JB (Cheech & Chong CEO): Building a National Cannabis Brand Through Trial, Error & Partnership

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Bryan Fields: JB, everyone knows the brand Cheech & Chong, but few people understand the infrastructure behind it. What are most people missing? JB: There's a lot of complexities. You know, the ultimate goal of this company was not to just get consumers, right? Not to sell one product like celebrity brands often do — like, hey, we threw our name on something, we sold one product. The ultimate goal was twofold. First, get consumers into brand followers. We want someone to buy the product, buy it again, and tell their friends about it — that's what makes a brand at its very core. Second, how do we infiltrate as many markets as we can with the brand? I want to get the brand into everybody's hands, whether they're wearing a t-shirt, buying a pre-roll, or having a hemp beverage. It didn't matter how — we just wanted to curate that experience based on the legislation we're facing across state lines and nationally. So how do you take two guys who've been synonymous with cannabis for 50 years, the biggest advocates, and package that experience into something a customer can enjoy and talk about? That was ultimately the goal. When we started this business, we started on the cannabis side, and Brandon and I met — he was on the CBD side. We brought in the CBD side, and he quickly developed products for the hemp side, pushing into massive distribution and retail chains on the liquor side for the hemp beverage, while growing the cannabis side to now 16 states live, 20 states under contract, a few countries in that mix, and dispensaries being built out across a multitude of states with the Cheech & Chong name brand on it. So it's how do we curate this experience beyond just a movie and a culture, into an actual consumer's hand, without becoming a corporate scenario where it's all about revenue and not about experience. Bryan Fields: Thinking through the brand, I'd argue Cheech & Chong is one of the top three most well-known national brands in an industry desperately trying to have national brands. You have that head start where you can name-drop it and people immediately know what it's associated with, which helps so much in expanding to new states, versus other brands that have to explain who they are. Do you feel any sense of urgency to accelerate on that head start? JB: Yeah, I think there's a few things coming together here, Bryan. What you're seeing is these MSO-heavy states getting very smart — similar to what happened early on with Paramount, MGM, Warner Brothers, where they start off making a product and operating in a system, then want to control the entire system from distribution to retail to manufacturing, just like early Hollywood. What happens to other brands is they can't trade shelf space at stores because they don't have stores. We're more similarly positioned to United Artists in that context — we're the brand that wants to bring other brands with us and work within the MSO system of trading. We don't want to leave brands behind that are recognized locally but not nationally. We want to bring them into this ecosystem and find a way to trade shelf space — that's the mentality to get more coverage for our brand while bringing others with us. That's why we've done IP licensing with stores, and production in different states, so we can have a brand with great partners — not trying to control them, but using their wisdom in the local market mixed with our national branding perspective. The people who manufacture our products manufacture other brands too. So how are they going to get a spot in a prime location store if it's just, hey, this is a popular brand in Ohio or Illinois but not nationally? Well, Cheech & Chong comes in as part of that collection you're selling into that store, and by the way, Cheech & Chong has stores, so let's talk further. It's good business but not necessarily expansive business otherwise. On the cannabis side we're dealing with a market that's really controlled within state lines. California is predominantly controlled by Nabis — they distribute the majority of brands, so if your store wants recognizable brands on shelf, you have to go through them. Arizona is more seed-to-sale, with big operators owning their own manufacturing and stores. So how do you navigate contexts that won't scale nationally without national reach, while also bringing other brands with you? It does us no good to be a national brand alone. When interstate commerce frees up, being the only national brand won't work well — we saw that in the hemp side early on, being stuck in a fridge door between a lager and an IPA, and it creates consumer confusion. If there are other brands in a hemp drink section, that's much better — then we can compete for who sells more. Establishing a category of national brands is huge, because cannabis compares well to beer or tobacco in scale, yet it's still operating within state lines, and those handcuffs are going to come off eventually. Bryan Fields: That strategy doesn't feel like an out-of-the-box first move. What was the origin — is it based on the fact that Cheech & Chong is such a well-known door-opener for other brands, like, "we're in 17 states, we can help open these stores"? JB: Trial and error, honestly — a lot of mistakes, a lot of misunderstandings, then learning from local operators all the way up to multi-state operators, seeing what they're doing and how we fit into their sales channels and systems, while keeping an eye on the future. It was bumping our heads a lot before getting it right — four years of painful experience on the cannabis side trying to find a mechanism that would work within a state and nationally at the same time. It wasn't like we walked on water or were geniuses — it was how do we figure this out, how do we meet consumers where they want to be? Our chief product officer, Joey Marin, who's Cheech's son, knows so much about cannabis, but you have to deal with growers in Arkansas, Mississippi, Oregon, and consumers expecting a certain experience. So we started going off of terpene profiles, mixing and matching what we had without massively changing a local grower's genetics, so everybody had a similar expectation of experience but still culturally tuned to what they were getting from the best local growers. It was tough figuring out how different systems meshed — a lot of edges we had to sand off as we went. Bryan Fields: It sounds like a lot of trial in one market, tweaking in the next. Was there a specific moment — a dispensary or manufacturer partner asking for another brand or expansion — that sparked this? The relationships and trust factor seem like hidden assets that let you get into different states without fully knowing the local market. JB: Yeah, there's a lot of trust back and forth. It's very hard for an independent dispensary, or one with a few locations, to compete against an MSO — MSOs have technology stacks, personnel, investment, all these things an independent doesn't have; you often have one guy doing seven jobs while also trying to market. We bring in the market, the technology stack, the products, and the ability to negotiate for the buyer to bring in more products. But we still want them to operate their business the way they feel is sound. For example, we have an autograph room in our Oklahoma dispensary because the owner loved autographs — he was a manager for years, fun guy — so we worked that into the design; Jasmine did that, and it was amazing. We also have a trust factor — our original partners in Arizona and New Mexico sold their operations and went to Massachusetts, and we went with them; we have dispensaries out there together. We have tools like a loyalty platform and point-of-purchase merchandise systems, but not everybody uses all of them — they use what they feel inclined to use. Mississippi wanted to do a Cheech & Chong Day, so we got them cutouts and shirts and made it happen. Vegas did one too, but not everybody does. We want to work alongside the system where it makes sense to bolster what partners are trying to achieve. Bryan Fields: You're providing vast resources in a really difficult area — picking partners, navigating costs and trade-offs. It seems like you avoid the trap some companies fall into working with a consultant who sets things up and then leaves. JB: Yeah, that's the vision Tommy and Cheech have always had — never standoffish about working with people, and neither are we. We've applied that mentality: what's working best for you, and how do we amplify that with our skills? It doesn't hurt that we're doing a lot of advertising online — Brandon Herzberger and Steve Gunn were the first to open up X, TikTok, and Snapchat for advertising on the hemp side, since cannabis is still problematic in some of those areas. So people see the brand repeatedly, then see a store or product in a dispensary, and that familiarity drives purchase. That's a win for us and our retail or manufacturing partners — we only win when they win. We've tied ourselves to a role of partnership instead of dictator, and we're striving for legislation on both sides that lets consumers be met where they're at. Bryan Fields: How do you know when it's enough? Obviously you want in-store purchases, not just awareness. Using Arizona as an example, if foot traffic isn't where you want it, how involved does your team get? JB: We have a technology relationship with partners like Headset and Flowhub, so we can see what's transpiring in that in-store connection between budtender and customer, and we want feedback — we can't be everywhere at once, but our products can be. So it's education, branding, and consumer awareness that carry the day in a lot of these places. We use that technology infrastructure plus the on-the-ground intelligence of our partners to figure out how to best position what we're trying to achieve. Bryan Fields: That visibility helps you understand the gaps — you don't need to be told something isn't working, you can see it and decide whether to deploy more assets or marketing ideas at the state level. JB: A hundred percent. In some cases you have to be patient — Mississippi took a long time to connect, but we kept working with the partners, and now we're in a very good position there. It's a medical market, the income isn't comparable to New York, so it's a different strategy and exposure, and we had to be flexible, and they had to be flexible too. We got there. Bryan Fields: Can you give a quick overview of the different markets you're in and the operations, so people understand the complexity? JB: I'll cheat off my big board behind the camera. We're in Nevada, Arkansas, Colorado, Illinois, Massachusetts, Maine, Montana, Mississippi, Missouri, New York, Oregon, Connecticut, Ohio, Oklahoma, and Arizona. Coming online: Pennsylvania, Guam is now online, Peru is coming online. Washington — we were there before, pulled back, and we're coming back to that market. Maryland — we're working on it, we've got products in place and are working on dispensaries to get open. And we're looking at Rhode Island, New Jersey, Virginia, Louisiana, Alabama, and Delaware as markets we're working through right now on the product side and potentially the dispensary side. Bryan Fields: With Maryland specifically, are you looking for the right dispensary partner, or is it timing? JB: We have a product partner, and getting a product live means working through packaging, formulas, everything. We're well down that path with somebody. On the dispensary side, it's location, expectations, and how we manage the whole process. It's always helpful to have products in market first, because walking into a dispensary conversation without products creates an issue. Sometimes we launch with both products and stores simultaneously, like we did in Montana, where we now have seven stores. It would be strange to open a Cheech & Chong store with no Cheech & Chong products, so it's about balancing timing. It's a three-store deal in Maryland, and I really like that partner — we should be on market there in the next two to three months. Bryan Fields: Do states ever ask for exclusivity? JB: Sometimes people ask for exclusivity, but generally we look at an area rather than an entire state for stores — putting just one store in the corner of a state doesn't make sense, and people are usually reasonable, since more stores in a state means more buying power. You just don't want two stores close enough to fight for the same customer. For products, that's typically a statewide deal — we don't want multiple manufacturers or sales teams in a state unless one lacks capability in something like vapes or gummies, in which case they'd sell through our funnel, or we split territory based on who has the best sales coverage where. Bryan Fields: So each state is handled uniquely but all independently at the same time? JB: Yeah, you have to treat them uniquely — even basic labeling that works in Mississippi or Arkansas would look terrible in Illinois given the limitations there. Bryan Fields: How do you actually get a brand into all those states — is that where the reverse licensing model comes in? JB: Yes. The reverse licensing model is about growing top-line revenue by bringing partners in differently than it's traditionally been done. It's not sexy for them because it's a licensing fee, and we're not charging upfront to be part of it, but there's a benefit tied to an exit — whether that's public markets or a buyout — where we share value with them since they helped build it, rather than keeping it all for ourselves. Right now that's mostly on the store side; we're having discussions about extending it to production, which is more complex since it involves multiple brands' production under one umbrella, but it would let those brands get the distribution and shelf space they need without owning stores themselves. Bryan Fields: It also seems like a diversified, creative revenue approach — playing the long game on brand awareness rather than being fully vertically integrated in 19 states, especially since interstate commerce could change everything. JB: Brian, there are really two camps on the legislative side. There's the MSO camp working on what a Schedule III scenario looks like based on what the president said. And there's the big tobacco camp looking for complete descheduling and interstate commerce viability. Both have good goals and common situated interests even if they're not in the same camp. As interstate commerce eventually springs free, localized production gives a great benefit — shipping cost is one of the most costly parts of hemp-derived beverage, and while we manufacture in one place now, markets will eventually dictate other manufacturing locations. Multiple brands under one roof make packaging and distribution cheaper and give sales reps more to sell. But even if state lines come down, what can actually move across them is still uncertain — there will be litigation over license fees and how states handle interstate commerce. Ultimately operators will get bigger, merge, or exit. It shouldn't be scary — the possibilities are kind of endless, even though the unknown scares everybody, including myself. Bryan Fields: So where do you personally fit between the tobacco camp and the MSO camp? JB: Tough question — good one. I lean toward what can actually be achieved immediately. The big tobacco plan, as I understand it, lets recreational states opt in or out but includes complete descheduling and interstate commerce provisions — I like that idea because it opens a lot of possibilities immediately, though it's a definite reach even though they have the political capital to get there. The MSO side is writing a more sustainable, achievable Schedule III scenario. I lean a bit more toward the tobacco side for its aggression, though I wouldn't bet either way right now. Big tobacco wants legal thresholds to play in this space, and that legal cover has let us and other brands build businesses — now it's time to accelerate, and any legislative clarity helps everyone. Bryan Fields: I'd imagine a tobacco company scouting brands would love one like yours — national brand recognition and infrastructure without being locked into vertical operations everywhere. Do you think about positioning the company for that kind of interest? JB: We always give it some thought, but our primary goal right now is consolidation of the market — MSOs need to get out of the states they're overexposed in, and brands need to get into the states MSOs dominate; we present a path for both. An exit is always part of the industry chatter — everybody's talking about who got bought or invested in. We've had conversations with MSOs and with big tobacco about what this might look like. Realistically we're looking for a compliant structure that lets a brand grow, and in doing that we'll end up working with these bigger players one way or another, as well as the smaller independent partners we deal with daily — so it's about consolidating that gap between MSOs, big tobacco, and independents. Bryan Fields: You fill a unique void for both — MSOs want a brand that opens doors instead of building one from scratch, and tobacco wants a proven national brand. What does that mean for the hemp side, since it can sometimes pull against the cannabis strategy? JB: There are people on both sides of that line besides us — GTI has Señorita's and a great cannabis business; Kim Rivers had Onward and a great cannabis business in Florida. For us, the question was how do you sell cannabis in Texas — you don't, you sell hemp. I think cannabis sometimes looks at hemp negatively, but it shouldn't. When we sell a 5-milligram drink at Benny's, ABC, Total Wine, Bevmo, or Circle K, that's an initial low-dose experience that can migrate a mass consumer into a dispensary eventually — we've seen that in Illinois, where we sell both hemp beverages and cannabis and have seen growth in both, so they don't cannibalize each other; they meet a consumer at a comfortable, basic level. We're on a time clock for hemp given the CR package passed through the Senate to reopen the government, and we're hoping for real clarity, because inputs for both cannabis and CBD involve hemp. There may be a very narrow, constructed space for hemp going forward — maybe just beverages — and we're hoping for at least a two-year continuance to work out sensible regulation alongside the cannabis and CBD industries. There's a lot of short-sightedness right now, and it hurts hemp farmers who are having a big piece of their business taken away. This is American ingenuity — Europe doesn't have this; you won't find a hemp beverage in a British pub — and we've already started expanding globally, selling cannabis in Germany, Malta, and Switzerland, plus hemp/cannabis moves into Peru and Guam. Bryan Fields: I agree beverages open the door for consumers who might be hesitant to try an edible after a bad brownie experience, letting them realize a low dose can be light and enjoyable. Is it a replacement for alcohol, JB? JB: No — I think alcohol's biggest competitor isn't hemp-derived beverages, it's GLP-1s; you're not knocking back beers or cocktails on those. Hemp beverages have actually kept jobs alive, kept liquor stores and manufacturing open, because the alcohol industry was facing decline before hemp drinks became a billion-dollar category, which is still a rounding error for the liquor industry. The last three generations before this one spent $20 billion on alcohol; this generation is at $4 billion — people are looking for different functional beverages or drinking less. Hemp shouldn't be seen as a competitor; instead of building a moat, alcohol companies should ask how to get into this business and expand. We work with the 25th largest brewery in the country — they were down to one shift and struggling, now they have three shifts including a swing shift because of hemp beverage production. Our distributors and retailers were struggling, and now hemp is 10-20% of retailer sales. It's creating jobs and meeting consumers who may eventually go into a dispensary. Bryan Fields: Hopefully something gets done on the Hill, since no one really knows how the government operates anymore. JB: You're not alone, Bryan — no one knows. Just taking a shot in case anyone in government is listening. Bryan Fields: Do other celebrities reach out to see what alignment or partnership might look like with what you're doing? JB: Yeah, we've been reached out to by other celebrities with different ideas, and we're always willing to work with them and share knowledge, because as an industry we're still very young — cannabis is a $31 billion industry per BDSA, and hemp-derived beverage, even though it could become the fourth largest category in a liquor store, is still around a billion dollars in sales. We've seen Willie's have some success in hemp-derived beverage after struggling in cannabis, and we're the first to congratulate others building a real brand rather than slapping a name on a quick buck. Bryan Fields: That's been the detriment for a lot of celebrity brands — quick launch, quick taper-off — whereas you have to be dynamic and understand the industry's limitations. JB: Right, and it's bad for us too, because we get grouped with brands that failed, even though — to their defense — you're going to make mistakes in this market. You saw that with Tyson and Tyson 2.0. So we're always here to help anybody who wants to reach out, take that call, and share some of our playbook, because I think it's huge for the industry to have more brands succeed. Bryan Fields: Last question — what question do you wish more people asked you? JB: I really like talking about the size of the addressable market and what the future looks like, hearing what people think it is — we all have a slightly different idea of what it means to be in cannabis or hemp. I wish more people asked the general question of where do you see this going, instead of everyone playing cards close to the vest for fear of looking foolish. And obviously, what's your favorite podcast — this one, right? Tell everybody to come through this podcast, Bryan's a solid man. Bryan Fields: Is there a market you think most people are undervaluing, or overvaluing? JB: I think Missouri's cannabis market is overvalued — it benefits from being surrounded by locked-up or hard-to-access states; my understanding is it's the fourth largest cannabis market in the U.S., which blew me away. On the undervalued side, on the hemp side it's New York — they have a 1-milligram cap on drinks, which is a shame; we've been working on policy there with the governor's office, which would like the taxable revenue. On the cannabis side, Washington and California still have dust settling, but I think they're undervalued and will be even bigger once taxation and Schedule III come to fruition. And then Texas — let's see what they do; it's the eighth largest GDP in the world, and their hemp program has been killing it even though it hasn't fully delivered what was intended. I've met Governor Abbott — great guy, loves business — but he'll be put in a tough position depending on how this plays out federally. Bryan Fields: Hopefully governors realize taxable revenue is real and that most Americans like cannabinoid products, and it's time for sensible legislation. JB, if listeners want to get in touch, learn more, or buy products, where can they find you? JB: You can find me on LinkedIn, or just email me — I'm JB@Cheech&Chong.com. Send me a note, I love to respond and compare notes on what's going on. Bryan Fields: Either way, thanks for taking the time — this was a lot of fun. JB: Thank you, this was awesome.