In the latest episode of the Cannacurio Podcast from Cannabiz Media, my co-host, Amanda Guerrero, and I discuss license numbers and cannabis license verification as well as retail and dispensary license data in 2020. We also speak with Nick Tennant, Founder and Chief Technology Officer of Precision Extraction Solutions, a global leader in cannabis extraction equipment, technology, site planning, compliance, lab build-out, installation, consulting, and training.
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Cannacurio Podcast Episode 7 Transcript
Amanda: Thanks for joining the Cannabiz Media Podcast. We're your hosts, Amanda Guerrero and Ed Keating. Ed, since the last time we spoke, wanted to check in. How's the data team holding up during quarantine?
The data team's doing fine. Since Larry and I founded Cannabiz Media five years ago, we've always been a virtual company, so the researchers have always worked that way. As a result, in addition to dealing with the craziness that the quarantine has put upon us all, at least their work is kind of a steady thing that they've been able to do really without missing a beat. So we are doing just fine. How about the sales team and the outreach to the trade associations?
Amanda: You know what? We are movin and groovin, being the remote platform that we are, it has been proven to be a really helpful tool for our current subscribers, as well as for our prospects. I've been fortunate enough to have a lot of good traction and hope to continue that momentum moving forward.
Amanda: Yeah. Bringing it back to the data vault though, I know you talked about digging into Q1 data, what have you found?
Ed: So what we're doing this week is digging into dispensary and retail licenses because everybody likes to track that, it's point of sale, it's where the rubber hits the road, it's where consumers actually consume and buy.
So we've been looking back at the first quarter to see where were the licenses created, and we've seen about 380 licenses that are new this quarter. Oklahoma is by far the leader with 155 of those licenses, but a surprise second place is Michigan, followed by California as well. So, not a surprise. I think it's still interesting that Oklahoma continues to crank out dispensaries. I don't know how many more the state can actually consume since they've already got several thousand in what is a rather small population.
We'll continue to keep an eye on that. It does appear, though, that the numbers are not as great as in past quarters, so perhaps we're reaching a saturation point. But I think I said that last quarter, so eventually I'll be right. But I think we're going to get there shortly.
The other thing that we've been working on is looking at all the ways that our customers can reach the marketplace beyond an email address. A lot of people try and use email as their sole contact point to the cannabis economy. We're just trying to help people realize that there are a lot of other ways to interact with the different license holders.
We tallied up in the data vault and found that we have over 50,000 different social media contact points, whether it be Instagram, Twitter, Facebook, Leafly, websites. We also have over 45,000 phone numbers, and a lot of people find that as a great way to reach the market.
And then lastly, we also spend a good amount of time, our research team, curating news stories that either describe what may be happening in a state that's significant, or more interestingly, if they correspond to a particular license or company.
For example, recently CuraLeaf bought three Connecticut dispensaries. So we've got a new story in there that tags it right to those records. So you can see CuraLeaf, the company, purchased Arrow in Connecticut, and we list all the Arrow licenses.
So for people who are doing research before they reach out to some of these licenses, we've got a lot of stories there that can help you be way more informed as you make those contacts.
Amanda: Yeah, it's actually how I like to start my morning. I'll have my cup of coffee, or rather, my tea. I've switched to tea now, but I'll have my tea and I'll go into the platform and I'll check out all the new updated stories that have come through overnight. It really is a great way to stay informed.
I'm glad to see that this is the type of data that we're pulling to highlight because it really is a great way to stay informed. But thank you, yeah, thanks for the update, Ed.
So, on today's show, we'll be joined by Nick Tennant, the Founder and Chief Technology Officer of Precision Extraction Solutions. Stay tuned.
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Amanda: Welcome back to the show everyone. Today we're joined by Nick Tennant, the Founder and Chief Technology Officer of Precision Extractions. Nick, welcome to the show. Thanks so much for joining us.
Nick: Thanks for having me.
Amanda: It's a pleasure. So how are you doing? How's everything going?
Nick: I'm doing well. The company's doing well. We still have our entire staff working, and everything is bright and sunny as it can be anyways. Obviously, we're a little bit impacted by the current situation, but our overall sentiment is very bullish.
Amanda: I'm happy to hear that. That's really positive on kind of a dark time, but to give our viewers, our subscribers, some background on yourself, how long have you been in the industry?
Nick: Sure. Yeah, I've been in the industry 15 years, so I got started back, first in 2005, 2006, in California and Colorado. I had some family out there, so just getting my first exposure to the industry. And then through 2007, 2008, really getting my hands a little more dirty in the industry, through California, in Colorado, specifically in Colorado, as they were kind of coming online.
And then, obviously, my home state here is Michigan, so in 2008, we had our medical laws pass. So I began getting quite a bit of exposure and cannabis became my only and primary business at that time.
So whether it was growing retail operations, consulting, industrial scale large grows, basically every niche that you could ever think of I've worked in, in the industry. And about six or seven years ago is when we saw the trend moving towards extracts and executed on that trend, and that has been one of our most successful ventures yet.
Ed: Well, congratulations on that. It's always great to find people who've been in the industry for a long time. When we were building our company, we started to go to trade shows and whatnot, and we came up with a market segmentation that was people who are cannacurious, or cannaserious, and I definitely put you in the cannaserious. We even came up with one for cannaclueless, people who didn't know what they didn't know.
But working with folks such as yourself really helps the industry grow because you've got such depth of experience. I'm hoping you could tell us a little bit more about Precision Extraction Solutions, especially what makes you guys unique, in addition to the length of time that you guys have been serving the industry?
Nick: Yeah, I'd be happy to. Precision Extraction Solutions is a company that I founded seven years ago now. Basically, when we founded the company, our primary focus was to build the best technology, the best extraction equipment possible to be able to extract the essential oils, the terpenes et cetera, from the cannabis plant.
What happened is I looked at the technologies at the time, and they were very primitive, so we engineered our first generation one model, which was the PX One, and took it to market and did really, really well with it.
Since then, Precision's transformed into a more full service firm. When I say full service, meaning we don't just design and engineer the equipment, but we actually come out, we install the equipment, we train your staff. We ensure that the businesses that we're doing business with, or the businesses that are our clients, are ultimately going to be successful because they are armed with our depth of knowledge.
It's not only myself in the company that has over a decade of experience. We have several individuals that were pioneers in the industry, and a very strong technical and R&D team. So, the end to end integration is, I think, huge for us. I think it's a huge value adder for our clients.
I think that that's one of the biggest advantages for us in the industry is having that depth of knowledge, the end to end integration, and the ability to really work with our clients to ensure their success.
Ed: Interesting. Now, one of the things I learned about your company is that you offer compliance and training services, as kind of a modular, or part of your suite of offerings to the market. I was curious, is that an offering that is attractive to new markets, where they don't know what they don't know, mature markets, or both? Who signs up for that?
Nick: Yeah. We see a variety of clients, definitely new markets are a big consumer of the compliance and training. Obviously, the less experienced people are in the industry, the more guidance that they need.
But I would say that this market, particularly, is very dynamic. Cannabis and hemp, in fact, are both constantly changing in terms of the regulations, the market dynamics, consumer trends, the regulatory factors surrounding the FDA that are going to come down, and GMP regulations in the hemp space.
The regulatory factors and the differences of those from a state to state basis, those are also issues that our clients have to deal with all the time, including building codes, et cetera. So all of those kind of add into this perfect mix of different clients need different things. So hopefully that answers your question, the thoroughness.
Ed: Absolutely. Now you touched on hemp, which is one of the topics I wanted to ask you about. So, as we've been covering the hemp market for, I think we're in our third year now, what we've found is that the dynamic seems to be different. It's very much an agricultural market. Most of the license holders that we see on the cultivation side are farmers. They farm lots of stuff. Hemp just happens to be one, at least in some cases.
We've also seen a lot of news stories in states where there isn't enough processing capacity. People are growing a lot of hemp, but don't have a way to process it. So I'm curious, how is this market similar or different to cannabis for you? Is it a big piece of what you do? Or is it a growing piece? What kind of dynamics do you see at play?
Nick: Sure, absolutely. So last year, in 2019, it was a nice chunk of our business. Obviously there was a big boom in the hemp industry due to the farm bill. So that was definitely something that we addressed, and we did really well with.
We worked to launch our industrial line of extraction equipment, which was the KPD series, which is primarily geared towards hemp because it starts at 3000 pounds a day of processing and can go as much as 200,000 pounds a day of processing. So we did well with that.
The hemp market dynamics are very unique. There was a lot of what I would call speculators last year, and it led to a massive upsurge. The problem is that the FDA is kind of dragging their feet on regulating the hemp industry, so I think a lot of people are confused in terms of which way is this going to go right now?
I also see a lot of consolidation in the industry with larger scale operations and us having put out larger scale production. So the bottleneck and the processing is going away, effectively the market prices of the commodities extracted from hemp, meaning whether it's the crude oil or the CBD, or the distillate or any products thereof.
But those commodities essentially are diminishing in value to a point where they're more stable now. Obviously you don't have, $6,000 kilos of CBD isolate. It's more like 800 to a thousand right now, depending on contract size.
So I think that from a price action standpoint, the market is stabilized. I think that if you're in the CBD business and you're running at some sort of scale, it's like any other business in manufacturing. If you're a processor, you can target, say, between a 15 to 30% EBITDA and have a very successful business, depending on how you write the contracts and scale.
But over the long term, the hemp market will come back. It will come back once the regulations come forward, so to speak, and really have some guidance for everybody in the industry.
Ed: Right. I think for a commodity market to function effectively there needs to be some consistency and a less volatility in terms of regulation, and maybe even a harmonization of regulation, so people know, “All right, this is what it's going to be like looking forward.”
So, speaking of looking forward, last question I wanted to ask you is, any new product launches, new markets or initiatives that Precision is going to be looking to put forward in the coming six, 12, 18 months?
Nick: Oh yeah, absolutely. We pride ourselves on innovation, number one, it's one of the key things that we focus on. We're always looking at new markets. We're always looking at new initiatives. We have a team of over a dozen people that only focus on those particular topics.
I can't give you all of the details of the special sauce, but some of the things that are interesting to us are, obviously, the European Union market. We're anticipated to have an $87 billion retail market by 2028. So, effectively, once that gets momentum over there, that will come online and that'll be a big driver of what's going on in the global marketplace in terms of cannabis sales.
The second thing that we really focus on is our IP, coming up with new novel processes. We have a Research and Development and Science Team that is specifically working on process improvement and integration, whether that's like an instantaneous winterization process, which we just released, whether it's something like our T set process, which is complete separation of THC from CBD crude oil and extracts, whether it's alternative methods of purification that replaced distillation to get into the high 90 percentile of purity without distillation.
These are all things that we're building a robust IP portfolio. We're looking at new markets, and we're adapting to existing market trends in order to keep our business doing well.
Amanda: That's fantastic, Nick. And so, in terms of outreach and communication with the industry, obviously you guys have been a Cannabiz Media user, a subscriber, for quite a few years here. So what are some of the ways that you and your team utilize Cannabiz Media? And how does this compare to other sales tools you've used to address the industry before?
Nick: Sure. I think we use you guys as much as possible, and I apologize because I'm not the guru when it comes to marketing. Our Marketing Director knows a lot more than I do, but what I can tell you is that we take every opportunity that Cannabiz Media provides to us to execute on any outreach.
On top of that, obviously, taking the opportunities to get face-to-face with people at trade shows and use other marketing platforms. I think that you have to be rather diverse and rather robust in this industry. There's a lot of noise. So anything that you can use, such as Cannabiz Media, to your advantage, to do things like this podcast, or outreach to your client base, I think it's really, really advantageous because if you have specialized knowledge, or you are an expert in the industry, or you are running a good company, these platforms show the expertise. And people really look towards that type of guidance and understanding in the industry because there are so many new entrants.
Amanda: Understood. So how does your team address the current work from home remote work style from a sales perspective, Nick?
Nick: From a sales perspective, it's pretty easy. I mean, our salespeople can work remotely, no matter what. So, that's exactly what everybody's doing. Our company is currently on a work from home basis, except for our essential employees, meaning our warehouse guys, and a couple of key finance employees in the office. So we're obviously respecting social distancing, working with the appropriate personnel boundaries, using the proper procedures in terms of masks, sanitation, et cetera, in the office.
But, right now, out of our 63 employees, we're talking about only six or seven of them actually being in the office. So we're at a 90% work from home. We've been using Microsoft Teams platform, similar to Zoom, as most people have been. In terms of getting work done, it's been really, really efficient actually.
Ed: Great. So looking, once again at some of the trends, I learned that you called the focus on extraction products early on, and it's really been a focus for how people are consuming. Do you still see that continuing? And what will that mean for your business, obviously, if extraction-based products really continue to carry the day?
Nick: Sure. It's pretty straight forward because what's great about this industry is that each state, I would say, Ed, operates like its own kind of micro economy, on its own timeline, when it comes to cannabis.
Ed: It's a sovereign nation, is how I look at it.
Nick: Yeah, something of that nature. With that being said, it's almost like we have the historical data of each individual market ahead of new market entrance. So with all that being said, circling it back into your question here, the point of that is that we can see the trend in mature states move from flower and consumption of flower to consumption of extracts, and all that data is readily available at our fingertips.
So understanding consumer trends and how those consumers behave as they become more educated and have more products from a retail standpoint available to them, basically paints a picture of what's going to happen with the extraction industry. So we're extremely bullish on the extraction industry.
If you look at progressive markets or well-established markets, in most instances, extracted products account for over 50% of retail sales. In some instances, they're up to 70% of retail sales. There's just not a lot of people smoking flower in progressive markets.
Ed: Right. Yeah. I've seen some of the analysis by, usually like BDS Analytics or Headset, where they show how that changes, and I think over time as those markets mature, that product consumption changes often by age group, et cetera. So it is interesting to watch, and it's something, as I said, that you picked up on early.
Now in terms of markets, over the last six months, Missouri's been a big story where they had thousands of applicants and they issued all their licenses over the December timeline, and now we've got West Virginia that just talked about who their applicants are. So some of those people are going to be processors, extractors, manufacturers. How do you approach a new market like that? Like one that's about to come on, and what does your team do to get ready and work to be successful?
Nick: Sure. Again, without giving away all the secret sauce, we're constantly looking at the same data that you are, perhaps different data that's telling the same story. We know when the states are coming on. There's usually a lot of grassroots organizations and things like that that helped push these laws through that... It really depends too, Ed, on what the specific construct is in the state. For example, Ohio and Pennsylvania had a more, I would say, closed construct with a limited amount of licenses.
Nick: So those license holders were easy to reach, they were easier to contact, very straightforward to figure out. But that's not to say that the larger amount of license holders doesn't represent an equally large, or even better, opportunity.
What we do is identify those license holders, and we're absolutely reaching out to these new markets well in advance of them coming online. So, it's something that we're always looking at, we're always monitoring, and we're always trying to get in a pole position.
Ed: That's a great approach, and I think it's certainly one that will lead to future success as these new markets come onboard.
Amanda: Well, thank you so much for joining us today, Nick. It really was a pleasure to learn more about Precision Extraction and yourself. We look forward to hopefully seeing you guys after quarantine at another trade show, maybe next year, but we thank you so much for joining us today.
Nick: I would look forward to it, and we'll see you then.
Amanda: So Ed, what's coming up next?
Ed: Well, the data team, now that the first quarter's over, is going to be going through a variety of reports to take a look at what happened in Q1. At the top of the pod, we talked about what's happening in retail.
Next week we're going to dig into the cultivation licenses for the first quarter. The quick look shows that over 1700 licenses were issued, and to nobody's surprise, they virtually all came from California and Oklahoma. Those two states were responsible for 93% of the new licenses issued.
California is still the leader, kind of edging out Oklahoma, and the interesting thing about Oklahoma though, is it does seem that the rate of license issuance has dropped a little bit. They still issued more than they did in Q4 last year, but they're way down from their peak last summer and last fall. So that's what we'll be reporting on next week.
Amanda: Well, looking forward to it, and I wanted to thank everyone for joining us on today's podcast, we're your hosts, Amanda Guerrero and Ed Keating. Stay tuned for more updates from the data vault.