My first experience with the cannabis industry was way back in 2012. I was living in Seattle, working in advertising, and I had the opportunity to brand one of the first edibles that was coming to market. I had a really great experience with that and decided to leave my agency and start a little cannabis branding outfit with an art director buddy of mine. We successfully branded like five different edibles and cannabis brands in that market. If you think about how challenging it is today to raise funds and all that kind of stuff, think about how challenging it must have been in the very first market, where there was a lot more uncertainty. There just wasn't enough money flowing in that industry at that time for us to make it as an ancillary business supporting the industry.
Even way back then, what was really exciting for me and my art director partner was we were convinced that somebody was going to be the Starbucks of cannabis. Somebody was going to become that iconic brand that is synonymous with the product. Somebody was going to be that iconic brand who really pushed the needle forward in terms of reducing stigma around consumption of cannabis and creating a welcoming retail environment. It's really interesting that in the almost 13 years since we recognized that opportunity, that has not been realized in cannabis. That's for a couple of reasons. Cannabis is really fragmented because it's state by state. So it's very difficult to create the licensing deals or the distribution network in order to become that household name across the country.
But what I see right now with hemp is a lot of those challenges are falling to the wayside because there's no such challenge with having to go state by state and build it up one at a time. You can build a national brand online very easily. That's kind of why I'm here right now.
What is the relationship between No Coast Wellness and Hemp House?
No Coast Wellness is the parent company. Hemp House is our hemp retail brand. We've got six different edible lines, as well as our commercial kitchen, where we're doing co-manufacturing for dozens of brands across the state.
Where would you like to see this business in two to five years?
Certainly in more markets than Minnesota. Beginning in April, we are relaunching our website. We've invested tens of thousands of dollars into technology that's going to allow us to sell to 37 different states compliantly. We took the compliance part of operating this business extremely seriously. We look very deeply into every state's rules and regulations and we filter our entire inventory of products down to just what we can sell compliantly. Sometimes that means it's only CBD. Sometimes that means there's no drinks. Sometimes that means there's no chocolates. But we are flexible to what the states want to see in their markets. We aim to be good actors and we think that is the best way forward.
Do you plan to pursue a cannabis business license?
No. For Hemp House, we built the No. 1 retail destination for low-potency hemp products in the state. We do $6 million a year in revenue. It doesn't really make sense for us to walk away from that revenue, walk away from that expertise, and put jobs in jeopardy for us to take a gamble on cannabis. We do have a dispensary concept that we will likely be licensing out to folks, but we're not going to actively operate a cannabis business.
Are you concerned that there could be more regulation of hemp products?
I think that there needs to be a level of regulation in place for the consumer to be fully confident that what they're getting is safe and to be fully confident that what they are getting is what it says on the package. There needs to be a level of regulation in place so that we can keep these products out of the hands of minors. That should be where regulatory action is focused. I'm worried about more regulation coming mainly because of who is at the helm of these regulations. These are people who don't understand the product. These are people who misinterpret their own law. These are people who have proven to be anti-business and anti-industry at every turn. So, yeah, I'm concerned about regulation. I'm concerned about overregulation to put a finer point on it. But am I concerned about regulation in general? No, there should be potency caps on certain things. There should be limits to what you can do.
How do you think things are going with the rollout of the adult-use market?
I think things are going poorly. I think we have tried to tinker around the edges too much and really tried to make a unique market here in Minnesota. Unique sounds good, but the reality is this is one of the most complicated regulatory systems that you can put in place. At every turn, we've chosen to try and do something different without really respecting the precedent of other regulators and other state markets that have already gone down this path. They have to figure out for themselves that it's a bad idea and then walk it back.
Do you feel the state is delivering on the social equity promises that were made when this bill was passed?
No. To the contrary, I think that they have done social equity applicants a disservice at every turn. I lobby for the Black Chamber of Commerce. I was incredibly active in trying to shape the social equity laws. I think we know for a fact that lotteries in particular offer more hazards for social equity applicants than any other method. We know that the only benefit to a social equity license was getting a head start. That head start has been eliminated. Originally, when we were talking about social equity, we were talking about folks who were harmed by the war on drugs. That was the equity that we were seeking to create within our society. It has moved well beyond that. It's every veteran, which is what opened the floodgates for all these out of state applicants.
So when the OCM or the governor goes on television and says, “We're building a marketplace that is designed for the benefit of social equity applicants,” I don't know what the [expletive] they're talking about. What do you mean? What benefit? I don't see it. I don't see it in the license itself. Again, we advised them that the 65% [ownership] requirement was too onerous. Cannabis is a cash-intensive business. People who are social equity applicants tend to be from a lower socioeconomic class. They don't have the hundreds of thousands of dollars in their bank in order to get this business up and running. So you might give them a license. How are they going to get the investment that they need in order to open their business? They have all these pipe dreams about all these grants that are not at all up and running or funded yet. Maybe we'll get this grant funding together, in a few years' time, but I think that the 65% requirement is going to choke out all meaningful progress that could be had by these social equity entrepreneurs.
The draft tribal compact that is circulating would confer a number of privileges to tribally owned businesses that state-licensed businesses are not going to have. Do you see an issue of fairness there?
Of course. I think the bigger issue is operators and advocates have been seeking this type of dialogue with the state for years and we've been rebuffed. We don't have the same access as the tribes to sit in a room and have a back and forth and be like "this is what we feel like is fair.” The tribes did have that access, and they used it to their benefit and, honestly, hats off to them. I wish that we had that same opportunity to have a conversation as they did, because I think what it is clear is that the tribes looked at the way that the OCM was structuring the market and said that doesn't make any sense. We've got to have vertical integration. We've got to have some assurance that we're going to have these licenses. We've got to be able to operate all these things. And they got the concessions they were looking for. The challenging thing that I have and I know that the challenge that a lot of lawmakers have is the notion that they negotiated these compacts and then on the matter of taxing the cannabis, they just said, “Maybe we'll get to it later,” which seems insane.
On a lighter note, what is your favorite product that you produce?
Definitely the No Coast Pâte de Fruit. We decided to start making our own edibles about a year and a half ago. A lot of folks when they decide to make their own products, they're getting ready-to-melt gummy mix in a bag. Add flavor, add color, add distillate. Done.
We went a really different path. We asked among our foodie friends, “Who's one of the best dessert chefs in town?” And we found a leader in Nathel Anderson, who now runs our kitchen. She’s worked at James Beard award-winning restaurants around town as head patisserie chef. She's worked at Estelle and Patisserie 46. She's worked at St. Genevieve. She is classically trained in French dessert-making. So our Pâte de Fruit’s flavor profiles are, like, vanilla, pear and balsamic vinegar or raspberry rosé. These are more adult flavors that are geared for that adult flavor palate, vs. some of the stuff that is just a sugar bomb. What really sets our approach apart is that we're making products that, even if it weren't dosed, people would still buy. It's that good.
