Who Benefits From Federal Cannabis Limbo? ft. Jay Rosenthal

Bryan Fields: Limbo is the name of the game, and it has been for a long time, and it's not necessarily a united front. Right now they are the biggest, baddest players around, and I think it's always good to be the biggest, baddest player, and so limbo is actually suiting them. Jay, you said MSOs may be fine with slow or no change in Washington because their moat gets wider every day. Is federal limbo still a problem for the biggest operators, or has it become part of the business model? Jay Rosenthal: It has to be part of the business model because it's been this way for a very long time. Since they launched, it's been in limbo. Whatever that means, you can decide where you are in this limbo game, but it's always been in limbo. I think they would like federal reform for sure. What that federal reform looks like and how it benefits or alters their business, I think everybody might have a separate answer for, and I think that's why there's a quasi united front in DC, but it's not as big as in other industries, even if those industries are relatively the same size, because not every MSO wants the same thing, I don't think, and that's a real challenge. Whereas, you know, large brewers all want the same thing, right? Large pharma wants roughly the same thing. But cannabis operators, if they're operating in multiple states, it depends on what states they're in — what change they want might actually be the opposite of what another MSO operating in different states wants. I think they would like normalized banking, but they all get banked. They do have access to funds, certainly the largest ones, just not the same way other industries do, and certainly not at the same rates. So I think they'd like credit card reform, and I think they'd like to take credit cards in their dispensaries — that's for sure. I think they'd like access to other kinds of credit than what they're getting now, and that might open up with federal reform, but I don't think they all want the same thing. I think it's going to stay in limbo. Obviously it's in limbo now, it's been in limbo, and I'm not sure limbo changes before the end of the year in any measurable way. Maybe if you're a hemp operator it changes, which I think many of the MSOs would like — and this is the irony, this is exactly the point: some MSOs are actually in the hemp-derived game, some are not. So they want different things from the hemp ban even though you could categorize them all as MSOs. So limbo is the name of the game and has been for a long time, and it's not necessarily a united front. Right now they're the biggest, baddest players around, and I think it's always good to be the biggest, baddest player, and so limbo is actually suiting them. Bryan Fields: A couple things I want to bring up. One, credit card processing — of course, I think that's one of the very few things everyone can agree we all want, and what happens there is basket sizes likely go up. Outside of that, I'm really struggling to think of anything else we can all agree on, because your point is well taken — different states want different things. If you have assets in certain regions and you're doing really well, you want it to stay that way, and any kind of change jeopardizes that. Operating within the chaos is kind of the strategic edge right now. How long that works for remains to be seen. I think credit cards and capital markets — the New York Stock Exchange, NASDAQ — I think that would help many of them, although the path to the New York Stock Exchange, it's good to be first or second, but it hasn't led to some massive influx of capital for the companies that are listed there. So it would be nice, but that's not actually happening in DC, that's happening in New York, and even if something happens in DC, the New York Stock Exchange and NASDAQ may have something to say about who gets listed. So the reason I wonder if they're not getting as much traction — Boris talked about this at what was the Benzinga Capital Conference, now rebranded as Ignite, sorry for using the old name — he mentioned that the size of the business is what needs to be bigger in order to attract some of those bigger institutional players, like BlackRock. I wonder if that's currently a holdup in the process, and if teams are thinking about how do we become more attractive to some of these larger players. Jay Rosenthal: Yeah, I was actually talking to someone — I think I mentioned a baseball dad — who's done some work for the companies listed here in Canada, the ones that were on the TSX and now on the CSE, the Canadian Securities Exchange, which is actually a partner of Cultivated. The CSE was the first place that had publicly listed cannabis companies. And the capital requirements, the regulatory requirements, the filing requirements, are less on the CSE than they are on the TSX, and less on the TSX than in New York. So in some respects, while they'd love the access to capital that New York brings, they probably also appreciate that they can be smaller with less regulatory burden and less filing in Canada for now. Bryan Fields: Pros and cons with each. And then as regulation evolves — Jay Rosenthal: Yeah, then I think it gets really interesting, because these big fish in a small pond become small fish in a bigger pond. And now we get bigger players coming in — there are already some tobacco players, right? We see BAT already in here with Organigram, however they want to publicly or privately position themselves — but there's no doubt these companies are operating that way today. And one can hope the bigger companies in the outside space are thinking, "Hey, let these cannabis companies kill each other off, figure out who the strongest are, and we'll come in, and those will be our partners," because up until now those larger companies saw cannabis as a blip on their radar, not even worth their time. When you think about some of those more established industries, they have a much longer lens — they're not struggling to survive right now, they have way more cash on their books. Even if they are thinking about it, they don't need to do anything right now. It's almost not worth their time, it's kind of a gamble. Bryan Fields: And the way I think about it, when you go into a dispensary and see 600 different brands fighting for space, it's chaos. And for me, who knows most of these brands, it's still overwhelming. So I can imagine for someone else, figuring out how brands position themselves to capture market share today, but really keep and solidify it so the brand can grow, is an interesting problem. We see certain brands in the newsletter, which we'll talk about in a bit, constantly at the top, specifically around New York, and I'm really proud of those guys, but how do they continue to fend off that position when it's still so early? Jay Rosenthal: Yeah. And if you look at other — I don't even know if they're analogous industries — but if you look at beverages, I watch Dragon's Den and I have a friend in the beverage space, you put out beverages, see if they hit, and then the big beverage companies say, "We don't need to do that work, let someone else do that work, we can pick them up whenever we want." Look at Poppi in the States — there are well-established industries where you let brands pop and then capture that, and that's actually an arm of their M&A strategy, an arm of their R&D strategy. Bryan Fields: It makes sense, though, right? Because there are so many different risk profiles. But from your lens, covering the industry, how do you know how wide to go and how global to think on some of these topics? Jay Rosenthal: It's hard, because even when you think of market share in New York, which is a big state, a relatively big market — then you look at the top ten brands, or the Power 50 that Little Earth puts out with us, and you drill down and realize there's only, whatever, 600 dispensaries, and a lot of them are concentrated, and the numbers start to get very small very quickly in terms of distribution and sales. But I will say this — it's not a great example, but when we started Cultivated, we would say, look, it matters how many dispensaries are in Rochester to the overall industry in New York, and nobody's going to cover that. And that was sort of our point — if there are ten or twenty dispensaries in Rochester, that actually makes a big difference to an industry where there are 600 in the state. Another ten equals this much of the average brand's flower sales, the average number of jobs, the overall size of the market. Those things actually do matter, even though it seems very micro and is often decided by a planning commission in Rochester or some similarly sized city in New York, but it has resonance and relevance to the industry overall in New York, and New York is a big market, so it has relevance to the industry overall — and how the New York market is viewed by outsiders, is it investable, all of that matters. And then you realize the micro is like a planning commission in Rochester wants ten, not twenty. So the macro and the micro are quite related in an industry that we think is big because we've seen it grow over the years, but relative to other industries it's relatively small. And so these micro decisions actually have macro effects. That's what's interesting about this industry — these seemingly small, incremental differences actually have big impacts. Bryan Fields: Strategically they're tremendous, right? And following it all, covering it all, is close to impossible, because almost every single day I hear something and think, "Oh, I didn't know that state operates like that," or "I didn't realize it was like that." It can be daunting trying to keep up with all the different changes and figure out where do I get my information from, and what needs to be shared with the general public. Jay Rosenthal: Yeah, and that's the ethos of our newsletter — there's so much news, what's relevant to someone in the industry, that's our first filter. Then it's how do we tell that story, because it's really hard to gather all of that and put it into a newsletter that's digestible to you, Bryan, and the other eight thousand people who get the newsletter. But I'll say this, and I know you've had this experience too — because the industry is so new, when you see people who are really good operators, they stand out quite a bit. I'll name them: I went to Heirloom a couple of years ago, and Heirloom is one part of their overall business, and the rest of their business goes gangbusters too. You see real operators — they were very thoughtful about how they entered the hemp space first and the cannabis space next, and how many of their skills were translatable. When you see translatable skills enter the space — when I talked to them, they talked about distribution throughout the state, they knew the routes, they knew the people, they knew how to get in and out of New York City, which is really challenging, to make deliveries to first ten, then a hundred, then two hundred dispensaries — these things make a huge difference. When you see really good operators in it, and that's interesting now versus a few years ago when we started, when everybody was new and, to be quite honest, everybody was kind of a shoddy operator — you see the rapid improvement, both internally and from people externally bringing that to the sector, which I know you see all the time. Bryan Fields: Yeah — shout out to Luke and Mac and those boys. And I think you're absolutely right, and I think it's because the industry is so hard, there are so many things to figure out, and for them they had to figure out all those hard things too, but there was a core business they already understood fundamentally. They didn't have to figure out everything — maybe only 65% of the unique cannabis aspects were new to them. For the rest, they already had the infrastructure, they had the tools, they didn't have to build those things completely from the ground up, and I think it gives them a massive advantage. Plus, I think they're one of the teams trying to accelerate forward and say, "Okay, the industry operates this way today, but we know other industries use these tools and technologies, and we're going to try to pull our cannabis business in this direction," because they're trying to be proactive instead of reactive in front of regulations, because being behind the curve in this space has been a detriment to so many teams. A lot of teams are struggling so much with how do we keep the lights on, how do we keep product moving, how do we get paid — instead of thinking about it from a business standpoint, like, okay, we've got a rock-solid business, how do we grow this over the next eight to ten months, and how do we reduce our costs ahead of all the upcoming regulatory unknowns we know are going to disrupt our business. Where, remains to be seen, but we need to start experimenting now to get in front of these things. Jay Rosenthal: It's also easier, I think, to do in a finished product relative to flower. If there's too much weed and you can't get rid of it because there are too few retailers, the finished-product brands are in the catbird seat — your business starts off at an advantage versus flower brands, which have it rough. That did happen in New York — we went from Heirloom to Jonty, which is in Hudson Falls, New York, and they were a different kind of operation, starting from scratch in an old mechanic's garage, building incrementally and intentionally. Different models, different people, but really smart people with eyes wide open — it was really good to see, and you've seen the success of these companies. We were there three years ago, they were doing well, now they're sort of the leading brands in New York, which is always good to see if they're your friends and you like them. But again, those are micro decisions that we've covered, and they feed into the macro, because I guarantee you nobody in New York who knew Heirloom or Jonty when they were looking at the charts of the top ten, top fifty brands expected that. It'll also be interesting if those brands make a leap out of state. Heirloom has a little bit, but do others? Bryan Fields: Yeah, those kinds of conversations are so daunting, and thinking about expansion into new states is so interesting, because you've got a really successful brand with a really good foothold, and then where do you go, how does that work, who do you send, what products do you launch with, do the regulations work, does the branding work, do you have the operations there, do you have the supply chain in place? That's where my lean starts going toward supply chain operators versus brand-first companies, because from a supply chain standpoint you can get pulled by your brand partners saying, "Hey, take us over here." Jay Rosenthal: You are such a nerd, I love it. It's really — I've learned a lot. Don't tell anyone about that. I think I've told you — Randall from MariMed, I listen to his podcast with you, or your podcast with him — about bomb bags, and I always drop the word "bomb bags" when I interview him. But also this week we interviewed Sarah Strickler from Grown Rogue, they're based in southern Oregon, and they're a flower-first brand that's in a bunch of states. That seems like a more daunting task to me than sending a bomb bag to make gummies, right? Bryan Fields: Both challenging, both operationally challenging, but now you're growing in a new environment, both literally and figuratively — new market, new environment, trying to put out a premium flower brand, and then you've got the hard part of getting it into stores, building trust with retail. That seems really daunting, and it's not the business I would want to be in because it's so hard, so hand-to-hand combat, on the ground. But if you can do it well, and you've learned so many lessons in southern Oregon and all the other states you've been in, making the leap to another state, you sort of know it by feel, I would bet, how it's going to go. Jay Rosenthal: Those guys have their numbers absolutely dialed, and I think that's the element that helps translate really well. I feel there's a difference when speaking to some teams, and it gets uncomfortable sometimes because you can feel it in the conversation. Some leaders know all their numbers, know exactly where they need to be, and are super meticulous about it. Others you speak to, you feel like they have a feel for the business, but it depends on how it comes. I think the biggest differentiator in whether you can transfer to another state is how ruthless you are with your numbers, how dialed in you are. It's one thing to put it on a spreadsheet and say, "These numbers are beautiful, and if we sell more, we make a ton more money." But the real scenario planning needs to happen for when things go wrong, because things always go wrong. How well capitalized are you to survive? Where's your disaster line? What do you need to do to minimize the downside? That's the element we need to figure out — how do we make sure we don't go below this line, and if things do go wrong, how are we flagged immediately? Bryan Fields: Yeah, I also think, to zoom out to the macro — we've been talking state to state, a lot about New York — but we're also in the midst of a hostile takeover, Curaleaf and Aurora, and I think the world looks more like Aurora's business than it does Curaleaf's business, which I think is why Aurora is the target right now. EU GMP facilities, more than one of them, distribution and operations in Germany — EU GMP is a huge hurdle, and it's almost impossible to retrofit a big U.S. grow into that; it almost needs to be purpose-built, wildly expensive, but done right. And the market is better in foreign countries not named Canada — the market is just better when it's medical, the markup is better, the margins are better, it's a steadier business, and it looks more like Canada than it does the U.S. So you see a whole bunch of different strategies unfurling among the big cannabis companies, which is always interesting to cover — more interesting when there are things happening in DC, state by state, a hostile takeover, and footholds in new markets like Germany, Israel, and Australia. When I started doing this in 2016, 2017, there was all this conversation about Canada leading the way, having all these leads, and many of those things didn't happen — but it's funny to see now that Aurora is a target for takeover precisely because they pivoted so many times, and because they made a big pivot toward EU GMP and international, the thing they were talking about back in 2017 — that Canada would have these leads — is actually coming to fruition, in the most reverse possible way imaginable. And they're not the only ones I think will be targets for takeover, because they have these facilities and markets abroad in the most regulated markets possible. Bryan Fields: So many important points there. One, I'd love to get a prediction on who's next — I felt like you had a tiny lean, but I won't put you on the spot yet. Two, the hostile approach, however it's accurately described, I think is an incredible play, because, one, Boris was open about it — the European business, the "crown jewel" part of his business, in his words, or very close to it. He's been very outspoken about how powerful those assets are. Plus the distribution in Europe is so much better than we'd all hoped the U.S. would be — it's not here yet, we don't know when it will be. So the growth opportunity that's untapped, plus the ability to take the product and send it over — and my favorite aspect is the limited-license nature of it, because there are so few of these licenses and they're so difficult to acquire, having them means you control the entire supply chain. And when you control the entire supply chain, you can dictate how it all works during this window, before more facilities come online and things change. But there will be a tiny window of time where everyone else has to play catch-up, and if he has these assets, he controls most of the pieces on the board, and he's pretty good at what he does. Jay Rosenthal: Well, it's like what Newman said: when you control the mail, you control information — that's a Seinfeld reference, for all of you old people. I don't know if people realized it at first, when that deal got positioned and announced, you guys do a really good job covering it, especially with all the changes, because it's hard to keep up with all the communications back and forth — that's a plug for reading Cultivated. But I don't think people, at least in my opinion, understood at first that the facility is the crown jewel of that position. A business is what it is, there are certain aspects we can get into the numbers on, but that physical asset allows him to do so much more, especially if he has a shortage of supply and wants to feed the European numbers. Bryan Fields: Yeah, I saw what you wrote. It's funny. Jay Rosenthal: I used to do these presentations — this was 2016, 2017, I was running Business of Cannabis at the time, we had just started it — and I was on a speaking circuit where big law firms would have these retreats and want to hear about cannabis. I did one in Whistler, which is such a plug for myself, that people would fly me to Whistler to speak to a group of lawyers, which is so silly in hindsight. I had this slide with some big names — Aurora and Canopy, and at that point Hydropothecary, which turned into Hexo — three separate billion-dollar-valuation companies in Canada — and I'd show this facility that was meant to be at the Edmonton airport in Alberta, I think it was Aurora Sun, a fully automated million-square-foot greenhouse, the most fancy thing you could ever see. I don't think it ever opened — the irony. But I'd show this glistening building and say, "This is the future, these greenhouses built in Canada to all these standards." But as Canada goes — obviously I think two of those facilities never even opened, and there's probably one or two million-square-foot greenhouses sitting empty right now in Canada that were meant to grow cannabis and are probably growing lettuce or tomatoes at this point. It's interesting to watch the full cycle unfurl in front of you — it hasn't happened quickly, it's been ten years, and it's interesting to watch it unfurl, probably some beautiful tomatoes. Bryan Fields: I think there are other lessons there too — the EU GMP push isn't a surprise to me, I kind of saw it moving in that direction, especially from a medical standpoint. I wonder, are there other industries and aspects operating today that cannabis teams can look at and say, "Okay, the next phase looks like EU GMP, here's how that works, here's what comes with it" — if the FDA comes in, are we talking real-time quality control, do we need to pull in technologies to monitor things like the extraction process? We already see sensors in cultivation. Are there other elements that'll be expected, because other industries have playbooks we're just going to apply here as the industry evolves and matures — third-party labs might still exist to some extent, but there might be more internal testing, like other industries have to do, to qualify themselves before releasing a product. Jay Rosenthal: Well, you tell me, you're the supply chain guy — but I'll say this: if that's the way it's going, there are some companies ill-prepared, ill-equipped, and unable to do those things, whether from a team perspective, a facility perspective, or a finance perspective. While everybody's talking about how great it would be if there was federal reform — unless it comes with the kind of requirements you're describing, in which case it'll only be the big guys that can actually comply, until the next wave of companies builds for that from day one — because retrofitting buildings is really hard, especially for agriculture, and the standard for cannabis will be way higher than it is for tomatoes, and then you're in real trouble. Bryan Fields: Yeah, I agree one hundred percent. I think retrofitting the businesses will likely not be feasible — I think they'll have to spin off part of their extraction business and third-party it. But I think that's where "what do you do better than anyone else" will really propel you going forward. And I think this is where thinking about the future doesn't have to be so daunting — we don't have to reinvent the wheel, we just need to figure out what other industries do, how do we anticipate these changes, and how do we apply them to our businesses one step at a time. A lot of it is making it easier for yourself — I know sometimes it's daunting, we talk about these technologies and scientific advancements, but in hindsight they'll likely save you more money if you think about the principles and how it actually works. But change is really difficult in our industry, and asking teams that are already moving as fast as they humanly can, stretched in too many directions, to make an adjustment and then see an ROI on technology, when they've mainly been burned a bunch of times — I understand, from a leadership standpoint, that's a really difficult ask. Jay Rosenthal: You just described Cultivated, though, and I know it doesn't sound like you did, but it is. Jeremy and I said, "What do we do better than anybody?" We understand the industry better than anybody, certainly on the journalism and media side — that was one differentiator. Two, I said to Jeremy, who was writing a Substack at the time, "You've got to turn it into a daily, let's do what Morning Brew does, or our friends here in Canada, The Peak" — that would be a huge edge, because other people out there still won't do it, they don't have the team, don't see the business model, whatever the reason. And if we do it, and do it long enough, and do it well enough, people will find it, and it'll be a viable business. It's a bit like — that was our edge, just like Heirloom had an edge and Jonty had an edge and all the companies we've talked about have an edge. That was our secret sauce — it's not even secret, it's just sauce, you can see what we do every day, it comes out. We're not doing anything crazy behind the scenes — it's just figuring out the workflow, having the wherewithal and dedication to do it, and building from the foundation, which in our case is a newsletter. Bryan Fields: I think the thing that differentiates it is the trust, right — that you show up every single day, and even on the days you don't want to show up, something still goes out, because I'd guess there are a lot of days where you're like, "Oh my god, we've got to get something out, what do I do?" That's what separates it to me. Creating content in today's day and age is super, super easy. Having the wherewithal and the ability to continue to do it every single day, that is the separator to me, and to have the trust. Because as the content comes out, and I see it growing and growing, people are having more and more of an opinion on it. If people are hating on it, you're doing something right, because that means people are seeing it, thinking about it, and sharing it. That's where it becomes a little uncomfortable too, because you're putting yourself out there and taking a stance, trying to be thoughtful and directive, saying, "Here's the truth, here's how it is," even though someone else might see it completely differently. Jay Rosenthal: Yes. In my previous business — I started, launched, scaled, and sold Business of Cannabis — early on we used tools that we now take for granted, even Slack, I don't think we had Slack at first, maybe we did, but a lot of tools developed over time. I was watching a lot of Gary Vee, and he said, "If you're not embarrassed by the first thing you put out, then what are you doing?" So now I look back at early videos, early newsletters, and it's not cringe, because we sort of knew what we were doing, but it was just so early, not honed, not polished. But that's the thing, you just have to do it — this is content strategy too. Your first podcast, I don't know what it was, but you must have been so nervous, and you get through it, right? I know many people in the cannabis media landscape, and I like many of them, but I don't think any of them could do it on a daily basis. Some of them write a story a day or cover things daily, but putting out a newsletter is really different than writing a story, and having pieces that are thought pieces, more editorial, more opinion — you have to build trust. AI couldn't do what we're doing, because nobody trusts AI, with good reason, we can talk about that — but we've been in the industry for ten years, and it's funny, when I was at Business of Cannabis we were trying to raise a little capital, and a guy said, "Well, it's all you — what do we do if it's not you?" I said, "Well, I don't know, but it's me, I'm here, that's the thing." And we did get acquired, and I did have business partners, but it was largely about me and the relationships I'd built and the trust. Sometimes you can't separate the business from the people, which is fine by me, because I like doing the work. The business doesn't exist without me, and it doesn't exist without Jeremy. Bryan Fields: Yeah, I think the combination is really, really good, and I forgot who clipped the two of you the other day, but I love it, because I'm curious what he's clipping, because we're hearing the same thing but he's internalizing something completely different, and he always has a very thoughtful approach to it, and then he posts it, and I read it and think about what I heard from you guys versus what he's saying, and it's crazy that the two of you can speak and we're hearing completely different things. Jay Rosenthal: Yeah, that's funny — that's the thing about content that's so wild, you've triggered me to think about X, and you've triggered him to think about Y, and now he's sharing it, and I'm like, "Oh, I totally see his point, but it didn't even register to me." He does that with us too, and other people do too, but he does it — it's funny to have your own content clipped because that's what we do with content too. He also hears things publicly traded CEOs are saying that I haven't even honed in on, and we've clipped it and not pulled back. He did it with Oxley, a Canadian company — he's listening to it from an analyst perspective, I think, and a really well-informed one too. I think he's an investor, but he's listening for different things — a little bit about capacity, a little about distribution, and he has a vision of the future, what's going to be valuable. Time will tell, but he seems pretty thoughtful. Bryan Fields: Yeah, that's the interesting part — you're scrolling through the feed and you think, "I know that guy." Jay Rosenthal: Yeah, it's funny — my kids are on a new baseball team, and I do the same thing they do, look at the list of parents, do a little research, since we're going to be on the bleachers together, might as well know a little about each other before we get there. The first thing that comes up, obviously, is that I'm in the cannabis business, so a lot of people will come up and say, "Oh yeah, we love weed," and ask what brands I like, and a lot of that conversation happens while the kids are on the field, whether it's a hockey rink or a baseball diamond. But yeah, it turns out the stigma is pretty strong — some dad's like, "Oh, are you high right now?" And you're like, "Not quite, but I really wish I was." Bryan Fields: It happens to me too, in those settings. My wife's a school teacher, so she's asked me not to share some of those details, and I understand and want to respect that, but the conversation still has that look. I say, "Oh yeah," and most of the time it's like, "I've tried an edible one time," and I ask, "Which one did you try?" and they say, "I don't know, my friend gave it to me," and I think, "Wow, that's really good brand awareness you've got there, I'm sure you're going to get a repeat purchase from whoever bought that." Jay Rosenthal: Well, it's interesting, because my kids go to a small private school, and I was president of the board for a long time. Before I joined the board, this was ten years ago, just about when I started in the cannabis industry, I said to the board, "Do you want me on the board? Here are the responsibilities — but you also have to know I'm in the cannabis industry, and I'm going to be very visible about it." And God bless the downtown Jewish community in Toronto, there was dead air, like they thought I was about to say there was a problem. I said, "No, I'm not saying there's a problem, I'm just saying the board president is going to be very visibly talking about cannabis and legalization, is that okay?" And they said, "Oh yeah." It's unfortunate that even now we still have to clear those things, but I think it's an important part of the reality of the world we operate in. Bryan Fields: But going back to Cultivated — you announced the membership, right? I think it's important people understand why it's important and what it helps fuel on the inside. Jay Rosenthal: So I'll talk about it from a member perspective and then from a business perspective. Jeremy and I met in 2016, 2017 — Jeremy's from Toronto, I live in Toronto but I'm from Boston, and Jeremy lives in New York, so we've sort of switched spots — but we have mutual people in common, and someone said, "Go meet Jeremy." He was writing for Business Insider at the time. I tell that story because it's our origin story — I remember the coffee we had, I thought, "Oh my god, Jeremy's a kid," this was a long time ago, he's in his mid-thirties now, so he was in his mid-twenties then, but he was a real journalist. I was running kind of a weird cannabis business. Jeremy said the same thing then that he says now: nobody is covering the cannabis industry from a proper journalistic perspective. I said, "Yes, you're right," because at the time I needed more information about what was happening — there were very few sources, basically zero in Canada, and a few in the U.S., some of which have since gone by the wayside. Fast forward, Jeremy was at Business Insider, then business school, then writing his Cultivated newsletter on Substack. I was at Business of Cannabis, tried to hire Jeremy, then went to Duchy, left Duchy, and Jeremy and I started Cultivated together to make it a daily newsletter. Jeremy's driving thought the whole time was, "We need more cannabis industry journalism," and the daily newsletter was one way to do that, aggregating and giving context, alongside long-form pieces. As we built the business, people were willing to pay for this, we thought — that was our thesis — and now that we're three years in, we asked, can we start a membership tier, give access to long-form journalism? There are a lot of great cannabis industry journalists out there now who weren't there before, that we could hire — Natalie Fertig, Chris Casacchia, and a bunch of others — and they have great story ideas because they're so looped into the industry. How do we activate that and provide value to the people who read us every day, in addition to giving them unique access to gated content? So the membership gets you access to about four stories a month that are only available to members. We also added something we call "People Moves" — a deep rundown of who's moving up, who's moving on, who's hiring, we started that on Monday, and you'll get it every week. You get the original story, discounted and early access to our events, which people do want, you get briefings with Jeremy and me. We call it a membership, not a subscription, because over the past year we've been in five or six different cities hosting what we feel are very "Cultivated" events — coffees, breakfasts, cocktail receptions — and if you read the newsletter, you feel like you're part of a community, and when you get together it feels like you're becoming a member. We believe only we can put on events that feel like something, to be quite honest — I've been to a million cannabis events, some feel "eh," some feel kind of bad, ours feel like, "We all do this thing together every day, let's get together and talk about it." So we've leaned into that for membership, offering the subscription for premium content, but also access to this readers-and-members-only community, which we'll be doing more of toward the end of this year and into next. From a business perspective — because I know you've talked to people about business structure — when we launched we had theories about how to make this a viable business. The most obvious was partnerships and advertising in the newsletter, plus some content like webinars. So we started with advertising, then built on real-world and online events, and the third pillar of revenue is subscriptions. Ideally they'd be even, but they're not — still, three revenue streams is better than two, and there's direct value to both events and subscriptions in that you get what you pay for. Our advertisers and partners on the first pillar get value too, and that's how we've sustained this three-legged stool of revenue in our third year, rounding out our offering. Ideally they all interplay — our partners and sponsors allow the newsletter to do really well, our best event attendees are the people who get our newsletter and our partners, and those same audiences are our best subscribers. When we have an event, we get unique content for the newsletter and subscription-only content, feeding this — I hate the word "flywheel," because I don't know if you listen to Acquired, but it's not really a flywheel — it's more like an ecosystem. Bryan Fields: It's an ecosystem, and I think the important part is that it lets your team keep investing and growing the value you give out, because every day you write the newsletter, but you want to do more, and time is a challenge — where do you get the ability to give more? You can acquire resources and bring in partners to help, and unfortunately the only way to do that is to position some of it as premium. But that's the value people get, and sometimes there's a stigma around paying for things — people ask why would they do that — well, if you want more, and you're enjoying what you're getting, here's the option, here's the benefit. It's probably not for everybody, but there's a select group of people who trust you, rely on you daily, and know that every time they engage with you — reading the newsletter, spending their time, coming to an event — they get massive value. Over time, you ask, is it really any cost at all? You go to a trade show and spend a thousand dollars between flights, so getting this kind of informational value as a guiding pillar is just like paying for the Wall Street Journal, the New York Times, or The Athletic. Jay Rosenthal: Yeah, and I think people are more willing than they were three, five, ten years ago to pay for things they find value in. I can't tell you how many subscriptions we have — Netflix, Amazon Prime, TSN, Sportsnet, Disney+, Apple TV, Crave, we had HBO. You pay for things because the value is very direct. Whereas when you paid for cable, it was like, "I don't need forty-five of these channels, it just comes with it." This is very direct — people feel like it'd be great to get longer-form journalism about cannabis, I'd find real value in that, and I also get this free newsletter every day that I find tremendous value in, and I get to feel part of something, which is great. That's the most rewarding part, honestly — people come up to me at events, or email us after a newsletter, and say, "Thank you, this is making me a smarter cannabis industry professional," and then they start quoting it back, which is fun — I read this somewhere, and I think, I know you read that, that's our thing. Bryan Fields: It's a really, really good thing — you get that too. It's a difficult balance, because sometimes people push me and say, "Why don't you create more episodes, it's so easy," and I think, why don't you go — I certainly could, but the time element is the real challenge, and I think people forget that creating something you're internally proud of to put on the internet requires time, effort, resources, tools, and all those things, versus just continually putting out AI slop into the universe. I've definitely thought about it, but there's a cost involved — there's someone who edits the podcast, someone who reviews it, the time of setting up the conversations, making sure there are enough thoughtful conversations so you're not saturating the brand. I think that's the important element — there are people interested in doing it differently, not everyone's going to, but that's what allows you to do these things. I want to talk about the upcoming event, because I was really excited when I saw regulators from both California and New York on a stage together. How did you get that to happen? Jay Rosenthal: I won't be specific, but one of the New York agencies has a new public face they want to put out there. We're a partner with Gotham, a well-known retailer in New York, that helps draw people in for sure, but also — I won't name names — we have analytics about who gets our newsletter, and a lot of regulators read it every day, because they need the information, they're being inundated too, and they want context about their state and how their state and others are being viewed. I think it goes back to trust and relationships — they know who we are, they know if we're putting on an event, it'll be valuable, we'll ask really thoughtful questions, we won't spend time on cannabis-regulation-101, we'll really get into what's happening in California with enforcement of unlicensed grows in the Central Valley, and why that matters to California. The interesting thing is that it matters to New York too, because much of the unregulated cannabis coming into New York comes from those unregulated grows — so while they're a continent apart, the industries are related in big ways, because they're arguably the two biggest markets, and they drive the rest of the industry in terms of brands and thought, the counterweights on either coast. Bryan Fields: Are we going to get that type of conversation? Because that's the part that got me excited — I thought, "Oh boy, we're really going to talk." They know what the event is, but they haven't been given questions in advance. Jay Rosenthal: Jeremy's going to moderate it, they know Jeremy — this is the benefit of, I mean, you and I like to shoot the breeze, but Jeremy's an actual journalist, and I think they want to be in settings like that much more than settings with investors, or getting grilled by the people they regulate. I'd argue it's important that they come out and talk about this, because otherwise it's like they're hiding from it. If they come out with a thoughtful answer and say, "We understand this is likely happening, here's how we've looked into it, here's how we're trying to do a better job," I think the industry would respond very favorably to that. Maybe they won't like every element, but if they're honest and transparent and say, "We're aware this is happening, here's how we're trying to stop it, here's how we're trying to improve, and we want to work closely with the teams operating," and they genuinely mean it and are heard, I think that makes for a better industry overall. Bryan Fields: I do too, and I come from government — I worked on Capitol Hill, then in local government in California. In my experience working with elected officials, but especially regulators and the people who implement what elected officials or voters want, they're mostly well-intentioned, they're not trying to screw things up, they're trying to do the best they can with the information they have. When you're starting a regulated industry from scratch, in a market that's going to be worth billions, you're going to make mistakes — nobody's gotten it perfectly right, there is no perfectly right. I think the challenge, and we've talked about this before, is that you're given policy goals, generally from elected officials, voters, or a governor, and those goals can counter each other. In Canada, the policy goals from Prime Minister Trudeau at the time were: keep cannabis out of the hands of kids, drive down the black market, ensure safe and secure, tested access — none of those were about standing up an industry, that wasn't a priority. The other thing we talked about on This Week in Cannabis Live last week is, if you monitor the success of an industry based on the number of retailers, or viable retailers, that might not be the best metric. Here in Ontario, we had basically a free-for-all after a slow start — anybody could open within the geography, municipalities could opt out, but if they didn't, operators could go wherever within the rules. We had a huge influx of dispensaries all at once, and the share of people buying on the black market went way down — so in that case, sheer access to legal cannabis was the deciding factor in people accessing the legal market. But if you're basing success on the viability of a dispensary, that was a terrible way to do it, because half of them have gone out of business. The market decided the right number of dispensaries, not a regulator, in that case. Jay Rosenthal: That's a great point, and I wonder what their metric of success is — is it the same, is it different, were they given one, or do they have to assume one and say, "Okay team, here's what we think is doing a good job"? Because if it's counterintuitive to what the industry thinks, that's probably why there's sometimes a difference — if their job is to reduce the black market, and the industry says, "You should be doing this instead" — Bryan Fields: Well, and oftentimes it's to drive tax revenue, which we know can backfire, right — we just saw this in Michigan, needing to drive more tax revenue from cannabis. People are inelastic on this — if the all-in price is too high, they won't buy it. You might raise taxes but keep revenue the same or even lower it. It's the spreadsheet again — "if we just charge more, people will just spend more" — and at a certain point it dips, and figuring out where that is, is really, really difficult. A legislature may say, "We need to fill a budget hole with cannabis money," okay, but how you do that is Econ 101 and regulatory structure — if you don't have enough dispensaries to serve the market, you'll never get that revenue anyway, or if you charge too many fees for people who want to open a business, they won't open them, or they'll be driven back to the black market. We've seen it here in Ontario — this whole influx of retailers opened up, and with no enforcement of unlicensed dispensaries in many communities, some of the same owners, building managers, think, "Why don't I just flip back to where I was before," because there's better money and no regulatory cost. There are three in our neighborhood that have taken over former dispensaries. Those are the specifics when we talk about the industry — you ask, "How does that work?" and sometimes I just throw up my hands. It's really complicated, and sometimes it moves right, sometimes left — the right decision is kind of a floating one, it feels good sometimes. Jay Rosenthal: Well, we just had on, today on Cultivated, a woman running for lieutenant governor in Texas, a Democratic candidate — she actually has a shot, there may be a big blue wave, not everywhere, but also in Texas — and she wants to undo the hemp regulations that have been put in place, to provide safe access to THC products, hemp-derived. That's a weird conversation to have, and my thought, which I put to her, is that the people watching this very closely are the border dispensaries in New Mexico, where a hundred percent of their business is people coming over from Texas — they probably like the ban being in place, because it gets them more business. It's very convoluted, which is why it goes back to the MSO conversation — depending on the state and how their business is set up, I think everyone operating in the space feels that way about some regulation. That's why there's always an outcry over rule changes, because people think, "I don't know if I agree with this, this hurts such-and-such." Someone always gets hurt, and I think things always evolve. Bryan Fields: It's funny, there was a poli-sci class saying where you stand depends on where you sit. Any other panels you're really excited about, that you think people are underrating? Jay Rosenthal: We have a panel with a bunch of retailers in New York about "co-opetition" — that's the word I'm using, they're in this together whether they like it or not, they may be in competition, but good rules, regulations, and a thoughtful approach to their business helps them all. We've got Vlad Batista and Joanne Wilson from Gotham, and I think one more I can't remember right now, but that's an important conversation. We're having a real conversation about price compression in New York, which is the number one topic there, with Lit Alerts and a couple of different operators, about how they're dealing with it and how a market actually thinks about it, so it's going to be a thoughtful conversation. We heard back from attendees at round one — they said fewer panels, more networking — so we've shrunk it down, it's about an hour, an hour and fifteen of panel conversation and speakers, then an hour and a half to two hours of networking. We're not changing locations this time either — last time we had one place for the panels and a different place for networking, this time we're keeping it all in one location, the Green Room at WNYC in Soho, New York City. It's going to be a great event, I encourage folks to go — you can find it on our website, but you have to go through the Gotham website, Highrise, to register. Tickets are on sale, but we have to unlock it for you, because we want to make sure the room is representative of the industry in New York and elsewhere, so we ask for an application. It's a great event, and then, as I mentioned, we're hitting the road after that — St. Louis, Las Vegas, Buffalo, all before the end of the year. You want to come on the road with us, Bryan? Bryan Fields: Maybe, depends on the week. But I can tell which regulators are reading Cultivated based on the cities you're going to — I've got my detective hat on, I figured that one out. Jay Rosenthal: If I were them, I'd read it too. Of course, dude, of course — if you're not reading it, you're probably not doing your job right, because that's part of your job, to understand what's going on and how it all works. Bryan Fields: One more thing I wanted to point out — the fact that everyone came back and said they wanted more networking, I think, is an incredible sign, because panels are good, but they have a finite amount of value — doesn't matter how amazing you make it — but the networking means people were having really good conversations and didn't want to stop. That's the best sign, because sometimes you go to these events and walk around six times and have maybe one conversation, and the feeling isn't there. The fact that people wanted more of that is a really, really good sign. Jay Rosenthal: Yeah, I like that too — it's helpful for my business to meet everybody face to face, but it's also indicative, I think, of where the industry is, and how we try to plan our events — people are looking for more intimate settings where everybody's "actionable," which is a weird way to put it, but they're actually meeting people they can do business with, and it's not as direct as a buyer here, a brand there, a retailer here — it's people in the industry, all of a mind that they want to do good work, knowing the rough waters ahead, and when you put those people in a room together, alchemy happens. Bryan Fields: I love it. Only strong survive. Jay, for our listeners who want to get in touch, want to read Cultivated, and more importantly want to hang out with us at the upcoming event, where can they find you? Jay Rosenthal: Cultivated.news, easy peasy — hit subscribe, put your email in, you'll get our newsletter every single day, it'll be worth your read. I think the longest one we've ever put out is maybe ten minutes, usually it's between five and seven. I think it's really thoughtful, Jeremy does an unbelievable job as editor-in-chief putting it all together. You can also find us on YouTube, all the links are there — this week we had one of the co-founders of Grown Rogue, we had the lieutenant governor candidate from Texas, and we have a show on Fridays called This Week in Cannabis Live, Bryan, you're going to be on it this Friday I think. We try to have fun, we're still talking about cannabis, so it's "around the horn," that's how I'd describe it. Bryan Fields: And what about any upcoming big conversations with any MSOs? Jay Rosenthal: Yeah, I think we're going to have Boris Jordan on — I can't say the date because I don't actually know it, but it's coming up. Also some thoughtful analysis about that deal in particular, because I live in Canada, and it has a different view here than it does on the other side of the border. Also this week the price went up — Curaleaf raised their bid to five dollars a share. If you're not following Cam Battley, who was a C-suite executive at Aurora, he's been tweeting about the deal, and I think really insightfully, as a former Aurora insider and someone who's been in business a long time with publicly traded companies — this isn't his first time watching a hostile takeover and what it all means. I think he's providing some of the best analysis on it, pretty cool story. Bryan Fields: It's straight out of a TV show. Jay Rosenthal: It is, and he's sort of curating it like it is a TV show, but he's got an insider's lens, and he's still a shareholder. What strikes me is that Aurora hasn't been, over the past years, super in touch with their investor base, which surprises me, because I know a lot of people spend a lot of time thinking about that — we talk to High Tide all the time, and they're really on top of it, which I think a lot of publicly traded companies should be, lest they find Curaleaf knocking on their door. Bryan Fields: I love it. Thanks for taking the time, this was a lot of fun. Jay Rosenthal: This was so much fun, Bryan. We'll see you out and about.