PP 99 | Cannabis Industry

 

The cannabis industry may not be the easiest venture to get into, but it’s definitely developing and growing. With the right people, managing a business smoothly is more than possible. In the second part of Tony Frischknecht’s interview with Matt Gillard and Chris Gillard from Jamaco, LLC, they tackle environmental issues and other challenges in the cannabis industry. Sharing the problems they incurred, they also talk about the quick adjustments they made and their whole approach to managing their business.

Watch the episode here:

Listen to the podcast here:

Passion To Product: Growing In The Cannabis Industry With Matt Gillard And Chris Gillard, Part 2

Without divulging information that you try to control your security, what has that process been like for you guys to understand? Obviously, this is a valuable product. Theft is a big part of running either a wholesale or retail operation. How do you guys handle that?

Initially, we are explicit in a sense, to explain to people the tremendous amount of responsibility that we’re bestowing upon them to be part of this and what we’ve sacrificed to get here. Also, we are trying to hire people that have been vetted well and/or vouched for. There are new members to the team but there’s certainly a leap of faith that we take.

To be fair, there are upwards of 50 cameras on the premises. We explicitly told people, “We’ve reserved the right to go through your personal stuff. That’s part of the job description. It’s not something we have to do on a regular basis but for whatever reason, if we had a suspicion, we have the right to do that.” Also, we have some of our owners in there in the tremor. There are two of our partners and owners in that facility keeping their eyes on it.

It’s developing a team, building a team and taking care of people. Being good to them. Being fair with people. Trying to use our best judgment when we hire people and our intuition to get good people. It’s, fortunately, something we haven’t had to deal with yet. I hope we don’t have to deal with it. If we’re fair, decent people, we hope that we get fair, decent people in return but we’ll see.

A lot of our employees seeing that me and Chris are there every day, working in the garden and trimming right alongside these guys. I’m not asking them to do anything that I’m not doing. It gets us a little bit of respect for them. They see that we’re two regular kids that are pulling off our dream.

Matt’s a little meaner looking at me too. Being that he was a brick mason, we stuck them in a tremor. We’ll let him work with the tremor.

Is it his bald head or what?

Everybody knows that we can search their stuff. When you sign up with the State of Massachusetts, the state can come here and inspect anything they want on the property. They can ask to see in our pockets and our automobiles. When you do sign up for the program, we do let our employees know the state can show up here and go through your car. If there’s cannabis in your car and we get some fines, because of this, you’re immediately terminated. You’re signing a piece of paper saying that you won’t do that, so you could even be liable.

You could even be prosecuted. You could add to that.

Moving forward, we certainly are going to work and had been working on setting up programs to get some of our employee’s products. Now the State of Massachusetts, the CCC, Cannabis Control Commission has allowed for employees to get a certain amount of product as a sample. We hope to be generous and fair with people and get that in return.

They can get upwards of 4 grams of strain that we grow. It can be given to an employee per month after testing.

If we give it to them, hopefully they don’t steal from us.

We tried similar stuff to that. At least, if you can account for the inventory, it’s so much better than it disappearing.

In the metrics, everything’s on camera. Everything’s tracked. We know how much grams. There is some dry weight that could happen. It’s interesting with the regulations that for us to sample our cannabis up until when they changed it, we would have to go to the store and purchase it. After the store, we could consume our own cannabis.

They did that in Colorado.

We can’t do any sampling.

Have you guys created a standard operating procedure for theft?

We have internal policies on that. We’ve been fortunate to have a great offers manager. She has a tremendous background. She’s organized and super on it right way to do things not only within metric but within our own timelines that we’ve created.

The chief of staff comes from the defense industry.

We were talking about her last time. She was taking care of all your paperwork stuff.

PP 99 | Cannabis Industry

 

I write the SOPs and hand them to her. She laughs at me a bunch, completely rewrites them, uses a couple of the words I used and hands them back to me like, “This looks great.”

I want to give you guys props for pulling off your first crop in six months. People may say, “It’s taken them that long?” With all the obstacles in the way, brand new place of growing, you’ve got all new environment around you and new equipment that a lot of it you’ve never run before. Did you guys have any pest issues?

The pressure for pests has been minimal. We started from seeds and the problems we thought we might incur, we did. We started a little bit of everything but we made quick adjustments. Our approach to it is adjusting quickly. All things to be expected. Nothing out of control. Nothing that I felt like we got the death wobbles and almost wiped out. We hold good control throughout the whole process and had a healthy and successful crop. The plants are great. The flower looks great.

I consider the plants very healthy throughout the whole process, with minimal damage. That’s just us being honest. I don’t know what other people experience or how they would portray it, but where there are plants, there are also pests and environmental issues. These are all things that none of them are acceptable. Any problem that we do have, we’re going to tackle it head-on.

The second employee that we hired is an integrated pest management specialist who came from another cannabis company. She was unhappy working at a big facility and wanted to come more to a family facility. We realized being in an open-air environment, that’s going to be a huge battle that we’re fighting. We’re seeing something a little bit different in the facility, where she calls them street bugs. I thought it was neat that we got street bugs. They’re not necessarily pests that are going after the cannabis. They’re bugs that are regular mosquitoes and things flying in because it is a great house.

It’s like when you get ants in your house in the spring. That’s probably one of our worst problems but it’s not that bad. Considering a nice Dramm Hydra Sprayer to get us up to speed on our IPM specialist and have her combined with my experience with pests and dealing with those things. We’re at a pretty sufficient spot.

A 100-feet from our building, directly across the street, there is a cow barn that houses 40 cows. There’s a hay barn next to that.

For people that aren’t growers out there, how would you know? You guys are growers and you understand the pressures but how would you know that across the street from some farm, you would have pressures that were happening?

It’s tough. When I first found the property, Chris showed up and said, “There are cows there. My weed is going to smell like shit.” That was a legit concern.

Some people would say, “Weed smells like shit, anyway.”

Our next concern is, are we going to stack the new air into our building that has E. coli on it? Will that E. coli then fail us for testing or will E. coli make the product smell like horsemen cow?

We have enough buffer and space, so it’s not an issue but certainly like your vial of where you locate farms and whether it’s city air, city pollution, country or farm pollution. These are certain things that moving forward I’d consider and put a lot of emphasis on. I know guys that grow outdoor put a lot of emphasis on where they pick their plots, “How has the sun hit it? How does the air hit it?” These are considerations to keep in mind for sure.

I’ve talked to dozens of people that they’re not mindful of it. A lot of them aren’t here anymore. It’s something that doesn’t come overnight. You either have to have experienced or you’ve got some good horticulturalists that are on point that are like, “This is a terrible area for us.” It could destroy the whole operation that you’ve put millions into. You guys have a lot of money invested. Not just your own but a lot of people’s.

We’re at a good spot. We’re in a farmy neighborhood that it’s an agricultural practice, the idea of farming cannabis. We’ll be successful either way and if we do incur any problems, they’ll be addressed immediately. The testing will tell us a lot. It’s still unknown but does that mean we have to sell all our products for extraction? That’s a possibility too.

In the worst-case scenario, sell it off, but at least you get some profits.

Maybe that’s just during the summer months or certainly, during the winter months and the fall months. As your readers may or may not know, we’re in New England. There are at least four months of weather. Sometimes it seems like six. The patterns change. It’s not as consistent as some other spots. Every three months, it’s a little bit different. Will that be an issue in the fall and winter? It’s likely not.

Certainly, for the three months, summer and early spring. The things like pollen, bug pressure go up but that goes way down in the fall. These are things that I’m considering as the head grower and the person responsible for producing a healthy plant and product. That’s our ultimate goal. We should be able to get there. I’m pretty confident.

Moving forward to the testing part. You guys talked about that a couple of times. Can you explain how much weight in the sample do you guys give them? You guys said 15 pounds or did you give them a 6?

7 grams every 15 pounds. We have to package it up into lots of fifteen pounds. We put it in roughly pound. We’re trying to get our brain to stop working in pounds and starting to work in kilos and thinking more grams. We weigh our packages out to 450 or 500 grams, under or over a pound. Often, it’s easier for us to go under a pound because we don’t want our fifteen-pound package over fifteen pounds because then we have to pull more state samples out of that.

How many testing sites are there available in the state at this point?

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We’re working with MCR Labs for now and they’re good. They’re on point. They’re here and they have a great staff. They’re super knowledgeable and helpful.

What turnaround time are they giving you guys?

Seven days. There’s not a bottleneck yet. We’re not seeing that in Massachusetts. They’ve been on it. Credits to them that they’ve been well-prepared to handle all the testing.

They pick up the sample for free.

How much are they charging you per sample?

It’s $500.

You guys have to pay for it for sure.

Every 15 pounds is another $500 in tests plus the 7 grams that you lose. They don’t return that.

That’s the cost of doing business.

You got to put a lot out to get it back but that’s the name of the game with cannabis. You have to put a lot of money out and you have to be willing to do that to get your return.

You got to think that if we grow 200 pounds, how many tests are with that? It costs significantly. We’re paying thousands. We could pay $10,000, obviously.

Do you see an opportunity in the future for once your program gets used to it? Do you think you’ll get them to reduce that to not so often? Do you think you can get that change?

The state went from 10 to 15 pounds. That was an update that they did.

They seem to start more stringent with these markets. They do seem to be a little bit more forgiving. They loosen the strings.

They’re learning like all of us as we go. It’s a new state bureaucracy. These people haven’t been doing their jobs for five years and a lot of them I’ve been doing it for six months. It’s a lot of learning and treating them with a lot of respect.

Have you guys pushed back on some stuff? Have you guys done exactly everything they said? Are you guys like, “According to the regulations?”

We’re doing everything that they say. We’re not trying to meddle with the state. There’s a system in place and we’re prepared. Our chief of staff and office manager have been real proponents of just doing things the right way. That’s what we’re about. We haven’t begun to call them and ask any questions. It’s pretty laid out. It’s cut and dry in a lot of respects. There’s not a lot of ambiguity in it. It’s not too vague. It’s clear as to what they expect of us and you can’t spray pesticides. Everything you spray has to be 25(b). It cannot have an EPA registration number. These are all cut and dry.

There’s a list of ingredients on the EPA website that says what we can and can’t use and we’ll fall within that. If you’re creative and if you find the right products, you can be successful. To answer your question, we haven’t pushed back much on the state. Moving forward, having an open dialogue would be important in communicating concerns or issues would be important to the state to have an open dialogue.

Now we don’t have the capital or the lobbyist behind us to stick our head out and try to push back or pick a fight. The nail that sticks out gets hammered down. If they’re going to let us operate with their rules, we’ll follow their rules and operate the way they tell us to. We’ll be happy for that. Maybe once we get more capital and get a little bit more established, we might start going to our state officials that we know and start trying to maybe lobby. Not lobby, that’s such a dirty word.

It’s a part of business, especially in your industry.

PP 99 | Cannabis Industry

 

We recognize what we need because this is extremely valuable. We pay a 3% commission to the town and we’re selling our product in the dispensary in town that also has that same agreement. They pay 3% on our product too. Our products get in tax an extra 6% and go directly to our town coffers.

Let’s talk about that exciting stuff. You guys have somebody that you’re solely working within the town you’re at.

It’s not solely working with.

You’re providing them flowers. The stuff that you have testing is going to go to them. I don’t want to go into the fine detail of costs and stuff. Do you have 1 person or 2 companies, 1 company? How have you guys created that relationship?

Honestly, we’ve had a lot of inquiries. Amanda Massachusetts is exceeding the supply as of the moment. There’s a lot of interest. Matt lived in Amesbury for many years now. He has a lot of local connections. Even me being in Maine, I got a call from a gentleman who got my number from one of my vendors in Maine. They’re two completely different separate businesses and markets.

Nonetheless, we are seeing some people that have different operations in different states. That brings some opportunity with it as well. We know a good amount of people. There are probably at least a half a dozen to a dozen different vendors we’ve either had direct or indirect conversations with to provide a product to.

There’s been a lot of people that call us and ask if they can buy everything. There are a lot of sharks circling that want to pre-buy stuff and want to promise us the world and things like that.

What stuff did they promise you? What kind of deals? I want to give people an understanding because when you say circling the waters, it’s legit. You have people that are offering you the world. What are some of these things that they’re saying to you?

A prime vendor agreement that we looked at was a signed piece of paper saying that they would buy all of our cannabis that we could produce for the next two years. If we sign that paper with them, they will give us a front of $1 million.

What are they hiding behind all that that’s kind of the jaws and the shark that are coming around?

It was a lot of vagueness. How do we price that? We pick three different dispensaries, THC level, average and this is what we’ll pay on average. What it comes down to is if we signed that agreement with them for the next two years, we don’t have brand control. We’re just a whole wholesale supplier that’s giving this guy his stuff. If he’s going to be our broker, he’s going to be making money off of us. It was a nice offer.

We said, “Thank you.” He was a great guy. He has a retail store. We’ll let him sell our products for sure. That was one. We’re getting emails. They’re saying that the Colorado companies that are hedge fund people that represent MSOs, Multi-State Operators wanting to buy our company and point-blank saying, “Will you sell us your company?” Which we’re not interested in.

It makes you question a lot of things when you hear these ridiculous offers sometimes. I’ve heard some crazy ones where people are like, “We’ll pay you $5 million for the license alone.” The reality is not too many people know what $5 million is. We can say it all day long, but at the end of the day, that’s a lot of fucking money. Whether you’re passionate or not, it’s going to get you to the next level. How do we think about that as entrepreneurs? Everybody’s different. This isn’t the question to you guys directly, but there are people out there reading that are like, “What happens if I get an offer like that? Is this what I wanted?”

That’s part of it, like, “What’s your goal going into it?”

I don’t feel that we have accomplished our goal yet. I won’t give up until we get that. Our goal is to bring the highest quality, most sustainably grown, sensibly, consciously grown products to the Massachusetts market.

What does that mean to you guys? I appreciate the essence of the hard work that it takes to get there. Visually, if you were to talk to somebody, how would you show them what that is? How would you create the product that was?

The smell is an easy one and look is the biggest one. The Phenos that my brother chose in the genetics that we’re growing are showing a lot of purples. There are beautiful flowers. Some of them are almost red. Some of them have pink hues. We’re going to search out the dispensaries that have bud bars. In Massachusetts, most of the dispensaries, you order off a menu.

They turn around and they open up a drawer, pull that out and pull a pre-packaged container out. They don’t show you that pre-packaged container. They put that into paper bags and staple it up. You don’t know what you got for a product until you get into the car, open it up and like, “What is this?” The ones that have the bud bars or cannabis bars have big jars where you can see the product. We want to get our product in there. When you walk into the store, you can see the structure, color and trichrome buildup of a flower.

Part of it is going to be educating people to say, “These are the practices we use to grow it. Here’s how we grow it.” Being transparent and giving them a bit about the story, our facility and the structures in which we grow in and try to be an open book.

The reason why Chris chooses his genetics, each retail store that carries our products, we want a little poster up saying, “This Diamond Runtz came from this lineage. The reason our head grower chose it is because he liked this father and this one. He thought it would be an excellent experience for you.”

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You guys are going to create a story around each genetic.

We haven’t gotten there yet but it’s a big part of it where the plant came from, who read it, the lineage of it, the story behind it and why we chose it. It’s important. To some of the patients, consumers and retail shops, we have to educate them and say, “Here’s what we’re about. We’re willing to show you. You can come to check our facility out.”

We’re growing with sustainably grown cannabis also. We’re growing with the sun. We have a transparent roof. We’re making the joke with our IPM lady. She comes from an indoor grow. We’ve shut the lights off on the sunny days. It’s funny, in your grow, you’re shutting the lights off in the middle of the day. Traditionally, if your lights go and you grow, it’s panic time. We have a clear roof and growing with the sun. We don’t have to worry about it. We get free.

It’s good that she was also indoor. What kind of number difference are you? Overhead, electricity is expensive. When you go into that, is she like, “You guys are half the overhead cost of some of the stuff?” Are you getting any feedback from her on that type on that stuff?

We haven’t looked at those numbers yet.

You’re not even a year in so I get it.

I still have 100 lights on in that room on some days so that number is a lot.

You can air it out quickly, which is it’s not that easy to do in a warehouse when you can raise the center and air, blow everything out. That’s amazing. This is all great stuff, guys. I’m trying to get around about feeling where are you guys are at. I’d like to come back with you here in another six months if you guys are okay with that.

We’re excited because at that point, our flower will be on the market. I want to go sit in the store and see how people receive it. Be a secret shopper sitting back and watch the expressions on their face when they open this jar up and see. It’s damn good cannabis.

To your point, we’re going back to January 2018. You are already past January 2021. You will be selling here if everything works out. When people say this is a get rich quick, they can get their money in and get out. You laid out the timeline of what it’s taken you to get your first crop.

For the last several years, I’ve supported my family on under $60,000 a year. It might seem like a lot of money, but we’re a family of four. It’s tight. The good news is the airplane, the landing gear is up. Our facilities are up and running. It’s fun for me. I was sitting in the trim room, trimming away. Chris was in the greenhouse one dealing with some tags that are getting that. We’re going to flip that room soon. Greenhouse two is on week five, maybe. We know in another four weeks or something, another couple of weeks, we have that coming down. As soon as we emptied that drying room and finished some of that product, we’re going to load it up again. It’s not stopping now.

The machine is moving.

I know it’s an amazing feeling. For those people that are reading that are almost to the licensing stage and they’re getting beat up, being challenged. I know there are a lot of challenges that are happening out in California with the governor just came out. I read an article where he’s giving out $100 million in grants to the cities, which is incredible.

To boost the recreational market.

They try to give those the extra push to get them through the licensing process. What would you tell those people that are thinking of giving up?

Don’t do it. It’s too soon. If you made it this far, keep going. It’s only another two years away. If you’ve been fighting for two years to get your license already, it’s not that bad. If you think it’s only 4 or 5 years to change your life, that’s not that big of a sacrifice.

As a country and as different states come on board, it’s still the beginning of it. As long as this is all been happening through the illicit market, the medical market, and the recreational market, it’s still growing and developing. If you want an opportunity in it, something you work hard for, then people will find where they fit.

Surprisingly enough, there are not as many people going for these licenses as you might think. In the easy license states, they blow up quickly. In the heavier states, Massachusetts, we’ve seen a lot of people get halfway through, fall out, and stopped doing the legwork. It is a long process. If you make it to the end right now, there are only 47 licensed cultivators in Massachusetts. Once we get our test results back, we’ll get on that. We’ll be, hopefully, within the first 60 licensed facilities in cultivating. That’s pretty huge.

It’s 1 out of 50 licenses. You are one of a very small amount of people in that state with the population of Boston. I don’t know what it is off the top of my head but you are 0000. 1% of the population that has these licenses. Matt, going back to what you said, four to five years to change your life?

Isn’t that bad. It goes to a lot of people who are going to hate on it and tell you that it’s going to go Federally legal soon. This is going to happen if a wall is going to fall down. Big cannabis is going to come in. We’re seeing a lot of employees come to us because the MSO is the big cannabis aren’t treating their employees right. They’re not doing a culture. They’re doing an industry.

PP 99 | Cannabis Industry

 

We’re starting to see the separation of the market from quality to the quantity already. We think Federal legalization will happen. Cross-border transportation is away. The regulations in Massachusetts that we deal with are different than Maine and in California. Before California can ship its weeds here, it will have to pass the same standards as Massachusetts and vice versa. That goes to having a very standard system across the board.

Do you think that all the work the State of Massachusetts has done with regulators with guys like yourself, with all these other companies that are actively working in the state, do you think they’re going to let them come deliver their flower into your state?

The next thing is the tide is turning. Now that I can tell my local municipality that 6% of my product are profits, 3% for me and 3% from the wholesaler or the retailer goes to the town. They suddenly want to protect me because we might be giving them $500,000 a year. If we’re giving them that much of a tax base increase, suddenly, it’s a neat feel that they want to protect us. They’re working for us. They don’t necessarily want Oregon coming in that can produce cannabis cheaper than we can in flooding our markets and putting me out of business and then sending our dollars again to another state.

In a sense, they are incentivized.

How many businesses are creating half a million dollars in tax revenue on a daily basis?

Hopefully, soon we’ll have a position to operate from with a little bit more clout and respect where people are like, “I know what these guys are giving a lot to the community. Let’s try to help them out. Let’s not put any more roadblocks in front of them. Let’s loosen up our regulations a little bit.”

You guys are headed down the right road. I enjoy knowing what you guys are working on because it takes me back so many times when I’ve had to deal with the same stuff. It’s not easy some days to push through. Thanks so much for being here. I want to encourage the readers, reach out in the comment section and let us know if you have any questions for Chris or Matt. These guys, they’re doing it.

If you hit us up with questions, we’ll gladly answer them. We’ll send them back to you. If you’re operating in the Massachusetts market, in any little thing that we can help you. A couple of people have helped us along the way. We believe that a rising tide lifts all boats. We want to help everybody that we come across.

I appreciate it, Chris. Thank you. It’s a huge part. I want to emphasize this point. You’re working seven days a week. You don’t have a lot of extra time. Taking this amount of time with us, I’m grateful to you guys for doing that. I hope my readers are able to take some stuff from this because this is the real deal. These guys are in it for the long haul. They’re paying their dues. It’s fulfilling, but it’s also one of the biggest things that are going to check you in the cannabis industry, whether you’re going to stay or go.

It might not be for everybody. Once they get started, everyone wants to grow weed until they had to start to grow weed.

There’s one last thing I want to do. What’s the rec market selling for right now?

It’s $4,000.

I want to do a prediction. In six months, what do you think that price is going to be?

It’s going to hold steady. It could be a little less. I don’t think it’ll go much more than this.

It won’t go up. It was $4,500.

You’ve seen a $500 change.

If it’s a wholesale pound unpackaged, it’s $3,800. If it’s packaged into eights already, you can get closer to $4,200 for it. We say $4,000 is the average.

Do you think we’re going to sit in six months? I want to ask this question again and see where we’re at.

This market is strong. It’ll hold firm. Moving forward, let’s hope that the state, if they recognize, “If we can test every 30 pounds and only spend $500 versus every 15 pounds testing,” those prices are getting pushed on to the consumer. It’s not the biggest benefit to the consumers. We’d be fine with a lot less than that.

Hopefully, the producers, consumers and the state can find something that works for everybody, where no one’s getting taxed. That’s not our goal. People deserve good cannabis at an affordable rate. It’s all proportionate to where you are, in all different factors. As the state adjusts its regulations, we may see an adjustment in the price.

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Once we hammer down our things, if you can produce a pound for $1,000 and you can sell it for $2000, that’s a decent business plan right there. Selling and seeing the market in 2022, we’re okay with that. That’s still an operational business plan.

I’m sure there’s a lot of companies out there that are not okay with that.

We don’t want to be the biggest company out there. We want to bring the best cannabis to the market. If that means we supply 10 or 10,000 people, that’s awesome.

It’s a great way to look at it. Guys, thanks so much for joining me.

Thank you so much.

Enjoy, Tony. Thank you so much for having us.

You’re welcome. Guys, thanks again for reading. We hope you enjoyed the show. Coming forward and understanding what is happening in different markets. This is going to be different. California is different than Massachusetts, Colorado and Florida. These are all different markets because we have different regulations.

This is such a huge part of being successful in your state and understanding where you fit in or a neighboring state. Take a lot of this information here and you’ve got to adjust it. It’s not perfect. If you guys are working out in Oklahoma or something like that, they’re not the same but these concepts are all very similar to what’s happening in each state. There are some different things but there’s a lot of similarities too. Keep that in mind. We want to thank you, guys, for reading. I’m coming up on my 100th episode. I plan on making something fantastic for that. I hope you guys will be a part of it. We will see you next time. Everybody, thanks for reading. See you next time.

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About Matt and Chris Gillard

PP 98 | Growing CannabisJAMACO supplies the Massachusetts adult-use cannabis market with high-quality, full-spectrum, sustainably grown cannabis.

 

 

 

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PP 100 | Against The IRS

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