Cannacurio Podcast Episode 64 with Kevin Brooks of Conception Nurseries

On this episode of the Cannacurio podcast, host Ed Keating interviews Kevin Brooks, the CEO of Conception Nurseries, the world's largest cannabis plant provider. They discuss his transition from Silicon Valley to the cannabis industry, how they are revolutionizing the cannabis industry with their innovative tissue culture techniques, and so much more!

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Cannacurio Podcast Episode 64 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 Kevin Brooks, the CEO of Conception Nurseries. Hi, Kevin.

Kevin Brooks: Ed, thanks for having me. It's good to, uh, good to be here.

Ed Keating: Yeah, absolutely. Well, welcome. And, um, just a little bit of background that I've learned is Conception holds the distinction of being the largest cannabis plant provider globally, and is the sole provider of commercial scale multi state tissue culture services within the cannabis sector. What does that mean?

Kevin Brooks: That's a mouthful. So, um, look, we Conception puts out more plants than any single company in the world that we're aware of. Um, now to be fair, our plants are only three and a half, four inches big. So it is micro propagation, but when you think about the supply chain base. We're putting out more plants into the supply chain, um, than any other company in cannabis, including the largest MSOs.

Ed Keating: W ow, So how did you decide, you know what, that's what I'm going to do. That's what I forget the Silicon Valley stuff. I'm going to go crank out a lot of plants. Like I'm curious as to sort of that origin birdie story. Cause that's, that's pretty unique.

Kevin Brooks: Yeah, you know, the Silicon Valley story is a story in itself, but, um, I ended up moving out to the Sacramento area after, uh, a couple of successful exits in tech and, uh, I linked up with a guy who, um, I went to college with and he candidly sold me weed in college and he stayed in the game his whole life.

And, uh, I think, you know, at this time, Colorado had just passed adult use, um, Oregon and, uh, Washington were right behind, uh, right behind it. And figured it was just a matter of time before California, um, had passed, you know, adult use cannabis, recreational cannabis. And so I really wanted to understand the market better.

And you know, just growing up in a beach town had always, you know, consumed cannabis, had a relationship with cannabis, was, you know, always very interested, excited for, uh, for the industry. Yeah. This was 2015. It was still, um, a very different world. And we had, you know, the, the landscape was nothing like it is today.

And I went out to lunch with, uh, with Caleb Counts, who's, uh, the Founder and CEO for a Connected Cannabis. And this was gosh, this was well before Connected was established and really tried to understand his business and the market and where things were going. And after a couple of great conversations, I stepped in as CEO.

Um, and at the time it was just a couple of stores in a grow. And, uh, we ended up meeting up with Berner and signing the exclusive license for, uh, for Cookies. At the time, Cookies was clothing, it was wrap, uh, it was, um, you know, illicit, you know, uh, clone sales and, and, uh, and flower sales, but nothing, you know, approaching the legal market.

And so we were the, really, the plant touching entity for, uh, for all Cookies for many years. And, um, um, you know, there came a point where we had scaled Cookies across the state of California and opened up multiple shops, despite, you know, every city that we went into, not very happy about the name Cookies.

Um, and we were putting out, you know, some of the most well known, well awarded, super premium price product in the state. And at one point, uh, Berner, you know, wanted to take the Cookies name and, and go a bunch bigger with it. And I think, uh, Caleb and his partners, wanted to start their own brand. And so I dissolved the, uh, the Cookies relationship.

And the next day we opened up as Connected Cannabis. Uh, we met up with the guys from Alien Labs and, uh, I did the Alien Labs acquisition and so it became Connected Cannabis and Alien Labs, uh, super premium brand operating multiple States. Great group of guys, you know, legacy operators, ya know, fucking great weed.

Um, and, uh, and I've been able to take that onto the, uh, The legal market. Um, and I think, you know, learn pretty quickly that, um, they're really two broken parts of the supply chain, at least, you know, having seen, you know, cultivation at scale, on one hand, you have the technology, right? The technology can be anything from dehumidification systems, HVAC systems, lighting, racking, fertigation, like you name it, right?

None of this was designed for cannabis. It all existed in traditional agriculture, um, and it had to pivot into cannabis. So we were struggling to find AC dehumidification systems in 2015 2016, um, and we were putting in equipment that was designed for other crops, but we had to kind of bastardize it, make it work for our needs, and we made it work, but it wasn't ideal.

And that was, it was across the supply chain, you know, POS systems weren't made for cannabis, retail, um, distribution software wasn't designed for cannabis, right? So it, it, it, it occurred to me that the technology would catch up very quickly. And that was one big part of the supply chain. And it's true, right?

For anyone who's been to MJ BizCon over the last 10 years, like a number of manufacturing equipment and lighting and racking and all that stuff, it's. It's, you know, thousands of companies are all competing for a very crowded, uh, shelf space. The part of the supply chain that was not easily fixed was the plant itself.

So you have to understand that, like, I don't know, every tomato you've ever eaten, every bloody fruit or vegetable you've ever eaten has been studied for likely 50 or 100 years and optimized for different environments.

Ed Keating: Alright, like, like, like bananas is the one that I know where, like, pretty much now there's, like, one kind of banana that serves all of North America.

Like, we used to have all these varieties. I think it's down to one, if I, you know, read the article correctly.

Kevin Brooks: That's right. Um, so I don't think cannabis, I hope cannabis never goes the way of the banana, uh, but, um, you know, you look at grapes, for example, and wine, um, you know, those, those vineyards, those wines, those grapes have been studied for agronomic traits.

Some traits are larger yield. Some traits are, um, I don't know, more consistency or drought tolerant or disease resistance, right? Um, and so cannabis, we just never had the, uh, the, the, the financial backing and the regulatory landscape where, you know, real institutional companies could study that. And as a result, um, what we get is, um, what we have, what we have is very inconsistent deliverables.

We have plans that are, uh, they're given the same name that are completely different and no one knows who owns what. We, um, we have plants that, you know, maybe you grow well in one environment and they don't grow well in others, right? And so, um, you know, it became clear that somebody needed to own this part of the supply chain.

And the only way that you could get a clean, consistent, healthy, vigorous plant, that's genetically identical every single time is through tissue culture. And so that's what brought me to launch Conception in 2018.

Ed Keating: Wow. Yeah, because I was going to say, so the next question I want to ask is, sort of, what problem does Conception solve?

And that would seem a big one. I mean, it makes me think back to when my wife was in grad school and as a psychologist they had to do, studies with like mice or rats and they had to be identical and the genetic had to be all the same. And that was, you know, just an important piece. So, so if, if, if farms are able to get that product, uh, that tissue, what is that process like for them?

Because do they truly get to that almost nirvana of having every time they grow that crop for the most part, it's going to be similar to what it was. The last time they did it.

Kevin Brooks: Yeah. Great question. So let me take one step further, kind of back in the conversation. When you talk about the benefits of the customers.

Because nurseries like Conception didn't exist, the nurseries that were out there were, were pretty dirty plants, right? There's no, uh, no consistency. There's no way to validate that the, the plant was what you're buying. Um, plants by nature are a vector for pests and disease. So there was a lot of viroid spread through, you know, some of these original nurseries.

Most growers got their genetics from some guy, from somebody they knew. Right. You paid cash for it. And because you couldn't go back to that guy, every time you have to keep your, your plants in house, right? You have to keep them in your own in house nursery or mother room, right? When you look at your business of growing your mother room is your main source of pests and pathogens, which essentially means it's a single biggest risk to your business.

You're not going to have a grower on your show. That's not going to say, Hey, we had a near,you know, farm ending disaster with, um, a virate or mite or something. They've all had rooms wiped out, harvest wiped out, um, and had to fight these. Right. So it's, it's a tremendous risk to your business. It's exceptionally expensive.

Um, you know, it's expensive to upkeep and in lots of cases you're dealing with fairly expensive real estate. So you have this. This risk center and a cost center. And so the problem we solve for, for growers are, um, some growers, they don't want the mom room, right? So they eliminate this big, this big, uh, point of, um, point of failure, uh, outsource their clone production, turn their mother room into a flower room.

So then they turn their, their largest cost center into one of their largest profit centers. So that's really the problem that we're solving for growers.

Ed Keating: And take away that vector. I think that's the right term of, of, you know, not having the bad stuff come in or be propagated, uh, into other parts of the organization.

Kevin Brooks: It's really amazing to see how much money And time and effort and thought are putting into grow builds and how little energy and effort is put into the genetic library and diversity and the cleanliness, the sterility of the plants going in there. In my life and data, we'd say bad data in, bad data out.

It's the same thing with plants. If you have a mother plant who's been, uh, has some kind of, uh, HLVD or some other, you know, systemic issue with it, or has been hit with something, right. Or it's just old and has been cut on and replaced, and cut on and replaced, and not revitalized, it will underproduce one that comes directly out of Gen Zero tissue culture.

So to answer your question around what did growers get from us. We essentially, um, not, not only are we the largest producer of cannabis plants in the world, but we're the only ones in the world that will guarantee they are pest and disease free, and they're delivered in these hermetically sealed packs directly from our lab.

So our customers call us up, or email us, or contact us, and they say, hey, I want a thousand of these, I want two thousand of those, I want five thousand of these, and the next day, or the next week, whenever they want delivery, We show up with hermetically sealed plants, uh, plant packs. And what's really nice that the growers love that, you know, we focus a lot of energy on what's below the dirt, right?

So a lot of nurseries are focused on the plant what's above the, what's above the dirt to deliver a plan with a fully developed root ball increases the chance of success and survival and thriving. And it's, it's, it's, it's the root of the plant, right? It's, it's the most important part, arguably. Um, so, so, uh, providing a plant with a fully developed root ball, versus one that's taken as a cut from a mom,

it's a very different product.

Ed Keating: Yeah. Wow. Wow. Uh, and that whole reduction in cost and being able to turn that into, uh, let's say a profit center revenue center has to make the, the choice easy to sort of go down this path and, and sort of perhaps reorient the way that they're running that farm.

Kevin Brooks: We have some customers, um, that we're so confident in our ability to improve the performance of the plants that we are, we're basing the price on the final deliverable.

So if it doesn't overperform, um, what we committed to perform at or above, uh, then it's no cost to them, right? So we believe firmly that at virtually every, um, by every, every measure of performance, a gen zero tissue culture clone. Well, I'll perform one from traditional propagation and that that's not just the performance of the plant.

We're talking reduction in labor, significant reduction in integrated pest management costs, so you don't need to spend as much money fighting pests if you have gen zero tissue culture clones with no Uh with no pests so across the board A's to B's ratio yield consistency Or like my wife is a huge Starbucks fan And if she if she goes to different Starbucks and there's a different Pike's Place, you know at each one They don't have a brand same thing with cannabis.

Ed Keating: That's right. So, uh interesting Well, I I mean just fascinating the implications that it has Just in terms of your spot in the market out there too, because, you know, based on what you're sharing, that sounds like a pretty remarkable brand promise where you're even doing essentially pay for performance.

I don't know the, the, the, the license count of people with nursery licenses in California. I should know, but you know, we, we cover so many licenses, but I would imagine that's a pretty unique offering in terms of how you must compete with others who are nurseries, because there are other nurseries in California.

Kevin Brooks: Yeah, no, absolutely. And there's some really strong nurseries out there. And I think we all fit in our own lane. Um, you know, there are some groups that, uh, that want a much larger plant. Um, they see value in the teens or the tweens, right? That's not our sweet spot. Um, we have groups that, um, you know, are potentially being more nimble from a menu selection standpoint, right?

So, um, if you are, uh, if you are looking for the newest, coolest hype streams, what's performing or what. What does the market want this week? Right. There are other groups for us to take a plant through culture. It takes about, you know, call it nine months and it's exceptionally expensive. So when we take something through, it has to hit the mark.

And when I say it has to hit the mark, it has to hit it, not just for the consumer, but also for the grower. So we spend a lot of time on the front end running a performance trials so that we can go to the grower and say, Hey, we have the data behind this cultivar. Right. It's the shield. It's this THC.

Here's the COAs. Here's the, you know, turf profile. Like we know it can perform at this scale, um, but it's also backed by a known breeder. Um, it has the bag appeal that the consumer wants. And so we can check kind of both boxes where I don't know of a lot of groups that will take the time to, to do both.

Ed Keating: Well, and it sounds to me. That this is really, you know, if you will, kind of a relationship sale. Like if you're working, you know, over such a long period of time to deliver what the, the farmer wants. I mean, it's not a transactional kind of thing. It's not some guy showing up like, yeah, I got what you ordered.

This is just, it seems way more intense and sort of clever and harder too, but with, I would assume better results.

Kevin Brooks: Yeah. You know, we spend, um. The way we kind of think about our budget is for every dollar we spend on sales. We spend 2 on customer success and 3 on R and D. And the thought process behind that thought, the thought process behind that is sales are sales, and that's great.

You need to be in front of the, in front of the market, in front of your customers, but the ones who really drive home the relationship are our customer success folks. And these are, these are individuals that have, you know, deep plant background inside and outside the industry that really understand best practices that can bring value to our customer by providing them with.

Insights on other grows they've seen or how to get more out of the plant itself where they can push where they should pull Um, and then R&D has been a huge investment for us and it's allowed us It's the only reason why we're able to put out the volume of plants that we can if you if you look at our facility Um, gosh, our sacramento facility is 20 000 square feet, for example, and we can push out call it 700 000 plants in a month, right if you were to do that in any other environment, it would take north of 20 acres You Right to put out 700, 000 plants in a month.

Um, yes. Uh, and the only reason we're able to do that is through advancements in science. We don't. We don't work our people harder. We work the plant smarter. So, um, that's kind of how we think about, uh, the business in the future, but we think that the future will be, you know, high volume, um, low cost, very developed root balls, um, you know, clean, guaranteed, clean, healthy, true to type, um, performance tested plants.

Now you,

Ed Keating: you touched on this a little bit before, and we spoke about this earlier. You know, some customers are sort of chasing. The most exciting thing, the flashy thing, the now versus wanting specific agronomic traits. Do both those people benefit from working with Conception or is it more the folks who have the agronomic traits profile, if you will, and what they're looking for?

Kevin Brooks: Yeah, you know, that's a great question. We have a handful of, of like exceptionally talented boutique growers, and we're happy to have them. We support them. Our model, though, is really built for the large scale commercial grower. Um, the groups that can plan and are interested in planning, you know, call it nine months, six months, 12 months in advance.

Um, and so I think our, our, our true model where we shine the best are with larger commercial grows, who tend to go with cultivars that they know perform in their environment and they have predictability. Um, they need to know the plants are going to sell, right, first and foremost. They don't want to grow things that don't sell.

But, um, I think second, they want to know that the plants perform consistently and they can put out budgets and pro formas and, uh, and they've got their menu planning, here's what's coming out in the fall, here's what's coming out in the summer. Um, and so that is a big part of, um, support that we get for our customers.

Ed Keating: No, it makes sense. It's, it's sort of like betting on those people that you. No, we're kind of playing the long game and thinking ahead and not just, uh, uh, tomorrow, but, but, but, but well beyond. Now, one of the other interesting, um, topics I want to discuss is this notion of breeders rights in the future of genetics.

Like, I've seen a little bit on this in terms of sort of the intellectual property of who owns brands and strains. And is it something that somebody is going to try and patent or whatnot? Um, you know, do you start to get into the, the, like the Conagra or Monsanto and seeds, you know, where you see that in, in farms in the Midwest, like you can't do, you can't harvest seed.

So, so what's going on in that area? Can you, could you, could you help us understand?

Kevin Brooks: Yeah. I mean, look, I think that there are. a few really bad actors in this space, um, that are trying to corner that are going for the patent troll angle. Um, I think it's real. Um, and I think that, uh, it would be naive to say that that's not happening in the space.

The way we think about breeders rights is, um, look, these, these breeders, these, these individuals who put out, you know, these cultivars that have been around for, you know, forever, they're artists and we look at them like artists and it's our duty to, um, to compensate them for their art, even though we're under no obligation to do so.

We have many breeders that look, I can get in a car, you and I can get and fly down to San Diego and get in a car and stop at all the different farms that we know and visit all the different nurseries and buy, you know, You know, whatever plants we want, and then we can open up a farm and we can sell them, or we can open up a nursery and we can sell them and get away with it.

And there's nothing anyone can do about it. And that's what's happening. And it, it's, it's absolutely bullshit. We take this position that every breeder should be compensated for their, for their plants, for their artwork. It spurs innovation, you know, it fosters great relationships, you know, and encourages, encourage them to put out more plants, right.

And then, you know, all of a sudden they start sending customers to us because customers want the original breed. They want the cut from, from the breeder. And if we can't track down the original breeder, we tend to find whoever has kept that cultivar the longest. So the caretaker, make sure that they're compensated for.

you know, taking care of

Ed Keating: That's great. I mean, it systemic industry wide view of your sort of role in the industry and industry. It's obviously thing uh, to just make mo ney, you are really hitting it from almost all angles.

Kevin Brooks: Yeah, we try. We try to do the right thing. Yeah.

Ed Keating: Um, now what about this notion, this concept that you guys talk about of cannabis 2. 0 moving from full integration to specialization? What does that mean? How does that play out for for for you and or your customers?

Kevin Brooks: Yeah, you know, it's funny. I was asked on a, um, Uh, some panel, what do you see as a future of cannabis?

Where is this going? Yeah. What's your prediction? And my prediction was that there will be this, um, this shift away from full vertical integration, full vertical integration into specialization. Um, you know, it, it's unfortunate that the industry has put so much pressure on companies to be fully, um, you know, uh, on their full supply chain.

Yeah. It's almost like you're tying, you already tie the company's hand behind their back with. high taxes and regulatory challenges and, um, you know, all the challenges that we face difficult banking that we face in the cannabis industry. But then to expect that company to also do every piece of the supply chain flawlessly is it's absurd and it's a, it's a recipe for disaster.

And if you look at traditional agriculture or other industries where they have banking, they have traditional capital, they can hire people, you know, uh, they can ship product across the line, drag any other industry out there. Um, they've realized that it very much is stay in your lane, focus on what you do really well.

And so I, I do think, and we're starting to see, um, this higher emphasis on, uh, on specialization. We know, we know of a lot of the MSOs, a lot of large companies who have tried tissue culturing. It is incredibly difficult to do at scale. Um, and so I think, you know, the future will be on finding companies that specialize in different parts of supply chain and working with them rather than try to do it yourself.

Ed Keating: Yeah, sort of goes all the way back to Adam Smith, Wealth of Nations, 1776, sort of the invisible hand of the market and breaking up those pieces of labor so that it gets done more efficiently and effectively. So, uh, can't fight the market.

Kevin Brooks: You know, some of the biggest mistakes I've made in my previous life was just trying to do too much.

I'll tell you, I mean, you probably see it, um, in this industry, there are a lot of shiny objects. And, um, staying focused on doing one thing really well. Um, you know, that, that, that's kind of been our motto and our focus. So,

Ed Keating: yeah, no, it's, it's true. It sort of leads to my next question, because we talk a lot about staying in our swim lane, like we focus on licenses.

There's a lot of other cool stuff out there that we could go chase down. You could go get all this other data, but it doesn't really tie to a license or a licensed business. But, but I did want to ask is how does, how does your team use a tool like Cannabiz Media in terms of like reaching the market or understanding the market?

Maybe it's more for research.

Kevin Brooks: Yeah, you know, that's a great question. Um, we have a business intelligence team, um, internally, um, part of their job is to work on internal KPIs to make sure that we are, we're hitting our mark. But also part of that is, is. Trying to synthesize data to read the tea leaves and find out, you know, what does the market want?

What is the market going? What, what, what are the trends of the future look like? What markets do we want to be in? Which market should we stay away from? Um, you know, that's that's how we would essentially use it. Excellent. Excellent.

Ed Keating: Well, yeah, it's in sort of your talk about The vertical integration. I mean, some states don't require the verticalization like I'm in Connecticut and when they launched their medical program, they broke it apart a little bit.

They licensed for growers manufacturers. So you did two parts of the stack and then the stores were separate. And but other states like Florida, you have to own everything. And it does get, uh, I think it's challenging. I mean, you know, to your to your to your well made point that, uh, Not everybody can be an expert at everything and letting people come in where they can do the most.

Good work is makes a lot more sense.

Kevin Brooks: 100 percent completely.

Ed Keating: Now, um, from where you are, you know, have you, do you think the industry has hit bottom yet? You know, we're starting to see things picking up more now. Uh, and I don't mean just because of the rescheduling, but this year seems a little better.

Although, you know, we we've, we've decided on the notion that. Every year in cannabis is different than any year that came before. And you really can't compare it to say, Oh yeah, it's up like, you know, compared to last year. So we're sensing it being a little better, but I'm curious what you're seeing, especially in talking to growers.

Kevin Brooks: Yeah, I mean, look, it depends on on where you're at. Like you said, um, you know, the California where we're headquarters, we've, we've, we're headquartered. We've, we've taken a beating. Our customers have taken a beating. It definitely feels like there's some stabilization here in the state. Uh, we have satellite offices, remote satellite labs, many labs and 2 other locations, and we have a handful that are being built out right behind it.

Um, those markets tend to feel a little bit different. Um, but I really think it's a, you know, really has to do with where you're at from a legalization standpoint and what the regulatory landscape of your state looks like as well. Um, you know, I keep my fingers crossed that rescheduling, you know, goes through.

Um. I'm hopefully optimistic, but I'm not holding my breath. I've, I've seen too many weird pivots in this industry that I've learned to just, um, not count on anything until it, until it actually happens. So, yeah,

Ed Keating: yeah. I was gonna say that is true. I mean, we've been at it since I was like you since 2015.

It's been a really long decade. I mean, it's, uh, and the pivots changes and, you know, things that made sense years ago that don't make sense now. It's just, it's, it's just, uh, it's just sort of amazing. I mean, it's like the fun of being in a new industry, I guess. Um, now looking forward, you know, we talked a little bit about rescheduling.

Are there any other trends that you're seeing or things that we should be looking out for maybe in your space or in other adjacent spaces in the industry?

Kevin Brooks: Gosh, any, any trends? Um, off the top of my head, I don't, I don't have anything that's, uh, that stands out as, um, you know, exceptionally interesting. I think, you know, I just got back from Spanibus a few months ago, and it's interesting to see, you know, all the West Coast genetics kind of make their way around the world.

Um, and they bring with them all the problems of the West Coast genetics. Uh, so I think, you know, nationally, internationally, the challenges that we've seen in some of the more mature states like California, Colorado. Um, you know, we're going to see those, uh, you know, around the world and around the U. S.

And as New Jersey opens up and some of these little large markets, um, I hope New York can get their, get their act together here soon. Um, but that's a whole nother conversation.

Ed Keating: Well, it is. I mean, I was going to say in terms of what we're looking at are sort of all these. Markets that are moving now, like we see that Delaware is going to, uh, you know, sort of speed up their pace a bit where they're going to do dual licensing.

Ohio's like, you know, we can, we can move this ahead. Let's get people going in June. Minnesota seems to be picking up the pace. So I think there's definitely. A lot of forward momentum, and it may be a while before there's an actual license for Cannabiz Media to track, but it does, you know, start early. And we found that as those markets come online, some of those Early ancillary companies can start working with them and helping them with build outs or security or software, et cetera.

So I think, you know, 2024 is definitely looking like things are heading in a better direction than we saw in 2022 and 2023, or at least I hope so.

Kevin Brooks: I don't know if it could get much worse. It's uh, yeah, but like every time I think we hit rock bottom as an industry, we seem to, there seems to be another one.

So. Yeah, well,

Ed Keating: yeah, let's hope that we found the bottom. We're coming up the other side of the valley. That's the thing. Like, you know, we hit bottom. Yeah, we did, but we don't know how long we're going to be down here for. So, but I'm hoping we're, we're clawing our way back up. So, uh, Kevin, I want to thank you so much for joining us today and telling us all about Conception Nurseries.

I learned a lot today and I appreciate your time and expertise.

Kevin Brooks: I appreciate being on here. Thank you for, uh, for hosting and for having me and, uh, look forward to speaking again.

Ed Keating: Excellent.

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