What Makes Consumers Buy the Same Edible Again? ft. Kim Sanchez Rael

Bryan Fields: Consumers don't buy droplets. They don't buy delivery systems. They buy an actual experience. Is it predictable? Does it taste great? Am I getting the onset that I want? Kim, you've called slow-onset edibles the dial-up internet of cannabis. Eight years and 800 million servings later, why isn't dial-up dead? Kim Sanchez Rael: You know, that is a great question. I would have thought by now that dial-up internet would be dead. I came out of the tech industry, and when I first started looking at the edibles problem of slow onset, I had a chart in my PowerPoint presentations — I still use it sometimes — that showed the decline of dial-up and the rise of broadband. I said, 'This is exactly what we're doing here. We are moving this category of cannabis edibles from slow-acting, inconsistent, painful, which was what dial-up internet was, to broadband — fast-acting, predictable.' I would have thought when I started this almost nine years ago that we'd be at a point where slow edibles would be maybe 5 or 10% of the market. The data actually doesn't show that. We did a study with BDSA a couple of years ago, and based on the data available, it only looked like single digits of the edibles category had converted to fast-acting. So way slower than I would have expected. But it also says to me there's still so much opportunity for innovation in the ingestibles category to continue improving products across the board, across all brands. So I think it's moving slower than I would have thought — there's still way too much dial-up out there in this category — but still a huge opportunity for brands to innovate. Bryan Fields: What does fast mean, and why do we think so many companies are sticking with the slower, old-school approach when it comes to onset? Kim Sanchez Rael: For us, fast means onset within 5 to 15 minutes, and we have multiple pre-clinical studies, PK studies, sensorial studies, now including thousands of consumer reports. Fast for us means that 5-to-15-minute onset and that predictable experience consumers have. As for why there are so many products that haven't made that conversion, I think one of the biggest dynamics is concern about adding to your COGS, adding to your costs, and ultimately your price at retail. That's a very legitimate concern in an industry facing a lot of margin pressure. What I'd say to counter that, or to coach brands to think more creatively, is that the data indicates consumers are actually willing to pay considerably more for a fast-onset product. For example, based on retail data, consumers are willing to spend up to 31% more for a retail unit — a 100-milligram gummy — versus a traditional gummy. And brands with fast-acting SKUs experience four to five times the sales volume versus a traditional line. So the data is quite clear that investing in fast-acting, which is ultimately investing in your end consumer's experience — knowing that the first gummy and the last gummy in a packet deliver the same effect, the same flavor, the same texture, the same shelf life and stability — really builds trust with consumers. Bryan Fields: So can brands put the word 'fast' on the packaging in a marketing sense? Maybe it's not completely accurate, but if brands leverage the word fast, consumers are going to believe it means quicker onset. Is there any regulation around that? Kim Sanchez Rael: Like everything in cannabis in the US, that varies state by state. There are some states, though not many, where you can't use the word 'fast' or 'fast-acting' on a label — it's viewed as a claim even if there's data to back it up with the right formulation. But in the majority of cases we've found that a fast-acting logo, a time-infusion logo on a package conveying the fast-acting ingredient, is allowed in almost every jurisdiction. Obviously we and our brand partners pay a lot of attention to those compliance issues, but the key is really the consumer experience. We've all had the experience of walking into a dispensary and asking what's fast-acting, and they'll say 'try this,' and some of them aren't fast-acting at all. I'll often buy the product because I'm secret shopping, and what happens is you try it and think, I'll never buy that again. You can say anything, but what's really going to build your brand is building consumer trust. People go back to a brand because they trust that brand to be the same every time. Bryan Fields: I think that's such an important point, and there are so many options when you go into a dispensary that it's so easy to switch to another one. When I bring cannabis products to my friends' houses, the number one question I get is, 'How long will it take to hit me?' And that's a hard answer because sometimes you don't want to say 'it depends,' but you also don't want to mislead people. They're looking for that feeling 10-15 minutes in, otherwise they start thinking it's not going to work, or they get scared they're going to get too high, and now we're playing an anxiety game. Kim Sanchez Rael: Right. And I think that's a key message — that you can finally trust edibles, but not all edibles. Not all edibles are formulated equally, and not all infusion platforms deliver consistently across product formats. An infusion platform, say an oil-and-water emulsion system that works fine in a beverage, is actually incompatible with the manufacturing process for a gummy. Some infusion platforms require surfactants, and a surfactant adds a terrible taste, so then you have to add bitter blockers to cover that up, and now you're putting that into a gummy recipe you spent a lot of time developing a flavor profile for. So the message is you can find edibles optimized for a predictable, every-time-the-same experience, but you have to read the label, understand who did the formulation, what the infusion platform is, and understand what it's really going to deliver — then trust your experience. Bryan Fields: Is that suitable for most of the buying community? I'm thinking about people who want edibles to help with sleep, walking into a dispensary with 50 choices and having to read labels. Are there groups helping distill that information so people can make informed decisions? Kim Sanchez Rael: I think the honest answer is it's still a pretty mixed bag. There are some dispensaries that do a great job of budtender education and can articulate why and how a fast-acting water product's time infusion works, but others are inconsistent. So we have a lot of work to do there. Some brands' websites do a great job of educating the consumer about why an encapsulated cannabinoid — which is what time infusion is — works. I like the little demos: think of this tennis ball as a THC molecule, and this glass as time infusion. What we do is encapsulate that molecule in a water-friendly, hydrophilic coating, and our bodies are over 60% water, so when you consume it, it's absorbed very easily. It's protected in the delta-9 THC form, not the 11-hydroxy form, so you experience what people describe as a smoker's high in an edible form. So I'd say look for dispensaries with well-educated budtenders who can speak intelligently about what's on their shelves, not just push the special of the week, and also check brand websites for good educational materials. Bryan Fields: That example was really helpful. I want to get into what Azuca does. If I was an edible manufacturer with my own THC and gummy formulation, what am I buying from you, and what do I need to bring to the table to work with you? Kim Sanchez Rael: Let's say you're a gummy manufacturer with a classic, traditional, non-fast-acting gummy, and you want to do a line extension — your traditional gummy and your fast-acting gummy side by side on the shelf so the consumer can choose. You'd come to us, and we'd work with you and your formulators, but it's usually a very straightforward addition to your gummy recipe through the time-infusion process. We license our formulations to brands, and as part of that license agreement, we sell a non-infused precursor ingredient branded as an 'activator.' The activator ships in a bottle — because it has no cannabis in it, we can ship it anywhere in the world. Our brand partner takes their active ingredient, usually THC distillate but we can use any extract or even whole flower, puts it with our activator into a mixer we provide, pushes a button, and in about an hour has an infused, encapsulated ingredient that gets added directly into the gummy batch toward the end of the cook. It doesn't have much water, so it doesn't disrupt the gummy recipe — it works very nicely in the manufacturing process. We have a very standard onboarding process and make it easy. If a brand wants our team on-site for training, we do that at no extra charge — we don't nickel-and-dime our brand partners. Then they're empowered to manufacture their fast-acting gummies at whatever volume suits their needs, without needing us on-site for big infusion batches or bringing in a pile of equipment. We work with single-state small artisanal brands and the largest brands in the industry. And not every infusion platform is optimized for every format — our activator that's exceptional for gummies and hard candies isn't what we license for ready-to-drink beverages. We have a specific activator for beverages and another specifically formulated for chocolate, which has its own unique set of challenges. Whatever you can imagine in an ingestible form, we can partner with you to optimize the end consumer experience without mucking up your manufacturing process or recipe. Bryan Fields: Do teams come back and say, 'Hey, we're trying to do this trifecta recipe of cannabinoids and want it to have this flavor' — does that influence the product you're providing? Kim Sanchez Rael: Our product doesn't affect flavor profile — it's inert from a flavor perspective, and the encapsulation actually naturally masks the sort of barnyard taste of some cannabis extracts, so you get a flavor enhancement as a side benefit. It doesn't alter your flavor profile at all. Bryan Fields: Has anyone ever come back and said it's not working — like internally, they signed up, made a batch, tried it, and someone said they didn't feel it in the expected time period? How does body chemistry, dose, and size factor into figuring out whose 'fault' it was? Kim Sanchez Rael: That's a great question. No, we've never had a brand partner who implemented time infusion leave us for a competitor. Like everything, everybody's metabolism is a little different, and it's affected by things like whether you ate a heavy meal beforehand. If someone is a very high-THC consumer as their baseline, they'll often take a while to find an edibles dose that gives them the effect they want — that's a tolerance issue, not an infusion-doesn't-work issue. It's finding the right dose for that body's tolerance. Bryan Fields: Oh, 100% agree — the tolerance question relates back to the onset timing, which is essentially the USP we're pushing here. Kim Sanchez Rael: Right. And anecdotally, high-tolerance consumers tend not to necessarily feel that 5-minute onset, but they'll usually peak within 30 minutes. One of our studies with Colorado State University showed that 55% of consumers reach their peak experience within 30 minutes. So there's the onset and there's the peak. Bryan Fields: What about extending the duration? Sometimes the peak feels like it goes too short — is there a way to have fast onset and a longer duration, say two hours? Kim Sanchez Rael: That's an interesting question too. One thing we've found with time infusion is a faster onset, faster peak, and a more predictable window of effect. If you want an extended period, you'd think about layering that. But for most people you also get a more predictable offset with a gummy that has time infusion, because you don't have the long tail of the 11-hydroxy effect, which can last many, many hours for some people. Bryan Fields: Is there a comedown effect in your data, or people feeling tired afterward? Kim Sanchez Rael: We haven't had that reported in any of our studies — no comedown or tired feeling. What people report about the time-infusion experience is it's more euphoric, more of a smoker's high in edible form, versus the couch-lock of a traditional edible. That's what we hear from the sensorial studies. Bryan Fields: Those are my favorite experiences — seeing someone's perception change immediately. Are there elements people have asked you for that your team is chasing scientifically, but maybe consumers aren't ready for, or the industry hasn't thought through yet? Kim Sanchez Rael: We're constantly innovating, bringing the next generation to our platform of activators and products. Right now we're focused on R&D that will increase the loading capacity of the activators, increasing manufacturing efficiency and potentially the consumer effect. We think the consumer effect is probably ideally dialed in right now, so we're focused on layering in ways to make the manufacturing process better, faster, cheaper for the brand, so they get the consistency they want and more manufacturing efficiencies. Bryan Fields: Can you talk more specifically about that? Is that bringing in outside industry technologies — what specifics can that bring? Kim Sanchez Rael: For example, our hero ingredient, used primarily in gummies, has a loading capacity of 300 milligrams per gram. If we develop a next generation that can be infused at 400 milligrams per gram, you get a huge increase in manufacturing efficiency — fewer infusion batches, more efficient injection into the recipe, and so on. We're trying to make the manufacturing process easier for brands. Bryan Fields: What's one of the challenges in figuring that out? Kim Sanchez Rael: I wouldn't call it a specific challenge so much as doing it right — very methodically. In our lab, we create iterations of these products and processes and test the heck out of them: reliability, shelf life, everything, before we put it out into the market. It's about being diligent as a research and development, innovation team. Bryan Fields: And then doing the studies on the back end to validate it. Kim Sanchez Rael: Exactly. I mentioned pre-clinical PK studies, sensorial studies, blood studies in both animals and humans, and broad-based sensorial survey work testing time-infusion Azuca gummies versus traditional gummies versus a nano-emulsion product, validating much better results with time infusion. For example, versus the nano process, there was a 26-point gap in how consumers rated taste — 86% versus 60% rated the Azuca product as very good taste. If you have a nano emulsion, by definition you have surfactants in your process, and that's like eating soap — then you add bitter blockers, and you can end up with an unpleasant flavor or mouthfeel because you've added a bunch of extra ingredients. Bryan Fields: Would you say nano is one of the most overused words in this industry? Kim Sanchez Rael: I think nano is a buzzword. It's used in so many different ways that it doesn't mean anything in the industry. Bryan Fields: What does it mean to you? Kim Sanchez Rael: Nano in and of itself is just a measurement — a billionth of a meter. What it's implied to mean in the industry is nanoized particles, but the reality is most things with a nano label have no evidence or validation that they're actually nano, or that it even matters. If nano is a measure of a droplet in a jar that then goes into a gummy recipe and manufacturing, that droplet size doesn't necessarily even show up in the end product. There's a real disconnect between what that measure means and what the consumer is actually looking for — what surfactants are added, what happened to that nano droplet when it was cooked into a hot gummy recipe, did it even hold up, how does it hold up in the final package? There are issues with some nano emulsions in gummies causing what's called weeping or seepage — if you've ever seen a sweaty gummy in the package, that's one of the things that can cause it, because you're adding a lot more water at the end of the cook cycle. It can also affect curing time, which is often the constraint in gummy manufacturing — if you add a lot more water at the end of the cook process, you affect your curing quality and timeline. Actually, going back to why we still have 'dial-up' in edibles — concerns about the complications nano adds to a manufacturing process, and maybe a lack of information that there's another path that doesn't create those problems, is probably still part of the issue. Bryan Fields: Change seems really hard in this industry because there are so many variables and so much lift involved even when something isn't perfect but is working. Kim Sanchez Rael: To put it in a box — if I'm a brand evaluating infusion suppliers, I'd ask four questions. One: what does this infusion process do to my consumer experience? Consumers don't buy droplets or delivery systems, they buy an actual experience — is it predictable, does it taste great, am I getting the onset I want? Two: what does it do to product quality across shelf life — the sweating issue, for example. Three: what does it do to my manufacturing process — is it simple, modularized, can I do this across multiple states without crazy equipment or a vendor on-site making a mess? And four: what data does this infusion process have behind it — ask for PK data, sensorial studies, stability studies, how long they've been in the market. I like the servings-infused number — we've done over 800 million servings infused, and it's a real testament to the quality of the product. There's also one thing I don't think we talk about enough in any industry, and this one in particular: I talk about Azuca and time infusion as the 'brand behind the brand' — for those of us of a certain generation, like the Good Housekeeping Seal of Approval, or 'Intel Inside,' which sends a message of quality. What we don't talk about enough is how the people you're working with treat you — the brand experience at the business-to-business level. We really value helpfulness — it's one of our core values, and we try to live it in everything we do with our brand partners, licensees, and customers. We also have a great sense of humor — one of our core values is fun-spiritedness, and Karen, our SVP of growth, will take you on pizza tours in Brooklyn. We have a 'no jerks' rule. I think we can all treat each other better in this industry and value the people and relationship aspect of the brand experience. Bryan Fields: That's a really important point, because the relationship is so powerful — when someone's buying an edible brand, they're buying the experience, but the delivery system powering that is really important. If they can't trust the partnership, they put their brand on the line, and that's when a customer doesn't come back. Kim Sanchez Rael: 100%. I have kind of a funny story about helpfulness. Earlier this summer, we got a call from a manufacturer using a different infusion supplier, who wasn't going to be able to meet their production schedule for about six weeks — a very long time in manufacturing, where you never want lines down. They had started testing and qualifying our process, but we weren't yet in these particular products, and this was Fourth of July weekend — they said, 'We need the infusion on Wednesday.' I literally loaded up my F-250 pickup with activator and a Time Machine — what we call the thermal mixer that does the process, about the size of a computer — and drove it myself. They had their stuff by the Tuesday of Fourth of July weekend, never missed their production schedule, and now they're working closely with us from here on out. Bryan Fields: Those are the type of success stories where the relationships matter — they called in an emergency, needed help, and you were able to help them. You talked about Intel a lot, and that industry operates at a maturity level far superior to cannabis. What does cannabis still do that makes absolutely no sense to you? Kim Sanchez Rael: We already talked about the nano thing — that doesn't make sense because it doesn't really mean anything. But at a macro level, the thing that doesn't make sense to me is this dynamic where cannabis and hemp are pitted against each other. There's certainly a rational reason for that — the regulatory frameworks create unequal playing fields — but it doesn't make sense for this plant to be artificially at war with itself within what should really be one industry, because it is one plant. We're working with some industry thought leaders on what a rational regulatory framework for the cannabis-and-hemp plant would look like. The solution we're advocating is called the One Plant Solution, TOPS for short — there's information online, and we can share a link. It's a framework that says: let's use what we already know to regulate this collection of industries. The analogy I like is corn — an agricultural crop that can be used for fuel, industrial solvents, or baby food, and each is regulated differently and appropriately in its own channel. The One Plant Solution approach preserves states' rights but creates a basic federal framework: the USDA would regulate cultivation, the FDA would regulate food, dietary supplements, pharmaceuticals, and cosmetics — we already have paths for that — and the FDA/TTB would regulate intoxicating adult-use products, which we already have channels for. This whole concept that cannabis and hemp are different things, and this artificial war, just doesn't make sense. Bryan Fields: What's the biggest hindrance to laying something like that out? It seems very sensible and logical, and I've been trained that logic doesn't always apply to this industry. What's the first pushback you get? Kim Sanchez Rael: I think the biggest barrier is a kind of creeping incrementalism around policy that pits one side against the other — carving out one piece or favoring a protected industry in one state. I think backing into an incrementalist approach is the biggest barrier. Bryan Fields: I wonder if some large MSOs like the idea logically, but operating in 16 different states with different regulatory bodies per state, it becomes even harder than what they're currently dealing with, and I wonder if that's part of the pushback. Kim Sanchez Rael: I think it varies. Even some of the things we've seen play out in the last week in terms of battles in the courts within the industry certainly caused me to scratch my head. Bryan Fields: No doubt. What about AI? Does it play a role in anything you're doing? Are you using it, and can you share use cases for how you see it rolling out over the next few years? Kim Sanchez Rael: We actually use it quite extensively internally. One of my favorite things is that Karen Butler on my team, very early on, created an agent version of me that has all the things I like to think about, authors I reference, and our brand work. Her name is Timothy — we're on Timothy 6.2, I think. She's way smarter than I am. Often if there's a branding piece or an article someone's working on, they'll ask Timothy to review it and say what Kim would say, and Timothy gives her thoughts, and I'm like, 'She nailed it, I don't have anything to add.' Once in a while she gets it completely wrong, and I say, 'No, Kimothy's crazy today, mix that, here's what we're going to do.' Bryan Fields: Has she ever said, 'Kim would say this, but I don't agree, I think we should do this'? Kim Sanchez Rael: Not yet, but given my other 'offspring' who are a little stubborn and like to argue with me, I suspect Timothy will be arguing with me someday, as she learns more about the process and starts forming her own sense of the best direction versus my predisposed biases. Bryan Fields: I wonder how you'll feel in that moment when you realize she might be right. Kim Sanchez Rael: I'll have to come back and talk to you about that when it happens — I might need therapy. We also use AI to make the customer experience better — we build portals for our brand partners with FAQs customized for their application, so they always have the best and latest information on time infusion and how to talk about the infusion process. We use AI to streamline our customer experience, but not in the sense of a bot when you call us — never. It's about giving them online access to a lot of information at their fingertips. Bryan Fields: Is there any best practice from the food, pharmaceutical, or other outside industries that you think cannabis should look to as it matures? Kim Sanchez Rael: I'm a big fan of structured quality systems. I grew up at Intel, spent seven years there, and our quality system was ISO 9000. Our quality system at Azuca is cGMP practices — our standard exceeds food cGMP practices; we operate internally at a supplement-grade level, which is a higher cGMP requirement. And we have one line of activators that we're taking through the EU GMP pharmaceutical-grade quality standard for specific applications that require pharmaceutical-grade certification, particularly for overseas markets. The quality is the same across them, but the practices and certification differ depending on whether someone wants food grade, supplement grade, or pharmaceutical grade. Bryan Fields: I come from that space, so I understand the extensive nature of it, and I think the sooner people start thinking about it, the easier it becomes, because it's not an easy process — one that will likely take hold sooner than later as the industry evolves. Kim Sanchez Rael: Yeah, I was lucky — I spent seven years at Intel and many years on a large hospital board that used the Baldrige quality system as its framework. Different quality systems are appropriate for different organizations, but committing to a quality management system, and all the documentation and discipline it requires, is really critical for this industry to mature. The other thing is the math has to work — we have to build businesses that are sustainable and profitable, not dependent on a regulatory change happening in some unpredictable time frame. That's one of the reasons so much capital has been lost in this industry over the last ten years — billions were raised and invested on the premise that it was 'all going to be federally legal in 18 to 24 months,' which is what I was hearing when I walked into my first MJBizCon in 2017. I also worked on Capitol Hill for a couple of years earlier in my career, and you just can't bet on the field changing. You have to build your business and make it sustainable on the field you've got, and then advocate for a better future regulatory state — but you can't bank on that to make the math work, otherwise you get the bloodbath we've seen in cannabis capital markets. Bryan Fields: 100%. Last question: what question do you wish more people asked you? Kim Sanchez Rael: I'd go back to, 'What is it like working with you and your team?' Forget about the technology for a minute — who are you as people? We do what we say, we like to have fun, and in the end we're all human beings living a reasonably short life on this planet, and we ought to enjoy the other human beings we get to interact with. I'd like us to talk more about what it's like to work together. Bryan Fields: Well said, Kim. For our listeners who want to get in touch and learn more about Azuca, where can they find you? Kim Sanchez Rael: Azuca.com. Bryan Fields: Thanks for taking the time, this was a lot of fun. Kim Sanchez Rael: Yeah, I appreciate it. Thanks, Bryan.