Subscribe
Share
Share
Embed
Welcome to the Free Spirits Podcast with David Gonzalez and Lars Miller, your go-to source for deep dives into the world of beverage business operations. Each episode, we bring you insightful discussions with industry professionals, from founders and brand operators to retail managers and supply chain experts. Whether you’re an entrepreneur interested in the hemp and cannabis space, a functional beverage enthusiast, or a curious consumer wanting to understand the intricate details behind your favorite brands, this podcast is for you. Join us as we uncover the stories behind the founders, explore retail strategies, and navigate the complexities of running successful beverage companies. Tune in and elevate your understanding of the beverage industry’s dynamic landscape.
Lars Miller (00:00.802)
Welcome back to the Free Spirits podcast where we dive into the functional and THC beverage industries. We'll be exploring the brand's stories and operations that redefine how we relax, connect, and socialize. I'm your host Lars Miller here with your co -host David Gonzalez. Joining us today is Jason Dayton, the co -founder of Trail Magic, one of the fastest growing THC brands out of Minnesota. Welcome, Jason.
Jason Dayton (00:23.59)
Hey guys, good to be here.
Lars Miller (00:25.077)
Absolutely. So tell us a little about your experience with Minneapolis Cider and being the VP and now the president of the Minnesota Cider Guild. Did that give you an edge or confidence when you were launching TrailMetric?
Jason Dayton (00:41.168)
Yeah. So I mean, to take it back to the beginning, our journey in adult beverage actually started as our senior project in college. So had traveled abroad to England, fall in love with cider, came back, started dating my now wife whose father was born and raised in southwest England and learned how to make cider, wine and beer on the farm from his grandmother. And they basically converted their entire basement into an industrial kitchen for home brewing.
And we like to say that the only store -bought booze in that house is the Scotch. All the beer, wine, cider is all made in the basement, and most of it's made from fruit grown out in the backyard in the garden. And so I got into cider making and got into the beverage through home brewing, like a lot of brewers these days, and it's a hobby that got wildly out of hand, through my father -in -law.
Then we had an opportunity at the University of an experiential entrepreneurship class where the group came together, the business actually formed, and our very first investor was actually our professor from that class. So that was 2015. We launched our first brand. was called Lionheart Cider. We were 21.
David Gonzalez (01:47.796)
wow.
Jason Dayton (01:56.28)
We knew absolutely nothing. We didn't know anything about production, manufacturing, distribution, sales, branding. We were clueless. And it was really really challenging learning experience for a couple of years. We caught some good breaks. We had some really hard times. And we ran that brand as a contract manufacturing brand.
about three and a half years until we transitioned to Minneapolis Cider Company and did what many craft brewers have done and decided to open up your own taproom and production facility. So we did that in May of 2019. It was great timing on our part. Our first month that we were profitable was February 2020. We finally figured, like we had figured the business out. We do pickleball, we do food, we do events, and you know obviously COVID came and...
completely transformed our business. We were able to kind of muddle our way through and you know thankfully with Pickleball and a few other events come out the other side of it. But going into the summer of 2022, we were mostly a regional local cider company very similar to the 10 ,000 craft breweries that are around the country. On top of that we weren't really necessarily paying attention to the changes happening in Minnesota at the Minnesota State Legislature.
around cannabis and Delta 9, just like many brands, brewers, even, depending on who you believe, state legislators didn't really know what was happening. So.
Fast forward to July 1st of 2022, when the law went into effect in Minnesota, legalizing Delta 9 beverages, you started to see news articles hit, know, the Star Tribune, the Pioneer Press, and they were all talking about this change that had happened in Minnesota law, unexpectedly and, you know, unbeknownst to a lot of legislators who voted for it, that all of a sudden now we could get legal hemp drive THC across the state of Minnesota and, you know, retailers, know, hemp shops and liquor stores,
Jason Dayton (03:53.646)
and other players got into the game really quickly. You know, at that point...
Trail Magic didn't exist. It wasn't something that we were pre -planning at that period of time. I was up at my cabin in northern Minnesota, like a lot of Minnesotans over the Fourth of July, sitting at the lake and reading these news stories like everybody else. And really quickly we realized that this was going to be a huge opportunity. We knew that cannabis beverage is a category that has legs and has potential. Going back a couple of years to my own personal experience, when we were
running Lionheart Ciders, a contract manufacturing brand, we didn't work on it full time. So I worked at Target, I was at General Mills, and then was also the marketing manager for a company called Gamer Packaging, which...
your listeners may have heard of or may have received calls from, but we sold packaging into the cannabis industry. And so I had been to MJ BizCon, I had tried emulsions, I had seen, you know, Keith and Cannes, and I knew of these early brands and I knew this work happening in the dispensary space, and I also knew that it was 1 % of sales, but being a beverage, being a beverage guy, I had that deep belief that this is the way that we could unlock the category. So, you know,
July 4th, 5th, I'm reading those stories. know, 6th, 7th, I start emailing everybody that I knew in the cannabis industry. Basically, you know, who's making emulsions? Who has hemp -derived emulsions? Who can we work with? What do we need to know? And I sit my partners down.
Jason Dayton (05:22.584)
at the cider company and lay out what I believe is going to be this next fastest growing category of adult beverage and why we need to get into it. You know, we are a beverage manufacturing company, so we have in -house packaging expertise. We know how to develop beverages. We have flavor expertise. We're a cider company, so we know how to deal with fruit. We can make really tasty beverages. And so the three of us as partners align and say, yep, we're going to get into cannabis beverage. We don't have a product. We don't have a brand. We just know we're going to do this. And this is July.
10th. So immediately that afternoon I call our designers who were working on some other projects for us at the time and I say you know pause everything you're doing I need a cannabis brand in 48 hours and the creative brief is what if REI made a beer. That's all I got for you. I didn't have a name, I didn't have product flavors, we had nothing else to go on. What if REI made a beer? I'll get back to you with the name. Now meanwhile
David, one of my business partners, his wife, who's actually our events manager, she's about to give birth to their first child. And she, along with the rest of our team, is on Slack jamming on name ideas. And I probably have a document somewhere with the 200 potential name ideas that we could have had. And we're trying to come up with this quick so we can get it to our designers so that they can keep moving forward. We land on trail magic. We dug into a bunch of different ideas around how can we talk about exploring the outdoors.
What is it about cannabis and sort of that, you know, getting out in the world yourself, exploring, you know, not only just inside you, but what's around the world. And it was a brand that really connected really well for us. So we get the packaging design done in about 48 hours. And if any of you are designers or have gone through this process, you know how insane that is. Simultaneously, we, you know, basically walk back into our production facility and we say, okay, look.
What are we sitting on from fruit? What do we have here? We're a cider company. We make fruit beverages. What do we got? And we walked into the cooler and we had strawberries, blueberries, and basil. And so that was Berry Basil, which we still make today as one of our original products. And that was really the development cycle. We made some long time Trail Magic fans might know there used to be a Blackberry.
Jason Dayton (07:39.558)
We made it once because we ran out of berry basil and we had blackberry at the cidery. And so it was kind of this, you know, very let's move as quick as we can to enter the category. And thankfully along the way we found some amazing partners on the emulsion side.
with EnviroStars who we worked with locally here in Minnesota, fantastic partners and Roxanne really helped guide us and help us understand, know, hey, look, you guys make beverages, but there is another step to this and, you know, making sure this product is stable, making sure you're delivering the right testing. So they were an awesome partner that came in and made it happen. And then we ended up launching on July 29th. So we went from, let's start a cannabis beverage business to...
We're launching Trail Magic in a period of 19 days.
David Gonzalez (08:28.623)
Wow.
Jason Dayton (08:29.638)
That story and that timeframe, that's only possible because of the previous seven years that we had in the industry. We had the equipment, we literally had fruit sitting in a cooler, we had a canning line, we had labels, we had all of these ingredients ready to go so that we were able to simply turn it on really quickly. And then we got very fortunate with some incredible partners on the emulsion side that helped us get up and running.
And then in that case, you we launched July 29th with the first Minnesota made brand to launch in the Twin Cities. We get our distributing partner Hohenstein's onboard. And it was like selling water in the desert. I mean, we sold a couple thousand cases in the first few weeks. was, we couldn't keep up with it.
David Gonzalez (09:16.709)
That's fucking awesome. So Jason, think the first thing that comes to mind is obviously you guys inherently as a pillar in your business bias towards action must be a value that you guys fundamentally live and breathe all day every day. Stands out to me was I was talking to Carl Hohenstein and he was like, maybe a few days after these laws passed, I got a call from Jason Dayton saying, how do we do this? So my first question for you is,
Lars Miller (09:17.937)
Yeah.
David Gonzalez (09:45.975)
as an operator, you're weighing risk and reward, right? You mentioned you have all these assets already. You have the ability to manufacture, you have a brand, tap room, all these things. How did you look at the situation and weigh out the risk reward? Because this is a brand new category, you know, in your mind, going for that is resources away from your core business. So how did you make that gut decision or what was the kind of analysis you went through to say,
I'm going to go tackle this unknown brand new phenomena that just happened, popped up overnight. How did you go through that and weigh that risk reward?
Jason Dayton (10:25.576)
Yeah, I mean, you know, it'd be great to sit here and give an MBA answer of how we weighed the pros and cons. But the reality is we had a gut feeling that this was going to be a huge opportunity. And go to 2022. Nobody knew that cannabis beverage was going to work. It was 1 % of dispensary sales, and most of the cannabis industry said it's a waste of time. But we had a gut feeling, I think, being beverage entrepreneurs and seeing what's happening in NA and seeing what's happening in alternative beverage space, that there was going to be a strong demand for this.
David Gonzalez (10:30.149)
Sure.
Jason Dayton (10:55.344)
And so it really was one of those of, you know, let's take the leap and we're going to build the plane on the way down. You know, thankfully in our, in our situation that that's not a bet the company type risk either. We, we have been in time, we have been in places in our company very early on with.
Lionheart, example, when we were doing contract manufacturing, we wanted to come up with a new flavor and the minimum order quantities were so high that we bet the company on that new flavor. We didn't do that in this situation. So the risk wasn't huge or significant. I'll be frank, we didn't fully understand the insurance complexities at the time. That is something that I think as a whole industry, we have started to understand over as we progress through this, but it really was.
gut feeling from a beverage industry perspective that there's going to be demand for this. There's clearly a lot of excitement in Minnesota and we're really well positioned to deliver a delicious fruit forward, flavor forward beverage that's going to be unique compared to lot of the other offerings that were already on the market or that we were hearing were coming.
David Gonzalez (12:02.275)
Yeah, absolutely. I imagine with that as well, you're looking at the opportunity and saying, well, I have all these pieces. There's not a lot of risk. If I try this, it's a calculated risk. And so if we tried and doesn't pan out, we still have a whole other business to fall back on, which is in contrast to most other people. So that part's pretty fascinating to me. And one of the things that you mentioned, one of the questions that we had was
being new to this, one of the first to do it, what were some of those initial challenges you mentioned, insurance being one, obviously the timeline of moving quickly, but what were some of those initial challenges right out of the gate that maybe you didn't anticipate or no one would ever foresee?
Jason Dayton (12:40.572)
Yeah, I mean, think anybody that was around those early days in the Minnesota market knew the challenge with emulsions, testing, and stability. We got incredibly fortunate. I can't say that we...
knew this ahead of time. We got incredibly fortunate with EnviroStar that the product that they were producing at the time and had in market and had available was really stable and worked really, really well with our formulations because we didn't necessarily know at the time all of the testing, can liner components, everything else that needed to go into it to make this work. mean, had we known about those, it would have definitely taken us longer than the 19 days to launch the products. We got really, really fortunate along the way.
And I think that probably has been the biggest challenge in the Minnesota industry is coming from Bev Elk into cannabis. You just are dealing with a lot.
a lot more difficult product to make and make well and stay within the 10 % compliance that Minnesota asks. In alcohol, your plus or minus half percent ABV, which is a much wider variance and a much wider tolerance than the 10 % on a three milligram beverage, for example. And so that's been the learning, that's been a lot of the learning that we've had to do and improve as a manufacturer is really understanding emulsion technology, how it's working specifically with our products, making sure that we're delivering
consistent, reliable product and we've been
Jason Dayton (14:11.3)
you know, very rigorous on that from early on. there's been, and we haven't, we've been fortunate in that we haven't had any recalls, we haven't had any situations where we lost potency or we had other issues. But there were other brands in the market that did, and that caused a lot of confusion in the broader market where people were asking, hey, this is a five milligram beverage, is there actually anything in this? Or on a contrasting example, there were brands that were operating that said, well, the five milligram is my minimum promise. So I might have eight milligrams in it, and that's totally fine.
And then consumers were getting this wildly different experience from brand to brand. And that's been something that the industry has taken some time to shake out. But then also, I think in Minnesota, we benefited immensely from enforcement and regulation from the state that's enforced that 10 % threshold with COAs. And that's really forced everybody to either get on board and up their game and do it right or decide to get out of it.
Lars Miller (15:06.662)
Yeah, you mentioned a few things there around like recalls and stuff. I've had experiences as a consumer where I've had, I'm not going to name names here, but I've had a couple 750 milliliter bottles explode on me. I thought it was one of my champagne bottles in my wine fridge. They happened to be on my dry bar. then consistency is a huge thing. If a brand doesn't consistently deliver the same experience from an effect standpoint, you know.
For me personally, it puts a sour taste in my mouth, so to speak.
David Gonzalez (15:39.62)
Thank
Lars Miller (15:42.201)
And at one point you were working with Target, as you mentioned earlier, as a merchandiser. Could you walk me through that experience at Target and working there at a big box retailer, has that influenced how Trail Magic approaches retail?
Jason Dayton (15:59.86)
It's given me lot of context from that experience. And we've also built on that with our alcohol side of the business. I was the inventory analyst for cheese. So I bought the cheese category. not like the fun cheese, the imported stuff. bought shred, slice, block, sour cream, non -dairy sour cream. So very like meat and potatoes type category, if you would. But I think one of the things that really experience I gained from being a
David Gonzalez (16:12.549)
It's awesome.
Jason Dayton (16:29.626)
target was you start to understand how a large retailer operates and how they're operating in a very different way than your local independent bottle shop.
It's not just the buyer, right? Who's who you need to convince. They need to convince, especially in a challenging category like this, they need to sell up into their executive team and their legal and their risk. And, the number one concern of any, any type of buyer at large retail is don't make a big mistake, right? Don't have a downturn from the business. Don't do something that's going to cause a negative impact in sales. so upside risk is upside is great when you can get it, but you're much more careful not.
to make any type of big mistake that's going to cause a big impact to the business. Because when you're operating at that scale, it's just a completely different type of operation than selling into a local bottle shop who, you if something goes wrong, that's not really a big deal. The other challenge, I think, in cannabis specifically with large retailers is are they going to treat this category
like CPG or are they going to treat it like alcohol?
Lars Miller (17:41.008)
Stop for a second, but we're back.
Jason Dayton (17:44.402)
We're back. All right.
David Gonzalez (17:44.727)
on a roll man, I'll let keep going.
Lars Miller (17:46.448)
I don't know why it stopped, but...
Jason Dayton (17:47.462)
Natural. What I saying there is, are large retailers going to treat this like CPG, traditional CPG, sodas, things like that, or are they going to treat it like alcohol? And what's really important there is how are they going to interact with the brands? So let's use Minneapolis cider or Crispin cider for an example. When I want to go pitch Safeway or Target,
David Gonzalez (17:48.815)
So CPG versus alcohol.
Jason Dayton (18:10.768)
or Whole Foods, we get the buyer's contact info, we sign up for the regular meetings, we submit our products for a pitch submission, they review the products if we're fortunate and it's the right fit, we get the placement, we fulfill it through our wholesalers. Done, dusted and move on. Relatively straightforward process. That process is protected and set up in part due to the three tier system and the laws regulating alcohol.
on the soda side of the business or on any other CPG product, there's a lot more pay to play. There's issues like slotting fees or required media spend or free fills where you're actually loading up the shelves for free. Billbacks if product goes bad on shelf or there's other issues. There's way more expenses placed on a brand in traditional CPG than there is in alcohol. And what we're seeing right now in
cannabis beverages retailers take sort of two different approaches. You have
major retailers like Total Wine who are really treating this like any other alcoholic product they carry. They're not charging a slotting fee. They're not charging any required minimum marketing spend. They are treating these brands as if they were any other craft brewery in their set. And you have other retailers who might be asking for equity, asking for slotting fees, asking for media spend. And while those things are not terribly unreasonable in the CPG or not un -
not all that unusual in traditional CPG. It's a much higher barrier of entry for small brands and especially in the hemp beverage space. A lot of these brands are, you know, bootstrapped small entities. Nobody's sitting on tens of millions of dollars of venture capital funding to go out and buy their way into retail at this point.
David Gonzalez (19:58.275)
Did just hear you say that retailers are asking for equity just to get into a store?
Jason Dayton (20:03.08)
A certain unnamed retailer is, yes. They are asking for an equity position in the brands that they carry.
David Gonzalez (20:08.322)
boy, okay.
David Gonzalez (20:12.557)
Wow.
Lars Miller (20:14.095)
Like what, like 1 % or something drastic?
Jason Dayton (20:16.806)
I don't know any details, we haven't explored it, yeah, it's a wild bus. They can ask for anything they want. And that's really the difference between traditional CPG and alcohol, which has these more protected channels.
David Gonzalez (20:18.414)
I was gonna say that's new. I get it. Wow.
David Gonzalez (20:26.649)
Sure.
Jason Dayton (20:33.51)
Talk to anybody in craft alcohol. have all sorts of complaints about the three tier system and franchise law and everything else that goes with it. But there's a much more protected route to market for small brands that exists in alcohol that doesn't exist in traditional CPG.
David Gonzalez (20:48.057)
Wow. It also sounds like a leverage game to some extent as well. If you have all these small brands and they don't have the same infrastructure relationships that somebody like Trail Magic has, then they don't have that same negotiating power. So they might fall for...
taking that on and saying, if I can have these guaranteed stores and that'll help me with my business. And when it's all in the beginning, equity doesn't mean much. But once you're actually getting going, then it's like, why, why did we do that deal with the devil, so to speak.
Jason Dayton (21:13.821)
Right.
David Gonzalez (21:20.943)
So Jason, one of the things that I fundamentally love about your business model versus a lot of other ones out there is how de -leveraged you are and how you manage risk. Meaning you guys have a tap room, have ciders, you have pickleball courts, which in and of itself is phenomenal because it's the fastest growing sport in America. And you have THC, which means that your eggs aren't all in this THC basket. They're spread out here.
Jason Dayton (21:49.415)
Mm
David Gonzalez (21:51.137)
So we had mentioned the farm bill at one point. If that farm bill went south, you would live on. would hurt a bit, but you continue to live on, right? So walk me through how, I don't know if there's a, Minneapolis CiderCo is overarching company, but how do you go through resource allocation and figure out what are the profit centers? Where do we double down? How do we know where to ease back on a certain thing?
When you're handling these kind of multiple business units all under one umbrella, how are you weighing which one's getting resources fed, et cetera.
Jason Dayton (22:25.99)
Yeah, I mean, so it goes back to our strategy with being a, you know, craft cider and a craft brewery. And the strategy there is that the tap room is your profit center to feed distribution. Distribution is extremely expensive. It's low margin, takes a lot of resources. So if you can run a profitable tap room operation with, you know, pickleball and events and food and everything else that comes out of it, you can reinvest the profits of that into funding distribution.
David Gonzalez (22:49.892)
Yep.
Jason Dayton (22:56.975)
And so then how we think about our distribution business, Minneapolis Cider is the core historical brand that's really limited mostly to just Minnesota. And then as we started to expand with Trail Magic,
and we started to look at getting into other states, we wanted to be a larger partner for our wholesalers. And we wanted to essentially have a bit of a hedge on the THC space by being able to sell alcohol in those states as well. So if we're going to go through the effort of setting up a state like California,
we would like to be able to sell alcohol in California alongside selling our THC products. And it accomplishes a couple of things for us. One, it generates more revenue in the market for us. So it allows us to just generate more money from that state, be able to put more resources. It makes us a larger supplier to our wholesalers. So now they care about us more because they are selling more of our products and we're generating a larger portion of their revenue. And then the third part, which isn't necessarily measurable, but we found has been really important.
is it builds a level of trust with beverage alcohol wholesalers that wouldn't, might not necessarily exist if we were just selling THC beverages. That's becoming less so, but in the early days that was really important, where we could go to a major wholesaler.
and say, look, I'd like to sell you Crispin Cider, which is a brand you know, you trust, you've been selling, and I would like to talk to you about Trail Magic and THC. And, you know, in a couple of wholesalers, they were ready to sell cider and start building the relationship with us, but they weren't quite ready to get into the THC business yet. So we started the relationship, we started selling cider, and then we were able to have the conversations about getting into the Trail Magic business over time, and then be able to launch Trail Magic alongside that. And so for us, having
Jason Dayton (24:45.384)
that combined wholesale network is really important. And it just serves to open doors. It serves to build trust. lets distributors know that
if there's a change in the law, if there is a change in the regulations that we have a broader business with them in alcohol and in THC and that we're gonna do what's right to make sure they're taken care of and they're doing it responsibly. And the unfortunate reality is in cannabis, like there are some bad actors who might not treat wholesalers that way and wholesalers in the beverage alcohol space, they're risk averse.
They are, these are mostly multi -generational family businesses. Most of them are on their second or third generation or is kind of, like to say they're in the protect the money phase. And the most valuable asset they have is their AB or Miller rights. And so they can't do anything to risk their licenses or their AB or Miller rights. And so brands have to approach them understanding that that's their primary concern and they would like incremental growth opportunities, but they need to be really careful about how they go about it.
Lars Miller (25:50.656)
Yeah, so we spent, you mentioned earlier some of your products being in total wine and then down here in Florida we have urban flow over in the St. Pete, Tampa area and you mentioned the combined wholesale, but as you are evaluating new markets, new states, do do additional research on what are the buying behaviors or the different buyer preferences in each of these states and then how does that inform?
Trail Magic's strategy going into those states.
Jason Dayton (26:24.136)
Yeah, I mean, from a consumer standpoint, we have a pretty broad consumer strategy and that we believe in low dose beverages between three and 10 milligram. There might be some variation on a state by state level or, you know, kind of how developed that market is for what potency is going to be the best seller. But we really believe that your average everyday American drinking consumer is eventually going to come around to cannabis beverage and is going to be looking for products in this category. And so we are a flavor forward brand or a fruit company.
So we're almost always going to play in that space with brands like Half and Half or Lime Margarita. We're probably not going to be doing seltzers. So we take that approach. We look at what are the other beverage alternatives in that space, be that a Twisted Tea or Spike Darnie Palmer's, NA Cocktails. What are the brands that are doing well with those flavor profiles? And then...
from a regulatory environment, we are very focused on how stable is this market. We have been in markets where we've entered the market, invested a considerable amount of resources, and have the rug pulled out from underneath us. New York is one, Massachusetts is another. And that's really hard. Even for a larger brand like us, that's really, really challenging to go through because you put a lot of time and energy getting those markets set up and those distributor relationships running that we want to find markets that we believe are going to be stable for the long term.
and that there's not going to be any significant changes that are going to impact our business. Now, if it goes from no cap to a five or 10 milligram cap, we're not concerned about that. That works inside of our business. If there's a CR top requirement, we can manage that. But really, we're trying to avoid situations like California or Missouri is another one where you have the risk of all out bans. And so as we're looking at states, we feel really good about Florida and where that
is trending, even if the hemp regulations that were vetoed last year were to come back in place, know, low dose beverages, fairly well protected in that. Georgia, pending the outcome of their regulations, we feel really good about. South Carolina and North Carolina are both fairly stable for the moment. Tennessee has passed laws. Minnesota, obviously, I think, is leading the way in that.
Jason Dayton (28:43.228)
But that's really what we're looking for is, has there been legislation affirming these products that we can then take to our wholesale partners and say, here is the state legislation or AG legal opinion saying, yes, you can sell these products? Because when you're talking with wholesalers who are doing five, six,
you know, five million to 20 million cases a year, that's what they're looking for. They want not just a, this is a gray area and I'll probably just get my wrist slapped. They want, you know, this is okay and I can do this.
David Gonzalez (29:20.055)
Yeah, that's that's really interesting how a lot of brands will just say, I want to be in this state, this state, this one. But it's it's really if you look at it, it's like a game of risk where you're looking at territory captures, if you will. Where do I have the green light or I know that if I set something up there, it's not going to come back to bite me. So the other thing that really interests me, too, is I think this is kind of what Lars is alluding to is.
Jason, you guys have a unique spread of flavors and dosages. So you have a lot of experiments, if you will, or a lot of ways that you can plug into different markets. So do you find that certain flavors and certain dosages sell better in one market versus another? And how do you figure out maybe which flavor to double down on? Or if it's time to try out a new flavor for a new market? it margarita and half and half do really well?
Jason Dayton (29:48.892)
Mm
David Gonzalez (30:12.645)
Florida and back home, maybe it's a different mix. How does Trail Magic go about figuring out which products might perform better in different states and how does that go back into your product feedback loop on, hey, maybe it's time to try out a new dosage or a new flavor.
Jason Dayton (30:28.614)
Yeah, so our number one marketing expense is brand ambassadors doing in -store tastings and samplings. And so we gather feedback from every single tasting that they're doing in each market and see what consumers are responding to. Half and Half is our best seller. We're actually about to launch a peach line extension on Half and Half, and we'll have strawberry coming down next year. So we're continuing to double down in the Half and Half category. We think we do that exceptionally well.
And then in the other side of the business, we're refining that into our cocktail series. so we're really defining the business into two different areas where that half and half is much more of that.
Saturday afternoon out on the golf course type occasion. And then our cocktail series, lime margarita, mimosa, berry basil, that is a little bit more of the refined on -premise type focus. that's, new marketing is gonna reflect that, some updated packaging is gonna reflect that. And then we're gonna really build in those two categories. As far as what...
I think the one challenge that we've had is we don't have equal dosages across all flavors. So Berry Basil and Mimosa, we get really great feedback on the liquid. People love the liquid, but it's only in a three milligram. So what is the sales opportunity if that was in a five or a 10? And that's some of the things that we're still trying to test and learn.
David Gonzalez (31:51.813)
Sure, and I mean you don't want to throw too many darts at the wall and have too many experiments going on and so it sounds like it's very, it's controlled but of the things that comes to mind here as well, just thinking through this, as you're considering new states, new flavors, new markets,
Jason Dayton (31:55.196)
Right.
David Gonzalez (32:10.187)
and this whole overarching farm bill in the background here. For you as an operator, when you're looking at this category, what are you seeing ahead for short -term challenges? And then what are those long -term challenges that maybe people aren't thinking of as much?
Jason Dayton (32:25.96)
Yeah, I mean, short term as it relates to a regulatory environment, it's hard to know. And I think anybody who says this is what's going to happen in 2025, maybe they have some insight, but they don't know. we're going to, there are going to be surprises, both good and bad for this industry. Farm bill risk is real. And I think we need to continue to work with partners around the industry to have conversations about.
let's regulate this industry, let's do it safely and responsibly, let's eliminate bad actors, let's make sure these products are not sold to children, let's make sure they're 21 plus, let's keep them in 21 plus environments. Coming from an alcohol space.
You know, we look at this and you look at the conversations that, you know, say like Gavin Newsom is having in California saying this is being sold to children. It's like, look, we have a system in place and have for a hundred years to manufacture, market, distribute and sell adult beverages and adult products. And we do this just fine every single day. If retailers and stores are selling to underage kids, like that is a failure of both the retailer and then the regulatory environment into that state to enforce it. Right. And the same rules.
stings that apply to alcohol should apply to cannabis, right? Send an 18 year old in there trying to buy a drink and if they can buy that drink, go down and put the enforcement action into that retailer in the same way you do with alcohol and cigarettes across the country. This is a very solvable problem and so I think you know that is something that we just have to continue to work at on a short -term standpoint and then you know frankly for us as an operator we just have to adapt, right? So
there's a potential, you know, we're waiting for the rules in Georgia to come out in the final rules. Well, we already made packaging with the Georgia draft THC symbol for a couple of SKUs to ship to Georgia.
Jason Dayton (34:19.58)
We didn't know if that was going to be a requirement, but we said, you know what, look, we're going to just put this on packaging. We're going to get it made. We're going to come up with a plan and we're going to be able to fulfill it and be on shelves October 1st. Well, everybody else is getting pulled off shelves because they don't have that required symbol. If Georgia does that, if Georgia doesn't do that, great. The rest of our packaging should still be compliant and we keep moving on. And that's just some of the costs of doing business that you have to build into this industry. Now, long -term.
I believe the arc of cannabis beverages long and bends towards federal legalization and consumer access. So be that five years, be that 10 years.
I believe that we will have federal legalization. We will have 50 states of unique regulations, just like we do in alcohol. Hopefully we have standard federalized labeling and interstate commerce and a few things, but there will be unique ways that each state implements their own federal legalization. You might end up in a situation like you have in spirits where North Carolina is a great example. If you want to buy beer and wine, you can go to Walmart.
If you want to buy spirits, you have to go to a state -run store, and it's a separate store, and you have to just deal with that. And people in North Carolina drink plenty of Tito's, right? It's not a problem. People figure it out. And we might have that type of situation with federal legalization.
What I think hemp has done in the short term is we've proven the use case for beverage. We've broken out of this 1 % of cannabis sales myth. And we've shown that consumers want these products. So if we can survive as an industry through to federal legalization and as a brand to federal legalization, there's going to be a huge opportunity. And we are going to see cannabis beverages being that 10 to 15 % of
Jason Dayton (36:08.22)
Bevelk sales across the entire country, at least if not higher.
Lars Miller (36:12.347)
Yeah, totally agree with that. So, you mentioned earlier that you guys already obviously had the cider company and the equipment and things going for you. So if you were to give advice for someone that is watching a THC brand, what would that be? And would it be different for someone that has never ran a beverage company before?
Jason Dayton (36:35.494)
Yeah, it's challenging if you haven't been in the beverage space. think a lot of cannabis entrepreneurs are understanding that beverage is just very different than gummy manufacturing or any other type of cannabis product. It's heavy, it's low margin, it's bulky. There's all sorts of stuff that can go wrong. But if you were get, if you were brand new entering a brand today, I would focus on low minimums, contract manufacturing, asset light.
It would not be a good idea to spend a million dollars or two million dollars to build a beverage manufacturing facility if your only business is cannabis beverage today. That would be really challenging to do, just given the current regulatory environments.
If we see the farm bill go a different direction and we see some type of standard federal legalization where this isn't going away, completely different. Build the brewery, be the local brewery, get 10 year business loans from the SBA and go to town. But like that's how Kraft Breweries are built, right? We didn't raise a bunch of venture capital money to open Minneapolis Cider Company. We worked with a local farm bank, got an SBA loan and put our houses on the line for it.
You can do that when you have a business that you believe is going to last 10, 15 years and you can map out that business plan. That's really hard to do in hemp beverage.
Lars Miller (37:59.61)
So go ahead, Dave, I think you have a follow -up question there.
David Gonzalez (38:03.043)
Well, I think it's a good, that's very solid advice. You guys had a different path than most people, because I get tons of people who are saying, I can't get a loan as a cannabis business. Can't find people to support me or find investors. And it's like, well, it's tricky out there. It's a risky new type of category. And if you don't have a very, very concrete plan, it's a huge risk for somebody to allocate the
capital needed to actually get a brand or a product really off the ground there.
Jason Dayton (38:36.454)
And we lost access to SBA funding by launching Trail Magic, which is not something I think a whole lot of breweries realize that they're getting into. And I think a lot of breweries are going to wake up and have to make a decision next time they need money from the bank is, now ineligible for SBA funding. They didn't call our loans, we can't get any new, we had a whole new production facility lined up, ready to go, shovel ready project.
David Gonzalez (38:40.143)
Yeah. wow. Okay.
David Gonzalez (38:54.349)
I even think about that. Right.
Jason Dayton (39:02.684)
put the application through to the bank expecting basically a sign off, no problem whatsoever. And they said, you your primary, you're, now involved in cannabis beverages and beverages. because those products are non FDA compliant was the concern, not because, you know, hemp is federal legal, but because they're not an FDA compliant, we can no longer fund you. And that's true no matter what part of the cannabis beverage space you're in. So if you're a retailer selling cannabis beverage,
David Gonzalez (39:24.813)
Wow.
Jason Dayton (39:32.238)
you can't get SBA funding. If you're a distributor, you can't get SBA funding.
David Gonzalez (39:39.109)
Geez, did I know that, wow. Well, Jason, despite all that, that's a great nugget, it's a great piece of advice, people will know about. Despite all that, obviously we're seeing headlines for Trail Magic winning awards.
Jason Dayton (39:40.498)
Yeah.
Lars Miller (39:42.404)
I where they are.
David Gonzalez (39:54.181)
Minneapolis Cider Co being named on the Inc 5000 list. That's a huge testament to the team, the growth, the strategy really paying off. And earlier on the call, you're seeing you guys got a brand new office space as well. So walk me through what's on the horizon for Trail Magic. Is it continuing to dominate the backyard? Is it spreading your wings into new states, setting up satellite offices? What's on the horizon for you guys?
Jason Dayton (40:22.183)
Yeah.
It's been a pretty incredible rise the last couple of years and we've really transformed the business, like I was saying, from being a local regional craft brewery into a national beverage company all of a sudden. We want to continue to win in Minnesota. It's our hometown, it's our home market. Trail Magic's the top selling THC beverage brand in the state and we fully expect to maintain that market share. And we think we're doing the activities needed to do that, investing with retailers, investing with distributors.
investing in new brands. And then we're being very strategic about the markets that we're expanding to. And like I was talking about earlier, we're not trying to be everywhere all at once. We are trying to be in the markets that we think are the best fit for our products and where we can find the best distributor partners. So we're really excited about the Southeast. Like I was saying earlier, we just launched South Carolina, North Carolina.
We have a great partnership with, we're in Parker's convenience stores in Georgia. So while Georgia lost the ability to sell in packaged liquor stores, convenience stores can still sell the product. So we're in over hundred convenience stores in Georgia with three SKUs and that's gonna be expanding up into South Carolina.
We're now looking to expand down into Florida with distributors. already there with Total Wine. And just kind of continuing to go where the opportunity is there and then where we can find those distributor partners of choice, right? Those distributor partners who have the muscle and the breadth to be able to build and support a national brand.
Lars Miller (41:56.737)
Yeah, so as you continue to grow and find success, how do you ensure, and as I grow, mean, head count as well, how do you ensure that company culture and values are maintained? And what steps do you have to keep the team motivated and aligned with that vision?
Jason Dayton (42:14.95)
Yeah, it's definitely different. mean, we've been a company that has all been based in Minneapolis, all under one roof for almost a better part of a decade. So we're learning on that as we grow, but we're very intentional about who we hire. We're very intentional about our company values. We're very intentional about entrepreneurial spirit, about a bias towards action, about being a team player, about working together. We're not a...
Jason Dayton (42:42.066)
We're not an alcohol company that stays out till two o 'clock in the morning drinking shots of Malort in Chicago. Some people will do that. That's not who we are. A lot of us have kids. A lot of us are living family life and trying to do things responsibly. So as we start to get more remote team members, that's going to be more challenging. We're seeing that with our brand ambassadors already of maintaining that company culture. But it's about finding time to get together in person about.
you know, making sure your team feels connected to the broader mission and finding people who are excited about it, right? So one of the reasons we hire our own brand ambassadors to do store tastings rather than hiring an agency. mean, a lot of times when you go into a liquor store and there's a tasting, a lot of times it's just a third party agency who just, you know, okay, you're tasting trail magic today. You're tasting.
know, XYZ random brand tomorrow, there's no connection to the brand. We really believe in hiring our own team because they're people who care about the mission and who are excited about the products and know the products and are excited to be there day in and day out. And then that translates into the customer and makes the customers more excited about it who then hopefully go out and...
and tell their friends. The other program that we're excited about with Trail Magic that we're doing in Minnesota and will be expanding to our other markets is our hiking club and our trail cleanup programs. So last weekend, we had a group of about 20 people out along the Mississippi River cleaning up trails, right? And working together to just leave the world a little bit better than we found it. And we're going to continue to do that across all of our markets.
Lars Miller (44:22.333)
I that.
David Gonzalez (44:22.447)
That's awesome. What a great initiative. What's the perfect opportunity to have a Trail Magic beverage? If you're on a trail, literally clean it up.
Jason Dayton (44:30.361)
There you go. We also think it's, know, in a conversation with our distributors a lot of times is, we believe in being a part of the communities that we're selling our products in. I don't want to just ship products to Florida and not have a presence from us as a brand and being engaged in what's going on in the local community and the local market. We think that's really incredibly important to being building real relationships to then building success as a business.
David Gonzalez (44:56.271)
Well, yeah, absolutely. If you have people who have that personal connection to the brand and believe in it and it's ingrained in that kind of local fabric, the odds of success for everyone is going to absolutely go up instead of just a third party being, hey, here's another brand, another can. You should try this one today. You're literally investing back into that community. Of course. So Jason, our last question for you today is what is a dream outcome for Minneapolis Citeco for Trail Magic? Is it?
Jason Dayton (45:13.634)
Mm -hmm.
David Gonzalez (45:26.403)
to have taprooms all over the country? Is it to be a massive, massive brand that's a household name? What does a dream outcome look like for Trail Magic and then for Jason in particular?
Jason Dayton (45:37.608)
Yeah, well, retail is hard. So I don't think any of us have interests in more Minneapolis Cider Taprooms. That's a ton of work. Our goal is to build the category. You know, we really believe in cannabis beverages. We really believe in this space, and we want to see these products in store shelves across the country on all 50 states, and we'd love Trail Magic to be a part of that. You know, I think what we try to do
David Gonzalez (45:40.452)
Yes.
David Gonzalez (45:46.723)
Yeah.
Jason Dayton (46:07.462)
in the way that we operate our business and the products that we create and the partnerships that we have, is we try to lead by example, we try to do it right, we try to treat all of our partners with respect and make sure that we're leaving a legacy for our brand and for this category that will be looked positively on as we're building this space.
And so I think that's really the dream is let's build cannabis beverage across the entire country. And I think you'll see a lot like beer that you'll see different brands win in different regions. So maybe Drill Magic's not the number one brand in every region of the country. That'd be great. we'll see maybe High Rise in the Southeast and maybe Cannes in California and Cycling Frog in the Pacific Northwest and Howdy in Texas.
what will really, you know, if we achieve that, if those are the brands that everybody knows about and you can find in every single store where they can find alcohol currently, that will be success for this industry and that will in turn be success for Trail Magic.
Lars Miller (47:15.019)
Yeah, well, thank you so much for your time today, Jason. It was a real pleasure getting to know you and learn more about your background as well as Trail Magic. So truly, thank you for your time. Absolutely. If you guys enjoyed the show, please subscribe and leave a...
Jason Dayton (47:28.21)
Thank you guys.
Lars Miller (47:35.185)
a lot and until next time guys, cheers.
Jason Dayton (47:39.368)
Cheers.