Jenny’s Baked at Home Enters NY State Adult-Use Cannabis Market
- Aug 30, 2022
In this episode of CannaCast, Eric Altstadter, Partner and leader of EisnerAmper’s Cannabis and Hemp Group, speaks with Jenny Argie, owner of Jenny’s Baked at Home. Jenny has been creating CBD products for several years and is now looking to produce THC products for the New York market. She had been a successful entrepreneur in the children’s furniture business before pivoting to the CBD sector.
Eric Altstadter:Thanks for tuning into this episode of CannaCast. I'm your host, Eric Altstadter, EisnerAmper's National Cannabis and Hemp Practice leader. I am joined today by Jenny Argie, owner of Jenny's Baked at Home, a Brooklyn-based small business that sells organic CBD infused products and is developing THC infused products for the New York marketplace. Jenny is an entrepreneur. Besides Baked by Jenny, Jenny ran and owned an international children's furniture company called Argington. She's also an avid tennis player and a mother of three. Jenny, thanks for joining me here today.
Jenny Argie:Thanks for having, Eric.
Jenny, how did you first start Jenny's Baked at Home?
JA:About seven years ago, I was diagnosed with breast cancer. And I had hailed from a... I had owned my own company designing and manufacturing modern children's furniture. And I decided that instead of using the traditional cancer curable methods, I guess, or common practices of chemo and radiation, that I would try cannabis in place of it. Mainly for the pain management, but also for the follow up treatment, the aftermath. So I surgically had it removed and then proceeded to use THC for pain management and then CBD came onto the market. So I couldn't find too many products that were health and wellness related, and I decided to design products around the food and beverage aspect of cannabis. So coming from 15 years of designing and manufacturing children's furniture, I was able to segue into products with cannabis. And that's kind of how it all came to fruition.
EA:How did COVID impact your business?
JA:COVID. I saw an upswing in sales during COVID, both with THC, but mostly with the CBD as people were looking for an alternative to both maybe alcohol, but also to help with the stress of COVID.
EA:With the Farm Act, CBD was moved to a schedule one and became legal. Why is selling CBD so different than selling cannabis?
JA:I think CBD is cannabis. It's just a different cannabinoid, but marijuana and CBD are two different methods in which the plant is grown. So we grow high levels of THC for marijuana and high levels of CBD or hemp or CBN or CBG. Schedule one is a classification that the government puts on drugs. And I don't think that there is a difference between cannabis, THC or CBD or THC or CBN. I think they're all cannabinoids, but the government has classified that THC is illegal and serves no health purposes whatsoever. They've taken CBD off schedule one. And the purpose for that was so that children who suffered from epilepsy could have access on public property to their medication. So I believe that the plant is one and the same, but right now we're going to keep the THC federally illegal to all the states, legalize it, and then the federal government will come in and probably legalize it federally.
EA:You're adding THC infused product to your line. How are you able to pivot into those products? Was it difficult?
JA:Well, I haven't done that yet. New York is getting ready to go recreational. We have decriminalized it in New York. There's an initiative for adult-use in New York. However, we won't see dispensaries in New York for the next maybe six months to a year. So I will be R&D'ing THC products in the next couple months preparing for the dispensaries to open, and that is a very large pivot. It's a economical and a financial burden upon me to scale a facility that was operating in one method to transition to another.
EA:How different is the manufacturer of a THC product, as opposed to a CBD product?
JA:The manufacturing is very similar. It's the same plant. It looks exactly the same when you extract it. When you extract CBD to distillate and you extract cannabis plant that's high THC to distillate, the oil looks exactly the same. Obviously, there's one is intoxicating, THC, and then one is non intoxicating, CBD, so you have to know your dosage and make sure that there's no discrepancy when listing your dosage, but it's very similar.
EA:Cannabis companies often have problems getting banking and other financial services. How have you been able to grow your business considering these difficulties with banking and credit cards, for example?
JA:Banking is an issue because marijuana is federally, illegal. CBD is not federally illegal as you pointed out, the Farm Act, however, banks still don't want to bank with CBD companies. I guess they don't feel protected by the government. How difficult has it been? Maybe I'm on my fourth or fifth bank. When a bank is purchased or merges with a larger bank, they typically do a sweep of pornography, gambling, and cannabis. And then you're booted. And then you have to find another bank and banks typically charge a lot to bank with them. They charge an exorbitant monthly fee. We call it the marijuana tax. And credit card processing agencies are exactly the same. Once they're purchased by a larger company, then they do a sweep and you are dismissed. It's a lot of leaping from one to the next.
EA:Jenny's Baked at Home is a woman-owned business. How hard was it for you as a woman to be in this industry?
JA:In the very beginning, it was a very kumbaya experience where women were valued and championed cannabis for the healing aspect of it. As it became apparent that there was a lot of money to be made in the cannabis space, women were pushed aside and women typically only... I don't even know if they get 5% of capital raised, so women definitely didn't take the lead where they... as before, it was not such a money making industry, the women were leaders because of the healing aspect of it. So it's been difficult to get capital. It's been difficult to get infusion of capital to scale the company. So that's been difficult. But other than that, I've been very welcomed in the industry.
EA:Do you feel that women and minorities are adequately represented in the industry or does the industry need to change to be more inclusive?
JA:Women and minorities are not represented. There is a lot of social equity play and initiative to make that a forefront. But again, money makes the world go around. So if women and minorities are not getting the capital raised that's necessary to grow the businesses, then they won't succeed. So if banking and service merchant issues are a problem, you can imagine what it's like to get private funding for minorities and women, so it's a catch 22.
EA:Let's go back to New York for a little bit with all these references to the New York marketplace and how big it has the potential to be. Where do you see the New York marketplace in relation to the US marketplace for THC?
JA:New York has a lot of barriers that they're going to have to overcome. We have a very large legacy a.k.a. black market in New York. I think one of the largest in the country. So understanding the illegalization of cannabis and maybe not thinking of it as two different components might be a good approach. So I think we have a lot of learning to do from what's from the legacy dealers and the social equity or the minorities that have kept cannabis alive. Instead of condemning it, I think we need to work alongside of it. We need to really concentrate on our taxes that we don't overtax to the point where people can't... where it's draconian and we can't stay in business. So I think both on New York loves tax and New York loves to make it a little difficult just for small business owners to rise up, so I think New York has a lot of learning to do both from the legacy market and from other markets that have overtaxed.
So I think we're in a great position. We're a highly populated, a condensely populated state that can have a very big, positive impact with cannabis, but we have to make sure that we're paying attention to the mistakes that other states did and also valuing the players that have gone before us.
EA:How is the New York licensing system? Is it working as it is or does it need to be overhauled?
JA:Well, I don't know about an overhaul yet. We're such in the early stages. I think the OCM, the Office of Cannabis Management, had to form quickly, and I think they're doing a fantastic job getting up to speed with probably a lack of staff, especially coming out of COVID, not having a lot of support. I think we'll see how it rolls out with the first round of dispensaries. But currently, they've taken all of the hemp cultivators, a.k.a. growers, the processors, manufacturers, and distributors for CBD and transitioned them for a conditional two year adult-use. So a lot of us are up and are already starting to prepare for the market, but again, we're all coming out of a very distressed hemp market so a lot of people are financially strained. There hasn't been a lot of support for this side of the industry. They're going to give more support to the dispensaries. So the system I think is working. I'm not sure that they're fully aware of how difficult the transition is for some of the smaller players. So we'll see how it transpires
EA:With New York legalizing adult-use recreational cannabis, what impact will that have on the medicinal and CBD markets?
JA:Well, CBD is a different animal than THC. CBD is only medicinal. There's no recreational aspects to CBD. It doesn't hit the receptors in your brain. It only hits the receptors in your body, so it's not intoxicating. So I think CBD will always have its own place like ibuprofen, but THC has a recreational side. It has a strong medicinal side as well. So I don't think it's going to impact the CBD market. If anything, it might support the CBD market. Once THC is separated from it and people can really, really delineate the difference between CBD and THC, which I think people still are a little unsure of about all the cannabinoids and the uses.
Medicinal, I think eventually all the medical dispensaries will be recreational. However, going forward, if we are going to use THC medicinally, we absolutely need to start educating the public and the people that are prescribing or selling or advising on how to use THC to use it medicinally. Recreationally, we can cap the dose and make sure service sizes are low so that there's more responsibility from the manufacturer around that. But for medical use, we need to continue to educate doctors, practitioners to how to prescribe it.
EA:Jenny, the way the current rules read, cannabis, really can't cross state lines, state borders. How different is it to manufacture and market in New York, as opposed to say California or Colorado?
JA:Right. So THC is federally illegal and marijuana, so you cannot cross state lines. Marketing in one state, I think the analogy I give is, would you market the same to an Italian as you would to an English person, to somebody from UK? California is very different than New York. The perspective on product is different, culture is different, population is different. Maybe even your ethnic infusion is different in an area, in a different state, so I think understanding the demographics. And New York is a condensely populated area. We have the boroughs. And even the boroughs going from Harlem to Brooklyn could feel like you're going to a different country. So I think understanding your demographics in New York versus the demographics perhaps in Ohio might be very different. For instance, maybe the demographic that spends might be 30 to 40, where in Missouri might be 20 to 30. So I think that marketing is going to have to be tailored to each state and understood more than I think what's happening right now. I think right now it's just being all thrown into a pot and stirred.
EA:Yeah, no, I would agree. What products do you think have the bigger potential for going forward? Is it beverages or is it edibles or is it something else?
JA:Currently, it's difficult for beverages to get any traction. There's not a market for it yet, meaning there's nowhere to sell it per se. You can sell beverages in dispensaries, but there's very few consumption lounges. So until it's easy for you to walk into an establishment like a bar and purchase a THC beverage, I don't see THC beverages really taking the lead. However, edibles is rising. That's definitely a rising category in cannabis. I think number one is still smokeable, combustibles, flower, pre-rolls, vapes. Vapes aren't as popular as they used to be. So I think currently right now, the number one selling is premium flower. Then on the rises pre-rolls, vapes next to it. Edibles is definitely coming up quickly to the race. And beverages, once beverage has a market, will dig and succeed very much so.
EA:Jenny, my last question today is where do you want Jenny's Baked at Home to be in five years?
JA:I would love Jenny's Baked at Home in five years to be the leading food and beverage cannabis company in New York and globally.
EA:Great. Well, we believe in you and we have the same faith and we hope the same hopes that you have Jenny. And thanks for listening to Cannacast as part of the EisnerAmper series. Visit EisnerAmper.com/cannabis for more information and podcasts. And join us for our next Cannacast Podcast where we'll discuss other budding issues.
Transcribed by Rev.com
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Eric Altstadter CPA is an Audit Partner and Chair of the firm's Cannabis and Hemp practice with over 30 years of experience working with public companies and privately held businesses
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