Ep 344 – Midwest Cannabis Company Thrives In a Difficult Market

tim schuler detroit edible

We hear a lot about what’s going on in the west coast cannabis market, but what about the midwest? Here to fill us in is Tim Schuler of Cannalicious and Detroit Edible Company.

Learn more at:

http://www.cannaliciouslabs.com 

http://www.detroitediblecompany.com 

Key Takeaways:

[1:09] An inside look at Cannalicious and Detroit Edible Company, two of Michigan’s most successful cannabis businesses

[2:00] Tim’s background working for Anheuser Busch and how he got into the cannabis space

[3:42] How the cannabis market in Michigan has evolved over the last ten years

[8:35] How Tim and his team decide the best cannabis extracts to produce at Cannalicious

[11:23] The types of products sold at Detroit Edible Company, from gummies to brownies

[17:44] Detroit Edible’s latest partnership with Eaze and why the California-based delivery app is expanding into Michigan

[21:31] How Tim manages his inventory using LeafLink, cannabis’ largest wholesale management platform

[25:51] Where Tim sees the cannabis market in Michigan heading over the next 3-5 years

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 @cannainsider.com. That's C-A-N-N-A insider dot com. Now, here's your program.

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Matthew: We hear a lot about what is going on in the west coast cannabis market, but what about the midwest cannabis market. Here to tell us what business is like for a cannabis operator in Michigan is Tim Schuler of Detroit Edible Company and Cannalicious. Tim, welcome to CannaInsider.

Tim Schuler: Matt, thanks for having me today.

Matthew: Give us a sense of geography. Where are you sitting today?

Tim: Ann Arbor, Michigan. We call it the cannabis capital of Michigan. They've been doing that annual hash bash for more than 50 years. When adult use or recreational cannabis came to being a little over a year ago, the first provisioning centers were in Ann Arbor. Now, we have over 220 here in Michigan.

Matthew: What is Detroit Edible and Cannalicious on a high level?

Tim Schuler: Detroit Edible Company is a truly an Edible Company. We make everything from fudge to brownies, to chocolate bars, which we call Barracuda bars, and then we have honey peanut butter. Then we have variants of gummies as well. We just launched our Guppy gummies. That's a five to one THC to CBM line, and then Cannalicious it's in a different location.

It's actually in Pinconning, Michigan, which is up North here in Michigan and it's a pure extractor and concentrate company. We do everything from hydrocarbon to ethanol washing. Then we obviously make distillate after we do both of those processes.

Matthew: Tim, can you share a little bit about your background and journey and how you came to start these two companies and got in the cannabis space?

Tim: Well, do you have an hour? No, I'm kidding. [chuckles] It's an interesting story. I started my career through Anheuser-Busch and working for one of the largest brewers in the world. Learned sales, marketing, and distribution, and worked for them for more than 15 years. The last five of those years, I was a state sales director here in the state of Michigan.

It's a three tier system. A brewer, then a wholesaler and then a retailer. We moved about 48 million cases of beer in Michigan on an annual basis. That's where I got or cut my teeth, at least, in sales, marketing, and distribution. Then I launched into the supply chain here in Michigan about three years ago to start one of the first secure transport companies here. Along the way, I met my current partners and decided to get out of secure transport and jump into the processing game. We launched Cannalicious about two and a half years ago. Then Detroit Edible Company started about a year and a half ago. We're progressing well as a processors here in the State. Then we also have one retail location in Ann Arbor as well.

Matthew: You have two businesses then. You've got Cannalicious, the extraction concentrate company and Detroit Edibles Company.

Tim: That is correct.

Matthew: We hear a ton, as I mentioned in the intro, about California, Oregon, Colorado, but we just don't hear that much about Michigan. It's just not talked about that much in the bigger markets. Can you just orient us in terms of what the background or the Michigan markets like in the past and what it's like today?

Tim: Sure. A little over 10 years ago, there was what was created the caregiver network here in the State of Michigan, which made it legal for an individual to grow up to 12 plants for him, or herself and five other patients. That individual, the caregiver could supply those products, whether it be a flower, pre-rolls, tinctures, edibles whatever variant of cannabis that they could come up with.

Along the way, through some various loopholes, various dispensaries started popping up across the State, where caregivers could bring their overage to that dispensary, and then that dispensary would sell it to medical cardholders who didn't have a caregiver to go find. The medical cardholders grew to nearly 300,000 medical cardholders here in the State. It became a little unwieldy because caregivers were doing things a lot different across the State. The State enacted a new supply chain, which essentially meant growers, processors, a safety and compliance.

They added a different wrinkle that most states don't have, and that's a secure transporter, to move the product between the different entities. Then of course the provisioning centers. That was implemented in late 2018 when it was all medical. Then the state voted by a margin of 58 - 42 to go adult use, and that started last January. All of those various medical license had been applied for adult use. We completed our first year in Michigan at 2020 and did almost $1 billion of retail sales.

Matthew: Wow. Let's dig into your business a little bit. Cannalicious, the extraction and concentrates company, and then Detroit Edible Company where you have one retail store and you also have all the edibles. How does the revenue breakdown between these two companies?

Tim: It's about 53% on the Edible side and 47% on the concentrate side to various stores. It varies by month and it also varies by areas preference. We obviously distribute across the state and that includes the UP. There's over 325 different provisioning centers. We have to call on each of them and we deliver from each one of those two facilities on a daily basis.

Matthew: For people not familiar with the Midwest, the UP is the Upper Peninsula,

Tim: The Upper Peninsula it's connected to both Wisconsin and Minnesota. It's a vast amount of land. If you're in Detroit, you can get to Washington DC quicker than you can leave the state of Michigan, if you were to go all the way up to the UP across the Mackinac bridge and then all the way to a place called Ironwood, which is where coach Tom Izzo at Michigan State's from.

Matthew: What kind of extraction equipment do you use for your business? Just curious there.

Tim: We started with hydrocarbons. We extract with both a combination of propane and butane and we use XT70 made by ETS to do that. Then, just recently about eight, nine months ago, we purchased an ethanol skid. We do ethanol washing, and then we take that ethanol product or by-product, and then run it through an HPE thin film separator to create distillate. We're one of the largest producers of distillate in the state of Michigan and do it for ourselves as well as there's a few other growers that also have processing license, but don't have the ability to extract so we do some toll processing for them to get raw distillate for them.

Matthew: How do you arrive at what kind of extracts you want to make at Cannalicious.?

Tim: I tell you what, we take the Amazon model from 20 years ago with Jeff Bezos, and that is that you have to change and adapt to what the marketplace may want or need. We've always rooted ourselves with a product called Rick Simpson Oil. We make the most RSO in the State and make a few different varieties of RSO.

As we look at live resin or shatter darts, distillate carts, we try to round out a menu so that our customers are, if they need a concentrate, we're a one-stop shop for them. As our inventory, we try to keep anywhere from a four to six-week inventory amount on our shelves so that PCs know that they can come to us and rely on a consistent product that's always there for them. We just build our inventory based on those levels of different products that are on the concentrate side of the business.

Matthew: A lot of people are familiar with RSO or Rick Simpson Oil, particularly if they know someone that's a medical patient using cannabis oil, but can you just go into what Rick Simpson Oil is?

Tim: Sure. Rick Simpson Oil he's a Canadian, so he's right across the border from us here in Michigan. He discovered almost nearly 50 years ago that the cannabis plant has some ability to either stop or retard the growth of cancer cells in most peoples' bodies. He started an extraction process where you basically get to a crude, and then you eliminate the fats and lipids. The product itself is not a pretty-looking product, but we put it in a one gram syringe and recommend to people to put about a rice-sized droplet on a cracker or mix it with some peanut butter or whatever they want to do because it's an ingestible concentrate that helps relieve a lot of different ailments.

It's not just cancer. We have a lot of research that shows that it helps in the relief of pain. We've mixed it with some CBN, so you can take it and have a good effect to be able to sleep at night. We call it a Rest RSO. Then, we've also flavored it with some natural terpenes, both cherry, grape, and wine, like RSO. For those who haven't had it, it's not the most flavorable concentrate out there. We tried to make it a little more appeasing to the palate.

Matthew: That's great. I'm really happy to hear that you're making that for patients. Then, we've talked about how you've picked extracts and you're trying different things. Is it the same way then with the Edibles Company or are you just trying different things? How do you think about that?

Tim: We're Detroit Edible Company now, but we used to operate as Detroit Fudge Company and made the best fudge on the marketplace. Since we're going in a direction of having multiple different variants of edibles, we changed it to Detroit Edible Company. We've always rooted ourselves in having great fudge, great brownies that are nice and moist for the consumer.

A fudge only has a lifespan of about three months of shelf life after it leaves our facility. Brownies have six months. Then, chocolate bars, honey, peanut butter, guppies, they all have 12 months. We have to do a nice job of working with our retailers to not over order and make sure that they have plenty on hand, but not too many because the last thing we want is any product going out of date.

Matthew: Balancing act there.

Tim: It is a balancing act.

Matthew: What does the illegal market for cannabis look like in Michigan or unregulated, some say? How would you describe it?

Tim: Unfortunately, too big. The caregiver model lasted here for eight or nine years, and there's a lot of caregivers that grow a lot of great product out there. The way the rules are written, caregivers can still exist. They can grow up to 72 plants. Because we're in a COVID situation, nobody's really monitoring how many plants that these individuals are actually growing. Then, obviously, their distribution chain is such that they have the ability to penetrate quite heavily. Whether it's 30%, 40%, or even 50% of the actual market, there's really no way to tell, but we definitely know that it exists out there because many of our retailers share with us what their customers are coming in and saying that they can buy from various sources. At one point, there was 40,000 caregivers here in Michigan. It's now down to registered 30,000. The caregiver network has the ability to grow up to 2.1 million plants. The licensed market only has the ability to grow about 700,000.

Matthew: Wow. I'm interested in how you brand with the edibles. You seem to have chosen a fish theme. Talk about that a little bit.

Tim: Sure. Michigan is surrounded by four of the five Great Lakes and we pride ourselves on being a great state to be in enjoying water. Barracuda is our chocolate bar. It comes in two different levels, 100 milligrams for adult use and 200 milligrams for medical use. We want to pay attention to the microdosing market out there because we believe there's a lot of canna-curious, that if they take too much at one point, like any other consumer product good, if somebody has a bad experience with that product, you may never get them to try it again.

We brought out a 10-milligram Minnow bar, which Minnow, obviously is a lot smaller than a Barracuda and allows people to microdose 10 milligrams. It comes in four distinct rectangles that they can break off so they can get it down to 2.5 milligrams per dosing, which we think is a great thing for the consumers because we recommend, "Start slow." Everybody has a different tolerance. Everybody has a different metabolism. We want people to have a great experience with our products.

Then, we've just launched our gummy line. Staying with that fish theme, we launched our gummies to be called Guppies, close to a gummy-sounding name. We found some white space in terms of what we believe is a great seller in California, Oregon, Washington, and that is a THC to CBN combination. There's so many of those canna-curious or myself, I'm a 54-year-old male that has problems sleeping at night, I can take one of those 45 minutes to an hour, and I'll sleep all night and fall asleep very easily.

It's better than taking a melatonin or Diazepam or any other sleep aid, in my opinion.

Matthew: Just take one of your gummies?

Tim: Exactly.

Matthew: How many milligrams is your magic number?

Tim: I stay with 10. I don't need to go much further than that to fall asleep and have a very restful night of sleeping.

Matthew: Wow. With a 100-milligram gram bar-- I know around 420, sometimes you see a 420-milligram chocolate bar. How do you orient someone that might be new to cannabis and they're going to take this, and like, "Oh, I eat the whole thing." Is there something on there that says like, "Hey, you might only want to take a nibble of this to start out or you're going to blast off to another planet."?

Tim: [laughs] That's one of the things that the MRA, which is the Marijuana Regulatory Authority has recommended and made sure that everybody follows, and that is a dosing amount on each package. For the adult user, the most amount of milligrams we could put into a chocolate bar is 100. Then, each serving size can be no more than 10. We recommend to people that, if you need an entire chocolate bar, that's going to be the entire bar and it's 100 milligrams. All of our bars have lines, a mould that it comes out of, so there's 20 triangles of five milligrams each. If they took half the bar, they would know they'd be getting 50 milligrams.

Matthew: You're going to start partnering with Eaze, the delivery app for home delivery. Can you talk about that a little bit?

Tim: Sure. We're really excited about Eaze. Eaze is obviously the leading home delivery company in California, potentially the largest retailer now in all of California through their home delivery depots. They made a concerted effort to want to expand out of California and they saw what was happening in Michigan in terms of $1 billion of retail sales. They've entered the market with us and we're going to launch next week Thursday, I believe it is, April 1st to be the first depot delivering out of about a 45-mile radius of Ann Arbor.

We believe that home delivery is going to be here to stay. COVID's obviously accelerated that with DoorDash or Uber Eats or any other restaurant or any other delivery service that's out there. What better way to allow people to bring things straight to their house to try. Cannabis and pizza has always been two of those things that have been home delivered. We believe Eaze is going to knock it out of the park here.

Matthew: How many adults in Michigan are not cardholders? I'm trying to get a sense of what the opportunity or the blue sky is for you going forward.

Tim: The state of Michigan is about 10 million people, last census, which is a little over 10 million. There's 7 million of those are over 21, and there's 300,000 cardholders in the State of Michigan. Now, you can be a cardholder and still be under 21, but most are over 21. The blue sky of adult use, we believe is somewhere between 6.7 and 6.8 million people. Another thing that's great for Michigan is Michigan is a tourism state.

Like I said earlier, it's surrounded by four of the Great Lakes. It has a number of different lakes. Tourism is one of the major industries here in Michigan and we lost out on that all of last summer with COVID. We believe there's still another level of consumption that will go on once people are vaccinated, COVID comes back down and people are now more apt to travel. Our surroundings state Indiana has zero cannabis sales. Ohio has medical only and a very difficult one at that.

Illinois is adult-use and medical but again their supply chain is not built out. Then Wisconsin is not either cannabis-friendly. When you look at those five states surrounding us, that's about 46 million people that are within a five to six-hour drive of the State of Michigan. We think Blue Sky Michigan has a great opportunity yet.

Matthew: For international listeners or people who have just never been to the mid-West, it's hard to understand the vastness of how big the Great Lakes are. They're just absolutely enormous. I brought a friend over from Germany once and he thought it was the ocean. I said, "I thought you guys were supposed to be good at geography, better than us." He goes, "You're in the middle of the country here." It's so big. You can't see the other side. I think it's a wonder of the world actually, the Great Lakes. They're just so big.

Tim: It is. You can stand on pretty much any shoreline, whether it's up in Port Huron, up north on Lake Superior, or on the left side of the State of Michigan. On a rough day, you would think you're on the shores of both the Pacific or Atlantic Ocean.

Matthew: One thing in talking with you that I was really interested in is that you use the B2B platform called LeafLink that's in the cannabis space. You use it in some interesting ways. Can you talk about that?

Tim: Yes. LeafLink, when we started this journey, we had a lot of inventory. How do you manage inventory and make sure that sales were actually not stepping on one another in terms of the amount of products that they have or selling on a basis. We went looking for one. I had used Salesforce in the past and Salesforce is a great tool, cloud-based but extremely expensive. There's another one out there called Sugar, it's good but again pricey.

I was introduced to LeafLink as a CRM or a consumer relationship marketing tool. We found it to be outstanding from a control of inventory. PCs can go on at no charge. Shop your menu as you keep it updated. We put up great pictures, test results, case quantities, all of those important things that a customer would need, and they can click and order. As we learned and dealt with LeafLink, they're a great company. We have a great relationship with probably more than half of their 100 employees now.

They wanted to bring to us some various tools. They have myBI which is my My Business Insight so that we can have a nice deep dive into our own analytics of when people are ordering, what are they pairing with each order, things like that. Then they also have another platform called MarketScape. Everyone that's on the LeafLink platform here in Michigan, we can now run reports to say, "Okay. How much RSO are we selling compared to the market? Where are our price points at? Where are other competition basically?" That helped us from there.

The other area that we've always wanted some help in is cannabis is a cash business. They brought out LeafLink Financials. We're their launch partner here in Michigan for it. Essentially, what it does is it provides to the retailer not have to pay on delivery it's net 30 terms and we don't have to deal in cash. That's really important to us because Matt, I don't know if you've every tried to count $70,000 at one time. It's dirty, it takes long, and there's a lot of risk. 

Matthew: I can barely count my fingers, Tim.

Tim: Exactly. If we can get out of that, we felt we'd have more time and more resources to put in other directions. We're a big believer in that. Now, we're in about 86% of all the provisioning centers in the State of Michigan and I want to say about 80% of those use LeafLink Financial, which makes it a whole lot easier on our comptroller to be able to monitor cash flow as well as understand he doesn't have to get his hands dirty or worry about safety.

The third platform that they've instituted is what's called LeafLink Logistics. Secure transport is one of the supply chain that we have to use here in the State of Michigan. What they've done is they've simplified it down to where we can click on a delivery, put in the date, and they arrange all of the logistics to get it from our facility to a PC. Why I say PC, it's not politically correct, it's provisioning center.

We've again, found them to be great partners. They're very knowledgeable about the industry itself. They helped people understand how to use the power of terms to be able to buy, sell, and then be able to buy some more products through that 30 days we've been running out. They've been a great help to our industry here in Michigan.

Matthew: Tim, how do you see the cannabis market changing in Michigan in the next three to five years?

Tim: Right now, there's 1,400 and fifty-something different cities and townships in Michigan. Only 400 of those have opted in to allow retail sales. There's big hot pockets of where retailers are centered whether it's Bay City, or Lansing, or Ann Arbor, or Kalamazoo, or Detroit, all the way up to Traverse City, things like that. We believe that as more cities understand the value of what cannabis can bring to the market and that it brings reputable people jobs and tax revenue, that we'll see as many liquor stores in the State of Michigan as we'll see cannabis stores. We as a manufacturer have to be ready for that and we have to work with companies as they grow. There's not going to be urban centers with a hundred stores, there's going to be a store in every different municipality. We believe there's a wide-open growth there.

Another level of adult use that's out there is called consumption lounges. We believe that that's another [unintelligible [00:27:11] for people to instead of going to a club and dancing and buying alcohol, they are going to be able to go and enjoy cannabis, which again would provide another opportunity whether that's through an edible line or a concentrate line for us.

Matthew: Tim, I'd like to ask you a few personal development questions to help listeners get a better sense of who you are. 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: Sure. I do love to read. Thomas Edison's biography is incredible. The preamble talks about how the time he was 18 to the time he died, he averaged filing a patent every six days. [chuckles] It's just incredible. He just didn't invent the light bulb. He did so much with plants. He figured out how to make a synthetic rubber for the tire manufacturers. He was very influential. Steve Job's autobiography was also another all-encompassing how do you control where you're going in life.

Then my very first autobiography I ever read was Lee Iacocca. Never knew it at the time that I'd be living in Detroit but what he did with the Ford Mustang and then latter-day with running Chrysler, the ability to lead and to adapt and change every day is so important for personal, and obviously, a company's development. You need to have a vision of where you want to go and how to get there but also, the fortitude to change when something is not going the way you want it to.

Matthew: What do you think the most interesting thing going on in your field is besides what you're doing with Cannalicious in Detroit Edible Company?

Tim: I think it's the marketing of the cannabis itself. Obviously, every one of us believes we have some idea of what and how to market things. I believe, cannabis, when you walk into a store, you're now competing with Heinz, and Clorox, and every other food product out there that's a consumer product good. Our packaging has to be spot on, it has to be consistent, it has to represent and speak to the consumer.

If individuals are wanting to find different niches of where to go, it's not always how do I get in and run a grow facility? How do I process, but how do I market, handle, or do public relations around the industry itself? Much of it is currently ignored. We've talked to a couple of different agencies here that don't even want to deal with cannabis right now because they're afraid they're going to upset other clients. The individuals that jump on and take this from--

I equate it similar to prohibition, that people are hesitant to do it to where it's going to be mainstream is going to really help us grow as an industry. Then hopefully, as our company, rises along with the tide that comes with that.

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

Tim: In this particular industry, people disagree with me on moving to what I consider the 95s or the 45s. Most people that sold cannabis in the past sold it as zeros, so $15 grams, or $40 eighths or candy bar for $20. If we're going to truly elevate us, we need to be more aligned with other consumer product goods and we need to price it at $14.95 $13.45 and be able to take price increases as we go because right now, the supply and demand makes pricing fluctuate so greatly, that the consumer gets a little confused at, one day I can buy a gram of live resin for $75, and the next day, it's $35. That doesn't make sense to the consumer.

Matthew: Tim, as we close, can you tell listeners how they can find your business and connect with you, the businesses?

Tim: Yes, businesses. Eaze obviously, if you're going to do a home delivery, and you're going to be anywhere in the lower half of Michigan, which is where they're going to launch first, go to the Eaze platform, which is www.eaze.com. Secondly, we're big believers in Leafly. A lot of retailers push people toward WeedMaps and it sounds WeedMaps. Oh, okay. How do I find my weed on a map?

Leafly does a much better job of educating the consumer, providing the exact same information, or geo-targeting to the location where they're at to find the store that has their products that they're interested in. We're listed on both Leafly and Eaze to be able to help people find where their location. Then, obviously, we have our own website, which you can obviously go on it and it'll show you where our retailers are as well as ask us where to find the closest retailer for them.

Matthew: Well, Tim, thanks so much for coming on the show. We really appreciate it and good luck surviving the winter here as we turn into spring, it shows you should be getting happier every day now.

Tim: Spring has sprung. It was 70 degrees here yesterday in Michigan.

Matthew: Great.

Tim: When it gets over that number, people start to move around a lot more.

Matthew: [laughs] Great. Thanks, Tim.

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Tim: Thanks a lot for the interview, Matt.

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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. Look for another CannaInsider episode soon. Take care. Bye-bye.

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