got to make it easier for these businesses to grow, to grow state coffers and to essentially continue to create these jobs to drive our economy.

Matthew: Is there one or two bullet points from the jobs report that really stuck out to you as a cocktail party snippets that you could share?

Yoko: Oh, totally, tons. We've got more jobs in cannabis now than we have dentists in this country. We have more jobs in cannabis than we have electrical engineers and EMT and paramedics. I saw another state specific stat, which I thought was absolutely fascinating around more jobs in cannabis than police in Michigan.

Matthew: Wow. [laughs] That one's particularly nice.

Yoko: I think it's time to wake up to the opportunity here and act on it.

Matthew: Job seekers that are listening, and they're trying to figure out what category of jobs are there? Is the job's report have any detail about what kind of jobs there are that are interesting and making cultivator, extraction, lab scientists, trimming, all those things? Is there anything else that's on top of mind?

Yoko: We don't do a breakdown of job categories by job, we do do a breakdown of the states in the report, but just as a participant in this industry, I love the way you asked that question simply because it is the whole breadth of what it takes to support an industry and an opportunity to get involved, not just in plant touching, but looking at cannabis technology company like Leafly. You've got everything from marketers to finance people, to lawyers, to salespeople. I think that's what I love about this space, which is come one, come all. We need your expertise.

Matthew: How about Oklahoma? It seems like things are just going nuts in Oklahoma. Can you talk about that a little bit?

Yoko: Oklahoma is amazing, and it starts with the regulatory structure there, where they basically said it was an open market for getting licenses. That's so different than state by state. What you then have is adequate supply for all the consumers who are looking for products there. I think this is one of the biggest barriers right now that we've got to work there from a regulatory perspective in each of the states, where our store-to-consumer ratios are off in a lot of our biggest markets like California. This is just something where-- I think we can't get ourselves.

We're still fighting stigma, and we've got to get our local regulators on board and understanding the opportunities that cannabis presents. I call it the cannabis Boogeyman dispelling those myths around "the harms that cannabis legalization brings", some of which we've dispelled, for example, real estate properties actually increase when you've got a cannabis dispensary in your area. But that was a long-winded way of saying yes, Oklahoma is hot. I think it shows this great demand that consumers have for the plant.

Matthew: Any other jobs numbers that stick out at all?

Yoko: I think the jobs numbers, we also have to just look at sales numbers. We focus solely on the license market. The jobs exist because this industry drove $18.3 billion in sales in 2020. That's a 71% increase over sales in 2019. The other side, I should just mention about jobs. These are massive, massive sales growth, but this number, this growth in jobs

is-- We are the fastest growing employment segment in this country.

I'm going to just flip-flop back to that sales number. There's another interesting COVID stat. Again, you started here, and I think that's such an interesting space. This essential industry, what we saw with consumers in 2020 was that basket sizes are up 33% in 2020.

Matthew: I wonder if there's more shopping or deeper shopping, meaning I don't shop as much, but when I do, I get for a longer period, it's like a mini hoarding internal narrative because I might be in my house for a long period of time. I want to make sure I have a big stash. You know what I mean?

Yoko: We definitely saw some toilet paper hoarding behaviors, similar to toilet paper at the start of the pandemic in our own ordering info, but what we've seen is that as you track COVID and through the spikes we saw, things levelled down. People stopped hoarding, but what I do think it's driven is this shift in greater adoption of online ordering. Again, when we are talking about reducing in-person contact, this ability to actually leverage technologies like Leafly to order and then pick up, I think this is driving a massive consumer shift and really creating this more broader acceptance around shopping online for cannabis.

I was having this great conversation with someone about, a lot of the times you're shopping for cannabis, these are really personal and private issues you're trying to deal with. There's personal health issues that you may not necessarily be comfortable walking in and talking to a bud tender about. If we can help you with information and the news you need to do some of that exploration on your own, in the privacy of your own home, it just makes it somewhat easier when you walk into the store to pick up your product.

Matthew: In Seattle there, are they doing the trunk open delivery in the cars?

Yoko: No, we are a no-delivery state.

Matthew: No-delivery state.

Yoko: Yes.

Matthew: Is that changing?

Yoko: There's a movement but not in this session of the legislature.

Matthew: Interesting. Well, that leads me to the next question here. Where do you think the whole cannabis industry is going in the next three to five years in a national way?

Yoko: Oh, I call it the most bipartisan issue in our country. You've got 67% broad support for cannabis, COVID's devastated state budgets. We need tax revenue. Equity issues, criminal and social justice issues are at the forefront of all of our minds. Cannabis sits at the center of solving so many of those problems. All I see is opportunity, opportunity, opportunity, as well as an opportunity to do it right and to be inclusive, to be equitable, and give the people what they want.

Matthew: You're the CEO of Leafly. There's a lot of listeners that are new to the cannabis space they want to get in. What do you think are the most important skills that are hireable right now?

Yoko: Oh, like in working in the cannabis space to doing everything with one arm and a leg tied behind your back, tenacity, and curiosity. I think the opportunity in a space like this is that it hasn't been done, and it's yet to be defined. There's a level of intentionality that you can do that we should be doing. I think combining that you aren't reinventing the wheel, you're inventing the wheel. That's going to be difficult.

We actually have this conversation internally. If you want just a job, this probably isn't the place, but if you really want to be creative problem solvers, we have so many problems for yourself.

Matthew: Well, Yoko, I want to ask a few personal development questions. Is there a book that's had a big impact on your life or way of thinking that you'd like to share?

Yoko: This one is a question that differs on the day you asked me. Today, I'm thinking about Catch-22 by Joseph Heller.

[laughter]

Matthew: Tell us why.

Yoko: I think it's one of those things I read it super early, like many listeners may have had too, and probably in high school. I think it just gave me a framework for thinking about life and back to some of the challenges you were talking about, where it actually gives you some levity and a sense of humor to address all of the things that come your way in life.

Matthew: What do you think the most interesting thing going on the cannabis field is besides what you're doing at Leafly?

Yoko: I'm so excited by that question, but then having to reduce it down to the most exciting, I am super passionate about this ability to tackle equity and business opportunity all in one. There's such a unique history to cannabis and prohibition and this intentionality that we are all trying to bring to say we can solve for all of this. It's not a zero-sum game. There can be winners across the board. That is hugely motivating and what makes me super excited to show up to work every day.

Matthew: Now, the last one, what is your favorite comfort food?

Yoko: Ramen.

Matthew: Tell us what that is.

Yoko: I'm Japanese. Comfort food, Japanese noodles, soup base. You start with a very rich-- or actually a custom-made broth. It can be a bone broth. It can be a soy sauce-base broth. It can be a salt-base broth, and noodles. On top of that, you can add anything from vegetables to slices of meat. It's just savory, hot noodle soup.

Matthew: Nice. Well, Yoko, as we close, can you tell listeners how to find out more about Leafly?

Yoko: Absolutely. We encourage everyone to just come to leafly.com. Just start with the news and information. Start with this discovery. Start with learning more about the plant, the science, the news, the lifestyle commentary, and dive in. It's a journey that will take you to so many different places. If you're interested in advertising on Leafly, you can find the link at the top of our website that says advertise on Leafly and click through.

Matthew: Well, Yoko, domo arigato for coming on the show and educating us and give me a little Japanese lesson before we hit the record button. Thanks and good luck with everything you're doing in 2021.

Yoko: Thank you so much.

[background music]

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

Have a suggestion for an awesome guest on CannaInsider? Simply send us an e-mail at feedback@cannainsider.com. We'd love to hear from you. Please do not take any information from Canna Insider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Emotional consideration may be provided by select guests, advertisers or companies featured in CannaInsider.

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

[00:28:43] [END OF AUDIO]