The CannaBiz Success Show is excited to announce its new co-host, Brett Adams! For Brett’s first episode, he and Guillermo explore the New Jersey cannabis market with Brian Dowling, CEO of Sussex Cultivation, and Joe Bellantoni, CFO of Sussex Cultivation. Brian shares his transition from college athlete to cannabis entrepreneur, influenced by his family's healthcare business. Joe discusses his finance background and challenges in the Oregon market. They highlight the competitive licensing process in New Jersey and their focus on quality products and consumer education. The episode also touches on market dynamics, regulatory challenges, and the potential impact of federal rescheduling on the cannabis industry.
Episode resources:
Timestamps:
Introduction to the Episode (00:00:00)
Overview of the Cannabis Success Show and its focus on helping cannabis businesses thrive.
New Jersey Market Focus (00:00:25)
Discussion on the New Jersey cannabis market and introduction of guests Brian Dowling and Joe Bellantoni.
Guest Introductions (00:02:32)
Brian and Joe share their backgrounds and experiences in the cannabis industry.
Joe's Journey to Cannabis (00:03:03)
Joe discusses his transition from accounting and finance to the cannabis industry in Oregon.
Challenges in Oregon (00:05:29)
Joe explains the difficulties faced in the Oregon cannabis market, particularly pricing issues.
Connecting with Brian (00:07:16)
Joe recounts how he met Brian and their collaboration in New Jersey.
Licensing Process Overview (00:08:14)
Discussion on the licensing process for cannabis in New Jersey and initial challenges faced.
Cultivation and Manufacturing Licenses (00:09:55)
Details on applying for cultivation and manufacturing licenses simultaneously in New Jersey.
Retail Market Dynamics (00:10:55)
Brian and Joe discuss the retail landscape and competition in New Jersey's cannabis market.
Brian’s Background (00:12:19)
Brian shares his story as a college athlete and his family's healthcare business experience.
Enhancing Customer Experience (00:14:02)
Brian talks about their commitment to quality and enhancing the customer experience in cannabis.
Importance of Education (00:16:20)
Discussion on educating consumers about extraction methods and product quality.
Impact of Rescheduling (00:19:51)
Exploration of how potential rescheduling by the DEA could affect the cannabis industry.
Tax Burdens and Market Entry (00:22:02)
Discussion on the advantages of entering the market without the burden of high taxes.
Strain Competition in New Jersey (00:23:13)
Brian discusses the limited strains available and competition among manufacturers in New Jersey.
Product Development and Quality Control (00:24:19)
Discussion on the range of products and quality control measures in cannabis production.
Market Consolidation Trends (00:25:14)
Exploration of consolidation in the cannabis industry, especially in new markets like New Jersey.
Acquisition Interests (00:25:49)
Insight into acquisition approaches and strategic growth plans for Sussex Cultivation.
Retail Strategy and Local Regulations (00:28:06)
Plans for retail operations and the challenges posed by local ordinances in New Jersey.
Local Market Dynamics (00:30:08)
Challenges faced by cannabis businesses at the local level, including ordinances and municipal regulations.
Taxation and Revenue Generation (00:32:55)
Overview of taxes affecting the cannabis market in New Jersey and their implications for businesses.
Application Fees and Licensing Challenges (00:34:22)
Discussion on the high costs of application fees and the difficulties in obtaining licenses.
Importance of Customer Relationships (00:37:58)
Emphasis on transparency and communication as key factors in maintaining customer relationships.
Future Excitement and Growth (00:40:25)
Anticipation for the cultivation facility's launch and the integration of cultivation and manufacturing processes.
Closing Thoughts and Contact Information (00:43:06)
Final remarks on the cannabis market and where listeners can find more information about Sussex Cultivation.
Intro 00:00:00 Welcome to the Cannabis Success Show. If you're a cannabis company owner or operator who's ready to scale your business, grow your profits, and plant the seeds to take your business to new heights. This show is for you. We'll share expert insights, industry trends, and actionable strategies to help you blaze a trail of success in the cannabis industry.
Guillermo 00:00:25 Welcome to the Cannabis Success Show. I'm your host, Guillermo Rodriguez. Today we talk about the new Jersey market. We're interviewing Brian Dowling, CEO, and Joe Billington, CFO of Sussex Cultivation. This is the first time we've had two guests on our show, so that's exciting. We're going to hear their journey. specifically for Brian being a college athlete and then starting cell cultivation in the new in the emerging new Jersey market. Throughout that journey, he met Joe, Bella, Tony, who's the CFO who had been an established market in Oregon. and we get to hear about all those challenges in Oregon with regards to pricing and then how they met and started Sussex Capital in New Jersey.
Guillermo 00:01:13 And so I love what they have to say about how we can work together, to push our industry forward. Make sure you stick around the end, where he talks about what he's most excited about for his business in 2024. That's what's coming up on the Cannabis Access Show. Well, welcome to the Cannabis Success Show. I'm your host, Guillermo Rodriguez. Today I'm joined by my co-host for the first time, Brett Adams. Brett, welcome to the show for the first time.
Brett 00:01:41 Thanks, Guillermo. It's good to be here. This is a long time coming. We've been working on this for a while, so.
Guillermo 00:01:46 Yeah. Yeah.
Guillermo 00:01:48 Well, our mission here and we were talking before the episode is this just share stories of success from licensed operators, whether that's navigating a challenging legacy market and what comes from that with pricing or emerging markets where it's difficult to get off the ground, where some programs have been delayed. I think New Jersey is definitely one of those that has taken some time to get off the ground.
Guillermo 00:02:13 And so we're excited to have two guests from the New Jersey market. Today. We're talking with Brian Dowling. He's the CEO and founder of Sussex. And we also have Joe Blanton. He's the CFO. So, gentlemen, welcome to the show. It's great to have you here today.
Brian 00:02:32 Thank you. Thanks for having us.
Guillermo 00:02:34 You bet. And you know, we're going to get into, you know, the licensing process. You know, where in New Jersey, in terms of launching that market, it's underway, as we can see, you're here today. But before we get into that, can we hear just, you know, your story, how you got into the cannabis industry, maybe your background and how you got here today. Let's start with Brian or Joe. Sure.
Joe 00:03:03 So, my background is accounting and finance. I started my career at KPMG as a consultant. I worked in real estate development with a Saudi Arabian chic at GMR properties, and then moved to new Jersey, working for Great American Recreation, which is the, which was the owner of, Action Park and Vernon Valley Ski Area.
Joe 00:03:29 Then we migrated to golf, operations and development at Crystal Springs Resort. from there, I went to the cannabis. I migrated to the cannabis industry in Oregon, where I, developed, actually eight farms, on one property in, down in Josephine County. Unfortunately, the market wasn't so strong there. So, we're looking to repurpose that property. We're still, you know, we still have the licenses, but we moved to, you know, look to develop, and open operations in new Jersey. That's where I met Brian, Brian and Chris.
Brett 00:04:17 So Oregon to new Jersey. That's quite the quite the gap. How did you get from Oregon to New Jersey and get connected with somebody there.
Joe 00:04:24 Well, I live in new Jersey, so, Okay. Yeah, yeah. So, I live in New Jersey. we were operating remotely. We had an excellent farm team out in Oregon, but unfortunately, it's just, you know, the market was saturated.
Joe 00:04:37 we got in it in 2018, and it just, you know, slowly just disintegrated, unfortunately.
Brett 00:04:45 and was there something specific that drove you to cannabis and to jump from finance and accounting? Right. Being a CPA myself. making that jump is it's quite the gap.
Joe 00:04:56 It was an excellent opportunity. And you know, you know, you need the same skill sets in cannabis, you know. So, to me, it was just a natural progression. I had a lot of exposure in different industries. So, for me, I was able to, you know, we're actually developing the property out in Oregon. So,, I was able to, you know, utilize my project management skills, my budgeting skills, financing all that came into play. just, you know, managing and working with people. so, it was it was a good synergies.
Guillermo 00:05:29 And, Joe, for those who aren't as familiar, when you say the Oregon market was challenging, sure. You're referring to wholesale prices from the time you started until the time you exited that market.
Guillermo 00:05:42 Can you talk a little bit about what that pricing was and how you as a finance person can tell that, you know, that those prices weren't sustainable or operating in that environment.
Joe 00:05:55 absolutely. So, when we got into the market, pricing for the greenhouse grows were, per pan was over 2000, $3,000. and the outdoor growths were 1500. Now, an outdoor grow will get you 150 to 250 per pound and, indoor or greenhouse grow will get you 650 a pound for 50 to 650 per pound. And it's challenging. However, you know, we did we did readjust. We were going in the market with a combo grow strategy but just backed off the outdoor I mean, the, the indoor and just focused on a total, outdoor strategy. And even then, we refocused on growing not for flowers but for oil, which it costs a lot less to grow and there's margins there. So, we're able to, you know, break even where a lot of a lot of growths out there were, were going under.
Guillermo 00:07:06 And, and then can you take us to the point in the, in the story where, where you and Brian, you know, connected and headed to where you are today?
Joe 00:07:16 Sure. so, I have a partner, I had a partner in new Jersey. That was my partner in Oregon. And so, we were looking to, you know, grow out in New Jersey. Brian was also looking to grow in New Jersey. And, so I met Brian through my former partner, who had a farm in Vernon, New Jersey. And, we, we had a good, good connection. We work together. Well, and, you know, we each have our strengths and weaknesses, and I think there's good synergies there. Absolutely.
Brett 00:07:51 Cool.
Guillermo 00:07:51 And what can you take us to the licensing process, kind of the initial launch, how long it's been? I think for listeners to they may not those who aren't in the new Jersey market, have a kind of a perspective of how long it's taken or maybe for you, you have a different perspective and how your experience has been throughout that licensing process.
Guillermo 00:08:14 Can your kind of just take us through the timing and.
Joe 00:08:17 Sure.
Joe 00:08:18 So, we originally applied for the medical license. It was a competitive strategy to get to get into the market. it was at the they, we had put in an application, we had a show that we had control of the land. But most importantly, it was a competitive entry and, you know, which was scored, I think we did very relatively well but, at the end of the day, we didn't make that cut. We, then went forward on the recreational side, which I think at the end of the day, was to our benefit, getting right, right into the recreational market.
Guillermo 00:09:04 Yeah.
Brian 00:09:05 And some background on that. So, we applied for the 2019 North Jersey cultivation license, and they were actually giving one license in North Jersey, one license in central Jersey and one in South Jersey. but we learned a lot through that medical process.
Brian 00:09:23 And ironically, the adult use applications opened up, what, maybe two months after we got the results for the medical. So, its kind of just transitioned into adult use.
Guillermo 00:09:35 And so thinking through the business model, then you applied for cultivation. Did you simultaneously apply for manufacturing or how's New Jersey's licensing process that two different licenses for manufacturing and the cultivation side and what's the timing of the two licenses being awarded?
Joe 00:09:55 Yeah. So, we originally went in for cultivation and then while that cultivation license was being reviewed, we applied for the manufacturing license. So, we were working on them both simultaneously. And although we started out with the cultivation, we actually got our manufacturing license ahead of cultivation. So, in that process, we just received our manufacturing license on April 24. So, it's been some time. The more difficult, the more difficult challenges. in New Jersey, we're getting approvals, local approvals.
Guillermo 00:10:38 And has the, has the retail side. So can you talk about your business model because you're in cultivation? You're doing the manufacturing side The retail side has to get off the ground fast enough for all these parts to work together.
Guillermo 00:10:55 Right. So how about the retail side of the market? Has that gotten off the ground fast enough from when you had your licenses issued? Or can you share some of that?
Brian 00:11:07 You know, we can't complain. You know, in our, in our current dynamic of the market, you know, we have, I believe, like 15 to 20 producers of product. And we have, I believe, over 150 dispensaries. So, we all know the experiences that come in saturated markets. So as a producer, I always preach this to our team. We would be foolish to complain because the dynamic could be much worse. Now, we're not naive to what's going to come here in New Jersey. but we're just fortunate early on that we do have an opportunity to approach dispensaries, and there is not a lot of competition out there. So, I think ultimately all of us want to enhance the customer experience here in New Jersey. We're going to do our part in that. But the dispensaries just want more brands and more licenses operational to be able to do that.
Brian 00:11:58 So, you know, it's gone good so far, but ultimately, we're only in control of so much of that, and we'll see how quickly things saturate.
Brett 00:12:08 Yeah. So, Brian, I'd like you to expand on the enhancing the customer experience part, but why don't we back up just a minute. Why don't you introduce yourself and tell us your story? I don't think we got your story yet.
Guillermo 00:12:19 Yeah.
Brian 00:12:19 So, you know, from my standpoint, I was acollege athlete that, you know, I mentioned that because cannabis and athletics don't always go hand in hand, especially when you're being tested for, for cannabis products in, in college. but after college, like most athletes, I had ambitions to play at the pro level and went down that route while working with my family's company. And fortunately, my family's company is a healthcare staffing firm in the North Jersey area, and I say that because it has a lot of experience and regulations. So due to that, I was able to learn a lot about, you know, highly regulated businesses, specifically in the tri state area and tried to use some of that experience and correlated to something I was a little bit more passionate about, which is cannabis.
Brian 00:13:09 And through that, you know, our family was all in on it. And we've just built a great operation. That's more of a high level, from my personal experience. Joe and I connected is, as my family made the decision to try and get into the industry, we were vetting different properties, and we happened to meet Joe's business partner. Joe was sitting at the end of the table. He clearly had a wealth of knowledge and experience, and he was passionate about it. So, it just made perfect sense for our family to link up with him, and we've been together for about four and a half years. Five years since.
Brett 00:13:53 Cool. And so, you mentioned enhancing the customer experience. What are you guys doing in that field to try to do that?
Brian 00:14:02 Great question. I think first and foremost everyone could do it. The decision is, is, you know, are the are the individuals who are making those decisions, are the shareholders of the company, you know, willing to make those decisions? And what do I mean by that? Well, everybody could put a high-quality product out there.
Brian 00:14:20 and ultimately that's all we're trying to do. The different variables that go into that and the decisions that have to be made and maybe the sacrifices that have to be made to do that, I think, are more willing to make to ultimately benefit the customer. Things like, you know, focusing on a solvent less product, even though it may not yield, you know, the way a hydrocarbon product or a distillate product does because we ultimately feel that the customer deserves that experience. You know, biomass is so expensive in New Jersey. Are people willing to buy biomass and produce a solvent product, knowing that ROI may not be where they want it to be early on? You know, when you come to the cultivation side of things, are you willing to take the living soil? I stay away from the word organic, but more of a, I guess you could say an organic approach, due to the fact that there's some risk with that. You know, the yields may not be where you want them to be.
Brian 00:15:24 Some of the R&D stages may take longer than you may originally anticipated. You have the capital to deal with those things. So from our ownership standpoint, we've made the conscious decision to invest in the right approach, hoping that ultimately we give the customer a good experience and that will take up market share in the long run, rather than maybe just chasing some profits early on and putting out a, I guess you could say, a subpar product.
Guillermo 00:15:54 Yeah. So, taking that long term approach and Brian, you talked about solvent lists from a consumer standpoint. Can you explain why a consumer would be even interested in the extraction methods that are being used? Why solvent less is something that consumers really should demand and look out for when they're, when they're choosing, products.
Brian 00:16:20 Yes. What I've learned is its really just education, right? I don't know if the customer really understands the difference. They do in more mature markets. So, we're just trying to do our part in educating the customer. I think a simplified way to explain it would be extracting the essential compounds from the cannabis plant chemical free.
Brian 00:16:40 And when you use the term chemical free in the current dynamics of the world, I think that that can go a long way with some people.
Guillermo 00:16:48 Yeah. So, what you're saying is, solvent less is safer. There's less chemicals for a consumer who's looking out for particularly new consumers, I think tend to be more educated. And there, they're looking for values within their, their products and, and safer, products that use solvent less methods. a lot of consumers are looking for that, right? When you say it comes down to education, how do you feel this education is happening? Because it does take some time, right? especially in newer markets, you mentioned mature markets, you know, consumers they know, and they've been around a while. But in a market like New Jersey, is this something that's communicated through, maybe through your brand and messaging through, you know, you spoke.
Brett 00:17:44 Packaging.
Guillermo 00:17:45 At different.
Guillermo 00:17:46 Conferences and packaging. We're talking about it today.
Guillermo 00:17:50 I think what I'm getting at is what are some of the ways that, you know, we can all educate consumers much more effectively than we have been.
Brian 00:18:00 Great question. I'll go first and then I'd love to hear your opinion. But, first and foremost, it starts with us educating the bud tenders, right? And provide them with enough information so that they can teach the customer what they're spending their money on. and then I think if you take it a step further, some of the things you guys are mentioned are spot on. You know, you want to hit social media elements, maybe on your website, maybe on your packaging. Honestly, I don't I think it's more subjective than objective. I don't think there's one way to do it. I think anything that's a creative approach, that's going to educate the customer and get them more interested in learning about the dynamics that goes into making their product. I think that that's beneficial in the long run. So, we're going to keep doing our part.
Brian 00:18:48 But I also truly believe some people won't admit this, but it's going to be our competitors combined with us that are going to do that. Right. You know, more people coming to new Jersey doing solvent lists, pushing the envelope, having higher expectations, doing pop up events at the dispensaries, educating, the customer, you know, the market will start to saturate, prices will start to drop, people will be more willing to come in and purchase products rather than maybe turning to their black market. So, that's really my perspective, Joe.
Joe 00:19:19 I you know, I agree, social media, our website, but I believe most importantly are those pop ups that will have at dispensaries getting our director of manufacturing and team out to those dispensaries and, you know, teaching them on, you know, the differences between the various manufacturing, Techniques.
Brett 00:19:41 So the big news in the industry, obviously is the rescheduling coming down from the DEA. How are you guys preparing for that if at all.
Brett 00:19:51 And how do you think that will impact what you guys are, what you guys are doing?
Joe 00:19:55 Well, for me, and, you know, until the two ATP changes. So, that's really what I'm looking for is to have that, you know, change in two ATP. Right now, we're, you know, working in compliance with that rule, that regulation. and other than that, you know, banking once, you know, banking frees up that that'll also be an additional significant benefit to the to the industry. When I say banking, you know, more, you know, financing right now, the rates for financing are typically 15 to 18% and sometimes higher.
Guillermo 00:20:32 Yeah, yeah. One of the one of the points I just I always make is that it's, It. The reschedule doesn't necessarily equal safe banking, right? It could be more likely, but it does make every cannabis company that has been previously subject to a more bankable right, better credit and more access to capital, because you're just more profitable and able to generate more cash flow.
Guillermo 00:20:59 It's like, it's like insurance, right? If you're a safe driver, you can get insurance, but you don't really need it. And then, maybe the analogy is not right, but no.
Brian 00:21:08 No, that that's a good one.
Guillermo 00:21:11 You're making a ton of cash now. And now everybody wants to let you borrow money. But yeah, that is like a not necessarily the path, but an impact that I think that that the reschedule is going to have is that companies can generate more cash, and they'll have better credit and access to capital, and more banks will be willing to willing to lend. another part of it is, you know, being in a new market. I know you've been subject to 80 for many years in the Oregon market, but one of the things I really hear, and I think this is a great point, is that for those who are in new markets, you're really starting out without that burden. Right? And so, I think the challenge has been for companies who have operated under such a high effective tax rate for like ten years, especially in the legacy markets.
Guillermo 00:22:02 So, starting and without that burden in your in your first year, that's such a great start to, to be to be able to potentially start in that manner.
Joe 00:22:12 Absolutely.
Joe 00:22:14 Absolutely. And being in cultivation and manufacture, we're not I mean we're impacted significantly with 280 but not as significant as much. Yeah, as that. That's right.
Guillermo 00:22:23 We interviewed someone from the Oregon market a couple weeks ago. And she mentioned, well, I'm just not as excited because I'm a cultivator, meaning that, you know, the burden wasn't as high Correct. And so that's a great point. Well, let's go into, you know, manufacturing, cultivation. Can you talk about, is New Jersey a market where there is, limited strains, or are you competing more on, on the strains or the various SKUs that you're able to, to offer from the manufacturing side? Could you maybe talk about your brand and maybe which are you focusing on any form factors, as you're entering the market on the manufacturing side or, how do you think about that?
Brian 00:23:13 Yeah.
Brian 00:23:14 I think you hit it right on the head. Strains are probably a little bit of an issue for all manufacturers, especially if you're not cultivating your own product. Right. I would say, and I don't have the, the accurate number, but I would say there's like maybe 10 to 15 grows operating and they're not massive. So, trying to identify maybe washers or solvents, you know, strains. I think the few of us that are doing it hunting for the same ones. So, we're hoping that as biomass becomes more readily available and as we start growing, that'll give versatility for more people.
Guillermo 00:23:53 So another way of saying that new Jersey similar to Maryland, it's still going to in that situation, it's a bit, limited and still, you know, on the, on the path there and from the, from the manufacturing side, which, which just how many SKUs are you carrying or, where you focus there on, on the manufacturing side?
Brian 00:24:19 We have, I want to say, anywhere between I got to go check they we just got some new test results and some new SKUs, but I think we have between like, maybe between like 7 to 10 different products.
Brian 00:24:31 I know between our hydrocarbon lab and our solvents This lab; we would like to have as many as possible. From our standpoint, it's dialing in the quality control on each individual skew, understanding the data and the biomass that needs to be allocated to specific ones. but we're pushing our team to get as many out there as, as quickly as possible. It's been a major conversation topic.
Joe 00:24:58 And with respect to the number of strains, one of our growth strategies is to, you know, implement a, you know, Fino hunting, strategy, new strains, developing new strains. So, we're very big on that.
Guillermo 00:25:14 And you know, one other topic is, you know, your new market, but what you keep hearing out there is the consolidation that's happening. Right? It's inevitable just to where the overall industry is. You're a new licensee, but are you just being approached about consolidation? Is this something that you're seeing even in a new market like New Jersey? Because I think we've seen it in New Jersey.
Guillermo 00:25:49 Even new markets like Missouri, like, you know, where Brent is?
Brian 00:25:53 do you mean from like, a white label and like a cool manufacturing opportunity, like brands trying to come into the state.
Guillermo 00:25:59 That as well as like.
Brett 00:26:01 Acquisitions.
Guillermo 00:26:02 Acquisitions or yeah like a lot of interest in companies trying to buy other companies.
Brian 00:26:09 so acquisition standpoint, we've been approached once, but, you know, we're from new Jersey. I think we've always Joe and I and our families have always been aligned on how we want to build this thing. And, and then when we want to approach that dynamic, you know, Chris has a lot of, you know, our investor has a lot of experience. And actually, selling companies specifically in the private equity arena. So, when the time is right, we'll approach that. But, to be completely transparent, we don't really entertain any of that right now because we feel like we have so much growth in the next, what, 6 to 12 months to do here that our focus is on really enhancing what we're doing here.
Brian 00:26:53 And then, being able to, you know, prove our concept at a large scale and then have those conversations.
Brett 00:27:00 Yeah, I think we're looking at the market as a whole, like the big picture. Right. So, we here in Missouri, we are seeing there's 2 or 3 kinds of big dogs, if you will, on the porch that are coming through and they're scooping up everybody that they can. one issue that we've seen here in Missouri is, Joe, to your point earlier, because prices have kind of come down a little bit, there's a lot of labs that just aren't profitable here in Missouri. And the bigger entities have the ability to come in and optimize and put in some efficiencies, and they also have the capital to absorb some of those losses because it's now a vertical market for them where they own from, cultivation all the way up through retail. They can afford to take a little bit of a loss on the lab, because their margins and stuff like that are better at retail.
Brett 00:27:56 or, you know, or in the cultivation side. So, we are seeing that some of here, some here in Missouri. I was curious if we were seeing that there in New Jersey, too.
Brian 00:28:06 I don't think we're there yet. But ultimately, if the business model obviously has been proven to work, if there's only time, you know, there's time will ultimately show us what will happen in new Jersey. I will give you a little bit of, of an understanding of our full perspective from a long-term approach. We do have retail in mind. My wife applied for one and had one of the first conditional retail licenses in New Jersey. Now, if you guys have experience in New Jersey, you must take the conditional and get it to an annual license before it becomes operational. We kind of pivoted in. Our focus was on cultivation and manufacturing. being that we have local ties in New Jersey. We have some municipalities in mind that we would like to approach with retail operation.
Brian 00:28:58 when they change some of their ordinances and they become more welcoming to cannabis. So that's also part of our strategy that that aligns with when we'd be looking to maybe move on or get acquired by a bigger operation. Is, is once we were vertically integrated. So, I don't want to act arrogantly and say, you know, we have all these resources, and we can compete with them. But we like to think that here in New Jersey we have enough resources, connections and a long-term plan that will be one of the hopefully one of the staple local brands that, makes it in the long run. As things start to saturate here, and people start to get squeezed.
Guillermo 00:29:40 Yeah. And so, for someone thinking through, you know, does it make sense to, you know, head the retail side of things, different, different businesses. Right. what should you be thinking through as you're trying to enter the retail side of becoming vertically integrated? You mentioned one is that I think sometimes the, the considerations at the very like ultra local level aren't there.
Guillermo 00:30:08 Right. And there's a lot of challenges at the, at the local level. even I think some folks don't know that even in a, you know, state of California, you just still have a majority of, municipalities that don't allow cannabis or have ordinance against it. You pointed that out and that that's a big consideration. Are there some other things to be looking out for?
Brian 00:30:31 I would get even more specific. If you look in New Jersey, the way they've drafted these ordinances, the town has, has owned these properties where the retail locations are right on top of each other. And they're not necessarily to appeal. So, I think New Jersey has a lot of work to do, as maybe other states do in maybe redrafting some of these ordinances and introducing some more real estate to these retail operations. That one creates a better situation for the one existing in town. So, they're not right on top of each other, but creating a dynamic where it does hit more customers.
Brian 00:31:09 And that's a problem in many states. But I know in New Jersey it's a major issue. You know, you have got some small towns. We've talked about it where they've approved and given out signed resolutions for seven retail locations in a two-mile radius. So, at a certain point, the municipality should take some responsibility and try and create a better situation for their businesses to succeed in the long run.
Brett 00:31:38 Yeah, that that runs into the not in my backyard philosophy. Right. You know, everybody wants everybody. Oh, we're so welcoming. Just don't build it right next to me.
Guillermo 00:31:47 That is why that is spot on.
Brian 00:31:49 That's exactly how it is. We'll take the tax revenue. But we don't want it to. We almost want them to think it's in a different municipality. It's interesting how they.
Guillermo 00:31:58 Yeah. The only business model that works for Starbucks because the franchisee owns all those locations and they're all corporate owned so they can absorb each other.
Guillermo 00:32:07 and it spreads the brand. But, in this situation, it doesn't work. So, you talked about, you know, that at the local level, I think we're dealing with, you know, going back to Missouri. Right, you know, high excise tax, sales tax, some stack taxes and another, the municipalities wanted, but they don't always talk to each other. And how this tax is affecting the consumer and essentially pushing people back into the unregulated market. Can you talk about the situation in New Jersey with regards to how the local governments are dealing with, you know, the excise tax, sales tax at the local level? in the New Jersey market.
Joe 00:32:55 So in, in new Jersey, they're so in Vernon, they're in new Jersey in general. There's a, there's a social equity fee that's paid at the cultivation level, and that's $1.24 per pound. And then on the manufacturing level, there is a transfer tax which is 2% of gross sales. So, there's opportunity there for, for new Jersey and Vernon in particular to you know, generate funds from cannabis.
Joe 00:33:31 I believe the I don't believe there's any additional there may be a 2% transfer fee on the dispensary, but there's definitely a sales tax, not like other states where they're paying a, you know, outrageous sales tax. But it's reasonable.
Brian 00:33:46 And we're very fortunate to have gotten in early because what we are seeing, and I'm sure you've seen it, is municipalities are starting to put in this ridiculous application fee. And that's where you guys can do your own homework. There are some, I think, some lawsuits in new Jersey, just due to the fact that you're charging somebody such a ridiculous application fee, and then they find out there might have been a personal relationship behind the scenes, making decisions on, you know, who got the approval. So, you guys could do some homework on that. But we've seen more recently, towns taking advantage of that. That's compromised some businesses.
Brett 00:34:22 Yeah, ours. So here in Missouri we I think it was medical first in 2015, something like that. I may have my dates mixed up there.
Brett 00:34:31 but the way I got my start in the cannabis industry is I had a there's a very prominent attorney in Kansas City. had some people approach him who wanted to apply for, the medical a medical cannabis grow license. Right. And they are a group of kids from Colorado. They all kind of had a little bit of experience at their own dispensaries. They all came together to form this group, and they wanted to make sure that they were doing everything the right way. So the attorney called me and said, hey, I've got this group of people, they don't have a ton of money, but they need some performers, to be put together because they need to go get some financing or some investments to, to apply for the license fee, because just the license fee alone was $25,000. and it was. And it was only that there was no guarantee you were going to get it, and it was a non-refundable fee. So even if you didn't get it, it was just a sunk cost that, you know, you're like, hey, what? Like I may be throwing $25,000 down the drain here.
Brett 00:35:37 So ultimately, they did end up getting, you know, we produced those performers for them. It was a I really kind of fell in love with all of the research and data and stuff like that that came out of it. Looking at some of the grow, grow periods and harvest times and stuff like that, I love data. And so going through that was just, it was, it was like, you know, candy to me, like, this is fantastic. They did get the approval for the, for the funding and they did apply. They weren't selected, unfortunately. But, but yeah, those are some of those ridiculous license fees are crazy. It's insane.
Joe 00:36:16 You're right. And even, you know, the attorney fees and consulting the woman out. up in Massachusetts. And she went through $1 millions of due diligence fees and never received a license. Yep. Yeah.
Guillermo 00:36:34 Yeah. I think we have endless stories on these and different markets. I'll share mine from Texas, but our legislature meets every couple of years, and there was, I forget the number, but there were various licenses because they were looking to expand the medical program.
Guillermo 00:36:55 and of course, didn't move forward. But all these license fees were lost as well. And there's story after story like that on the various states on the amount of risk that's involved in applying, especially where there's so much uncertainty and so much political opposition, like in a state like Texas. so, as we're getting, we're getting closer here to the end, I just want to make sure we touched touch on, you know, you're looking to connect with, with retailers that you're in and customer, you know, we talk a lot about relationships between vendors, retailers. Can you tell us about what it's like, what a retailer can expect in terms of working with you? or, and just touch on the importance of, of managing good relationships, in the cannabis industry because I think that's, that's been a really a key to success and something that, that we always talk about. can you touch on those two things before we, before we wrap up?
Brian 00:37:58 Yeah.
Brian 00:37:58 From my standpoint, I think transparency and consistency. So, you know, we are customers first. We care about the customer. Joe and I, we go we go back and forth on this. But, you know, his job is to drive profits. And I joke, my job is to protect the customer. So, at the end of the day, I think we've worked together, and we've had a good approach on that, but, yeah, that that's my perspective on it.
Joe 00:38:30 I've never seen a business that went out of business because they made sales. I think sales are very, very important. I agree with Brian. and communication, we do a tremendous job communicating with our customers. And, you know, we're constantly visiting and, you know, communicating with them and, you know, bringing them up to speed of what's coming online and all that. So, it is very important to communicate.
Brian 00:38:55 And one thing that I think we do that I think everyone appreciates in all industries is we have some humility here.
Brian 00:39:01 You know, we don't we're not afraid to admit if we're wrong on something and, you know, communicate with people and say, you know what? Thank you for that feedback. We're going to make that change. We wouldn't have known that if we hadn't had this conversation. So, there's a lot of egos in this industry. And we are from North Jersey, and there's some egos in this building. I have one myself, but ultimately, I like to think that we truly care about the customer experience. So, we have some humility and being able to be approached and told how we can do things better, because we think that that will enhance the customer experience.
Guillermo 00:39:34 Yeah, absolutely. As a service.
Guillermo 00:39:36 We're a service provider, right?
Guillermo 00:39:37 We're CPAs, we're virtual CFO firm. And nothing can ruin a relationship more than just not being transparent upfront about what did go wrong, trying to address it as soon as possible, but without that transparency, in that honesty, it could ruin relationships.
Guillermo 00:39:57 And so that's something that that really resonates with us. And maybe one last question, as, as we wrap up is, is what are you most excited about in the coming year? And let's wrap up with that, because we have the reschedule that we already talked about, in New Jersey market is, is growing. And so, I think, any final thoughts on what you're most excited about in the coming year?
Guillermo 00:40:25 So, you.
Brett 00:40:26 Know, you read my mind. That was going to be my last question that I tried to sneak in here.
Joe 00:40:29 So actually, I look forward to seeing our cultivation, you know, facility up and running. our, our head grower is very, very passionate about growing, and he's just been chomping at the bit to get into that. And, I really want to see him succeed there, and I know he will, but I really that's one thing I look forward to. And then all the synergies that are, that are going to that will be achieved by integrating both the cultivation and manufacturing and going through all that, you know, analysis as to what goes to flower, what goes to manufacturing.
Joe 00:41:07 but most I do want to see our team; our growing team is really excited about getting in there. And I would really like to see that happen. Like it's going to be very exciting.
Guillermo 00:41:20 Yeah.
Brian 00:41:20 I'd agree. I'd like to see it all come together. You guys know this. In this industry, sometimes you're in real estate. Sometimes you feel like you're working under a legal team. At other times you're in engineering and design. then you're raising capital, then you're building out a team, and I think we're getting to a point. Hopefully we'll by the end of the year, we can really just focus on running our cannabis business. And that's exciting for us because, you know, our family has sacrificed a lot. It's been about 4 to 5 years, so one step at a time. But if by the end of the year we can have some great flour and some good, manufactured products and, you know, take care of our team, I think we'll be very satisfied.
Guillermo 00:42:01 Yeah, well, congratulations on being, early in the market.
Guillermo 00:42:05 I know it is. It is a challenge. And. Right. It's the only industries where we've talked so much about regulation and, it makes it difficult to just get down to the to the basics and the fundamentals of profitability and operations so I can appreciate the challenges it's been for you and your family over, over many years and the challenges that that, Joe, you've had in a in a legacy market like Oregon. but I just want to thank you for your time today. I know our listeners will find hugely valuable your experiences in the Oregon market and then in the New Jersey market. Thank you for sharing your perspective. We wish you lots of luck in this first year and lots of exciting things going on. So, thank you for being on the on the show today. I keep saying this is the last question, but where can people find you?
Brian 00:43:06 Yeah, actually if you check out, you know, right now we have a big presence on our Instagram.
Brian 00:43:11 We have us at Sussex Cultivation and at Onyx new Jersey. And from there, we're going to be doing a big update on what dispensaries they can specifically find us in. And we're actually overhauling our website. So, our website will start to identify what products we do have and where you can find them. So, and that is what Sussex cultivation.com Sussex cultivation.com.
Guillermo 00:43:36 Brian and Joe thank you again. Thank you. Thanks to all our listeners for joining us today. And we'll see you next time on the Cannabis Access Show.
Brian 00:43:45 Thank you guys.
Outro 00:43:47 Enjoy this podcast. Visit our website Anders cpa.com/virtual CFO cannabis. To get more tips and strategy for achieving business success in the cannabis industry.