Premium Should Mean Organic: How Jetty Extracts is Leading the Clean Cannabis Movement ft. Ron Gershoni

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Bryan Fields: What's up guys, welcome back to another episode of The Dime. I'm Bryan Fields, and with me as always is Kellen Finney. This week we've got a very special guest, Ron Gershoni, co-founder of Jetty Extracts. Ron, thanks for taking the time — how are you doing today? Ron Gershoni: I'm great, guys. Thanks for having me on. Excited to dive in. Bryan Fields: Kellen, how are you doing? Bryan Fields: I'm doing really well, really excited to talk to Ron, really excited to dive into an OG West Coast brand. How are you doing, Bryan? Bryan Fields: Yeah, I'm stoked. There's a lot of lessons we're going to pull out of Ron today — a lot of things he's seen during, God, it's gotta be 10 years now, of endurance in the sport, which we were talking about, and we're going to try to get an honest and optimistic take on where we are and where we're going. But before we dive into the fun stuff, we're going to have to put you on the record, because with your business being split East Coast, West Coast, we should probably separate that out and go truly to where you started and where you were born, as a way of separating at least Coast vs. Coast. So if you had to be on the record — where were you born, Ron? Ron Gershoni: I was born in Englewood, New Jersey. Bryan Fields: Put that on the record, Kellen. That's a tough one, I got nothing for that. Bryan Fields: That's fair. So Ron, for our listeners, can you give a quick background on how you found your way into the cannabis space? Ron Gershoni: I grew up in New Jersey, ended up going to the University of Michigan. I studied business there, and then I moved back to New York City and lived there for almost a decade. I was working in commercial real estate, and then I moved into the natural products space — I was running an aluminum-free deodorant brand. So I got a lot of exposure to sales and distribution of CPG and the retail environment. I got married in 2009, moved to California, was looking for a change of pace, and kind of became enamored with the dispensary scene. I'd been a cannabis consumer since I was fairly young. In 2013, my father came out to visit me, and he decided to try using cannabis to help with his back pain, and found that it helped him tremendously, especially with sleeping at night. That was the first exposure I had to the medicinal side. I had some friends who were in the business, and I asked them what was going on, and they started showing me some concentrates, which I hadn't seen before. And we ended up, without much of a plan, deciding to buy some extraction equipment and make some products. We didn't have a brand or much of a strategy — it was more like a little side hustle, a fun experiment. Pretty quickly, I recognized that the dispensaries looked a lot like health food stores had looked in the 1980s. My father was in that business, so I'd been in and out of stores quite a bit as a child, and back then there was very little in the way of branding — a lot of scooping your own seeds and nuts. Fast forward, and Whole Foods became the biggest player, and everything was taken over by brands. It just felt like if we could create a brand with a really good product, the dispensary environment would end up looking a lot more like Whole Foods than those 1980s health food stores. So we ended up creating Jetty. We were all in San Diego at the time — there was a Jetty down at Ocean Beach that we named it after, so that someday in the future there'd be a tie back to San Diego. But yeah, we were just experimenting, tinkering — there was no blueprint at the time. Concentrates and extraction were all very new in the market, and we just started making products and selling them. Bryan Fields: I want to stay with that first extraction run. You buy the equipment, get it set up — what's that first experience like? Are you on YouTube, asking your buddy? And how long did it take before you felt like you were making progress? Ron Gershoni: So I have a few co-founders — there were four of us when we started the business. Nate Ferguson, who's still very close with me and still leads all of product, is just brilliant when it comes to the cannabis plant and the science around it, and he really embraced the extraction side of things. He had been hustling weed since he was a teenager and owned some dispensaries and some grows, so he was much more steeped in the industry at the time than I was. He was sourcing trim at the time. We bought CO2 extraction equipment, and as I said, there was barely an instruction manual — almost no one was doing it. It was a lot of trial and error: trying different pressures, different settings, different lengths of time, and seeing what came out the other end, trying out different hardware on the vaporizer side. The amount of hours he put in — I think he probably has almost more hours than anyone in the world on that type of CO2 extraction equipment. A lot of YouTube, a lot of watching interviews and looking to see what's in the background of someone's lab, like, what is that piece of equipment? Random calls to scientists, just trying to ask questions, going on different message boards. But at the end of the day, there was really no guide for us. It was very much just, we're going to keep trying stuff and keep working to make the product better. And back then, when we started, everyone was cutting with MCT oil or some sort of PG, and one of our first real big goals was: how do we get just cannabis oil in a cartridge? We achieved that pretty quickly, within the first few months. We started the company in 2013 — this is now our 11th year of operation. Bryan Fields: Why cartridges at first? Ron Gershoni: They just were so amazing — I'd never seen them before, they were brand new, so convenient, so easy to use. But they actually kind of sucked — they didn't really taste that good, they didn't really perform that well. It was more, we realized if we could make something with solid performance that tastes really good, that's just weed in a cartridge, and make it look like something on a shelf that we'd want to buy — that seemed like it would be a great opportunity. Bryan Fields: And then the process of creating that product, moving it to dispensaries, and then scaling it up — how long does that take, just for people to understand the type of effort that goes into getting there? Ron Gershoni: Yeah, it was a really different time. This was 2015, and there was really no regulation, so we were operating out of unlicensed facilities, and there were no requirements around packaging or process or anything. Today it's a completely different thing — to get started today would cost more money and take more time than it did then. We were self-funded — I had invested in some real estate that I sold, and then, along with my father, we invested some money to buy equipment and get the business running. For several years, that was the entire funding, just ourselves. It was fast — we bought the equipment, set it up, started extracting, filled some cartridges, made a package, walked into stores, and we were in business and selling. What was crazy was it was super popular right away — there just wasn't much competition, and we were so small and had such low throughput that we couldn't make much, but we were just selling in San Diego. It happened quickly. I remember watching an episode of Shark Tank where someone threw out a revenue number and the sharks all looked impressed, and it was a couple hundred grand over the year, and I was like, we're actually hitting that already, within our first year. It happened very organically. In those days it was very easy to get a product into the market, and if it was even mediocre, it would sell — so it was a very different environment than anything you'd find today. Bryan Fields: Take us through the scaling of the business, fast forward — because obviously, as we've seen, there are a ton of businesses that started back then, and maybe most of them made decisions along the way that could've been a disaster, or the right route. So take us through some of those decisions and how they led you to where you are now. Ron Gershoni: I believe we're one of the oldest brands across any category in the legal industry at this point. Most of our friends who went into the legal side back in those years haven't succeeded, for many reasons — it's a really hard industry, there's a lot of luck involved. We made so many mistakes — every mistake you could possibly make — but I think we were fortunate that we didn't have outside money, and we ran the business like it was our own money, our own thing. So we weren't aggressively trying different marketing strategies or expansion — it was more like, if we're getting some growth, that seems good. We weren't gunning to be super fast to number one. We were just focused on the product, and I'd say from the beginning, that's been the biggest reason we've been successful — it's always been about the product and how do we make the most consistent product over time, so that every time someone buys it, they know they're going to get a good experience. There are a lot of ways to cut corners in production and in the business generally, and we've always stayed true to making sure that every product coming out of our facility is something we'd be proud to put in someone's hands. But man, there were so many decisions, and again, a lot of them weren't good decisions. I think a lot of it is tenacity — we're all super competitive, and there's always a way forward. You just can't look backwards. You're going to make mistakes, and if you dwell on them — learn from them, but you can't change the past — you've got to figure out, all right, what do we do now, and move quickly and decisively, and try new things. I think one other thing early on was that we weren't good at raising money, and I think that benefited us. A lot of companies, once you bring in money, there are expectations on what you're going to do with it, so you spend it and end up doing things that aren't really core to your abilities. We saw that over and over, companies raising insane amounts of money. No one really wanted to invest with us, partially because I think we weren't selling a sexy enough story — we were a little too honest about measured growth, and investors were seeing much more of a hockey-stick projection elsewhere. So money was flowing into businesses telling investors they could hit these massive growth numbers. For us, it was always more of a long-term strategy — build a brand over time, and as long as we focus on the product and building that loyalty, over time it's going to be very valuable. I think it's also very scalable, more so than cultivation or retail, which were really the hot areas back then. Brands were relatively new — now there are many brands, but back in 2013, '14, '15, there weren't that many, and that wasn't what people were talking about. Anytime I met somebody and they heard I was in the cannabis space, it was, "Oh, you own dispensaries?" No. "Oh, so you have a grow?" No, I have a brand. That just wasn't something people were focused on. But I've always felt that's where, over time, as things open up, the most scalability and growth would be. It's been a roller coaster — we have a lot of stories — but now we're in four states. We expanded out of California for the first time just a couple of years ago, and I think the brand is what allows us to do that. Bryan Fields: Did the expansion start with picking which extraction method to move to next after CO2, or was it more, we want a different product category, so we have to expand into a different extraction method? Ron Gershoni: CO2, when we started — people were still having explosions with butane, and it was scary, people were being arrested for it. So we were trying to be a little more cautious, and that's why we started with CO2. CO2 is actually not a great solvent for cannabis extraction — butane's much better. Once we got our facility in Oakland — we'd started in San Diego, had a facility up in Grass Valley north of Sacramento, set up a little grow, got raided, had to shut down for several months, it was chaotic — we ended up in Santa Cruz, then in Fresno. We were in five locations, I think, in about a year and a half, and we realized we needed a home base where we could actually invest in the build-out and staffing and really build a business, instead of being on the run, which is really how we were in those first few years. We ended up landing in Oakland, had a facility by Harborside, and then in 2016 we bought a building in Oakland down by the Coliseum — 13,000 feet. This was just after Oakland had set up a map with their green zone, which allowed for all solvent manufacturing, so we started experimenting with butane, with ethanol, still with CO2, and found that ethanol and butane created a much better finished product and were much better to work with. We built what they call Class 1, Division 1 rooms to make sure it was very safe — explosion-proof. It's more efficient and creates a better-tasting product; it pulls more of the terpenes and compounds you want. I still think it's a great extraction method. We started experimenting with rosin — pressing flower to rosin — in 2016. It was always something we wanted to be involved with, but very hard to scale. We've moved our business way more toward solventless extraction, which just uses ice and water, and I think that makes the best and cleanest product. That move was really a result of wanting to be in front of where things are going and to lead the industry toward cleaner products. It's taken some time, but that's where the majority of our extraction efforts are today. Bryan Fields: When you were trying to scale it up, were there tools you pulled from other industries in order to have a consistent end product? Because the input material is a plant, so it's extremely variable, and then you've got all these other environmental variables in extraction. Are there tools or best practices you pull from outside industries to try to have a consistent, reproducible end product? Ron Gershoni: Absolutely. We were all guilty at times of thinking cannabis is different from anything else and that no one understands this industry — but the reality is it's still a business, and it's still manufacturing. So we'd meet with different types of chemistry people, labs, to try to understand how they were doing things. We used a lot of equipment that was traditional to universities and research labs and adapted it to cannabis, because there weren't many people doing it at the time. It was kind of cool, because there was a shared openness from most companies — even competitive companies — like, "We're trying this, have you tried this?" A lot of knowledge sharing, even though we were all competing with each other. Those days were great, honestly — it was a lot less savage, there was less capital, and I think it was a lot of much smaller businesses. But absolutely, we used technology, equipment, and processes that other industries were familiar with and using. Bryan Fields: The reason I bring that up is because I know the importance of building a brand for longevity, and having tools that allow for a consistent, reputable product is what a customer really relies on when they purchase your product for the first time — because that first experience is so important. If they have an amazing experience and tell a friend, and they go buy it a second time, it has to deliver that same feeling and value, which is where the challenge of extraction becomes such a big piece of the puzzle. Ron Gershoni: Yeah, and it's an organic material — there are thousands of different strains and genetics, and they all have slightly different properties, smells, and flavors. So there's always going to be some variation in the finished product. Our goal was always to get whatever extract it is as close to the starting material as possible, and then over time to use more organic and higher-quality starting material — that's where we've landed today. In 2013, extraction was mostly done on trim, kind of a byproduct that everyone found a way to make into something decent. That's really evolved considerably — we now have multiple acres grown specifically for our extraction process, whole flower. Bryan Fields: So when you guys go into a new state, what extraction method do you lead with? Or do you feel the market out, analyze which product category is going to do best, and go in with a single product category built from there? Ron Gershoni: We've expanded to Colorado, New York, and New Jersey from California — you guys are now able to buy our products legally without having your friends ship them to you from California, which is great, because that's what a lot of people were doing before. Colorado was our first market. We have a really long-standing friendship and relationship with LEEF, who's a solventless company in Colorado — they have a small vertical operation, so we were excited to work with them, and we focus exclusively on solventless in Colorado. The more mature markets are where we're seeing the most success — we have the number one rosin vape in California. In Colorado, we've only been there for less than two years, and we have the number four rosin vape, but solventless is really where we're focused. New York and New Jersey we entered with distillate, which we do quite well with, but that's not our best product — our best product is solventless. We did launch our solventless products in New York, so we're doing solventless extraction there. New Jersey's lagging a little behind — there are constraints around having the right supply and enough volume of that supply at a reasonable cost, and in the newer markets, that's hard to come by. In the more mature markets like California and Colorado, we have ample supply we can make hash from that yields well in our ice-water extraction process. In New York and New Jersey, even the cost of biomass and distillate is still very high, so I think it's going to be some time. But our goal as we look toward national expansion is to ultimately bring our solventless lineup everywhere we go. Bryan Fields: How challenging is that balance — knowing that, say in New York, distillate isn't your flagship product, but it's the one you start with, and a consumer who goes into a dispensary for the first time might say, "Ah, Jetty, I love their solventless product," tell a friend, and that friend goes and buys something else, assuming it's the same thing? How challenging is it knowing you're not leading with your best product, given that market conditions are what they are in an early state? Ron Gershoni: New York's a crazy market. Nate, who I mentioned earlier — his brother Bob is another one of the founders and is still super involved, especially in the out-of-state stuff — they're both from Buffalo, New York. So it was kind of a homecoming of sorts. New York and New Jersey were really exciting for all of us, because that's where we grew up, and our families and friends can now buy our products legally. So there was more to it than just randomness in choosing when we wanted to enter. We know the geography, we have a lot of relationships there, and a lot of the effort to go into other states is about having good partners — we did not acquire our own licenses and facilities, we're working with others. But we know we want to make sure solventless is a fast follow anywhere we go, because we believe that's the best product in the market, the best product Jetty has, so we want to be able to offer it. In New York, there was one dispensary for many months, and our thinking was, let's get into the market, let's figure it out, let's start dabbling — we're not going to invest a lot, we're not going to try to do too much, but just by being there we'll start hiring up a bit of a team, meet some of the store owners. This is going to be a huge market — New York's going to be huge. It's a brand-heavy market, and it felt like people are fairly affluent, especially in the New York City area, and our products are typically a little more expensive — we're on the premium side of things. So there were a lot of reasons we liked New York. We weren't ready with solventless when we entered, but we are now, and we have this new integrated all-in-one device from CCELL, who's the best hardware manufacturer — it's called the Mini Tank. We launched it in California and Colorado already in solventless, and it's doing almost as much as our 510-thread. We're launching it in New York in our solventless lineup imminently, which I think is the form factor people are looking for. Again, our goal was to get there and figure out the right product assortment over time, and we're honing in on that. I do see a lot of opportunity in New York and New Jersey over the next couple of years — we've only been there slightly over a year. But it's hard managing an operation across the country when most of our team is here in California. Bryan Fields: Those are the chaotic details, right — but also the fun elements of the industry, spinning up a new market in a massive one where it's pure chaos. All the consumers are anxious for California products, you've got an incredible product you want to bring over, but it has to make business sense for you to manufacture it, plus you need the right partners to produce it at a consistency and quality customers can rely on. It's just endless variables on top of endless variables. Ron Gershoni: Yeah, the industry is tough. When I was running a deodorant business, we could ship our finished package to 50 states, and the package is the same, the product's the same — it was easy. Here, we're at a massive disadvantage, and it creates a tremendous amount of cost, because you have to have full vertical production — cultivation, retail, all of it has to be within each state. So yes, we want to grow, we want to be in every state, but it's got to happen at the right pace. Right now we're looking at going deeper in the markets we're in — we'll likely move to some other markets this year or next, but our goal isn't to be in a lot of markets, it's to be stronger in the markets where we really want to focus. That's kind of the main growth driver for the business over the next couple of years. Bryan Fields: You want to tell us any of those states? It's just the three of us. Ron Gershoni: There's a lot of interesting ones — they're all interesting, we don't have anything locked in yet, and anything I'd say isn't necessarily where we'll be next. But Florida is very interesting for a number of reasons. I think Illinois and Ohio are somewhat interesting, Pennsylvania too — there are a lot of interesting markets. It was nine years before we ventured out of California. Back to one of the earlier questions — I think saying no a lot was a benefit to us. There were many opportunities where other companies wanted to take Jetty into other markets, and I just didn't think we were ready. It takes a lot of bandwidth from our team — we don't have a big team, so it takes bandwidth, it takes capital. And what we've seen so far with our expansion is it's not immediately super profitable, so we'll do it in a measured way. We'll let you know once we lock something in. Bryan Fields: Speaking of other markets — shipping anywhere domestically — what about the hemp market? Have you guys looked at that? What's your opinion on it right now? Ron Gershoni: We've looked at it. I think it currently doesn't make sense for Jetty, but that could always change at some future point. It's very attractive for many reasons — depending on how aggressive you want to be, you can ship to many markets, or maybe restrict some. Kind of like what I was saying about deodorant — you just ship your package anywhere and it seems easy. I think a lot of companies are actually making quite a bit of money — it's not heavily regulated. It's just a very different business for Jetty. I think it makes more sense for edibles companies right now. Bryan Fields: Does anyone make a solventless CBD-type tank? I don't know what the market for that is, just a random thought. Ron Gershoni: Yeah, we've looked at all of it. I could see there being a time — it's a completely different business model and a completely different skill set for your staff, a lot more digital-marketing-heavy, direct-to-consumer understanding, and we don't have a lot of strength in those things because we don't do it. It would take capital, and we're still getting growth — that's sort of where it's a really hard industry. We've always prided ourselves on being focused. We've had top-line growth in 10 out of the 11 years we've been in operation, and we're already showing growth this year, so I think that's going to continue. If we can continue to get growth in the licensed space — which I do think is harder — and if we can really succeed there, it creates a stronger business. If that growth slows, or we don't see a good line of sight to continuing it, we'd look even harder at hemp. We have a strong enough balance sheet that we could allocate something to it from an investment standpoint, but it's a large undertaking, and we'd have to really jump in and spend a lot of resources to do it. I've been wrong about many things — maybe I'm wrong on this too — but so far, I don't think it's the right time for our existing business. Bryan Fields: I think that's a very smart and prudent approach, given what you've seen over the last 10 years — the waves, the shortcomings, the long-term approach you have — because it's important to focus on what your team does really well, know what those skill sets are, and watch the dynamic unfold. If you have to explore and dabble a little capital to put your foot in the water, you can consider that, but if not, it's business as usual — here's the brand we have, here's our best product, and we still think we're ahead of the market. One of the things I really want your opinion on is clean cannabis, which could still really be early in the industry. Explain to our listeners what that means. Ron Gershoni: I mentioned earlier we always wanted to remove any cutting agents, and at this point everyone has kind of moved there. When you do most types of solvent-based extraction, you're soaking the plant in a chemical solvent and then evaporating that solvent out. What we've moved to is primarily solventless extraction, which is just ice and water — that's all that's touched the finished product. So when you're consuming that concentrate or vape product, all that has touched it is ice and water, it's never touched any chemical, so it's cleaner. We've taken that one step further in California — there's a relatively new certification called OCal, which is an organic certification set up by the state for cannabis. Our top supplier is Coastal Sun Farms in Santa Cruz — they're a tremendous grower, everything they grow is to organic standards, and it's not just organic, it's regenerative farming. If you go to their farm right now, they've got goats walking around eating whatever's there — it's truly the front edge of the most sustainable farming practice that exists, and I think it's important to have companies leading on those things. So we have OCal cultivation, but OCal has decided that only solventless extraction qualifies — anything put through butane cannot be considered organic. So all of our solventless product is now fully OCal-certified, based on both the cultivation and the manufacturing process, and that's what's become the number one selling rosin vape in California. It's not the majority of consumers, just like it isn't the majority of consumers buying organic food or cosmetics, but there's a growing interest in it, and it's something that's going to stick around — people care about what they put in their bodies, and we're giving them the option to know it's the absolute safest, cleanest product available. There've been a lot of articles and headlines about pesticides throughout the California supply chain — really in every market. Another thing we're doing is a new certification called Echo in California, which is independent and requires testing for a bunch of pesticides that aren't required to be tested for by the state of California. It's voluntary — we've opted into it, so we're doing extended-panel testing on all of our products to ensure they don't have a lot of these compounds that the state hasn't even said are banned; it's just a group of companies that want to see the industry cleaned up. We're competing with the hemp market, as Kellen suggested, but also an illicit market, and those markets are objectively less clean — they don't do the same type of testing, they're not required to. If you pull products off a shelf that's not licensed, they're going to test higher for all kinds of things you don't want in your product, and we've got to give people a reason to spend more money to shop in a licensed store, and that's what we're doing. I think we're going to see more and more companies move in that direction, and I certainly hope so — the industry is fairly fragile, a lot of companies aren't doing well, and a lot of it's that compliance costs and taxes are really high. If you buy from your dealer down the street, you're going to get cheaper product, and it's pretty good product, so we've got to give people a reason — when they see Jetty and see that OCal symbol, they know they're getting the absolute cleanest cannabis product available. Bryan Fields: Can you give our listeners a quick estimate of how much your team spends on testing, and how expensive that is, given that your team voluntarily takes it on to ensure quality? Ron Gershoni: It's absolutely insane. There's required testing — what's called compliance testing — in order to meet all the requirements the state regulators have set up. But we do significant testing in addition to that, as I mentioned, the Echo testing that's not required, and we'll also do multiple tests throughout our production just to be extra careful. We spend tens of thousands of dollars on testing on a monthly basis — it's absolutely crazy, really, really expensive. Bryan Fields: I think those are important things for people to hear, because I don't think people always recognize the cost implications of doing these additional tests on top of the required ones you described. Ron Gershoni: Yeah, even the required tests are expensive. It's just a very inefficient market in so many ways, and the regulators have struggled to keep up with what's rational and sensible. So there's a lot of excess testing — just in the last year, we've done a lot of testing at multiple labs, even on the same product, just to understand what's going on, and we still, unfortunately, get different results at different labs. I'm not suggesting lab shopping — that happens a lot too — I'm more saying we're trying to figure out how there are differences. Some of the labs we work with are getting a lot better at hitting the same results as the other labs, which is a welcome change over the last five years. Bryan Fields: All right, hard pivot — dream vaping session, three people, dead or alive? Ron Gershoni: That is a hard pivot. Okay — Bob Marley, Barack Obama, and my grandfather, my mother's father. He's dead — two dead, one alive. Bryan Fields: One year from now, what has changed? Ron Gershoni: There's going to be a number of businesses that are no longer around. Bryan Fields: What question do you wish more people asked you? Ron Gershoni: What is OCal? Bryan Fields: What is the most expensive lesson you've ever learned? Ron Gershoni: There've been a lot of them, so I would say don't be too greedy when negotiating with investors. Bryan Fields: Last question — tell me something that's true that nobody agrees with you on. Ron Gershoni: I think I already did, which is that Jetty should not jump into the beverage space. Bryan Fields: That's fair. So Ron, for our listeners who want to get in touch, learn more, and buy Jetty products, where can they find you? Ron Gershoni: Pretty much any licensed store in California — we're fairly well distributed. We're not selling online, there are deliveries, but most local dispensaries will have Jetty. As I mentioned, we're also in Colorado, New York, and New Jersey. You can find us on our website, jettyextracts.com, and Instagram at Jetty Extracts — that's kind of where you can learn the most about us. Bryan Fields: Cool. Thanks for taking the time, this was a lot of fun. Ron Gershoni: Yeah, thanks guys.