Editors’ Note: This is the transcript version of the podcast. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below if you need any clarification. We hope you enjoy!
How does a company handle cannabis from seed to sale across multiple states with regulation differences?
Listen to The Dime podcast’s episode where Bryan and Kellan speak with Robert Beasley of Cansortium.
Cansortium has developed strong proficiencies in each of cultivation, processing, retail, and distribution activities, the result of successfully operating in the highly regulated cannabis industry.
Listen to today’s episode for:West Coast vs East Coast Cannabis Florida legal cannabis market Educating new cannabis users Cannabis scaling limitations
Receive more information on Cansortium through their website: https://investors.getfluent.com/
Love The Dime Podcast? Sign up for our monthly report to receive insights and trends into the cannabis market: https://www.eighthrevolution.com/monthly-report/
[00:00:00]Bryan Fields: This is the dime, dive into the cannabis and hemp industry through trends, insights, predictions, and tangents. What’s up guys. Welcome back to that episode of the dime I’m Brian Fields of with me as always is my right-hand man Kaelin Finney. And this week we’ve got a very special guest Robert Beasley, CEO of consortium that does business as fluent.
[00:00:23] Robert, thanks for taking the time. How are you doing today?
[00:00:25]Robert Beasley: I am great. Thank you for having me on
[00:00:27]Bryan Fields: Kellan, how are you doing??
[00:00:29]Kellan Finney: I’m doing great, really excited to talk to a couple more east coasters today,
[00:00:33]Bryan Fields: before we dive in, I’d love to get a little background about you and how you got into the academy.
[00:00:38]Robert Beasley: Well, like a lot of folks that have entered into this space.
[00:00:41] I was a frustrated lawyer. I had a full-time practice and commercial litigation and real estate development and became involved in the early days of the constitutional amendment guidance in Florida when the amendment two was being passed and proceeded to track into the legislative process. And then the regulatory process assisting [00:01:00] clients with the more legal, technical issues of applications and guidance and.
[00:01:04] Ultimately I ended up on the boards of a board of one of the first MTCs in Florida and made my way through that to be the chairman of the board, and then brought that company through its early days of development with processing packaging. And. And we ultimately sold that company to Africa, which is now Liberty.
[00:01:24] And so from there, I went out to develop other cannabis businesses throughout the United States and Oregon, California, and Washington DC. But it was the same thing someone had received or investor group had received the ticket and now they needed to turn it into a business. And so. Kind of becoming known as the startup guy, helping these startups get on the ground and off the ground.
[00:01:45] And then was asking January of 20 summer of 19 to come in with the fluent and do a different role, which was more of a consultant role in helping the company pull wings up and nose up and get back in the game. So having performed that role. I guess I’m now [00:02:00] a startup guy and also the salvage guy.
[00:02:02] So we’ve taken the fluid company from where it was to great Heights now. And I’m very proud of the progress of the last year and a half.
[00:02:09]Bryan Fields: What was one of the biggest challenges that you’ve seen in the growth of fluent? And then let’s dive into kind of what fluent.
[00:02:16]Kellan Finney: So fluent is a multi-state operator and that’s, that’s, that’s the first thing to know about one of its biggest challenges and its challenges in the condition that I came into was not really that different from Mednet or some of the other entities, you know, in the early pioneer days, it was a race for footprint.
[00:02:32] It was a race for licenses. So fluent. No. They were originally awarded the knots license in Florida, one of the first seven big deal, big award. And then they went out and got a Texas license and then a Michigan license and then a couple of Pennsylvania licenses, then a Puerto Rico license. And so they ended up in the state having run this race.
[00:02:52] What I call a hundred miles wide and one inch deep, you know, being spread out so thin. Capital’s very hard to come by in this market, although it’s getting better [00:03:00] in this sector. And so not able to be in a position to invest vertically in their assets to develop them out. So what we did was we pulled back to the essential core footprint what the moneymakers were, where the big markets were Florida being the premier.
[00:03:14] And then started investing vertical in the company instead of being so horizontal and that, you know, big picture shift change. That’s really the heart of it. And many, many companies found themselves in that same circumstance, they had more licenses and more potential than they had assets to develop and Capitol.
[00:03:29] And I just want you
[00:03:30]Bryan Fields: to expand for our listeners that are on familiar. Can you expand on horizontal versus vertical from an investment standpoint?
[00:03:36]Robert Beasley: Sure. So in the context, I was just using it horizontal breadth of coverage, meaning number of licenses, a number of states, you know, MSO means multi-state operator and to be a Mo MSO, you have to be in more than one state.
[00:03:49] And so that was the early pioneer goal of these companies with. Go get that next license so that they were in more states. So you can achieve that. And it [00:04:00] takes capital and time and effort to get that license. But the license is just a piece of paper. And then from there, you’ve got to do the hard work, which is, you know, you’ve got to build a cultivation center, you’ve got to build a processing center, you’ve got to build a retail, whatever your licensing allows you to do, you’ve actually got to actually do it, which is a lot harder sometimes in being the lucky winner of a.
[00:04:19] So that’s the vertical versus horizontal concept I was talking about in that context, typically that those phrases are used in the context of the type of licensing that is available in a state. Some states allow entry points into the market at other stages. Like you can just retail or you can just process, or you can just grow some states like Florida and Texas are truly vertical.
[00:04:42] And that’s where you hear that word used most often, meaning that we do it all literally in. We grow the plant and we sell the final product from cradle to grave, seed to sale as they call it. And so we’re responsible for every step of the process and we can’t sub any of it out. And that makes it very difficult because [00:05:00] it’s one of the few industries that I know of.
[00:05:02] And maybe the only industry where we are an agricultural. We’re a chemical manufacturing company. We’re a processing packaging company. We’re an advertising company. We’re a marketing company, we’re a retail company. And we also are a logistics company to support all the movement of those steps that I just told you.
[00:05:19] So it makes it very, very complicated in highly regulated and very capital. And I’m
[00:05:24] glad you shared that in Kellen. I want you to expand on that. Cause a bunch of times we’ve talked about as a vertical integration company, you’re essentially like Robert described you’re all these companies in one, so kind of specializing one makes it even more challenging.
[00:05:36]Bryan Fields: Kellen can expand on that.
[00:05:38]Kellan Finney: I’m just laughing. Cause Robert, you literally almost said exactly what I was going to say verbatim. As far as vertical integration goes, I mean, running an agricultural centric business requires. A completely different set of operators versus a chemical business versus a retail location.
[00:05:54] I mean, it’s, it’s pretty wild in terms of how all those departments have to play together. [00:06:00] And then you add to the fact that you guys are not only doing it in Florida, but you’re also doing it in other locations as well.
[00:06:06] So how
[00:06:07] do
[00:06:08] regulations and those kinds of challenges
[00:06:10] from state
[00:06:10] to state affect that vertical
[00:06:12] integration?
[00:06:13] model You have two components of that. You have the regulations themselves. And of course we have developed regulatory compliance department, a legal department, if you would. And, and every person has their own specialty. So we have a Michigan person, a Pennsylvania person and and so forth. And so you know, the rules are different.
[00:06:29] They are somewhat similar in many aspects. A lot of the testing protocols are similar, a lot of the ways of seed to sale tracking. Software may be different. The concept is the same, but what sometimes we see as the most difference is the regulatory attitude that we face. For instance, Michigan, Michigan is either understaffed or under motivated from a regulatory point of view.
[00:06:53] They’re just not that interested in helping out the industry or really even policing the industry, [00:07:00] which causes this massive influx of illegal activity. Illegal. Very very slight regulation. They’re not doing their job. And when they don’t do their job, they don’t protect the market, which means we’ve got capital outlay that we don’t get the returns on.
[00:07:15] The pricing, is that what we thought it would be because of all the illegal product. So you go from there down to Florida, Florida, they’re doing their job. They’re enforcing, they’ve got a robust reinforcement group. They also have a very cooperative administrative group for things like variances. Move that over to Texas DPS, a Texas, very small program, three licenses.
[00:07:34] Those guys are actively helping us everyday, trying to help us get our businesses off the ground. Get a viable economic model. They want some. And so we almost have a partner in Texas with the regulators to try to help us navigate, whereas Florida they’re regulating us, but they’re doing a good job.
[00:07:51] And then Michigan, they’re not doing anything Pennsylvania. You know, they’re an understaffed department. And so getting things like advertising, here’s an example, very strict [00:08:00] advertising rules in Pennsylvania to open a store. Every thing you say and do and put to the press has to be. Their process of proving.
[00:08:08] It takes a while and you got to keep calling and asking, when is it going to get done? Well, in the meantime, I’ve got a store that opened that is completely unsupported by advertising. It’s what we call a soft opening in the business, but you usually don’t have a two month long soft open. And so, you know, I can’t get my regulatory partners to understand that I need this stuff approved so that people know where I’m at and what I’m selling.
[00:08:29] You have a variety of environments that are different, but not necessarily different because the rules are different. They’re different because the posture and staffing capabilities of the agent.
[00:08:39]Robert Beasley: Which just adds to another layer of complexity and the challenges that face on a day to day basis. So when you’re staffing those positions, are you putting somebody in a higher macro role overseeing certain verticals, or are you putting them in specific and saying, Hey, you’re in charge of X for Michigan and Y for Florida.
[00:08:55]Kellan Finney: So for client’s point of view, I’m the chief legal officer of our [00:09:00] company has within his department. Other law. That are assigned and tasked with knowing what the Michigan rules say. So when I want to know whether we can do something in Michigan, you know, there’s someone on the phone there that says, I know these Michigan rules so forth.
[00:09:14] We also have local council if it’s a zoning matter, so forth, but from a operations point of view, each of the operations have a kind of a person in charge on the ground. And so usually have an interaction between them. It’s illegal at headquarters, then it gets to my office and headquarters. Do you guys see a significant operational differences from like
[00:09:34]Robert Beasley: Michigan, which is an adult use state versus Florida, which is medical market.
[00:09:37] I mean, but fundamentally are you guys running the businesses the same or are there, and there’s just kind of like
[00:09:43]Kellan Finney: slight nuances that
[00:09:45]Robert Beasley: change from the
[00:09:46]Kellan Finney: medical to the adult use market. So, you know, you mentioned how our business is divided in a vertical scenario in sectors. And so I can answer that question by sector.
[00:09:56] So in the agricultural base aspect, it is [00:10:00] different because it’s different climates, different growing environments. Even within Florida, we have three facilities in Florida. Each of the facilities has their own facility manager and those facilities are organisms.
[00:10:11]Robert Beasley: Things are a little bit different from facility to facility, how they do things because you’ve got different.
[00:10:15] enviornmentals When you take a facility in Florida and then compare it to the one in Michigan, totally different environments. You know, up there, they gotta worry about frost Florida to never has a frost. There’s all kinds of, so agricultural practices are different, but that’s being driven by the environment, the next step, which is processing, not all that different, you know, how you extract the equipment you’re using the resulting process.
[00:10:37] Flower stream versus a oil stream is all kind of the same. Then when you get to the retail arm, it’s again, a little different in those states, which are non vertical. You have entry at the retail level of wholesalers where our shelves may stock. For instance, in Pennsylvania, our shelves may start the Cresco.
[00:10:57] It may stock a pyramid or curely product [00:11:00] along with our own products. Whereas in Florida, it’s just,
[00:11:04]Kellan Finney: I appreciate you
[00:11:04]Robert Beasley: highlighting that. So before we dive into some of the, more of the specifics in the Florida market, obviously no day’s ever the same, but from a hundred percent, if you were going to chunk your day into percentages on, on how you spend your day and responsibilities, can you kind of break that down for us?
[00:11:18]Kellan Finney: Sure. You know, it’s kind of like a speech I just gave to some of the managers the other day. You know, you, you handle plants and stuff until you get to a certain level of management and then you handle more people than you do stuff in processes. And by the time you get to my level, you’re mostly all handling people.
[00:11:33] And so I manage by consulting and giving a directives and taking him. But from. And those teams are representative of any one of the components. This morning I’ve had, this is my fifth zoom of the morning, and this morning, the zooms and called someone from processing and packaging on methodologies of segregation, purely from Florida, just messed up by getting some, not tested product on the market that had mold.
[00:11:58] And they had to recall it. And it’s a [00:12:00] terrible embarrassment for them. They’ve had to recall some product because of the mold, but honestly, it was a very easy, simple mistake that. And so I spent an hour or two this morning with those teams, understanding how we can do better and not be on the news for selling out product that wasn’t tested yet.
[00:12:13] You know, nothing, it was a very easy, simple mistake that has big consequences. So my day is. Sitting in on meetings where teams that are prepared to propose solutions. And sometimes I’m just that final decision. You know, ultimately I take recommendations from those who know and I make the decision and the way I talk about it is I decide because of it’s a total disaster is my fault.
[00:12:36] If it’s a total heroic when it’s your, your compliment. So after that, what I do is I, I talked to investor groups, you know, we are publicly traded. We have many stakeholders that want. A lot of those stakeholders are active because they hold large percentages and they feel entitled and privileged and they are entitled and privileged to call the CEO and ask them some questions.
[00:12:56] I have to be very careful about not releasing material non-public [00:13:00] information. We only do that at the quarters, but you know, the creative investors that are in the business, they can ask a bunch of questions and try to get themselves up a little bit more confidence in what’s going on. So I do a lot of investor relations and then I do a lot of brand awareness and advertising for the brand fluent, like this podcast.
[00:13:17] I do interviews and podcasts and talk about the brand and talk about the market.
[00:13:21]Robert Beasley: So let’s talk about the Florida market. What would you say is the current state of the Florida medical.
[00:13:26]Kellan Finney: So it’s still developing. It still has lots of room to grow. There is a current patient slow down as far as new patients and where we hit that 600,000 market has been slowed around the hill.
[00:13:38] And that is because we haven’t had a legislative driver to bring new patients in. There are plenty of additional, extra patients out there in Florida that are potential patients that have not come to the market. But what we saw. You know, you had a low THC, the high THC, that was a big driver. Then flour came on board.
[00:13:55] Then edibles came on board and every time the government or the regulators [00:14:00] released some component of the industry to provide additional services or conditions or whatever, we had a wave of new patients in DOH has been silent on that. For some time, we haven’t done anything from a regulatory point of view that was newsworthy that caused an additional patient group to come from.
[00:14:16] Our to come to the market. So that’s why you have the patient slow down, but the market is very robust, very active. And so the demand is still there. Now on the supply side, you know, in the last 12 months, we’ve seen the bigger MSOE come in and buy up some little guys we’re in a consolidation period. Those bigger companies have more capital to put on the ground.
[00:14:37] They are all in expansion mode right now. We’re not yet seeing the effect of. In the market, in the pricing of the market, although there was recently a discount where we can talk about but that wasn’t really anything more than an instance we can talk about, but, but we’re what we will start to see increased pricing competition, increased product availability.
[00:14:57] As far as types of products, you know, the Florida [00:15:00] market will be the consumer will be better served. In the next 24 months than they are now with store availability. I mean, I, you know, some of these guys, the bloom up purchased by Cresco, they’re coming in strong. They’re going to put however many stores on the ground in the next 12 months.
[00:15:17] And so folks who don’t have a store nearby, we’ll probably have one in a year from now. So that’s going to help the consumer cost of board. So pricing will start to inflect down a little, but not a lot. Honestly, the fact is that we’re all doing it the same. You can talk about who does good, who does bad, but the results of the regulations overlaid on the environment, overlaid on the cost and efficiencies.
[00:15:40] We’re pretty much all doing it the same way. And it cost us pretty much all the same costs. So there is a, a, a point where you know, we’re not going to sell it for less than we make it for. And so there’s a limit that price decline. There will be an adjustment that benefits the consumer, but it will not continue to go down for.
[00:15:58]Robert Beasley: Share some more information on the [00:16:00] Florida market. I know you’ve done some research there from a pricing standpoint, kind of expand on
[00:16:03]Kellan Finney: it. I just I gonna take one
[00:16:05]Robert Beasley: moment and highlight what Rob said that they’ll never sell. Anything for less than they make it. I think that’s brilliant business advice,
[00:16:12]Kellan Finney: honestly.
[00:16:13]Robert Beasley: But yeah, the price war is a thing happens
[00:16:15]Kellan Finney: in every single state from my experience
[00:16:17]Robert Beasley: where my
[00:16:17]Kellan Finney: mind goes is, yeah,
[00:16:19]Robert Beasley: there’s different strains of cannabis. And like Rob said that they’re all kind of following the same recipe as far as trying to generate
[00:16:27]Kellan Finney: the, the highest quality material for the
[00:16:31]Robert Beasley: least amount of capital.
[00:16:32] So with everyone kind of running towards the same finish line, how do you separate yourself from the pack?
[00:16:38]Kellan Finney: Robert there’s a lot of things that, that do that. New and innovative products. Florida’s a very young consumer market. This may be stale data, but our patient age was 53 average patient age and they were new timers to cannabis.
[00:16:52] And so, whereas when you go out west and you look at the patient market that they’re in the quasi medical, [00:17:00] California market, when it was, you know, a lot of those were traditional cannabis. Now coming into the system and adopting it for medical use, but their daily consumption that didn’t change much.
[00:17:09] They just went from buying it illegally to buying illegally. Whereas our patients are a lot of times, this is their first experience with this medicine known as cannabis. And so they’re young consumers inexperienced consumers, but now we’re educating them. And what we’re doing is the competition is telling this consumer, Hey, You know, it’s not all about THC because right now, THC sells in Florida.
[00:17:33] TC always sells at a young market, but when the competition comes in and you get a cookies and jungle brothers and those guys, younger boys, I’m sorry. And those guys come in and they’re like, Hey, it’s not about all THC. Look at these other qualities of the plant. Look at these other, you know, let’s talk about canabinoids Tom, a terpene.
[00:17:51] And so all of a sudden the consumer starts being told what they should be looking for, and then they become more savvy and that’s the direction [00:18:00] everything’s heading. And so, you know, truly, you know, truly, it was just massive in quantity and really mediocre and quality. My very first report to the fluid board.
[00:18:11] The very first month I was on the job was we sell a mediocre quality and quantity. Those are the facts. Good news. So does everyone else. And so we’re right in the market, but that’s going to have to change and that’s going to be the movement. It’s going to be an interesting dynamic where pricing settling down, the quality is going up, and then we’re talking about quality more.
[00:18:30] And that’s really in the flower industry. And then with respect to the other products, there’s lots of new, innovative products that have not yet been on the Florida market. As we roll those out, for instance, we’ve got this. Pre-packed three and a half gram pipe right now, little glass pipe that is just flying off the shelves.
[00:18:46] Convenience. It’s not a pre-roll, but it has the convenience of a pre-roll. We discovered this, this product from, from another vendor and we’re the only ones offering it. Now we’ve got that edge, right? We’re going to sell that product and people are going to come in for that product. So [00:19:00] those are the couple of ways that you stay competitive with
[00:19:04]Robert Beasley: your board.
[00:19:04] Surprised when you, when you told them that message about the quality of.
[00:19:09]Kellan Finney: No, I made sure that I followed it with it’s okay. Because everyone else is. But it was a hard message and it was meant to be delivered for the impact that it had, because what I was doing was advising on the current status of our company versus where we needed to go.
[00:19:24] And so it wasn’t so much to be derogative towards our company’s products or anybody else. It was just, here’s where we are in the. And I always prepare it to alcohol. When you start out first, legally able to drink no one drinks before they’re legally able your energy level is fireball shots, tequila shots, high, high octane stuff.
[00:19:44] You’re all about potency, you know, jello shots, you know, then later, you know, you’re, you’re drinking beer, but you maybe try a craft beer and really focus on quality over quantity. Then you know what time you get my age? You’re a red wine drinker or maybe a nice stock, but you just want a glass. You don’t need to drink the whole [00:20:00] bottle for your night’s views.
[00:20:01] That is the same evolution that you see in cannabis. When you come into a young market, we are still in THC cells, but we are coming out of it now we’re, we’re maturing in
[00:20:11]Robert Beasley: the, so when we talk about maturing, are we using data sets from a previous sales? Let’s say if purely product in Michigan, for example, like you were saying before, it’s selling really well on a certain product form and you know, it might hit a specific demographic here.
[00:20:26] Is that one that fluent might look to integrate into their portfolio? Or how do you do about the development of the information and then moving it forward from marketing.
[00:20:34]Kellan Finney: So, you know, the winds blow and cannabis from the west to the east. And then they, they blew to the Northeast first, across the top of the country.
[00:20:41] And then the Southeast is still the last frontier. Now, you know, we have many Southern states that don’t even have a program yet, but their legislation is in process. We look out west at what’s coming down the line. We were just at MJ biz out in Vegas. You’re looking at what’s going on, you know, go to planet 13.
[00:20:56] So you, their concepts see their product lines, see what’s happening [00:21:00] out there. And so that’s what we look to. Not necessarily our other stores, but that Western. But here’s the problem. It doesn’t evolve as fast as you can drive or fly from California to Florida. And that’s the, that’s where a lot of these California brands are really, it really breaks their heart.
[00:21:14] I mean, you know, I talked to them and they tell me how they’re going to do this thing in Florida. And I tell them, they’re not going to that the thing they’re doing 40 isn’t ready for yet, because they flew over here on a plane, but the market didn’t come that fast. And so you can look at that as an example of where your.
[00:21:30] But then the trick is what’s the pathway between here and there. How do we bring those customers along? How do we get them acquainted to this product? Because I can throw a Western product, a California product on my shelves and it flies off the shelves out west. And it doesn’t move here because they’re not ready for it.
[00:21:46] They haven’t been educated to accept it yet. And so that’s the biggest.
[00:21:51]Robert Beasley: How do we educate people to accept that it’s going to come through the
[00:21:54]Kellan Finney: competition? You know, I used jungle boys in cookies and I’m not sure what’s going on with cookies, but cookies [00:22:00] rolls in here. You know, you hear the name cookies.
[00:22:02] Well, if I’m a Florida consumer that just tried cannabis for the first time. And, you know, and literally this is a real example. I brought a note from my pastor to make sure that it was okay, that I try cannabis because it’s the devil’s weed. Cookies are a, are a dessert to me. Right. It means nothing to me, but when the advertising and the word gets out that there’s this aspect of cannabis, that is a quality.
[00:22:26] That is a whatever. Maybe I try it, you know, maybe I go, well, let me try this thing. And I’m not trying to advertise cookies in this podcast. I’m just using as an example of a Western brand movies. You know, there’s nothing particularly unique about what they’re doing, except they’re growing a different profile, but I’m not ready for that profile yet.
[00:22:42] Unless I’m told that I should try it. It’s about consumer awareness. And so the competition is going to do it. We’re going to say, Hey, try this thing. We’re doing. And then someone else is going to say, Hey, we’re doing that thing too. You should try ours. And then together, we push each other up in in consumer awareness,
[00:22:58]Robert Beasley: we’ll send burner a [00:23:00] bill for the podcast.
[00:23:02]Kellan Finney: You know, I know he’s much respected in the industry and I I’ve got no issues with them. I just know that, you know, it’s not as quick or spin up as, as people expect it to be cookies, really unique
[00:23:11]Robert Beasley: brand to, especially for like the
[00:23:13]Kellan Finney: Florida demographics.
[00:23:14]Robert Beasley: Like when I think of Florida, like my grandparents used to live in Florida, like I think of a lot of.
[00:23:19]Kellan Finney: Kind of the older generation that’s settled down and like, like you said, like, I mean, I don’t
[00:23:24]Robert Beasley: have the sweet tooth I had when in my twenties. So I imagine that it does not, it
[00:23:28]Kellan Finney: continues to trend that way.
[00:23:29]Robert Beasley: So it sounds like a hard brand even push in like an older
[00:23:33]Kellan Finney: population. That’s just my 2 cents.
[00:23:34] So I’ve met with many, many brands from out west and, and like I said, it’s, I feel like I, I feel like I break out with my girlfriend every time I do that, because I really, I really heard the farmers because they are really keen on their brands and, you know, good gracious. They’ve made a ton of money off their brands.
[00:23:50] All they had to do was stick the brands out there and it was readily absorbed and they got a great. And then when they look at me and I say, it’s not going to work here. People don’t know you and they don’t [00:24:00] care. Because we don’t have multiple brands on our show. They walk into our store, it’s all fluid.
[00:24:05] And that’s because it’s required to be all fluid. And I had one gentleman, one young man who’s made a million dollars out west. He said, well, that’s because y’all, aren’t using any billboards. You don’t even know how to use billboards in Florida. So I, you know, Florida’s got a lot of billboards. You probably should take note of the fact that it’s illegal for us to do.
[00:24:21] So, you know, when you come from out west to Florida, you’re going to follow the same rules we do. You’re going to get in the same box that we do, which means white labeled products, no colors, no, no artificial colors, no artificial labels. You know, you’re going to sell your stuff in the same white box.
[00:24:37] I’m selling mine. And now what are you going to do? So that’s my branding. Doesn’t follow.
[00:24:43]Robert Beasley: The game becomes a little more challenging when some of the rules are a little more tighter. And as you were saying perfectly, the west coast there, they’re used to with different kind of set of skills and rules to play by.
[00:24:53] And when they come to the new markets, it’s a little surprising sometimes for them because the adoption is just a little more different [00:25:00]
[00:25:00]Kellan Finney: in the news. The bad news for them is all the Southeastern states are going to do the same. They’re all going to be tight. They’re all going to be really restrictive.
[00:25:06] You know, the catchy logos and everything may not pass. It’s good for the, for the industry as a whole, you know what I mean? It’s at least it helps stick, change the cultural stigma. You know what I mean? I mean, it’s a win, right? That’s what I chalk it up
[00:25:20]Robert Beasley: as a win
[00:25:20]Kellan Finney: because we’re playing the long game. So to get, I get legislation passed in the Southern states, you have to do a lot of compromises and all of this compromises have to do with, you know, making it not recreate.
[00:25:30] Pot and making it a drug making it a medicine. So when you start stripping out all the recreational aspects, that’s what you have to do to get it past, you know, you don’t have,
[00:25:39]Robert Beasley: I mean, I don’t have any sweet branding label on my medicines. I go pick up at the pharmacy. So, you know what I mean? Like it’s the same orange bottle with
[00:25:49]Kellan Finney: the light, like candy it’s medicine.
[00:25:50] That’s right. Yup. So
[00:25:53]Robert Beasley: let’s, let’s continue on the conversation. How do you Robert balance let’s say growth into new markets [00:26:00] versus optimization into current markets. How do you balance that relationship? So
[00:26:04]Kellan Finney: when you grow into a new market, you have to understand what the challenges of that market or Texas is the best example.
[00:26:11] Texas has a very low patient registry right now was 5,000 people. I think it may be higher now. Since the new legislation came through. And so when you think about that market, what does that mean? Well, you know, there’s three licenses in Texas currently, but we could service five to 10,000 customers just with our facility.
[00:26:29] So, you know, there’s, there’s not enough people there that are actually participating in the program. So you’ve got to think about, well, what do, I’ve got to do vape? I’m not about capturing market share. I’m about creating market. So you go back old school, Florida ways where you have these cannabis awareness days, you have these educational seminars, you hold banquets in the hotel, lobbies and the hotel banquet rooms, where you bring people in and go, let me teach you about this because you’ve got to learn.
[00:26:54] And here’s the trick where you teach the consumers. You got to teach the physicians because they all have to go through a gatekeeper [00:27:00] and you don’t have a lot of physician buy in, in the early market. So you’ve got to touch that physician market, get them buying in, find out who your physicians are. That are interested in being in the market because it’s not a money maker for doctors.
[00:27:13] You’re not going to have a orthopedic surgeon, turned cannabis doctor, unless it’s commensurate with their retirement. From the orthopedic surgery practice. It’s not insurable, it’s cash pay. It’s, it’s limited on what the doctors can make. And it’s very clinical and. So you’ve got to get the physician development first because they’re the portal to get the customers in.
[00:27:33] You’ve got to think about. And that was just an example. When you asked me, how do I break into a new market? Well, that’s how I break into texts. Other markets, it’s more about product competition, whereas development of your existing market right now has to do with footprint and production capacity.
[00:27:48] Historically, every market is underserved and production. Florida’s the same as everyone else. We did not build enough growth space. And so that’s what everyone’s doing right now is expanding. If [00:28:00] you can grow it, you could sell. So you just gotta figure out how to grow more. And so expanding in a market right now means expanding your production capability.
[00:28:09] And then
[00:28:09]Robert Beasley: continuing on that conversation on the flip side, having the conversation with investors and letting them know that this is not going to be a immediate return on our cash investment in Texas, this is a longterm play. How does that communication go down? If you’re reading the reports, you’re seeing all these other states that are having booming sales numbers and something like Texas is a longer-term place.
[00:28:28] So how do you communicate information
[00:28:30]Kellan Finney: to your shareholders? So what I’d say about Texas is we have a plan to capture and build market share. It is not a plan to build revenues in the first couple of years and that, you know, what I like to do is I actually like to reference with truly did in Florida, you know, They came out with a big cultivation footprint and they gained a bunch of market share.
[00:28:47] But it wasn’t that profitable. And then that market share volume, turned into profit over time. You know, I want every new Texas patient to be a fluent patient because I need everyone up. And then if we continue to grow that [00:29:00] program over. And that seven or 8,000 patients turns into 200,000 and I have 60% of them now I’m making revenue.
[00:29:07] And so that’s different now in the states where we’re increasing production, which has been the status we’ve been in for the last year. I have to very basically explained to the investors into the market that those plants do not. At all, they’re going to grow as fast as they’re going to grow, regardless of how many dollar bills I wave at them.
[00:29:26] And so the fact that I have investment money, I can’t take that a hundred dollar bill and tease that plan to do anything different than what it’s doing under the pathway that. And so that’s just the reality of farming. Then I have the additional reality of constructing in this environment. So I’ve got to build it first.
[00:29:42] I’ve got to build it in an environment where the supply chain, regardless of what the president just said, the supply chain is severely impacted to get the materials we need in a specialized agriculture industry, which means. Fertigation supplies tables, grow benches, poco to grow and cocoa. All that cocoa comes [00:30:00] from Thailand and over there, which has got to get on a ship.
[00:30:02] And so, you know, I’ve got to beat the supply chain problem. I gotta beat the labor problem that COVID created, those COVID created. And then I’ve got to grow plants that only grow as fast as they want to grow. How do you find the, as far as the size of the facility
[00:30:16]Robert Beasley: to meet demands? Because it sounds like it could be pretty easy to maybe even overproduce
[00:30:20]Kellan Finney: this.
[00:30:21] So overproduction is a spectrum that we’ve all talked about, but no one’s experienced, you know, and what has happened is I talked about these legislative events that bring people to the table. There are more on the horizon. I think in Florida reciprocity, we could increase sales by 35, 40% on a reciprocity.
[00:30:38] Without adding one new port, a patient, because reciprocity would allow all of those people that come to Disney world and to Tampa and to Miami and to Jacksonville which are a lot of folks who have cards in New Jersey and New York and wherever to go to our store. And so big change there. And then we haven’t even talked about adult use, you know, we’re two, four years out and he went to governor election does to [00:31:00] opening up adult use on a 23 million population.
[00:31:03] That has an influx of another 20 million of seasonal. And so every, no everybody comes to Florida to do something. And when, when they come to Florida, we’d love them to have a good time and doing cannabis when it’s recreationally allow. So there is not a production limit problem right now.
[00:31:18] Goldilocks is an interesting phrase. And I get the pleasure of meeting and talking with other CEOs of other MSOE, some of which were much larger than us. And this industry’s biggest problem is scalability. You know, when we first all started as pioneers coming into the business, we had to look to.
[00:31:37] Technology skills and techniques of essentially those who ran illegal grows, but illegal grows had scale limitations. You know, when, when I talked to a quote grower and I use those quotations, often every time I say the word grower, you know, I’ve got to decide, you know, where there’s growing techniques, but those 10 plants behind grandma’s house out.
[00:31:59] Or, you [00:32:00] know, was that an indoor facility and, you know, does it scale? And so I asked that grower every time does it scale because I appreciate that you did that for a hundred plants sometime ago, and you had no market driver getting those stores to feed, you know, it just, it was ready when it was ready.
[00:32:15] And you’ll sell no weed before its time, but I’m running out 10,000 plants a week on a production schedule. Does it work for me? You know, is your special fish eggs stew? Can I run that at 20,000 gallons a day? Or do I run out of. And so scalability is the jump. We all knew that those of us who are running 60, 80,000 square foot canopy spaces, we know that scalability is the killer, but now these guys are running two and 300,000 square foot canopy spaces, and it’s a whole different league.
[00:32:42] They’ve gone into a whole different ball game. They’re not even using the same ball where you, and they’re running into all kinds of scalability problems because the techniques we use are now not. And so it’s a scale jump issue.
[00:32:53]Robert Beasley: We, one has licenses and operations in Florida, Pennsylvania, Michigan, and Texas, all Kiki [00:33:00] states.
[00:33:00] But non-art the more mature states such as California, Oregon, Denver. So is there a future state that you have got your eye on
[00:33:08]Kellan Finney: in the roadmap? Yes.
[00:33:11]Robert Beasley: That’s a good answer.
[00:33:17] Yeah, it was worth this swing. Right? I had a couple in my
[00:33:20]Kellan Finney: mind that I was telling you I’m seasoned at talking to investors
[00:33:25]Robert Beasley: proprietary, but I had a couple in my mind. I was wondering if you’d take one of the boxes since you’ve been in the cannabinoid industry, what has been the biggest misconceived?
[00:33:36]Kellan Finney: So scale.
[00:33:37] I just mentioned that I don’t want to talk about it again, but that has been the biggest in the production area, which is the techniques and knowledge just doesn’t scale up the other, is that getting a license gets you somewhere, you know, I, all the time run into people that say I’m really wanting a Florida license and I’m like, no, you don’t.
[00:33:56] I said, that’s a $50 million ticket to that invites you to a [00:34:00] $200 million problem. You know, You know, getting the license, isn’t the touchdown. It is the start of the game. And, and folks just don’t realize that all the works ahead of them you know, I’ve talked to groups that we’re going to get a license and then they’re going to do these things.
[00:34:14] I just get tired listening to the pathway when I think of the pathway that they have ahead of them, but they don’t even know enough to know how tired they should be looking at it. It is a highly regulated industry. That’s very capital intensive to do it at scale that is new and it’s a frontier and, you know, pioneers die on the trail side all the time.
[00:34:33] And you know, we’re the pioneers that are suffering, you know, Sit back a little bit. This comes into this social equity issue that I’m hearing a lot about. Really, if, if we want to have a good social equity movement than it needs to be in the retail licenses, because retail’s pretty easy to come up with speed with a low capital investment.
[00:34:51] I can buy wholesale, sell retail, go get me a store on the corner. Put it on the shelves and make some money it’s, you know, lightly entering into this business. But you know, [00:35:00] what you don’t want to do is burden of. Well, they full vertical license that they just really can’t come up. Really well said before we see that, I mean, Florida’s got multiple licenses that are not being used because they don’t want to make money because it’s, it’s an awful big burden.
[00:35:16] You get that license.
[00:35:17]Robert Beasley: You’re not just running one business. I think you did a really good job of expanding on just the complexity of the challenges of that, because there really can’t be a redundancy of the talent from one to the other. You really need specialized people across the. And finding that with the labor on the capital, it just, the levels of challenges continued the
[00:35:33]Kellan Finney: pilot, culturally, it’s kind of a, an interesting brew.
[00:35:36] If you go down to like our facility, one of our facilities we grow and we produce we process. And so you have a bunch of growers. With dreadlocks and tattoos, engage earrings and a bunch of chemists, all eating lunch together, a wild group to go in and talk to.
[00:35:53]Robert Beasley: You can only imagine diversity though, right?
[00:35:56]Kellan Finney: That’s true. Diversity.
[00:35:59]Robert Beasley:[00:36:00] If you could sum up your experience in a main takeaway or lesson learned to pass onto the next generation, what would it be?
[00:36:07]Kellan Finney: It’s not an easy business. Vertical is the bigger challenge. But it’s still very young and still a frontier business. There are still plenty of opportunities and maybe don’t focus on being the license holder.
[00:36:22] Look at the ancillary industries that are spinning up related to this. You know, everything from packaging to fertigation techniques software. You know, support this industry. If you can’t get in it mainstream, think about how to support you know, what are we doing with our soil? You know, we’re not recycling our soils, we’re throwing them out, you know you know, look for opportunities to enter this industry and an ancillary role.
[00:36:46] If you can’t be in the mainstream role, because it is vital fire prediction,
[00:36:50]Robert Beasley: time, Florida, or Pennsylvania who goes don’t wreck first.
[00:36:57]Kellan Finney: Pennsylvania goes first. It is in the [00:37:00] wave of those Northern states that new York’s flowing over Pennsylvania has the politics to support it. The governor of Florida is not a supporter of the expansion of the program.
[00:37:10] The department of health and Florida has been very lethargic. You know, they should have already issued more licenses. They haven’t worn it as a much more contentious market. Pennsylvania goes first, Florida is 24 or later, depending on the governor race. When you think Pennsylvania. Pennsylvania’s and, you know, next legislative session, it’s already the wind and not the how or why as already being discussed.
[00:37:33] And so I think it’s a votes issue. Pennsylvania is a great market. The consumers, there are, they are very supportive of the market and it’s got good economics, good regulatory concerns. And it’s just, it is ready. That’s why he’s ready to go. Florida might not be.
[00:37:50]Robert Beasley: Well, I mean, I think Pennsylvania is the obvious choice for everything that Robert said, as well as, I mean, they’re going to,
[00:37:56]Kellan Finney: their hand is forced right
[00:37:57]Robert Beasley: with the tri-state area [00:38:00] already having the ball rolled rolling.
[00:38:02] Right. I mean, New Jersey, New York, Connecticut, they’re all going to be legal. Philadelphia is right there in that corner. I mean, I’m not from the east coast, but I’m pretty sure Philadelphia is closed. It’s pretty close right to New York. Close enough. Yeah. So I think their hands, his hand is forest and there’s a lot of big companies looking at Pennsylvania already.
[00:38:18] You know what I mean? I think that that’s always a sign that they know something the general population probably isn’t aware of when you see multiple MSOE purchasing licenses and
[00:38:27]Kellan Finney: facilities in the medical market and the state. So that’s my 2 cents. What are
[00:38:31]Robert Beasley: your thoughts, Brian? Robert, do you want to.
[00:38:34]Kellan Finney: Well, I was going to say that, you know, as an operator in multiple states, and one of the things that’s recently come to me is I get a lot of questions from staff positions in these states that are drafting their legislation. Virginia, North Carolina, Alabama, fucked up all of the legislative word makers there because they knew I was involved in the drafting of the legislation in Florida.
[00:38:53] So I have that, I have that background and they asked me this one question every time, what states should we look to to model after. [00:39:00] Pennsylvania’s always on my list, the way they segregated their zones for licensing, for retail, without allowed an even distribution, the way they try traded out the growth, they didn’t do it.
[00:39:11] Perfect. But they did it right. And right enough to get them ready for rep. And so it was just a good regulatory. Why don’t
[00:39:19]Robert Beasley: you think other states just follow models that are successful, that are done well versus just kind of taking a year and a half, two years to figure it out on their own.
[00:39:29]Kellan Finney: When I’m in Alabama’s legislative discussion, I’m trying to decide what the difference between an agriculture business and a farm business.
[00:39:39] And, you know, it’s the people that are in agriculture related business that sell fertilizer that really want to be eligible for the license. And so it’s all,
[00:39:47]Robert Beasley: yeah. Something I’ll never be able to actually understand which I’m I’m wonder if anyone actually does. It seems more complicated. Every single. So Robert, for those who want to get in touch, they want to learn more about fluent and your company, where
[00:39:57]Kellan Finney: can they learn more?
[00:39:58] So we, a website is get [00:40:00] fluid.com. We have a investor page and a Q and a page there. You can send a Sunday question. Believe it or not the investor question link. I’m copied on every one of them. And I try to distribute them in a way that gets a good response. We trade on the Canadian exchange under the ticker T I U.
[00:40:17] The parent company is, can source them. And that is the publicly traded company. T I U M it is also co listed on the OTC Q X, which is the U S exchange. And so get out there and buy some stock if you believe in what we’re doing and and we hope to continue the upward trends. We’re on.
[00:40:33]Robert Beasley: Awesome. Thank you so much for your time, Robert.
[00:40:35] We [00:40:35]Kellan Finney: appreciate it. All right. Thank you. Have a great day.
