🎙️ Cresco Labs, Chief Information Officer, Zach Marburger
🎙️ Cresco Labs, Chief Information Officer, Zach Marburger
Zach entered the Cannabis industry in 2013, initially building a Cannabis tech company. Soon after, he figured Cannabis was the opportunity and joined Cresco Labs to build out their tech stack.
Summary:
Entry into the cannabis industry. He mentioned being too early in the eCommerce space for Cannabis and ultimately bet on Cannabis as the opportunity and joined Cresco Labs, where he focused on building technology in-house
Overview of Cresco Labs and its stack. How the company has built a custom stack to power its retail and wholesale businesses, focusing on creating a seamless experience for both employees and customers, and integrations with third-party platforms like Canix and AlpineIQ
Impact of MasterCard's restrictions on using debit cards for cannabis purchases.
The success of Sunnyside's e-commerce platform, which surpassed a billion in online retail sales since launching in January 2020
Online-centric customer base and superior marketing efficiency
Background. Zach Marburger is Cresco Labs' Chief Information Officer. He oversees the technology and data infrastructure throughout the organization and is responsible for designing, scaling and implementing technological systems and data platforms to optimize the customer experience. Throughout his tenure with the company, Mr. Marburger has worked in various executive roles supporting Retail, Operations and Technology functions. Among his many accomplishments, he and his team have engineered a proprietary internal ERP platform, responsible for driving operational adherence and over $2 billion in commercial sales across retail and wholesale operations.
Before joining Cresco Labs, Mr. Marburger served as the co-founder and CEO of Topple Track, a startup providing a scalable, self-serve, content monitoring platform for musicians and record labels. In 2015, it was acquired by Symphonic Distribution, a music distributor and media services company.
X/Twitter: @chapelhillgreen
Cresco Labs. When Cresco Labs reported Q1 2023 Results, there was a bullet point that the Company had surpassed $1 billion in online retail sales solely through the Company’s ecommerce platform, Sunnyside.shop.
$1,859M in Total Revenue from Q1 2021 to end of Q1 2023: $822M in 2021 Revenue, $843M in 2022 Revenue, $194M in Q1 2023 Revenue
Leading eCommerce and Loyalty Program (Q1 2023 Investor Presentation)
4.6M transactions annually, 1,600+ dispensaries where branded products are sold
Dispensaries in 7 States: 68 Total–Arizona (1), Florida (31), Illinois (10), Massachusetts (4), New York (4), Ohio (5), Pennsylvania (13)
Transcript [lightly edited]:
@0:00 - Zach Marburger (Cresco Labs)
You know, my history in cannabis professionally, I think, you know, actually started in 2013, where I was living in Asheville, NC at the time, and my former co-founder and I had just exited a previous business in the copyright space.
And we were always really large consumers in the cannabis space and had a personal interest, but we were looking to Colorado.
And we thought after a trip out to Denver to go snowboard and such that there was some potential opportunity.
And I stumbled across an investment group called ArcView, which at the time was like the only show in town.
And I put together a pitch deck and pitched from my basement in Asheville some early day ArcView folks. On an idea called Canabild, and we were effectively going to be this, excuse me,-end operations platform for dispensary operators.
And on that call was a gentleman named Ian Seed, who at the time was a, you know, a long time operator in Colorado.
Today he is the, I don't know his exact title, but he is the cannabis policies are for a Jeri Polis in the state of Colorado.
And I'm on that call by chance, we took a liking to each other, and I was able to secure some funding from the network, and actually packed up and moved to Denver about a month later, and his partner, Kavon, and a couple of other folks were really the our initial ushers into the industry, and we were able to use their Denver relief dispensary to really build our initial product.
So I'm forever grateful to That camp who really brought us into the industry and showed us what the OG industry and Gen 1 adult use looked like and gave us a front row seat.
So that was really my path into the industry over 2013 and 2014.
@2:24 - Dai Truong (Arlington Capital Advisors)
Was that Whaxy then or was that another company?
@2:28 - Zach Marburger (Cresco Labs)
Yeah, that's the same company. Cannabuild was just our DBA. The product we ended up building was Whaxy. And yeah, over a couple of years, we were kind of, we were first a party in the cannabis e-comm space before Jane or Dutchie had even arrived at that point.
And we were honestly too early. We were far too early and didn't raise enough capital. But at the time we were working with the premier dispensaries in the country doing some really cool stuff.
I remember for two years we powered harbor sides ordering and got up to, I think, when we got acquired by Mass Roots in 2017, about 200 different customers on the platform.
So we were doing some cool stuff, but ultimately, with my trajectory at Cresco and just being underfunded at the time, we decided to go through that acquisition with Mass Roots at the time.
And that's how I effectively transferred from that project to Cresco. And the connection there was Ian and Kavan again.
Ian and Kavan had a consulting business called Denver Relief Consulting that was tied to their dispensary. And they were the folks that the initial Cresco Labs founders hired to write the applications for the initial Illinois licenses.
So early in that process, I met the Cresco founder. There's Charlie and Joe and Rob and Dom. And we really took a liking to each other.
that formed into myself and another gentleman. And we argue about it to this day, becoming the first and second employees of Cresco.
So at that time, we were much different than what we are today. But that was vis-a-vis my relationship with Ian and Kavon, who to this day, remain highly involved in multiple cannabis projects.
@4:31 - Dai Truong (Arlington Capital Advisors)
Yeah, so let's take it back a bit. So you mentioned being too early with e-commerce in the state. Let's dive into that a bit more.
Is it just so much easier for people to go into stores? It was more folks who kind of knew what they wanted.
So they liked the in-store experience.
@4:49 - Zach Marburger (Cresco Labs)
Or can you tell us more about what you mean by being too early back then? Sure, the technical infrastructure for a third party project or product, excuse me, to exhaust.
This on top of the point of sale was a very risky proposition. At that point in time, think, MJ Freeway likely had 90% market share and had an API that was underdeveloped at the time.
This was 2014, and APIs in the space aren't nearly what they were today. It was a scary proposition to only build an integration business on the back of that one integrator.
It was very difficult in that regard to actually build a digital product at scale. As you said, habits at the time were a little bit more focused on actual brick and mortar trips.
At that time, I think the marketplace dominance as well was a lot more prevalent than what it is today.
I can recall at that point in time where operators were 100% reliant on and on Leafly and WeedMaps listings.
And, you know, that made it very difficult for us to gain market share or gain traction. But ultimately, I think the timing for Jane and Dutchie, where they could, you know, stick their tentacles into more point of sales with wider distribution and more evolved tech, allow them to just build far superior products and, you know, we were working on at the time.
@6:29 - Dai Truong (Arlington Capital Advisors)
Yeah, and at any point when you were at Cresco Labs, you're thinking, maybe I should go and do this because now the timing and let's say I think both of them started around 2017-2018.
Hey, we should probably go do this now. Do you think about that with your co-founder?
@6:45 - Zach Marburger (Cresco Labs)
Yeah, I think for us, it kind of morphed into us really looking at cannabis as the opportunity and not necessarily just building that specific product.
And Cresco had such a intro to Interesting opportunity attached to it where the founders were folks that I had never met in cannabis before. These guys had a real palpable interest and incredible business track record and the capital to actually capitalize on the things and lofty goals that they were saying.
So it was really interesting. So ultimately, what we thought the opportunity may be was to take what we've learned already and maybe some of the same team members, even.
And kind of build that for an operator and have that be ultimately our in-house tech that we could evolve over years and use it to our competitive advantage because of, you know, what ultimately was a lack of options in the marketplace to help us do something beyond what was required by compliance.
@7:56 - Dai Truong (Arlington Capital Advisors)
Yeah, that makes sense. In your entry into cannabis where you work with Very closely with an operator in Colorado to start, it seems like you gravitate more towards having that vertical understanding of, hey, we operate the physical product, and then we also provide technology.
So it seems like that makes a lot of sense of path you chose.
@8:19 - Zach Marburger (Cresco Labs)
Yeah, I think the industry itself and the nuance between all the different markets because of regulatory differences and then just some structural differences drive a real desire for us to be as close to the process as possible.
And that's where we can hone a product to be hyper specific to whatever that may be. I think Flowhub actually, out in Denver did a good job at this.
Kyle historically was in the industry. I think he was a multiple frontline positions for over a year before he started Flowhub to really understand what would be
The product that serves the needs, the best, right? So I think for us, that's been a real competitive advantage and all of the products we're building to make sure the actual ROI there is something that exceeds what you could otherwise get off the shelf, which is a really important barometer for us.
@9:21 - Dai Truong (Arlington Capital Advisors)
Yes, let's get into that. So let's talk about Crescendo Labs and the technology that you felt. So let's give us an overview, tell us how big the team is, how long certain things may have taken to develop.
And then after maybe touch upon some third party technology that you still use because you chose to use that versus building in-house.
@9:41 - Zach Marburger (Cresco Labs)
Sure. Yeah, I think today we are a team of, I want to say about 25 total engineers and that spans across application engineers as well as our ETL and data engineers and some BI folks as well.
So we have responsibilities. The was in the business for the complete technology infrastructure. And so what that means is ultimately there is a product element and then there's a more traditional corporate IT element.
So I'll focus on the product element. And what that ultimately powers us is actually our retail business and our wholesale business.
So I'll focus on retail first and then explain wholesale, which I think is a little bit new to your understanding day.
So Sunnyside is our retail brand. I think there are 65 locations if I'm not mistaken across six or seven states.
And Sunnyside.shop is the primary consumer interface for all of our customers. And we do an overwhelming majority of our business online in some respect.
And that is powered by a completely custom stack that we've built internally over the. Past four years. And so where our responsibility starts and stops is effectively at the cash register.
So what we try to do is facilitate every every movement, every every every data collection point. And every product interaction all the way up to the point of sale.
And so what that means is we've effectively created an ERP that we are modeling after very traditional ERP approaches that starts with the procurement cycle on the retail side.
And when we procure inventory all the way to when we actually sell that inventory to end customers and do so through a high-performance e-commerce face that we believe has the catalog and UX capabilities to outpace some of our competitors who often use off-shade.
Shelf options, all of which are always getting better, but don't allow for the specificity that we have found drives value beyond what they're offering us.
So on the retail side, we really control the employee experience all the way all the way through, call it, arrival at the store to purchase, as well as the consumer experience.
From when they're shopping on our website, all the way to when they check out at the store. So we've built this platform that serves both sides, if you will, and is considerate not only of the commercial experience therein, but also the operational procedures, because this was really a day born out of COVID more than anything where our system is very considerate of the throughput necessary.
From a measurement. A facilitation of steps to the store to generate outcomes we desire. So it's hyper-specific in these steps both to our staff and how you shop as a consumer.
So we have found that that really drives high, high levels of conversion, high levels ultimately drives a net net outcome that we believe is worth the squeeze to take the effort to build this ourselves.
And on the wholesale side, this is less developed for us but is fully active within our business I think for about three years and it's a little newer to the party.
But ultimately we integrate with a platform called KANX, who we've been very happy with. We think the team over there is really talented.
Stacey, the founder, really sees things through the same lens that we do from an ERP perspective. And we're using CanX to really be our regulatory interface across the country so we can develop a similar relationship with our internal portal to facilitate an experience with our dispensary customers.
That is on par or better with market options as well. We believe some of the wholesale market places within our industry don't necessarily give us the competitive advantage that we'd like or consumer experience to our dispensary customers that we'd like to offer versus doing that ourselves as well.
So we're starting to find on both sides of our business competitive advantages and creating this platform versus off shelf options.
But we're always. Integrating with all of these partners within the industry to either syndicate our inventory, syndicate our purchase orders, or bring in other data that helps us with planning and modeling.
so we're very receptive to relationships with these folks and play nicely, but we still feel ultimately the product that we ship to our customers is best orchestrated by us internally.
@15:26 - Dai Truong (Arlington Capital Advisors)
Yeah, so a few questions on that. So as far as you know, are you sort of the only top five Tier 1 MSO that's doing this that's built it in the house?
@15:39 - Zach Marburger (Cresco Labs)
I think to this level of degree and scale. I know some of our peers have really done some pretty cool stuff with the new Dutchie or Jane API's that allow them to be headless in their experience.
And have really focused on evolving their econ platforms on the front. And I think that has been in a response to what we're doing, which is cool to see just the entire industry leveling up.
But as far as the back end goes, I think we are the most sophisticated right now. And there is a lot of engagement with marketplace players.
And because, you know, we do a lot of business with each other. So we see how and what systems each other use.
And so ultimately, I think we're all interested in creating, you know, the least friction transactionally between systems. And so that's really why, you know, we play nice and integrate as well.
So we can ultimately, you know, do business agnostic of the system. But I do believe we're probably the most advanced in this area.
@16:52 - Dai Truong (Arlington Capital Advisors)
Got it. then going back to, you know, the marketplace on the consumer side. So it sounds like you don't really use others.
Places like weedmaps for customer acquisition, or maybe you do, it's to a small extent. Can you give us an overview of how much of you are, let's say, customer traffic comes from just folks going directly into either Cresco Labs or Sunnysite.com shock, and how much of that is coming from external places?
@17:20 - Zach Marburger (Cresco Labs)
Sure. Yeah, I don't have our Go-Go Analytics pulled up in front of us, but as a rule of thumb, the overwhelming majority of our business on the retail side is really centered on our e-com experience.
And we have been participatory with, leafly with weed maps and retail listings, but they certainly don't drive the commerce value or even the total traffic for us that they once had and are challenged with not singling those two platforms out in particular, just because they're the largest.
And, you know, most known. Sometimes in our space platforms have a really hard time with attribution, which makes it really difficult for us to continue to invest in something with that level of opaqueness from a performance perspective.
You really want to understand what's driving that value. And that's where I would say a third party platform like Jane has been really beneficial for us on the wholesale side.
When you use their platform as a wholesaler or a brand to reach retail consumers, vis-a-vis retail dispensary menus, that has shown to be a very effective, excuse me, and measurable channel for us.
And I think many of our peers as well that allows you to continue to reinvest or change strategies just because you know what you didn't know previously.
So for us on the real retail side, the platforms as a whole have become less of an acquisition channel for us, and something that we're really focused on over the near future is going to be upping our traditional SEO game.
That's just not something that we've chosen to battle previously. We really believe we have an opportunity to evolve our ecom experience through some just basic blocking and tackling that will continue to make it an acquisition machine and not just an experience destination.
And on the wholesale side, we really do a lot of that value generation directly with customers versus having a marketplace presence, right?
And ultimately have a, you know, it a hybrid model that allows us to utilize our relationships and our technology at once because I don't think right now our markets in a place that we're
Where you can go full ecom and not have a relationship that would drive the value you're looking for with dispensary customers.
So ultimately, we believe that's the right mix. And no single platform is really capable of commanding that outsized acquisition value that they once had.
@20:26 - Dai Truong (Arlington Capital Advisors)
And it helps me understand the wholesale side. So in terms of wholesale marketplaces, let's say Leaflink as an example.
So are you guys probably listed there? But are you trying to direct most of your wholesale customers onto your own custom-zilled platform?
@20:46 - Zach Marburger (Cresco Labs)
Sure. So a good question. very nuanced. The Leaflinks and Leaf Trades of the world, depending upon market, have different penetration rates, as we've noticed.
One may be amazing in state A and the other is amazing in state B. So depending upon that dynamic, there's always a desire for us to just have our products present, right?
We have optionality to just be present. And what I'm speaking of today is the actual backend operations. For most operators who use the leaf trades and leaf links of the world, that's also like back in operations ERP platform as well.
For us, it's really a sales order, you know, or acquisition. Source where our dispensary customers, if you happen to already engage on that platform and that's your platform of choice, we make it easy to view our inventory and access our inventory.
But ultimately we facilitate the backend movement of sales orders and voicing so on and so forth through our system, which goes all the way to, you know, fleet logistics and full cycle through the entire delivery.
@22:00 - Dai Truong (Arlington Capital Advisors)
Got it. What about loyalty? Do you guys use that in-house or third-party software?
@22:05 - Zach Marburger (Cresco Labs)
Yeah, so I think we probably have a really one of the most interesting integrations that someone has done without Pine yet, and a big kudos to their team for changing a lot of stuff within their existing API to accommodate, and we've been able to ship a pretty cool product as a result.
So for folks that are familiar with semi-side.shop, our loyalty program is actually within the e-com experience, and it's powered by Alpine, but that's invisible in the experience, and we don't utilize the traditional Alpine wallet that many of our peers do, or the Spring Big Wallet, if you will.
So we've built that directly into the e-com experience and have built a fairly interesting technology layer in between that adds some real flexibility therein, so it allows our customers to
To redeem on a schedule or in an amount that's ultimately up to them. So you could say 3.7 points, 9 points, whatever it is.
You know, there's very few restrictions that drive that experience. And because it's directly in the ecom experience and it's not fragmented or disjointed specifically during the checkout experience.
We've seen incredible adoption as a result. And really large. Penetration through our user base as well. So it provides a more traditional restaurant-esque rewards experience something like a, you know, a dunk in our Starbucks app where your points balance and ability to spend and ability to earn is is right there within your your ecom experience versus exiting offsite or otherwise we've generated a lot of value as a result of taking that approach as opposed to.
The mortuary. So we commend the Alpine folks a lot. We're on Slack directly with them and do a lot of direct engagement and appreciate just their very technical folks over there and have built something special.
So it's cool to be able to play in the sandbox with those types of operators, who just really weren't present two, three years ago.
So I think our talent and our space for third party products continues to get better and it'll So You know, I'm not going to then let's not be available today or from a technology standpoint that you're hoping someone develops or improves upon.
I think the boring one that I think has a lot of opportunity is something that really helps folks with demand and supply modeling.
You know, when the price of cannabis continues to drop, it becomes very important to make sure everything that you make.
Generates the most possible margin for that particular good. And it's really important to know what mix and ultimately at what scale that you need to produce at.
And right now, that's more art than science in our industry. And that comes with the adoption of traditional ERP systems that are still having challenges with entering our space because of how rigid they are and lack specificity.
But ultimately, that's where folks can really generate more value than they are today with better demand and supply modeling.
Just more sophistication and easier tools. Because I can imagine what we do at Cresco or larger operator for supply and demand modeling is significantly different than a smaller or mid-tier operator who doesn't have the capacity to
It or desire or need to be as sophisticated. Some tool that potentially serves that mid to small market with supply and demand modeling to tighten up their inventory and obsolescence, I think, would generate a lot of value and solve a lot of problems with folks' inventory positions and ability to produce the right thing.
That I know today is a real challenge. That's something that I think could ultimately solve a lot of problems for operators.
And something that I also think is really exciting and we're starting to get benefit out of us, is this, you know, it LMS slash incentivizing software, education software at the retail level.
Think seed talent, they've had great traction here. And I know they're actually local to Illinois, if I recall. Those platforms allow us to make sure our wellness advisors are well educated on the product.
So from a baseline consumer experience standpoint, really making sure our information is accurate and whole, but they also allow us to run contests and synergize, measure and do other things with our wellness advisor or button your staff that otherwise wasn't possible for us.
So that allows us to create training programs, reengineer or SOPs, or just make reactions to the data that wasn't otherwise possible.
So I think some of these engagement and learning platforms for the workforce are really in the first couple innings and ultimately have some legs and some opportunity for folks.
And those two areas have been really where we internally right now are trying to craft really interesting solves and solutions.
And then the third one for me, given yesterday's event, News, as we record this of MasterCard and the Pindebid Space, know, payments is always interesting.
As all of us look to, you know, fortify, if you will, and reduce the risk associated with taking payments at our retail stores while, you know, being on par with our non-cannabis peers and making sure it's convenient and safe and, you know, sexy at the point of sale.
It's important to continue to innovate there. So I think folks like AeroPay and other payment providers will continue to have opportunities to ship some payment products that allow us to not only risk our retail environment, but also innovate it.
And so, those three areas are really, when I find most interesting right now, And I think I have some future opportunities here over the next couple years.
@29:05 - Dai Truong (Arlington Capital Advisors)
Yeah, and I'm glad you brought up the MasterCard news. So I assume Visa is going to follow suit. So then you can't use a Visa or MasterCard debit card to complete your purchase.
A lot of people, and I want to say when I went to Sunnyside in Chicago, you guys use a pin debit system.
So how's that going to impact if Visa, I assume, again, hopefully I'm wrong, but it will come out and make a similar statement.
How does Aeropay or someone like them kind of work around this restriction from the two major credit card companies?
@29:41 - Zach Marburger (Cresco Labs)
Sure. Yeah, I don't want to speak for Dan and the team over at Aeropay in too much detail, but ultimately it's a different set of rails that are under a different set of compliance guidelines that allow you to do compliantly achieve a transaction or payment.
It's tied to your bank account and you connect your bank account in a compliant fashion as opposed to using a debit card in the fashion that they're saying isn't supported anymore.
So it's really a completely different mechanism that allows for a different compliance standard that gives us the, you know, the risk tolerance that we're comfortable with.
And ultimately, for us, a lot of the PIN, not a lot, all of the PIN debit solutions, lack ecom infrastructure and API capabilities to ultimately extend the ecom experience to be, you know, payment performance, if you will.
So you've seen platforms like Jane, I believe, and others, I think, Dutchie has their own product in this space.
Integrate or launch payment products so folks can as a part of their, you know, experience free off or commit to paying through that.
Mechanism that generates throughput at the store that generates a stickiness with the customer that we're ultimately looking for. And I think speaking for Daniel he could give you the obviously the great detail, but it's a different set of criteria because of of the of the actual pipes if you will that the transaction is operating through.
@31:24 - Dai Truong (Arlington Capital Advisors)
Yeah, that makes sense. then I've used something similar. I think Hypur has a solution like that where it routes directly from your checking account.
I've done it more so online where I've checked out, but I'm sure in-store, given that you guys are using the Sunnyside platform.
You know, you're not that similar and you're not dependent on debit card processing.
@31:46 - Zach Marburger (Cresco Labs)
Yeah, exactly. I think it just becomes incumbent upon us to create an experience of trust and education. folks adopt new, you know, otherwise, maybe a little bit scary payment mechanism, right?
You want to make sure. The customer feels really comfortable and ultimately connects their bank account to purchase cannabis. You know, that has optics that need to be, you know, surrounded with education to make sure folks, you know, see the benefit in it.
And for us, we've read a lot of trials. It's about every payment product in the space. And I think we have a really distinct point of view.
And ultimately, you know, with this type of integration, it allows you to move into other more interesting areas, like potentially rebates, which Arrow Pay participates in and as giveaways as well as actually wallet storage, which is really interesting as well.
Something like, you know, a Starbucks wallet, which allows you to, you know, facilitate actual, you know, cash storage, if you will.
@32:53 - Dai Truong (Arlington Capital Advisors)
Yeah, and that'd be great for operators. We know Starbucks makes a lot in the arbitrage of letting customers store their cash on their loyalty and rewards programs.
@33:05 - Zach Marburger (Cresco Labs)
Absolutely. I think that's based on trust, right? I don't think anybody thinks twice about loading their Starbucks card from the security and brand trust perspective.
So I think it's really important as folks build payment products within our space where anonymity is a concern. You know, it's just new.
We have to be very thoughtful. I think there's probably some rocks that have not been overturned that are still pretty challenging in that space.
we look forward to just offering a payment option online at all. Today we don't do that. so we look forward to just being on par with some of our marketplace competitors there.
@33:49 - Dai Truong (Arlington Capital Advisors)
Yeah, and look, I want to touch upon the bullet point that kind of caught a lot of your attention in the most recent Q1 23 earnings, which is you surpassed a billion in online retail sales and that’s solely through your e-commerce platform. Sunnyside.shop. Can you give us a bit more detail and sort of that number and what that billion dollar cumulative number, I think you started the platform in January 2020? What does that mean?
@34:17 - Zach Marburger (Cresco Labs)
Sure. Yeah, I think it was Jan 2020. I was trying to think of the exact date in which we kind of kicked it off internally.
And, you know, we had some fanfare and otherwise. But ultimately when legalization kicked off in Illinois, it was a, you know, watershed moment for the business.
And it really was calm before the storm with COVID. And so we were ultimately preparing for adult use, not knowing COVID was coming down the pipe.
And at the time we were really focused on processing in, in, in person traffic because the lines associated with, you know, new legalization in Illinois were incredible.
And we had a couple of primary stores within Illinois at the time. it was a really, you know, challenge to ultimately handle that amount of traffic.
And we started to just morph towards some sort of econ platform that can not only help us, you know, facilitate digital traffic, but internal traffic.
So at that time is really when we kicked off. And I think since then we've had a real focus on the in store experience.
So when you think about that number, I believe it doesn't even include the transactions that we process within the same platform or walking customers within the store.
And that's really what's unique about our platform is it drives, as I mentioned earlier, connectivity between the in store customer and the online customer.
if Sally shops with us Tuesday online. And Friday in store, we, Sally, is Sally to us and we know who she is and can treat her appropriately from a compliance perspective, right?
We know what her limit is in the case of a medical customer or in the case of an adult-use customer.
Maybe her preferences and specials and deals that may be applicable to her and ultimately bridge that gap with that same platform.
So I think for us, that number, I think if I was, if I was betting is actually little bit higher, maybe if we included our internal transactions as well that the platform accounts for and something we're really proud of is it also accounts for our wholesale business, know, we're, we're so And I think right now, if I'm not mistaken, the country's biggest wholesaler.
And all of our wholesale business goes through our platform as well. So it's a, it's a Various amount of GMV, if you will, using that metric that goes to the platform.
So our stack is something that we feel very confident in from an enterprise grade perspective. Recently, and much like our peers, we're getting into new regulatory territory from a socks and a sock one and two perspectives.
So now we're under some new scrutiny. Our technology is so it's been interesting to go through these more traditional compliance and audit evaluations and make sure all of our platforms meet those third party regulations as well.
And I'm sure some of the, you know, the Jane and the Dutchie of the world are going through that as well as they sell to customers who need to meet those requirements.
@37:51 - Dai Truong (Arlington Capital Advisors)
Yeah, I just want to go back to the first sentence that is e-commerce. So if you're saying the billion is understated, I did the.
Quick math of all revenue in 2021, 2022, Q1, 2023. We're talking about a billion, $859 million. So a billion already is like a majority.
And that number being understated means a very good majority is e-commerce. That's surprising to me that it's so e-commerce heavy for the cannabis consumers across the seven markets in which you operate.
Is that, would you say that's much higher than industry standard or am I kind of not understanding that the majority of the cannabis consumers today actually are e-commerce customers versus walk-in retail customers?
@38:42 - Zach Marburger (Cresco Labs)
Yeah, Dai, I think we over-index. I think we versus the industry baseline have a much more online centric customer base where we've built this platform that's so sticky in our view and commands a...
An experience that we believe is better than alternatives that allows us to drive a higher percentage from online customers.
And things like loyalty within the app, things like better usability, accessibility, and otherwise through our application, we think we've ultimately built this sweet spot where we just index a little higher, you know?
I think you're getting it right, but we just index little higher.
@39:37 - Dai Truong (Arlington Capital Advisors)
Yeah, that makes sense. And then I don't know if this is a proper question for you on that same point around, you know, customer acquisition, I'm going to assume because of everything we talked about and how Econ is built for Cressical Labs is lower than your competitors.
So that falls into the SGA line. So I just did, again, a quick comparison between SGA, percentage of revenue.
For Cresco Labs versus let's call GTI your main competitor, right? Honestly, there are others, but we're talking about that percentage.
And again, that's not purely marketing. It is 37.1%, If we look at just Q1 for Cresco Labs, that number is 32.4% for GTI.
And so it seems like, you know, if you've made up the difference, you have cheaper marketing costs than, you know, sales and some of the other GMA items are kind of inflating that percentage of revenue.
But I would assume you'd confidently say that your marketing is more efficient because of this customer acquisition challenge that you have, correct?
@40:44 - Zach Marburger (Cresco Labs)
Yeah, 100%. And I think the, you know, in terms of S&A percentages, you know, we both derive all of us drive revenue from wholesale and retail.
So knowing those splits is really important when doing that equation, right? And making sure those comparisons are. Apples to apples, but in short, we believe, yes, our marketing engine that we have built is fine tuned into the extent that it has a real expectation of our ally that we can, that we know what it will be when we turn on certain programs and we're confident and what those programs will will derive.
And ultimately, I think what a key driver is, is our performance on conversion is, I think, better without having the data than our peer tech because one thing that I think is challenging is ultimately, if you took 10 dispensaries, individual brands that all use the same e-com third party experience.
I assume that those conversion percentages from a UX perspective, sans any, know, doorbuster promotion impacts are good for
We're really similar, and their ability to influence performance there is very limited, very limited. We have, at any point in time, multiple tests going on, multiple card experiences going on, multiple PDP experiences going on, to ultimately drive a higher conversion rate that we believe is far and away superior than something that takes a, you know, everything else.
So that's where we think we really build some, some, some value.
@42:35 - Dai Truong (Arlington Capital Advisors)
Is that conversion percentage of visitors who come to the site who then ultimately purchase or what?
@42:43 - Zach Marburger (Cresco Labs)
Okay, great.
@42:45 - Dai Truong (Arlington Capital Advisors)
And then look, I assume, you know, you guys have so much data, you guys built a lot of your technology in-house.
You guys have a very good idea of what marketing spend actually works. So help us understand, you know, what marketing do you want
That's kind of a budget for.
@43:02 - Zach Marburger (Cresco Labs)
Yeah, I think speaking for our really talented marketing team who would be much more eloquent in these comments than I think for us, we tend to lean on platforms and agencies, if you will, and channels that ultimately derive a traditional feedback loop of performance, similar to as if you ran a Facebook ad or a Google ad.
And an understanding of performance is very clear, that allows you to react and increase or decrease investment accordingly. And for us, that's, I think, a lot of our expectation with our marketing is to be that measurable.
And so for us, we use a lot of traditional technologies off shelf that are non cannabis, when we talk about our our our tech stack, you know, segment is one of our, you know,
Long standing constituents in our tech stack. And I think it allowed us early on to build an understanding of the persona of our customers that we still utilize to this day.
And it allows us to really be confident across those marketing channels that Sally is Sally and we know who Sally is and really tether that to the entire experience.
So for us, we lean towards channels that drive a measurable outcome more than anything versus click, know, just, you know, impression data or otherwise.
And I still feel, and I'm assuming many of the more experienced marketers in this space would say, we're still behind the eight ball when it comes to non cannabis platforms just because of compliance and inclusion.
And other baseline entry rules. So when those become available to us, say, and I guess Twitter is, it allows us to play nowadays.
I think we're going to see a new revolution, if you will, a marketing within the space that allows us to be, you know, on par with non-campus industries, which we're really excited about.
I don't know when that is, but you know, I think it's definitely inevitable.
@45:20 - Dai Truong (Arlington Capital Advisors)
Yeah, so just on that point from a Martex standpoint, are you guys using like Elo or Surfside then?
@45:27 - Zach Marburger (Cresco Labs)
I think we have done business with both of them. At some point, you know, today, I'm not sure if we're utilizing both or one, but we utilize a number of different folks in the space to, you know, accurately market even on the wholesale side, you know, folks like Hoodie and Pistol, I think are relatively, you know, newcomers in terms of, you know, the last couple years and they've created a layer of intelligence that's really interesting for us and other operators to tap into, you know, understand.
And then we of our wholesale customer from a what's on the shelf, propensity to buy an otherwise perspective. So those types of tools are really interesting.
And I think there's an opportunity for us to continue to evolve our stack right now we kind of use who is originally willing to play ball with us.
And ultimately, I think our options have grown over the last couple of years. So we've had more of a selection criteria and been able to engineer something more specific.
So that's been nice as well.
@46:40 - Dai Truong (Arlington Capital Advisors)
Got it. Thanks, Zach. This was great. I think you covered a lot of tech companies in the space that you are curious about.
So it's nice to understand how the classical lab is using it and what you've felt internally about what you still use from a third party standpoint.
Appreciate the time.
@46:55 - Zach Marburger (Cresco Labs)
Absolutely. No, we're looking forward to continuing to build and making sure. At any point in time, our competitors from a technology standpoint don't outpace us because it's a really cool time to be inside of cannabis tech.
I encourage anybody who's listening to this, who's thinking about moving into cannabis tech to do so and to do so head first because the opportunities are still very much here.