Why Cannabis Companies Must Face Reality, Make Hard Choices, and Follow the Data ft. AnnaRae Grabstein

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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 Kellan Finney. This week we've got a very special guest, AnnaRae Grabstein, founder of Wolf Meyer. AnnaRae, thanks for taking the time. How are you doing today? AnnaRae Grabstein: I'm doing so well. Excited to be here with you guys today. Thanks for having me. Bryan Fields: Excited to dive in. Kellan, how are you doing? Kellan: I'm doing well. Really excited to talk to AnnaRae — an OG trailblazer on the West Coast, fifth generation, I think, is what she said before we started recording today. So really excited to pick her brain about the whole industry. How are you, Bryan? Bryan Fields: Yeah, I'm stoked. I think strategy-wise there's a lot we can all learn from AnnaRae, and maybe we can dive into specifics and apply it to some companies that could probably use her help immediately. But before we get into an East Coast/West Coast battle, let's separate where we're from originally and just focus on one thing: the fall, when it's beautiful out. If there was a specific location, East or West Coast, that you'd prefer to be during that timeframe, where would that be? AnnaRae Grabstein: Well, the fall is harvest season, so I have to split my answer right down the middle and say that I would love to be on the mountain in the Emerald Triangle in California in the fall, or I would love to be underneath some beautiful trees in Northeast, upstate New York in the fall. Yeah — like Kellan said, I'm fifth generation, born in California. AnnaRae Grabstein: My roots are really deep in California, and it's where I got my start in the industry, so I'll always be loyal to that. But you can't ignore the East Coast, and certainly New York. So big ups to you guys. Bryan Fields: I love the fair, impartial, PC answer. For our listeners unfamiliar with you, can you give us that quick moment in time when you realized you wanted to be part of the cannabis industry? AnnaRae Grabstein: That quick moment in time — I have been working in and around cannabis since 2004, which is when I left UC Santa Cruz, where I did my undergrad. I was invited to spend a season in Mendocino County on an outdoor cannabis farm, and I met people that season who became my chosen family and my closest friends. AnnaRae Grabstein: And it really was the harbinger of a really long journey of me exploring what the business opportunity was for me, for the industry, and creating professional and legitimate long-term opportunities in the space. Bryan Fields: I love it. And I can only imagine some of the experiences along the way — ideas and things that have transpired, some of the optimism and hope you had when you first got started, and then seeing the back and forth. I think we should start specifically with consumers, because I think most industries are built to be understood by them and to work for them. So: the market is shaped by consumers — I love that you sent me that. What does that mean for you? AnnaRae Grabstein: Well, I think the market being shaped by consumers is part of remembering and acknowledging that there's a massive amount of change that's just an inherent part of the cannabis industry maturing. We see that right now with what's happening in the medical and adult-use regulated cannabis space, the hemp market, and the state-by-state patchwork. AnnaRae Grabstein: People talk about the cannabis industry and the hemp industry, and I'm just going to say it — it's one industry, because the consumer is where we need to be anchored. It's the consumer that's flowing between these two spaces and doesn't really have a reason to understand the difference between them. Bryan Fields: So how do operators who operate very differently work together, in competition, to attract the consumer? And how does the government or the industry educate the consumer to understand the differences in the product so we can all work in unison to provide safe access for consumers, which in my opinion is the ultimate goal? AnnaRae Grabstein: Well, acknowledging that the consumer is the anchor doesn't mean every company should be in hemp and cannabis. And I don't necessarily think it's the consumer's role to understand where their product is coming from, whether it's hemp or cannabis, and what the ingredient is — it's way overcomplicated from a consumer perspective. What I'm leaning into is that — AnnaRae Grabstein: Regulatory navigation is part of a holistic business strategy. Let's say you're an edible maker — you think about where you can be based on your skill set, your supply chain, all of those things. If you're in the regulated adult-use cannabis space, you can operate within the four walls of the state you're in. AnnaRae Grabstein: If you're operating in the hemp space, you might be able to manufacture in one place and have interstate commerce sending your products from place to place. But the anchor is the consumer. It's not the regulatory navigation — the regulatory navigation is what creates your go-to-market strategy: where you can sell, how you can sell, and the different strategies that are going to get you into the — AnnaRae Grabstein: hearts and minds of the person that's going to fuel your growth. Kellan: The hemp and cannabis industries are essentially similar because the expertise required for operators to produce the products is almost identical, right? The regulatory framework is different, so why wouldn't companies just operate in both spaces with the same teams? It sounds like it's just paperwork, but it's not — why is this so challenging? AnnaRae Grabstein: Yeah. Some do operate in both spaces, and I think that's a really great strategy, because companies in hemp that aren't looking at adult use are being short-sighted — regulations are coming even if they don't currently have them. Not being afraid of regulation as part of your business is really important. That said, it isn't necessarily right for every company to be operating in both spaces, depending on where they're at. AnnaRae Grabstein: Understanding the difference between going deep and going wide as a company is really important. If you're in a market that has a lot more depth in it, focusing on that market and going deeper is a really strong strategy. And there's a lack of access to capital, as we know, in cannabis, so really looking at how your resources are best spent is critically important. That said — AnnaRae Grabstein: I think it oversimplifies things to say it's the same, Kellan. I don't think you said it's exactly the same, but yes, manufacturing processes are similar — if you're making a THC-infused edible, you're going to do a similar process whether it's adult-use cannabis or hemp. But distribution channels and the way consumers access these products are very different on the — AnnaRae Grabstein: on the two different sides of the space. So when I say it's one industry, it's not that it's one holistic industry today that travels back and forth smoothly — it's more of a long-term philosophy about access to cannabinoids being something consumers want. AnnaRae Grabstein: Companies need to understand that their customers are participating in both sides of this market, so ignoring it or thinking you're one or the other is short-sighted. On the hemp side you're seeing a lot more utilization of existing alcohol rails for distribution, people targeting alcohol-beverage pathways as a path to market. That's actually a very different skill set — AnnaRae Grabstein: that we're seeing a lot of folks coming in from craft beer or spirits, and people with familiarity with those supply chains, have a lot of success on the hemp side. Whereas in cannabis you're dealing with much more closed supply chains. It's not the traditional environment — if you're a wholesaler in cannabis, all you can sell into is the — AnnaRae Grabstein: licensed dispensaries in the state market you're in. That's a different skill than looking at the entire alcohol space and figuring out the best place for your hemp beverage and who the distributors are that get you into that channel. But on the manufacturing side, yes — lots of parallels. Kellan: Honestly, it's kind of unique, because if you were operating in both spaces you could treat your cannabis operation almost like a pilot plant, right? Much smaller, much more closed systems, tighter margins. So if it's successful in cannabis, then when you go to hemp — yes, it's different, but there are also different problems from a scaling standpoint, from manufacturing, and everything else you mentioned. So you could look at it as running a pilot program for your beverage in the cannabis space. AnnaRae Grabstein: Yeah, I have watched in awe and been really excited at different times as innovation that's happened in cannabis has left cannabis and gone into other spaces. For a long time people thought we had to bring talent from outside cannabis in. Now we're getting to see things start in cannabis and go elsewhere. An example: there's been a lot of really exciting — AnnaRae Grabstein: cultivation technology that was created specifically for the cannabis market but has since gone outside cannabis into other agricultural technologies, like greenhouse ag. There's a lot of talk right now about existing cannabis companies trying to grow their total addressable market by going into hemp. That makes sense, because the cannabis market is sort of at this — AnnaRae Grabstein: place where there's not a lot of revenue growth in existing markets and not a lot of new states coming online. But for hemp companies, looking at getting into the adult-use cannabis space is really interesting, because that shows a different skill set. Whereas cannabis companies going into hemp are just thinking, "Oh wow, this is so simple — now we can streamline our manufacturing and go over state lines." For a hemp company to flex into the regulated market shows — AnnaRae Grabstein: courage and fearlessness, to make sure they're also growing their total addressable market into places they aren't already, which I find really interesting. Bryan Fields: Do you see that happening more and more, or is that something you anticipate happening going forward? AnnaRae Grabstein: I don't see it happening more and more. I do see some groups exploring it with foresight, and there are some companies on both sides of the market, but most of those started in adult-use medical cannabis and are expanding into hemp. So — give me a call if you're a hemp company expanding into the regulated space, I want to hear from you. AnnaRae Grabstein: I'm interested. Bryan Fields: Well, one question I'd have about the regulated market is that you've got states like Pennsylvania waiting to come online, states like Illinois that are heavily MSO-driven and really competitive, Massachusetts too. Companies that operate there are forced to fight within the walls of that state, and they'd love the opportunity to serve customers in New York, New Jersey, California, and vice versa. Do you think that's a limitation on those companies just based on rules and regs outside their control — Bryan Fields: and that them being pushed into the hemp market is just based on the rules at play versus, say, just being inefficient? AnnaRae Grabstein: I think the first step to really winning in cannabis, and being an executive and a leader who's going to be a strategic innovator in this industry, is accepting the market realities right in front of us and getting out of denial about the things we hoped, dreamed, and wished it could be. So yes, are there complicated restrictions if you — AnnaRae Grabstein: put a bunch of money into investing in Pennsylvania and you still can't serve the adult-use market, and you're limited in the form factors you can create? Does that suck for you? Absolutely it does. Is that something you can control? Not really. You can certainly go lobby Josh Shapiro and the other legislators in Pennsylvania who have your destiny at their fingertips — AnnaRae Grabstein: with the policy changes in front of you. But yes, there are all kinds of irrational restrictions in the cannabis market, some more rational than others. To win in this space, accepting the realities of the market is part of it. When you understand the opportunities and constraints of — AnnaRae Grabstein: the regulatory and legal environment, then you can set a plan to navigate it and win through it. That comes back to regulatory navigation as a critical aspect of understanding the business opportunity. But the anchor still becomes the consumer. If you're in Pennsylvania thinking about that, you understand the rules of the road, but what does the consumer want, and how can you still serve them with — AnnaRae Grabstein: the opportunities you do have. Bryan Fields: I think that's where the complexity becomes so difficult, because I'd assume some of the operators who came in earlier, especially in Illinois, didn't model in outside players — hemp companies coming in and taking consumer dollars. Because when we think about consumer dollars, they spend on the category, exactly like you said — it's roughly the same category, just a different product form, to each their own. Bryan Fields: And that's where I think the modeling has become so difficult for these companies — they forecasted it out like a protected environment, and now here comes beverage saying, "okay, we've got unit economics across the United States, so we can get our COGS down as low as possible and get our margins up," where these other operators are dying to unlock that same total addressable market. AnnaRae Grabstein: I'd push back on the idea that hemp beverage is displacing opportunity for Illinois operators. I will say — and I think it brings up a good point — that there are right-fit channels for right-fit products, and high-potency THC products do make sense in a more regulated environment. I don't want people to think I'm advocating for highly intoxicating — Bryan Fields: I was just giving an example. I was just giving an example. AnnaRae Grabstein: unregulated products having widespread access to people who don't have confidence in the safety of their products. However, it's been shown over all the years of adult-use legalization that beverages specifically do not sell well in dispensaries. So beverages being available outside the dispensary environment are not displacing or harming existing cannabis dispensaries. AnnaRae Grabstein: You can make an argument for competition from things like THCA flower and vapes. Are those the reasons Illinois companies' financial models aren't coming to fruition? I'd say no. And you might have heard me say this before, but I think there's been a lot of financial pornography in the projections that cannabis companies have created over the years — AnnaRae Grabstein: and fantasy is a great thing, everyone needs a little bit of fantasy in their life. But we're not in a place where this industry has unlimited growth ahead, where any company starting from scratch or growing into a new market can be confident it's going to walk in and take a 10% market share of that market, be it Illinois or elsewhere. So — AnnaRae Grabstein: if companies aren't fulfilling the promises of their financial models, they need to ground themselves in reality today. Like I said, you have to get out of denial, accept the realities of the market, and right-size the company and the plan so you can make strategic decisions appropriate to where the company is. That means hard choices. AnnaRae Grabstein: It means validating our instincts with data. It means thinking about resource allocation and having a clear strategy that becomes your true north for making decisions. Yeah. Kellan: Speaking of data — hemp and cannabis will eventually be the same, one could argue, and we've been seeing stagnant growth in the cannabis industry. From a macro perspective it's all just about consuming cannabinoids, right? So — I don't know the answer to this, this is my question — has there been significant total revenue growth for cannabinoid consumption — Kellan: with the hemp industry becoming more prevalent, as beverages now go into traditional markets that don't have a robust medical industry? You could argue it's actually been really good for the total growth of cannabinoid consumption, which is good for the whole industry long-term, and it helps change cultural stigma — it sounds like hemp is getting people to try the same product just because it doesn't have the name "cannabis" on it. AnnaRae Grabstein: Yeah, absolutely. The hemp market has unquestionably created massive market opportunity in the cannabinoid space overall. Even as the adult-use regulated space sticks around that $30 billion a year top-line revenue number, the hemp market has been growing exponentially. AnnaRae Grabstein: There's been a lot of talk about what's happening in Texas right now — Texas is considering bans, considering regulation, considering expanding its medical marijuana program, looking at a whole bunch of different things. Depending on when this comes out we might know the answer, I don't know. But there's absolutely growth in cannabinoid consumers happening because of hemp. And I think one of the most compelling consumer profiles — AnnaRae Grabstein: is kind of me — the yoga mom. Because in cannabis, and I've been in it for a pretty long time, when adult-use markets first opened up, when we were building brands in California in 2016 and 2017, people talked about women-centric brands, the soccer mom, low-dose products. And the reality is those consumers — AnnaRae Grabstein: never materialized in the dispensary channel at all. Those brands, by and large, did not find strong footing or the same level of growth as different types of hype, lifestyle, high-potency brands. But what we're seeing in the hemp space is that those consumers are the ones purchasing product. AnnaRae Grabstein: I think a lot of that has to do with the fact that women make most of the purchasing decisions in their households and are the ones going to the grocery store and so on. If you put products where those women are, you're more likely to bring them in, and I think that's ultimately a really good thing for the industry. I think the movement away — AnnaRae Grabstein: from alcohol is also reinforcing this moment and the curiosity around alcohol alternatives. But as more states put regulatory environments in place for high-potency products, most likely in a dispensary-type environment, I also believe what we're doing is opening a pathway toward — AnnaRae Grabstein: people becoming more curious, or more willing to go to a dispensary, because they tried a product, had a good experience, and realized they didn't get so high that they might be open to trying other things. The other thing I want to say about hemp data is that there's a growing understanding that some of the more high-potency products in the beverage channel — AnnaRae Grabstein: are the ones getting more sell-through. The difference between a 2.5-milligram beverage and a 10-milligram beverage — there's more sell-through on the 10-milligram beverages. The 2.5-milligram beverage might be the on-ramp someone wants to try, but as people try them, they want to feel something. That's just the reality — people want to feel it. Bryan Fields: I love it. I think that approach is so smart, so not intimidating. Every time I go somewhere, instead of bringing alcohol, which used to be my normal path, I now bring low-dose beverages, and people's eyes light up every time — "oh my God, there's THC in this, I can get high." Very lightly, but they see that and feel more comfortable trying it again. You hit the nail on the head — people go back the second time and say, "I want to feel something. I felt comfortable with the 2.5, I can try the 10." Bryan Fields: I want to ask your opinion, because you've been in this space for 20 years and you've seen constant ups and downs — given how hemp is operating now, how do you foresee the right approach for states to have a safe, regulated market where products can be tested and people feel comfortable? What would you advise Texas, or anyone else who came to you today, AnnaRae? How do we set this up so businesses can succeed and we create a good environment? AnnaRae Grabstein: I think in every state I'd hope there's some level of access to cannabinoids happening within some sort of regulated environment. I think an easy path in the short term is to look at the hemp market being for non-inhalables and more low-dose products, 10 milligrams and under — AnnaRae Grabstein: non-inhalables — things like edibles and beverages. And for consumers who want to partake in inhalable products, they'd go into a more regulated environment with more age verification and safety standards, more like what we have today in the dispensary channel. The reality is most states are kind of choosing one path or the other. AnnaRae Grabstein: I think a world where there are adult-use dispensaries for heavier users, for people who want to explore dabs and infused joints and all the stuff that's out there, but that also provides widespread access to — AnnaRae Grabstein: the products we're seeing proliferate in the hemp space, still with some type of safety standard, is kind of the utopian path, because that provides the most access and the most flexibility. Ultimately we need regulation — AnnaRae Grabstein: to become a little bit lighter in some state markets to make it easier for businesses to operate and succeed. And obviously federal policy change is something a lot of people want and hope for, but we don't have any crystal balls, and every time we think we're getting close we seem to take two steps back. At this point, I'm just not holding my breath for that. AnnaRae Grabstein: I think this is still going to be sitting with the states for a pretty long time. I hope there are some states we can really point to and say they're doing it right. It's possible that might be Minnesota — I'd been looking to Minnesota for a while, hoping it would land in the place I just described, but they've been really slow to turn on their adult-use market. AnnaRae Grabstein: So I'm starting to lose some confidence in Minnesota, but there's still hope for them. Bryan Fields: I love that approach — it's logical, thoughtful, considerate of both sides. I'd wonder if that's part of the grounded-reality concept you're referring to when you talk about cannabis operators needing to get away from the financial pornography — I love that phrase, I just say it so I can say it out loud — and really ground themselves in the reality of today and what the market could look like in the future, given the unknowns on either side. Is that kind of what you have in mind? AnnaRae Grabstein: Uh, yeah. Bryan Fields: So how does that approach translate — does a company that's a larger MSO have to double down on making data-driven decisions, locking in the numbers so every product SKU has a clear total COGS and you remove the guesswork? Or do you think they're already doing all that and there are no issues to be had? AnnaRae Grabstein: I'm not sure what the question is exactly. Bryan Fields: How efficient are these cannabis companies at understanding their true numbers? AnnaRae Grabstein: Is it okay to laugh when I say this? If the question is how good cannabis companies are at understanding their true numbers, it's a very wide spectrum. In my advisory work I definitely work with companies that are extremely good at understanding their product-level margins, their cost of production, and how their SG&A contributes overall to the company's performance at the end of the year. AnnaRae Grabstein: And I also see companies that have absolutely no idea how discounts, distribution costs, and all their SG&A are pulling down performance. All of this comes back to the importance of being a leader who can drive purpose and mission at a high level — understanding why a company exists and what its focus is. AnnaRae Grabstein: What are the major top-line objectives that get everyone inside the company rallying behind a mission? But ultimately, having quantitative goals you can track, measure, and watch throughout a company's performance is the thing that's going to help you actually win in the market. And I think a company that — AnnaRae Grabstein: looks at the whole market and thinks that because the market exists, they have to be in every part of it, is operating from a place that isn't very creative, to be honest — just trying to capture, capture, capture market share instead of being really good at certain things and winning at them. Two different approaches. And I think we're seeing — AnnaRae Grabstein: most of the top five MSOs launch hemp beverages, and it's not necessarily going to mean they win at them just because they're a top cannabis company. Do they have the knowledge and understanding of those distribution channels? Are they going to dedicate the resources to build that out? Ultimately, does it make sense for them to do that, or are there other areas of their business where they could go deeper? AnnaRae Grabstein: This concept of going deep versus going wide is something I come back to all the time in my work, helping companies think through what's next for them — where does it make sense to go next? Kellan: Can you give us an example of going deep in a market versus going wide? Going wide, of course, is expanding into new territory. Going deep is expanding your product SKUs in one state. Would that be a good example? AnnaRae Grabstein: Yeah, I'll give two examples — one for a California wholesale brand, one for a hemp beverage company. If you're a California brand currently wholesaling into a bunch of dispensaries, the California market only has certain dispensaries that actually pay their bills. So if you're a brand and you've — AnnaRae Grabstein: figured out there are 300 dispensaries you work with that pay their bills, and the other 700 don't, you don't really want to go wide trying to work with those other 700. If you're a pre-roll company selling into those 300, you can go deeper by figuring out how to build bigger, deeper relationships with the existing 300 customers you're working with today. How do you do that? AnnaRae Grabstein: You expand what you sell them in various ways so you can sell them more. Because you know you have a limited set of potential customers, and the way you win is by selling those customers more, as opposed to selling the same products to more customers, which would be going wide — a risk that doesn't make sense in that market, because going wide means selling to people who might not pay their bills. If we take that to — AnnaRae Grabstein: a hemp beverage — going wide might mean creating a DTC strategy, selling direct-to-consumer across the whole market on the internet to anyone in any state you can mail a package to, or just the ones allowed to purchase hemp beverages online. Going deep would be saying, "we want to launch and win in Atlanta." AnnaRae Grabstein: We're going to partner with a distributor in Atlanta, deploy brand ambassadors, close all the accounts we can in Atlanta, and win the Atlanta consumer. From there, we look at the outskirts and strategically move into places adjacent to the market we've won — a regional approach to growth — AnnaRae Grabstein: versus a distribution deal that goes into 10 states at once, launching in those 10 states but not necessarily supporting sell-through the same way as if you'd really focused on one market. Both strategies are valid — it just depends on the market dynamics, your resources, and the strategy, the North Star you want to lead with. Kellan: Your North Star. Bryan Fields: Yeah, that's what I was going to bring up — the California example is perfect. Maybe your metric of success before was, "we have to be in as many dispensaries as possible so we can show growth." Now you're focusing on profitable growth — the areas where you feel most successful, doubling down on what makes you most successful so that as the industry evolves you can keep accelerating your business. I'd imagine there are a lot of companies that have worked so hard to grow as fast as possible that they've got little pockets of their business that are complete black holes. Bryan Fields: They have no idea what their costs are, no idea what their revenue growth is — they're just estimating here and there. They might be better off figuring out what their numbers actually are, and if it makes sense, great, and if not, getting rid of that and doubling down on what they do best. Do you think that kind of internal analysis is currently going on at these larger companies, or do you think it needs to be going on? AnnaRae Grabstein: It's 100% going on. There are a number of really good companies in the mature markets — California, Colorado, Oregon, Washington — that have been doing this work for the past couple of years, really focusing on understanding the cost to run their business and reconciling who their worth-working-with customers actually are. AnnaRae Grabstein: And figuring out a strategy to best serve them, and getting real about what that means for their potential size and growth within the market that exists. So yes, absolutely, companies are doing it — there's a need to do it, because you can't just keep burning money forever. There are definitely groups that aren't, but they're learning the hard way. And if you're going to survive, this is the way to do it. So yeah. Bryan Fields: This is where leadership is so critical, right? Because it's not enough for a leader to just get up and talk about it — it has to be in the culture, in the DNA, so it's no longer reactive decision-making, it's proactive decision-making. Bryan Fields: I want to get another quote of yours: "Growth requires perspective. Identifying blind spots unlocks opportunities and supercharges strategic thinking and deeply entrenched networks." What does that mean to you? AnnaRae Grabstein: Um... say the quote again? What did I say? It's — okay. Bryan Fields: Sure, let me ask you a different one instead. When it comes to profitability and companies understanding their true numbers, do you think technology and automation can make a bigger difference for these companies? Because in our opinion, there are gaps in visibility, a lot of it from not utilizing other industries' best practices. Do you think operators can pull from outside industries — oil and gas, big ag — and implement — Bryan Fields: technology tools internally to help with some of those blind spots? AnnaRae Grabstein: Yeah, technology is critically important across every aspect of the cannabis supply chain. I think there's been a move toward more integrated tech stacks, which has been really interesting to watch over the past 18 months, especially on the retail side, which is one of the most tech-heavy aspects of the cannabis space. AnnaRae Grabstein: I will say I haven't really seen an ERP or manufacturing technology win yet, and that absolutely creates an opportunity. I was COO of a meat company for a few years — my little short-term sabbatical from cannabis in my career path — and there was a lot of choice when it came to the technology we'd use to — AnnaRae Grabstein: monitor and track the business in that space. There's a lot of technology in cannabis, but it also has a long way to go. Best practices are going to mean deploying technology to create efficiency, to put humans to work doing what humans do best. Kellan: How do they balance this within the cannabis industry? I think there are three different tiers, right, from a company perspective — there are companies with creative accounting that are able to access capital for equipment — Kellan: capital equipment purchases, under standard interest rates you'd get if you were a normal business in America. But then there are other tiers of cannabis companies that are smaller, trying to grow, that don't have the same access to capital — the banking issues and everything else. So — Kellan: from a strategy perspective, how would you advise them to balance investment in technology when it can be really expensive and the ROI can be four, five, ten years down the line, with limited resources, while still trying to figure out whether they need to go deeper or wider? AnnaRae Grabstein: If it's going to take you four or five years to see ROI on something and you have limited resources, I'm probably going to advise you not to do it — to really look at what you have right in front of you and build a business that can be profitable with what you have. Bryan Fields: On the ERP and manufacturing technology side — you said nothing's really won yet. Why do you think that is? AnnaRae Grabstein: I think it's really complicated in cannabis because you're starting with a plant, and that plant has many different outputs — stems, bud, flower, leaf, all the different parts. Those things get divided and sent to different places, and tracking them and creating value is complex. But also — AnnaRae Grabstein: there's the efficiency of slowing down in order to speed up. I've seen from my own experience leading a cannabis company that when we deployed an ERP, it created a whole bunch of data entry and human work we weren't anticipating. That can be really hard in a resource-constrained environment. For a company to invest in more labor — AnnaRae Grabstein: to do more data collection, that needs a direct correlation to performance. I think ultimately it will. I just want solutions that are effective, that actually work and deliver that value, and don't just increase resource needs. Bryan Fields: It's a super hard balance, right? The tool has to come in easy and ready to use, adapt into the workflow, and operators have to be able to use it without it adding extra hours to their day. In essence, the tool is supposed to save them time so everyone becomes more, quote-unquote, efficient. And the next level is that if the data from the tool isn't applied and used correctly, the tool's true value to the company gets minimized because the data just sits idle. AnnaRae Grabstein: That's right. Kellan: How do you even discuss ROI with something that's essentially just managing data they're already trying to deal with from an analysis perspective? These ERP systems that companies like Walmart use, for example, track all their lettuce, especially because of E. coli outbreaks and things like that, and there's a cost associated with that. Kellan: How do you justify the cost of a system like that for a cannabis company? Is it about recalls? Is it a labor thing? How do you quantify all of it? AnnaRae Grabstein: I think companies need to look at ROI more holistically than just one piece of software — what is this actually going to give me? It's probably not going to give you cash in your pocket directly. But it's going to give you better tools to understand your business, to track performance, to understand the levers you can pull. And you shouldn't overspend on deploying technology. AnnaRae Grabstein: But ultimately that technology should add to your suite of knowledge about your business, helping you identify places for growth, places for efficiency, and ways you could be doing internal transformation to run a better company. Bryan Fields: No, I think that's perfectly said, because it's that blind-spot area where you just don't know. And Kellan, from the other perspective, it might be hard to quantify the immediate ROI of a tool, but if your company is highly inefficient and you're not sure where, you can't solve the problem — you just keep going on your own. And how bad is it? Well, if you don't know, it could be really, really bad. AnnaRae Grabstein: Well, and I think when you talk about data, it's like — data is useful, but what are you doing with the data? It's about how you're integrating data and market information and everything else we've been talking about into a rhythm of business that becomes part of the DNA of your company. In my work, I talk a lot about rhythm of business — it's a concept I really like. Bryan Fields: Bang. AnnaRae Grabstein: Within that, it's about what the people inside your company can depend on, and how much of that has to do with information-sharing to unlock creativity. It's about using data to create monthly business review processes that include key decision-makers, managers, and operators, giving them data to help them see different perspectives — AnnaRae Grabstein: help them view their work in different ways, and ultimately become better leaders. That's when it really matters, and that's how you create ROI. It's like — did this piece of software deliver half a percent better margin on the products? That sounds great. But did it actually empower the leaders in my company to make better decisions? Did it help us see the market in a new way, understand our capacity and capabilities — AnnaRae Grabstein: in a way that was empowering, that helped us step into a new phase of development and maturity as a company and as a team? Bryan Fields: Yeah, and if it adds margin, even better — that's icing on the cake, and the data allowed us to make better decisions so we could increase our margins. Bryan Fields: All right, hard pivot. One year from now, what has changed? AnnaRae Grabstein: Um. AnnaRae Grabstein: One year from now, not much has changed. Bryan Fields: What about a lot of companies going out of business? AnnaRae Grabstein: Yeah, yes — there's a wave of companies going out of business, and that will continue to happen. There will be more consolidation. Bryan Fields: Dream smoking session, three people, dead or alive. AnnaRae Grabstein: Scott Galloway, Sarah Blakely, and my grandfather. Bryan Fields: Most impactful book. AnnaRae Grabstein: Cheers. AnnaRae Grabstein: Just one? The Signature of All Things. Bryan Fields: Just one. Bryan Fields: Favorite under-the-radar company that you think most people are sleeping on. AnnaRae Grabstein: Pass. Bryan Fields: There's a good one, I can see it in your face. All right — talk to us about the podcast, what's the plan going forward, and who's been your favorite guest so far? AnnaRae Grabstein: Oh yeah, so people can listen to me opine about all sorts of cannabis information weekly on the High Spirits podcast, which I co-host with Ben Larson. The podcast — what was that? Oh yeah, shout out to Ben, great co-host and really an accountability partner in making content. We've been — Bryan Fields: Shout out Ben. Shout out Ben. AnnaRae Grabstein: having conversations, the two of us, about what's going on in the cannabis space for a long time, and we wanted to open those conversations up to an audience that was more than just us. We've had a really good time, and I've appreciated tremendously how much great feedback we've gotten from people wanting to hear more from us and wanting to build community around the conversations. I don't want to say who my favorite guest is, because I love them all. AnnaRae Grabstein: People should just go listen for themselves. And I want to shout out my small but mighty team at Wolf Meyer, who have given me the freedom and flexibility to explore content-making within the context of the strategy, advisory, and consulting work we're doing in the cannabis space. Bryan Fields: Well played, mom. Bryan Fields: Love it. Last question — what question do you wish more people asked you? AnnaRae Grabstein: One question I wish more people would ask me is: what is qualitative due diligence, and how does that play into making smart investment choices in cannabis? Bryan Fields: Can we get an answer to that? AnnaRae Grabstein: Oh, yes. I think there's been a general lack of integrating a deep understanding of leadership and strategy into investment decisions. We talked about financial pornography — I think a lot of investment choices have been made on the backs of pro formas that never came to fruition. AnnaRae Grabstein: And I think a lot of the most important questions that should be considered, as people think about who the winners are going to be in the market, get left out. Those are the qualitative things — who the leaders are behind these companies, how tough decisions get made when the ship really hits the fan, how people think about the consumer, their supply chains, their partnerships, and who the companies are that they're standing next to. AnnaRae Grabstein: Qualitative due diligence is really doing a deep dive into understanding all the aspects of a company that aren't on a spreadsheet, starting there at a high level, and then using the spreadsheet to basically prove what you understood on a qualitative level. Bryan Fields: I love it, I love it — that's the perfect way to end. So, for our listeners who want to get in touch, learn more, or need help with their strategy, where can they find you? AnnaRae Grabstein: Yeah, I'm really easy to find on LinkedIn — just search AnnaRae Grabstein, I'm there. You can go to our website, wolf-meyer.com, we've got a mailing list, or you can contact me. I'm just out and about in the industry, so if you see me, come say hi — I want to get to know what everyone is up to. I look at that as a critical part of my work, just — AnnaRae Grabstein: understanding what everyone is trying to accomplish in the space, so I can always be playing kind of four-dimensional chess to make the right matches and help people come together around the things that matter. I take an approach of constantly aligning incentives across all the people, players, and companies involved. So yeah — come find me, tell me what's important to you. Bryan Fields: I love it. Bryan Fields: Thanks for taking the time, this was a lot of fun. AnnaRae Grabstein: Yeah.