An All-in-One Technology Platform for the Cannabis Industry

EA:
Great. Anne, tell us what Dutchie does.

AF:
So Dutchie is an all-in-one dispensary software solution. So we are your one-stop shop. So say Eric, if you wanted to open up a dispensary one day and you need software solutions to keep you compliant, you need a point of sale, an e-commerce solution, inventory management and a compliant reporting, we can provide that to you along with compliant payment solutions. And we also offer insurance. So everything you need to be a compliant dispensary operator.

EA:
What drove you to this industry?

AF:
Now, Eric, I would actually, I'm curious to know what drove you to the industry too, but I think what drove me to the industry is similar to what drives everyone to this industry is that inherently we all want to be part of something bigger than ourselves. You don't really get a lot of opportunities in life to be part of an emerging industry, to make history. And I would just love that opportunity when we're all old and gray and looking back on our lives in this moment and to just point to this one thing, whether it's in New York or wherever we are at that time. To just point to something and be like, "I played a small part in making this happen." So before we get to the next question, I would love to learn from you, Eric, what drove you to this industry?

EA:
Well, Anne, I'm already old and gray, so it's different from me. But like you said, I think it's so rare to be involved in the industry so early on and things move so quickly in this industry, you really got to be kind of on your toes and you got to be kind of nimble in the industry also. And I thought, in my view, trying to be involved in something from the ground floor was so important.

AF:
Yeah.

EA:
And so interesting to be able to do that. So yes, that's how I got involved in the industry.

AF:
Love it.

EA:
Now, Dutchie was involved in creating the Bronx Dispensary Showroom. How fun was that to be involved in that and how many people got to see that?

AF:
Oh my goodness, it was so much fun. A lot of sleepless nights. Not too much sleep, I got, during the eight weeks leading up to that. But for those listening who are not familiar with the Bronx Dispensary Showroom, it was a collaboration that Dutchie did with the Bronx Community Foundation. And through that, the Bronx Cannabis Hub where Desmond Lewis, one of the co-founders of the Bronx Community Foundation, him and I, we were talking one day and they were setting up this incubator and accelerator program called the Bronx Cannabis Hub. At the time, the Bronx Cannabis Hub was representing about 40 card applicants. And while the hub was really good at communicating and teaching the theory of the cannabis industry, a lot of these folks, they had actually never been inside a licensed legal adult use cannabis retail dispensary before. And then I shared with Desmond that in my past life, we had done these mock dispensary showrooms just at the time to get community and neighborhood and regulators bought into the idea of having a dispensary in their neighborhood.

And through that, we came up with the Bronx Dispensary Showroom. It was at the historic post office in the Bronx. And yeah, it was really fun. We had, gosh, I think at least, I mean, we had over 2000 RSVPs. I think there was nearly a thousand people over a three-day time, who came to visit, got a tour of the showroom. We had many elected officials, including the Bronx Borough President come in and say a few words. And really, really exciting, not only for the Bronx but for the entire industry. And it was really important to me to have an event like this, not necessarily always in Manhattan or Brooklyn, which is where you normally get a lot of the big events. It was important to me to collaborate with someone like Desmond and the Bronx Community Foundation to bring something like this to their neighborhood.

EA:
The program you used to create the Bronx Dispensary Showroom, are you expanding that program or taking it on the road?

AF:
Yes, actually. I'm really glad you asked, Eric. So the Bronx Dispensary Showroom, it was really successful, but the number one piece of feedback we got was like, "OK, where are you taking it next? Or you need to take it here, you need to take it upstate or to western New York." So I'm super excited to say that we have since evolved the Bronx Dispensary Showroom into the official New York State Dispensary Showroom Tour. So we are taking this on the road. It will be a traveling dispensary showroom where we're taking it, we just took it actually to Mount Vernon. We're taking it to Buffalo next and Rochester Mid-Hudson. Where else? Queens, and then we are wrapping it up in the Bronx. And I'm also really excited to announce that after the Dispensary Showroom Tour, we will be donating the dispensary showroom to the Rochester Library.

They are, I believe, collaborating with CWI, the Cannabis Workforce Initiative. They're opening up a cannabis career center there. And we are going to be donating the dispensary showroom materials to support the Rochester Library Cannabis Workforce Initiative and just the initiative for a cannabis education and workforce development. And that is really a big thing to our strategic partner in the dispensary showroom, Temeka Group, they're one of the construction design build firms who were also awarded in New York to build a lot of these licensed legal dispensaries. So we have them to thank for that. And at Dutchie, we are also all about supporting cannabis education and doing what we need to do to help dispensary operators succeed. And education and workforce development is a big part of our mission to support and provide safe and easy access to cannabis as well.

EA:
Anne, that's focused right now in New York State, does a program like that lend itself to go to other states as well?

AF:
Yes, we have talked about it. So really, what we're doing is that we're piloting this initiative all across New York State. We have been gathering analytics and data to see if we can lend this self to other new markets and other states as well. So stay tuned. Maybe I'll be lucky enough to get another invitation to come back to your show and I can give you an update.

EA:
Great. How hard is it to create software addressing legal compliance with a compliance falls to each state and each state can have its own rules and regulations?

AF:
It is definitely not easy. I think, at Dutchie, we are very grateful to be in a position where we have a really, really talented team. We have an entire legal and compliance team that has direct relationships with each state and the regulators from that state. They've got a really difficult job and our team recognizes that. So that team led by my colleague, Bryan Barash, him and his team are in regular communication with the regulators, collaborating and making sure that we stay up to date on all the regulations to make sure that our software keeps our customers compliant.

EA:
So a working relationship with state regulators is a must, right?

AF:
I would say so. And the regulators have a really, really difficult job. And I think that maybe a misconception is that the regulators are out to get you or they want to ding you for not being compliant. And that's really not the case. They, like all of us, want this industry to be successful. So it really is looking at regulators more as a partner instead of someone that will give you grief.

EA:
Now, New Jersey rolled out a little bit earlier, or earlier than New York state, obviously. How is New Jersey's rollout?

AF:
New Jersey's rollout was definitely very, very different than what you're seeing in New York. So just to contrast it, in New York, you're seeing a lot of these card licensees rollout. And so with these licensees and for that license, in order to be qualified, you had to have been previously just as involved and you now own a profitable successful business for at least a few years. So that's a very specific license that caters more towards social impact and the independent entrepreneurs.

In New Jersey, I believe it was on April 21st, a lot of the ROs, the medical operators in New Jersey, they were actually able to open and at least get early entry and be more first to market. Meaning that if you were previously a medical operator in New Jersey, you had first dibs at opening up an adult use dispensary, which is a very different approach. And then furthermore, New Jersey, they do have a type of licensing stage called conditional licensing for priority applicants falling in several different categories. And that gives you, if you have a conditional license, you do have time to look for real estate. Real estate, as we know, is a tricky thing to accomplish. So New Jersey's been really interesting. I don't know if we've figured out New Jersey yet, but it has been very different than New York's rollout.

EA:
Do you expect their market to continue to grow in 2023, specifically in New Jersey?

AF:
Yeah, I think that you'll start seeing, I mean, already a lot of the annual licenses come out. So with an annual license, one of the conditions is that you already need to have real estate. So those annual licensees, they are opening up a lot quicker than someone with a conditional license. So definitely, I think there was just a new batch of New Jersey licenses that just got announced. So you will see New Jersey picking up steam for sure.

EA:
Now, you talked a little bit about how New York did it and New York did it a little bit later and they tried to use the good things that other states did while passing on the stuff that really didn't work in other states. And in fact, New York opened its first dispensary, opened at the end of December, which I guess kind of met their initial guidelines of wanting to have a legal dispensary open before the end of the year. Did New York do it right?

AF:
I think it's still too early to say. I know that New York has taken a very, very different approach and the intention is right. What I will say about New York, just working in New York quite a bit and living in New York part-time now, is that there is a certain grit and tenacity that you see and a certain hustle you see in New York that you don't really see in any other states. And I'm Canadian, and you definitely don't see this in Canada. So I think depending on who you ask and what lens you're looking it through, I think right is such a subjective term. New York definitely is doing it different. And I do think that, whether it's 10, 20, 30 years later, we will look back in this moment and look back and see how New York rolled it out and it will be a benchmark for others for years to come.

EA:
You talked a little bit about real estate. Does the real estate exist for new dispensaries to open?

AF:
Ah, that's a good question. So in New York specifically, real estate has always been really difficult. And in terms of having enough real estate for new dispensaries to open, I think, and we've talked about this with other industry professionals, that there is that problem of the illicit bodegas. And I do want to differentiate, there's a really big difference between the illicit bodegas and what we call the legacy market. And what I'm talking about specifically are these bodegas where they're taking advantage of the fact that New York cannabis is legalized now and they have unregulated product selling in these stores. And I think, I don't think I'm the only one who thinks this, that if we were able to shut those down, that would free up more real estate for the licensed legal dispensaries to open and for the licensed legal operators who do want to do cannabis properly in New York. It would kind of kill two birds with one stone. That's what I think.

EA:
In addition, when you talked about the legacy market and the delis and bodegas selling the cartridges and the product, forgetting about real estate, is closing down that market vital for the legal market to survive and thrive?

AF:
Yes, I do think so. Just being in Vancouver, BC in Canada, where there's BC Bud, there's still a big legacy market here. And then with the unregulated market, all you need is someone to get sick from consuming maybe one of these unregulated vape cartridges and then all of a sudden it's bad for the entire industry. So absolutely, I don't think it'll happen overnight, but definitely in order for the licensed legal market to reach its potential and really, really thrive, there definitely needs to be something done about the illicit market. Absolutely.

EA:
In New York, it's very interesting, you have a handful of legal dispensaries in New York state right now, but if you walk down 7th Avenue in Midtown, south of Penn Station, you'll see a dispensary or someone selling cannabis on every corner.

AF:
I know. And then even some of these shops though too, when you think about the illicit shops, it's you think that they look really maybe sketchy or these old school bong shops, but some of them actually look really nice. And as an average consumer, we forget that since we work in this industry that we're always living, breathing and eating the cannabis industry, but the average consumer, they'll look at a shop and they'll see a headline that says, "Oh, New York has legalized cannabis, which means that every shop that I go to must have legal cannabis. Otherwise, why would it still be open?" And that's the big question.

EA:
And the legal dispensaries incur so much more cost being legal as opposed to in a illegal shop. And as you pointed out correctly, the products go through review and check and testing to make sure the product is safe for consumption. In the illegal dispensaries or the legacy dispensaries or the bodegas, the products don't get the same review.

AF:
No, there's definitely, they don't have the same rigor at all. So it's a public health and safety thing. Right? And again, all it takes is one person to unfortunately get sick from consuming an illicit product that hasn't been tested and then it's bad for the entire industry. So I'm really hoping that that never happens.

EA:
Every day seems like, well, not every day, but certainly we see more and more states legalizing adult use recreational cannabis. What new markets do you see on the horizon?

AF:
Well, I mean, I don't know if it's a net new one, but you're seeing a lot more activity in Florida these days too. And then there's a lot of stuff happening in, you're seeing a lot of chatter now happening in Hawaii perhaps too, which I'm not mad at that. And you always hear some stuff happening in some parts of Europe. And I know that all of us from an international standpoint are excited at the potential of Europe, but I think we're still a ways away in expanding over to Europe.

EA:
Is branding important for dispensaries?

AF:
Absolutely. And when I talk about branding, I'm more thinking about the brand experience. So as the market develops, you want to give your customers a reason to come back to your dispensary. And as more and more competition heats up, absolutely. I think it's important. And it's also important to stay within the guidelines and the regulations when it comes to branding. I know it can be frustrating initially for legal dispensaries to have to follow such strict guidelines, but we have to remember we're at the infancy and at the beginning of New York legalization. And it's always a lot easier for regulators to start lifting some of the guidelines versus if we open it up and we're maybe a bit too free when it comes to branding regulations and guidelines, all it takes are a couple bad apples to maybe take advantage of it and ruin it for everyone else. But coming out of it, you can get really, really creative when you color within the lines, some pretty innovative and creative branding can come out of it.

EA:
Branding is also so hard because of federal legalization or lack of federal legalization. And the lack of interstate commerce makes it so much harder.

AF:
Yes, it does. And I mean, each state has different branding guidelines. Right? So if you are someone who maybe lives in a different state or maybe has done business in another state, you do need to check to see if New York has the same regulations or different. It does vary from state to state.

EA:
Do you think an ultra premium grade market or craft cultivation market will thrive?

AF:
I think so if the numbers work. And cultivation and craftdom, it's not my specific core competency, but what I am seeing in terms of the definition of craft, that at this moment is related to the size of the canopy. And really, it becomes a numbers game. Right? So there's power in numbers, and so when there's a certain level of volume production, your cost to produce per unit goes down.

But when you're restricting the definition of small batch and when you're restricting certain things that can really, really affect how much it takes to create and produce a product, then all of a sudden your cost to produced and your cost to manufacture goes up. And to mark that up to make even a little bit of a profit, by the time it gets to the end consumer, you could be paying potentially a lot of money for an eighth where the consumer could just go to a legacy product or go to a different. They're used to paying a certain price and for premium products. And I think in order for craft to thrive, and there is a lot of potential for that, the numbers just need to make sense.

EA:
The days of having stoners running dispensaries and cannabis companies are long gone. Are you seeing a more professional and mature industry these days?

AF:
Yeah, absolutely. I mean, I'm grateful enough to have said that I've been in the cannabis industry and specifically the cannabis tech industry for gosh, nearly seven years now. And I've told that that's almost equivalent to 70 cannabis years. And over the years, I've been lucky...

EA:
You don't look that old, Anne.

AF:
Thank you, Eric. And yeah, I'm grateful to say that a lot of the most hardworking professional people that I've met in my entire career are from the cannabis industry. So absolutely not only are cannabis professionals just really hardworking hustlers, they're also a lot of fun. But definitely in this industry, anyone who thinks that the cannabis industry is full of lazy stoners, it is not in the cannabis industry. I can guarantee you.

EA:
And I think anybody that thinks it's an easy industry is in for a rude awakening as well.

AF:
That is true.

EA:
My last question, will we get to the point where selling cannabis is similar to selling alcohol?

AF:
I think so. Again, I don't think that necessarily the regulations, regulating alcohol is very different than regulating cannabis. I understand why there are those parallels, but when you look at the make of alcohol and then you look at cannabis, ultimately cannabis is a plant, it's a living, it came from a living, breathing plant, whereas alcohol has not. And I believe that the culture in cannabis is also quite different. Right? You've seen a lot of people maybe who came from the alcohol industry to pivot and come into the cannabis industry and tried to run a business the same way they've run alcohol, and it's definitely not the same. I think the end user is different. And it's all about knowing who your audience is, attracting the target market. And I don't believe selling or regulating alcohol should be applied, necessarily applied, to cannabis. There are certain parallels, but we should definitely treat it like its own special industry because that is what it is.

EA:
Anne, do you think we'll ever have federal legalization? Or somewhere down the road, how long will it be before that happens?

AF:
Yeah. So I do believe that there will be a path to federal legalization. I think a lot of dominoes, a lot of things should need to fall in place first. I think there's other wins that could be earlier in the horizon, such as the Safe Banking Act and also the rescheduling of cannabis as well. I believe that that will happen before federal legalization, but that will ultimately pave a path to federal legalization. And I believe that will be, we'll be lucky enough that we'll still be alive to see it happen. That's my prediction.

EA:
Great. Well, thank you for joining me here today, Anne. And thanks for listening to CannaCast as part of the EisnerAmper podcast series. Visit www.eisneramper.com/cannabis for more information and podcasts. Also, please visit www.dutchie.com for more information about Dutchie and Anne. And join us for our next CannaCast podcast where we'll discuss other budding issues.

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