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Tracking the intersection of cannabis, CPG, and the regulatory shifts reshaping both. Delta Dispatch applies an investor's lens to the operators, deals, and policy moves that are defining how cannabinoids enter the mainstream.
Hosted by Ian Dominguez, founder of Delta Emerald Ventures. Solo commentary, executive interviews, and panels recorded live at CannaBev Summit and CannaDataCon.
The written Dispatch is invite-only. The podcast is public. Show notes link to the full publication.
Hello and welcome to episode thirteen of
the Delta Dispatch Podcast.
I'm joined by the illustrious team behind
Trail Magic,
Mr. Jason Dayton and David O'Neill.
I'd love for you guys to take a moment to
kind of ~ chat about yourselves
a little bit and then we can get started.
Yeah, thanks Ian. ~ good to be here.
For those that ~ we haven't met ~ or
aren't familiar with Trail Magic.
~ so David and I started this company long
before THC was ever ~ considered
in THC Beverages. It was actually a hard
cider company we started back
as our senior project in college as a
bunch of twenty one year olds.
and in twenty twenty two when the law
changed in Minnesota and
THC beverages became legal, ~
We launched Trail Magic in a period of
nineteen days,
which if you know anything about the
beverage industry is a little bit
~ insane from a timeline. And we're one of
the first brands to hit
the market in Minnesota and we've been
building ~ in the THC beverage space since
and then also continuing to build our our
cider and our alcohol business nationally
as well.
Great.
Yeah.
thanks Ian for having us. ~ David,
one of Jason's business partners,
we've got another that ~ that does
production as well,
just to kind of fill in some gaps a little
bit about our team.
~ Jason really fills the role of kind of
the sales marketing,
~ you know, run a thousand miles an hour.
~ I run behind Jason and try to piece it
all back together for us
to actually be able to to kind of keep up
with ~ with his speed.
And then our other business partner,
Rob.
~ is one of the best cider makers in the
country.
~ so he's he's got his agricultural roots,
masters in horticulture. ~ at one point,
you know, sold his house to move to a an
orchard and grow apples.
So really deep kind of expertise on the
product ~ you know,
side of things. And ~ yeah, it's a lot of
fun to be in this THC space.
It was a kind of an avenue that we we
weren't anticipating when we first wrote
our business plan, that's for sure.
Yeah, I want to get into that.
So ~ one question that I'm asked quite
often is how we
as Delta Emerald choose the teams that we
want to work with and and invest with.
And the two things that I I say most often
is adaptability and tenacity or some
version of that.
And as listeners I think are well aware,
~ we've been presented with many
Iterations of what adaptability means,
whether you're talking about ~ cannabis
that preceded THC beverages
in its current form, or the obvious ~
issues at hand in terms of ~
the the November 12th pending potential
ban on the category or effective ban.
So ~ I say that to kind of tee you guys
up on the concept of adaptability and also
listening
to one's customers.
Can you guys give some context or stories
about ~ I think what makes y'all special,
which is your willingness to listen to
your customer first and then
let that lead you in terms of adapting to
where the market is going or
or where you might need to go?
And maybe let's start with the earlier
days and then we'll transition into
how you're going to approach ~ or you are
approaching the potential band that's
coming up.
Yeah, I mean I would say, you know,
from our
Cool. ~ go ahead, Jason.
I d yeah, from from our earliest days as a
company,
~ we have ~ always needed to adapt.
~ there's a story that David will like to
tell and remind me of is when
we started this project, I stood in front
of a PowerPoint presentation
and I said Cider is easy and it was gonna
take two thousand dollars
and we're gonna be in stores in Christmas.
And this was, you know, three months
forward from a class project.
and that did that didn't happen.
It didn't go any way that we expected.
And and our business has been a story of ~
reinvention,
you know, every six to eighteen months for
almost a decade.
And that adaptability has allowed us to
survive and it's allowed us
to see new opportunities and make make the
most of them when they when they came
around. I mean, we opened our tap room,
our our production facility up in
Minnesota,
~ in May of twenty nineteen and our our
first profitable month
was February of twenty twenty.
~
Obviously, we all know what happened in
March of that year.
And, you know, it was that, you know,
experience going through COVID,
and we added pickleball.
Ma maybe n not everyone will know ~ yeah,
I'm I'm gonna I'm gonna stop you there.
Not everyone might know what happened
then.
So you wanna you wanna ~ explain a little
bit more on that?
Yeah, so you know, middle of March,
just as we felt we were getting our feet
underneath us as a business,
the city of Minneapolis, you know,
and then soon the state shut down all bars
and restaurants.
And at the time, we didn't have a
distribution business.
So a lot of brands sold way more product
in total wine,
but we only had our tap room. we only had
the product sold over the bar
and out the front door. And we were a
brand new business with very little
capital.
And so we had to adjust and adapt
very quickly. David ran our tapram at the
time,
so he can speak more to that experience.
~ and that story has kind of repeated
itself again and again.
So as we're coming up to the potential ban
on hemp in November,
you know, we are now again looking at the
business and saying,
how are we going to keep surviving?
What do we have to do from an
organizational structure?
And then also what are the assets that we
have in terms of brand,
product, liquid, production capacity?
that we can now go find you know new
market opportunities.
And and for us, you know, one of the
things that we launched ~ just three
or four weeks ago was we expanded our
Trail Magic brand into a new cocktail
line,
right? Of a 2.9 and an 8% ABV product.
And that for us is is a pivot.
We're an alcohol business, we can get into
that space.
~ By no means are we abandoning hemp or
THC,
but we are recognizing the need to make
sure that the business can
be diverse and stable so that when we get
through what we
you know, expect at worst to be a period
of prohibition.
Trail Magic and Minneapolis Cider are
gonna be one of the brands that
are are still here at the other side of
it.
And I always go back to the example,
I think it's Line and Kugels. They sold
ice cream for a decade,
right? That's how they survived
prohibition.
I I hope we don't have to sell ice cream
for a decade.
you know, but if we have to sell ice cream
for a decade,
we will sell ice cream for a decade so
that,
you know, Trail Magic THC is here when ~
when that market's there.
The other classic story of this was
brewer's yeast,
which ~ Anheuser Busch sold by the by the
ton.
~ but first they had to convince people to
actually put brewer's yeast
in their mouths, ~ and that was its own
marketing ploy,
if you will. But I did not know the Len
Lenin Kugels.
David, you were about to say something
too.
Yeah, I mean just to just
to kind of double tap on you know on top
of what Jason was talking about,
even thinking about our origins,
~ w we're built differently, ~ you know,
fundamentally. ~ we have, you know,
physic we have about 30,000 square feet
that we lease.
we have a physical tap room where we where
we connect with consumers
and engage ~ and and get feedback on our
products.
We have a manufacturing facility where
we're constantly tinkering
and playing with different things,
which gives us the flexibility to
to iterate and and to kind of have fun
with our products in ways that
if we were coping, which we do cop as
well,
that we wouldn't have the flexibility to
do.
So I think from like kind of a you know
reinvention every six months or so,
like it's just kind of it's it's how we're
structured to be able
to execute that way. And then I think the
industry that we're that
we initially chose and are in ~ didn't,
you know, it wasn't it wasn't just all
sunshine and rainbows.
you know, we're selling cider to a
population that really didn't even know
what
cider was. So how do we how do we reinvent
that?
How do we bring something to the table
there?
You know, Jason and I would go talk to
people in liquor stores when
we were first selling our first cider
brand called Lionheart,
which means bold, courageous, get out
there,
you know, and ~ we were selling it as
like,
hey, you know, you might know what angry
orchard is,
and people like, you I don't like cider.
It's like, all right, ours is half the
sugar of an angry orchard.
And people are like, okay.
So it's like we kind of started in this
niche having to convince people who we
are,
why we should exist, and what value we're
bringing to the table.
~ even when we opened up our tap room,
~ you know, I thought, wow, and naively,
~ I thought, wow, you know, we're the
we're the shiny new ~ tap room in the
town.
We're not beer, we're different,
we're cider, people are gonna appreciate
that.
Nobody, you know, people came,
but not many people, and and it's like
very humbling to realize,
like,
You you don't just build it and they will
come.
Like you're gonna lose, you know,
we were losing ten, twenty, thirty
thousand dollars every month and
I left my corporate job and I and to wash
the bar towels ~ and and you know kind
of make the tap everyone's like,
what the heck did we just do? It's like,
well, you know, you you didn't tell the
story,
you didn't get out there. So it's like,
okay, great. How do we how do we make
people care about cider?
How do we get them excited about kind of
this like,
you know, cool heritage from the farm,
you know, to here? It's like one of the
least kind of process it's you know,
very similar to wine, but kinda like beer.
Anyways.
So it's like, how do get people excited
about that?
How do we do events? How do we,
my gosh, ~ you know, long story short,
had a ended up with a building that was
twice the size of our business plan.
How do we use the extra space?
~ we brought pickleball into, you know,
the basically the the Twin Cities market
in,
you know, what November of 2019.
There wasn't a single other dedicated
court.
We were the first ones. so it's like our
we we've been we've iterated
and pivoted because we've had to.
Like you you sign up for ~ you know,
you put your back against the wall,
you take on loans, you make commitments to
investors and other people,
and and you basically, you know,
you're looking at your community and
everybody else and you know,
and it's like, what am how am I going to
serve you?
What am I gonna do? And and you get
creative and you,
you know, you kind of you know put the
gloves on and get to work.
So I feel like the hemp ban and whatever
else,
it's like, yeah, are we happy about it?
Absolutely not. Does it cause a lot of
headache?
A hundred percent. Are we gonna get
through it?
I think so because you know, we we just
believe that we can kind
of overcome and pivot and do different
things.
So Jason was kind of alluding to a new
product line.
We've got three new verticals.
So it's like that's that's kind of what we
do well is ~ of is just kind
of keep moving, pivoting, iterating.
So I think ~ and I wanna get to some of
the game theory on on some
of the scenarios ~ coming up, but before
we go there,
~ just to circle back on this this notion
of adaptability,
with a team of three co founders,
I think a key part of adaptability is also
inviting conflict
and being willing to disagree and then
commit to something.
So can you guys
share any experience you have with that or
how do you how do you invite that type
of conflict without making it be something
where you guys are
at each other's throats all the time.
Unless you actually are at each other's
throats and I'm just not aware of it.
I think we're I think we're pretty
friendly,
but I you know, I'll say over the course
of being in business together
for eleven years, ~ we've had challenges
and conflicts as a team.
we've come out stronger because of that.
Every week we ha the three of us sit down
for supposed to be an hour and a half,
sometimes it's longer. ~ it's very rarely
shorter,
you know, and sit down as an ownership
group and and talk about the core issues
of the business. Each of us I think what's
unique about our business
and the ownership structure is none of us
are passive.
We're all actively involved day-to-day.
This is all of our full-time job,
and we each have really unique lanes to
run in.
Right. So on my side, it's sales,
marketing, brand development, distributor
relationships,
sales. David, it's finance, back of house,
tap room operations. Rob, it's all of our
production and logistics.
And so our skills are very complementary
and our areas are very unique.
And so, you know, what we do well is we
challenge each other by,
you know, asking
Good questions and when each of us comes
to the table and presents,
here's what's going on in my side of the
business for the week.
And you know, that striving to understand
what's going on has made,
you know, time and time again us make
better decisions.
~ a great example is we're we're about to
launch a new large format bottle
in Minnesota. The law changes August 1st.
It's five milligrams per serving,
so it's not quite the ten milligram per
serving that you'd see,
So seven seven fifty ML.
you know, in techs.
Kind of. No, it's not. ~
n kind of. Okay. All right.
Interesting.
So, you know, for us, the law is seven
fifty ml or larger,
and that's what everybody assumes they're
gonna be doing.
And we started with that as our,
you basis for the conversation of could we
make a spirit?
Could we make a, you know, some type of
mixer,
vodka alternative, you know, but for us it
it didn't feel like trail magic.
It didn't feel really like a unique play.
It felt very much, you know, there's a
dozen or two dozen other brands doing
the same thing. And, you know,
over the course of one of these ownership
meetings,
that iterated into ~
you know, we're gonna make large format
iced tea and a large format lemonade,
so two separate skews, not a half and
half,
in a 32 ounce glass bottle like you would
see at a high-end grocery store.
Right? And for us that is something that's
uniquely trail magic.
It's different from anything else out in
the market,
its use case is different, and it wasn't
something that any of us came
up with individually. We each sort of
brought little different pieces
to the conversation and at the end of it
it,
you know, we came out with this
new product line that we're really excited
about.
Is that mine?
Is that Yeah, go ahead.
And I and I think tying Ian kind
of tying the original question into that,
you know, kind of format, ~ you know,
we we work well together because,
you know, I think we we know what our
strengths are and I think we have
a mutual respect for what each other's
strengths are.
We kind of trust that and that's that's
built over a long period of time.
~ like when we make a product,
like I know Rob is gonna hit it out of the
park.
~
If he he does that, he's gonna make it
taste great.
I don't have to sit and kind of,
you know, micromanage or kind of like give
feedback on anything.
Like I, you know, I just I just trust
that's gonna happen.
He's his own worst critic. you know,
when it's like exploring new markets or
getting out,
you know, kind of sales and marketing
ideas,
I'm not like, mm, is Jason is Jason
putting in the effort?
Is he trying hard enough? Is he thinking
out of the box enough?
It's like, no, I of course I know he is.
~ and so I think that there's like a
mutual respect ~ for for each other.
And ~
kind of when it comes to you know new new
product development,
like that's where we can kind of lean on
each other's strengths and kind
of push each other and ~ and kind of like,
all right, hey, if we did this,
like does that work? And like there's kind
of a general trust and like,
you know, maybe some healthy nudging of
like,
like, yeah, I know Rob, it's another skew
and I know we're at,
I don't even know what our skew count is
right now,
but like, ~ you know, yeah, I know it's
another one,
but like, can we do it? Do you think we
can pull it off?
What resources do we need to allocate to
that,
you know, time, money, you know,
kind of whatever, other firepower.
to help you accomplish that. So I I think
we're we're kind
of accommodating with each other to to
make that ~ to make new things happen
and because I think that there's a
baseline of trust there.
So on the topic of making new things
happen,
now I I do want to transition to kind of
the menu
of possibilities and options ~ as we think
about November twelfth.
You already mentioned one of those
scenarios,
David, I think, which is or maybe it was
Jason saying there could be a
ban for some period of time. Let's let's
put that on on
one kind of leg of a stool.
Can you guys walk me through some of the
other scenarios that you think
are kind of the most likely and and if
you're willing to ~ offer probabilities
even
better? But I I've I've been doing this
for myself and and also asking others too.
Very curious to hear based on what you
know today,
~ what are the odds on favorite one or two
potential outcomes?
And then maybe what's the curve ball that
that you think is low probability
but but still has has some likelihood?
I think, you know, first and foremost,
I like to say that it is we're recording
this on Wednesday,
July twenty second at ten twenty-five
Central Standard Time.
Ha ha.
Ha ha ha
because, you know,
as as in politics, you'll find that things
can change very rapidly and you know,
we're all sitting here currently waiting
for the bar bill.
And I think at the end of by the time this
podcast airs,
we'll likely have a good picture of what
that looks like.
I mean overall, you know, we are planning
our business as if
The November 12th law is going to go into
effect because you know I don't know
any other way. We are not a company like
we've talked about that is 100% hemp drive
THC. We have a hard cider business,
we have other angles, we have a tap room.
So responsibly, we need to make sure that
we manage the business accordingly.
~ and we're also having you know proactive
conversations with retailers
and distributors to make sure that we're a
brand that they understand that
we are respecting and helping them manage
their own business and risk,
right? I want retailers.
If the worst case scenario happens and we
have a full ban and that is in place
for a period of six months, I don't want
trail magic to have been
the brand that they felt ~ they got
stiffed on or they had to throw away
product
or was an issue for them. I want to manage
it responsibly,
make as much money for everybody else as
we can along the way,
but then have this very smooth transition.
So that's, you know, scenario one.
I think
And and that
said, Jason, just to just to interject,
you know, and that doesn't mean that,
you know, all the all the crap in the
pipeline flows back
to the supplier necessarily either.
We just, you know, we can't bear the
brunt,
we can't bear the entire load.
So ~ you know, it's going to and that's
why I think,
you know, when we kind of approach,
you know, our different partners is like,
okay, how do we work together to solve
this issue?
Like we can't just swallow all of it.
No no no brands can. ~ it's like we need
to we need to how can the retailers,
how can the distributors
And the suppliers all work together to,
you know, kind of work through inventory,
you know, and and kind of figure out any
solutions to issues.
you think that there's an understanding of
that from the trade?
Because I I I've heard different stories.
~ in some cases, maybe ~ a brand that
has already ~ I guess run low on its
political capital,
so to speak, and it doesn't even sound
like there is ~ leeway going into
the selling season that we're currently
in.
On the other hand, I hear from folks like
you that
you know, th this this kind of
understanding exists.
So wh what do you think is the difference
there and and do you think there
is some variance in terms of the trade
understanding,
well it can't all go back to the brand
necessarily because if you want
to to continue to do bus business with us
~ in the two,
three, four year time horizon,
you understand that we also need to
continue,
you know, to be able to to to survive as
well.
So how does that work?
It's it's different depending on which
part of the trade you're you're kind
of having these discussions with and and
their relationships,
right? So ~ distributors have a unique
problem in that their primary customer,
the retailer, THC might only be ten
percent of their business with that
retailer.
And so they need to make sure that they're
managing the entire relationship
~ and making sure that retail it retailer
is taken care of.
~ and so you all you will have
distributors who will pick up product
~ because they are
focused on maintaining the long term
relationship with that retailer.
a lot of THC distribution contracts have
language around ~ what happens
in the case of a ban. ~ you know,
ours incl ours included, kind of depending
on the
Uh-huh.
the contract in it, you know, really at
the time when these were contracts were
made, it was focused on state level ban.
So if it gets banned in one state,
hey, can we pick this up and be a good
partner and if we can move
it to another state and resell it,
you know, I'm gonna do everything possible
to
To be a good partner and be able to do
that.
the tough thing that I think that we've
had some conversations with
our distributors and wholesalers are not
just on trail magic,
but just more broadly, how are you
planning the industry?
Is you're gonna see brands go out of
business.
And so you're gonna see distributors,
you know, try to come back to brands and
said,
We had a contract guarantee saying if this
category ~ went under,
you would buy back all of the product in
our inventory,
and the brand might turn around and just
say,
We're out of business, and you know,
I'm sorry.
You know, I can't I can't help you.
and so, you know, I've also tried to be a
a resource for our wholesalers and saying,
like, here's how I'm planning trail magic.
Let's be proactive and wind down our
inventory and make sure that we've got,
you know, our highest rate of rate of sale
items.
Mm-hmm.
make sure you're not stuck on long tail of
inventory.
Can we proactively move this through the
market?
You know, what day are you telling
retailers,
hey, if you buy this after this date,
it's yours and you and you own it,
right? I'm trying to get ahead of those
problems because I know they're gonna be
having some challenges with you know other
brands and inventory that they just
weren't able to get rid of. And the
problem too in the market is going
to get flooded. Right. If we have this
November ban and that becomes
a reality and there's no fix ahead of
that,
you're going to see a lot of product push
to market and people are going
to just be trying to get rid of everything
they can because you'll end
up in a situation, which this happened in
Ohio earlier this year,
the distributors couldn't have it in their
warehouse.
The retailers couldn't have it in their
back room,
right? You couldn't have
be in possession of it at all in the state
because then it was
a Schedule One substance. And so it became
not a,
you know, November twelfth problem.
It became a, know, two weeks ahead of that
problem.
Hmm.
And
so that'll kind of go distributor by
distributor,
market by market.
So in a in a way we've actually seen
Mm-hmm.
Yeah, in in a way we've actually seen a
preview of that if you look at Ohio
as an example. Is that a fair statement?
Yeah, yep, absolutely. But at the same
time,
you will have, you know, markets where
maybe it's a cannabis product,
~ you know, and that state has more
lenient cannabis rules.
So maybe you can still hold on to that
product and kind of figure
out something else to do with it.
Like there there's gonna be some other
paths and avenues.
~ so no state is gonna be the exactly the
same.
and you know, brands should think about
overall reducing their inventory.
And then figuring out a state by state
strategy for,
you know, how to manage that process ahead
of the November twelfth date.
Okay, so if if on one end of the spectrum
total ban ~ sticks,
it sounds like implicit in that scenario
from y'all's perspective,
that's a total ban that lasts for some
number of months to could I say up to a
year,
or do you think a year is is i is too
bearish in that kind of downside scenario?
I don't think
Jason's the bear and I'm the optimist,
so but he knows way more than I do about
how politics works,
I don't yeah, I mean I
so
think the problem here is politics is just
inherently unpredictable.
~ you know, I remember, you know,
Ian when we were back at your conference
in February and and talking about this
and is Congress gonna get something done?
you know, one of the sort of offhand
comments was who knows,
we could be at war tomorrow and literally
flying home on the plane,
the Iran war was starting. So,
you know, Congress Congress can get
Yes, that was
yeah, that was an opening remark.
Congress can get
distracted. ~ what we hope is going to
happen,
is obviously this hopefully this gets
resolved before November twelfth.
If it's not resolved before November
twelfth,
~ our hope is that the concern of the
economic loss of jobs
in the district will motivate ~ members of
Congress to fully understand
and appreciate the issue.
What I don't think a lot of members of
Congress fully understand yet is
how many of their breweries and their
liquor stores and their distributors
are dependent on this. People have this
idea that this is just something that's
going on in the hemp of the cannabis
industry,
and it's just those head shops that,
you know, maybe people didn't want in
their district to begin with.
And they will be really surprised when a
major brewery that's a huge economic
driver
for their downtown community and their
downtown revival is now all
of a sudden facing a dire financial
straight because of this product category.
And we hope that that will, you know,
spur them to action beforehand.
Or if it doesn't, that that noise will be
so loud between November twelfth
and the start of the next Congress that
this is something that
can be addressed relatively quickly by the
new Congress in twenty twenty seven.
But I wouldn't put any bets on it.
It could be a year, it could be longer
than that.
We really just we really don't know.
And then ~ to push one step further,
so ~ I I think we can always talk about
the upside scenario.
something gets done before November
twelfth.
My opinion and I'm aligned with you guys,
better to prepare for the worst in this
case and especially when you have
a pre existing business like you do,
it's easier to do that. ~ so you mentioned
another kind of scenario,
maybe a sub scenario here, which is
different states
approach the ban differently. can you kind
of expound on that a little
bit and and like what could that look
like?
Are there any leading examples of states
where you think that that's starting
to materialize or we have evidence that
there's a will to to find
a solution in spite of a ban and maybe
Minnesota probably is an easy one for you,
so you can take that if you want,
or or go in another direction as well.
I think what we're trying to understand
right now is, you know, what does the
state rec cannabis market look like?
And then what can businesses do inside of
that space?
I think there's opportunity and there's
also warning,
right? So California I think is a warning
in this space in that California
has a state rec program, had hemp drived
products available for a period of time.
when they were removed from Total Wine and
Bevmo,
they went back to the dispensaries and
that that market hasn't picked up,
right? That's still 1% of sales,
and there's still only a handful of brands
available.
~ so I think we're still waiting to see if
the hemp drived market going
to carry over and drive people into the
dispensary channel or into
the traditional cannabis space.
What I think's unlikely to succeed is a
pivot to either
a.4 or this broad market pivot into.
functionals, you know, kava or other types
of products that are that are not THD.
I think people are buying the product for
the effect.
And if you take away the effect that
people can feel,
I think you lose them you lose the market.
I agree with you there. David,
anything else to add to that?
No, I I think I'll let that land with
Jason,
although I think Kava does have an effect.
I have ~ I've actually got samples coming
for for that.
I haven't told you Jason just to just to
play around with it,
but
See, we're always we're always pivoting,
That's a that's another R and D.
Some future future conflict. Yeah,
we're never stopping. Yeah.
We'll see. Yeah.
But you know, the other the
exactly. Yeah.
other thing that's interesting,
Ian, is I'm in I'm in Texas this week,
and you know, one of the questions that
we're asking in Texas is there's
a license program in Texas, right?
~ there's licensing and manufacturing,
but you also have a government that's not
super friendly to the category,
so could you operate an intrastate Texas
business potentially?
Is the Texas Alcohol and Gaming
Enforcement.
I'm I'm not actually sure the exact ~
acronym for their agency.
Are they gonna get involved? Will they
will they be okay?
And then and then obviously there's the
downstream effects of banking
and payment processing and everything else
that sort of goes along with
it of operating a cannabis company.
but I do think you're going to see some
really interesting market dynamics take
away. Like I don't I don't believe in this
like November 12th cliff and
the thing is dead. I think you're gonna
see
you know, different markets and different
brands try unique approaches.
Mm.
And the question all of us are gonna have
to see is like,
will that work? I think what we do know,
and and I'll be really clear, this is not
coming from inside information from
our relationships with retailers.
This is just sort of, you know,
my understanding of the market is is
you're not going to
see major retailers continue. ~ you know,
you're not gonna see likely the targets of
the world or or some of
the big chains probably keep in the space
because I think for them
it's gonna be a more of a, you know,
compliance risk where you'll see this
market sort of evolve and adapt
is gonna be independence, just like we did
back in twenty twenty
two at the beginning of the category.
~ and they'll lead the way and they'll
kind of figure out what the
new route forward is.
I think Ian, you can look to, you know,
just kind of the rec cannabis market about
like,
okay, how did how do these, you know,
businesses who are, you know, not
federally blessed as Hemp was,
~ operate in states that, you know,
that have a licensing structure or
something for them?
~ and kind of to touch on, you know,
some of the compliance challenges,
banking, you know, insurance, payment
processing,
two ADE taxes, you know, how how do you
Can your organization jump over those
hurdles?
~ and you know, I I think that there's
ways for for smaller operations
or kind of more nimble operations to do
that,
like our business. But ~ you know,
to kind of Jason's point, like large
national retailers,
it's hard to, you know, ~ I don't even
know what the analogy would be,
steer the ship, just a, you know,
it's a bigger ship.
Do you also think that that means that the
largest ~ players
in the THC beverage space is it is it more
difficult to adapt in this
way at size and scale,
or is it easier?
I mean, I think it probably depends on how
much capital you've got and,
That's a good question.
you know, how willing how able you are to
to adjust,
~ and how much runway you have.
I I I think from our own personal
experience,
as we've grown as a company, it has been
harder to launch new products.
I mean, we we like to talk about all the
time,
you know, hey, we launched Trail Magic in
nineteen days.
And we did. It was it was an incredible
effort by the team.
~ new product development now.
For variety of reasons takes longer.
We're just a bigger organization.
We've got, you know, more checkboxes.
And so I think it will be a market that
rewards small,
nimble companies who, you know,
have some capital, who are willing to take
a risk.
Alright, so we've we've talked about some
of the scenarios.
No one knows for sure. It is Wednesday,
July twenty second, and all this could
change in a week.
I would love to transition now to
a a third topic that I think we're all
quite passionate about and is certainly
a a hot topic of late, and that being ~ AI
and the way that
AI is transforming and integrating into
these businesses and a favorite kind of
way of thinking about this from
my perspective is that ~ there is no world
where and people ha will have heard
me say this before ~ potentially there's
no world where we download a joint from
the cloud or a beverage from the cloud.
So in in in some sense there is a a a pure
form
of the physicality of of of consumer
packaged goods that never goes away.
And in my mind, it's actually more
interesting for that reason,
because anyone can spin up a an app now,
a mobile app, let's say it's gonna be
clunky and and cost you a lot of tokens,
but you can do it. It's more interesting
to me to think about how
the physical world changes as a result of
AI.
And you all are in the business of
producing and moving physical goods
in this world.
I would love to maybe start off to to hear
how you guys got started.
And then I know ~ you've built some
internal proprietary things that you use.
So I'd love to then move into a little bit
more depth as far as what you're doing.
And and then at the very end of this,
we will do some show and tell and screen
sharing,
acknowledging, of course, that not
everyone is going to be able to watch this
over
video.
So we'll do our best to kinda narrate
what's going on as well.
But but yeah, I'd love to get into that
topic.
Yeah, I mean so I can say, you know,
how we got started, you know, in
AI in our business is is similar to I
think where most businesses are right now.
Is, you know, we're a small organization
and we're always trying to find ways
to to do more with the resources that we
have.
~ it's a blessing and a curse.
I can tell you, you know, being a well
funded organization,
it's easy to spend money, you know,
a bit more carelessly and all of a sudden
when you're watching every single penny,
you know, you you start to get
you know, really focused on, you know,
how do I maximize my time and effort?
And as three founders who are actively
involved in the day-to-day business,
you know, we always have more work than is
feasible within,
you know, our lives, especially as
parents.
And so, you know, how do we improve the,
you know, the operations and the
efficiency that we're doing.
So very basically it started with,
~ on a sales operations side of things,
how can I better analyze data for my
wholesalers and be a better communicator
with
my wholesalers? one of the
You know, number one things that we talk
about in sales operations
and especially as a small brand working
with a network of sixty plus wholesalers
is,
you know, we can win by being a stronger
communicator than most of
the other brands and by making sure that
we show up with the right information
for the wholesalers exactly when they need
it and make it very actionable
for their team. So we're not creating it
an extra burden.
For a lot of our wholesalers, some of them
were one of their largest suppliers.
A lot of them were were pretty small
supplier.
And so we don't necessarily get
the time of day from their internal teams.
So we needed to make it, you know,
really straightforward. And one of the
projects that we worked on first
was managing our target sets, which was,
you know, almost 3,000 points of
distribution across 21 wholesalers,
across 350 stores, right? And so you're,
you know, trying to get to 100% ex set
execution.
And making sure all of those items are in
the right spots and then identifying gaps
as as long as you go. And so in that in
that case,
there are existing software that you can
pay for that will
do your chain management for you.
~ there are specialized software in the
industry like Vermont Information
Processing
that has some of these systems ready
built,
but it's gonna cost you, you know,
hundreds or potentially thousands of
dollars of additional cost per month.
Now, if you have the raw data,
Hmm.
your $20 a month Claude subscription ~ can
get you that plus more
and make it customized for your use case.
So very simply, as I was going through
this process with wholesalers
and managing this set, I would take our
set execution data from Target.
You know, they would send us a list of
saying,
here's the items that have been set,
here's the items that haven't been set by
store,
~ by item. And this spreadsheet is,
you know, not just Trail Magic,
it's every other brand in the set.
So it's 10,000 lines long.
~ I would pair that up with ~ my
distributor data and information
and which distributors covered which
store.
Cause in beverage, if you kind of have
been through this,
you recognize that there is a ton of data
and not a lot of it's connected anywhere.
It's all living in sort of these
independent spreadsheets.
And using Claude,
we were able to merge that data,
have Claude filter it for Trail Magic and
have it identify the immediate gaps
~ that were left in our set execution.
And then create a live dashboard that I
could send to my wholesalers,
and then they could very easily just click
in and say,
Great, here's the four stores and these
items that are missing for Trail Magic.
Take a screenshot, send it to their rep.
And it it is a process that you could
manage with manual Excel work.
It would have taken significantly longer.
You could manage by paying, you know,
several hundred dollars or several
thousand dollars a month,
or a twenty dollar Claude subscription and
Five minutes and a quick prompt ~ spits
out the data,
the exact data that we needed as a
business.
And so that was the start of our journey.
And I think from a sales operations
standpoint,
it's a lot of those types of prompts and
data processing that we use.
~ and then as I'm going through this,
I'm passing along these insights to David
and kind of some of the work that we're
doing. And then David really ran with it
for a lot of back-end operations
in our team, especially on the finance
side of things.
So I'll let him jump into it there.
Yeah. I I mean I think that it's like a
you know it's it's an amazing tool.
I think w you know we're not I I don't
personally feel like I'm on anywhere near
the cutting edge. ~ I'm I'm you know
trying to figure it out,
keep up with ~ all all the different
changes and things,
but but it really at the end of it it's
like,
okay, how do I how do I build,
you know, just as we would with any other
process,
something that can, you know, kind of run,
execute, make our lives easier.
So
~ from like a financial side of things,
you know, one of the most one of the most
difficult things for us
as we've expanded and kind of really grown
up and changed our business from this,
you know, local cider company that's just,
you know, distributing has a couple
distributors in Minnesota to like,
my gosh, I don't even I don't even what do
we have?
70 distributors, Jason, something like
that,
~ around the country in you know 20
different states with you know three
different
brands and you know, however many
different SKUs,
it's like, my goodness, ~ how do we
possibly get our arms around all of this?
How do we how do we know what SKUs are
profitable when we ship it to California?
Are we even making money on kegs that we
send to California?
~ how do I how do I instruct our warehouse
team to you know make sure that when
we're booking freight, which when you have
a war in the Middle East and
f you know freight goes you know
absolutely bananas,
like ~ we're not we're not sophisticated
enough to be
hedging or doing any kind of like aluminum
or or oil kind of ~ hedging operations.
Like maybe that's ~ maybe that's in
another decade or or maybe a couple
of years with AI, maybe I'll we'll be
hedging that.
But ~ but anyways trying to use these
tools to to accomplish some of those
things.
So for us at a very core on the back end
side of things,
~ you know, it's like I had to learn what
an API was and how did that work?
~ so getting an API to connect like to you
know my finan or
my my accounting software, QuickBooks.
you know, pulling that into my kind of
forecasting spreadsheet,
which I basically live in and kind of
have,
you know, for a decade for our business.
And pulling pulling in financial
information from that,
how do I make that easy? my gosh,
every t I I update books, you know,
all the time. ~ you know, I kind of used
to work at Ernst and Young,
so I'm I'm kind of dangerous enough on the
accounting side to like,
you know, to meddle in there. And and and
basically it's like,
okay, cool. How do I write something that
I don't have to pull
a spreadsheet manually to do that?
It doesn't take long to do that.
It takes a couple hours, you know,
especially when you're learning what the
heck an API is,
it takes, you know, several hours in the
beginning,
setting up a developer account,
figuring this all out, you know,
banging your head in the cloud,
which is getting easier, especially with
like more advanced models.
~ but r basically making the time to not
work in the business but work
on it and using AI to do that is super
helpful.
So kind of like tactfully, like what we do
is,
you know, I have an API that connects to
QuickBooks.
~ using a Python script that it wrote.
~ it I don't code. And and basically it it
it pulls financials for me into it.
And then it kind of then starts to update
my spreadsheet and it's like,
hey, did I add any new chart of accounts?
Sometimes accountants like to do that.
So it kind of flags different things.
And it's like, hey, I actually don't want
that account.
Cause like I'm our treasurer, I'm our
controller,
I'm our CFO, I'm all the different things.
~ so if if our kind of our bookkeeper does
something that,
you know, kind of ~
you know, outside the outside the scope.
I don't have a robust internal controls
and processes.
It's like it's two people. ~ so anyways,
I'll I'll pull that, I'll run a script to
do that,
and then ~ and then then it's kind of then
kind of cleaning or doing like
a budget to actuals process. How do I
Mm.
get how do I get my other owners to know
what the heck is going on?
So or even my chaproom ~ hospitality
director.
So it's like cool running run the budget
to actuals for the company,
budget to actuals for our ~ for our
production and wholesale business,
budget to actuals for our tap room.
And then kind of along with that process,
here's here's a scorecard that's again
another formatted kind of separate thing.
Like most of the people I'm I love the
full you know PL.
That's great. ~ but for most people,
that's wildly overwhelming. Okay,
how do I scorecard it, get kind of
different metrics that really matter?
and that might even pull information
that's coming outside of you know
a financial system. Okay, cool.
I need an API to ~ to my my point of sale
software ~ for for the tap room.
I need an API to my you know pickleball
court reservation software,
you know, what hours are doing well?
It's like, all right, cool, like let's
start building these Legos on
top of each other. It's like great,
then here's here's a scorecard.
So it's like my my tap room manager,
my kitchen lead, whoever can see these
numbers and like we're all
Like this is the direction we want to go.
Like, and then here's the measurements of
on how we're doing.
~ and then and then on top of that,
even for like my director of hospitality,
which was super helpful, like he's like,
wow, this is amazing. It's just like,
here's a general ledger account dump of
like everything that you know hits these
accounts. You're PNL, he's PL responsible.
Here's your PL, here's your scorecard,
and here's all if you want to search a
transaction,
here's all the transaction, and here's a
little financial package I
can give you every month.
I can run it by month, I can ask it by
quarter,
I can re-update the accounting,
rerun the scripts and just like pump it
out again.
So it's like trying to make these things
like,
you know, in a in a Python script where
it's like something changes
and then that can just run. And like I
don't even have any agents that
are autonomously doing this. I'm sure that
that's the next step where it's like
stuff changes or whatever else.
Like, I'm sure it could run for me and do
some of these checks.
Like I'll I'm I'll get there, but I'm not
sophisticated enough yet.
And then really for us is the is the kind
of the ownership beyond the
you know just kind of like what happened,
like we need to figure out like what we're
gonna do next.
~ and and basically like for us,
like for as we've expanded across the
country,
one thing that we haven't done a great job
of is figuring out,
you know, what is and like I think
everybody needs to kind of shift to this
that
if they haven't already, that's like what
is your what is your kind
of your actual like margin contribution?
margin dollars that you get on each skew
and then go further ~ by channel like what
Mm-hmm.
market
is it going to? So like getting,
you know, kind of looking at, you know,
your your kind of your system and your
market and like figuring out like
how do we how do we want to set this data
up?
Cause like as we've gone through,
I gosh, it feels like every year I feel
like I I've changed like
our PNL structure to kind of like better
fit the business.
Whereas like now I think I'm in like a
structure that can at least accommodate
you know a lot more kind of growth.
it's like we have each brand has kind of
like a revenue and cost side of thing,
like that's broken out. ~ and then like,
you know, kind of like a pet like if it's
either,
you know, cans or or kegs or something
like that.
Cause it's like every one of those choices
you make,
you then have to track the costs for on
the back end too.
Otherwise, kind of like what's the point?
~ so it's like you kind of have you can't
just describe everything.
You have to be choosy. so it's like,
okay, that amount of work, I think that
that that works for us.
And then it's like, all right.
Wow, like I don't even know when I sell a
keg to California versus,
you know, ~ you know, Iowa, what's
profitable?
How do I how do I kind of tag that?
So it's like we did it by state for a
while.
It's like, well, I might have multiple
distributors,
some might overlap. Like this isn't
actually functional for Jason to then
go have conversations with distributors.
So it's like, hey, if we're investing in
the market or we're not making money
in the market and we're spending too much
on freight or something like that,
like it's not just like, like,
Iowa sucks. Like it's like, well,
that doesn't help. Like we might have a
couple different distributors there.
It's like, how about we then change our
class structure to then tag expenses,
to tag, you know, all that type of stuff.
Let's do it by market, which we consider
as like basically a distributor.
or like a distributor has a bunch of
locations,
like, okay, Wisconsin, like your six
distributors,
like you're all the same. Like we're gonna
keep we're gonna put you in a bucket.
So it's like kind of being, you know,
myth like, I don't know, considerate about
how you wanna organize your data
to then ~ you know, be able to then run
For example, like what I'm working on
building,
like literally, you know, right now is
like cool,
like how do I have Claude then tell me ~
and I can run now a script
I haven't I'm not I'm not there yet,
but run a script to basically tell me I
want a
breakdown of every SKU and the
profitability,
like the margin dollars ~ by channel.
~ and I want that every month for all the
products that were sold in the last month.
How do we do? And that I think is gonna be
a little bit more real time for
us to be better managing.
fuel surcharges for freight to California.
So then I can go tell my, you know,
my logistics ~ you know guy in our
warehouse like,
hey like like we you know these SKUs you
have some flexibility on these ones don't
do that. How can we reorganize and and
kind of change our our shipping processes
to be actually profitable for things
because you know you just you can't
you can't let you know kind of some of the
the dead weights drag you down.
~ you have
Yeah.
to have all of your if like that's why
you're business.
You have to have all these things actually
make sense and be adding
~ additive for you. So I kinda rambled,
You said no,
so I'll I'll stop.
that was perfect that's perfect.
You you said one thing I wanna circle back
on is working in the business rather than
on the business. And ~ it
Flip that.
I'm sorry, on the business, not in the
business.
Mm.
So yeah, explain that a little bit more
and and I guess related to this
is in my mind everyone has kind of this
journey of w how how do
you first start using it and then how does
using it allow you to
I wouldn't say add more complexity,
but maybe more detail to what you were
already doing before in such
a way that you can get higher quality
answers or you can get closer to
a version of what you're trying to
actually accomplish,
whereas before it wouldn't have been
possible for you,
David, just to do that all on your own.
So ~ I'd
Right.
love to hear a little bit more about that.
Yeah. well I think just kind of the the
just to that last part with like
the detail kind of side of things.
Like if I was gonna do profit
contribution,
you know, by skew, you know, by channel,
I might be able to do that once a quarter,
couple times a year, kind of do some of
Mm, mm.
these pulse checks. And maybe for the size
of our business,
maybe for the complexity of our business,
maybe that's okay. And like, hey,
I'm I'm not like kind of like,
you know, di- d getting all like little
data points that I'm
probably not necessarily making wild
decisions and changes off of,
maybe that's fine. ~ but it's it's still a
it's still a burden to process and do.
And if I can set up my system to whether
it's doing it monthly or doing
it a couple of times a year to be like,
hey guys, you know, we're resetting we're
resetting pricing for distributors,
probably, you know, once, maybe twice a
year.
so it's like as long as I've got the
information for doing those,
you know, kind of types of thing within
the business,
great. So it's like the AI can help me do
that.
but working working in the business versus
on it,
~ I mean, like the in the business is like
you're managing your email.
All the crap, all the storms, all the you
know,
distributor issues, product is,
you know, has an issue, ~ transportation
didn't show up,
whatever. All the like the the Monday
morning like fires,
the fire drills, that's all in the
business type of stuff.
And anytime that like
I'm trying to learn how to get a,
you know, how to have Claude, you know,
automatically run, you know, pull an API
of data and then run a script that adds,
you know, kind of some type of like
dashboard or insight for me,
like that I can then repeatedly do and
like that changes the way that I work,
like that's on the business. So ~
Mm-hmm. Got it.
you can't it's a balance. ~ you know,
I try to as much as possible, you know.
be working on the business, but like the
reality is it's like
I'm probably working way more within it.
~ and it's like, okay, then can I find can
I have somebody else hire them
to do some of the in-person stuff?
It's like, yeah, you can do like there's
plenty of,
you know, things that you can do that for.
But it's also kind of an art of like,
you know, what are you giving up?
Like what and do you have kind of your,
you know, process is set up or controls
kind of in place where,
you know, that person is set up for
success to do that.
Or are you now disconnected? Or if you
give that away,
like
How do you stay in touch? So like a great
example would be like,
I do not run the day to day of our tap
room at all.
Like I am out of it. That is like it is a
it is death by a thousand cuts.
It is the definition of a constant
Uh-huh.
treadmill of working within the business
because you have customers come
in and like they're never fully satisfied.
You can always extend more hospitality.
So like it's just, you know, there's the
ball is keep getting,
you know, you pulled away from you.
~ so for me to be able to like
release that and feel comfortable.
Mm.
Like, I don't know. I'm I'm the type of
person who sees a lot of things through
a financial lens. That's how I kind of
like,
you know, like grab a hold of something
and like kind of understand
it and feel comfortable. So it's like for
me,
it's like there's that process that I was
talking about.
Cool. I can run financials, I can do
scorecards,
I can give these things to my my kind of
manager.
And it's like I literally had this
conversation yesterday and it's like,
gosh, like our pickleball sales are
dropping off.
What's going on within the market?
Like
You know, like and and trying to explore
that.
It's like, all right, our leagues are kind
of dropping off.
We're losing competitive players.
Well, that's fine that we're losing
competitive players.
We're kind of more of the social spot.
But then like kind of ideating with them
of like,
you know, how do we ~ like kind of
providing direction of like,
okay, how do we how do we garner more
private leagues?
How do we, you know, reach like,
my gosh, like do it like the business
community,
whatever. Like you can kind of start to go
into kind of different things.
So it's like I
~
can kind of provide like, you know,
these these kind of ~ there's I have
enough insight.
to give me context as to what's going on,
to then prompt really good questions and
conversation for then the people that I've
got, you know, actually doing the day to
day,
~ to then like kind of continue to give
them guidance and direction
and make sure that they're kind of pointed
in the right direction
and we're working on, you know,
~ working on things that I think are going
to be productive.
But then it's also having great people,
you know, kind of in those spots.
So it's it's it's an art. I don't have any
there's no secret sauce to that.
It's it's a thing that you're constantly
working at.
So
But you try and have that infrastructure
in place so you can do some
of the other processing that then makes
your working in the business easier.
So if I if I can do the script that gives
me the information to help
me better manage the the day-to-day in the
business,
then like then I don't have to be in the
business as much.
I'm I'm like freeing myself. And I think
entrepreneurs in general,
like they just kind of like entrepreneurs
are very,
you know, like out there and get shit
done,
but they're also like, I don't want to do
something twice.
That's like that's boring. Like
That's key.
I don't like and I'm an op like Jason's
more shiny object.
I'm a more operator. Like I can do things
more than once,
but like but like man, if we have really
good work on you know,
on the business to make things that we
don't have to do all the time,
like entrepreneurs love that. So like
we're really good,
I think, in that as like a ~ like as a
kind of an industry or kind
of like a headspace of people.
There there no, I think I mean it's it's
really interesting you say that 'cause
I I f I I feel of two minds about it,
that sometimes an entrepreneur,
and I wouldn't I wouldn't call myself an
entrepreneur in the way that you all are,
but everyone in this business is at some
level.
There can be sometimes a ~ falling in love
with
the process of doing things that if you
really ask yourself like
If I'm gonna be doing this more than once
today,
in today's age, there's no reason why I
need to do it more than once.
I can do it once, teach a machine how to
do it,
and I don't have to do it again.
Now, maybe I like to do certain things,
and so then that that that gives me more
time for that.
But really asking yourself that question.
So the the maybe to to wrap this up,
I've heard about ~ a bit from Jason as far
as the communication elements,
and I'd call it
Call that the business to business part of
where AI has been helpful.
We are going to circle back at the final
bit of this to to ~ dive in on that
of what you guys have built. David,
you've talked a lot about the internal
processes that you have been able
to build or that has unlocked as a result
of AI.
But just as a clarification, does that
should I take that to mean that from like
a business to consumer standpoint,
is that
maybe ~ a less
less trodden ground for you when it comes
to AI or or are you also doing things
in that realm as well?
we'll so so to to wrap things up,
we have decided as a collective team that
we don't necessarily want
to show live data on some of this.
So ~ what we're gonna do is ask the Trail
Magic team to basically replicate what
they have but with dummy data and we will
include that in this podcast
in the show notes.
Great. Well thank you both so much for
participating in this.
Jason, especially you dealing with the
Texas Heats.
myself, I know a thing or two about that.
So ~ keep your AC on and ~ thank you both
for all that
you do and thanks for listening everybody
to another episode of
the Delta Dispatch Podcast.
Thanks again.