Cannacurio Podcast Episode 57 with Jacques Santucci of Opus Consulting

On this Cannacurio episode, Ed and Jacques Santucci of Opus Consulting discuss his years of leadership experience that eventually led him into the cannabis space, his success in working with Indigenous American tribes, the current state of the market, and what trends we should be looking out for, and so much more!

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Cannacurio Podcast Episode 57 Transcript

Ed Keating

Welcome to the Cannacurio Podcast powered by Cannabiz Media. I'm your host, Ed Keating. And on today's show, we're joined by Jacques Santucci, the President of Opus Consulting. Jacques, welcome to the pod.


Jacques Santucci

Thank you, Ed. Thanks for having me.


Ed Keating

Absolutely. Absolutely. Well, it's, it's good to do this. We've known each other for years. I can't think how many times we've run into each other at trade shows in the last, at least for me, like 8/9 years. It's, it's been many times in many cities.


Jacques Santucci

Yes, for sure.

Yeah, you and I, we, we meet most of the time in conferences around the country.


Ed Keating

Exactly, well-traveled, and speaking of well-traveled, you had such an interesting career that I wanted to dig into. You started at Ernest and Young. You've been an early Maine license holder. You've been a software CEO and now you're running a consulting company. So how do we get here? Like, and how did you land in cannabis after sort of all those interesting things and I skipped over, you know, half the places you landed at.


Jacques Santucci

Yeah, for sure. So I'm originally from France. I moved to the US almost 25 years ago. Now, when the French-English company bought a company in the US. Not thinking I would stay just, you know, one of those couple of years move, I started my career after college at Ernst and Young, worked at Universal Picture in France as a controller and then part of a team that was buying rights on the video,,it's gonna age us a little bit, on the DVD side. Anyway moved to the US 20, almost 25, years ago, and then I started consulting almost 15 years ago now. I was doing some business consulting before, and then I went on my own in 2009. And so that's how I ended up, you know working in that professional service realm, business strategy, and all the related business management things. I live in Maine, and Maine is the first state who passed the medical marijuana laws. First in 1999, but not much really was implemented, but in 2009, for sure there was a referendum and then a license process in 2010. And I was part of a team that applied to get one of the eight licenses in 2010, we got four licenses and then we started a company called Wellness Connection of Maine. Four stores, we ended up building a grow site production, site, extraction, packaging, 45,000 square feet. And then we, you know, first opened in late 2011, and most of the stores opened in the spring 2012. And then we continued to grow the company.


Ed Keating

So, so, so what was that like? I mean with 88 stores in the state and you had four of them, you know, what was it like? You know, having that much market power if that's the right word.


Jacques Santucci

Yeah. Well, yes, market power, I guess. But, you know, you gotta think though that the market was more or less there, right? With the illicit market at the time two, we were the only one up on the northeast and there was no benchmark for us and I didn't come from the activist side of the cannabis industry. So I was not aware too much about what was happening then. So I actually, you know, traveled and educated myself, and then when we started Wellness, and then we raised the capital, we made an effort to apply business basics and then have a good business plan. And, and we, you know, looked at, you know, all the benchmark - I have to admit though, if I look back and I did a few years ago when I look back at, at the, at our plans from 2010, it was not exactly right. But, you know, I didn't know, nobody knew actually. Right. And we, we had a lot of people telling us and, but at least he gave us a good guidelines and then every month, every quarter, every year, we realigned the strategy. We also, it was interesting from a customer standpoint, people were coming to us to find medical cannabis and I was at the store and where our small headquarter was at the time every morning, right? 8:30/9:00 o'clock, some people were waiting outside and they got to know me and they were telling me their stories and I was convinced before, but after talking to those customers and seeing what we were bringing to them from the medical standpoint, it was more of a, you know, it became really a passion, right? There was the business side really making it, right was very important.


Ed Keating

So at that time, and probably even to now, I think there's been an enormous collection of caregivers in the state and some of them went from sort of growing it for others to essentially running big stores, kind of unlicensed, like thousands of them. How did you navigate as you know, one of those early license holders? Because it's sort of like a different set of rules for each group from what I've read.


Jacques Santucci

Yeah. No, that's definitely the case. And from the license perspective that you have, it's definitely the case from our business standpoint, I didn't really pay attention to it because, you know, Maine is a big state. Nobody else in New England had stores at the time. What really was important for us was, quality of product, good, good staff, good experience, good stores and, and be a model which we ended up being, I think, you know, the, the, the investment pool that we had were all interested in our approach to this business, but really was very important, was doing it right. And so, you know, I don't think I'll get the credit but, you know, I put on my suit and tie and then went to talk to bankers to explain to them at the time. This is what's happening, those are the rules and you know, talk to credit unions so they could open their door to us. Same for insurance. when, you know, there's a lot of myth in the industry. But in 2011, when we late 2011, when we opened the store, we had health insurance in place, we had 41 K in place, we had PTO everything. And because to me it wasn't, it was, it is a business, it has to be done properly. The staff has to be that will,, you know, treated correctly saying from, from an administrative standpoint, we invested in our accounting system and, and, and how we were tracking the inventory. We didn't have Metric at the time. Right. And there was no, actually even in Maine, medical still doesn't have Metric and there's no testing. But and then, you know, from the customer standpoint, you know, we had a,, we invested in the point of sales. I, at the time everybody was using MJ freeway and I looked at it and was like, no, that doesn't, that doesn't cut it for us. So we, we actually went outside of the cannabis industry and found a point of sale system that would, could give us enough data. And then we went from there.


Ed Keating

Wow. So, so it's interesting. So, you know, you, you have this early sort of corporate background, you, you have consulting and you, you land in this cannabis space, and with all that on-the-ground experience is that what steered the direction of Opus to be what I'm guessing more focused on the cannabis industry now?


Jacques Santucci

Yeah, so Opus when, when I started was like I mentioned earlier, business management turnaround of companies, I mean, 2008, 2011, right? There was a lot of struggling companies. So turn around helping people with performance management, interim management. Then got focused on this project by 2013, and some of our partners here started to be interested in other states. At the time Massachusetts was starting to open, Rhode Island was already open. Connecticut was coming online and our partners were involved in all those states. So started to develop a practice on licensing from 2013 to, I mean, even now we still do licenses in New York and New Jersey. But at the time, you know, if you remember, right, licensing was, you know, that much documents, it was weeks of work. And so we've done licenses in, in all the New England States. And then we actually started to do licenses outside of New England. We did licenses in Hawaii, Ohio and, and every state that were opening and that's really what got us out of, got Opus, on the focus on licensing. Then, you know, same, same groups were asking us for business strategy and modeling and we had the data, we had the knowledge, we knew the ins and outs, and then led to people asking us to stop companies for them. you know, kind of a being the staff before we hire the staff sops branding.


Ed Keating

And then, and then real quick, now, did you guys stand apart from others in the industry? Who came in with, let's say more of an advocacy background from a consultant standpoint or more just construction, let's say, because I know a lot of people from the construction industry sort of moved in that way and it seems like you were coming in with a much more holistic sort of business first approach. Is that fair to say?


Jacques Santucci

Yes. Yeah. So, you know, cannabis industry, we, we built to your example, right, the construction part, we've been construction manager or owner rep, right for growth side. So buying equipment, so retail stores and things like this, but that, you know, for us, it's more, you're right in a holistic approach, more of a global approach if you don't have, you know, if you don't have the right talent and you cannot control the different pieces of that project, then you're going to miss something. So sometimes we end up, you know, working with other people on those on a particular part of the project. But our approach is more on the management level and then going down to the operation and bringing the talent if we need to.


Ed Keating

Yeah. So, one interesting area that we've talked a lot about offline, and I studied in a past role in sort of human resource compliance is a market segment that, that you've had some success in which is working with tribes, and that has just a whole different set of rules about it, what they can do and also from the like HR standpoint who can work in there the hours they get. So, so tell us what that's been like because that's a pretty unique market segment with these, you know, 580-some sovereign nations that could all run cannabis operations.


Jacques Santucci

Yeah. And I think it's, it's a good continuity with the way we approach business and approach our client. We're really a niche boutique, you know, a consulting firm. And outside of cannabis, you know, we started to work with a tribe here in Maine and they became good partners of ours and they asked us to help them with various projects outside of cannabis they were interested in cannabis, but just, you know, Maine is a very particular market for tribes. But, we learn what are the challenges, what are their, their options and opportunities. And that led us to talk to other tribes with their help and then with some of their partners too and to develop a pro I guess offering right, a service offering to tribes where we help them with the feasibility study. And if they decide we can be the business developer, in a sense, just like a real estate business developer where we help them start the business. Tribes have very specific opportunities with the sovereignty, not every state and not every tribe tribes has it, but they have they can have sovereignty, and they can create their own rules. They have access to land or locations that others don't have. They may have access to capital that others don't have or at least options. And but they don't know most of the time about how to create the industry or create the, the, the, the market, create the company. So some bigger cannabis companies approach them and they're really looking at them as a, as a landlord, we approach them as a partner where we don't want to own the business, we just, you know, we are just compensated based on our effort and our work. So we can bring all our expertise, all our partners, all our knowledge and then work with them to create a company that can be sustainable without us after, you know, 1-2-3 years, whatever the project is.


Ed Keating

Right. Huh. Well, interesting because I think it was, wasn't it in New York where one of those big MSOs sort of walked away from a tribal relationship recently?


Jacques Santucci

Yeah. Yeah.Tilt. Tilt and the Shinnecock Nation had a fallout. I don't know about the details. So I can't really talk about it, but that would be a good example. Yes.


Ed Keating

Yeah. Yeah. And, well, and there's a difference of being a partner versus not now, one thing that's always intrigued me about the tribes and, and, you know, as we look at licenses and states or actually when the regulations get passed, we used to joke that the first people that ran in there were the testing lab, some franchise would be like, I'm gonna test in the state. But now what we see is it's often the tribes who are first in line to say we're gonna open a store tomorrow and they do it. So, like in New York, Minnesota, I think one of the Carolinas, it just happens really fast and, you know, is that I’m assuming, it's because they don't have to really contend with all the rules. They've already got all those things that you said you have access to capital, land…


Jacques Santucci

I would not say it like this. I would not say like this because all the tribes I've been working with, they're not trying to cut corners, right? So, for example, we work with the Seneca nation, upstate New York and we did a feasibility study for them and we showed them, what is the industry? What is the path, right? How can you do it? They made, they made their own decision. But they don't have to be within the New York program. With that said they hired regulators, they hired lawyers to create a regulation that really is a good example of what a small nation, right? The tribe is a small nation. Well, small nation can implement. And so the store that we opened and then we're building a facility for them now, a production facility is, is following the, the rules that any of the businesses should follow. Right. So the store has everything else. But they don't have to wait for the license from New York and they don't have to, you know, go through the craziness of the bureaucracy of the, of the New York program.


Ed Keating

Well, and that's a good thing. So, speaking of programs and bureaucracy and, and pulling back a little bit from, from the tribal side of things, you know, as, as we have looked at states since we started tracking licenses, you know, one of the clearest dichotomies is those states that are limited license versus those that are free-for-all. There aren't many free-for-alls, but some, you know, still exist out there. I'm curious with your perspective as somebody who ran a licensed business and who's consulted with many, you know, how do you see those two markets shaping up? Especially as the industry matures? I mean, you talked about Maine starting in 1999. That was a long time ago. So, you know, how does this play out in terms of the different kinds of markets we can expect?


Ed Keating

Yeah, even 2009, when really the market started here or, or even, you know, Massachusetts. Massachusetts is almost, what, 10 years now, right? I think it's, was in 2014 so those markets are starting really to mature. So, from a, from a philosophical standpoint, you know, it seems ok, you know, if there's an unlimited license but from a business standpoint, it feels like it, it's difficult. The, industry is, it's a hard industry, right? A lot of people thought it was very easy. It is, it is hard. You have so many things against you from capital to taxes, from talent to, you know, regulations. If on top of that, you have to deal with a crazy competition, from a regulatory standpoint. And on top of that, from a crazy competition from the illicit market that it's like, it's like a multidimensional always moving market. It feels like, to me, that these states will be much better to have limited licenses that they expand over time or towns, right? Because cities are doing the same thing instead of having 10 licenses in a small city. How about we just start with two and then, and then we add two more, two years later or a year later and then it gives a chance to every business to get on good footing and then grow because at the end when there's too much competition, it doesn't help the industry for sure. It doesn't help the business and doesn't help the employees, it doesn't help the customers and, and then at the end, the town is then viewed as, as one of those cannabis towns where nothing is happening. So I, I think there's something to say about let's limit, and let’s and let's look at what's needed. And I have the same, same conversation. I can't have the same conversation about vertically integrated versus non-vertically integrated. Yeah, 10 years ago, every state wanted to have vertically integrated and it's a very difficult business. You know, you go from, from a cultivator, a scientist for the extraction, packaging, logistics, then retail, I mean, it's a lot of talent for starters.


Ed Keating

Yeah, very different skill sets, and is going to be good at all of them.


Jacques Santucci

No, and you can't, you can’t. So if you put on top of that, all the other issues of access to capital and taxes, it's a lot of layers of difficulty for a really new industry.


Ed Keating

Well, like, you know, I, I always looked at it in the States of New York and Florida when there are medical programs only. And Florida still is. If you're the regulator, it's really easy to only have 10 registered organizations in New York. It's just 10 phone calls. It's same thing down in Florida where they have like, you know, 18 or something. But originally, you know, 9 or 15, it's a lot easier to manage your industry when you keep it so constrained. But is it really best for the market? Probably not. I mean, it's, it's a lot of government intervention there, you know, look at Connecticut in terms of, you know, at least how they used to do their liquor stores. It was supposed to be roughly population-based, like you don't want to have 60 stores in old town. It should be based on, you know, how many 100,000 or something like that. So, it's not like we don't see that elsewhere or in Arizona where I think they still peg the number of dispensaries to the number of pharmacies in the state and it's like a 1-to-10 relationship or something like that. So, yeah, there's certainly public policy out there that supports, you know, what, what you just recommended.


Jacques Santucci

Yeah. And on top of that, we're going to keep in mind that the market is still growing with new customers that never been to a store before because I think that the people have been buying, you know, cannabis since high school, they are still going to come and then they have their place. The market is not growing with that. I don't think that the market is growing with those buyers. It's growing with new buyers, new type of buyers, new types of products, you know, new types of drinks, vapes, whatever it is. It's hard to invest in new products, new experiences for the store, new payment solutions, new everything to, to explain to the customers, you know, this is not what you think it is, it is, it is beneficial to you and, and, and at the same time, you have to compete with, you know, 25 other stores, 40 other stores, not even counting the illicit market. It, I mean, no surprise that some, some companies right now are…


Ed Keating

And the hemp market too.


Jacques Santucci

Yes!


Ed Keating

You know, I mean, those cannabinoids too. So a lot of this, what you talked about has led to, you know, some of the challenges that we're in now as an industry. You know, we've talked a lot about this and I'm curious, given your one-to-many relationship with people out in the industry, you know, what challenges are your clients contending with? I mean, you've outlined a couple of them already there, just all this vast challenge, anything else out there that's really making it hard for them to succeed.

Jacques Santucci

Well, I think so everybody's talking this year and I think next year is gonna be even worse that, you know, that the, the cannabis industry is struggling, the cannabis market is still growing. And that means there's more people buying new products at new locations and in general, the pie is growing. What's happening is that the companies I think are now catching up with the reality of what the business should have been and, and, and when, you know, companies started in Massachusetts three years ago, starting their cultivation, I'm using Massachusetts as an example. Looking at the market and thinking that it's going to stay at $4000/lb. for a long time and not looking at their cost of goods. Most cannabis companies, for example, have no idea what the cost of goods are. I mean, they may as, as a total every month but not by the items. Well, I think what's happening now is that's where it's struggling because the prices are coming down. New buyers are coming, they're asking for better products at a lower price. And I don't think the industries, a lot of companies have been ready to end all this that said, I know some companies that are very well positioned to continue their growth. They thought about it, they’ve been ready and they're going to continue to grow and we may see, you know, some, some companies that didn't, you know, prepare for it and they don't have the talent or they don't have the right business approach or they don't have the right data. They're not talking to you to know about what's happening with licenses, and they're going to struggle.


Ed Keating

So looking at another specific part of the cannabis ecosystem is, you know, sort of the ancillary space and we have a lot of customers who are in the software space. You know, they use us because they want to know where the licenses are, where the licenses are, and how things have changed. They want to contact people. So I'm with all the M&A that's happened there. I'm curious, you know, is it suffering from the same oversupply that we've seen in other parts of the industry where there's just too many providers all trying to make it big. And you know, what did you see also when you were running Streama which was, you know, in that space?

Jacques Santucci

Yeah. No, I was in that space and yeah, it's, you know, the, the, you know, one of, one of the things I've seen is that there was not enough technology for cost accounting and then getting data all in the same platforms to make good decisions. And what I'm finding out now is that I think the industry was not ready to pay for it. And I think that some of those software companies went probably too fast, too expensive, thinking that the clients will pay, and will be there forever. And what I'm finding out now, I think what's happening is that everybody's getting their, you know, shrinking their budgets and then reallocating their, their budgets to very specific parts of their PNL. And then at the end, some of the software, might not have been ready to have their, you know, recurring business or recurring, you know, revenue, decrease.


Ed Keating

Yeah. Yeah.


Jacques Santucci

But there's, there's some good technology out there, that are, you know, I'm hoping you're going to continue and to survive, I think in the next couple of years going to be pretty rocky. But hopefully, you know, I know this, I mean, you know, them too, there's, there's a few Softwares with the CEO and knows exactly what's happening. They, on, they, on the, on the ground, they're talking to people, they're evolving and I think those would be the winner. And then if you look back actually, the, the POS’ that everybody was using 10 years ago, you know, they're not doing that good.


Ed Keating

Not much money in that…


Jacques Santucci

Right. Yeah. So now, even Metric, even Metric, I read, I think it was last week. Even Metric just realized that their client is not the government but their client or the users. I'm like, huh? That's innovative. I never thought about this one. And, and so now they're trying to listen to what people that are using it every day wants to say, wants to know, you know, I think it's a good move and, and, for example, yeah.


Ed Keating

Yeah, I was, I was at the PBC conference a few weeks ago in DC and the CEO of Metric was there, and he shared that he spends at least a week on the phone being a customer service agent for the company. And they get, a ridiculous number of phone calls coming in because people don't call the state, they call Metric and, and they, they are the front line for so much. So, I, I think that that kind of listening tour that he's been on has been very illuminating and, you know, I applaud them for doing that because it, it's how to find out, you know, some of the stuff you just described and in your experience where, you know, you guys have been doing that and operators have been doing that as well.


Jacques Santucci

Yeah. Yeah. And, and, and you know, the, the users have been the one paying those Softwares, right? Even if it's through the government and the users are the ones that are entering the data. So sure it is for compliance and it's got to go through the government, whatever it is. But, really, you know, taking care of, the final user is where the success of the software, the platform is gonna be.


Ed Keating

Yeah. Yeah. No, I agree. I agree. Now we already touched on sort of like, where's the industry and, and you think that there's definitely still some time for things to shake out. I've just heard that, you know, once again, there's been a bumper crop of cannabis which will depress price is probably even more. But, you know, looking forward, you know, I always like to ask guests on the podcast sort of what trends that we should be looking out for, and this isn't really a trend so much as an impact. But do you think the federal government is gonna get us safe, safer, safest banking or do you think that rescheduling, you know, may occur to, you know, from, from 1 to 3 in terms of, you know, how cannabis is treated?


Jacques Santucci

I, you know, it feels like I've been, I've been asked the questions for, what, 6/7 years now, and then we talk about it on a regular basis. So I would not bet on it. I am not even sure that the de-scheduling is really the panacea that people think it is. It, might create, it might open some open doors that probably are better, closed. I think, I think the Safer Act, but let's put it this way, resolving the banking, access to banking, and resolving the taxes is, I think, the number one and two things that we have to resolve. This is a young industry, a lot of companies only started in the past couple of years. They're very fragile. Some may have been longer than this, but they still are not that strong and the things that really slow them down is being able to have good banking, potentially even lending if they need to line of credit. And then on the other side, the, the taxes, right, it, it, it costs so much money, you know, to administrate the 280E and find the right strategy. I don't want to give any ideas here to, but, you know, at the end, it might be almost easier to get rid of 280E and just put a small tax extra tax on every cannabis companies that at least, you know, maybe give a bit more money or something. But, you know, at least let's be everybody on the same, on the same platform, right? And that thing is gonna help us better companies better, better benefits to the, to the employees, better access to R&D, better products. And then at the end, the customer and the, and, and the tax office or agencies will, will benefit from it.


Ed Keating

Got it. No, I think you're absolutely right. And, you know, it's gonna be challenging to see how this industry breaks through and, you know, if that 280E tax relief comes through, I think it was truly just tried to call back some of their tax payments, you know, saying that, you know, they're sort of owed this if, if I read it correctly. So, you know, sort of going back to your, you know, good operations, record keeping, etcetera. They're just trying to run a good business. It's gonna generate a lot of cash perhaps.


Jacques Santucci

And, and running, running a business just based on the cash balance is not a good strategy. So I'm hoping that, you know, what's happening in, in a few states and there's good, again, there's good companies out there and good examples, right? It's going to show that people are going to invest in their talent, in their accounting systems, in their data, so they can make the right decisions, they can be ahead of the game and that's, that's going to benefit the entire industry.


Ed Keating

And in terms of looking forward to where the industry goes. I mean, besides the Doom and Gloom, you've talked about how there's going to be a change in customer acquisition and, is that driven based on the products that will be offered or how that customer is going to change as we all get used to having cannabis stores across the country like we have liquor stores. Yeah. How, how do you see that playing out? Because that was an interesting trend you highlighted,


Jacques Santucci

How about coffee shops, right? We all drive around and it feels like there are more coffee shops than there are gas stations. And so, and then we can all get a coffee at home at that gas station at, at a regular coffee shop or Starbucks or Dunkin Donuts, of sorts. And the price goes from 25 cents to $6. But in the end, we all buy the same, same coffee. And, so I, I think the, the, the, the, the trend here is the, the product is kind of the same and I know people don't, don't like it when I say this but you know, it's still just like buying a coffee is a hot drink. Buying cannabis is people are buying it for what it is. So when you get to a store that is sterile or got no experience in it, when you go to a store where there's so many products that even you know, people that are in the industry sometimes don't make the difference between the, the products because you have too many vapes, too many gummies, too many things. I don't think it's, I think that's gonna, and the other thing too with too many discounts. So you need to, you know, you need to understand which, who you are to try to sneak in for, to get a 10% discount. There's no other industries that, so that's complicated. So I know there's a brand play and things like this, but I'm hoping that we're going to start seeing less product in stores, better portfolio of products, better R&D around what the products are, and a better experience. It doesn't have to be, you know, Starbucks or the gas station, right? To use the same comparison, but you pick, pick one and then your customer is gonna fool you.


Ed Keating

Right. It sort of takes it back, you know, to where we started this conversation today of, of, you know, what do you have to do to succeed? And it goes back to business basics. Are you going, for example, be the low-cost provider? Are you gonna be, you know, customer intimacy? Are you gonna be operational excellence?You know, pick maybe two, but ideally you pick one and, and go with that.


Jacques Santucci

Yes.


Ed Keating

Excellent. Well, thanks so much for joining us today. This was a great conversation and it really allowed us to dig into some things that we don't always have time to do on the showroom floor. So thanks so much, for being here this afternoon.


Jacques Santucci

Yes. Thanks for having me. It was a pleasure to talk about this industry and always a pleasure to talk to you. And then, you know, thank you for all the work you've done with you and your partners at the Cannabis Media.


Ed Keating

Absolutely. And I look forward to seeing you in Las Vegas.


Jacques Santucci

Yes, that's right. That's right. That's the one time of the year where we all get to Las Vegas.


Ed Keating

Indeed, indeed. All right. Well, thanks for joining us on today's podcast. I'm your host, Ed Keating, stay tuned for more updates from the data vault.

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