Host: Jen Lamboy, Director of Strategy, Hybrid Marketing Co.
Guests: Benjamin Kennedy, CEO of Fable Libations; Joel Canada from Bayou City Hemp; Erik Knutson, founder of Keef Brands; and Jake Bullock, Co-Founder and CEO of Cann
Jen Lamboy: Thanks for joining, everyone. I want to start with your thoughts on the beverage space right now. Infused beverages have proven to be one of the most exciting beasts within the space. So whether we’re talking hemp-derived or regulated, THC, microdosed mushrooms, some concoction of those ingredients, and more, we also see that the space is crowded. More and more beverage brands are coming to the market, probably faster than we can actually drink them. So, what’s emerging as a result is a variety of business models. That’s why we’re having this conversation today. So, strategy is critical. For example, do you position yourself connected to cannabis, or do you follow a traditional CPG go-to-market strategy? As a category, are we replacing alcohol or just taking a few occasions away from what Ben mentioned on a previous call? For example, maybe during the week, I sip a Howdy and a martini on Saturday. I don’t want to dork out here about who is joining me for today’s webinar, but I’m thrilled to hear from the boldest brains on this side of the category. I’m joined by Ben Kennedy of Fable, Joel Cannon of Howdy and Bayou City Hemp, Jake Bullock of Cann, and Eric Knutsen of Keef.
I’m Jen Lamboy, the Director of Strategy at Hybrid Marketing Company. We are a business outcomes-focused cannabis agency. We also operate in the hemp and psychedelics space, as well as the beverage space with our sister company, 4B Marketing.
Both organizations focus on key business drivers, including revenue risk, cost, cash flow, and asset utilization. These guys are also hyper-focused on all those things. I want to kick it off with brief intros. Joel, let’s start with you. Give us more information about who you are and, more specifically, who your brand is in the space.
Joel Canada: First of all, thanks for including me. It’s cool to be on a panel with all these guys trailblazing this new category. I’m Joel Canada. I’m the chief revenue officer for Bayou City Hemp Company. We are a vertically integrated beverage manufacturer. I’ll say food and beverage manufacturer because we make gummies, too. We’re located in Texas, so under the Bayou City hemp umbrella, we have a house of brands, including 8th Wonder, an extension of the 8th Wonder craft brewery we acquired last year. And then we have the Beach Break brand, and our leading brand, tier one, is the Howdy brand.
Jen Lamboy: Awesome. Ben, do you want to jump in?
Ben Kennedy: Sure. Thanks, Jen, always a pleasure. Yes. So I’m Ben, CEO, Fable Libations. Fable is a line of original and infused cocktails. We stress the word original because we decided early on, and it’s aged me considerably, that we didn’t want to imitate an existing alcoholic product. We wanted to create something new, which was a long journey. But today, we have four SKUs. They’re ready to drink. They’re five milligrams of THC with some variations on the way. The company is based in Denver, Colorado. We were one of the very first companies to try and make a drink back in 2018. There were Dixie elixirs on the market then, so that’s how long it took, but it’s good to be here. We operate exclusively today in the hemp side of the world. I’m sure we’ll get into that. For 60 months, it operated in the regulated market of California, but today, it’s pure hemp.
Jen Lamboy: Jake, do you want to introduce yourself?
Jake Bullock: I’m Jake Bullock, co-founder and CEO of Cann; we make a range of microdosed, infused THC and CBD drinks. We grew up in the dispensary channel, so we launched the business five and a half years ago in Venice Beach, California, selling to folks like MedMen and Eaze. Fast forward half a decade, and the company is primarily online. It’s a lot in retail in places like Minnesota, in the northeast and the southeast, and states you maybe never would have thought five years ago would be leading on the front lines of safe access to cannabis products. Still, they are; we sell into 20 states now on the retail side and a few more online.
Eric Knutsen: That’s probably why we’re all here having this conversation—the OGs. We founded Keef Brands and Boulder in January of 2010. We have been a leading cannabis-regulated beverage company for 14 and a half years. I’d say, at this point, we have twelve regulated states. So, talking about the traditional market, first Puerto Rico and then most of the provinces in Canada through our partnership with Tilray and then an affiliate of Southern, Glazer. So yeah, that side keeps us busy, and we’re continuing to expand it. Hopefully, we have Florida coming online and the tri-state in the next twelve months. Let’s see. On the D9 side, we are shipping through traditional retail channels. So, brick and mortar in seven states. Total Wine is our lead partner.
Jen Lamboy: Who are you targeting specifically?
Joel Canada: Having three brands in the space, we’re contributing to that crowding that we all feel. So, for each of our brands, we designed a focus on a different affinity group. We have yet to sort of pull that marketing lever and hyper-focus digitally. It’s so early that we’re learning about who our consumers are as we build our distribution network and expand our brand footprint.
The canna-curious is such a vast, wide demographic. And we’re learning more and more about how that consumer is every day, as an example, like the Howdy brand, you can find it in, you know, the Divius dive bar in East Austin. That’s way too cool for me to go into as a 42-year-old dad. But, you know, that sort of hipster demographic. And then I found out yesterday that over the last two weeks, our top-selling account is a bingo hall next to a retirement home in Houston. And so it’s just such a vast swath of the population that, for us, we’re learning. We’re just learning and learning as we get out there. As we expand our distribution footprint, a big part of our focus is to come in and support that distribution through field marketing efforts. That allows us to meet the consumer and market face to face, learn about who they are, and sort of engage, which, you know, helps us understand who the consumer is. And then also, of course, driving velocities and the accounts surrounding the activation and all those things so long. That’s a long-winded way to say that we’re still learning who our consumers are. We built our brands to be inclusive. I think, like, I, you know, I’ll focus on the Howdy brand. We call it Howdy because we knew that introducing this product in many ways would be an introduction to the consumer, their first introduction into this category. And so we wanted it to feel friendly and welcoming, pop off the shelf, and say, pick me up, understand what I am, and ultimately choose me over the other brands. And so, the whole creation of the brand, we just built something that we liked and resonated with us. And now we’re seeing the consumers sort of get that. And so, yeah, that’s what I would say.
Ben Kennedy: Are you all finding the same? Are you learning your consumer as you go?
Eric Knutsen: Yeah, I think, to Joel’s point, it is a wide swath. I think everybody, and especially with the introduction into these new markets that had no previous experience, really, with cannabis. I think Minnesota was the first one to kind of trailblaze that. That was the first state we entered last January; the demographics were all over the board. And it’s fascinating to see coming from 14 years of selling into dispensaries with budtenders gating the way and forcing high milligram profits onto people constantly. Honestly, I couldn’t be more excited with the expansion of where this is going right now to the point of Joel’s name. Howdy. It is. It’s impressive to see the introduction to so many different demographics. A lot of people who may not have tried cannabis since the seventies go to retirement homes and other places it’s; it is exciting to see this expand. I know it’s Keef, obviously, our first product, which is sodas. You know, your traditional soda flavors. That’s pretty much all demographics, as well. You know, Pepsi is still the largest sponsor of the Super Bowl every year. So even as beverages migrate towards salt seltzers and everything else, we built our niche around that. We have Seltzer products that we launched in California and Colorado in 2017, but, you know, traditionally, we’ve been known for that product for anybody, which is a soda. Obviously, I am trying to make it as healthy as possible with cane sugar and agave.
Jake Bullock: I can jump in. Jen. I think, at least on the hemp side of the world, we should take away the legacy experiences just for a moment. It’s worth remembering just how early this is. And we’re still in the infancy of this thing. And I think it is in line with our business model. And I want to stress that everybody has a different goal for that company. Some people want to build a lifestyle business. Some people want to build a business for acquisition that matters. With everything you fill in between those two goalposts. We’ve always been clear that we want to develop a credible company to sell to one day. So, we make decisions that may be based on a longer timeline than others. So, I think a brand takes ten years to build. I think the first iteration of a brand is to have a pretty can, a pretty Instagram page, and a founder who is active on LinkedIn. And in this space, you kind of can ride on that. And I think that’s where, as an industry, a lot of us are. And if you look at some of these shelves, Joel made a really good point. We’re starting to see the beginnings of saturation from certain markets. Minnesota being one. I think Tennessee a little bit. There’s so many cans on the shelf. I’m really proud of what’s inside of our can. Our challenge is nobody knows what’s inside of our can when our can is on a shelf with 200 other cans, all of which look various degrees of colors. And so that’s where we are today. I think the extension of that is how do you build authentic communities experiences? How do you build what we call cumulative advantage, meaning that when somebody sees your brand ten times they don’t have to think at shelf. There’s a misnomer with marketing that you want people to think it’s the exact opposite. You don’t want people to have to think. It’s why laundry detergent is bright orange. You walk down the aisle, you don’t think, you pull the one that you saw on tv. So there’s an awful lot we need to do to break through at shelf in the most practical sense. And then where the long pull comes in, where there’s no other answer than spending a lot of money hiring the best talent, is building that authentic brand that really has longevity. And that’s where you start adding real value to the business. So that’s what I’d say is, we’re struggling today. Figure this out, like Joel said, to bring the point of difference to bear. But you get into channel management and a hundred other things, you know, so daunting. Daunting. But at the same time, I’m curious to hear from Jake as well, who’s taken a different approach, where, you know, you’re coming out of the gate and now becoming a household name. Whether or not someone’s choosing an infused beverage, you know, speak to that a little bit, because I feel like that’s a model that we can replicate. But we’re seeing a lot of big players come to the game as well.
Jake Bullock: Yeah, it’s a good question. I mean, a lot of what Eric said resonates, right? Like we’re, we were, really felt like we were a brand in search of distribution. And, and now, you know, state’s regulating hemp is producing that distribution, and it’s producing it in the way that, you know, we sort of from the beginning, six years ago, when we started the brand expected, like our dream has always been that there will be beer, wine, and Cann at every social occasion. That really only works if we’re selling alongside beer and wine. It doesn’t work if we’re in the sort of far corner of a dispensary where no one really cares because we don’t actually make the dispensary any money. And so that kind of was the world that we lived in for so long, and it forced us to create a brand. It was the only way we could really sell. We had to actually go out into Venice beach, where we launched the west side of LA, broader circles around that, and bring customers into the dispensary that weren’t otherwise going to be there. We were often selling in the dispensary. Well, surely, you know somebody in your life that might want this product. Like, that was the extent to which we were talking about. I mean, 90% of people that walk into a dispensary. Want a highly potent THC product, not a two milligram drink, you know, in a light pink can. And so we had to really go create that. That viral word of mouth kind of marketing that brands, you know, need to survive and to scale from day one. And we had to do it in the community, and we had to do it with events, and we had to find big megaphones from celebrity investors and from sort of splashy video content and things that we could do to really punch above our weight so people would know we even existed. And then we needed to convince them to go buy that product in a foreign sort of retail environment. Now that we were able to break out of that into something that feels a little bit more better matched to who our consumer is. Like, the customer actually hasn’t changed. Like, our end drinkers are the same in some weird way. Like, we figured out about the Marin moms pretty early on when we were in California. And there was a reason that the desert Palm desert dispensaries would just cook from January to April. It was because of people’s grandparents. And so we kind of had a sense that this product should cut across demographics that, like, sort of gender and age weren’t as helpful for us in figuring out who our drinker was. But it was this common frustration with alcohol, and we found this with our customers. Like, they drink a lot. We’re selling to people that drink alcohol. Like, don’t. There’s no question about it. Now, what we do is we take them from being sort of four or five times above average, and we bring them back to average. That’s probably a pretty good thing for their health and wellness, but that means that the potential for this category is so large, because we’re really going after a very wide range. Now, marketing 101 may tell you you should narrow that focus. Don’t try to be everything to everyone. I think that’s one of the big challenges that brands in this space have, because in theory, we could be. Because so many people are looking for these products, and now they can actually find them in their local liquor store. Right?
Jen Lamboy: What beverage infused beverage represents within the cannabis space is so different than any other category, because you collectively all are trying to make more shelf space for a category versus necessarily going head to head. Now that we see more and more brands come to the table, that’s probably the situation. But in the earlier days, I imagine a lot of the heavy lift was on a handful of brands who were just really paving the way for beverage as a category, infused beverage as a category altogether. I think, Ben, one time, or in a previous conversation, you asked the question, are we creating a sub sector or actually disrupting an existing sector? So when we think about alcohol in particular, expand on what you.
Ben Kennedy: On the question that you posed, if you don’t mind.
Jen Lamboy: Yeah, I think this can go a couple of ways. I think it would be a shame if we end up building a subsector of infused beverages that sit on an end cap like energy drinks or one of these novel kind of purchases, when I think we can do much greater than that. I think what Jake was saying is true. There’s a generational opportunity to change consumer behavior for the good here, but that’s not going to happen if we only speak to a certain subsector. And I think if we lead with, you know, certain imagery, certain naming conventions, you know, you know, awake and bake, vanilla float, you know, with 20 milligrams, 50 milligrams, there’s a place for that. I’m not disparaging that, but that’s a different shopper, that’s a different person. So you, do you have this. There’s the promise of the cannabis curious, and that’s the target demographic. We’ve built fable behind our data, very small, but it says that we’re 45 plus that demographic on primary buyer. They’re very, very different to somebody looking to buy a 50 milligram beverage or a syrup or, you know, even maybe a soda or a seltzer. And I think that’s where we are as an industry. We’re so excited by the notion of drinks. We’ve not really defined use occasions within that sector, and that’s a sign of maturity, and that will come. But, you know, there is room for a cocktail which is different to, you know, a functional beverage. I think that’s where we, as founders, need to be a little careful. I think the tendency, or there’s a temptation to bring functional into recreational, again, based on our demographic, 45 plus cannabis. Curious that they’re getting their head around what five milligrams of THC is going to do. If we start putting ABCD and then we fling mushrooms in there as well, their head’s going to explode. So for us, it’s about normalizing, familiarizing. The use of the word get tipsy is familiar to alcohol. We use that instead of buzz. So the image of fable, the way we speak about fable, we’re trying to be as familiar as possible to alcohol because we think that we are to Jake’s point, we’re capable of displacing a use occasion or two in the life. I cringe when I hear people say, we’re going to replace alcohol, death to alcohol. People are always going to drink alcohol. They’re going to drink alcohol and fable together. Not that we’d ever recommend that, but you see the nuance here. And I don’t know the answer, Jen. I just think this is a tension. Do you build to the alcohol prototype and therefore become familiar and ease the tension of somebody coming into the category, or do you build for the cannabis comfortable being consuming for years? There’s a demand for that. Those things are very different, and I think we need to establish that distinction across brands.
Eric Knutsen: Eric, what are your thoughts on that? Because your audience is historically different than talking about going through this conversation here, just having flashbacks. It actually brought me back to 2014 when Rec first launched in Colorado. We were approached by normal in October of 13 about doing an ad for the Super bowl. And it was a two part ad where the first one was an alcohol based party, and by the end of the party, everybody’s passed out, shits everywhere, you know? Yeah, just a mess, which typically happens. And then the second party was the canvas party, and it was the exact opposite, the end of it. It was with kids, obviously, with normal. It was normalization. So, you know, it’s been our goal for a long time, obviously from the very beginning, two most commonly accepted forms of smoking and drinking. So seeing where it is now, I think we really do have an opportunity on both spaces. So one of the anecdotes I like to tell is when we launched medical in Missouri, we were the first product sold on shelf, and we still maintain a massive market share for a beverage. Now we’re the only beverage, but we have about a 97% penetration, and it’s. We compete on a dollar for dollar basis with some of the biggest gummy brands. It normalized beverage right away, rather than us having to come from behind to take down the traditional type of products. Obviously, in the beverage category, I’m now shifting over to where we are now with the hemp side and this traditional space. I think there is the opportunity to both displays and create new, entirely new users that may not even have ever looked at, or not even drink alcohol at all. And I think that’s that younger generation that we’re also looking at, that they just don’t drink. So you have, I think, the opportunity to do both with this category right now. And that’s why it’s so exciting to see all the brands. All this innovation, to me, it’s just the coolest thing I’ve ever seen. It’s what I had hoped for 15 years ago. Took a lot than I hope. Just being on this panel talking about this is amazing to that point. And to see the category expansion and market expansion from a demographic standpoint is surreal. So I think we have a huge opportunity here to revolutionize the way people interact socially and the way this country operates. I mean, obviously, we see in every state, when it legalizes one way or the other, you have duis go down, violent crime go down, all of these things, and that’s a direct result of people not consuming as much alcohol. There’s no other way to put it. So it’s awesome.
Jen Lamboy: What are some of the, we’ve talked about the momentum, the task at hand, as far as who we need to get in front of? A little bit touched on the value of narrative, maybe brand narrative. What are some of the big piles of dog crap that you guys have stepped in along the way? Literally?
Eric Knutsen: Eric and Jake probably have a lot more of this and Ben than we do, but, you know, having been in it, but, you know, there’s. There’s some of the obvious stuff, you know, packaging issues. What else, you know, now what maybe this is, this is new to everybody, is really reviewing your I distribution contracts well and making sure that you’re choosing the right partners. What we found is that, I mean, I think all of you guys have probably experienced this, as we have over the last six months. It’s, the market has really opened up. And so we’ve gotten to a point where we have distributors reaching out to us from the AbMbev networks and the Molson Coors guys. And so really, it feels like we’re at a point now where we’re interviewing those distributors, as opposed to a year ago, where we were begging them and paying our legal counsel thousands of dollars to sit in meetings with us and all those things. People really get it now. But if you’re not familiar with consumer packaged goods and especially sort of the beer world and the beer distribution network, I would say definitely be cautious and review those contracts and have your general counsel review those contracts over and over again and make sure you’re getting into something you could potentially get out of. Because there are distributors out there that are looking to collect brands and sort of place their bets on, like, a large number of founders in the space, as opposed to finding the ones that they like and betting on them and really supporting and partnering with them. We’ve always been sort of conscious of that as we have built out our network. And I think that’s something that we’ve been able to avoid for the most part. But I would say it’s definitely something to watch out for. And then the packaging thing, I’m sure we all have horror stories of, you know, producing a large production run of, you know, whether it’s cans or boxes or gummy bags or whatever. You know, we, our first run of ranch water, I think our Howdy ranch water said contains cocoa, cut on it. You know, just little things like that that, you know, you kick yourself once the product comes out. But that would be two things that I think are, I think, pretty obvious, you know, to kind of watch out for. That could be pitfalls as you’re navigating the space.
Jake Bullock: Anyone else? Has it been smooth sailing for the rest of y’all?
Ben Kennedy: Probably. Jake, why don’t you jump in?
Jake Bullock: Yeah, I’m happy to. It’s not the most fun question because I’m like, oh, God, where to go? We could talk about legally issues. We could talk about compliance. We’re fighting multiple regulatory battles right now, which we’re happy to get into if folks are interested. But I’ve been trying to avoid thinking about, you know, we misspelled pregnant in a warning label on one of the early versions. So I have a lot of empathy for that. It happens. You just look at so much packaging, too much packaging. And that actually is a lot of the challenges in this industry, I think, is the level of regulatory and compliance and how that intersects with our operations. It just shouldn’t be this way. It doesn’t make any sense. We’re making specific skus for some states. Some states have a warning logo that’s specific to the state, others don’t. There’s some markets where you can’t have a marijuana leaf on the label at all. But then the warning logo in another state has the marijuana leaf. I mean, it’s just sort of, like, laughable, and it’s not actually that difficult to solve. Right. We think that, like, the FDA should step in and regulate this space. We understand why they’re nothing. We hope Congress will make them do it. And if we can get through that gating threshold item, that’s really the only thing that I think is holding back this industry right now. In a weird way, if you think about how brands usually build and scale, they go to the core set of retailers where their highest experienced customer is, and they’re going to do the best, and they’re going to go prove that velocity out. And they’ll say, look at how well we’re doing in this. Maybe it’s like specialty grocery channel, and it works really well because it’s like a natural health snack food or something. And then as they expand, the question kind of becomes like, well, how far can this really go? Does it expand into new markets and which markets and how much white space is really available? We’re the opposite. We’re starting in the absolute worst retailers for these products, and then we’re going to go to the next worst, and then the next worst and the next worst, the very last places to stock our products are the best alcohol retailers in the world. And we will do amazingly well in theme. Like, just think about how these products will sell in Costco in sort of large variety packs, and it will change people’s lives in a way that alcohol doesn’t. Right. We hear these amazing stories from folks that try our products, and we’re social. To Ben’s point, we don’t really have a health claim or a functional claim to our product, and yet people find them and use them for all these amazing ways. Managing pain and illness and just sort of struggling with being social and how they fit into that world which is so dominated by alcohol. That is all coming, and it could come really fast. Joel made the point about some of the larger beer networks getting into this space, I think, out of necessity. I think some of this is what we’re seeing with young people drinking less. Everyone is drinking less beer, whether you’re young or not. And you’ve had a couple of specific beer folks deal with some direct issues to some of their brands that have just taken cases off the trucks of their distribution. We’re starting to see some of those factors catalyze the momentum behind this industry. And that last piece is really getting a clear set of federal regulatory standards that we can work within that allow the existing state programs to continue. Right. I don’t think we should be making any state laws illegal at the federal level. But providing some guidance here, I think, is what those big retailers like the Costcos and the Krogers are looking for. To feel comfortable bringing these products into their stores.
Jen Lamboy: Absolutely. Ben, I feel like you’ve.
Ben Kennedy: I feel like you’re going to jump in there.
Jake Bullock: Oh, it’s tough because I relate to what Jake’s saying. When you look back, you know, and you think about the, let’s call them pitfalls, there’s not a lot of happiness that kind of comes with that period of time. In our case, we waited for two years for a manufacturer in Orange county and we had a phone call with them every week for two years. You know, we’re nearly ready, we’re nearly ready, we’re nearly ready. And then a month before going they said, we don’t like the fact you use real juice. Can you use flavor, can you take the honey out? Because we’ve never used honey before. And that was more stressful than anything else because with every passing week another drink appeared. And you know, we’d been working with Vitosa on stability for twelve months prior. So there’s things that happen Jen, along the way. And what ive learned is the universe really, really does try its damndest to help you out if you just listen. And when I think back, we were asked to really salsify fable in 2020 and we could get it on the market in six months and we decided not to. And I hated it. And I was like a bear with a sore head for the best part of twelve months. If we had done that and if we had committed to California, we’d have bled out within twelve months trying to chase that market. So it just shows sometimes due course and time reminds you why this industry requires a little more diligence, a little more steady as you go. We’ve avoided some of the regulatory issues going on because we were told, just give it six months. Not that that makes what’s happened any more palatable in California, but there are ways, by having a slightly more conservative culture, we can mitigate the risk. The downside of that is we’ve been slow. We’ve been a little slower than I would have liked. We have lost any first mover advantage or even first group advantage that we may have had, you know, so time will tell, you know, I think that the warning though would be, you know, don’t chase perfection. You fail forward, fail fast. We’re getting better at that. But also just trust that things happen for a reason. And as long as you have a really, really tight model, and we’ve not touched on this, everything we do is based on a model. And the two things you hear from people that don’t have models is typically forecasts don’t count or. I’ve never seen a forecast that ever made sense. That’s not the point to have a model, it gives you discipline. You don’t build awareness ahead of distribution. Very common mistakes CPG founders make because we’re so excited about our products, we want the world to know about them, we want to build that awareness. But if the distribution isn’t there, that you’re literally filling a bucket full of holes. You throw LinkedIn into the mix and you wake up every morning questioning why you’re not doing 50 things that the next person is doing. Well, because you don’t have distribution in that state yet. Having a really sound model, I think, acts as guardrails. Not to say that that model doesn’t change every couple of weeks, but it just gives everybody a universal point of view to check decisions and to say, should we go into California? Should we do a 20 milligram drink? You know, and on and on and on and on. Right?
Eric Knutsen: Yeah. We see that so much on the regulated side, so much where it’s a reactive space. Everyone’s looking at their competitors, what they’re doing. Oh, gosh. Sales are of dropping, margins are razor thin. We need, how are we going to fix all these pieces? And in reacting to everything, you’re really abandoning the strategy, or you never took the time to really build a strategy. So I think that, you know, that we’re trying to train folks off as they’re coming in our doors with hybrid, but same thing on the beverage. We see it on the same, you know, when folks approach me about helping them with marketing, they say, this is what we want to do. Because this company, this company, that company, that’s how they’re doing it. How did they do that? Show me how they did that, because that’s exactly what we want to do. We’re like, let’s back up a little bit. What is the goal overall? What are we wanting to accomplish at what piece? And ultimately for us, it’s like, with what budget? Because that’s also a piece. We’ve seen organizations, infused beverage and otherwise, who blow through resources because they didn’t have the strategy. They were only reacting to everything around them. Or regulatory action forces the strategy to completely comes out of left field like a bomb. I think, Jen, everybody. I think I could speak for everybody. Jake, you may have a different point of view, but we’re certainly looking to understand our cost per acquisition number. Because if you can understand your cost per acquisition number, you could go raise smartly and you can to some degree theorize forecasts and everything that flows out of that. So right now, because it’s so new and because I don’t think there’s a lot of loyalty, I think people are jumping around the category. The cost for any brand to acquire a new consumer is high one, and then it’s still being defined. I think back to your point there. I’m curious, Joel, because you all kind of teeter in both worlds with 8th wonder as well. So what component of the alcohol space kind of bleeds over into Howdy and your other brands?
Joel Canada: Well, I mean, I think, you know, I don’t know who mentioned it. I think it was Ben and Eric. I think everybody’s kind of discussed what, you know, how this is all tied together and our. Well, I’ll say, I’ll start here. Anecdotally, we’ve been selling these beverages on tap and in package alongside alcohol for three years in Texas at our tap room. So that really gives us, it sort of positions us to understand consumer behavior in the on premise location and how people interact with cannabis socially and in public and on premise when it is available. Next, alcohol. I’ll say that from what we can gather, it’s not cannibalized our alcohol sales in any way. And instead, we’ve seen younger demographics coming into the tap room. You know, back when we launched this in 2021, I would say that craft beer, you know, enthusiasts were sort of getting older, and we’re seeing sort of Gen Z age groups come into the tap room for the first time because they heard about cannabis on tap, and they could come in with their friends who are drinking alcohol or drink more mindfully, drink, consume alcohol, consume less alcohol. So we’ve been sort of watching that for a long time. But in terms of the alcohol space component fitting into what we do, I think we’re all sort of forced to follow some of the same analogs in the sense that we’re all pushing for this to live next to alcohol, both on shelf and in distribution. And so, and frankly, that’s the best route to market right now are the beer networks. I mean, we’ve, you know, we could. We could sit around and wait for the big, big guys in liquor to get in, and we know that they’re looking at it, and I’m sure all of us have had conversations, but. But in the meantime, we have to keep moving, and it’s through AbMbev and Molson, Coors and whoever else. I mean, we. That was our focus initially in launching our brands was the first thing we have to do is find distribution. And so the first distributor in Texas to carry these products was a small craft beer distributor called Flood. It’s so similar, especially with them being they were so niche, and they had these, like, really hyper niche craft beer brands, that their sales team understood it. And it really helped us to kind of build awareness in the state of Texas and build out the category here and the distribution footprint so that we kind of put more of a spotlight on the category for the bigger guys. Eventually, we executed an agreement with Silver Eagle, who’s, I think, the third largest ABM Bev distributor in the country. And they only serve as three counties in Houston. So, you know, I think there are a lot of things in common we’re starting to see now. I talked to a retailer the other day as an example. This is a C store that we just closed, a sea store chain. They’ve got hundreds of locations. They’re launching THC, I think, in about 142 of them in a couple of states. This C store chain is, they think that the margins need to be 40, 50% on this category. They’re getting pushback, I think, from other retail accounts and also the distributors, and that this should be more in line with the craft beer model. This should be a 30% margin at retail. You know, we’re trying to hit a specific SRP that makes sense for our strategy so that we do see those velocities that are in line with beer and we can continue to grow the category in that way. So I think it’s really very tied together in sort of the strategy. And, you know, ultimately, we want this to, we want our brands. I think everybody here wants our brands to be as recognizable as some of these big alcohol brands out there in the very near future. So.
Jen Lamboy: Sure. Absolutely. We haven’t, we haven’t talked at all about direct to consumer where this, you know, certainly part of a business model where there’s, well, let’s call it distribution in a variety of ways. And Aaron from Breeze isn’t with us. I wanted to squeeze all of you into one conversation, but, you know, Breeze is knocking out the park. When you look at a solely focused, direct to consumer offering, where do you guys stand on selling directly to folks?
Joel Canada: We do it. It’s a big part of our business. I would say that I think the jury is still out on how this industry grows up. If we think about channels, there’s a couple of models out there. One is, well, do we buy beverages online today? The answer is not really. If you think about most of the drinks you’ll consume in the course of a week, you’re probably not getting that shipped through the mail from a distribution center somewhere in Ohio. But there’s also, you know, some shifting, changing preferences. Right. We’re seeing younger people maybe being more open to buying some of these things online. We’re seeing, you know, in the absence of availability of your favorite drink, it’s not at the local store. It’s not in grocery or retail or liquor stores. You buy it online. So, you know, we’ve always thought about this as a more premium customer that values the availability and it being shipped to their door. We think we stole a lot of our best customers out of the dispensary channel through online. So they’re good and really loyal. But over the longer period of time, really, I think that this industry is going to succeed or fail based on its ability to execute in retail alongside alcohol. And whether that’s on the beer, more towards the beer side or it’s out of land somewhere, we think maybe likely around these RTD cocktail type drinks, the high noons and cutwaters of the world, it’s probably going to fall somewhere in there and retail execution is going to be key. So that really is the gatekeeping to real scale in beverage. And so the way we think about these two parts of the business is, can you kind of use the online business in a time where availability is not as high to fund the retail rollout? Because beverage is expensive and I think everyone on this call gets it right. When you’re operating at the margins we’re operating at and trying to grow, you grow yourself into a whole. And so something has to give there, there.
Eric Knutsen: The way we’ve balanced it right now is using the d two C business to help fund that retail rollout with the expectation that in ten years most of our drinks will be sold through retail.
Jake Bullock: Yeah, I think from a keef standpoint, we’ve obviously playing on both sides. We still have to maintain those dispensary relationships and relationships with large retailers across the country. So we’ve chosen not to go direct to consumer yet, but not that we’re opposed to it in any way. I think what’s happening once again, as far as market expansion, what Aaron’s been able to do and what Jake and the team be able to do is amazing. Increasing the category, increasing awareness in the places that otherwise would have zero access to that point, there’s no retail doors carrying them or it’s very limited in some states. I think it’s a great component of it right now. I think long term, to Jake’s point, especially going back to even what Joel was talking about, our best asset and ally right now in legalizing this is the alcohol distributors and channels that are carrying it. And at the end of the day, there’s not much alcohol being sold online for a reason. The three tier system doesn’t allow it. I think as TTB starts looking at regulation, it’s probably going to go away. But for now, I’m.
Jake Bullock: I think it’s a great avenue, once again to market and expand the category we keep. Just haven’t jumped into it yet. We’re heavily focused on the retail side with specific key partners and then obviously, the regulated channel. But I think there’s definitely a place for it right now. Sun’s out, make hay. So it’s a good thing that’s happening right now. I don’t know, from a longevity standpoint if it’s going to be here in two, three years. Obviously, there’s a model with wine. It’s very difficult. If anybody’s ever had a wine subscription, you got to be there when FedEx shows up with an id, and more than likely, that type of gating is going to come in place as we ask for federal regulation. So, you know, once again, while the sun’s out, grow that. Hey, yeah, I would agree with.
Joel Canada: With both of those guys. I will. I would like to shout out Aaron. I love how Aaron Nosbich is so transparent on LinkedIn. And if you know Aaron personally, that’s just his personality. Also, I would be transparent if I were crushing it in the same way that they are. But, yeah, we’ve been hyper focused on building out our retail presence, building out our distribution network, activating our brands, engaging with the consumer face to face, those sort of things. I will say that we are starting to see movement as Jake, I know you guys are, and I’m sure everybody’s sort of starting to dabble in, you know, as another option for more of kind of a direct consumer model would be Doordash, you know, if people want their products straight from the retailer and they don’t want to drive over to specs to get a Howdy, you can doordash it. Go. Puff is also coming online now. And so similar model where, you know, now they’re 35 distribution hubs in Texas, can buy our products from Silver Eagle and Dynamo and our other distribution partners. So I think it’s yet to be seen what the real impact of those sort of platforms are going to do. But it’s looking bright, so I just want to mention those.
Jen Lamboy: Yeah, well, I feel like within the space, we always. We’re always considered pioneers, whether you’re on the regulated side, the hump side, or somewhere kind of on both sides. Ben, I think about you often having a presence at even, like, Aspen Jazz fest here in Colorado, which is such a mature state when it comes to cannabis consumption, but showing up in a way, I mean, that’s the first I’d heard of anything like it, at least here speak to it a little bit.
Ben Kennedy: Yeah. If I could just quickly, Jen, just. I want to make one comment on DTC. I think Eriche makes a really good point. I don’t think we can take all the advantage of the alcohol system and then be like, but we’re going to do it this way and we’re going to sell it online. So I think absolutely there will be regulation there. The second point I want to make though, is DTC means different things to different people. And we look at DTC as an ecosystem. And in that ecosystem, of course, is your website, but there’s also affiliate programs, social commerce programs. You’ve got marketplaces, you’ve got CRM infrastructure, the ability to subscribe people into the brand. A lot of our revenue is coming through subscription and repeat purchases. So there’s. SEO is another one. SEO is really important now for driving DTC and in the ecosystem sense of the world. So I think you have to have an ecosystem approach to DTC if you’re going to drive the most from DTC. Specific to your question, it was the Aspen Food and wine classic, not the jazz festival. And yeah, look, I think that was, that was great. It gave everybody a needed pat on the, pat on the back that what we think we have, we might have. And by that I mean a crafted beverage that could sit in that tent with the best food and drink products, really on the planet. And we held our own and we did that on behalf of the sector. The point the guys made earlier on, erin and breeze, absolutely. This is a rising tide lifts all ships right now. There’s enough human beings out there to convert into consumers that we are, I genuinely believe rising a tide for everybody. Yeah, look, it was a great event. It reinforced what we can credibly play in, which is hospitality, food, drink. I think to that end, on premise will be great for fable. It was developed to be sipped to be a drink. Regardless of the THC. The THC was, was brought in afterwards. So, you know, in that regard, from a brand amplifier, I thought it was a really good weekend and yeah, it was. We were the first infused product to ever show there and the, in the tasting pavilion. So, you know, I can’t tell you there’s a great ROI today, but, you know, hopefully in time that will, that will come.
Ben Kennedy: Ben, I’m glad to hear that went well. I know. I remember we met had a door probably two weeks before that was going to happen and you were a little nervous. So really exciting.
Eric Knutsen: Yeah. Thanks, mate. On that level. That’s that point. I want to give a shout out to Jake. I was actually on a call yesterday with a bunch of Colorado regulators, well, Colorado lobbyists and people looking to make some changes here that we’re working with to hopefully reintroduce some higher milligram product onto the shelves like the products we all make outside of the regulated channel. And they were all talking about coming back from Canra and that they had all shipped a bunch of cans and had been enjoying that social consumption. So I think there is movement. I think there’s movement everywhere right now. To be on a call yesterday with that team, the team specifically responsible for legalizing cannabis in Colorado, and knowing now that they’re shifting gear into helping get this access to these amazing products, products in more consumers hands, and that we actually have big dispensary. Dispensary and MSO partners, they’re starting to see the light that at the end of the day, beverage is not a threat. Low dose edible products in general are not a threat. What they will do is expand the category and expand the marketplace. You’re going to have more opportunity and more customers with these products out there. That may be and not all of them, but some of them willing to say, hey, I might go try it. I might go shop in the dispensary. I might go buy a joint. Now, I haven’t had cannabis in 30 years. Yeah, you know, fuck it. I’m going to go get a pack of pre rolls. So it’s really heartening to see that side of the aisle start to move also onto this and really take it seriously as a category from not just social use, but really category expansion, market expansion, to the pre existing channel. That’s a.
Jen Lamboy: There. At the end of the day, I see both of them living side by side. I think there’s room for both. Just as you know, in Colorado for a long time, we had a thing called near beer, and you couldn’t even buy liquor on Sundays, so you had to go to, you know, safeway and go buy a 3.2% beer. Not that this is that, but you still, to this day, if you want a bottle of tequila, you have to go to liquor store. If you want to buy beer or wine, you can buy it anywhere. And I think that that really translates well to this category. People understand it. Alcohol regulators understand it. And, you know, we’ve got with, obviously, the alcohol lobby behind us right now, at least from the district distribution retail standpoint, we’ve got a hell of an opportunity to kick the doors wide open on this and really be that tip of the spear that beverage can be to legalize weed. Just call it what it is. It’s one plant, and we’re talking about hemp, cannabis, all this THC is THC, where it comes from, it’s all the same. And, you know, I think Beveridge really finally has that opportunity to open it up.
Jen Lamboy: Well, I feel like we’re so fortunate. I’ll see Ben and Eric to be here in Colorado, where there’s a lot of muscle behind the movement and a lot of forward thinking, and not only because we’re a mature state, but there’s. I don’t know. I do attend some of the association and legislative meetings as well, and it’s just to see the amount of horsepower that goes into strategizing the endurance, to be honest, I think that’s a big. A big key is not only if you’re on the regulatory side but, of course, if you’re on the brand side as well. Sometimes when I ask folks why they’re in this space in particular, it’s like, are we all masochists or what is
Jen Lamboy: Jen, I think it’s really interesting that the states that kept me and our team going for the first two or three years are the very states right now that are prohibiting fable being sold. California, Colorado, we can’t sell fable today. And it’s crazy. Meanwhile, in Iowa, North Dakota, and Louisiana, we’re good to go. They’re falling dramatically behind. It’s pretty amazing to think about, you know, people talking, Colorado and California being these leaders. I mean, I’d throw Washington and Oregon in there. Both. Both pretty awful places for cannabis if we’re thinking about it as one plant. The states that are leading the way is Minnesota, the American South, Midwest. It’s pretty amazing. Yeah, well, I think. I think that, you know, on appreciation for. Are we talking about tax revenue? Are we talking about opportunity? You know, I was born and raised in Texas, and when I first stepped into the cannabis space, and I had so many questions, too, for Joel, even just a handful of years ago. It’s like, how does Texas do? What is the boldness behind where they’re moving? Boldness. And at the same time, like, such high restriction. And so I think those who we perceive as movers and shakers are also the ones that are kind of locking us up. It’s crazy because Louisiana, Texas, still have the harshest cannabis laws and the most people jailed in the country right now for the same plant that, if you call it hemp, you can legally carry it all over the place. But there’s still more people incarcerated in those states than anywhere else, Florida included, unless you have a medical card right now. But you can go into a c store and buy 30% THCA flour tomorrow. If you have that package, you don’t get arrested. So there’s, there’s a lot of cleanup up that still has to be done. There’s a lot of social equity rebuilding in a lot of places. And I think as we grow the hemp category, that can’t be forgotten. And I think right now, a lot of people are looking at these companies making a ton of money. How are you going to get back? How are we going to then turn around and work on changing these laws in these states, freeing people from jail for the same place plant that some people are making millions, tens of millions, both in the regulated and the hemp space on. Yet you still have massive, massive amounts of people incarcerated today for minor possession in many cases. So there’s a lot of disparity that still needs to be solved.
Jen Lamboy: Well, there’s, I feel like there’s so much opportunity for unity within the space. I mean, I would even say just a, well, now and even a handful of years ago, there was such a dividing line between the hemp derived and the regulated market. Now we’re seeing those lines blurred a lot more. We’re certainly seeing, on the marketing side, msos who are looking to step into the space, other organizations that have not traditionally operated on the hemp derived intoxicant space, really asking questions of a marketing team, like, how do we do this? And who are we looking under the hood at business models and, like, what risk? What risk is worth it? I want to be respectful of time, but I do have a couple more questions. So we’ve got one question coming in saying, how do you all support your retail partners to drive shelf velocity trade education in store pop ups? Feel free to jump in there.
Joel Canada: I can take that a little bit. I think. I think it’s so, so important to, I mean, I think one of the things that someone might not understand if they are new to consumer packaged goods is that even though your sale is to the distributor, they are not your customer. They’re your partner in getting your products into market. And that goes the same for your retail partners. You know, they’re going to give you the opportunity to put your products out on shelf, but you really need to drive brand awareness and ultimately velocities for your brand there. We do that in a lot of different ways. I think, you know, from what we’ve seen, that is a differentiator for us, especially in the state of Texas where we’ve been doing this for three years, we’re hyper focused on field marketing efforts. So when we get a placement at total wine, we are then going in and getting placements at the on premise locations surrounding that offer prem to kind of drive awareness of the brand so that when that person goes into the, you know, one of the bars, little Darlin in south Austin, and they have some experience with Howdy because we’re there doing some sort of trivia night or whatever the case, then the next time they walk into specs, which is down the street, they’re going to recognize our brand and grab it off the shelf. But in addition to that, I’m a big proponent of liquid dellipse, which is another phrase that we get from alcohol. So you see that, you know, that sort of tie as well. Really big proponent of like getting in front of the consumer and engaging and letting them taste your product and having an experience with your brand. So when it comes time for them to make a choice, they will choose your brand. I don’t think we’ve mentioned it yet, but my background is in CPG. I co founded a brand called Malk Organic ten years ago now, almost eleven years ago, and that was similar in that we were filling a white space that was very clean, organic plant based beverages where it didn’t exist at the time and it was pricey and it was sort of novel at the time. And so we invested heavily in product demo teams, brand ambassadors nationally. We were constantly demoing at Whole Foods and I think that translates here. And we’re sort of building that network now in Texas and the new territories where we’re going into just building a big network of brand ambassadors that understand your brand, that you can train and tap into again and again to use for activations. A lot of in store sampling. We just started to kick off in store sampling at total wine. You guys probably know total wine is not allowing for dose samples, right? So we had to do, you know, being a manufacturer puts us in a position where we can do production runs of non dose product that, you know, we have a flavorless emulsion, it tastes exactly the same as our dose. But we’ve been executing those demos for the last month and it has been incredible. You know, I think as an example, we just did, I think last week, product demo at a total wine in the Heights in Houston. We were there for 2 hours. We sold 26 four packs during that demo. You know, I mean, we’re seeing that people are very interested in this, this category. It’s really just a matter of engaging with them and letting them sample your product. They don’t know what it’s going to. Is it going to taste like weed? They have no idea. You know, and especially in Texas, this is a very new category. And so those are some of the ways in which we sort of partner. And then, of course, we’re now starting to see opportunity for trade, spend and some of these things that are brand new to, I think, the cannabis, certainly the hemp space where, you know, we’re smack dab in the middle of a promotional deal with ABC fine wine and spirits in Florida, where they’re, we’re doing a dollar off of four packs. We’re going into October and November, where we’re going to do kind of a bogo deal with some of the other brands. So all of those sort of traditional consumer packaged goods tools that have always been available to almond milk or whoever else are starting to become available to us. And I think it’s just key to utilize all of those because it’s such a new category that anything you can do to sort of further call out the category in your brand specifically is just so important to the success of the category.
Jen Lamboy: I want to go ahead and pivot toward a final question as well. So you’re talking about leveraging what we know has worked in other industries, specifically in alcohol. What happens when we see these large, large, large organizations adopt into or absorb, I don’t know how you want to say it, the hemp drive space, the regulated space, potentially. What happens when this gets, when this gets bigger? What happens to the infused beverage industry?
Joel Canada: I think it continues to grow, but that’s predicated on a lot of what we’ve talked about today. I think the three tier model is an absolute must. I think, as Jake mentioned, I think the states that have got this slightly wrong will come to the realization that the three tier model makes perfect sense. It’s literally doesn’t even need tweaking. It flows right under it comes back to what we said earlier, Jan. I think the difference in taking this from today to 100 x today is going to be based on our ability to reach this new audience. And I think if we’re all talking to the existing audience, we will miss the potential massive audience. I think it’s also worth mentioning that that could be global. I think what Joel was talking about, playbooks and toolkits and so forth, they come into play when you’re launching into new territories whether that’s the Caribbean or Europe because you want that consistent brand execution. So I think it will continue to grow. I think the compound annual growth rate we’ll see still north of 20% year on year but it has to sit within the alcohol framework. Absolutely awesome. I’m going to pivot us over to a close. If you all are seeing my screen, if you don’t already audience, if you don’t already follow these guys and follow their brands on LinkedIn, do it right now they’re leading the category with not only innovative thinking but a lot of experience under their belts as you’ve heard in a lot of different ways. I also want to thank each of you for taking the time off of your regular day to day. I know everyone’s super busy so thank you, thank you. Thank you from the bottom of my heart for joining in this conversation. One of many I anticipate.
