High Spirits: The Cannabis Business Podcast
Hosts Ben Larson and AnnaRae Grabstein serve up unfiltered insights, reveal their insiders' perspectives, and illuminate transformative ideas about the cannabis industry for people who want to make sense of it all.
High Spirits: The Cannabis Business Podcast
#049 - Gaining Clarity on Mainstream THC Distribution w/ Scott O'Malley, CEO of Clarity Company
Unlock the secrets of effective THC distribution and brand presence in our latest episode! We start by breaking down the most recent developments in the cannabis industry, including a GOP congressional panel's controversial attempt to block marijuana rescheduling and Tennessee's strict ban on Delta-8. We'll also discuss Walgreens' bold decision to stock CBD products and the FDA's looming decision on Juul vaping products. Joining us is Scott O'Malley, CEO of the Clarity Company, who offers unparalleled insights into the burgeoning hemp-infused beverage market, sharing the company's growth story, distribution hurdles, and team-building strategies.
Discover the art of building a powerful brand presence through meticulous distribution strategies. Our discussion includes the importance of strong relationships with distribution managers and marketplace representatives and how consumer research fuels our marketing decisions. Learn about the pivotal role of educating retailers on product differentiation and implementing marketing programs designed to boost sales. We'll also delve into the collaborative planning needed to forge effective long-term strategies, ensuring success in a constantly evolving market.
Finally, we tackle the complexities of state-specific THC distribution strategies and the promising future of THC beverages as alcohol alternatives. Scott sheds light on navigating different distribution models, evaluating partners, and the medicinal benefits of THC drinks. Hear about the unique regulatory landscape, including Minnesota's proactive legislative fixes and Iowa's peculiar serving laws. Wrap up with an engaging Q&A session, where we express our gratitude for your continued support and share an exciting moment that underscores the growing influence of our show. Stay curious, stay informed, and keep your spirits high until the next episode!
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Hey everybody, welcome to episode 49 of High Spirits. I'm Ben Larson and I'm flying solo today. We're recording Thursday, june 27th 2024, and we have a great show talking about THC distribution in the mainstream. We got on my friend Scott O'Malley from the Clarity Company and we're going to dive into all things distribution in the mainstream THC alcohol channels. But before we get there I'm going to do my little thing. I don't fly solo too often but I thought I'd go through some recent news just to kind of talk about what's top of mind, what's guiding the way I am thinking.
Ben Larson:So let's bring up some news articles here. We have Marijuana Moment reporting on a GOP congressional panel that's moving to block marijuana rescheduling while amending medical cannabis riders with penalties for sales near school. Thank you, kyle Yeager, for the headline there. That's a little concerning. It just goes to show that rescheduling is not yet a done deal. There's a long way to go before we see that implemented. The other concerning aspect here is that without a coal memo, this is kind of the first, or maybe not the first, but another step that we see in federal overreach into the regulated markets. Hopefully this gets stopped dead in its tracks, but we will see Certainly something worth tracking. In addition to that, new Tennessee laws are tackling regulations and banning Delta 8. And I think this goes into effect July 1st. Maybe we'll talk about this a little bit with Scott. So this is hemp-derived Delta-8, become famous a lot for its chemical conversion. But Delta-8 is a compound that is naturally found in the plant and so, without any defined limits established in this legislation in Tennessee, it leaves a lot of ambiguity what that means for full plant extracts. So again, just as we've been talking about in the news, the pendulum is swinging, and when it's swinging fast and hard and we don't have responsible regulations going into place, there are some very confusing ambiguities that can be implemented.
Ben Larson:Moving a little bit away from the direct industry, there are some things that are happening kind of tangentially. That, I think, is interesting signals, and the first one that came up for me and Anna Rae, who is sick today. Sorry, I didn't acknowledge that. Anna Rae is out sick. She wishes she could be here. She's sorry she's not here. This news article came from her as well as the insights. But Walgreens is bringing CBD into their main shelves, so they're identifying space in the store, they're pushing things aside and placing it where they believe it belongs and in this place, in this case topicals, pain relief and whatnot. But interesting to see them taking this move and what it might mean for the future, future product line extensions, cannabinoid extensions. But does bring up an interesting point about where do hemp, cbd and other compounds belong in the source. Watch that as it continues to develop. Similarly, we see the FDA potentially reversing their order on Juul vaping products as we start to see retailers struggle about where and how to sell vape products, largely in the hemp space. Bringing nicotine vapes back into vogue, we will see, but again, maybe creating space for a future cannabis and or hemp industry.
Ben Larson:So that's my run of the news for today. I won't bore you with it anymore. It's just what's kind of top of mind. I'm going to jump right into it and get Scott on the line. Scott again is the CEO of the Clarity Company. They're low dose THC hemp infused beverages. Born out of the homeland of Minnesota. Scott is just outside the Twin Cities of Minnesota. Scott is just outside the Twin Cities. He's also a seasoned entrepreneur with over 25 years of experience across various industries. His expertise in strategy, sales and client relationships has positioned him as a visionary leader, driving his company to innovate in this dynamic beverage space. So, scott, welcome to the show. Super excited to have you. Thank you so much for taking the time this morning. How are you doing, man? How's the week going?
Ben Larson:The week's going well.
Scott O’Malley:I appreciate you having me on here. I'm excited to have a conversation. See where it takes us today.
Ben Larson:Absolutely, catch us up to speed, tell us a little bit about the company. How long have you guys been operating? What was the genesis of you jumping into this wild wild west of Hemp THC?
Scott O’Malley:And, yeah, let us know a little bit about the size of your team before we kind of jump into the strategy and Delta eight business previously, and when we got word in the middle of May of 2022, that that the law was going to change in Minnesota we had been experimenting with a beverage for CBD and potentially Delta eight, we pivoted as fast as we could and by August of 2022, we had a better first skew ofU of Seltzer in the marketplace. We tried to self-distribute for about a month, figured out quickly that that was difficult and we weren't very good at it.
Scott O’Malley:So we connected with a distributor network and started putting that process together. It took a little while.
Scott O’Malley:It took a few months to get all of that done, but we've grown quite fast, I mean it is a wild wild west, and it certainly was the first year they put some fixes into the law that began in July of 23, which made it a little bit easier for us to maneuver in, meaning that there were some rules and regulations that helped clear up some of the confusion, particularly at liquor store and on-premise bar restaurant levels. Right now we've got six full seven sorry full-time employees and then about 14 part-time people that serve various functions for us. So as a startup you're always about two people behind, but you kind of wear a lot of hats in the beginning and then as you grow you start to fill in with some experts in different categories.
Scott O’Malley:As you're building your team. Who are the?
Ben Larson:kind of like profiles that you're looking for?
Scott O’Malley:Are you pulling in directly from beverage categories? Is it helpful to have people with hemp and or cannabis knowledge? What are some of the kind of profiles of some people who've been in the beverage industry their entire lives? Um, and so you know, we've got 25 35 year veterans of the beverage business and I would say that there's a vernacular to the beverage business. That's that's.
Scott O’Malley:You don't find in some of the other industries a lot of acronyms. I'm often stopping conversations saying, wait, wait, what does that mean? Um, so we have beverage industry veterans. That way we can speak the language with our distributor partners or with other brands. And then, beyond that, we look for people who have retail experience. So building brands, creatives, copywriters, social media, all of that kind of comes together as you try to build a brand and you really have two relationships. You have a relationship with your distribution partners and then you have relationships at some level with the consumer of trying to help drive your brand. And then you kind of get that in-between stage where you're dealing with retailers, whether that's on premise or off premise, trying to put programs together, all in the name of building the brand and increasing velocity in all of those locations.
Ben Larson:I've often said that the cannabis beverage or THC beverage space is inherently different than all the other form factors that you find in a, say, a dispensary, right, um, and it's not necessarily a thc alternative, it's more of a beverage alternative and so, like you know, focusing on building teams that are that reflect more of a classic beverage company versus the, the diversity that you get in a in a typical cannabis or hemp company, um, earlier you were mentioning, mentioning kind of going from self-distribution into a more traditional distribution network. I'm curious actually. What it made me think about was kind of the nature of direct-to-consumer shipping, creating an online presence versus doing all the groundwork to do distribution. And I think there's a lot of conversation lately, even in the beverage category, which shipping beverage all around the United States is an interesting prospect of its own. But how are you thinking about direct-to-consumer online presence versus building the brand in the traditional retail market?
Scott O’Malley:You know, our focus has been and will be, you know, sales in the distribution channel. So through liquor stores, through grocery stores, through C stores. That's been our focus so far, and I think that there are other companies out there that are doing it differently, right? So you know, there are companies that start with distributors, convert most of their sales to direct-to-consumer and then they go that route. That's not the way that we're going to go. We have an online presence, but we don't push it very much. In my mind, you know, if your best customers are your retailers that are selling your product, and then you go online and you start selling it at a discount lower than what they could buy it for, or at the same price that they can buy it for.
Scott O’Malley:Suddenly, they're starting to look at you like, hey, are we really partners in this? And so for us it's been, you know, trying to kind of walk that fine line of making sure that we're not selling it at a price less than what our retailers can sell it for. Otherwise, you know, they don't have a lot of motivation to be pushing your product, and we need them pushing the product in order to build a brand. And so that's our strategy. It's not everybody every brand's strategy, but it's certainly ours.
Scott O’Malley:I think that building this network and kind of through this three-tier system makes a lot of sense. There's a lot of age gating in some of the rules and regulations around it that make us pretty comfortable and make our distributor partners pretty comfortable.
Ben Larson:I think you touched on something that's super insightful. When I worked with tech companies, we talked a lot about customer confusion and pushing founders to truly understand who their customer is versus who the consumer is. Can we dive into that a little bit? Can you talk about identifying the retailer as the customer and what that means and how that drives your decision making, and then we can kind of get into the interplay of also understanding who the consumer is but how that all relates back to being a better product for your customer who is the retailer? I think it's a really interesting concept.
Scott O’Malley:Yeah, so I think that we run parallel paths on trying to talk and communicate with our customer, who is really the retailer as well as the consumer itself, and so we spend resources at the distribution level, having communication with those area managers and those reps. We also spend resources and have people in the marketplaces talking to retailers, because, in the end, they're the ones pushing your product and they're helping you build the brand. Now, that doesn't mean that we don't also spend resources on the consumer, because we're trying to do that at the same time. So, yeah, our client is the retailer, that's the person who has our products out for sale, but we're also trying to communicate with the consumer, really digging into who the consumer is, why they buy our stuff, why they might buy someone else's products.
Scott O’Malley:And we're in the middle while we're getting close to the end of a research project on our consumers. So who's buying it? Who's buying other people's products? Why are they buying it, when are they buying it, what are they using it for, what's the occasion. And we're gathering all that information which I think, for the most part, we think we know, but we wanted to make sure that we knew, and so some of that consumer insight will then help us with retails will definitely help us with distributors, and then we'll kind of look at that and start to weave some of that information into our approach and our strategy when we talk about whether we're marketing to consumers or marketing to the or having communication with those retailers. So it's intertwined and it's not the same conversation.
Scott O’Malley:It's a little bit different when you're talking to a retailer than it is if you're trying to talk directly to a consumer and you know we've got programs that we do for both areas and kind of treat them both as clients.
Ben Larson:What are some of the mechanisms that you're doing to go out and get that data? Because what we hear a lot in the industry is that data is hard to find. Nielsen's isn't doing this, bdsa and Headset aren't doing it, so are you out there like pounding the pavement and gathering the data yourself, or are retailers helping you out with some of this?
Scott O’Malley:A little bit of both. So we're all doing our own surveys on a price and who's in the market and who's selling, and gathering information from our retail partners. We've done this research project into the consumer habits so we're gaining some insight there on you know kind of the buying patterns and the buying habits, what's helping them make the decision. I don't know that in this industry yet that any particular brand has risen to the top, or even a group of brands that are definitely defined in all of the different states that people are in as, hey, that's the top brand or that's one of them. We aspire to be there for sure, but I don't think it's there yet and I think there's a lot of curiosity. I think there's a lot of testing and sampling and experimentation within.
Ben Larson:The industry.
Scott O’Malley:So you know we're trying to stay in the forefront, make sure that we have as much data as possible. But you're right, it's hard to get to right now, it's not readily available. But you're right, it's hard to get to right now, it's not readily available and so there's a little bit of guesswork to it. Frankly, in this business, because it's still the wild, wild west, there's a lot of guesswork into into this category in general.
Ben Larson:Yeah Well, with the, the interest and the momentum that we see, I think it'll only be a matter of time before people start really wrapping their arms around this. I know there's been a lot of conversations and the associations and how do we, you know, create category codes for the products and get that into the data collection engines? But, speaking more tactically, when you're talking to a retailer and you're starting to get to understand your consumer better, what are some of the talking points that are and you're starting to get to understand your consumer better? What are some of the talking points that are helping you frame up the pitch to the retailers and distributors that are setting you apart? What are they asking for? What do they really want to see?
Scott O’Malley:Well, I think it's a number of things. One, it's education. So how do you sell it to the consumer? What's your product? How do you differentiate yourself from some of the other brands that are out there?
Scott O’Malley:And there's a lot of brands right now a lot of SKUs, right. So you know it's giving them the education of hey look, you know, our seltzers have zero carbs, zero sugar, zero sweeteners, zero calories, right? Our cold brew coffee product is very unique in that it has no preservatives, in a shelf stable, doesn't need to be refrigerated, and that it has no preservatives and is shelf stable, doesn't need to be refrigerated, and it's a really tasty product. So it's new and it's, yeah, you know, and it's unique, right. So I think they're looking for things that they can communicate to the customer that comes in on how to sell the product and what the highlights are. And then I think they're looking for activity how do we help them move more product more quickly? So that's with programming and end caps and displays and stacks and collateral and you know all the different things that we look at. We do some giveaways once in a while, we'll do some some rebates, um, that kind of stuff. So, um, you know, it's really just working with them and they know their customer way better than I do. They know their clientele.
Scott O’Malley:So we just have conversations, say, look, what do you think about doing this? What if we did this? And then we try to put a plan together with that retailer for a length of time. You know we often will do six month, one year programs where we're planning out that far and saying, all right, look in this month we're going to do this, we're going to take a little break, we're going to come back with this other product. You know we're launching our soda pot product next month, so that'll be new.
Scott O’Malley:We're launching some variety packs. Well, actually, some of them are today for the first day and then there'll be some more in the variety pack for for soda pot. So you know, you, you give them a little bit of lead time on on some of the things that are coming and they get excited about it and then you can put programs together. But you know it's really strategic about look, we want to be part of your display six months out of 12. It's not every other month, sometimes it's. You know, there are certain times that we definitely want to be the focus of someone when they walk into that store and they see our stuff. It's not necessarily always on sale, oftentimes it is, but that's not necessarily always the driver and then doing some interesting things that maybe are a little bit out of the box to attract the consumer and give the retailer something to talk about.
Ben Larson:I've always known that it takes more than a product right and I'd never understood that you can actually come in with those six or 12 month plans of like, really like this is what you're gonna expect from us as a brand and how we're gonna be a great partner. I think that's super helpful because I, you know, work with a lot of startups. They get super excited, pumped about their, their brand. They get it into co packing, they get it. You know they see it come off the shelf and then you know I don't hear this part of the business all that often and you know, hopefully, you know people pick up on this. I will give you huge kudos.
Ben Larson:I have a couple here in my fridge, like the Zero Cal product is fantastic. The flavors are there. You know there's a lot of high sugary beverages on the market. Um, some you know as high, if not higher, than you know a, a standard. You know Coca-Cola or something like that. Um, but your new products, that the coffee is my, my, I'm going to, I'm going to out my wife like this has become her favorite way to kick off a weekend is uh, get, get the get the energy and and the relaxation at the same time I know I like your wife um, okay, so let's talk about, like the, the, you know, putting this all into action and and getting the distribution you know.
Ben Larson:Uh, I hope you don't mind me saying clarity is not the biggest name going out there, but, to your point, there is not a biggest yet and there's a little bit of. We've talked offline. There's a little bit of rhyme or reason to how fast to grow a brand in the current state of the market, and a lot of that has to do with distribution relationships. Distributional relationships can get you very quick access to shelves and prominence, but it also could become a limiter at a certain point. So I want to kind of get into the kind of strategy and the dynamics about selecting your distributors and how fast is fast enough for, at least in your case, everyone's strategy is different. Not one is necessarily better than the other, but how are you thinking about it?
Scott O’Malley:You know it's actually changed a little bit, even in just the last two years. We were fortunate to connect with the Anheuser-Busch Network for Minnesota. They've been a good partner for us Network for Minnesota. They've been a good partner for us, and so you know we tend to look at those more macro type distributors.
Ben Larson:But you know when you think about distribution in a particular state.
Scott O’Malley:We really take it on a state by state basis and the team gets together and we talk about it and I've got four people that we all meet. They are all industry veterans, they know the distributors and that's the distributor you know. You can look at distribution and say, look, we can go with a macro distributor, we could go with a wine and spirits distributor, we could go with a craft distributor, we can go with an independent distributor. They all have their pluses and minuses. So, and then there's even now a few distributors that are popping up that are THC-centric distributors. So you know it can be a different strategy from state to state.
Scott O’Malley:It makes it a little bit more difficult because if you become used to sort of the template of working with a type of distributor, it's a little easier to put the programs in. You understand each other's business type of distributor. It's a little easier to put the programs in. You understand each other's business. When you switch back and forth from, let's say, an independent distributor to a macro distributor, the vernacular is the same but the implementation can be a little bit different.
Scott O’Malley:So when we look at it, we do it on a state-by-state basis and we have different strategies depending on the state and what we think that state's potential can be. So there are times when we look at a state we're like, all right, in that particular state we want to be one of the first five or six brands in that state, because it's important. We may look at a different state and say, hey, you know, we definitely want the right partner here and the right partner isn't quite ready to go yet, so we're going to hold off it's. We have that discussion every week about particular states and I will tell you that our team is often split on which approach to take.
Scott O’Malley:We don't always have the same opinion. So we kind of go through it and we and we look at all of the options and there's some nuances to to those different types of distribution and then what they might mean. If you do something in this state, how does that transfer to maybe an adjoining state or even one that that isn't adjoining? So there's more thought that goes into it than just you know, taking the first one that says yes. And so we've played it right a few times and we got it wrong a few times.
Scott O’Malley:And you just kind of learn a little bit and try to make the right decisions to make the right decisions, but in the end sometimes I think that that there may not be a wrong decision early on in this industry where we are now, because we're really in the infancy. Maybe we're a toddler now, but you know, it's the beginning of an industry that is likely to disrupt the beverage industry on some level. In Minnesota the liquor store sales are now reaching 10 to 15 percent of total revenue within the liquor store. It took craft beer 20 years to get there. It took THC beverages less than 18 months.
Scott O’Malley:It's a fascinating number. It gets everybody's attention and there are still a lot of distributors who are sitting on the sidelines saying, hey, I'm not sure about this, I'm not sure what this means from a legality standpoint with their federal licenses, and so putting that team together, putting that right partnership group together in a particular state, at times can be kind of like putting a puzzle together and trying to make sure that you know when you get to the end. You don't have three pieces that don't go anywhere.
Ben Larson:I'm sure you've seen some of the commentary on those numbers where people are saying, oh, this is. You know this is a novelty project. You know it's going to be a flash in the pan. You know a lot of dissent out there. But sitting in Minnesota, now that you've had, you know, a couple of years now of this kind of legalized market, what is your feeling or response to commentary like that?
Scott O’Malley:it might have been maybe a knee-jerk reaction to the industry in the beginning. I think that there's probably some validity to it in the beginning, because there were some bad actors within the space that were producing products that weren't really very good or didn't have the right potency or maybe didn't have the correct potency. But I think that what we see is that it's hitting the mark for some consumers and it's a replacement for alcohol for some people. It's a complimentary product for people who don't want to drink quite as much as they used to. It fits with the lifestyle for certain groups and, I think, the medicinal properties of it, which will become more and more relevant in the years to come.
Scott O’Malley:As more and more research is done and you can pinpoint, you know, maladies for pain, sleep, anxiety, women's health, that kind of thing. You'll see products that are specific to helping those. So I have a hard time believing this is a flash in the pan. It doesn't have this crazy amount of growth in 18 months and realistically it's really 12 months of where sales have really been booming. I just think it's something that the marketplace is looking for. It's a low dose product. It's not. You know someone who smokes every day. This is not their product. They can drink four of our drinks and go work out and feel fine. But for a certain part of the population and certain group of consumers this product has resonated and it's a void that that was in in people's, people's lives.
Ben Larson:Well, yeah, and you yourself entered the industry because of the medical benefits of the plant, and so that's an interesting connection to see that I um, you know I've found myself in a lot of arguments, conversations, whatever you want to call it, where people are saying weed is not a replacement for alcohol. Look how it makes you feel so differently. And I've thought about that a lot over the years, and there's two things that I've arrived at. One society has been forced into using alcohol as a tool to address various maladies, and often it's not the right tool, but it's the tool that you have in your toolbox that's legal. And now we're finding that, oh, maybe I shouldn't have been using alcohol for this, but a THC drink is a perfectly good tool and in fact, a better one that I can be using in these particular instances. So that's one aspect.
Ben Larson:So, like a alcohol replacement, I think people get hung up on that, as it's an analog alcohol which maybe some formulator out there creates a perfectly great combination of cannabinoids and terpenes to actually achieve that. I haven't seen it yet, but it is replacing where alcohol was being misused in society. But it is replacing where alcohol was being misused in society. And then the other aspect is that people are spending good money at a bar or restaurant and they want to feel something. They don't want to just spend that on a non-alcoholic drink no offense to those drinking non-alcohol or on the total sobriety chain. I love you, but people want something if they're spending money in a social setting, and this is again filling a void that previously existed.
Scott O’Malley:Yeah, I think it definitely is filling a void I personally really enjoy using them together. I like drinking our product or, frankly, somebody at one of our competitors' products, along with an alcoholic drink or two. But I can tell you that I drink a lot less alcohol and I've now thrown a clarity in there, so it's really having a water and I feel a lot better the next day.
Ben Larson:And as I get older.
Scott O’Malley:I do not like the hangover anymore and a lot of my friends and the people that I talk to, you know we used to maybe use that hangover or wear that hangover as a badge of honor, but I'm not interested in that anymore and so you know I can go out with my friends and they may have you know, I'm not going to put a number out there, but a number of of of beers. I'll have, you know, one of our drinks and maybe one drink and I'll feel the same as they do. You know I'm going to wake up the next morning feeling pretty good and they're going to wake up a little sluggish and it does make a difference. And I think that you know these products, particularly right now, are pretty easy for people to use for sleep. They're pretty easy to use to help with anxiety and pretty easy to use to mitigate some pain, without being specific about making claims about it, but people are experimenting with it and they're figuring out you know how to use it and how it works for them and the fact that it's fast acting, so it's it's kicking in at about the same time than an alcoholic drink would You're not getting. There's.
Scott O’Malley:So many people have stories, including me. You know, I tried a gummy and I waited 20 minutes. And I tried another one and I waited 20 minutes and I took a third one and then they all ganged up and suddenly I was not exactly feeling the way I wanted to feel originally. This is a much different deal now with with nano emulsified emulsion. It's fast onset. You're not getting what I call over the tips. Um, you know you're. You're getting to where you want to be for whatever that's for, uh, including if you want to catch a little buzz on it, but you can get to where you want to be and you can maintain that for as long as you want to without, you know, continuing to escalate, which typically, at least for for me, can happen in alcohol.
Ben Larson:I'm glad you point out the interplay of THC and alcohol. I'm a fan of the classic crossfade and it's been an interesting relationship between cannabis and alcohol and regulations. And I know Minnesota has gone on this journey themselves Like and I know Minnesota has gone on this journey themselves, like you know. I think there was a time where they said you couldn't serve a patron a THC beverage if they had consumed an alcohol beverage within like five hours. It was something ridiculous. That was you know, like you read it and like. This is impossible to enforce. How does this even get this far? What is the current situation in Minnesota? I think they've done away with that.
Scott O’Malley:Yeah, that law never went into effect. I think, the legislators knew that that was going to be a problem. They had told us early on that this will get fixed before it goes into effect. It was supposed to go into effect July 1st of this year. They fixed it in this last session. What I will say is they did a pretty good job in.
Scott O’Malley:Minnesota because there really were only three fixes that needed to be taken care of in the bill. They took care of those. That is not an issue anymore, mainly because it doesn't make sense and enforcement would have been darn near impossible.
Ben Larson:Man. What is that like? Living in a state where you identify issues and then you rectify them before it becomes law? That must be. It sounds like a dream.
Scott O’Malley:It can be but you know it's always a process right, and so you know you've got different factions that have different ideas of what they want to have happen. So we do spend a decent amount of time with conversations with our lawyers, conversations with lobbyists, conversations with the legislature in a number of different states. Now.
Ben Larson:As they put this together. I think that Minnesota did a really good job with this bill.
Scott O’Malley:I wish other states would use it as a template. Some are, but then you get the outliers who want to throw something interesting in. Like Iowa decided to make a four milligram per serving law when everywhere else in the country it's five.
Scott O’Malley:So that means everybody would have to change their packaging in order to be compliant within Iowa, but it also means you're now out of compliance in other states if you try to put more than two servings into a can. So I think I understand what they were trying to do, which was protect the smaller businesses and really the breweries and producers in the state of Iowa, but in the end they're really just punishing the consumer because a lot of the bigger better brands are not going to go there.
Scott O’Malley:It's going to change all their packaging. They're selling all over the country for one state.
Ben Larson:Well, not to mention that most small brands have aspirations of growing into bigger brands. And if you're an Iowa-based company, sure, you might have a leg up to get started, but the minute you want to scale beyond Iowa then you're totally handcuffed For sure, or at least as handcuffed as everyone else trying to get into the state. So there's been a lot of shifting legislation lately, both at the various state levels and at the federal level. Bring it back to the distributors a little bit. How is that affecting sentiment this year, or I said, well, this part of this year, so call it Q2 compared to like the beginning of the year.
Scott O’Malley:I would say that it has changed somewhat dramatically.
Scott O’Malley:I think that the distributor network, and it doesn't matter at what level, whether it's you know the macro distributors, wine and Spirits, you know the craft or the independents, they all at one time were looking at this saying, hey look, am I putting my federal license in jeopardy here? They've done their due diligence. You know, the National Beer Wholesalers Association came out with some guidance against it and so it took people a while and it took a number of the distributors and their lawyers to work through whether there really is risk here or how much risk. And in the end distributors started to feel like they had the information they needed and they were okay moving forward. They were not putting their national license in jeopardy.
Scott O’Malley:So that pace of acceptance and distributors looking at getting into the market in the last 45 to 60 days has increased dramatically. And I think part of it is that there were a couple of really big distributors throughout the country who looked at the category and said we're getting into it, We've done our diligence and we're comfortable with where we're at and what the risk is. And when a big distributor decides that they've done their diligence and they're okay, somebody that's maybe half that size might go. Well, geez, they sell a whole lot more than we do. They don't think it's an issue, then why do we?
Scott O’Malley:But there's also ownership groups who just are against the category in general, and so you get a little bit of resistance there. And then some of the legislatures in some of the states have made some noise that they don't like it or they want don't don't want it, or they want to regulate it or they want to tax it, and so there's a number of factors that that that can make people a little bit fearful. But you're talking about a high margin price item, margin, high price item and I think in the end they look at it and then they assess. You know what the risk tolerance is and for the most part I think the distributors are starting to say look, this is a category that's not going away.
Scott O’Malley:This is a category that's good for us to be in, and I think that liquor store chain and that age gating is the appropriate place for these products to be. They're used to checking age verification and they're already used to the way things are delivered and the way things are presented and how this whole industry works. So to me it makes sense to be there. We're still going to be in vape shops and tobacco shops and, you know, c-stores and that sort of thing also, but I think the majority of the of the sales, direct to consumer, direct from the retailer to the consumer, is going to be where they already go to buy beer, wine, spirits, that sort of thing.
Ben Larson:Makes sense. So you were talking earlier about being in the AB InBev distribution network and to my knowledge there's a lot of like independently owned, ab approved or relationship distributors, depending on the regions that you're in. What does it mean to be working with an AB distributor and are there relationships that that leads to like in other markets? You know relationships, yeah, I guess. What's the dynamic once you're in that relationship and how do those networks you know I guess maybe lean on each other, relate to each other, if at all?
Scott O’Malley:Well, there is some influence. You know we can reach out to our distributors and say, hey, we'd really like to work with this distributor in the state. Can you make an introduction? We've got three people on our team who've dealt with distributors throughout the country their entire career. So those relationships already exist. And it's not just the AB network, it's the Miller Coors, molson Coors, it's the Wine and Spirits groups, there's a couple of those that are pretty big and have a lot of coverage. So I think we look at all of those. But that relationship really is.
Scott O’Malley:You know, you kind of get it started and you gauge the interest of them, you gauge the timing of when they want to enter this market.
Scott O’Malley:A number of those distributors are setting up their own LLCs to handle this product, to give them a little bit of a firewall to you know, their main corporation, which has this federal license, and then it's really dialogue with these distributors. And we have every year we have, you know, these marketing meetings or planning meetings for the next year where we go through and we say, look, here's what happened this year, here's what we're looking to have happen next year, here's what we want to do together, get their input, start putting in implementing items and then put those into place. So we try to have a cadence with our distributors on a weekly basis at some level, and that goes sometimes down to our people going out and riding around for reps and meeting with key accounts. So it kind of is an all-encompassing effort together to try to make this our brand, a winning brand, and to try to support them in whatever way that we can so that they're getting us what we need.
Ben Larson:Great, and earlier you were talking about some of the pros and cons of working with certain distributors. What are some of the say, the top three things that you're thinking about looking for when you're working through the contracts and talking to different distributors? What are some of those pros and cons that really stand out to you?
Scott O’Malley:Well, I think in the initial conversation what we're concerned about is number of reps, what kind of coverage they have, how often they're seeing accounts. It's a little bit different when you go from a beer distributor to a spirits or wine distributor, to an independent or a craft. So cadence of communication with retail. So that's one of the things that we look at. Where do they cover? Oftentimes they'll have an exclusive territory that they handle for certain products and then they have an expanded territory that they use for some of these other products. And it's, like I said, piecing that puzzle together to try to figure out who makes sense. Can they handle this entire area or are they really good in this footprint? And now it's going to be another one.
Scott O’Malley:And then beyond that, it's really just some of the terms, and there's about three or four things that I always look for in a distributor and then really I think it's getting pretty comfortable with our ability to work with them in a new category and to maximize their capabilities with what we can bring to the table too.
Ben Larson:Well, tell us a little bit about the future, like what's the future hold for Clarity, like what are you hoping to achieve in the next 12, 24 months? To the extent that you're willing to divulge?
Scott O’Malley:Yeah, my team would say a lot, but I think you know we're on a fairly aggressive expansion program. We are looking for partners in states where it's either explicitly regulated or that they've said here's what our parameters are. There are a few states that we it's almost like we're going to have a stoplight and you've got green for go, you've got yellow for probably pretty good, and we've got some red that we're like hey, I'm not really sure they're talking about maybe regulating it or or putting it in a box and maybe we don't want to go there because we don't want to get started and then have to pull out. So expansion is definitely what we're into right now. We've got a new line of products, or soda pot product is coming out next month, the variety packs are coming out next month. We're going to add a pumpkin spice latte for our cold brew as a specialty. For that.
Scott O’Malley:You know September, october timeframe, and then we've been working on some other things. I think that through our research project that we've done with the agency, a company called Broadhead in Minneapolis, we've been able to kind of look and say, hey, look, we think between a certain timeframe this better for you health products are going to be really important. It might be a little bit early right now, but I think we're looking at adaptogens and nootropics and things that will be specific to helping people with certain certain maladies. So I think that's part of it. We've we've definitely looked at other what I would call not carbonated beverages, and then really looking at the marketplace and trying to figure out when do those things fit in or do they? They?
Scott O’Malley:may not, and so you know you watch the market, you try to see, and we're discovering a little bit, that buying patterns in, you know, the southern part of the United States may not be exactly the same as they are, you know in the northern part of the United States and then even a little bit from east to west.
Scott O’Malley:So we try to keep track of that and what we don't want to get is skew happy and just start pushing a bunch of skews up, thinking that that's going to make it better. Sometimes you can overwhelm your, your distributor reps and giving them way too many things to talk about. We actually peeled some of our smaller package items back from the distributors and we'll use them as an online item only, Um, just because they didn't fit with really the the the capabilities of the distributor. Um, they're used to selling things in cases that are beverages and that makes a lot of sense to them. So trying to sell them, you know, um, a little shot that comes in a 12 pack case that's really really small um is a little bit foreign to them.
Scott O’Malley:So, um, I think you know and it's hit and miss, those shots that we produced, Um, I think, uh, we're really good product, but we got them to market too early. Um, shots really have started to become popular in the last two months. Um, so we'll bring them back again. Um, we had put them out originally right away because we thought it would be a great on-premise play, but on-premise had a problem because of insurance, that there were a lot of on-premise bars and restaurants that were taking part. They're getting better and now there is insurance and riders endorsements that they can access to cover themselves, but because of this insurance issue, there were a lot of these bars and restaurants that just weren't taking the profits and so sometimes you can be too early and I think it hurts. It hurts you and I think part of that is trying to figure out the right timing, which that's no perfect science for sure.
Ben Larson:Yeah, it might hurt, but if it doesn't kill you, it's just a learning opportunity, right, sure?
Scott O’Malley:plenty of us.
Ben Larson:I also love how potentially bifurcating the catalog also helps solve that problem of not competing with your customer, the distributor or retailer. So you have your online products and then you have your core retail products. So really cool. Yeah, look, I I super appreciate you, kind of like opening uh the or I shouldn't. I don't think that that statement's actually uh pc anymore. So I appreciate you revealing, um, you know a lot of the strategy uh that that you're using and and hopefully, uh, our audience finds it helpful uh, in their journey. As we approach the top of the hour, we like to give our guests the opportunity to give us their last call. This is their opportunity to shout out their brand, where to contact them? Pump of you know something that they're passionate about, cannabis or otherwise. So, yeah, this is your last call. What would you like to tell the audience, scott?
Scott O’Malley:Yeah, I'm taking a little bit maybe a little bit different twist than some of the other ones I've seen on your shows for the last call. But my last call is that there are two million galaxies in the universe. Think about that. It's a lot easier to comprehend with a clarity and you can find it at seekclaritycom.
Ben Larson:I love that. I love that you made me feel very small, thank you.
Scott O’Malley:I really enjoyed being on the show. Thank you for having me.
Ben Larson:It's always great talking to you. It was awesome meeting you in person up in Minnesota. All the best to you, looking forward to staying on this journey with you and checking in and seeing how it's going.
Scott O’Malley:Absolutely, we've really appreciated all of your expertise and guidance.
Ben Larson:So thank you. Yeah, thanks, scott. Talk to you soon. What do you think everyone? Another great one in the bag. We miss my co-host, Anna Rae. I hope you're feeling better soon. I need you back. I can't do this all by myself.
Ben Larson:Thank you everyone, everyone for your understanding with our technical difficulties. Today. We didn't get to host a live show. But if you have questions, drop them in the comments. We'll get to them. I'm going to invite Scott to engage in the comments as well, thank you, thank you. Thank you for continuing to like, share and subscribe to the show. It's growing week after week and we are thrilled with the reach that we're getting. It's growing week after week and we are thrilled with the reach that we're getting. Scott was mentioning to me before the show that he was having people reach out to him saying hey, I hear you're going to be on High Spirits. That's awesome and that is awesome. I love it. It makes us feel very special. So thank you to our teams, vertosa and Wolfmeyer. You guys are the best. Thank you for letting us to do this while you do all that. And thank you folks. Thank you to our audience. Until next time. Stay curious, stay informed and keep your spirits high. That's the show.
