SPEAKER_01: 0:00

I guess it depends on the kind of data you're talking about. But if you're talking about retail measurement data, which is what we focus on, which is what companies like Nielsen or Circana, which is IRI, spins, you know, these kind of uh more mainstream retail companies focus on, I would argue that cannabis is is better data than what you can get out of those channels.

SPEAKER_02: 0:39

Hey everybody, welcome to episode one hundred and twenty. One hundred and twenty of high spirits. I'm Ben Larson, and with me as always is Anna Ray Grabstein, recording Tuesday, January 6th, 2026. Happy New Year! Oh my goodness, it's our first episode of 2026. Anna Ray, how are you doing? Did you ring it in properly?

SPEAKER_00: 1:04

Properly, a good question. I'm doing great. I am excited to be back to work, but ringing it in properly was pretty mellow around my house. Uh we hung out with some friends till about 11 and then um drove home and were home by the fire at midnight, which was great.

SPEAKER_02: 1:21

Wow. Nothing crazy started.

SPEAKER_00: 1:25

I did stay up till midnight.

SPEAKER_02: 1:27

That's impressive. That's impressive. We we barely made it to the the New York New Year's from our West Coast time zone. Uh but it was nice. It was like I really appreciated it being chill, which was kind of as as we last talked, the the kind of theme of my entire holiday period. Um and excited to be back, excited to be back with a belly full of fire and and a ton of inspiration about what what the year ahead holds for us.

SPEAKER_00: 1:53

Yeah. From a from a business operations perspective, I think having uh Christmas and New Year's uh Eve on Wednesdays was probably the most um unproductive holiday schedule that anybody could possibly imagine, the way that it just made the holidays holidays drag on. But I think from a human perspective, it was really good for kind of forcing people to rest this year. So I think that there's like a different pace that people are coming back from the holidays because there was so much more extended time off than times when Christmas is on the weekends, um, which then you end up working kind of the whole the whole week and just taking a day or two that you would normally take.

SPEAKER_02: 2:33

So yeah, it's good for the human. It's pretty wild, actually. It's uh I think it was across the board. Like I just got very few messages, emails during that time period. Slack channels, the numerous ones that that we're part of, uh, were pretty quiet. Versus like years past, we're like, oh, it's like that that if you have like that full week open from holidays in between Christmas and New Year's, sometimes things really ramp back up. Um, I know we've had like record-setting weeks in the past, like going into a new year. So um, yeah, really interesting to see how that that impacts that you know, that last month of the year, the Q4 numbers, et cetera, et cetera.

SPEAKER_00: 3:10

Yeah. Well, let's let's jump in. We've got a great show today and a great guest um for our news roundup today. Uh, drug policy is firmly in the spotlight. Uh, this time not with the cannabis focus. The US doubled down on hardline enforcement with a high-profile cocaine trafficking indictment tied to Venezuela's Nicolas Maduro and his wife and other kind of close allies. Um, but at the same time, here at home, the federal government is seriously reconsidering how cannabis is classified under the law. And I think it's an interesting moment where um the war on drugs framework is is clearly being applied to cocaine, but what we're witnessing is a clear split at the federal level to the way that we're now talking about cannabis. And so we're moving towards, yeah.

SPEAKER_02: 4:02

I I'm just gonna push back a little bit and or not push back, it's it's the same old war on drugs where it's acting as a veil for other initiatives that they're working on. They say it's about the war on drugs, but everything that I've seen is it's all about oil. And so, you know, once again, the federal government is using the war on drugs to achieve different goals.

SPEAKER_00: 4:27

And I guess I guess the point, too, that I was thinking with this lens of coming in today and cannabis is that what we're seeing is this split. Like maybe the way that we're talking about cannabis in the new year is not quite so war on drugs focused and more a willingness to re-evaluate cannabis policy through the lens of data and public health and the economy, as opposed to the war on drugs narratives, which have been uh very front and center the last few days as it relates to using uh the war on drugs to kind of leverage broader kind of global political and economic aspirations like um power and oil. So uh it is it is definitely a big week for for drug policy in the news either way, whether it's the real thing or just the thing that they're using as the tool uh for power.

SPEAKER_02: 5:22

Yeah. Well, it's an interest, it's a really interesting observation. And if we're talking about bifurcation of drugs and like putting cannabis and other, you know, plant medicines on one side and then opioids uh and hard drugs on the other, I guess we're okay there. I I I really not a huge fan of overcriminalization of any drugs, but you know, that's we'll we'll save that discussion for another day. Um, but as pertains to our our lovely plant, the cannabis plant, you know, if we can have a more positive discussion progression on that side, I'm here for it. Sure.

SPEAKER_00: 5:54

Yeah. And in that vein, um, as reported this morning by marijuana moment, congressional leaders officially dropped an effort to block the marijuana rescheduling process through an appropriations bill that um is in Congress right now. So that means that Congress is no longer standing in the way of the Justice Department's move to potentially reclassify cannabis uh to schedule three. And at the same time, in this appropriations language, um, they preserved protections for state medical cannabis programs, specifically listing every state that has one except Nebraska, which was notably left out, uh, which is kind of interesting that marijuana moment noticed that. And uh I think that what we're seeing here is that the bottom line is that rescheduling isn't a done deal, but Congress does appear to be stepping back um and letting the administration, the administrative excuse me, process play out rather than stopping it. Um what the DEA is gonna do and if they'll continue um to follow the process and follow the executive order kind of remains to be seen.

SPEAKER_02: 7:06

But it's pretty huge as far as like signaling goes about where the industry is is lying on on this political landscape because appropriations again, uh appropriations is what had closed down the government uh back in November and then famously reopened with the the hemp ban in tow. Um while some issues were handled in that minibus, there's a bunch that weren't. And if those aren't settled by the end of January or get another extension issued, then we're gonna we're gonna have another shutdown or another minibus passed. And and so there's a huge hustle right now in DC, uh, especially when it comes to the hemp ban, to get something inserted as a part of this next wave of appropriations.

SPEAKER_00: 7:57

Is there discussion going on to bring the hemp discuss like the hemp policy discussion back into this appropriations language this time?

SPEAKER_02: 8:08

I think the key focus from all corners of the hemp industry, be it from you know the truly therapeutic, full spectrum CBD all the way over to alt noids. I think everyone is generally pushing for an extension uh so that the industry has just a little bit more time to figure out what is a responsible regulatory framework that doesn't throw the baby out with the bathwater. And that extension ask is anywhere between 12 months, I've heard as high as 36 months, which sounds a little crazy. Um, but anything to push it beyond that November deadline. And then the main drip driver behind that is to give the farmers the assurance that they can put plants in the ground and that they'll have somewhere to sell that crop.

SPEAKER_00: 8:54

Yeah. Um well, when we get into our discussion with our guest, we're going to be talking about some beverage, hemp beverage data, which should be cool. Um, so moving right along, uh, another thing that is hot on everyone's mind in cannabis right now is that there's just been a lot of big deals announced in the last couple weeks. And um, we've got Wild's announcement of acquiring Gron that was announced yesterday. Vireo announced a huge deal um to acquire Ease, and Nabis, uh distributor in California and New York, announced an acquisition of a of a competitor in California this morning as well. So I you know what I'm seeing is that there are no signs of MA transactions slowing down, and that we're just gonna keep seeing more of this as the year unfolds. What do you think?

SPEAKER_02: 9:46

Yeah, absolutely. I mean, we're starting the first week off with uh a ball full of fire, and it's um it's a huge deal. This this wild gron thing. Like over you did the financial analysis. The the post you did on LinkedIn was fantastic. The$500 million in combined revenue, it's like this is a huge brand now. Brand house, I guess. It depends on on what the strategy is, but I hear they're maintaining both brands. Um yeah, it's kind of wild. That's a that's a big ha ha ha.

SPEAKER_00: 10:20

What what I will say is that both of these comp both of the companies, Wilde and Gron, were born from Oregon. And I have always felt that operators that have come up through the mature markets on the West Coast in Washington, Oregon, California, and I would toss Colorado in there, although not exactly West Coast, uh, they've just got a level of grit that the operators in the new market just have not experienced and uh understand their businesses if they're still around today and certainly thriving at the level that these brands have been. So um hats off to the teams. I know that deals like this are not easy to get done. I'm excited for someone to share what the terms are, but since these are private companies, we we haven't heard yet. Um so whoever wants to whisper in my ear and let me know what the valuations were and and what this deal looks like, I'd I'd love to know. So let's um let's cue up our guest. Our guest today is Cy Scott, who doesn't need much of an introduction, but I will still introduce him. He's the co-founder and CEO of Headset, one of the most trusted real-time data and analytics platforms covering the cannabis industry. Um, Cy has been shaping how the industry understands itself for well over a decade. And before Headset, he co-founded Leafly and helped to grow it into one of the world's leading cannabis information sources. And, you know, I met Cy back in the day, even before Leafly, when he showed up to Steep Hill Lab, a company that I started early on. Uh before he started Leafly, he was with another group that was making investments in the space. So, anyway, we're really excited to dig into data today with Cy, um talking about capital flows, rescheduling, consolidation, brands, and the signals from 2025 and what it might mean for the future. So, Cy, friend, welcome. Thanks, thanks for being here.

SPEAKER_01: 12:16

Thanks, Anrae. Thanks, Ben. Uh, thanks for having me.

SPEAKER_02: 12:20

Cai, the the voice of the high rise. How welcome?

SPEAKER_01: 12:23

The voice of the high rise, the long-lost high rise. Although we may be bringing it back, so so stay tuned. The the high rise for those that uh aren't familiar is uh is a podcast uh I used to do weekly with uh Emily Paxia uh of Poseidon there. Um so yeah, love love this format. Excited to be here. Love your show. Uh and NRA, um, the steep hill, you know. I it is wild to think that had to be 15, 16 years ago.

SPEAKER_00: 12:52

Um yeah, I was there from 2009 to 2012, so it was somewhere in there that you guys came through. Uh yeah, it's we should have like I was thinking of like an alumni association of the over 10-year people. Yeah, for a decade or more.

SPEAKER_01: 13:12

I know, and then and then you go to like the over 15-year people, it's gonna be like a it's a small handful of us, but uh makes me wonder what are we still doing here?

SPEAKER_00: 13:22

I know, I know it's a good point.

SPEAKER_01: 13:24

Yeah, but it's been a ride for sure.

SPEAKER_00: 13:27

It has been a ride, but you're still in it and and headset providing incredibly useful information to all of us. Um, I made a post yesterday using some data that I got from you guys about this um Gron and Wilde deal. And I'll tell you, uh I got more engagement on that post of sharing data than I have in a really long time. I thought, okay, I guess people are hungry for this stuff. They really want to know the data. Um, so that's how we want to kick off today's conversation is talking about some data that you've prepared for us to look back on 2025. Uh so I want to turn the mic over for you and tell me what you think mattered this past year. What did you see?

SPEAKER_01: 14:09

Yeah, yeah, thanks. Um, and anytime you need data for those social posts, just let me know. You know, we've got we've got tons of it. Um yeah, so I thought uh I just did like a high-level read on 2025. I mean, it yeah, we are in the new year here, so it's always a good opportunity to kind of look and see um, you know, what the big stories were at a macro level. It's it's you know, as you guys understand, this this market is like a state-by-state, province by province market, and there's so much uh variety that happens within uh each market. Um, so just kind of talking total big picture numbers, you know, you kind of lose a lot of the the detail, but often that's all you can do when you have a broad audience and and listeners listening from from everywhere. But uh we certainly have you know data drilling down into you know the the markets and what makes those markets tick, um, you know, top brands, top products, pricing, promotion, all of that. So just from like a high level, um, you know, the big picture, I think uh the the emerging states, the emerging markets, markets like New York, which is funny to say is still an emerging market. I mean, how many years has it been, right? Like I remember waiting for New York so excited to open, and then you know, five stores opened, and then it's just been a road for them, right? Uh, but it was a fantastic year um for New York, uh, fantastic year for markets like Ohio, which are also, you know, I would consider a new emerging market. So, like to put that into like numbers for for the audience here, uh New York grew 82%, 82.5%, uh, which was uh about a$740 million increase from 2024, uh, growing to a$1.6 billion market. Um, so to put that in perspective, uh mature market like Michigan is a$3.2 billion market. So it's still, you know, half the size of Michigan's market. Um, I'm not sure population. I have to believe New York has a larger population than Michigan. Um so yeah, so I think uh, you know, it that just shows you that this is still an emerging market. And uh, if we do this again in January of 2027, we'll probably be saying the same thing, like, oh, New York grew, you know, now it's a three billion dollar market. Um, just as it continues to scale out, and stores continue to open, brands continue to start operations and and so on. So that's a story that uh for sure I think we'll keep keep giving this year, just what's going on in the New York market, uh, for better or for worse, sometimes, depending on the headlines that New York seems to be making.

SPEAKER_02: 16:50

Uh, another just for clarity, New York is about 20 million people, and Michigan is 10 million people, so twice the size. So a lot of room for growth there.

SPEAKER_01: 17:00

Definitely bigger than Michigan. Um, yeah, so a huge amount of growth. You know, Michigan has some unique geography situations, right? Um, bordering markets like um like Ohio, which are now, you know, one of the success stories as well. But I think when you look at Ohio pricing and you look at Michigan pricing, although I read recently Ohio's trying to do something related to like cracking down on products coming from you know cross state lines. But I think you know, Michigan drives a lot of sales, uh, not only from their own constituents, but from you know, the the bordering states that have you know more um regressive regulation around cannabis. Uh so it maybe punches above its weight from a population perspective. But I think New York is certainly can can achieve it should be like the number two market, really. I think California from a population from a maturity uh will continue to be number one. Um but but New York should be number two. Right now, California is number one and Michigan is number two from top line sales.

SPEAKER_00: 18:02

And one of the things about New York is is that it has been able to hold on to premium pricing as it's been emerging and moving more towards maturing. So you'd think that with with premium pricing there, that you would see them getting closer to that$3 billion number a lot faster than if they were launching with a more price compressed environment.

SPEAKER_01: 18:26

And then that's like Michigan in a nutshell. I mean, you can get the the the cheapest products. Uh it's a volume game in Michigan, right? Like everything is is significantly cheaper than in than even a market like California. And I think that that is a good call out, Andre, on on New York. We we do see most new markets. Um, every every they call kind of follow this playbook, you know, prices are high. Um and a lot of that just has to do with supply and demand and availability and and competition. And and then, you know, as it as it grows and scales, you know, it that changes. And you look at markets like Oregon, you look at markets like Washington, markets like Michigan, very competitive, um, very low prices uh compared to other markets. And I think New York and any emerging market, frankly, has an opportunity to kind of hold the line. Um, you know, I think as it gets more competitive, um certainly there is pressure to start to discount, to start to sell, you know, to price things lower. But I think, you know, looking back, probably a lot of markets, if they could make the decision, not that that's a decision you can make so easily with everybody, uh, but just kind of a hey, we want to have, we want to try to maintain prices as best we can. And this is stories I hear from from operators in states like Washington. I'm I'm out here in Seattle, and um, I know you know a lot of operators are frustrated by the kind of pricing and discounting from other operators that happen that forces them. And it kind of brings everybody down. And so, you know, they it's it's hard to turn that around because once consumers start to get a sense of like that this is pricing, uh, to to bring those prices up is very, very difficult in a market.

SPEAKER_02: 20:15

Um are there any mature markets, mature markets, I guess, that have bucked the trend a little bit more than the others, or do they are they all falling into this? Like New York, you know, sure they could defend it for a while and and they seem to be evolving a little bit slower than some of these markets, but what are the chances that they're able to avoid this, or is it just like an eventuality for for every market?

SPEAKER_01: 20:41

Yeah, I think um that's a good question. Uh, you know, we'll we'll see. I think maybe if they're you know, most most states have like associations and um, you know, retailers are competitive, brands are competitive, but they're also kind of, you know, they have to work together in some ways and kind of define the market and work with legislators. And and so there's all sorts of associations that that pop up. And I think that there's opportunities to kind of have those conversations, like what are we really doing here? What is the what is the ultimate outcome? Um, but they're at the same time, there's the realities of business pressure um that everybody feels, right? So, you know, people can say, like, well, we want to do this thing and keep keep prices this way, but then they run discounts, maybe they get some more people, and then it kind of starts to slip a little bit. So there's a chance, I would say, to your to your question, like, are there markets where it has held the line a little bit? Um, yeah, uh, I think they all have their different stories. And I think it really comes down to like how many licenses get issued, where those licenses are, uh production, you know, costs, uh, brand licenses, brand production costs, and all of that. And in, you know, markets like Oregon, where you kind of had uh unlimited licensing structure, you know, you quickly saw pricing kind of hit the floor um you know very fast. And then you see markets like New York and others that you know are rolling out. Um it's it's you're starting to see it. And I think it just depends on the pace of those things. Like New Jersey has been around for a little while now, but it's also kind of a slow rollout, too. It's not overly saturated, but they seem to be, you know, holding pricing pretty well. Um, so I think it it's in a in a way an inevitability or an eventuality. Um, although that said, like, you know, we can talk about schedule three. You guys talked about in the news um uh section there. Obviously, it's a big the big news item. I think that's gonna maybe change some dynamics. Um, but it does feel like, yeah, without, you know, uh I don't know, like a clear strategy to prevent that, it is a bit of an eventuality, which isn't was isn't ideal. Because once you're there, you know, everyone wants to get out of there.

SPEAKER_00: 23:00

Well, and you've you've shared some some data with us about discounting and also the way that some of the more mature markets have decreased in overall revenue that they've been producing. But that when I see that then they're highly discounted, it makes sense that the revenue of the state's total market is declining. But are people consuming less cannabis? Like, are there less units being sold, or is it just that the markets are declining from a top-line revenue perspective because the wheat is getting cheaper?

SPEAKER_01: 23:33

Yeah, it's uh they're they're buying the same amount, they're just uh in the same like quantities, but they're just spending less to buy that. Yeah, exactly, exactly. So they're getting just as much as they as they want. It seems like it wasn't a matter of like pricing in in a market like maybe California, for example, wasn't uh doesn't drive as pricing goes down, their their baskets, you know, um go up, their baskets actually are going down. Um and uh and and basket velocity, you know, just the number of baskets, uh depending on market and areas, we see sometimes those going down as well, right? And that maybe is yeah, people not shopping as as frequently. And it just depends on the market. Um, it looks like I think December of 2025, California had a a decent little growth uh come in. And maybe, you know, we we're seeing some turnaround there. Maybe it's just a you know, a blip. Like sometimes months don't tell a story, you know, quarters or you know, years will tell stories, um, but as a strong month for whatever reason for California. So maybe, maybe it's it's gonna kind of rebound. But we have seen kind of that, yeah, it's just gets cheaper, people just buy the same amount at just a lower price.

SPEAKER_00: 24:46

Yeah. The business implications of that are really important because as a retailer, if you're selling the same amount of weed and you're just selling it for less, even if your margin is consistent, your profit is shrinking and it makes it harder to operate. And uh it's something that I I worry about with some of these newer markets when I see see data that's showing like the average revenue per retail location in a state like New York. And um and at a at a three and a half million dollar revenue per store, um it it's it's not that hard to run a business. A retailer can kind of figure it out. They can pay their staff, they can keep the electricity on, keep paying their rent. Um, but if prices compress and reduce 30, 40 percent, and all of a sudden that$3.5 million a year store is now bringing in$2.5 million. Um, that's when those stores stop paying their bills to brands. And all of a sudden, the ratio of how much they're spending on electricity and labor is increasing as it relates to the the profit that they're generating. And it just makes everything more challenging and then it pushes to distress. And that's that's what we're working through in in these different markets. And the stories like like the one that we talked about at the beginning with Nabis acquiring a distributor competitor is like the distributors are basically the bill collectors um in the California market. And that's a hard place to sit in uh in a market that has a ton of price compression and reduced margins. The retailers just stop paying their distributors and then the distributor decides to uh consolidate into their competitor, no big surprise, uh to get more power over the supply chain.

SPEAKER_02: 26:46

I I find myself like uh thinking about just how challenging it is to be in the cannabis industry when we're talking about these typical metrics and how they're tied to retailers instead of talking about the velocity of the brands themselves and like having just broader access to the consumer because, like, you know, like distributors in other marketplaces like the alcohol industry, it's a way to consolidate access to a number of different doors, right? And so it's not that they're bill collectors, it's that they're creating this service to to a number of different shelves. And like in the cannabis industry, we're so focused on just being what's viable for a dispensary, but by virtue of limiting the number of dispensaries, like we're limiting the access points for the cannabis product. So we're just stuck in this catch 22. And I try not to take this in a negative way, but it's like I'm just realizing this, like listening to you guys talk, like what a shit situation this kind of is.

SPEAKER_01: 27:49

It's a good way to put it. Like one of the things we noticed, uh, I think from 2021 to 2025, um, the average margin at retailers declined 10 10 points. So going from 50% to 40%. Um, and I think it's you know driven by a lot of those behaviors, and then those that that margin to your points here are driving that distress, right? Where you know that's a significant amount that that you're losing. And then when you have um the tax liability of cannabis being schedule one and what that means for taxes, um, and the 280E overhang and all that, you know, we see situations where um it's almost like half of the stores like negative profit after like a 280 tax liability. So they're not even able to clear kind of that that hurdle because they can't deduct business expenses, right? So there's like a whole host of things that are kind of stacked against um against the energy, but you know, maybe with the schedule three stuff, uh things start to improve uh you know by removing that tax liability, which should open up margin, which kind of maybe gives everyone some breathing room and we can kind of start to to see some recoveries. Like what we've seen, you know, when I when it started talking about the the emerging markets are great growth stories, you know, it's like those are the highlights. But then you look at, you know, California was down 5% in 2025. And I think that was coming off of a year in 2024, it was down, I think roughly the same. Um, and just you know, it's that's tough. And it's not that I mean, there's more consumers come, you know, technically coming in, right? Uh everyone's turning 21, someone's turning 21 today that they can go to a shop in in California and purchase product. And the Gen Z is purchasing more and more uh share of cannabis, right? And a lot of that has to do with just more eligibility and probably more openness to it, you know, just from a cultural uh standpoint. Um so that the consumers are there, right? But if the prices are going down and um, you know, operators are struggling, it just makes it a tricky business. So I think um the schedule three stuff is really was a huge, huge win. I know you know there's a lot of differing opinions on like, well, it's not far enough and all of that, but it's something. And I feel like we anything can can only be helpful. And you know, it's a it's a stepping stone um to future stuff as well. Um, but just the tax liability alone will will help ease a lot of that that pressure that you know these mature markets are feeling. Uh the emerging markets, you know, will eventually feel, you know, maybe not this year, maybe not next year, but you know, at some point New York's gonna kind of hit that same same point that California's in. Um but maybe they will never have that same pain because Schedule Three will happen and the tax liability is is gone and they're able to bring those margins back in, maybe hire people, um, you know, support the business in a better way with just more room, like any kind of normal business out there.

SPEAKER_02: 30:54

Yeah, well, we need the states to stop treating the industry like it's personal piggy bank. And like all I'm imagining is 280E goes away, and then states are like, oh, there's even more room to tax. And you know, we we saw what was going on in California going from like 15 to 18. I think that was the jump. Um, and and then having to reel that back. And I think Michigan started at like 5%, then 8%, now 10%.

SPEAKER_00: 31:20

Like now there's a 24% wholesale tax.

SPEAKER_01: 31:24

It's and that started this year, right? Or just now, like a couple days ago.

SPEAKER_00: 31:29

You know, you did an analysis of of rescheduling and and what the impact could be. Uh, I'd love for you to to share a little bit of of how big, how substantial uh from your perspective, schedule three and removal of two AD could mean for the industry.

SPEAKER_01: 31:46

Yeah, yeah. So at Headset, uh a lot of our data comes from our retail data cooperators. So we source data directly from retailers. Uh, that's via their point of sale. So, you know, we're able to connect in and see what's going on. So we've got a lot of good information on those on those dispensaries and retailers. Um, we also pull data in from you know online sources as well. But when we looked at, you know, what was going on with our retailers just in general, uh, kind of the median savings based on you know what we think they'll be able to deduct, assuming that they can, you know, the 280e overhang goes away, uh, that's uh about a quarter of a million dollars on an annual basis. Uh, and that's the median. And then in like high volume markets, I mean, that number goes up to$800,000 uh in in savings and in you know, tax liability that they have. And so assuming they've been paying their taxes, you know, the way the way they are required to pay them uh under the 280E structure. Um, and then assuming that Schedule Three comes in and that's no longer the case, that's a lot of savings when you look at the number of stores across uh the US here. Um, you know, we estimate it to be somewhere between about one and a half to a little over two billion dollars that that will be freed up. Um, so long as you know the states don't do what you're saying, Ben, and and go and grab that um directly. But hopefully, uh, you know, what we've seen, like California kind of doing a moratorium on on the change that they wanted from the from a tax structure, kind of realizing how tough it was for operators. Uh, we'll see what happens in in Michigan. Uh, I think you know it's gonna be pretty, pretty tough there because prices are so low. So hopefully states kind of give the give the I don't know, the the industry some breathing room to really grow and mature in and to to take advantage of of these changes. Um, and I think long term it just makes everything just much more viable. So uh certainly I think that's the the nearest term impact. And obviously, you know, we're a data company, we look at it from a data perspective, like what does it mean for the operators? And we really just you know started with the retailers, and so this is just the the immediate uh impact we think to the to the retailers. And when I say retailers, it's you know, retailers and dispensaries, um, you know, across across all the all the markets. But there's certainly a lot more, I think, that will come from this. Um, you know, I think the these stories just, you know, like I feel like the year has just started. We're all like you mentioned Anna Ray at the at the top there. There's a strange holiday, kind of like gone roughly for a couple of weeks, you know, kind of in, kind of out. Um, but then you come back in and it's like, you know, wild, you know, consolidation with uh with Grune there, and you've got uh today, Nabus, and I think all this stuff's gonna keep coming. But when you think about it, those deals didn't happen, you know, post the the schedule three change. It's not like that that headline, because that really did seem to kind of come out of left field, like in the sense of we've all been waiting for it for years, uh, but then it just like there's some rumors started happening, and it was a matter of weeks, and it and it happened. Um, at least that's how I I perceived it. You know, I'm sure there was a lot more going on, but um, I don't think a lot of people knew that was coming. I doubt, you know, Wilde you know, embarked on this knowing, okay, we're gonna have schedule three, let's like start making these bets. Um, but I think uh now with that happening, I think it's gonna attract a lot more interest from you know investors again, um, like what we saw, you know, post-uh Canadian uh federal change, right? When they federally legalized in in Canada, there was a huge wave of investor interest. I think that's going to be coming once Schedule three happens. I think you know, the the fact that it's slated to happen, I think it's great news. Um, what you mentioned at the top about you know, the some of the roadblocks are going away and it's it's progressing, it's gonna happen. And I think when it does happen, we're gonna see new investors come in. Uh, they're gonna see uh a market that can be more sustainable. They're gonna see tons of opportunity for consolidation and supporting that consolidation. Uh, so I think, you know, the wild story um it's just gonna accelerate because that was already happening in a pre-schedule three world. Imagine a post-schedule three where you have some more room, you know, the companies are gonna have more cash to put to work. Um, you know, investors are gonna see better margins on these businesses, but investors are gonna see the kind of growth stories um coming out of these emerging markets, investors are gonna see kind of the path forward that this is you know probably the beginning. Uh investors are gonna see things like you know, what's happening in in the the hemp beverage, and you know, hopefully some. I feel like you know, you're starting to see states talk about regulations, you know, at a state level for these programs and so on. So beyond just the tax savings for retailers, and you know, I know that's we wrote this report, and we if you want to see this report, just uh visit us at our website. Uh you know, that's where we really focused on it, but but I think it's so much bigger than than just that, you know. But that's just like one piece of of the puzzle that will um kind of continue to to to drive this industry again.

SPEAKER_02: 37:02

Yeah. To to your point on the surprise around schedule three, I believe what I heard is that it was a it was a it was more focused on the the hemp portion, the like kind of creating the the CBD pathway and and kind of highlighting that. And then schedule three kind of snuck into that bill, um, or that EO, I should say, um, in kind of the 11th hour there. So yeah, it came in pretty pretty fast. Um, but you brought up hemp beverages and and a big topic last year was definitely hemp and its impact on on the regulated markets, and what we saw throughout last year was various efforts to ban it at the state level. Um, and I'm curious as to what the data says around from from anything you can tell about the impacts of of hemp, um whether it was while it was selling or post-ban, you know, uh yeah, any any potential impacts that it had uh at the dispensaries uh level.

SPEAKER_01: 38:06

Yeah, it's um that is a good question. And it's frankly, it's it's kind of hard for us to measure uh that that piece. Um you know, the beverage, uh as you know, Ben, I mean, with Vertosa and and your your exposure, you know, even prior to to hemp, um, the farm bill, you know, the beverage category is relatively small in most markets in the in the regulated cannabis world, the dispensary world, um, I think for a variety of reasons, but um, you know, what roughly like a percentage point, you know, sometimes less than a percentage point. And um didn't really it's like that number hasn't really shifted all that much or in any significant way up or down, right? It's not like uh the people in the regulated channel are buying less of drinks, or now drinks are so much more popular in the regulated channel. It does feel like um, you know, maybe a separate consumer, or if it's the same consumer, maybe you know, they're and this is just anecdotal, right? We don't have data on this, but it it feels like um if it is the same consumer, maybe they're you know, if they are buying in that channel um in the hemp channel, there's just a lot more variety. And there's also markets where you know California regulated them out. Um, you know, here in in Washington State, they have to go through the regulated market. So you don't really see a lot of the like total wines aren't aren't selling it here uh in Washington. I don't think they're selling it California, but if you're in a market um like I don't know, you know, uh Texas, uh sure, they're selling it. Um, where Texas doesn't have the kind of regulated framework, like an adult use market, certainly not, and the medical market is a pretty unique structure there. You're not gonna see beverages there. Um, so it kind of feels like it's a separate, separate thing. Um, yeah, I've heard operators say, like, you know, that that are in the regulated market, like, oh, it's We don't really we don't mind it because it doesn't impact us, uh, you know, because our beverage sales are low anyways, and you know, it's a it's a different consumer. Um, and I have to think that uh I think, I mean, for just my this is my opinion, I think it's a good thing to have beverages in kind of in like Target, you know, in in circle K, uh, just for exposure to the cannabis category, because I think there's a lot of friction in many markets going to a dispensary, right, for the first time. You got potentially a security guard out front, you know, you can't see inside. I mean, it really depends on which one you're visiting. You know, obviously some are are much you know nicer experiences than others, but um, it's still it's still tricky, you know, and you go in and you know, sometimes you're in a in a lobby waiting to go in the back. Some, you know, sometimes you're you're not, you gotta talk to somebody, you know, people get you know embarrassed because they don't know what to ask, right? So I think going to Target and you're just throwing it in your cart uh kind of demystifies it quite a bit. So I think um could be you know two different kinds of consumer profiles. So yeah, from the data perspective, we didn't really see much, you know, that may change with with things um and the regulation, the you know, pending, you know, um regulation coming, but um yeah, it it it will be interesting. I I think it's exciting, even though we primarily work in the regulated channel, we are getting a little bit of of hemp data now, and it's like kind of a newer thing for us um that we started doing before the news came out. Um, and we've got you know a little bit uh there. I it's such a hard thing to measure, uh, as you know, because it's you know a lot of direct to consumer. That's historically challenging to measure. Um, you know, it's sold in all sorts of places. Uh with with headset, you know, we were working, we're working in one core channel, the regulated channel. So it's easy for us to understand the size of the market. It's easy for us to project up because states will report on like tax numbers. So we know like our sample size in a market. So we get really pretty good data. That's that's a harder thing to do in hemp. Um, but we are able to to get some access to information through what's available online uh and start to to measure what's going on at some of the larger retailers that are selling this product. So that kind of gives us an interesting look. But it's a small, I would say a very small slice of like what's how big it is. And I I you know, Vertosa, you probably have exposure to, you know, yeah.

SPEAKER_02: 42:28

I and yeah, I mean, I I share a lot of the same sentiments around the the the beverage category. I I was largely actually speaking to just the broader hemp, you know, flour, gummies, all that kind of stuff, vapes. And I think there's an interesting opportunity uh over the next several months, you know, as certain states do enact these restrictions around hemp to see if we see uh a significant change in dispensary sales, because we it's no secret that a large part of the regulated market is fighting against you know this category. And I was at the Ignited conference in DC, and there were uh other SaaS companies that were celebrating the ban and just very vehemently saying that any THC purchase should be going through their platforms. I won't call them out by the name. Um, but we've gone through a ban here in California, and as we briefly touched on, like California saw a decrease in sales, even though the governor, and this was inaccurate that we we know that there's headshops still selling a bunch of of product all around the state. But you know, the governor claims a 99% success rate, like weeks after he enacted the ban. Um, and curious to see that, like, oh, you know, uh sales actually went down in California in in line with a hemp ban. So um we'll be interested to see what happens in Ohio and anywhere else uh these bans are going into place.

SPEAKER_01: 44:00

Yeah, because Ohio is trying is is working to ban it like in an accelerated ban. It's it feels like like what California did before the farm bill um period you know runs out. Where I've read recently New Jersey is maybe looking at carving something out, or maybe that was Illinois. But I I feel like other states are looking at you know what what room is there for hemp. Um and I'm not sure if that's just drinks, or yeah, that's a good point about um the other other formats. Um, because certainly there are other formats that are hemp hemp derived, but um it will be interesting to see what what happens. And it's a great point that California's sales still declined. It's not like everyone just ran into the legal channel immediately when with 99% success, everything got shut down, right? They gotta it wouldn't just stop consuming, I would imagine.

SPEAKER_00: 44:53

So something doesn't there's an interesting world to connect here with what we've been talking about. We were talking about schedule three, and then we talked about this exciting consolidation story with Wilde and Gron. And now we're talking about hemp and and within the context of hemp, uh, I think that rescheduling and consolidation is also important in that the hemp beverage brands in particular, and headset does a lot of following brands, I think have had this incredible opportunity for brand building in traditional retail and have done things that I've just never seen cannabis brands do with merchandising and sponsorships and some really cool activations. But at the same time, because of the federal policy um challenges that Hemp is experiencing, I think that a lot of these companies have been shut off from capital very quickly in ways that they were actually being fed growth capital over much of 2025. And that automatically puts companies in a position where they need to start changing their plan. Because whereas they thought they were going to have a bunch of growth to build new facilities or to launch in new states or to do new marketing, all of a sudden things are changing and the environment is shifting. And I think that that is going to lead to some interesting consolidation opportunities because the regulated cannabis companies might all of a sudden have more of an influx of capital as a result of Schedule Three and might take a look at some of these hemp brands that have been really great brand builders. So I think that there is an interesting coming together between all of these stories. If I was to be predicting what might happen this year, I think that if I was a regulated cannabis company that was benefiting or seeing new opportunities for capital, I might be looking at some of these highly established brands in the hemp space and wanting to think about how they could translate into the regulated market potentially.

SPEAKER_01: 46:58

Yeah, and and um I know that there is a lot of friction between the you know regulated and hemp, but you do see operators like uh Green Thumb GTI, you know, with their senorita brand out in the um in the hemp beverage market doing really well.

SPEAKER_02: 47:13

Or even wild. Even wild.

SPEAKER_01: 47:16

Yeah, even yeah, great, great point. So you so we already kind of see that overlap. So it would make sense, Anna Ray, to what you're saying about just more of that happening, right? Because you're absolutely right. There are, I have like um I have neighbors that uh are familiar with like canned beverages, uh, you know, C A N N. And um, I don't even think they're in Washington um in the in the regulated market. I'm I'm pretty sure they're not. Uh maybe they were at one point, but anyways, like that they know that brand, right? Um, because they were doing uh direct to consumer. And uh, you know, that's something like if that was on the store shelf, you know. I think the I think most of my neighbors that are not really, you know, cannabis consumers would assume that those types of products would be on the store shelves when they walk into a dispensary here in Washington, but they, you know, surprised probably when they walk in, they don't see those brands that they would see kind of online, you know, marketed to them. Um yeah, yeah, that's a great point about marketing because not only like in caps and and displays and all that, but just like the digital marketing that they're able to do. And a lot of that was you know, probably direct to consumer led. Uh, you know, you gotta find those consumers somehow. But that stuff does raise awareness and raise profiles. And and we were talking about uh discounting, and I think one way out of discounting is is to have a brand that doesn't have to discount. Like, you know, you you you guys must buy products uh like everybody. Uh you're not always trying to buy the product that's on sale, right? You you buy the the brands and and the products that you know resonate with you. And how does something resonate with you? Well, you know, it's it's marketed in a way that you kind of see yourself in, right? And that's really hard to do in the regulated channel. It's very, very hard to market a brand outside of like walking into a dispensary or a retailer and seeing the way they position themselves there, right? You're not gonna just kind of bump into it um as you're scrolling social media the same way you would with hemp. So a lot of that brand equity has been built up, and that that's a pretty good strategy to go out and bring them in.

SPEAKER_00: 49:27

Yeah. The the brands uh broadly, cannabis and non-cannabis, uh, that have relationships with their consumers, I think have a lot of value uh because they can be talking to the people that are actually purchasing their products. And it's something that we've seen really over the past kind of 20 years as consumers have become much more comfortable with e-commerce and direct to consumer generally, whether it's like buying a jacket or shoes instead of going to a department store, going directly to the Nike website. And now Nike gets to have this direct conversation, whereas you used to maybe go to Foot Locker or Macy's to buy your tennis shoes. And and so then the store was the gatekeeper to the consumer. And and now there are all of these uh brands that have direct relationships and can talk to their consumers. And I think hemp has has absolutely done that to a level that that cannabis hasn't. There have been some of the more asset-late brands, and we've even featured some of those founders on the show here that I think have done a good job in the regulated cannabis space of talking to consumers. Miss Grass comes to mind. They really built more of like a content community first before they launched their products. But it's it's not that common that that regulated cannabis brands have email addresses with hundreds of thousands of consumers' names on it in the same way that maybe their dispensary partners do carry those email addresses.

SPEAKER_01: 50:54

So yeah, yeah, no, absolutely. And uh there are brands like Wild. I think that when you mention asset light and you know, I don't I don't know Wild's structure specifically, but um often you know, these asset light companies that you're referring to have um uh a broad geographic footprint, uh where they're in you know multiple, multiple markets and not just you know singular market. Um I think I think brands like Wild, because of that kind of scale, will even though they're regulated and they're so limited on how they can um how they can market, uh they seem to, you know, have a have a brand that that that works, you know. Whatever they're doing, it seems to work. They go into a market and it and it works. Um there there is there is a way to do that. I mean, you see similar things with like Jeter on the pre-roll side, uh Steezy uh as well, you know, some of these these groups. So it's it's possible in the regulated market in whatever playbook they're running, um, it's working, but you you could see how it's just it's it's not as as frequent, I think, as you know, some of what the hemp brands are able to do. Um, or you don't see as many out there. You know, I can't really, I can only name like a a handful that I like that that if I asked somebody about a canvas brand, they might know about it. Um generally it's it's it's more rare where you have a situation where my neighbor was talking about can. I was like, floored. Like, how do you know about can, you know, because it was just you know marketed to them online and they signed up and they have that relationship with the brand now, and I'm sure they're getting emails and you know, whatever, whatever it is, that that Nike direct relationship.

unknown: 52:38

Yeah.

SPEAKER_02: 52:39

So I bring it back to the data and kind of full circle here, because you mentioned you mentioned Wild and Um you know, in NRA, I mentioned the post that you did uh with all the data, and it told a really good story and just the the value exchange uh with this deal. And so, you know, this journey uh with headset that you've had, sci, you know, something that we heard a lot over the years was like data is challenging in the cannabis industry, there's no data, blah blah blah. And we hear that a lot less these days. Um, but it's still out there. People still say that data is unreliable on cannabis. And I wanted to get your take on just what is the the status of data and and where you think we're on the trajectory of it all.

SPEAKER_01: 53:25

Yeah, uh great question. Uh I think you know, you obviously know my answer. Um, I'm biased towards there's plenty of good data. Um, but I will I will say uh to be honest, um I think that um I guess it depends on the kind of data you're talking about, but if you're talking about retail measurement data, which is what we focus on, which is what companies like Nielsen or Circana, which is IRI spins, you know, these kind of uh more mainstream retail companies focus on. I would argue that cannabis is is better data than what you can get out of those channels. Um, a lot of reason for that, you know, it's uh it's very challenging uh to acquire uh the data in like a traditional retail vertical stuff is sold all over the place. Like if we're talking about beverage alcohol, right? You got to think about how many uh beers were sold at um you know Levi's Stadium, uh, you know, and and measure that, you know, how many at the bar down the street and at the same time from Target and you know, wherever, right? And to get all of that and to project up, I think you're gonna get a a lot more loss in in the in the the signal there. Um where I think cannabis in the regulated market, we know what's going on in the regulated market. Like we know the size of the market, we know who the operators are, you know, they're all licensed. Uh states report tax, uh, top line. So we can look at that and measure. Um so I would say that the data is is better. I think maybe where some of that comes from is you know, people expect, you know, 100% perfect data out there, but that's just like not a reality, right? I mean, there's no way. Um, I mean, you guys probably know it's it's hard in your own business sometimes. You're like looking at the numbers, like you know, these things don't don't square sometimes. Uh so imagine, you know, to get 100% perfection uh is just is not gonna happen. But I think when you compare it to other categories and really take a big picture read, like it's actually much better. The frequency of delivery is better. You know, we provide data in real time. You don't have to wait like a month, like you would, um, you know, for for a data set from Nielsen or IRI. Um, and then you know, now with the advent of like web scraping uh and and sourcing that kind of uh data that's out there, I think that the access is even even broader. Um, I think it just comes down to the rigor around the the programs that companies like headset have and you know how rigorous are our companies. You know, we've been doing it for 10 years, um, you know, one of the first. Um, you know, our it's our reputation, right? So we take it very seriously. Um, I'm sure every company would probably say the same thing. Um, but you know, it's just kind of different approaches. So uh I would I would argue that there's a lot of of of good data out there. I think you can you can find it. You just need to work with the the right operators. Um, but I I do think we live in a world, I don't know, maybe if we had a time machine, we went back 10 years, 20 years, and we're in the different category. You you would you would wish you were here in this category where you can get access to so much. Like we have you know, retailers, dispensaries sharing their uh data with brands directly on the headset network. We aggregate the data in a market to talk about what's going on in New York. Um, you know, we look at web scrape data to be able to round that out and better understand, you know, what's going on at pretty much every store that has you know online menus. So it's a lot of data and it's it's good data, but um it's you know, I think people might be comparing it to their exact numbers and say, oh, it's off by this or off by that, or maybe sometimes something gets gets out there and it's wrong and it kind of sours it. So so some of that is tough. So I would say, you know, just try it out, look at it, um, talk to your vendors about it, uh, talk about their methodologies, and I think you you'd you'd be you'd be pretty surprised. Uh I'll close with like for the data question, Illinois. Did you guys see this headline where they before they implemented metric, they were um they were counting uh just MSRP in their total sales uh for the market. So basically whatever was listed for, that's what they counted. So their total sales were inflated by I don't know, 20% or whatever. Um, and once they you know fully rolled out metric, they realize their mistakes. So this whole time, you know, they've been misreporting the numbers. So you even have a state like that, you know, that's it's tricky, right? But it comes down to the methodologies and really really looking at it. So I'm sure, I'm sure there's some that make mistakes, and I'm sure we've made mistakes from time to time, but um, you know, we really try to focus on it and do it, do it well because it's the one thing we do.

SPEAKER_02: 58:04

Yeah, and I will back you up on this. I've seen some data reports out of the the mainstream channels trying to track the hemp beverages, and the data is terrible uh so far. Right. It'll get better, I'm sure. But yeah, comparatively, yeah, I think you're right.

SPEAKER_00: 58:21

And and I think that Canvas actually has a really great foundation for being a very deep, uh rich data environment because of the track and trace requirements that are out there. And I would offer that the people today that complain about data just don't know what to do with it. Um, I I look at it all, I love headset. I try to make sure that I look at the data from lots of different data providers just to see, see how different it is. And um, it isn't the data itself is not that different. It's about the way that it's sliced and diced for usability and action, but I'm starting to not see as broad of differences whether you look at one or another data provider, which gives me confidence in what I'm in what I'm looking at. Uh, but we're at the end of the hour. So sorry, um, it's time for our last call. Um, and this is your final message for our listeners advice, call to action, closing thought. What do you got?

SPEAKER_01: 59:16

Yeah, come uh check out some data. Uh, visit us at headset.io. We've got a ton of stuff on the website that you can start uh exploring at no cost. And uh stay tuned for maybe the high rise coming back because this this podcasting thing is kind of fun. So might get back into that as well.

SPEAKER_02: 59:34

Amazing. Cy Scott, CEO of Headset. Thank you so much. It's always great to see you. Great to catch up.

SPEAKER_01: 59:42

Thank you both.

SPEAKER_02: 59:43

All right, everyone. What do you think? Uh, thank you for watching on LinkedIn, YouTube, X, wherever it is that you are. Thank you for engaging, commenting, liking, following, doing all the things. Huge thank you to our teams at Virtosa and Wolfmeyer. And of course. Course, our producer Eric Rossetti. If you've enjoyed this episode, please drop us a review on Apple Podcasts or Spotify or wherever you listen to your podcasts. And thank you for everything for an incredible year last year. 2025 was amazing. We're excited for 2026, year of the fire horse. Like we said in our last episode, saddle up. It's going to be a wild ride. But until then, folks, stay curious, stay informed, and keep your spirits high. We'll talk to you soon.