PP 32 | Marijuana Industry

 

The marijuana industry has experienced a large boom in the past few years, especially with the worldwide influence of social media as a platform. That said, there are still challenges that the industry has to face, considering that marijuana as a product is still not completely legal all over the world. Chet Melton has been a leader in the growing marijuana industry for decades. He joins Tony Frischknecht to talk about the rapidly changing landscape of the marijuana market. It’s only a matter of time before this industry sees another large boom internationally.

Listen to the podcast here:

The Rise Of The Cannabis Industry: The Inside Track, Part 1 With Chet Melton

I have a very special guest. He is the district sales manager for one of the largest marijuana nutrient companies in North America. He comes with decades of experience. The reason why I have him on is that he’s got quite an insight into the market on the ground level, which is very valuable to not only business owners but people that are trying to work in the industry along with investors. I am very happy and pleased to introduce Chet Melton from Austin, Texas. Chet is also a dear friend of mine. We’ve known each other for many years. I trust his judgment and I want to be able to share something unique with you, readers. Chet, what are you doing? What are you up to?

I got to Florida. The commercial market is still fostering in its infant stage. There are some facilities producing. They changed the rules so it’s made it easier for people to get consumer goods. It’s still not 100%, but I’m excited to see how that market is fostering all the way from Tallahassee to Miami. There is a cannabis industry budding in Florida but it’s very inclusive due to the state law. It’s quite the opposite State of Colorado. California has got its own thing but it’s a very inclusive permit market.

What markets are you focused on with CANNA, specifically you? 

I am putting a lot of energy into California. That is one of the largest economies in the world with a high percentage of consumers. In that population, it’s got a diverse economy with a diverse population. I’m trying personally because that’s one of my specific territories. I’m trying to capitalize on all the cultivation, consumption, production that’s going on in that state. It is quite a bucking bronco ride. California, in general, is a regulatory state. That is always a twist and a turn.

There are some interesting things always happening in California. When I was out there when I saw you, the taxes were a big thing. I did an episode on the taxes. The dynamics between the black market and the legal market are crazy out there. One side of the state doesn’t understand what the other side of the state is doing, which happens in California in a lot of situations. This is no different than the others. You said you’re working down in Florida as well. What is the growth happening in California? Are you steadily growing? Is it a push and pull?

Your show is mostly with investors and consumers. I’ve experienced a lot of growth in California and a large portion of it is the same amount that’s in the state itself which is 2/3 ratio of black to the legal market. I have seen a good jump in both. I’ve enjoyed the confusion as a nutrient producer and distributor. We’ve also suffered from both sides because if someone gets funding and is trying to do it illegally and they will go, “We want to use your product,” and then they realize that books don’t work out too well once you start paying taxes and you have to deal with labor problems. I’ve experienced that.

For those out there that are switching into the legal market, I’m glad you brought this up. That’s the biggest mistake that a lot of the black market people do when they’re switching over. What do you see? 

One of them is believing that switching over is going to solve your problems. That’s gone away. That was originally the dream was, “All I have to do to get my ducks in a row was to find some finance,” all the things that take to get a company off the ground. Every day they were like, “This was the wrong decision.” I see my friend over here who’s still in the black market. All he does is he posts stuff on Instagram, sets up a day shop or there are more illegal dispensaries in the county of Los Angeles than there are the legal ones. That one is the regret of believing that once I get all these things in a row, once I figure all these things out, I make it, I’m a hard worker and I’m going to succeed. I’m going to do it and the stages keep on. It can’t regulate itself out of a wet paper bag. The State of California creates its own problems.

In the commercial marijuana market, the major challenge is getting a license. Click To Tweet

What are the three biggest mistakes from the switch over from the black market to the person that’s moving into the legal market?

The second would be the relationship you develop with your financer. I’ve seen a lot of this all over the states in several aspects of this industry and other industries where people could go, “All I need is money. I’ve got everything else.” They bring somebody in and they can give them properly. They give them a controlling interest because we’ve always known that money has more influence and more control than ideas and labor. A lot of people go, “I brought the idea and I did all the hard work. You just brought the money.” Others say, “You wouldn’t be anything without the money.” Not quite understanding the relationship between you as an entrepreneur and the other party as a financier. That’s another huge mistake. You should understand what a financier does. It’s their money so therefore, it is their project. I may be wrong on this, I’m not an expert but I’m seeing how the money goes, “Now it’s ours. We control it because we control the finance.” The guy goes, “I didn’t want that.” You asked for it. Be careful what you ask for. It is the synopsis on that one. The third one is not having an understanding of the market and not having a long enough term goal. I see a lot of these guys with six-month goals and I’m like, “Nothing’s going to change for you in six months.”

I’m glad you brought that up. I would like to talk about that some more because I was talking to a gentleman about the same exact thing. It doesn’t seem to be that way. It’s not specific to marijuana. People think that when you’re in business and I don’t understand that. It’s gone through the stuff I’ve had to go through. You see these people that say, “Six months and I’ll be making money by then,” but there are many other things at play that they have no control over. I don’t know why that’s not worked into either their business plan or their business idea. You’re working in California and Florida. Where else are you at?

Those are the two major markets that I have to deal with. I do a little bit in Alaska. I’m not putting it down, I’m just saying where there’s not a lot of people with money. They’re not going to have a large industry.

PP 32 | Marijuana Industry

Marijuana Industry: Understand what a financier does. In a way, because it’s their money at work, it’s also their project.

 

Those are two completely different markets. Cannabis on one side of the country is completely different than on the other side, especially with the laws and regulations out of Florida. You’ve got a few big players there that are controlling Florida.

There’s a limited amount of permits with a very strict and stringent pre-requisite. If you didn’t go to Florida State and you’re not in a Sigma Chi, you’re not going to get a permit. Tallahassee is where the leadership is. That’s where they write regulations and laws. Most of the people there are FSU because that’s where Florida State is in Tallahassee. That is a good old boys club. I can’t remember the number, but it was funny how they issued 26 permits. There were only seven people who got these 26 permits. You can see the nepotism there. They didn’t want any Wild West in there. They didn’t want any Colorado, California. You could even put Michigan in a bit in that situation where they didn’t want any of that cowboy mentality in there. They want it to seem more controlled and more regulated. They kept a tighter lid on it.

How is that working down there with the tighter lid? Is that happening? Do you see that it’s the slow working pace or what would it look like?

It’s a very slow working pace. You still see a black market bubble up, especially down in the more diverse cities like Miami and Tampa. Florida is two states as we all know. Either you’re in North Florida, which sometimes jokes to Southern Georgia and then you’re in South Florida which is a whole other world. You can’t even say it’s Latino. There’s such a diverse culture that has developed itself there. There are two different markets and two different approaches. You can see that it’s going very slow.

What challenges do they have in North and South Florida compared to California? What different challenges do you see that they have there? 

The major challenge is getting a license. You’re not getting a license. You’re going to have to work with someone who’s already acquired a license. It’s strict because of the regulations and a large amount of finance involved. In California, you can get started, but there are limitations, regulations and finance are still there, but they’re there in a different way because California wants to portray the image that anybody can do this. Florida is like, “No, not anybody can do this.” For a reason, not anybody should be able to do this. We want to keep this controlled. It’s a South mentality to a West mentality. The South has its mentality and it’s got a history of how it treats things in the culture. The West in a more liberal way has its history in the ways it treats things in the culture. The perception of equality is way more important and drives things on the West Coast than it does in Florida and Southern parts of the United States.

I’ve noticed the equality has popped up quite a bit. It’s also happening in Colorado. It’s becoming more of a topic than it used to be. We see some stuff come out where they’re trying to give some equitable fair terms towards people that have had marijuana. They’ve had marijuana allegations or they’ve had legal problems in marijuana in the past. They’re trying to reduce those so people can get involved. It seems like from what you’re telling me is that California, we’ve got more of a free market, but the drawbacks are you’re also competing against a lot more people. At least you’re able to compete. In Florida, it’s not so much. You’ve got to know the right person and you’ve got to have some big money back and you need to take off.

You don’t get fooled in Florida going, “I can do this.” You can either, “I can do this,” or “I can’t, you know it.” In California, a lot of people are like, “We can do this.” It’s like, “Yes, but do you see the ceiling? Do you see the roadblocks? Do you see the restrictions?” They want you to believe that you can do it, but the reality comes out that not everybody can do it. California from my experience too, it’s killing them. I don’t know who to blame but it’s the fires and the electric availability. Those go hand-in-hand, especially in Northern California. If you don’t have the finances to have a generator, diesel and get that ready the next time PG&E turns off the power on a grid for 4 to 7 days, you’re out of business. That’s even if you own a gas station or a 3,000 commercial growth.

It’s very similar to what they run in hotels where they have a back-up generator that’s sitting away. They have that much trouble with power up there. 

They did last fire season. PG&E didn’t want to get sued for being responsible for any fires due to the low quality and minimum upgrade of the grid. PG&E has spent as minimal as it can on upgrade to the grid infrastructure because of its stockholders’ and shareholders’ desire. I believe in capitalism, but there’s a point where there’s a negative return. I’m supposed to have meetings with several cultivators who had indoor facilities. They were like, “I can’t do this right now because I’m worried that I will not be here on this next round. I won’t have the power.” This is the right to cultivate another crop. At the same time, a lot of these people, especially in Northern California, that’s where I do it mostly. These people are from the community. There’s a fire on the other side of the hill, three of your workers live on the other side of the hill. All of a sudden, you’re short in production because either they’re stressed about their house or their brother’s house is burning down or it’s more than stressed about it. They’re refugees or they’re temporary without all the amenities that a solid workforce would need to be a solid workforce.

You bring up a good point. I never even thought about the electrical. These people aren’t willing to invest any more money in their grid but yet they’re charging a huge amount to bring that electricity to the customer. 

For us to talk about it, it’s always obvious to point out the downfalls. What’s hard is to point out the solutions. If I could have a solution to PG&E, I’d be on a different show wearing a more high dollar suit. Those solutions are above my pay grade.

I appreciate you bringing up those facts because those are things that most people won’t think about. You opened my eyes to it. I didn’t think about power is an issue. We’ve all grown in different areas. The one thing that comes up is every area is going to have its own challenges. You’re going to have weather challenges down in Florida that you wouldn’t have in California. You brought up the fact that California allowed anybody to get a license. That’s due to a lot of the fact that they have a huge ag in California. Everybody needs to get a chance to get into this industry or California is much different. Even the citrus communities and the citrus farmers out there, there’s a few of them that run the whole thing from what I understand. I could be wrong.

That’s the other aspect of it. If we’re on this topic of contrasting the two territories. Of course, there are other places. I don’t want to leave Michigan out or the Northwest out. It goes back to politics, in my mind. California has a water problem. Its water problem is based on its inability to regulate itself. I suggest to anybody to watch a National Geographic documentary called Water and Power, which talks on the way of the State of California and 2 or 3 land barons have taken control of all the water in California. It’s terrifying because this water issue is not something that you say is a water issue. I wouldn’t want to say it’s a human right, but you would have to assume that if anything’s a human right. Air and water are two things that you can’t regulate away from people.

It sounds like people are trying to do it, that’s for sure. Water is a big thing. We could spend a whole episode on the water itself. You guys know out there the readers, these people are in the stores working with the owners that are selling hundreds of thousands of dollars of nutrients a month. They see these growers come in through the door all the time, whether they be legal or they’re still in the black market, we’re still starting to see a trend. Do you feel like your business is picking up or is it growing or is it about steady with what is happening in the market?

Due to all the factors and there are so many, it’s steadily growing. If you were to ask me strictly as a high-end and nutrient salesperson, I would have always preferred it to be a taboo market. This is a very selfish comment, but the prices would have stayed high. Therefore, the investments would have stayed high. The inability to grow low-grade products would have stayed low but due to these different factors, we see one is the ability to produce a par to sub-par. We call them mid-product or mid-range. That is dominated in the market. Your Ernest to Julio Gallo and your Robert Mondavi are shitting all over the market in the cannabis context. You’ve got to almost know somebody because when you go to a dispensary or any place as a regulated product, it’s going to have a cost factor over a quality factor. We’re on the pendulum swing and I’m waiting for that because this whole generation is known mid. The people who started consuming cannabis at the age of 21, a couple of years ago and for the next 30 years, someone’s going to go, “There’s a better product than Marlboro Reds out there and that’s the American spirits.” Any other industry has this example.

There are a few places here in Colorado that we’re starting to see that because they’ve been able to consistently grow for a while. They’ve gone through the growing pains of running a business. What happens is you get stuck in the day-to-day and you get very little time to work on how to make your growth better and make your plant product better at the end of it. We’re starting to see a little bit of that. I’m wondering when that wave’s going to start sweeping across the rest of the market. It’s a matter of maturity. What would you say?

If we started several years ago, we’ve got about several more years of it peaking towards not being accessible to high-quality cannabis. Everybody out there sees us and who is on the one side of the market is going to go, “I can get high-quality cannabis all the time.” Yes, but you’re also the same person who goes to the dispensary and goes, “This is shit.” I know Northern California is a little ahead of the game on that because they’ve always prided themselves, words like sun-grown, dry farming and these techniques that are from the ’70s and ’80s. They’re coming back and anybody can make their argument. Anybody can produce cannabis but we’re producing a specific quality of cannabis.

Are you seeing new techniques out there that are changing the way ag has done it all successfully?

There’s nothing revolutionary. I always look at the wine industry and there were two revolutions to the wine industry. One was in Italy. They started making wine and smaller 55-gallon barrels instead of the 200-liter barrels. They also started changing the demolishing of roads because the roads were close together and gave it a different breakdown. I haven’t seen anything revolutionary like that in the cannabis industry. Any Northern California’s technique is not to take away from those people is not a new technique. It’s probably an ancient technique. Anything that’s in the indoor industry, that’s either new to the indoor cannabis industry or perceived as new. It’s something that will be coming from the floor culture industry and the greenhouses of Europe or the coast of California.

They’re adopting previously used techniques. People would go, “What about the metal highlights.” This high-pressure sodium metal, these 315s. Light fixtures are my favorite and have been in the agriculture industry forever. It’s the newest thing to hit. GE’s, which we’re doing it than other light fixtures. That was the generation before the popular fixture before that. It’s also in greenhouses. A lot of this and other industries whether its greenhouse production, hoop houses, light fixtures, techniques, irrigation, or equipment. We’re not created just for this industry. Everything from the twist tie to how you set up your lights was adopted from another industry.

Are you seeing that there are some true commercials grows happening out there? Are people understanding what commercial growing of cannabis is?

I can mention a mutual friend, she has had her ups and downs. If you want to talk to somebody who knows the cultivation cannabis industry, this woman is definitely someone I have perceived as knowing how to figure out the market. She’s not alone. If there are people on this show who are like, “I want to put my money somewhere.” They’re going to immediately follow these recommendations. I’d be fearful of putting anybody in the wrong direction or swamping anybody with an inflight of communication. I have definitely seen a whole bunch of people out there who succeed. The Jungle Boys and their revolution. There is a revolution, and it was social media. I heard that there is a formula on how many likes equals money or how many followers equals money. The Jungle Boys, there’s so much credit to them, the one particular guy on capitalizing on the explosion of Instagram and social media to promote their brand, regardless of their product.

There has been a cannabis revolution, and it started in social media. Click To Tweet

I was talking to somebody about this. You could have the best product in the world but if nobody knows that it’s there, it doesn’t matter. There are people that are taking this. These people, in particular, the Jungle Boys that you’re mentioning. They may not have something that’s revolutionary, but they know how to get their message out there. That’s something that I’m slowly understanding more and more of how pivotal that is for your growth and success. Not just the cannabis industry but there are so many other industries that are starting to figure this out. This is such a new concept at least for a person like you and me that has not had the ability to market our product the way everybody else does. We’re starting to see that there are people that are adopting that and it’s costing them light years where they would’ve been in the past. Social marketing and social media is such a huge key to this deal. People that understand that coming into our industry are going to do well because they understand how to do that well. That’s some of the stuff I’m seeing. I’m not sure where you stand on that.

You can see it with Mike Tyson’s. If you ever drive down the freeway in LA, you’ll see these billboards. There’s a billboard on 405 on the way to LAX. Everybody who has to go to LAX passes by. It’s a billboard of him, “Go on Tyson’s Ranch, come out there.” It’s in Coachella or somewhere in the High Desert where a lot of these facilities are. That branding.

He was talking about it on Howard Stern.

There’s Kaya, which is in Jamaica. A friend of mine is participating in that. That is the Marley estate involvement. You’ve got the Snoop Dogg’s, you’ve got most of the hip hop artists. Some other people are getting involved. There are some MMA people involved. There’s a crossover there. It’s the brand promotion. A lot of it is something I can’t quite understand and I have to say that is above my pay grade because if I could figure out what the Jungle Boys were doing or anything like that who are not celebrities.

You may not understand every detail, but you would know how important it is. 

It’s almost essential. Until social media, itself got a downturn which it will have. Probably either because of its saturation and people’s lifestyle. If you said, “What’s going to replace TV?” People said social media. No one would understand what you’re saying. If someone’s like, “What’s going to play social media?” Whatever it was that people didn’t believe was going to replace the TV. It’s concepts I can’t quite predict. I wish I knew that Jeff Bezos and Amazon was going to be that big because then I would’ve been on that board.

There’s always another one coming. To change gears a little bit, CANNA’s corporate is in Holland, correct?

Yes.

Where are you seeing Europe in all this?

Spain is the market. It was once Holland but unfortunately, due to the strict regulations that Holland put on cannabis cultivation in 2014, it spread out from there. The UK got a lot of it but the UK is still a black market. Spain, I would have to say, is a gray market. Spain has such a laissez-faire hands-off attitude towards certain things where its whole culture is like, “Whatever.” A lot of people who are from California or the Southwest know that the Mexican culture has a mañana. Spain is amazing that thought the Mexicans in that culture of mañana like, “What is it you need? Mañana.” For sure, we’re going to take care of that. The government has that same as long as it’s not destruction to life and property, specifically people who have a lot of property. That’s the only thing that the government concerns itself with. It leaves people to this in-between because I don’t even think it’s decorum in Spain. Culturally it is.

Is it possible to start a business there outside? Can we go there, say from the US and start something there? Do you know if it’s possible? 

You’d have to be part Spanish. It’s the same thing of going to the Northeast and saying, “I’m not from around here. I’m not from Boston or New York or Connecticut. Can I get started?” “No. Go back to where you came from.” If you went to Spain, you have to work for some Spanish people and try to figure out. You’d have to speak Catalonian or Spanish and you’d have to be a Spaniard whether by birth or by heart.

PP 32 | Marijuana Industry

Marijuana Industry: If marijuana had remained a taboo market, prices would have stayed, and so would investments in the industry.

 

You’re saying there is some opportunity there.

I have always told people to go to Spain either for influence or for an opportunity. If you’re someone who regards yourself is wanting to or having knowledge in the cannabis culture and market, then you better have participated in some Spanish time.

If you’re interested in cannabis, understanding that side and if you’re able to go to Spain, coming from Chet.

Spannabis is on March 15th. CANNA has a huge influence on the Spannabis show. The show has grown over the years and it is the mecca.

Chet, if anybody wants to reach out to CANNA or if they need to reach out to you, talk about nutrients or anything or they’re interested in talking to you about anything, what’s the best way to reach you?

There’s a form submission, so go to CANNAGardening.com, scroll down, you’ll see where stores are located and see charts. There’s a place in there where you can submit a question. The moderator will get back to you and then inform me and we can go from there.

Anybody out there, if you guys are interested and have any more questions for me or for Chet, comment at my website at PlantProblem.com. You can leave questions and comments there. I would be more than happy to dig into some deeper dives and figure out the answers for you.

I have small personal crusades in life. One that is always dear to my heart is verbiage. I think that we should always be calling it cannabis. Marijuana has got a negative stigma on it. It was created by people who were against hemp. Hemp is cannabis and the flower has a high amount of THC or a low amount of THC and vice versa with the CBD. Let’s call it cannabis because that’s a more scientific and less negative derogatory term.

I learned that very early. I appreciate you pointing that out. Thanks, Chet, for being on and I look forward to talking to you soon. I can’t wait to see what you have coming up next.

Thank you.

Thank you so much for reading. As always, please visit my website at PlantProblem.com where you can subscribe, leave a comment, or ask questions. I want to bring to you some of the best stuff for cannabis. There are many questions, many things unknown and I’m always looking for topics. Feel free to leave me topics and suggestions. I hope you guys have a great day and I will talk to you very soon.

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About Chet Melton

PP 32 | Marijuana IndustryChet has been a leader in the growing industry for several decades. As the district manager for Canna Nuetrienst of North America, his insight is unmatched. Chet says to become a successful grower it takes more than a green thumb. It takes guts!

He has made it his goal to help whoever is interested in listening. In this everchanging market, the ride can be quick if you’re not prepared for the long road ahead.

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