Ep 299 – Cannabis Deliveries Surge in the Wake of the Coronavirus…

tim conder blackbird 1

With COVID-19 keeping people at home, cannabis delivery is booming.

Here to tell us more about it is Tim Conder of Blackbird Logistics, one of the industry’s leading software and operations companies.

Learn more at https://myblackbird.com 

Key Takeaways:

  • Tim’s background in cannabis and how he came to start Blackbird
  • An inside look at Blackbird and how the company facilitates the movement of cannabis products across the supply chain
  • How Blackbird fits in with its parent company TILT Holdings
  • Ways in which cultivators, dispensaries, and brands can benefit from Blackbird
  • How payment is being handled for home cannabis deliveries amid COVID-19
  • Recent changes Tim has seen in cannabis delivery and where he sees it heading in the years to come
  • How customer behavior is different than usual and the products people are ordering most
  • Tim’s advice for cannabis companies trying to navigate COVID-19
Click Here to Read Full Transcript

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

With COVID-19 leaving many at home, the cannabis delivery business is booming. Here to tell us more about it is Tim Conder, CEO of Blackbird. Tim, welcome to Canna Insider.

Tim Conder: Thank you, I appreciate it.

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

Tim: I'm in Reno, Nevada.

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

Tim: Blackbird is a supply chain company that operates in the cannabis space. We facilitate movement of cannabis product through the supply chain, both digitally and physically.

Matthew: Okay. Can you share a bit about your background and journey and how you got into the cannabis space and being a CEO of Blackbird?

Tim: Yes, absolutely. I worked as a bicycle messenger in San Francisco and moved back to my hometown of Reno, Nevada to start a bicycle messenger company in 2009, right after the 2008/2009 meltdown or financial crisis. I moved back with the thesis that, while bicycle messenger services in larger markets like San Francisco were suffering due to the advent of email, that a relationship-based service could thrive in a smaller market like Reno, Nevada.

I started that business in 2009, and it still operates today, almost 11 years later. In 2015, we saw an opportunity to pivot that business, which was called Bootleg Courier Company, into the cannabis space and start providing our unique brand of services around last-mile and on-demand delivery to cannabis operators. In 2015, when the medical program got on its feet here in Nevada, we launched Blackbird, which was a last-mile delivery company for both wholesale and retail cannabis operators.

Matthew: That's really cool. I hear Reno's really becoming a hotspot for people from California that are moving out of California for a bunch of reasons, some regulatory, some tax, some lower cost of living. Can you talk about that a little bit?

Tim: Yes, absolutely. I mean, Reno is within close proximity to the San Francisco Bay Area. The cost of living is definitely less expensive than San Francisco. Really, its proximity to the Silicon Valley as well as its cost of living, have contributed to a pretty significant uptake in technology companies settling in this area, either initially or expanding into this area. Apple has a campus here, Tesla has, I think, one of its largest campuses in the world here. Yes, I think it's become really a hotbed for technology startups because of the cost.

Matthew: Okay. Can you give some context of how Blackbird fits into the parent company, TILT Holding so we can get a picture there?

Tim: Absolutely. Blackbird was purchased by TILT in January of 2019. TILT was really an amalgamation of lots of different types of cannabis operators and ancillary companies servicing cannabis operators initially. What has evolved in today, is a group of technology and innovation companies under one umbrella that service cannabis operators globally. The two assets that underpin that goal are: Blackbird and Jupiter Research. There are other companies that were part of the initial business combination that have integrated into Blackbird now as well.

Matthew: The geographic footprint for Blackbird is Nevada, well, Nevada, I'm always corrected, and California, correct?

Tim: Yes, from an operations perspective, that's correct. We offer our services, operational solutions, statewide in Nevada and statewide in California, but our technology platform is utilized in all 33 regulated cannabis markets in the US as well as Canada, Jamaica and Puerto Rico.

Matthew: When I say Nevada, that's an immediate tell that I'm not from Nevada, right?

Tim: [laughs] It's an immediate tell that you're from the East Coast.

Matthew: Okay. But I'm actually from the Midwest.

Tim: We'll close yet.

[crosstalk]

Matthew: Okay. Just so we're really clear, can you go over how a dispensary, a brand, and a cultivator might work with Blackbird?

Tim: Yes, absolutely. We put cultivators, brands and manufacturers in the same category, we call them wholesalers. Essentially, what a wholesaler will do to utilize Blackbird is, they would use our software to create and manage their inventory, both at their own facility or when they're moving that inventory between facilities; either to another wholesaler or onto a retailer.

They would use our operational services to actually move that product from one facility to another. For example, if a cultivator has 100 pounds of flour that they want transported to a manufacturer, they would already have that inventory created in the software and they would create a shipment to the next location. Blackbird would come pick that product up, transport that product physically and then digitally, the product would be transferred from the Cultivator A, the originating facility to Manufacturer B, the destination facility.

Like I said, both digitally and physically that product is moved.

Matthew: Just curious, how is that transport done? Is it like an unmarked van or something? Or how does that work?

Tim: Yes, pretty much exactly. I mean, we use all sorts of different Ford Transit vans. Secure transport, so that's, they have cages in the back and they are GPS-tracked, alarms and all the bells and whistles that both Nevada and California regulations require.

Matthew: Okay. How many dispensaries are using Blackbird right now?

Tim: Roughly a thousand. I mean, we deliver product in Nevada and California to 100% of all licensed dispensaries. We know that because our software, in order for us to even contemplate making a delivery to either a wholesaler or retailer, we create that entity within our system and validate that they have an active license in the State in which they operate. We can cross-reference that against the State database. We currently deliver wholesale product to 100% of the dispensaries, like I said.

Internationally, Blackbird services- has retail clients at roughly about a thousand.

Matthew: Okay. I noticed Deliveroo and some other food delivery services are starting to move to total contactless where you just drop off, if you sign anything. How is payment handled for people that are doing home deliveries now and do you see that evolving at all?

Tim: Currently for us, it's a cash only business, is related to home delivery. We're always looking for long-term payment solutions because we don't want our drivers to carry very much cash; we require them to return to the facility to offload the cash that they have. It's an encumbrance to our business that we've been looking for solutions for the past five years.

We've found some solutions, but none have ever stuck. Most of the solutions that we've found have had some problem; either it's too complex and we can't get everyone that we need to, to adopt, or the solution goes away. We had that early on, we had a payment, a credit card processor, and we required all of our transactions to be done via credit card, and then that processor closed its doors. We had to deal with the fallout of that.

We've been very diligent and deliberate about onboarding a new solution. There really is no great fit for us currently, which is why we're currently cash only.

Matthew: Do you see something like a stable coin or a coin that mimics the performance of our national currency that could be sent between phones as a possible option down the road? Or do you think we're not even closely to that?

Tim: Everything is a possible option. What I would say is, we're trying to really go the direction of normal e-commerce environments. Until something like that is widely adopted outside of cannabis, will it makes sense for cannabis? It just becomes another thing that we're beta testing, right? It becomes another thing that's wrought with issues and problems that we have to solve for. One thing that I think all cannabis operators can probably identify with is, there is no shortage of problems that we already have to find solutions for. Introducing a new technology or concept that just creates more problems is just not something that's tenable for our business.

Matthew: You mentioned you support about a thousand retail environments. How many brands do you support?

Tim: Several thousands. Many wholesalers have a number of brands underneath their wholesale license umbrella. We work with a number of wholesalers and those wholesalers represent near 2,000 brands.

Matthew: How much has sales been this year and how would you compare it to let's say Q1 from 2019?

Tim: They've been good. Because we're publicly traded, we can't be too forward-looking but I would say that we are experiencing growth and we have been experiencing steady growth. When we combined with the other technology companies under the TILT banner, and those companies were Baker Technologies and Brightside, we saw just some attrition through that process. We've had some lumpiness in our revenue but have really completed the integration of those three technology companies under Blackbird and are really starting now to ramp up our revenue.

Matthew: How would you say the cannabis delivery business has changed since the Coronavirus has come on the scene and everybody's at home?

Tim: It's night and day, I think. I like to use Nevada as a microcosm. Nevada initially was going to allow dispensaries to remain open for online pickup order submissions, but reversed that decision only a couple of hours or days later, I can't remember. I think it was a couple of hours later to require that all cannabis purchases be done via delivery.

We essentially saw a market that in Nevada does like 60 million in monthly revenue, go from an in-store and delivery model to a delivery only model overnight. You can imagine-- It was very chaotic. We saw basically an immediate 600% increase in our volume. We've been really-- No business can scale 600% overnight, it's just not feasible. I'm proud of our team and how rapidly they were able to scale and now we have scaled to meet that demand and have been scaled for the past couple of weeks, and are actually taking on new clients and more orders as we speak.

Matthew: I imagine there's a lot of people that have never done a delivery before, for whatever reason, they just like to go to a retail environment. They're navigating it like a Zoom meeting for the first time. A lot of these things are firsts. Has that caused any hiccups?

Tim: Yes, for sure. It's a new process that people have to get used to. Cannabis is a heavily regulated product. It is more complex to get a cannabis delivery than it is to get a food delivery. The expectation has been set by companies like Uber Eats and Postmates that when you place an online delivery, you get it 30 minutes later, and that's just not reality with cannabis.

Blackbird, I think, does a good job of trying to get that to be as close to reality as possible. Because of the demand, we actually moved from same day, two hour, on-demand delivery to next day, but we'll be reintroducing same day deliver probably as early as next week. I think, together with our partners, we have done everything we can to meet the needs of our customer base and their customer base.

Yes, it's a little bit-- People have to get used to it a little bit. They have to pay in cash, they have to show their ID, they have to sign state paperwork, but all in all, I think that the service has been very well received by the significantly expanded base of customers and patients. I would just say, we're all doing our best to meet people's needs during a very, very uncertain and scary time.

Matthew: Does the software make a suggested route? Like if you have 30 deliveries to do in a day, does it say, "Okay, these are all, it would make sense to go counterclockwise around the city", or something like that?

Tim: Yes, absolutely. Our in-house software, it manages not only the compliant movement of product but also our drivers and routes. Yes, absolutely does that.

Matthew: What are people ordering? Is it different than usual? What can you tell us about that?

Tim: I would say that the product mix is not different than-- Is not out of the norm, but the basket size is significantly larger. Our pre-COVID-19 basket size was about $120 and our current average basket size is $139. We're definitely seeing higher, larger, more expensive orders. Most like-- It's probably pretty reasonable, right? People are expecting that they may not be able to get a delivery or want a delivery for the next week or longer. They're ordering to be more efficient with their own time or money.

Matthew: Have you seen cannabis brands react and adapt to this? Are they thinking more like, people are nesting, how can I give them products that would allow them to feel comfortable? What are they thinking? Are they thinking out loud to you at all and giving you any feedback about their thoughts?

Tim: Yes. I think that's a really interesting question. I think that, so far, the most adaptation that I've seen from cannabis brands is on their marketing. Rather than picturing young people out at the beach, they may be marketing pictures of people at their homes. I haven't seen any brands pivot. Personally, I haven't seen any brands pivot completely to new products or comprehensive marketing strategies, but we've definitely seen some of those more nuanced adjustments to individual marketing efforts.

Matthew: You picked a great business to be in by the way. This is so valuable for people. I get that the fourth essential or fifth essential product is cannabis, and now, cannabis delivery. Since we're such in a chaotic time here, when you sit down at your desk every day, do you realize like, "Oh, yes, right, this is like emergency measures going on"? What reminds you as you sit down at your desk like, this is a unusual time?

Tim: Gosh. What we've always tried to do at Blackbird is really just support to the best of our abilities the partners that we work with and the customers that we work with within the cannabis space. One thing that is become very, very prevalent is this fear of uncertainty and what the future holds for cannabis operators. I think a lot of them have seen a dramatic decline in their business. Despite being determined an essential business, I think, nationwide and globally, people are watching their expenses as they deal with uncertainty around employment and their own financial future. While we saw pretty big initial increase- or while cannabis operator saw initial increase in demand, I think there has probably market-wide seen some decrease or fall off in purchasing habits.

That's what's really hitting me over the head every day, is the decisions that cannabis operators are having to make about their businesses in real time as it relates to the employees that they have, the states in which they operate. They are faced with very tough decisions, and because we work so closely with brands and retailers, we hear about those decisions and we talk to people as they're struggling to find their footing.

Matthew: If you could wave a magic wand and change one thing about the cannabis industry in California, what would it be?

Tim: I would change the cash component. It's been, probably- the biggest burden on our business is handling cash, and I think a huge burden for the state, honestly. If we could find some resolution or solution around banking, a widespread solution, I think that would greatly benefit the industry as a whole and specifically California just because of the number of operators and the big numbers that we're seeing in tax revenue and purchases.

Matthew: How do you see home delivery evolving over the next two to three years?

Tim: I think it follows market trends outside of cannabis. I mean, Target, for example, is predicting, I think, that 10% of their revenue in 2020 will come through e-commerce and 85% of that will be done through the last final delivery.

I think that as cannabis becomes more and more commonplace throughout the country, and as people get used to purchasing legal cannabis, they will probably start making their purchases much in the same way that they make other purchases. Rather than going into the retail dispensary and waiting in line with 20 to 50 other people, they'll purchase online and all walk-in for pickup or they'll place their orders for delivery just like they do with their groceries; they do through Amazon, they do for their food. I just think it starts to follow market trends and consumer behavior in a similar fashion outside of cannabis.

Matthew: So if you put on your crystal ball or you take a look through your crystal ball here, which no one has, so this is totally subjective wild guess, when do you think the first commercial drone delivery to a residence will be, west of the Mississippi, because, I think, east of Mississippi, those states are going to be way behind the west states. So, first commercial delivery, when do you think, five years?

Tim: [laughs] I think five years, and I think it'll be Amazon but I think what cannabis will be well behind that. For example, in the California State Regulations, it specifically disallows drone delivery. So I think [laughs] cannabis being a regulated product will probably be the last thing to be delivered by drone.

Matthew: Seeing as you're in Reno there and Tesla has a large presence, their big factory and offices there, how about an autonomous car delivery?

Tim: Yes, I think maybe that's closer than drones, maybe not, I'm not sure. I think the landscape in Reno probably makes that hard. It's not a city with a type of tight streets and grid layout, it's spread out and there's a lot of seasonality here with snow and rain and things of that nature. So, I don't foresee it happening anytime soon but I wouldn't take it completely off the radar.

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

Tim: Oh, that's interesting. Yes, there's been several, I think. I found, from a business perspective, good reads like the Steve Jobs' book and the book about Disney and its creators. So, definitely, there are a lot of great books that I like to read from a business perspective. Then from a personal perspective, I think, anything around philosophy is always really interesting, personally, for me and provides a lot of perspective, not only on business but life in general.

Matthew: Okay. Is there a market segment you consider very desirable for people looking to get into this up-and-coming industry, where tech meets cannabis, because, I feel there's a lot of people sitting at home right now that are like, "I want to invest in a skill set that I know will be useful that when I'm done, I will be marketable." I see, obviously, technology, software, logistics is big in cannabis. So, those two roads are coming together. Is there one tech skill you think in particular that you feel is in short supply that you would be interested in hearing from people that have those skills?

Tim: I think that probably where I have seen where there has definitely been a shortage in the past is really data driven analytics that relate to marketing. I think there are companies that are dipping their toe in there, companies like Philo, that they're interesting and up-and-coming. At a whole, the cannabis face has been less data-driven, at least initially, than probably other more robust and mature markets. I would say data analytics is where I would focus.

There are companies that are definitely doing good work, I don't mean to say that there aren't, but cannabis operators have been operating from a place of like, "Well, this worked for me last time, it should work for me this time", but they're anecdotal and gut decisions rather than data-driven decisions.

That's something that Blackbird has always looked to solve. There are a lot of cool, up-and-coming companies that are also looking to solve for some of those problems, but that's where my focus would be.

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

Tim: I think one thing that we have always- has been always part of our thesis at Blackbird is that software and operations together are more powerful than the two independently. That is something that has definitely been contested both internally and externally. Some even [unintelligible 00:26:49] of my team feel we're trying to do too much, but I very strongly believe that the two go hand in hand and that they create a large amount of benefit for the partners and customers that we serve by pairing the two.

I always liken it to Dominos, right? Dominos is a technology company that happens to make pizza, we are a technology company that happens to facilitate delivery and transportation for cannabis operators.

Matthew: Great insight there. Tim, in closing can you tell manufacturers, cultivators, retailers how they can reach out to Blackbird if they're interested in learning more about what you do?

Tim: Yes, absolutely. They can visit myblackbird.com and see all the things that Blackbird is today and will be, going forward.

Matthew: One more thing, your parent company, TILT, which we mentioned, is a publicly traded company. Is there a ticker symbol or anything people can look up if they're interested in that?

Tim: Yes, absolutely. It's a T-I-L-T or T-L-L-T-S, and they can find more information at tiltholdings.com.

Matthew: Great. Well, Tim, thanks so much for coming on the show and educating us. You're doing some great work out there in Nevada and California, and good luck.

Tim: Absolutely, [crosstalk]

Matthew: In this crisis crisis.

Tim: Yes, thank you so much for having me. Please stay safe and healthy.

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