AnnaRae Grabstein: 0:05

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Ben Larson: 0:53

Hey everybody, welcome to episode 78 of High Spirits. I'm Ben Larson and with me, as always, is Anna Rae Grabstein as always, zanna Rae Grabstein. It's Thursday, march 6th 2025, and we're doing a Cannabis Business News Roundup, which is our guest-free show where we cover the news.

AnnaRae Grabstein: 1:15

And hi everybody, so good to be with you today. You know these news roundups are a labor of love for us. We put a lot of effort into trying to figure out what matters most, and one thing that I have been really aware of is that the pace of news is moving so fast recently that it has been hard for me to keep up. As I have been trying to create content. By the time I make that content, the news is almost changing.

Ben Larson: 1:41

Yeah Well, it's also complicated more complicated these days because I feel like we're spanning two industries yeah, we absolutely are it used to be just cannabis, regulated cannabis dues? That was really top of mind for me. But now, straddling both, it's like you're jumping from one world to the next and there's this like sliver in between, where they do overlap.

AnnaRae Grabstein: 2:03

Well, let's be real. I mean, any industry is part of, like, the broader global economic environment as well. So we're talking about all types of things that are going on, be it in politics and in international relations, and this is a supply chain business, and so we touch on everything from hard goods to, you know, marketing and media I mean, we actually have to talk about politics today.

AnnaRae Grabstein: 2:31

It's going to be inevitable? Yeah, totally, but I'm I'm stoked to be here. We're trying to do this monthly so that we um get in person to do a recording together and um also make sure that we're bringing the most important stories to the front of your minds and into conversation. Before we get started, anything you want to share that's been going on in your world.

Ben Larson: 2:57

Oh man, you know I I had a period of time where I was traveling a lot or just felt out of the office. I was sick, I was in Colorado, miami, took family to Maui and ever since coming back from all that, I've really enjoyed being home. So I'm trying to say no to a lot. I said no to a trip to DC, I said no to LA this week and it feels really good. I actually love working on the business. It's important for me to be up and out, be out there, but yeah.

Ben Larson: 3:34

I'm in a period of time where I'm just really focused on making sure that the business is set up for success in 2021.

AnnaRae Grabstein: 3:42

Nice, that's awesome. I don't relate at all. I feel like I've been in this travel decision-making purgatory where I have like an event on Saturday and a thing.

AnnaRae Grabstein: 3:51

I might do in two weeks in Vegas and I haven't booked anything and I'm on the fence with a whole bunch of people and then late at night I'm like or maybe I should just go with my family to like a hot spring and not think about any of it. So I like what you're doing. I need to either get to a yes or get to a no. That purgatory place of plans is tough, but I am in a good place overall, though. I think that, within the context of the world moving so fast, I know a lot of people are struggling of just how to keep up and how to manage and what this means for our business and our work and our families, and I am doing a really good job of staying grounded in it all and figuring out what matters most to me and the work that I'm doing and what I need to be paying attention to. So I'm feeling positive about the way that I'm showing up in my world.

Ben Larson: 4:50

Very glad to hear that. Yeah, it's hard, it's constant and we're in the middle of a legislative session which brings you a little bit closer to the business. Yep, there's a lot happening in Texas, illinois and Florida. It's just nonstop. I feel like a pinball, sometimes just bouncing around with a conversation in the next.

AnnaRae Grabstein: 5:11

Yeah, and I think it's important to acknowledge that, if people are feeling that way, that there's a lot of us out there that are just trying to keep up, and that difference between working in your business, on your business and balancing everything that's going on outside is really a lot. So lean on our community and our advisors and our mentors and all those things to keep us strong and level-headed. So what are we going to talk about today?

Ben Larson: 5:40

Where do we start?

AnnaRae Grabstein: 5:41

We've got some key stuff, but let's jump in talking about tariffs.

Ben Larson: 5:45

Tariffs. Oh, jump straight into the politics, jump right in. All right, great.

AnnaRae Grabstein: 5:50

So, like we just said, cannabinoids are at their core supply chain businesses, and the Trump administration has announced that it is imposing a 25 percent tariffs on imports from Canada and Mexico and a 10 percent tariff on goods from China, and that these measures are intended to address national security concerns around drug trafficking, which I think is particularly interesting since we are in a drug policy, adjacent and related industry. Specifically, fentanyl is what they're talking about. The concept is that fentanyl is coming in for Mexico and Canada, I guess Alongside, like other goods. Yeah, and as I was driving here today, I did hear that the Mexico tariffs were just announced to be postponed for one month. It is confusing how much these tariffs are actually planned to occur or if they're being used as bargaining chips. But if we were to just assume that these tariffs are what is happening, I think that the broader conversation for us to have is about how does this affect our industry and the businesses that are working inside of it.

Ben Larson: 7:12

Yeah, well, it's interesting. I won't talk too much about the administration, but the whole concept was like, oh, we're going to stick it to these other countries, but the only thing I see it doing is hurting the consumer in the business uh, in the us, yeah, and thinking about our business in cannabis. In general, we always have this theme of of precipitously dropping prices. Where I'm an ingredients company, I I source from other ingredient companies and it's not uncommon for me to get letters about increasing prices and so like are we going to enter a phase where we are allowed and for any of my customers listening, don't worry, we're not yet but are we allowed to increase our prices? Because that hasn't historically been the case.

AnnaRae Grabstein: 8:03

Well allowed. There's nobody telling you how to price your products, but what I will say is that the cannabis market in some places has reacted what I believe to be very irrationally to oversupply. That has created the situation that we're in today of so many businesses struggling an inventory that companies were holding. That inventory started to get really desperate for cash and started selling product into the market for less than the cost of producing it, and that was short-term cash need desperation as opposed to focusing on business fundamentals the need to create a market that's healthy and has long-term sustainability for businesses. And what happened? There were fast followers that said, well, we need cash too, and so now we're also going to sell our product for less than it costs to create it. And a domino effect has occurred that the whole market has suffered and those compressed, irrational prices at wholesale translated to cheap prices for consumers retail all the way through the supply chain.

AnnaRae Grabstein: 9:29

And then now, bringing it back to what we're talking about with tariffs, is there has been a narrative a green market report, in an article talking about the tariffs, said that experts warn that cannabis companies face difficult choices about absorbing or passing along tariff related price increases. I was like what? That is absurd. How is it a difficult choice? How do we just talk about absorbing costs endlessly, like we are not. This is not a charity. This is not like the SNAP program of cannabis, where we are just choosing to subsidize product manufacturing to get to market. So I will pause, but like this is enough, like I want companies to be healthy and be able to exist into the future. And that means that if a cost is too much to bear, if the cost of your can is now 25% higher than it was yesterday, you need to think about what that does ultimately to your costs all the way through the supply chain and adjust accordingly. Otherwise, you will cease to exist as a company.

Ben Larson: 10:39

One would think, but there's still. I mean I think I saw a number where it's like 25, only 25% of the company 26 yeah, 26 isn't cannabis are profitable. So that means that you're wrong, that 74 of the companies are not profitable and and are a threat of ceasing to exist right already okay, so they just haven't ceased to exist yet, but they're on.

Ben Larson: 11:07

I mean, how many quarters go by where we hear about these MSOs that are, with the exception of GTI, are just losing money? You're right, hand over fist and they continue to exist.

AnnaRae Grabstein: 11:17

They continue to exist Well. So I know that the companies that I admire, respect, want to work with and help are the ones that are actually creating businesses that are sustainable, which means that they're going to be able to support their market into the future. They're going to be able to support their operations into the future. They're going to be able to return capital to the cost we are just in for long term pain.

Ben Larson: 11:57

And so the interesting thing about this right is, like, the area where we see price compression the most is on flour and vapes. Yeah, that's true, and and a lot of those ingredients are localized well. Vapes you have all the hardware. I guess that overseas I'm not sure what the the cost is in the cogs of those products it's, it's very high the cost of hardware compared to the cost of the ingredients.

Ben Larson: 12:22

But, I am thinking that with the edibles market, the gummies and beverages, that a lot of those materials actually do come from overseas. So you're talking packaging other ingredients, the cans as you mentioned. So it'll be interesting. You have a lot of new companies starting up and I think, as investors evaluate these companies, they're going to look at the COGS and look at the stability of the COGS. So, yeah, it's a real consideration right now. Yeah, Luckily, the price of eggs are overshadowing all that.

AnnaRae Grabstein: 12:58

Maybe it's just because I live in Sonoma County, but I have chickens in your yard. I don't have chickens in my yard, but I clearly have enough chickens in the community, like I have not had a problem getting eggs I said it's going up 41, which is not it's.

AnnaRae Grabstein: 13:13

It's not the experience that I'm having, but yeah, I'm I'm very sorry and I like eggs. That's like a really good, healthy protein source. We eat a lot of eggs in my house. Um, I think that you know high level when we're thinking about tariffs and cannabis companies. You're right, you touched on it.

AnnaRae Grabstein: 13:29

I think it's hardware and packaging materials, and that that means that it's a good opportunity also to just be thinking about diversification of supply chains, having multiple suppliers to be able to move things around, to deal with, to deal with, kind of how the market swings, and that isn't just as it comes to tariffs, but also like availability of materials. When we're looking at participating in a global market, things like shipping. Have you know, we saw this happen during covid, where people couldn't get the packaging materials that they needed and things got a lot more expensive. So, just as companies are maturing, this is part of it. But getting back to this idea of building businesses that are fundamentally rooted in financial metrics that make sense is just not a soapbox that I'm going to get off of, right? I?

Ben Larson: 14:27

fully support you. I'm fortunate enough to be sitting in a position where I can be like yeah, totally, but that hasn't always been the case.

AnnaRae Grabstein: 14:36

It's a tough business to get to that point, sure, and you know, we're both coming from the Bay Area, which is where Silicon Valley is, and there has long been a history here of technology companies burning money. Quote unquote Growth at all costs, Growth at all costs, investing in the early stages of their business to reach some amount of scale that then… leads to profitability and ownership of customer and market share. Early cannabis leaned into that narrative and sure, yes, okay. 10 years into the experiment of legal cannabis, I think that we have proved that this is more of a nuts and bolts type industry that needs to be focused on product level, margin and profitability. Ultimately, that doesn't mean that if you're a brand new company, that it doesn't make sense to invest in building market share, to invest in innovation and constant reinvestment into a company Totally support into a company totally support.

Ben Larson: 15:44

Well, here's the thing, and I've said this before it's like the whole venture capital investment in space that started back in the early teens was on the premise that we were going to have actual legalization and that the market was going to continue to grow, and it just didn't happen. We're still sitting in a progressive state, so to speak, that many people just didn't happen, like we're still sitting in a progressive state, so to speak, that many people just don't have access to to legal cannabis. Yeah, and so this isn't legal.

AnnaRae Grabstein: 16:16

This is not what the populace intended when they said we want to legalize cannabis so do you think that federal policy change, if it was to occur, would bring us back to a big economic opportunity that is venture scalable?

Ben Larson: 16:31

Absolutely, absolutely. And the beverage category tells me that we see opportunities in Minnesota and Texas with certain retailers, even the Southeast, minnesota and Texas, with certain retailers, even the Southeast, where there are liquor stores or grocery stores, saying that THC beverages are accounting for 15% of their sales. And when you start talking about 15% of the alcohol market versus one to 2% of the cannabis market, literally from where it is today, 100x growth is not unreasonable and so there is absolutely opportunity for venture, scalable growth if that were to occur.

AnnaRae Grabstein: 17:18

They get, obviously with everything that's going on, I've been really impressed watching the Olipop story, which isn't a THC beverage but is definitely in a beverage category that is emerging. It's functional, healthier kind of new beverage and I hear you and I think that's been a cool story.

Ben Larson: 17:39

And they start a huge wave of prebiotic, probiotic kind of movement. And it's everywhere and I think it's a great product, healthy soda. I think there was just an article today about like the soda is back, it's just in a different way.

AnnaRae Grabstein: 17:51

It's back in my fridge. I've been watching it and it's important to, I think, pay attention to these adjacent similar paths that we're seeing other types of products follow, and to prove your point. So, anyway, cool. So tariffs I don't know, we'll see what happens, but I think that we're in for a ride on this?

Ben Larson: 18:18

Yeah, not looking forward to it. Cost of goods going up, adjust your business models and if you're an MSO, you should just continue to lose money and refinance.

AnnaRae Grabstein: 18:29

Yeah. So, speaking of that, we're going to talk a little bit about some of the MSO earnings and you know there are lots of people out there that are earnings report Jedis that are breaking these people, breaking the reports apart, posting a lot of analysis. We're not going to do that, but we do want to talk about the three biggest public cannabis companies that are all annually bringing in over a billion dollars of revenue. So I think it is worth bringing some light to what's happening. And those three companies are Green Thumb Industries, trueleave and CuraLeaf. So, just running down, green Thumb Industries is the only profitable MSO of the group and profitable in actual net income. We're not talking about adjusted EBITDA or EBITDA or all of these metrics that you know. Please make an argument to me of why they actually matter. But the one that actually to me matters is the one at the bottom line that says is there money left over?

Ben Larson: 19:38

after it all Cash flow positive.

AnnaRae Grabstein: 19:40

Yeah, and so GTI is there and they are very much differentiated from their peers that look very different. Cureleaf just reached a pretty wild, staggering milestone of reaching $1 billion of net loss for the past five years Negative milestone Negative milestone Staggering Wow. Negative milestone, negative milestone staggering. In 2024, their loss was 216 million on a full year of 1.3 billion dollars of revenue, which was slightly down from 2023, truly similarly had a 155 million dollar net loss on $1.2 billion of revenue.

Ben Larson: 20:29

Does that include the $72 million that they invested in lobbying?

AnnaRae Grabstein: 20:34

Yeah, good question, but interestingly, Trulieve is still celebrating a 62% gross margin while also posting $155 million of net loss. So these are interesting ways of spinning financial results to remind you what a gross margin is. That would be the margin from your revenue minus your cost of goods before your corporate expenses. So there's things All your salaries and all that kind of stuff. Yeah your marketing and office rent and things like that. So they're saying that they're doing a great job. With the 62% gross margin, that's solid.

AnnaRae Grabstein: 21:14

Yeah to me seeing that loss still says that there's something going on here. And then, another thing to point out that separates Green Thumb from the rest of the group is that Green Thumb is also paying their federal taxes, their 280e taxes, whereas the other peers in the MSO group are choosing to take a position that they do not need to pay their 280e liabilities. And collectively across the MSO group, those 280e liabilities are over a billion dollars at this point.

Ben Larson: 21:48

Okay, look, folks, I've had a lot of conversations on the Hill about 280. There isn't going to be any relief. So if you're not paying your taxes, you're going to have a big bill to the federal government. I would like to be proven wrong, but this is just a bad bet.

AnnaRae Grabstein: 22:12

And so there was, for a lot of the last two years, this belief that there was going to be a fast path to rescheduling and that the biggest benefit to the industry would be the 280E would go away, and so people stopped paying their 280e taxes, if that was defensible. During that time, when people thought oh, it's months away. Do you think that was defensible at that point?

Ben Larson: 22:37

No, it was hopeful thinking. The government is not just going to say, oh yeah, you can have it.

AnnaRae Grabstein: 22:45

So people are like smoking the hopium over here yeah. They need to get off the hopium. What will the government do? I don't know.

Ben Larson: 22:58

What are they doing now? What are they not doing now? Why not? They would enforce it against me if I personally, if I owe that much money my understanding is that that doge is, you know, eliminating half of the irs right well, so just how long does this go on?

AnnaRae Grabstein: 23:18

but I'm with you, I think that. Uh, back to what we were talking about as it relates to tariffs. This concept of just not paying taxes is another piece. It's like we need to be running businesses that, at the end of the day, like when they pay their bills, are still working.

Ben Larson: 23:35

The rubber's going to meet the road is when this all does, hopefully someday achieve clarity, and we are in a legal industry and the shareholders, especially for these publicly traded companies, will be the ones speaking with their dollars, and you're going to be hard pressed to find new shareholders that want to put money into a company that owes the federal government a billion dollars.

AnnaRae Grabstein: 23:57

Yeah, yes, it's, it's crazy outlandish. Yeah.

Ben Larson: 24:03

Although this whole.

AnnaRae Grabstein: 24:04

So can we just talk for a minute about doge and before we get?

Ben Larson: 24:09

there if you disagree with what we're talking about. If you have a good justification as to why you're running up the gap, please come on the show.

AnnaRae Grabstein: 24:16

We would love to talk about it. Totally, yes, you don't pay your taxes. We want to. We want to know why. Um, I I would like someone to tell me why I don't have to pay my taxes. That would be amazing, yeah, well, so I guess there's a couple more things, but before I talk about Doge, there is some.

AnnaRae Grabstein: 24:40

There's some separation amongst the MSOs too about the perspectives on federal policy change coming from the new administration, and the earnings reports are good times to hear from CEOs of these companies kind of ways that they are looking at the overall marketplace and their go-forward plans, and so sometimes we get tidbits. And so Kim Rivers, the CEO of Trulieve. She says we remain optimistic that the Trump administration will work to address inequities for state legal operators, including access to banking, expanded research and normalized tax rates. I can see why Kim Rivers would say this. Trump supported Amendment 3 in Florida. Trump reportedly met with her during that campaign. She is coming from a place, clearly, of hoping, of smoking the hopium. She's wanting to remain optimistic that the Trump administration is going to enact policy that is reflective of Trump's positions on leading up, like throughout his campaign.

Ben Larson: 25:47

Yeah, yeah, I mean we're positive on canvas. It was September, October where he did say he supported, you know, access to banking and legalization in general. So is he worth his work? That's not for me to say.

AnnaRae Grabstein: 26:03

Um, say that I'm not in a place of believing that solidly that there is no hope for federal policy change under this new administration. My perspective is more that the priority of paying attention to cannabis is not high on the list compared to the priorities that the Trump administration is choosing to focus on in the last few weeks Things like immigration and tariffs and things like that.

Ben Larson: 26:32

Yeah, I love. I'm an entrepreneur, I'm optimistic. Our job right now as an industry is to operate in the current paradigm. Sure Right and let be what happens, but do all the scenario planning. Sure Right and let be what happens, but do all the scenario planning. Sure Success plan, you know, plan for legalization and what happens under that scenario, but also plan for the status quo for the next decade.

AnnaRae Grabstein: 26:57

Yeah, yeah, absolutely Well, which leads us to the quote from Ben Kovler, who says differently than Kim Rivers. He says at the moment it's hard to think anything will fundamentally change, given the new administration's appointees, who seem to be descendants of the Just Say no campaign of the 80s and early 90s.

Ben Larson: 27:18

So Kovler is, so he's a success.

AnnaRae Grabstein: 27:19

If he's like Scrooge McDuck in his current scenario, yeah, I mean, I think what Kovler is saying is that we're going to plan for no change. If change happens, great, but we are going to build a business that can stand on its own with the current challenges. And I mean I think that, if you've been listening to this conversation for the past few minutes, that's what we've also said as it relates to things like tariffs, like we need to not be in denial about the things that we can't control, which is Trump's actions on policy, and just make sure that we can control the things that are in front of us, like our own businesses and our own decisions Absolutely that affect our businesses. So, yeah, okay, well, can I rant about Doge for a minute, because I have this idea that I think you guys think might be kind of funny, as I was listening and reading about some of the things that's been going on in the federal government, I had this hilarious idea or I thought it was hilarious to make DOSI the Department of Cannabis Efficiency to

AnnaRae Grabstein: 28:30

go into all of these companies that are bleeding money, and I would like to hire many 21-year-olds and give them chainsaws and we will just go in and we will tear your cannabis company apart for you. If you need us to, that would be awesome. I'm being a little sarcastic, but at the same time, um, as I was reading these earnings reports, I couldn't help but think that there's some major change that needs to happen. And while, uh, I have been watching with some shock and shock and disgust at some of the fast things that the Doge group has been doing at the federal government, it occurs to me that there might need to be some big changes ahead for these MSOs, given their financial positions.

Ben Larson: 29:26

yeah, I mean, it's it. There's just a lot of tough positions out there and what we see across a lot of the episodes, it's just there was a lot of mergers and acquisitions, not a lot of integration, and so you just have these beasts of companies with a lot of inefficiency, and it's a big job, and I don't know if we have the right people in those companies to, like now, accept that we might be on this prolonged path. We're like, all right, you actually got to step up and do the work, but there's not going to be some savior that comes up nowhere to save all these companies.

AnnaRae Grabstein: 29:56

Or maybe it's my new Doce business.

Ben Larson: 29:58

Maybe it's Doce.

AnnaRae Grabstein: 29:59

It's Doce. So you know, get in touch with me if you would like to fund my Doce startup, or if you're a chainsaw company, you can sponsor us Chainsaw Well. So what are these MSOs doing? That isn't cutting expenses, but that is looking into the future. They're launching into hemp beverages.

Ben Larson: 30:24

They're doing a little bit of that, truly being the most recent announcement we saw that GTI, with their acquisition of Senorita through Agrify Curaleaf, has been in it for a while already right, yeah, who else? Public MSOs yeah, or you can kind of go a layer departed and look at like Canopy Growth and Juana and you know brands like that.

AnnaRae Grabstein: 30:54

And we already know Boston Beer is in Canada but they haven't launched into the US.

Ben Larson: 30:58

But it seems like they're whispered yeah absolutely. Yeah, I mean everybody's looking at it right.

AnnaRae Grabstein: 31:04

Well, so why do you think MSOs are so aggressively entering the HEM space?

Ben Larson: 31:09

I think it's a hedge. I mean, you know it's a safe hedge right, Especially with beverage, because it's not competitive with their current portfolio products and brands.

Ben Larson: 31:20

Yeah, the interesting thing is that they are going into a heavy brand space. We can talk about the dynamics of this, but they're entering in beverage, which is all about brand. But MSOs are good at something else. They're good at limited license retail, vertical integration. So I'm not really sure how that all tracks, but I do see the hedge and it's defensible for them, because what we've always said in the beverage category is like these low-dose beverages don't really sell in the dispensaries. Yeah, they sell great in mainstream retail. And so it's like, if you can have the opportunity to kind of go out, build distribution, build brand residence and and hope someday that you are able to connect the two, but in the end hopefully build a profitable side of a business.

AnnaRae Grabstein: 32:13

Yeah, well, I guess I would answer my own question, too, of that. Msos have to be looking at hemp because they have to be looking at how to increase their total addressable market and there are only so many states they can participate in as legal cannabis operators, and some of those states are better than others and we've seen this reconciliation of the markets that the MSOs play in. There have been a divestiture out of some of the more mature price compressed markets where verticalization isn't as realistic, like Colorado and California, like MSOs have left, and so now they're in the markets that are the good markets. They're in Florida, new Jersey and Ohio and you know different markets where they can be profitable and make money, and then after that it's like well, where else can we go? What else can we do? And hemp is in a whole lot of other markets that they can't be in otherwise. So I think it totally makes sense. It took them longer than I expected. To be honest, I've been thinking that they would be launching into the space a lot faster.

Ben Larson: 33:19

It makes sense from a decision-making matrix perspective, but competitively I don't know how much sense it makes, because I look at someone like Kiva, who we've seen, you know, dominate in in regulated cannabis and continues to do so launch a hemp effort to address these States that they can't access through the legal markets and they're solely focused on product and brand. That's all they do every day. Same with Keef to focus on beverage Keef in more than 10 states, I believe. On the regulated side, they've also launched a line of beverages to address the markets that they can access. So these are people that know the business and I have a hard time believing that and prove me wrong, but, like these, MSOs are going to have a hard time competing against these people that this is all they do every day.

AnnaRae Grabstein: 34:18

I think that they're going to have to build a talent base for it, because I think what you're talking about is that you're right that ultimately you know if the product, once it's in someone's house, is a cannabinoid product.

AnnaRae Grabstein: 34:32

So that's like why it makes sense for them to look at the space. But the other elements to it in terms of like how the products get to market, how consumers buy them, it's a whole new business, right? People are using existing distribution channels and hemp via through alcohol and beer distributors, or they're using direct to consumer channels, both, which are not channels that anybody who's been operating companies that are bringing the same brands into both markets and, like you mentioned, keefe and Uncle Arnie's is an example. Keeva is another one of the groups that are bringing the same brand into just a broader market and that to me seems simpler and more consistent. And then they've created a brand story. They have a whole lot of followers, maybe on different platforms. People know what those brands are and now they can just get them in more places. But actually the examples that we're leaning on of these MSOs coming into hemp, it's all different brands than the brands that they have been investing in and bringing into market.

Ben Larson: 35:47

With the exception, of course, gti who, through a separate entity, acquired a brand that was already doing it. The founders of that brand are very seasoned beverage entrepreneurs and, right in line with that, I remember seeing GTI posts that they were hiring five beverage professionals. So they were hiring, like five beverage professionals. So, like they were being, you know, it's like not a surprise again because, like Ben knows what he's doing Just focusing on really launching a true beverage effort. Honestly, I haven't talked about strategy with the other MSOs so I can't say whether they're doing this or not, but if they aren't, guys, if you're listening do it, you need good talent.

AnnaRae Grabstein: 36:30

No, I did. Actually, at Canada DataCon I met a gentleman who was just recently hired to be in senior leadership on the hemp side at Curaleaf, who comes from a long background in alcohol theft, and so there is absolutely new talent that comes from traditional alcohol and CPG coming in to lead this effort in hemp, at least in small numbers. I've met some of these people.

Ben Larson: 36:57

Yeah, here's the thing we're actually pretty close to this, I think Is that once you reach a certain class of distributor in the beverage game and we're getting up there as far as the quality distributors, the breadth of them, the size of the business, that will attract the bigger brands in from the outside and that will be a whole new level of competition that none of us are really used to competing with.

AnnaRae Grabstein: 37:24

Say more about bigger brands.

Ben Larson: 37:25

You mean like existing brands that don't have I mean the constellations of the world, the boston beers you mentioned. You know it's like all the friends of the total wines, you know, like I know, a lot of brands are really excited about being a total wine. Right now. It's like now. I hope you cement those relationships, I hope you get the traction because if the momentum keeps up, the pressure is going to start flooding in from the outside and they will have to make that decision Do we build or buy? And in many cases they'll look at how much has been spent and you'll have to decide if you want to sell really quickly, but yeah, it's going to be a big disparity.

AnnaRae Grabstein: 38:10

When you're talking about big brands I don't know if we've talked about this. I'm curious of what you think in terms of existing brands that are well-positioned in alcohol or even non-alcohol brands that are well positioned in alcohol or or even non-alcoholic. What do you think about adding THC into those existing brands lineup of products, or do you think that that is problematic and that people aren't going to be doing that?

Ben Larson: 38:34

I mean, you see, you see so much today, like, like how many brands are launching alcohol products Like you never thought they would like Sunny D. Oh, I didn't know, know, you didn't know that. Oh yeah, sunny d has a ridiculous um. You know coca-cola did the jack daniels like collab right, yeah so I don't think it's a far stretch of the imagination.

Ben Larson: 38:56

I think there's a lot of um, very professional non-alcohol out there that are poised to enter the business. But it really doesn't matter, because right now it's all about distribution and retail space. Unless you have a DTC brand like Reeds right, which many of these products are splitting between the two. A lot of them are half BTC, half retail. But yeah, when you come in with a relationship and you can open up $2,700 overnight, I think that'll be the big differentiator and that's what these alcohol brands have.

AnnaRae Grabstein: 39:36

Yeah, okay. Well, shall we talk about maybe the biggest hemp market in the country, since we're talking about hemp, and what the heck is going on in Texas?

Ben Larson: 39:49

Yeah, all this momentum I was just talking about it's not guaranteed. I'll say that much because Texas is seeking to ban this proliferating hemp market and some have postulated that it is a $4 billion market. In Texas alone, $7 billion, even $7 billion.

AnnaRae Grabstein: 40:11

Yeah, there's a lot of numbers being thrown out there, but this is potentially the biggest cannabinoid market in the country. What's happening in Texas, and so, yeah, sb3,.

Ben Larson: 40:22

Senate Bill 3. Senate Bill 3, brought by the Lieutenant Governor, dan Patrick.

AnnaRae Grabstein: 40:28

Dan Patrick, it's a prohibition, but it's not the only bill that has been introduced in Texas. There's a lot of other bills that are touching on this. There's a bill to expand the existing medical program. There's a bill to introduce regulations for hemp products. Why is it that SB3 is what is taking all the oxygen? Well because it is a ban.

Ben Larson: 40:53

It basically would eliminate the 7,000 plus hemp outlets that have been created throughout the state. The CUP, the regulated side of the business, is highly restrictive. That's why we have these other bills to expand access to that. But, like right now, there's three licensees and it's very hard to get good product and so there's this huge disparity. And, at the end of the day, we know prohibition doesn't work.

Ben Larson: 41:20

And if you suddenly ban all these products, there's good reasons for it. If anyone listening to the testimonies of the Senate hearings, there's good reason, good reason for banning. Sure, it's like the industry hasn't helped itself in a lot of cases. Right, and I'll say that broadly. When we focus on the beverage category, there's a certain reason. We feel confident that it's a. It's a good meeting spot because of the low dose, uh, nature of it, the way you can titrate it. But this is, this is hemp root larch. So this is faves, this is flowers gummies000 milligram gummies. I don't know if that's an actual number, but you know it's like you hear these crazy stories. Anyways, you rip all that out and you people will find another way, but you'll also be taking away medicine, like the good products that people are consuming for, like veterans, but it's just a mess out there right now, and so it's such an interesting dynamic because a mess down there right now. It's such an interesting dynamic because a ban has previously been brought.

Ben Larson: 42:28

The legislative session comes every two years in Texas Two years ago this was brought by the House. I was just talking about this bill sitting in the Senate right now. Last time it was brought to the House in a cask with flying colors. It actually died in the Senate at the hands of Dan Patrick because he didn't get what he wanted from a different bill, and so now it's back, introduced by Dan Patrick, coming to the Senate and largely probably with flying colors, and the big question is what happens in the House?

Ben Larson: 43:01

And anyone that follows Texas politics which I never used to, but now I do the one thing Dan Patrick doesn't have control of is the House, and there is the potential that the House itself has flipped on this issue. So the big question is what happens when the bill gets passed in the House and that can be debated, and I hear a lot of things coming out of Dan Patrick's office from both sides and yeah, it's anybody's game at this point. But the interesting dynamic here, as it pertains especially to our audiences if that bill does get killed, there will have to be an alternative bill that gets presented, because otherwise it's status quo for the next two years. Now, there's some people that love that, but generally I think it's untenable.

Ben Larson: 43:53

I don't think anyone actually, at least on the political side, wants that to happen. So what's the alternative? And this is what starts to cause the quarrel between the broader hemp industry and those of us that are a little bit more focused on the beverage category.

AnnaRae Grabstein: 44:10

Sure Well, as someone that's sitting on the outside of it looking in because I don't have business interests in Texas specifically I think that… I think we all have business interests in Texas.

Ben Larson: 44:21

I mean, we all have this interest in Texas. It's a massive bellwether for what we will see.

AnnaRae Grabstein: 44:28

I guess I hear you that something does need to happen, and I have always believed in public safety and regulation as a key kind of a foundational aspect to being able to build a real industry that we can all depend on and that consumers can feel confident in and businesses can kind of stand on the shoulders of in order to plan for the future. So, yes, I hear you that, if the ban doesn't move forward, that there still needs to be something that happens in Texas, because there is no safety measures on the books right now that are protecting consumers. And, at the same time, within all new legal constructs, there becomes a question about enforceability and enforcement priorities, and that is something that I've been thinking about in relation to this of like, okay, if this ban passes, what is Texas going to do? It's like there's apparently 50,000 people employed working in this space in Texas. There's all of this economic activity that we already mentioned.

AnnaRae Grabstein: 45:40

Like that doesn't just go away overnight. What are we doing? Are we talking about criminalizing people? Are we going to basically force a illicit market overnight? This is wild, and even if there's becomes a more what I would call like sensible regulatory pathway of maybe just creating new safety standards and keeping some products in the market. There are going to be losers in this because, like you said, there are groups and companies that have taken it to an extreme and have put products in the market that very if they're just very likely will not be able to to withstand any type of oversight. They're just very likely will not be able to withstand any type of oversight, be that some type of inhalable product or product with questionable ingredients or potencies or whatever. It is no testing Like. What does that look like?

Ben Larson: 46:37

Yeah, it depends who you ask, right? Because if you ask a politician or someone on, say, the CUP side and I'm not speaking for anyone in particular, but they're probably perfectly fine with being like it's too out of control, we're just going to ban it and then maybe two years down the road or four years, because it's Texas then we can rebuild into it with what we're comfortable with. That's what's happening in California, right?

AnnaRae Grabstein: 47:09

But California has a vibrant quote, unquote like adult use. Vibrant, wow, that's what they would tell you is that there is like plenty of access for people that want cannabis at legal dispensaries. That is not the case in Texas, like there is a basically failed medical system that only has 20,000 people or something that are registered patients into it. So there is no access. But people are consuming cannabinoids broadly that they're accessing through the hemp channel.

Ben Larson: 47:44

I mean, this is why bans are so stupid. Like people now understand that they like these products and they want these products, and so as soon as you have a ban on retail, they're just going to the USPS, as it already is, is just going to be the biggest drug dealer in Texas, right yeah, and everyone's going to go DTC, and everyone's going to go DTC. And unless you put people ripping apart packages in the post offices, there's going to be really no way to stop it well, we're very much in the middle of this, folks.

AnnaRae Grabstein: 48:12

The Texas legislative session we looked it up, it's 140 days 5-ish months from January so we're going to keep talking about this and the fallout of whatever happens is going to be real in some ways, like, no matter what you're right, this touches everyone in cannabis in some way and you know, I will say that in terms of like, what my hopes are is that my hopes is that there is parallel pathways going on in Texas, that both they are looking at their existing medical program and expanding it.

AnnaRae Grabstein: 48:48

It needs expansion. That means that more types of qualifiers to be a patient, more types of access, broadened perspective about form factors, like all kinds of things. Open up that medical program and create sensible regulations that put consumer safety at the forefront for hemp products that are in market and do not shut down an industry without clear off-ramp to create access when there is already demand, because that is going to have unintended consequences of bolstering the wrong players in the market it strengthens the illicit market and the bad players, because the good players are going to like oh, I'm going to follow the rules, so the only products that will be available will be the worst ones and I just we just can't.

AnnaRae Grabstein: 49:44

It's enough already Like we've learned our lesson. Let's stop making the same mistakes. So please, happily, dan Patrick, do you want to come on and have a conversation with us about this? That'd be incredible, alright. So how are we doing?

Ben Larson: 50:02

I think we're close to the top of the list, yeah this is what we were going to talk about.

AnnaRae Grabstein: 50:05

huh, just looking through the list Yep, that's it. There's so much more news out there. Folks Like we really are trying to just figure out what is most important to talk about. So if there's something that we missed and what's most interesting to us and what's most?

AnnaRae Grabstein: 50:19

yes, totally, but follow some other people that are putting really great news out there. The folks at Cultivated are doing a great job. Follow them. Green Market Report continues to be an excellent source, marijuana Moment and Marijuana Moment and then follow other people that are just smart and have other things to say.

Ben Larson: 50:40

Yeah, because we support all of them, not just the loudest ones on LinkedIn. No, some of them are cool too.

AnnaRae Grabstein: 50:44

Yeah, they are cool. Yeah, this has been really, really good and I hope that this felt like some sort of support group for those that are looking to decipher the information while also trying to get some perspective on it.

Ben Larson: 50:59

It's been another Cannabis Business News Roundup. Thank you for liking, subscribing, doing all things sharing it, thank you to our teams after tosa here and wolfmeyer, and thank you to you uh, next week, yeah, next week, oh uh, we are having on um hippie water, hippie water, hippie water.

AnnaRae Grabstein: 51:20

We're to talk about building from the ground up, so tune in for that. It should be fun. All right, as always.

Ben Larson: 51:28

As always, yeah, go ahead, hit us out.

AnnaRae Grabstein: 51:31

Stay curious, stay informed and keep your spirits high.

Ben Larson: 51:36

Until next time. That's the show.

AnnaRae Grabstein: 51:38

That's the show.