#045 - Triumphs and Challenges of California Cannabis Retail w/ Lauren Carpenter of Embarc

Ben Larson: 0:00

Hey everybody, welcome to episode 45 of High Spirits. I'm Ben Larson and with me, as always, is Anna Rae Grabstein. It is Thursday, may 30th, 2024 and, yes, another exciting show for you today. I'm actually really excited about this one. It's a voice that we haven't yet had the opportunity of highlighting, but something that I think is super important the licensed cannabis retailer here from our home state of California, a state that has largely and very publicly been embattled. But there are some silver linings and I'm excited to jump into that and just talk about the triumphs and tribulations of building a cannabis retailer in the California market. But before we get there, as always, Anna Rae, how's your week going? What's happening in your world?

AnnaRae Grabstein: 0:54

Yeah, it's been a great week. Kind of a short week. I mostly took Monday off, but I had some potential partnership calls with some people in Europe that don't know about Memorial Day, and so I did take a couple calls on Monday, but they were really interesting and I'm hoping to learn a lot more about the European market and hopefully to bring some of that learning to the podcast too. So we'll stay tuned for some of that. Then the other, I would say, highlight of my week is that I have, um I have a client who together we've been reading this incredible book, a leadership book, called the five dysfunctions of a team.

Ben Larson: 1:31

It's a classic favorite yeah, love it.

AnnaRae Grabstein: 1:34

Yeah, you know it, and it is just a really, really great primer on how to up-level teams, build trust, commitment, transparency, focusing on results, and it's just been a really great experience to read a book with someone else and have a good reason to talk about it and want to be doing more of that, so that's been a real highlight for me.

Ben Larson: 2:02

That's Patrick Lencioni, right? Yeah, he's one of my favorite business book authors. Like you can read his books basically an evening and it's uh, it always has a nice, just kind of um story, I guess, to kind of like hammer home the points.

AnnaRae Grabstein: 2:18

Yeah, I'm thinking it would be fun to do a business book book club for cannabis leaders specifically.

Ben Larson: 2:28

Oh, another side project.

AnnaRae Grabstein: 2:28

All right, sign me up Off of the of the pod or something, Just tell everybody what book to read and once a quarter we could just talk about the book, If you guys like that idea and you're listening let us know.

Ben Larson: 2:41

And if you don't, and you just like reading books, definitely read that book. The next one I'd probably recommend is death by meeting um. Also just a very, very good message. You can already tell what it's about um, very what about you?

AnnaRae Grabstein: 2:54

I'm excited.

Ben Larson: 2:55

I'm excited for europe. We should definitely, uh definitely, get some guests on to talk about europe a little bit. People keep asking me about it, but, um, I don't think it's super exciting for the infused beverage category which, as everyone here knows, totally consumes my life. That has been my week, as always, especially with all the shifting legislation all around the US. So not to bore everyone with those details, what I'm really excited about this week, and why I have so much energy today, is that I have found my new workout routine, and I'm just super stoked on it.

Ben Larson: 3:30

You know, ever since well, business has always been crazy, but young kids post pandemic I just never really found my routine that worked, and so I just started forcing myself to get up even earlier every morning and being at the gym as it opens and then being home in time to get my kids out of bed and get them ready for the day. So it seems to be working. I am super tired by the end of the day, which I think is a good thing, but, yeah, encourage everyone to do it.

AnnaRae Grabstein: 4:00

Let's check back in a month and see if you're sticking to it. What holds you accountable?

Ben Larson: 4:06

You know me, I'm pretty tenacious.

AnnaRae Grabstein: 4:09

So let's, let's let's cue up the topic today, because this is going to be a really important conversation and it's you know, ben and I we both started our cannabis careers here in California and this is an incredibly important market to the legacy of cannabis, the culture of cannabis and also to the early movers of cannabis policy First state to create medical cannabis and not the first for adult use, but certainly a really important one.

AnnaRae Grabstein: 4:44

And I'm really excited to welcome Lauren Carpenter, the CEO and co-founder of Embarc, to the show. Lauren and I met when we were both in different companies building doing licensing work, probably like 2017 or 2018 in San Francisco. We were both trying to open retail stores and shared a landlord that owned a bunch of different places, and the landlord introduced us and, but anyway, lauren since then has done a whole bunch of really cool, badass stuff. She was instrumental early on at MedMen, she went on to be the chief strategy officer at Sweetflower, another dispensary group out of Southern California, and then started Embarc and they opened their first store in 2020. So really excited to bring you on, lauren, and have you talk to us about your journey of building Embarc and of the California market, so welcome.

Lauren Carpenter: 5:46

Thank you, thanks for having me, and I'm very much in on this business sort of book club, so let's just file that away as an idea that you should absolutely put into practice.

Ben Larson: 5:56

I love it, here it comes.

AnnaRae Grabstein: 5:59

To be continued, to be continued. So let's just jump in. Why don't?

Ben Larson: 6:13

you give us your thoughts on what is the state of California cannabis retail today.

Lauren Carpenter: 6:15

Whoa, the big, big question. Yeah, chi way to ease me in on this, I think, look, I don't think there is one state of cannabis retail in California. I think it's sort of a tale of multiple cities. I think from the beginning we've seen sort of two markets. You've seen the LAs and the Oaklands, right, these Sacramento's with real proliferation of licenses, and then you have these hyper limited or non-existent markets, and so I think the reality in those markets look a bit different, and so it's hard to sort of overly generalize about the state of California. I think you know we hear a lot and we have heard a lot.

Lauren Carpenter: 6:52

As a California retailer, I hate this narrative that you know California we should be moving on.

Lauren Carpenter: 6:58

I know as sort of the shiny toys of the East Coast came online.

Lauren Carpenter: 7:03

You know California took a lot of hate, but I think California is still the fifth or sixth, depending on the day, largest economy in the world and has tremendous potential in cannabis. I think we're seeing shifting dynamics in the ongoing debate of specialization versus vertical integration, which I think is sort of an interesting debate to continue to debate. At Embarc we've taken a very specialized approach and I think a handful of years ago most people told me I was crazy for that, but I think it's bearing fruit for us today. And then I think we're seeing some interesting sort of reactions coming out of this potential federal shift. I think sometimes in California our industry reacts to headlines and not to reality and the reality is nothing has changed yet. But I think there are a lot of operators who, because they're really economically squeezed, are increasing their race to the bottom because of a belief around some 280E change. So a lot of dynamics going on right now and I think you know lots of things we could probably dig into further.

Ben Larson: 8:10

Yeah, I just I would love for you to give just a little bit of detail about Embarc, because you do have visibility into the multiple cities that you kind of referenced. You know, just give us the background, the timeline, like how many cities you're in and kind of the approach there.

Lauren Carpenter: 8:26

Sure. So, as Anna Rae mentioned, we opened our first store in South Lake Tahoe in June of 2020. Very wild time to be opening a retailer that was at the very beginning of the pandemic.

Ben Larson: 8:38

Yeah, that's wild.

Lauren Carpenter: 8:40

So here's the unvarnished truth Our entire life savings was already put into building that building and we were halfway done. So you just, the only way out sometimes is through, and we had to just keep going. You know, thank goodness cannabis was deemed essential so that we didn't then just have to sit with an empty building because there would be no embarc had that happened. So thank God for small miracles, but I think, you know, we opened the first store in June of 2020 in a tourist community on a state line that separated two states with, I think, pretty different perspectives on the pandemic and on pandemic management sort of uniquely interesting circumstances. But we really hit the ground running since then. So since that time, we've opened 15 stores.

Lauren Carpenter: 9:29

Until about the middle of last year, we were entirely focused in Northern California. It was really important to me that, as sort of a family of neighborhood shops, I wanted the ability to go to any of our stores and still be able to be home in time for dinner and be able to be hands-on, and it was really only towards the end of last year that we opened our first Southern California location. So we're now focused on sort of statewide expansion, but in each of the communities we serve, with the exception of Sacramento, which has had a sort of a historical not proliferation, but certainly a historical retail presence. We were, you know, the first or part of a cohort of firsts to operate in the community, so really have been focused on opening new communities and driving some destigmatization forward by demonstrating through action and operating our stores that the sky doesn't fall with cannabis.

Ben Larson: 10:25

Yeah, but before we get to the opening new communities part, I just want to. I'm having a reaction to like 15 since 2020. That's almost a store a quarter. That's pretty fast pace. Does that feel like you're going at breakneck speed? Or like how do you manage that pace? Because it sounds fast.

Lauren Carpenter: 10:51

Yes, it feels fast. It feels sometimes like we have a tiger by the tail or like we're gonna die holding on and trying right. We've opened five stores since January of this year. So that's, you know, that's an average of one store a month. So it took us a handful of years to get to that 10 store mark. I think you know, we've learned lessons through the process of that scale and we've also continued to bolster our leadership team really throughout that process to prepare us for this year and to prepare to open those five stores in five months. But yeah, it is fast, we are committed to being fast.

Lauren Carpenter: 11:31

I think one of the biggest challenges, one of the biggest things I learned coming out of LA sort of 2018, 2019 retail, was this belief in sort of monopoly money. Right, we could hold real estate forever, we could pay ungodly sums of money for real estate, we could do two $3 million build-outs. That's really sort of where I cut my teeth and I think within Bark we really tried to take an opposite approach, recognizing that you know, at least from our perspective, the funds weren't always going to just magically appear right and you couldn't hold these buildings for years and you couldn't do these really sort of chandelier-centric build-outs. So for us, moving quickly is a big part of our business model, both because it's a promise we make to the communities that we operate, that we're actually going to actualize what's being proposed in their community, but I think also candidly, because it's the only way to make money is when you don't start four or five million dollars in the hole.

Ben Larson: 12:28

Makes sense.

AnnaRae Grabstein: 12:29

So another unique thing about you as a CEO and CEOs all have their own journey and some CEOs start in finance and some start in operations and some start in marketing, and you're a CEO that came from government affairs and public affairs and policy no-transcript hat into competitive licensing application processes and going into markets where there aren't going to be as many dispensaries. So I'd love to just talk more about the regions that you're in and how you've chosen those cities and how you've executed and actually gotten those golden tickets to open a license in some of these places. And even if you could share some stories about, like, a town that was particularly challenging or complicated, that would be really interesting.

Lauren Carpenter: 13:45

Well, they're all challenging and they're all special in there. They're all unique. I will say that. But I think you know you're right. I appreciate the way you framed it.

Lauren Carpenter: 13:53

The reality is my background is I'm a total nerd and I've brought total policy nerddom into what we do here. But I think you know, looking to legalization, I really saw it as this moment where communities needed to acknowledge the role that cannabis had played and existed for a really long time and sort of government needed to do that and didn't know how. And the cannabis community for so long had been not necessarily hiding but, because of prohibitionist policies, had not been super forward facing. And so you had a community and industry that a burgeoning industry that didn't really know how to speak to government, and you had government with absolutely no idea how to speak to cannabis and to the cannabis community. And so I think you know, in terms of sort of how have I applied my background? I think you're spot on that for me this emerged as an opportunity to be a bridge builder. I had spent about 10 years before starting Embarc focused on sort of explaining policy to communities and activating communities on policy, and so cannabis felt like a really natural extension of that work and somewhere where I could really sink my teeth in, just based on some sort of, you know, family. We all have our cannabis journey story and sort of connection, and for me that was familial, and so this felt like, you know, taking skills I had and really bringing them to a space in a place that was far more purposeful than anything I had done before, purposeful than anything I had done before.

Lauren Carpenter: 15:27

As you look to what I do today, my job is not sexy. It is a lot of coffees and coffee shops, one-on-one with people who are convinced that the sky is going to fall if we bring cannabis to their community. And so I think that's the secret, that's our secret sauce is in these licensing processes is really the consistent effort in each of the communities where we apply to educate not just regulators or local government officials, because obviously you often have to change their hearts and minds to create an environment where a local licensing process can move forward. But I think sort of even more importantly, it's doing the work in community, because so often, while those elected officials and regulators are perhaps approaching their perspective with preconceived notions that come from yesteryear and DARE campaigns, they're also obviously influenced by their constituents, and so our focus is really on community coalition building.

Lauren Carpenter: 16:25

We go into communities, often before a licensing process has ever been initiated and, like I said, it's a lot of cups of coffee with people who start really unexcited about the fact that I'm there. But it is a listening tour. You heard it here first. This is my big secret. I go on a listening tour in each of the communities. We talk with pastors and youth, nonprofit leaders and school board members, those who really feel that they're on the front lines of youth drug education and sort of engagement, and we just start to have those conversations and sometimes it takes months and sometimes it takes years, but most of the time through that consistent work we can create a coalition that, I think, while maybe not supportive of cannabis, we get them to a place where they're supportive of the idea that cannabis is both already in their community and likely coming to their community in terms of a regulated market, and you can get them excited about at least having a seat at the table and shaping what that looks like.

Ben Larson: 17:34

I think this is so important right now because there's so much happening on various levels of government about the movement of hemp and cannabis and it's just a lot of shouting and not enough listening, right, and some of the behind the scenes conversations that I've been having lately, it's just becoming very clear. It's like you know the regulators, the legislators they want to be heard and their you know the regulators, the legislators they want to be heard and their you know their initiatives can eventually go in the direction of supporting what we want, but it's only going to come through listening. So I really appreciate that perspective out that. You know, when people hear 15 stores, we'll acknowledge in the mainstream marketplace that's a very small retail chain, right, but in cannabis it can actually sound kind of big.

Ben Larson: 18:33

And what also is big in cannabis are MSOs. And what MSOs get a kind of a bad label for is kind of going in, dominating a limited license market and kind of blocking people out. But this is different, like you're actually going in and opening up markets that didn't previously have access to cannabis retail. And, and one of my biggest gripes with California is that, while we legalized in 2016, and maybe you can update, update my number, but, like I've always said this, like only 40% of people have actual access to legal cannabis retail and that was a big problem, you know, for the biggest market in the in the nation that we like to tout um for only 40% of residents to have that, that access. So I don't know, just huge kudos to you and the team. And then I guess my question is has that number been updated In large part and I know you're not going to claim this but in large part to your work that you're doing?

Lauren Carpenter: 19:34

I think that that number is approximately accurate. You know, I think there are a variety of dynamics that impact that. Obviously, the local control piece in this state. I don't think legalization would have passed without that. And yet it is so deeply frustrating and it's strange to be doing this work in communities and to be talking to folks who say but I felt like I already made this decision.

Ben Larson: 19:58

Right.

Lauren Carpenter: 19:59

And so that's that. There's actually some education around that. That's challenging, I think, as we start to look at how some of the local jurisdictions have opted in or opted out. I think there are some questions there. You know, opting out was effectively required to be a vote of the people and in many jurisdictions we actually have elected leaders who've made that decision, you know, sitting at a dais and one evening, and so I think there's some opportunity for movement there.

Lauren Carpenter: 20:29

But I think to your earlier point around the need for listening.

Lauren Carpenter: 20:33

I think tied to that is a need for unity, and I think that you know, while folks in this industry and in the cannabis community recognize that cannabis has been part of the community for a really long time, the legal market is in its infancy, and so I think part of that infancy is unity on among the sea of challenges we face and the sea of desired changes we want to make.

Lauren Carpenter: 21:04

What are the two or three changes that we want to make now and what are the two or three changes that build upon those changes and then the two or three more? And how do we create unity around that? Obviously, the rescheduling, descheduling conversation. All we're seeing are loud voices on both sides Hemp v cannabis all we're seeing are loud voices on both sides. I think we have a real pattern of not coming together and creating a cohesive platform for lack of a better term that we can really push forward in a systematic way, and I think this local control issue is an example of where I think the entire ecosystem would benefit in California for more access to cannabis, but it has just not been an issue that we've seen folks come together on in a way that allows us to push for change.

Ben Larson: 21:56

Right.

Lauren Carpenter: 21:57

I don't think that answered your question, but it definitely was my call to action diatribe, which is we need to get our SHIT together and start figuring out what are the priorities and how do we make them happen. And I think expansion of access is, you know, a big one.

Ben Larson: 22:15

Absolutely.

AnnaRae Grabstein: 22:16

Well, so also, though, let's let's be real on the business front that within, within the lack of access, is opportunity in the deserts, and you guys have gone into a little bit more getting away from the policy side, which I know we could get lost in for the whole conversation, but to learn about, kind of now that you have 15 stores and they are spread all over the state, like I would love to learn some of the business takeaways that you're seeing in terms of performance of different stores in different markets. Are the stores that are in these markets that only have two stores, are they performing on a revenue basis, like at a way, higher level than at the stores that are in markets that have more stores close by? Like how can you predict how much business you're going to do at a store? Any numbers that you're open to sharing? I'd love to dive into that.

Lauren Carpenter: 23:20

Yeah, I think it's. You know that's a onion with a lot of layers. I think pop like at its most basic population count is the biggest, I think, and is the biggest driver right. Number of licenses relative to population. Obviously you're going to have a greater opportunity for market share and thus for higher revenue.

Lauren Carpenter: 23:50

I think there's regional dynamics in places where you know I may be in a community that only has opted for two or three licenses, but the neighboring communities have opted for a proliferation and the operator response based on that proliferation is a race to a bottom. The operator response based on that proliferation is a race to a bottom. I'll use Fresno as an example. Embarc and Artistry were the first two stores to open and we were the only two of the 21 licenses issued to be open in Fresno for about a year and a half. But there are a lot of other dynamics going on there. So that is great and is definitely lucrative, right, but I think the impact of that is often that that discourages a desert. So then we saw Madeira come online, we saw Hanford increase the number of right. So you see these neighboring communities start to move forward, which ultimately I think is great, because these sort of monopolistic markets. I just that's just not the future and it's not from my perspective how we build a business. We've been strategic in building our business to this point by not going into oversaturated markets where we have, you know, no opportunity to drive meaningful margin. But I think the future of this industry is one where folks have access to cannabis and I think successful businesses in this industry will be ones that are prepared to compete.

Lauren Carpenter: 25:08

But that said, I think you know, in the past six months we've seen Fresno go from two to probably 12 to 14 licenses, and if you walk into most of those stores today, it's 40% off everything every day, and so that's this sort of reactionary right. So these folks are coming into a market, they're seeking to capture market share from artistry and from the existing operators in the community, and they do so by what? Maybe maintaining a 10% margin, and now you're having to pay your staff and do your community benefits and pay your vendors off that 10%. You know it, just the math ain't mapping in a lot of these communities, and so I think even in that way we're seeing changing dynamics.

Lauren Carpenter: 25:54

So you know, has it been awesome to operate one of two stores in Fresno for a year and a half. Has it been awesome to operate one of two stores in Fresno for a year and a half? It absolutely was. But I think, in order to get to 15 and to go from 15 to 25 or 30, we have to be focused on how do we build a business, how do we build stores that are profitable at, you know, three to $5 million, because the future, I believe, is sufficient stores in sufficient locations that folks have access to cannabis, and so I think it's more about building, you know, scalable process and sort of smart business practices. Now, which is challenging in a 40% off the entire store every day, dynamic, right, that's coming from a lot of our competitors.

AnnaRae Grabstein: 26:35

So what do you guys do when everyone down the street is 40% off? Do you go 40% off too?

Lauren Carpenter: 26:43

Yes and no. So no, we are not 40% off across our store every day, but I think we experiment because I think for us it's constantly about gaining that data around our customer, and then I think we remain specialized. So we have a real focus on sort of our owned channels, with a focus on our own loyalty program, and I think we've really invested in the creation of a robust rewards program, because that's a very tangible way that we're maintaining that connection with our consumer. We've focused heavily on BOPUS buy online, pick up in store because we're really developing what is our largest store but has effectively no rent right and very little overhead because we already have the staff in store.

Lauren Carpenter: 27:36

I think we're constantly focused on ourselves as a brand, which has been an interesting mentality shift for me.

Lauren Carpenter: 27:45

Starting Embarc a name and a vision that sort of harkens to this idea of a journey and exploration During a pandemic, when everyone was told they could not explore or leave their homes, felt like a bit of a mistimed.

Lauren Carpenter: 28:01

And so I think now you know now that we feel sort of through that, you know we're really focused on sort of Embarc as a brand and on being a partner to our brands, such that that can be creative to our customer. And then I think, really, because we're talking about 40% off, we've focused on how we can define value as more than just price, and I think it would be preachy for me to pretend that price is not a component of how we provide value. But I think in this dynamic, many folks have simply equated value equals price, and I think that's too narrow a lens, and so that's where some of this loyalty and these other key initiatives come in, because that approach, that race to the bottom, is just wiping folks out and I think for us, like, we have to be focused on something bigger than that, or you know, or the fleet wouldn't survive.

Ben Larson: 29:08

I really appreciate you kind of diving into a bunch of the details and tactics. I do want to kind of just dial it back a little bit. Dial it back a little bit. We had Chris Jackson on a couple episodes ago and he was talking about starting, you know, a single retailer and how focusing on that single retailer really allows for potentially some success. You know will broadly define success there. And he's also talking about the marketplace and how the larger again air quotes around larger chains and and their ability to drive success through economies of scale and whatnot, and kind of the valley of death, so to speak, that existed in between them. I'm just curious, like did you experience that as you're growing from one to 15? And and what are your thoughts on thoughts on the valley of death and what do you think actually drives that? Is it just an economies of scale or is there something else at play there?

Lauren Carpenter: 30:10

It's a great question. The valley of death analogy, I think is very real. It feels too real. Still I'm not entirely sure that we're, you know totally outside of it, that just might be California.

Ben Larson: 30:20

California is the city it's.

Lauren Carpenter: 30:21

If you can, I'm not entirely sure that we're, you know, totally outside of California. It's if you can survive here. Right, I think you know. I think it's a good question. I think that, first of all, as a single store operator, I think your store is incredible because it is the. You get up every single day fixated on that store, on its service, on it. You know, you know your customers by name. When we started this company I said, you know, I will retire the day that someone compares us to Cheers right and says, oh my gosh, everybody knows my name. And that's the dream. And that is so achievable at one store because as type A overachieving founders, we can be there every day, type A-ing and overachieving. I think as you start to creep into multi-store, and particularly when you get out of two or three that are regional and you're looking at five and 10 or 15, I think the complexities absolutely jump exponentially.

Lauren Carpenter: 31:18

I think one of the biggest challenges for operators in that dynamic, in that valley of death, is how do you upskill your team without losing the soul that sort of got you there. I think there's something almost cultish about a team in its early days. It's that everybody's so manically dedicated and driving toward the same thing and I wholeheartedly believe that almost cultish but not creepy approach is what got us from one to 15, most of the time in a pandemic. But against that backdrop, how do you provide different tools and different resources for your existing team? How do you provide different tools and different resources for your existing team? How do you supplement that team with folks that have expertise in scale or in scaling, and how do you do that in a way that doesn't completely disrupt the apple cart? I think that's probably where, as a founder, most many of the pain points come in in that valley. I think the other greatest challenge is the tools that are available to us.

Lauren Carpenter: 32:22

I think I don't want to call. You know I'm deeply grateful to our many tech partners and the calls that they take from me at 11 o'clock at night with feedback on their tech, but I think the reality is we are under equipped in this industry and I think a lot of our you know sort of tech stack tools are built to for one store or three stores or five stores, and they aren't built for 15. And it's an and at 15,. Those blind spots in that tech can kill you. I mean I have multiple at this point, which is completely unsustainable, which is why I'm calling people at 1pm.

Lauren Carpenter: 33:06

I have multiple full time employees that are effectively, you know, exist today to debug the basic fundamentals of how our tech meets our daily needs right, and so it's interesting. I was talking with the founder of a multi-location I'd say they're probably between five and 10 stores a California retailer, the other day, and he was talking about how they were actually changing their point of sale system to move to a platform that is one-stop shop, if you will. And it was so interesting for me because, at 15 stores, my biggest gripe is enough with this one-stop shop. Be specialized in what you do and be really good at that. One thing right.

Ben Larson: 33:49

Also, if that one-stop shop fails, then your whole system goes down. Yeah, yes.

Lauren Carpenter: 33:55

So I think that's you know, that's the other challenge, it's it's I mean, it's your people and it's your process Right, and we're still working with tools that I think are and with companies that are, you know, underfunded and under equipped to meet the needs of scale, because scale is still new, you know, or new for us.

AnnaRae Grabstein: 34:16

Yeah, so thinking about the tech stack leads my brain to starting to think about the product mix in the store, because I know that that is where all the data lives, on all the products and and you talked about the, the online menu to encourage people to buy ahead and come pick up in the store. And because we're talking about California and I want to make sure that we're giving the listeners good insights into California and what it's like here compared to how it maybe is in other States and and I know that there's some there's some special sauce at embarc about the way that you guys curate your menu, and you've talked about brands being partners. I would love it if you could demystify a little bit about how that menu comes to be. Is there individual buyers at every store? Do you have centralized purchasing? How do you choose the products that you think consumers in all these markets are going to want?

Lauren Carpenter: 35:15

Yeah, it's a great question. I think, at the risk of sounding cliche, it is an art and a science and we've really focused on honing the skills and creating the latitude for the folks on our team that are the artists and for those who are the scientists, for the folks on our team that are the artists and for those who are the scientists. But, as I said, in terms of upskilling our team, figuring out how to stitch those two together. And so I think, as a three or four store chain, we had one buyer shout out, ivy she's incredible doing it all, getting feedback from our inventory management teams in each store, because I do think it's important that you have sort of localization and some local feedback, but as you continue to scale, it's not scalable to have 15 different menus like entirely different menus. The cost associated with that is an example of something where I think a lot of operators sort of overlook, just like the billing costs of that, the follow-up on discount costs of I mean it's just it becomes completely unscalable. And so there was a point in time, as we were, as in that valley of death of scale, right where we looked at the menu and there were a thousand SKUs across approximately 10 stores and they were not all active, thank goodness. But that had ballooned right Because our focus had shifted a bit away from strict inventory control and inventory management, and the reality of that is it costs you a tremendous amount of money If you don't have inventory turn. You're burning money, you're burning labor time and money.

Lauren Carpenter: 36:48

And so I think, for us, ivy on our team is the artist. She's the one that I think has 10 plus years of instincts, that is a finger on the pulse of the California consumer and of what comes next. But we've really supplemented her with a four person team that is focused on constantly using, you know, leveraging the data, and so she's empowered to find what's next, she's empowered to fill holes that are in the menu, but she's supported by a team that I think, for the first time, we're really starting to hit our stride that is focused on the math, to ensure that we can continue to be a partner to our vendors. And I think you know one of the things when I talk with brand partners for the first time, one of the first things they say to me which is really a sad statement on the industry is thank you so much for paying your bills right, like what a bare minimum bar that we have to hit right, which is horrifying in so many ways.

Lauren Carpenter: 37:49

But I think, in order to be that partner, you have to be vigilant in your inventory management, and I think that looks different today than it did four years ago.

Lauren Carpenter: 37:59

There's no coming in and smoking out someone in the store and suddenly we've over indexed into your product line and it's all sitting there, because that doesn't help you as a brand, just as it doesn't help us as a retailer. I think you know we're trying to professionalize this process, but not in a way that takes the relationships out of it. You know, if anything, I think we've developed really fantastic relationships with the brands, which is why you know they show up and they do the events with us. They do all of the other things because we've been able to create an ecosystem that really amplifies who they are, since we are an agnostic retailer, right? So in this debate over vertical integration versus being specialized, we've decided to specialize in retail and really index into the fact that there are enough pieces of the pie for us all to go around if we're amplifying one another as opposed to just amplifying our own brand.

AnnaRae Grabstein: 38:57

I want to ask a follow-up on that. That's two parts. I want to understand around how many SKUs you target keeping in the store and, just for that broader scope, for those in other states. I think that in other states, when a retailer is curating their menu, it's often what is available, especially in the new markets where there's a lack of supply, and so I I'd like it if you could just give us a little bit of like when you're trying to decide what gummies to put on your shelf or what pre-rolls to put on your shelf, like how many options are there to choose from? How many brands are you seeing in the market and how many do you choose to actually um?

Lauren Carpenter: 39:34

1 million and unfortunately, half of them aren't here in six months from now, and you know you have entirely new ones, which is challenging because part of the brand promise to consumers has to be consistency, right, and so I think for us there's not a one size fits all answer. We in a lot of markets have hundreds of SKUs and we compete against competitors that have thousands, literally thousands, on their menu. I do think there is such a thing as decision fatigue, and even you know the greatest flower connoisseur, I'm not sure that they need 1200 flower SKUs to find something that works for them. I think part of our job or part of our role is in this sort of guided exploration is to curate something that gives something for everyone without creating 1200 options for them. So I think you know there are spatial constraints, market dynamics and other. You know there are spatial constraints, market dynamics and other. You know components that drive what that skew count is, but again, for us, per store it's hundreds, it's not, you know, 1200. I think there are also a number of factors. You start a bit broader in a new market because, again, so often, we're going into a market that's never had legal cannabis, so there isn't data around consumer preferences right. So I think we can start a little bit broader and then start to narrow as we see what consumers like.

Lauren Carpenter: 41:01

And then I think the other part of this is, you know, we've, over time, we've developed a real brand onboarding process that allows us to ensure that there's values, alignment, but also sort of feasibility. You know, there are brands that we want to feature but that don't have the capacity as a brand to be featured in 15 stores. They don't have the distribution capacity. I mean that it's not feasible for them, and so featuring them in 15 stores would actually set them up to fail rather than to succeed. And so I think that's what we've focused on is how do we create an onboarding process where we set really clear expectations for our partners, where we set really clear expectations for ourselves and where we've created mechanisms where we're checking in on that? Because, again, I don't want a brand to come into our store, tie up limited inventory they have and have it fall flat. That doesn't behoove our relationship. And so I think it's around really clear communication and expectation setting.

Lauren Carpenter: 42:01

I think the other challenge I think Ivy probably has the hardest job in our entire company because she has to say no a lot, and then everybody comes to me. Ivy has said no to me, right, and so I think the other role that I have to play is I have to completely respect that, that Ivy. If Ivy makes that decision, I have to stand behind it, even if you know the brand owner is a friend. Right, because I think it's really easy and I've seen this and I have done this before where you erode your own principles and then your menu starts to underperform, right, and so I think that's menu discipline is probably the hardest part of management. Right, because you see these exciting new brands or you want to. You know you want to uplift a partner, but there are times you just can't because it doesn't. It doesn't fit within your SKU count, it doesn't fit within that community. You know the community demographics and ultimately, you know it creates a dynamic where you're setting everybody up to not to be unsuccessful.

Ben Larson: 43:05

I love that. My, I have a. I have a good friend that's an entrepreneur outside of the space, but he was just talking about recently the role of the CEO and having to protect the container and be vigilant about it, even if it's not always making friends. I do want to kind of talk about building the container a little bit as we kind of wrap up our time. Do you guys mind if we talk about how to build a cult real quick? Yeah, no, it's something I'm super passionate about.

Ben Larson: 43:38

Cult building, no, but like seriously, I think building a culture within a company is something it sounds like that you've been very focused on, so I want to kind of dig into the details there. It's something I'm super passionate about because it gives you the foundation for building a resilient company, gives you the foundation for building customer loyalty and allowing you to grow and be successful, I believe, and so I want to get your opinion. Earlier, we were talking about the book club and different books that we like to read on leadership. What are some of the philosophies that you've brought into building Embar c And you know, whether it's books or otherwise, like what, what stands out to you is kind of the key to your success.

Lauren Carpenter: 44:23

Oh, that's a good one. I don't have one silver bullet. I think we have recognized from the beginning that culture is a living, breathing thing, and I think a lot of times companies try and set a culture on the front end of something and then there's so much energy spent sort of with guardrails, channeling the team and that culture to be made in the image that was, you know, created at a whiteboard on day one and doesn't necessarily reflect the ebbs and flows of a business, you know, and a more macro environment. So I think for us, the biggest trick has been sort of recognizing that there are times when culture is stronger and there are times when you have to invest in it more in order to keep sort of that heartbeat going. You know, I think that one of the biggest things we've done from a culture we're at about 400 employees now, which is, for us, has happened pretty quickly, right, in just a handful of years. And so for us, that scaled growth presents unique opportunities and unique challenges to culture, right, because, particularly as these communities become further and further apart, it can be easy to feel disparate rather than connected.

Lauren Carpenter: 45:39

And so I think the biggest culture driver for us has been really focused on how do we empower our retail teams to meaningfully contribute to one another.

Lauren Carpenter: 45:49

So we've built what we call a flight club, which is, you know, a group of our retail team members that literally fly in that, you know, like a flock and surround new store team members with sort of the extra care and attention and subject matter expertise they need to get their stores set up to succeed.

Lauren Carpenter: 46:08

And I think that seeing these retail team members be so empowered to set their colleagues up for success is honestly probably the greatest barometer I have for the team health and the team culture, because they're genuinely so excited and supportive to do it. And then I think, in terms of our leadership team, we've invested for about two years in ongoing business mentorship and coaching that is probably more focused on team health and health dynamics than on the business itself. It's helpful we use the business as sort of the spine or the framework that we continue to use these step back times to optimize around. But I think, more than anything it's it is that investment in the recognition of what everybody else is contributing that's been the greatest factor in helping us. You know this is stressful, given how quick we're moving, and I think that's been the quickest way to sort of get to the heart of each of our leaders, because they're the heart of you know, their teams.

Ben Larson: 47:13

Yeah. So I imagine that there's kind of like these, these micro cultures that exist, like with every location are do do the teams get competitive with each other? Is is, do you kind of like drive like kind of a larger umbrella culture that then fosters these kinds of autonomous kind of groups?

Lauren Carpenter: 47:34

Yes, I think what you see is teams engaging with one another and sort of playfully engaging with one another, and I think that is what allows them to celebrate their own identity on social media. A lot of times on our Instagram, you'll see and this is such a small example, but I actually think in some ways it's so indicative of what I mean You'll have one team doing a dance off and then they'll tag to another team that has to do their own. Who will tag to an end it's always these weird organic or they'll do who can get the most passport club signups, and then the loser has to send the winner a trope. You know, it's these sort of ridiculous, fun, silly little things, but I think it's those silly little things that allow them to celebrate who they are relative, you know, within the context of another team, but also is independent from them.

Ben Larson: 48:23

Love that.

AnnaRae Grabstein: 48:25

It's such a great thing to be talking about Because I think, especially with retail, it's extra hard in the world culture because when you have like, if you're a tech company or even a non-retail cannabis company, you make weekends off or you have a regular like nine to five workday and so you can do like okay, we're going to do a team dinner, but retail is usually seven days a week. It goes into the evenings. There's not a lot of time to be able to shut down and bring everyone together, and so to hear some of these ways that you guys are keeping it fun and fresh is really cool and I hope that it keeps building as you keep adding stores. So really awesome. Thanks, do we have time for one more question? What do we think?

Ben Larson: 49:10

Go ahead.

AnnaRae Grabstein: 49:12

Okay, we're so good in answering that culture question, about talking about the team, but I want to turn it back on you and within this, you are a first time CEO as well, and a woman in cannabis, and I just I wanted to both acknowledge that, but also to find out about what it means to you to be a first time CEO and and personally, like how, how you've chosen to to grow and continue and how you see it for yourself, like what are some of your aspirations for your own personal leadership in this journey?

Lauren Carpenter: 49:48

Um, great questions. On this one, I think I do not take for granted one day the opportunity that embarc has given me, and you know I'm 34 years old. Uh, I find it very hard to believe that I would be in a position like this in in any other industry or in any other dynamic, right, I'm just fortunate that I started this thing, so I get to be here, and I think, um, you know, candidly, I invest a lot of energy into being better tomorrow than I am today. Um, I, my poor therapist, I think it's just work that we talk about at this point, but, um, I think that's been huge and I think actually being pretty open with the team about that has been huge. I do think that there's a lot of stigma around sort of recognizing that we all have opportunities for personal growth, and so I would say that's my single, that's my biggest saving grace.

Lauren Carpenter: 50:44

And then the other thing and this is the most cliche thing I'll say all day is I 100% surround myself with people that are smarter than me in every single thing that we do.

Lauren Carpenter: 50:55

I am really good at getting coffees with people who are scared of cannabis, right, there are things that I know I'm really good at and I try and grow and matriculate our team in those places and those spaces because they're where I can provide the most value.

Lauren Carpenter: 51:11

But I think, even over the past sort of year and a half, as we've recognized the need to level up, that's when I've brought in this business coach. That's when I brought in Jeff, who's the former CEO of the Gap, and I'm on the phone with him four times a week about whatever the greatest challenge is facing our business. So I think for me I want to be in service to our company for as long as my service to us and to the team provides value. But I also sort of recognize that the biggest way that I can do that is by constantly soliciting the feedback from others on. You know how to best grow in, how I'm providing value. And I think the other piece of that is I feel a real duty to make sure that we're creating similar opportunity for other people, because I can't sit here and recognize what a tremendous opportunity this is for me if we aren't also working to create tremendous opportunity for other people to Hell, yeah.

AnnaRae Grabstein: 52:06

Now I don't know if that means I have to put the E on the podcast recording now, if I said that Well, so thank you so much, lauren. This has been a pleasure. It is time for us to wrap this conversation, and so it's time for us to move to our last call, and that's when we actually turn the mic back to you one more time to um, to make your lasting impression on our audience. So, lauren, what is your last call today?

Lauren Carpenter: 52:30

Okay, this one is sort of random. It's not going to be a big policy call to action, which is probably what you thought would come for me, but actually it's going to be a call to action around the California State Fair. So this year, after many years, we have been pushing the California State Fair to meaningfully integrate cannabis in all of its forms into what is really a global stage, and this year they're doing it in new and very exciting ways. So for the past couple of years, the state fair has had an exhibit, and the reason that is exciting is because it recognizes cannabis as the wonderful agricultural product that it is and allows it to be celebrated alongside wine and cheese and everything else that we celebrate at the State Fair. But this year it has expanded, where we have a competition that is intended to recognize the best of California and where there will be some other surprises that we are announcing soon that look like sales and consumption.

Lauren Carpenter: 53:24

So my call to action is to really embrace, if you are a California brand or you are a California operator, embrace what this incredible platform is that's being given to us to tell our story and to normalize cannabis on a world stage. So that is my. I am so excited about this. I think this is huge, and I think it's really huge in starting to prompt conversations that folks in the triangle have been having for a really long time around Appalachians of origin and things of that nature, but to really amplify them to audiences who have, today, no idea what we're talking about. But by the end of this, absolutely will.

Ben Larson: 53:59

And I can totally see why you're so great at getting coffee with people, because I feel like I could just talk to you for hours and just yeah, I'm already looking forward to our next conversation. Thank you, I really appreciate the time with both of you Amazing. All right, well, we'll talk to you soon. Thank you, Anna Rae. Thank you so much for setting this up with Lauren. Like I, seriously like I have a new aspirational best friend.

AnnaRae Grabstein: 54:33

She's pretty good, right, pretty good.

Ben Larson: 54:36

Pretty good, pretty good. It's also you know, just like so I don't know uplifting to hear a positive story coming out of California. A lot of doom and gloom.

AnnaRae Grabstein: 54:45

Yeah, to talk about someone that actually is investing in and growing in this state, because there's a lot of opportunity here, so we can't forget it and can't lose sight of it and the good leaders that are doing it.

Ben Larson: 54:58

Do not forget. What do you guys think? Good episode yeah, there's a lot of engagement on LinkedIn, so keep leaving your comments, share it, subscribe, do all the things. The podcast will be up shortly. My goodness, there's so much happening right now. Next week we have an all-star coming on and I just can't wait to quote unquote pick her brain Wendy Berger, a board member at GTI. Investor. Supporter of women entrepreneurs in the space just all around badass there. Investor. Supporter of women entrepreneurs in the space just all around badass there. Now we officially earned that E, thank you. Thank you so much for listening and engaging. Thank you to our teams at Virtosa and Wolfmeyer. Couldn't do this without you guys, literally, and yeah, I'm just so pumped. This is great, great to go to into the end of the week. As we go into the next week, remember folks, stay curious, stay informed and keep your spirits high until next time. That's the show.