Marianne Cursetjee, CEO and Co-founder of Alibi Cannabis, joins Guillermo to discuss the challenges of securing land, navigating regulations, and the importance of a focused business model. Marianne emphasizes the need for federal legalization, improved access to banking, and strategic cultivation practices. The episode concludes with a discussion on industry collaboration, quality standards, and the future potential of the cannabis market.
“We have to remember that we’re at the very beginning of this industry; nobody has ever done what we are doing. And, of course, there's going to be mistakes, and there's going to be learning opportunities. But the name of the game is pivot. You’ve got to try things, be willing to be flexible and to understand the market, and be able to pivot when things change.” – Marianne Cursetjee
The finer details of this episode:
Episode resources:
Timestamps:
The welcome (00:00:00)
Introduction to the Cannabis Success Show and its focus on helping cannabis businesses grow.
Marianne Cursetjee’s journey (00:01:23)
Marianne’s personal story of entering the cannabis industry after a cancer diagnosis and her transition from traditional tech and finance roles.
Securing land and property (00:04:21)
Challenges and process of securing land and property for cannabis cultivation, including navigating regulations and real estate barriers.
Business model and focus (00:08:03)
Discussion on Alibi Cannabis' business model focused solely on cultivation, the importance of staying lean, and resisting the temptation to integrate retail.
Market challenges and quality focus (00:10:05)
Adapting to challenges in the flower market, maintaining quality, and the impact of wholesale pricing compression on the business.
Consumer education and regulations (00:15:55)
The impact of regulations on consumer experience, the role of education in consumer choices, and the importance of quality in the market.
Production cycle and planning (00:18:54)
The monthly production cycle from seed to sale, the challenges of planning and reacting to market changes, and the time investment in the growth cycle.
Raising upfront cash for business (00:21:39)
Discussion on the challenges of raising upfront capital for indoor cannabis cultivation and the long cycle of cash tied up in the business.
Managing construction costs and risk (00:22:47)
Marianne discusses the stress of initial capital outlay, construction, and equipment purchase, and the strategy of starting small to manage risk.
Impact of potential rescheduling (00:24:59)
The conversation touches on the potential impact of rescheduling, specifically the potential reschedule of cannabis as a Schedule III substance.
Interstate commerce and market revolution (00:28:03)
The discussion explores the potential impact of interstate commerce on wholesale pricing and the revolutionizing of the cannabis market.
Challenges and potential of hemp market (00:37:04)
Marianne discusses the strict regulations and challenges in the hemp market, emphasizing the need for collaboration between the cannabis and hemp industries.
Excitement for future progress (00:43:45)
Marianne expresses hope for the potential improvement in cash flow and debt payment in the cannabis industry due to potential rescheduling.
Overall Industry Challenges (00:44:26)
Discussion on challenges and opportunities in the cannabis market, emphasizing the need for flexibility and collaboration.
Paying Down Industry Debt (00:45:41)
Exploration of the impact of paying down industry debt and the importance of being customer focused.
Contact Information (00:46:59)
Information on where to find Alibi Cannabis, including website, Instagram, and LinkedIn, and the importance of access for everyone.
Conclusion and Call to Action (00:47:29)
Closing remarks and a call to visit the podcast's website for more industry tips and strategies.
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. Today we'll be talking with Marianne G. She is the CEO and co-founder of Alibi Cannabis. I'm particularly excited because we haven't had a West Coast participant in our podcast. So, we'll be diving into the Oregon market and the West Coast in general. We've talked a lot about some of the emerging markets, but Marianne's going to be great to get your take on what's happened in the Oregon market over the last ten years in your in your journey for that. So, thanks so much for coming to the show. We're happy to have you today.
Marianne (00:01:03) - Yeah. And thanks, Guillermo. I'm really looking forward to the conversation.
Guillermo (00:01:07) - Yeah. And so, before we jump, jump into, you know, market I always like to get your, you know, take on your journey into cannabis and how you got into the space. Can you maybe take us through that story.
Marianne (00:01:23) - Yeah. It's you know, that's the cool thing about cannabis that I found is everybody does have a story. And I think that's what makes it a personal experience. My background is very traditional. I've worked at Intel; I've worked at Microsoft. My degree is in accounting. I have an MBA, so very traditional tech finance kind of roles. And about ten years ago I was diagnosed with cancer and a friend suggested that I try cannabis as part of my healing journey. And at the time I was like, oh wow, this stuff is great. This really helps. there's so many medical benefits and it helped me eliminate my need for so many pharmaceuticals. And it's just a plant. And so, I was at a stage in my career where I was looking for my new opportunity anyway.
Marianne (00:02:09) - And so while I was in the middle of radiation therapy, we started looking for property. We found property, started construction, and built the farm.
Guillermo (00:02:19) - Wow. And so, as if you were on that first journey. So, you were in Oregon and at the time, there was already a medical and a rec program. So, you had no issues accessing the plant?
Marianne (00:02:32) - Yeah, it was right at the very beginning. So, I really understood the need for a real medical program, which, sadly, in Oregon has mostly been eliminated because the adult use market is so much easier. But there's a, you know, an underground network of people who generously gave medicine and provided plant medicine to people who are in crisis. And so, for that reason, you know, even though we are a business, we're here to make money. We're here too to build something awesome. Like, that's what first got me into this.
Marianne (00:03:10) - And so I have a, a passion and a, just like we need to, we need to keep the patients in mind and the people who have gone before and have had a different experiences, you know, the people that have paved this path so that we could be here today are, are so important to remember.
Guillermo (00:03:26) - Yeah. I think there's so much, you know, everyone has their opinions of what has gone on in cannabis, you know, a lot of challenges with profitability over the years. But, you know, if you ask me, I mean, those who have, you know, went through this have seen, like some of the most, the toughest challenges from a regulatory tax standpoint, you know, price compression. I guess what I'm trying to say is that I think in some ways, like this is building some of the best business leaders because of all the challenges that, that, that you've had to overcome. well, the first one being, your kind of just briefly mentioned it, but one of the biggest challenges is securing land and property when you're getting started and getting the capital in place to do that.
Guillermo (00:04:13) - What was that like, when you started searching and what year was that when you first secured your land and applied for a license for cultivation?
Marianne (00:04:21) - Yeah, that was 2016. That's when we got started. We purchased the land in 2016. And you're right, finding places that you, number one, can fit within the regulations, that you have enough distance from schools and from daycares and all of those, you know, there's a significant barrier on the real estate side. But we're fortunate in Oregon to have a lot of farmlands. And it took me almost six months from the time I found the property until the time I was able to close the deal. So, just because you asked how that worked, it's a funny story. The land that I found was part of a larger group of nursery lands. So, two elderly gentlemen had owned it together and they had both died. So, it was in the process of, in being in probate, and I only wanted one piece of the property.
Marianne (00:05:11) - I didn't want the others. They were in different locations, and we got a deal. It was all signed, but we had to wait months. They were tracking down the last heir and nobody knew where he was, but we needed his signature on this paperwork. He ended up being found living off the grid on an island in Alaska. So that's what took so long. But it was worth the wait, because we were able to get land that was perfect for us for our, you know, for what we needed. We could afford it. the other risk at the time was that the land that we purchased was within some city limits, and the city had banned any cannabis businesses. But fortunately for me, the city was going through a bit of upheaval. It was, there were restraining orders between city councilors. Police were called to city council meetings. It was a giant mess. And so, because of that, the city just incorporated. It just incorporated right at the time I needed it to.
Marianne (00:06:08) - So, that solves all our, our local land use issues. And we were golden. Good to go and a great way to get started.
Guillermo (00:06:17) - Yeah. Did you know that going in. Because I think a lot of people don't realize that, you know, like a state like California, one of the, the most mature markets, there's still so many county cities that, that don't allow, cannabis retail sales or cultivation. And the same in Oregon. Right. Did you anticipate that? Like there's a state program and it may be just assumed that it would be, not so much of a challenge to secure land or space.
Marianne (00:06:47) - Well, I'm big on doing my research and going in with as much information as you can. I find that the more information you can figure out ahead of time, it sets you up for success because you're able to anticipate roadblocks. And so, yeah, I, I knew exactly the challenges, and I had heard rumors that the city was going to be incorporating.
Marianne (00:07:08) - So, I thought the risk was worth it, even if we wouldn't have been able to build the cannabis business, the land was still a good value. And so, we're like, you know, let's just do it. Let's think it's going to work out. We have hope and we can make it happen. And even if it doesn't, we'll be fine.
Guillermo (00:07:24) - Yeah. So, step one was the land. And it wasn't so much the capital that was the challenge. Sounded like it was finding the air that was in in Alaska. That's right. The last holdout. It's just crazy what you come across in, real estate. We work with real estate clients as well. And, and it is crazy the things that that can pop up when trying to acquire a property. Can you talk a little bit about your business model? You know, we talked with so many who are in cultivation, but also, you know, go into retail, has your business model currently and always been strictly within cultivation?
Marianne (00:08:03) - Yes, it has.
Marianne (00:08:05) - And I think that's part of the reason why we have been successful, and we survive. The ups and downs of the Oregon market is because we have found our core competency, created structure around it, created a business around it, and really leaned into that. It's easy to get distracted with these bright, shiny objects of, oh, I want to try this. Oh, I want to try that. Oh, what about this? And certainly, I want to be open-minded and happy to try things, but we must stay focused on what we're good at and what we know we can make money from. And retail specifically, it's been so tempting and so many people have told me, oh, you should be fully integrated, but running retail is a whole separate business that I do not want to. I don't have the skill set for it, and I just don't want to do it. And I feel like your capital gets spread too thin and your work gets, you know, you physically just get stretched too thin.
Marianne (00:09:01) - And our, you know, the way that we've been successful is by staying lean. We don't have a lot of extra fat. There's, there's, you know, we all chip in and do the grunt work. We all, you know, if something needs to be done, you show up and you do it. And that's just the way we run our business. And I feel like staying focused and being lean are our keys to that success.
Guillermo (00:09:25) - And for those who aren't as familiar when you're a cultivator, you're essentially competing in the, in the flower market, you're your customer is a retailer. Generally, retailers are about 40 to 50% of sales are in the, in the flower category. And that's also the most challenging, right? Because they, they compete a lot on, on price and, and thc content. But before the show, we were just chatting, and you were going into some other product lines. Are you also competing in other, you know, form factor categories other than flower or kind of how is that evolved?
Marianne (00:10:05) - We, about 90% of our sales are straight flower.
Marianne (00:10:10) - And that's good for us because we've figured out how to be competitive in the flower market. We focused on quality, and we are not the highest price out there, but we try to be the highest quality. So, good value. But everybody enjoys the experience. And because of the focus on flowers, we also have joints, pre-rolls. So, we take our bee buds, and we make pre-rolls make them into pre-rolls. So, they're still high-quality pre-rolls. And we have done some collaborations on gummies and syrups. But to be honest, the market in Oregon is so competitive that if it's not your core focus, it's hard to make money. We found that all this work building, trying to come up with a cool collaboration with awesome flavors and great effects. It's just that there's no money. So, why do you why do you do all this work and all this brand building and all the product development just to make $0.05 each? At the end of the day, it just doesn't it doesn't pencil out financially.
Guillermo (00:11:12) - Yeah. Pre-Roll is one of the of the fastest growing categories. And so, it makes a lot of sense and can you take us through you mentioned 2018. But there have been some, you know tremendous challenges on the West Coast with flower wholesale pricing. Right. Just the just the supply and the demand. What was that? What did you do to weather that storm? You mentioned staying lean. That's got to be a big part of it. But I would imagine also being able to adjust your overhead, right. Adjust your cost as there's changes. in the, in the, in pricing. Has that been part of it or what. What did you see helped you the most in trying to kind of weather that storm when wholesale prices started to, to compress over the, over the last few years and yeah.
Guillermo (00:12:06) - Started to give.
Marianne (00:12:07) - You. Yeah. To give you an example on wholesale prices when we first started the business, of course, having my financial background, I like modeling everything out.
Marianne (00:12:16) - I'm like, okay, this is. This is the best, you know, the most likely scenario, and this is the best case and the worst case. So, you at least have some sort of sense about where you're headed. And our most likely scenario at the time was $2,000 a pound. We modeled it higher. We modeled it less. But I was like, you know, based on what we're seeing in the market, this is where we're at and we made a lot of decisions based on that. Well, very quickly things compressed. You know, more people got licensed. The green rush was on. People are like, oh, we're going to invest in the cannabis business, and we'll get rich. Well, you know, you couldn't be further from the truth. But so, things changed quickly. So, in the middle of like 2021, those times, wholesale pricing for us dropped to we're lucky if we could get $1,000 a pound. So that's half. So, imagine you look at your forecasted budget for the year and what you have projected for income, and you cut that in half.
Marianne (00:13:16) - So we were fortunate because, you know, like we were talking we're very lean. But also, I'm the landlord. So, if so, if we had to skip rent because we didn't have enough cash, then we could just skip rent. We weren't I'm not going to evict myself. And so having control over the big expenditures really made a huge difference for us because in, in those lean times, you know, if I couldn't pay rent, that's fine. I got caught up later. But it made a huge difference on whether we could thrive and go through those lean times. What we learned is we really had to focus on quality for the flower market. We've had times in the past where due to various reasons, our quality was not where it should have been, and that's when prices drop, and you can't get off the product. And so, we get back to the basic quality, quality, quality. And that's shown, you know, that that holds true today because we're able to we'll we harvest every month.
Marianne (00:14:18) - And we're able to sell out of every month before the next month's is ready. And that's where I want to be. We're not in the cannabis storage business. I don't want to store it, you know, grow it and store it. We're in it to grow it and sell it. So, staying focused on sales velocity has been important also.
Guillermo (00:14:36) - Yeah. And that's a great that's a great point. I love the velocity that that point that you just made. And I love that you're a fellow council. We can talk about yield and metrics and, and all these things, but not a lot of industries where you see a wholesale price is just cut in half in such a short period of time. and you mentioned control over your, your expenditures. So, one of one of the things is. Over the last few years. You know, the flour category being price sensitive at the consumer level, at the retail level as well. And you focus on quality. Have you seen a shift over the years as and maybe it's more so, in California, Oregon, Washington state markets where the consumers are more educated.
Guillermo (00:15:28) - They're used to this higher quality. But even despite that, have you seen a shift towards consumers, become more educated about terpenes and, aroma and just the different, you know, qualities of flower to, to drive higher prices and to be able to sustain like a high quality, business such as, such as yours. Have you seen that shift in the West Coast? Even more so than it already has been.
Marianne (00:15:55) - Yeah, it's interesting thinking about how regulations impact the customer experience, because what I firmly believe in is like, like, as a user, as a consumer, how to how do consumers make their choices. And you know, there's lots of studies and people who are way smarter about this than I am. But you know, if you're going to go pick up a bottle of wine at the grocery store, you can't try it. So, you look at the label and you look at various things. so how do people choose cannabis? And fortunately, in Oregon, most stop shops are deli style, so you can open the jar and smell it and see if those aromas are there for you.
Marianne (00:16:38) - And if it's something that smells good to you and you're like, oh, I want this one. Sadly, in most other states you can't. And so, it's this interesting conundrum brought out by regulation. So, in Oregon, because it is deli style, people can smell and choose; it's a better option for people to get the quality they want. Because what might work for you might not be what I want and that we're all different. And that's why that's why there's so much variety in cannabis and, and that's, that's a good and right and just thing. So how do how do people choose. Fortunately, they are here and they're able to choose based on smell. And I love that. Sadly, there's still this focus on potency which hopefully will go away eventually. But it is sad I think here for a long term long.
Guillermo (00:17:28) - It's a long term. Yeah, yeah. We were just in New Jersey. You were also there, right.
Guillermo (00:17:34) - And MJ and packed and we went, a few of us got together. We went to go visit a dispensary, and it's just not, it's just not a great experience. You know, there's a there's a line and your kind of must get a ticket and there's not much interaction. And just being a CFO, you know, being on the financial side of things, I'm just thinking of how many sales are lost just because of this experience. You know, there's so many, people that just tag along and want to go into the dispensary and more than likely they would have purchased something if they were approached or they if they could have, the experience that maybe didn't make them feel so intimidated walking into a store like that or something. And so that is a huge difference in a big advantage of, of a market like Oregon. that where you're able to, to walk in, and going back to impact, I think you, you know, your presentation was on, on metrics and yield.
Guillermo (00:18:31) - You mentioned you have a monthly production cycle. Can you talk a little bit about the, the time from, from seed to sale and how you're able to produce monthly? And for those who aren't as familiar with what that cycle, typically looks like, and then we can get into yield and.
Marianne (00:18:54) - Absolutely. So, what we've done is we've divided our building essentially in half. So, we have two different cycles going on at the same time. And, for the most part, our plants come from mother plants. So, we take clones and cut off our mother plants, and those are raised up and will eventually become flower consumed. So, from the time that we take cuttings, they're rooted cuttings for about two weeks, and then they go to what's called a vegetative cycle. So, they're transplanted into larger pots, and we call it veg. So, they're in vegetative cycle for about three weeks. After three weeks they are transferred to the flower cycle. And they're in flower cycle for two months.
Marianne (00:19:41) - So, plants will start at maybe 18in when they go into flower, and they end up being three feet tall by the time they're done with flower. And that's when the light cycle changes, the feeding cycle changes. Everything is focused on getting these plants to produce, flowers, which is what the product is. And so, they're in there for a month, for two months. In the flower cycle. So now we're at two months, like three months give or take. So, three months there. And then we harvest it, dry it and cure it and hand trim it, which takes another month, including testing. So, we're four months from the time that we have taken cuttings until the time that it is ready to go to the stores. So, it's interesting trying to plan that and schedule it. We have our system set up, so we know what the schedule is. But reacting to market changes is challenging because you need at least six months.
Marianne (00:20:42) - So let's say somebody comes up and says, oh, this cultivar, this strain is the coolest thing ever. I really want it in the market. Like I would love to sell this. One of our sales guys will come up and say, hey, you guys really should have more of this. But even if we wanted to, it's going to take six months from the concept of it until it hits the shelves. So, it's kind of like driving an aircraft carrier. You, you might turn, but you're not turning quickly. This is not a this is not a fast turn.
Guillermo (00:21:08) - Yeah. And you mentioned the term velocity earlier. And so for those who aren't familiar with that term, I mean, you're talking about the time that you're investing, your cash in, in payroll, in supplies and everything it takes to all the costs that it takes to make it through that growth cycle until the time that flour is finally sold can be somewhere from 4 to 6 months. Correct. So, you have this, cash tied up? maybe four months.
Guillermo (00:21:39) - Right. We are within that cycle. And so, there's a couple of things that stood out to me is that first, there's the fact that it takes a lot to start this up in terms of, of cash, you know, capital because you're you said you're indoor, correct? Correct. Yeah. And so, there's more, with indoor, there's a lot more of a, of an investment and, and upfront capital. But there's also this long cycle. and so, there's cash tied up in the business to get to when you finally sell. And so, that's the question we get a lot as a virtual CFO is, I'm making profit. But at the end of the month, you at the end of the year or the month, you may still have some of that cash tied up in the business. Can you talk about, you know, how you've dealt with raising the cash that you need to start to grow the business, right, because you need the cash, to make it through this, this cycle? Have you, has banking worked for you? Have you looked at other outside lenders or what are kind of the kind of the things to think through for a grower that needs some upfront cash to get things moving?
Marianne (00:22:47) - Yeah, the initial capital outlay was stressful because we had to purchase the land, which we couldn't get financing for it, because getting financing for ag land in Oregon was very difficult.
Marianne (00:23:00) - So, that was all cash. And then we had to build a building and buy all the infrastructure equipment. So, you know, like you said, there's no SBA loans getting loans for that type of expenditure. They're very predatory. And, as, as they, you know, interest rates are high because it's a risky proposition. So, I get the, the high the high interest rates. But we had to do all of that, all those expenditures before we got our license. We had to have our building ready to go before they would come in and inspect and give us our license. So, there was a lot of at-risk capital, and we were lucky enough to be able to fund it ourselves. But, you know, most people aren't. And we're we just we got lucky that way. But part of the reason that that works for us is we started off small. So, we only built out approximately a quarter of the building at first because we were like, okay, this is I want to prove out these numbers.
Marianne (00:24:02) - I want to prove out our processes, prove out exactly how this is going to run. And that ended up being brilliant, but we didn't know it at the time. But we were able to afford building for small rooms and that's what we did. We ran those for a few months, saved up money from that and then gradually built out the rest. So, it was a long, you know, involved process as its construction was going. And we do construction then take a few months off, do more construction. But that's how we were able to afford it and stay nimble.
Guillermo (00:24:33) - Yeah. So, it sounds like you took the approach of going one step at a time until things were proven out to, to kind of manage the risk of, of going all out and, and putting all that, that capital in. So, it sounds like a great success story and that that's worked for you now during this time and still today and some of this year. Right. You're dealing with a high level of taxation.
Guillermo (00:24:59) - How do you feel about the reschedule is the two ATP going away. Is that what you're what you're most excited about or what are your thoughts on the potential reschedule this year? Just kind of an open-ended question here.
Marianne (00:25:12) - Yeah.
Marianne (00:25:13) - It's interesting. People are getting really worked up about schedule three. They're thinking that big Pharma is going to come in and take over. I don't see that at all. I don't see, you know what we grow. It's an agricultural product. So, this is not pharmaceutical grade pills that you're going to, you know, that are consistent, that you're going to put in a bottle and somebody's going to sell at Walgreens. It's a very different model selling a pure plant agricultural product. So big Pharma doesn't bother me at all. Having to add deductions is going to be nice. But as a cultivator, that is not the most important. That is not the biggest problem we face because we're at the right place, as you know, for your clients, like in the supply chain, we can maximize our actual deductible expenses.
Marianne (00:26:00) - There's some things we can't, you know, legal and tax and, you know, a handful of other things. But we're in the right place so 280 is not that big of a deal for us. What I see it more as, as a baby step and incomplete baby step that's going to get us towards full federal legalization. So, that's still the eye on the prize, I don't think I don't think stopping at schedule three is doing anybody any good.
Guillermo (00:26:26) - Yeah. And I'll just make a quick comment here for those who, may have not caught that is what you're saying is on the tax side is that cultivators are able to deduct more costs under 280, as opposed to a retailer who essentially doesn't have much of cost of goods sold. And so, since taxes are essentially, you know, 200 basically taxes, your gross, you know, gross margin versus your net income as a, as a cultivator, a lot of your cost goes into your product. You have very little overheads, such as legal, in which you mentioned.
Guillermo (00:27:01) - So, the tax rate at the end of the day for cultivator isn't as high as what it would be for a retailer. That's a great point, that from your standpoint you're going to lower your tax rate. Right. But it's not a huge, huge impact as it is for processors, manufacturers and retailers. So, what do you see as the biggest potential. Because, you know, being in Oregon, you have we talked earlier about balancing that supply and demand and the interstate. Eight. Piece of it, the market being limited to your state has some impact on that. And you have your kind of surrounded by states that are mature and that have rec programs. Do you see a potential, interstate commerce helping, wholesale pricing or how do you feel about being able to potentially cross state lines sometime in the future?
Marianne (00:28:03) - I think that, yeah.
Marianne (00:28:04) - I think that the interstate commerce really is the next big thing that's going to really revolutionize the market, because for all those reasons, you just said the West Coast, Oregon, California, you know, Colorado, but the for the outdoor crops, southern Oregon and northern California really are prime is the prime location to be able to grow cannabis in a natural sun grown environment.
Marianne (00:28:30) - And, not only that, but we have this huge, long history of knowledge and, skill for growing quality cannabis here on the West Coast and other states like let's say Arizona, New Mexico. You have so many other issues, like you have water rights, and you just can't. It's a very different environment. It's not set up to grow as a growing agricultural state. And so, if we were really to think about the big picture where people are going to put their capital expenditure, there's no reason for people to build indoor grow facilities in every single state. It doesn't make sense from a capital perspective, and it doesn't make sense from a talent and cost perspective. So, I hope that eventually we'll get to the point where we can produce where the states that should be. The producer states are the producer states and the states that that don't, you know, we shouldn't be building indoor grow facilities in Arizona where it's 150 degrees. It just doesn't make any sense.
Guillermo (00:29:32) - Yeah. So, what I hear you saying is that that, that whereas, you know, many times I think it's easy to say like one rec market in one state is this is the same.
Guillermo (00:29:42) - Right? And once the new rec market opens in the neighboring state, you know, there's less sales, you know, in your market. It's not that black and white. I think what I, what I hear you saying is that because of the high quality of flower in that region, even states, neighboring states like Washington, Nevada, you are going to gain some market share through, interstate commerce just because consumers in those markets, even though they have rec programs, they will demand a higher quality, flower from this region. Is that being that kind of what you're saying?
Marianne (00:30:19) - That's exactly it. and even states that are just coming online now, if you go to, I don't know, let's just say New York, for example, when I was there a few months ago, you look at the top shelf, high end New York stuff. Is it being it in Oregon? It would be on the bottom shelf. It would be the cheapest stuff. And that's I'm not trying to diss any cultivator in New York.
Marianne (00:30:43) - Everybody has said this is not a put down to anyone. It's just that the West Coast is where, where there's that culture and that history. And so, we get spoiled because even stuff that's the cheapest shelf in Oregon is better than stuff that's top shelf almost anywhere. And it's just a different it, you know, we're on a different side of the country, different culture, different everything. And so, recognize it's like what we've structured our business. We've picked one thing and we do it well and we focus on that. I think the same thing with, with culture, you know, with the different states, you should find the regions where it works and where you can grow efficiently and effectively at the right price point. And then they should be the producer states.
Guillermo (00:31:28) - And that's one of the that's, that's a good that's a good point because there's markets like, Maryland or yeah, I would say I would use Maryland as an example where you have limited cultivation licenses rights and therefore limited strains, which even in even in the emerging markets, that is taking, that's allowing the licit market to, to grow to some degree because, the regulated market can't meet the demand.
Guillermo (00:31:55) - But one of the advantages of additional licenses, even though it provides it kind of makes that makes it more challenging from a supply standpoint, is that a state and a market like that is able to produce higher quality strains, not just because of the region, but also just because there's more producers, right? And more strains available in the market. And consumers have more to choose from. How do you see interstate commerce really playing out? Do you think that's something that would be an agreement between states under the current structure? Or do you see full D scheduling kind of driving that? Conversation further in the future.
Marianne (00:32:38) - That's a great question. I don't have a crystal ball. I know there are many people hoping there will be some interstate compact. Oregon's governor signed that. So, if my understanding, not being an attorney, but is, is that if we get enough governors to sign on that we could get interstate commerce. So, like Washington, Oregon, California, that would be great.
Marianne (00:33:03) - But that doesn't. So, I think it's symbolic because the California market is tough too. So, you know, it's not like opening California is going to magically make things better for Oregon. It might make it slightly worse. but I think it's symbolic in that it's, it's, it's one little, tiny step forward. And that's how we make progress with keeping the mind on full legalization.
Guillermo (00:33:30) - Yeah I agree. One well, I was going to say I agree in the sense that there are so many things going on that I would categorize into this is truly impactful. Like the tax impact from the rescheduling, maybe not as much for cultivation, but it's still huge, it's a cash improvement to the industry overall. But there's other things like I think even if safer banking were to pass, I don't see it as an immediate impact. I think many can get. we work with a lot of banks in, in a lot of states, and it's not getting banking is not that much of an issue anymore, but I think it's more long term in terms of banks entering the space, institutional investors and investing or getting educated and coming into the space.
Guillermo (00:34:15) - But I see it as more of a long-term thing. And maybe perhaps you're saying the same thing with interstate commerce is that it would be a start, and you really don't see the impact of it. Until several years down the road, right?
Marianne (00:34:29) - Yeah. And on banking specifically, it's interesting to think about what the issues are. And for us, you know, of course access to banks, we, we have a bank account, we have a debit card. We pay, you know, we're legitimate business. I have checks where we have all that stuff. We're not a cash-based business anymore. But one of the impacts of it still being federally illegal are things like, my employees who are gainfully employed, you know, we pay, we they have benefits, I pay their Social Security, their FICA, all of that. But you can't go out and finance get financing for a house, say, based on cannabis income. So even though they get a W-2, it's just like any other regular job.
Marianne (00:35:15) - If they wanted to go out and purchase a house, they couldn't. And it's things like that that are that cumulatively, all these little things add up and just make it more difficult than it must be. And that's what federal legalization will do: it will recognize that this is a legitimate industry and we're doing things right. It's a real business. We should have access to the same types of structures that regular businesses do.
Guillermo (00:35:43) - That's those are the types of stories that I think are not shared as widely. And that's something that probably not a lot of folks know is that, you know, if you work for a cannabis company, something like that could, could happen to you, or a bank account being shut down if you're not careful when you're using, like, a, a large bank, even as an employee or a service provider, that can happen. And it's a tough situation. I mean, I can't imagine not being able to get a loan because of where you're employed, and you're employed legally.
Guillermo (00:36:17) - So, hopefully some of this stuff will, will start to, to flesh out. So, as we're kind of getting closer to the end, one of the areas that I like to cover, because it is we're in a year where the farm bill is being renewed. A lot of things are being talked about within the, the various states in the, in the hemp market and the hemp derived market. What is the current situation in Oregon regarding the hemp market? Does it operate? in the gray area. Kind of adjacent to the regulated market or what are some of the things you see changing in Oregon regarding the hemp side of things?
Marianne (00:37:04) - Oregon's rules are very strict and protectionist. I feel that this is one of the areas where Oregon is falling behind, because our regulators have chosen to make illegal a lot of those, minor cannabinoids and really, you know, drive costs up. So sadly, Oregon, while a leader in cannabis quality, has fallen behind in kind of this, the bigger picture of hemp and how that can add to the market.
Marianne (00:37:37) - But I there's a lot of people who get really worked up about these various loopholes in the, the farm bill, you know, thc the intoxicating hemp derived cannabinoids and things like that. And I think instead of having disagreements, having vitriolic disagreements between cannabis and hemp, I think we need to work together and keep our eye on the prize. The prize is full federal legalization, and I firmly believe that the reasons for legalization initially, where things like reduced access to minors so kids should not be having access to intoxicants, whether they're cannabis derived, or hemp derived. And sadly, hemp derived stuff is available in gas stations in so many states. So, you know, we failed on the, you know, don't get kids high. We've the testing, you know, you know, we want to have clean products so no pesticides or other nasty things in there. So, the legal cannabis market has, has, is successful in that very rocky but mostly successful. But the same thing holds true for on the hemp side it's just not working.
Marianne (00:38:50) - You have no idea when you get a hemp derived intoxicant, whether it's been tested or not. and so, there's a lot of unethical producers out there doing stuff that, sadly, are taking down that whole market. And, you know, the other big thing for.
Marianne (00:39:07) - Big.
Marianne (00:39:07) - Benefit of legalization was reducing cash to illegal, criminals, you know, so to, to criminal efforts. And so same you could there's the intoxicating hemp market is it's distracting all of us from the, the right work of federal legalization. And so, we need to find a way to work together so that we keep those tenets available for everybody. And just move forward together.
Guillermo (00:39:36) - When you say, like Oregon has banned certain cannabinoids, is that just THC cannabinoids like delta eight and delta nine, rather than regulating, the hemp derived products, is that is that what it is, is more of a, a ban rather than regulating the products?
Marianne (00:39:57) - Correct. Yeah. You can't go into any store in Oregon and buy any hemp derived D9 product.
Marianne (00:40:04) - So, they've spent a lot of work banning it. But then the flip side is I could buy it from a company in Kentucky today and have it shipped to my house through the post office, and it would get here regardless of whether it's legal or not. So, it's a patchwork of rules that don't make any sense.
Guillermo (00:40:21) - Yeah, same in Texas. Like I follow the rules. There's a smokable hemp ban yet you can pretty much buy anywhere. It's just, it's gray, not enforceable. And there's talk right now in Texas of banning Delta eight and Delta nine. I don't know if it'll happen. It's just so interesting to follow. Like right now in Florida, the governor has, he I guess he has struck down the ban on intoxicating products in hopes of helping, Kind of strike down the new rec program. Right. Or the votes on the program. So, it's just like, there's different reasons for doing that. I don't know if that's a good one, but, that's just it's just interesting how different states are, are treating hemp and trying to maybe like, like maybe in Texas, like, I know our very conservative, you know, policy makers don't want a rec program, don't want to spend the medical program.
Guillermo (00:41:24) - So, they've left the hemp space alone because there's a lot of jobs that the Secretary of Agriculture supports, probably more on the seed and grain part of it. But regardless, it's, it's a lot of jobs and politically, makes a lot of sense to help those industries grow. But as you said, they're story after story of children getting Ahold of these products. not just because they're getting high, but because they're having very adverse effects, because there's not, proper, dosing or they're able to buy it in their underage. And so, yeah, a lot going on and, a lot to do to, like you said, help those two industries or if you want to think of them as two industries from a regulatory standpoint, really work together. Right. Because a lot of good comes out of the hemp space. So, Marianne, lastly, we as we're, as we're getting towards the end, I just like to I like to ask you've shared a lot with our listeners.
Guillermo (00:42:25) - I think I love your story about, you know, how you've navigated some of the challenges with, with pricing and, some of your insights there? You know, going through things one step at a time, I think sharing your story is something our listeners will benefit from. You know, going through things one step at a time, I think sharing your story is something our listeners will benefit from. But, from my standpoint, I have a lot of optimism about what the reschedule will do and shift things in the right direction, maybe indirectly. One of the things that I would like to point out is that companies are going to have more cash, and they're going to be even though we're not going to have safer banking, better credit. Right. So, there'll be better credit, of cannabis companies, just because taxes are lowering, you're able to generate more cash.
Guillermo (00:43:23) - And so that will naturally increase access to capital and scaling, which just makes businesses more efficient. So, I just see this year as just great progress. but I was curious to get your take as we're wrapping up is we can maybe wrap up with what do you see? What are you most excited about in the coming years?
Marianne (00:43:45) - Yeah. Just to briefly go back to the credit piece, a couple months ago, there was a study release that there's $3.8 billion (about $12 per person in the US) of Uncollectible receivables in the cannabis industry. And that's a huge thing. We talked about cash and banking. But unpaid debts are massive. And so I am hopeful that this, you know, rescheduling from schedule one to schedule three frees up some of the cash so retailers can actually pay their bills because that's kind of the elephant in the room, is that you might look profitable on paper, but cash flow wise there are so many businesses who are really struggling. And so, I'm hopeful that that schedule three opens that up for them.
Marianne (00:44:26) - But overall, we must remember where nobody has ever done what we are doing. And of course, there will be mistakes and learning opportunities. But the name of the game is pivot. And you, you try things and you've got to be willing to be flexible and to understand the market and being able to pivot when things change. And we are just at the beginning and I'm excited because I do think that that the hemp and cannabis markets need to figure out how to work together and, keep the customer in mind because theirs, there's a need for a plant medicine in our society today. And that's why we grow. We grow with the highest quality that we possibly can, because I don't want to put something in my body that is less than, you know, less than, and I don't want to sell it. So that's there's so many great cultivators and great companies doing amazing things, and there's so much opportunity. There's room for all of us.
Marianne (00:45:30) - We don't have to be fighting each other. We could find ways to work together so that we, you know, I think, you know, it sounds a little trite, but I think we can heal the nation with cannabis. And so, let's find a way to work together and make that happen.
Guillermo (00:45:41) - No, I completely agree. And thank you for bringing that up, because I hadn't, I hadn't brought that up. But that is one of the points of all these talks on the two and whether we're talking about additional cash from amended returns or just the. Impact is paying down debt, you know, and that is one way for the industry to work together and to stay healthy is to pay down this big $3.8 billion (about $12 per person in the US) of debt that we're seeing between, retailers and cultivators and manufacturers. And so, yeah, this is just the beginning. You're in a mature market, but in the bigger picture. It is new. Right. And so, as you mentioned, you know, being customer focused and tapping into these, new customer segments, customers, consumers are just becoming more and more educated and demanding, you know, higher quality.
Guillermo (00:46:31) - I'm one of those I want to know where something's made the product's values and those who are making it. And that is a a winning strategy. Just be consumer and customer focused as we kind of move into these next couple of years. Marianne, where can people find you if someone is trying to get in touch with you, whether it's a retailer or someone who wants to collaborate with you, what's the best place to find you?
Marianne (00:46:58) - Yeah, ours.
Marianne (00:46:59) - Website is Alibi Cannabis.com and we're on Instagram. Alibi cannabis. And I'm active on LinkedIn. It's easy to find Alibi Cannabis there. So just go look for an alibi and be happy to connect. And I love sharing our story and keeping an eye on the prize, which is access for everyone.
Guillermo (00:47:18) - Absolutely. What a great way to end. That's all we have for today on the Cannabis Success Show. And I just want to thank you again for joining us today. And we'll see you next time.
Marianne (00:47:28) - Sounds good.
Marianne (00:47:29) - Thank you.
Guillermo (00:47:29) - All right.
Outro (00:47:30) - 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.