Discover more from Highly Objective
🎙️ Hemper/HARA Supply, CEO, Bryan Gerber
Bryan Gerber runs Hemper, a Cannabis accessory box with 33K+ subscribers and HARA Supply, which produces 1B+ cones annually for leading cannabis companies.
Background and the evolution of the companies (Hemper and HARA Brands). Bryan talked about starting as a direct-to-consumer (D2C) subscription box for smoking accessories, transitioning to a data-driven approach for product development, and eventually building the largest manufacturer of pre-rolled cones
Vertically-integrating in Year 2 of the business became a key differentiator for the business against the competition
Between Hemper and Hara Supply, the Company has 65 employees in the U.S. and over 4,000 in India
Distribution channels and strategies for Hemper and HARA Supply (self-distribution, partnerships with wholesalers and distributors), and the importance of unique and branded products in the market
Funding history and expansion plans into the mass market convenience channel
Founder/CEO, Bryan Gerber. Bryan’s journey with cannabis began when he was a teenager, smoking occasionally and enjoying the sense of calm that it provided. Later, when the stress and rigor of college became overwhelming, he found cannabis helpful for sleep. By the time he graduated, he was smoking frequently and buying papers from Amazon but could not subscribe to monthly orders at a discounted rate because of the product category. And so, Hemper was born, offering the subscription box he wish he had access to. He co-founded the company with Ravjot (RJ) Bhasin and Henry Kochhar. Bryan finished college on May 18, 2015 and shipped the first boxes the next day.
Hemper. Hemper launched in 2015 as a curator of monthly, limited-run cannabis accessory boxes and now has ~33,000 monthly subscribers (different packaging and products) with more than 500,000 boxes shipped to date. The company's limited-run boxes include celebrity-designed and curated editions with original artwork that have become collectors' items. The company also designs and manufactures its own smoking accessories, selling online and in more than 1,000 retail stores nationwide. The company self distributes to over 2,000 stores but wholesale to 200+ distributor and an additional 3,000+ retailers (smoke shops). The company hopes to sign with Eby-Brown (largest privately owned tobacco, candy and convenience distributor) / Core-Mark which would open 5,000+ additional doors.
HARA Supply. When Bryan heard about a pre-roll cone shortage in 2018, Bryan decided it made sense for him and his partners to enter a new product category. Today, the Company directly operates 14 manufacturing sites, spanning over 250,000 sq. ft. of pre-rolled cone production using European rolling paper. Hara Supply currently has over 4,000 employees based in India, along with HQ office and warehouse located in Las Vegas, Nevada. HARA Supply currently produces over a billion pre-rolled cones per year for the cannabis industry’s largest entities. One of the Company’s customers is actually Raw, which got in trouble for claiming they had a factory in a small town in Spain. Raw also has its paper manufactured by France-based paper conglomerate, Schweitzer-Mauduit International.
Funding / 50%+ EBITDA Margin. The company has raised $3.5M total to date and is currently profitable. Amazingly, the company has a 50%+ EBITDA margin. Hemper bootstrapped for the first 3 years, after which, they raised a $1M seed round from Evolution VC Partners. Nine months later, Hemper closed a $1.5M Series A, then a $850,000 Convertible Note which got the company to Cash Flow positive. Shortly after, investors committed up to $10 Million in December 2018. The Company ended up taking only $1.5M of the $10M as they became profitable. Both Hemper and HARA Supply functions with just over 60 employees at the Company’s headquarters in Las Vegas, NV. With this group, they’ve achieved $200M+ in cumulative sales over the past few years.
Marketing. The company works with 200+ influencers on a monthly basis, which includes people like merrrica (147K IG followers), brittney.jasmine (38.7K IG followers), haddy.la (12.8K IG followers). You may have seen the “King of Cones” associated with Bryan, which was a strategic move by the company’s PR agency as Don Levin (founded D.R.L Enterprises, which owns Republic Brands, the top seller of rolling papers in the world) is known as the “King of Paper.”
Competitve Landscape. Cannabis accessory competitors are not vertically-integrated, whereas Hemper is and provides them a huge competitive advantage. Cone competitors are middle-man vs. manufacturing their own cones. Which means that HARA Supply works with recognizable rolling paper brands like Raw.
Customers. 17 of the top 30 largest MSOs, dispensaries, and CPG brands (60% of the top 200) like Jeeter, Stizzy, and Zig-Zag, helping to cut costs, increase quality, and expand customization potential. We make sure to customize everything, from size, shape, color, design, and beyond, to fit the growing wants and needs of today’s brands and consumers.
June 2023: High Rise
January 2022: MJBulls
May 2021: Gene Hammett
June 2018: Forbes
Transcript (lightly edited):
@0:11 - Bryan Gerber (Hemper / HARA Supply)
I started two companies in the Cannabis industry, one in 2015 called Hemper, which has morphed into a larger CPG conglomerate called HARA Brands.
And then I started in 2018, another vertical called HARA Supply, which is the largest manufacturer of cones and combustibles alike in the industry.
And we produce over 100 million cones a month for the market and a lot of the big vanity brands.
When I first started back in 2015, Hemper was originally a direct to consumer (D2C) subscription box for discovering new smoking accessories.
And it was really taking after the Birchbox/Dollar Shave Club, subscription economy that was going on in 2015, and really there were no online resources for discovering new products.
And so I wanted to be the category leader in consumers discovering their next, best favorite product. And so that's what we set on to do.
And we actually did a stint with celebrity-curated boxes for a while where it was kind of like smoking like Snoop Dogg for a month.
And then that transformed into more of a novelty-theme based approach, which people ended up liking a lot more.
You know, if you're doing a Snoop Dogg box for a month and half your subscribers don't like Snoop Dogg, they’re not going to buy the box, right?
But you can convince thousands of people to buy into a gaming theme or a food based theme, you know, something along those lines.
And then about a year and a half after we launched, we realized that product development was going to be our saving grace and action.
We're innovating on the products that were in the industry and then releasing that through the subscription service, getting data and feedback from our thousands of consumers, and then taking that feedback and going to retail and distribution partners and then selling our branded CPG products to them to get into stores.
So it was more of a data-driven approach to product development in this industry while most people are just coming up with a random idea and barely have enough money for mold fees and they're barely having enough money for a trade show or table at a trade show.
And they're kind of just on this like begging spree, ours is more vetted products to thousands of end consumers prior to even going to a retail store.
And then halfway through 2018, we got this interesting opportunity as we were producing a lot of products out of India already.
And there was this pre-rolled cone shortage in the market and we were Coached by one of our fellow distributors, partners that said, hey, I've got a lot of money outstanding with one of the role-playing paper companies.
I've got 20 weeks plus lead times. I know you're producing stuff in India and I know they make stuff similar like this in India.
Could you guys figure it out? And so it took us about six months, figuring out how to make cones, going back to that partner and showing them the cones, and walking out with basically a $1M purchase order that day.
That funded our first facilities and kind of fast forwarding to today, we’re now at 14 facilities with about 4000 employees producing over 100 million cones a month for the market.
@3:42 - Dai Truong (Arlington Capital Advisors)
Yeah, let's go back to Hemper. So from a subscription standpoint, how many subscribers do you have today and roughly how many boxes are you shipping annually?
@3:52 - Bryan Gerber (Hemper / HARA Supply)
So currently we have about 33,000 subscribers at various different packages and products. And then we're shipping north of seven figures packages a year.
@4:08 - Dai Truong (Arlington Capital Advisors)
And are you still doing those limited run celebrity curations or have you stopped doing that? You said they’re sort of being polarizing between certain celebrities that customers will like and not like.
@4:23 - Bryan Gerber (Hemper / HARA Supply)
Yeah, we have not gone back to that yet. We are currently in talks with a few of the big record labels that would like us to take over merchandising for tours and other things for their artists.
However, when we were doing it years ago, it was very difficult, you know, nailing down the artists and getting them to put up the social post.
And dealing with the manager and the agent and the record label and the boyfriend that's pretending the We needed to be a manager and we just were trying to wrap our head around it to make it as smooth as possible, but it never ended up working out.
And oftentimes we sold less product than we actually were anticipating. What we found is that more people actually appreciate a theme-based approach than the actual celebrity side, even though we're such a celebrity obsessed country.
They liked the themes because we turned their bond collections into more of a sneaker collection as opposed to how many beaker bonds can you have sitting on the same shelf.
@5:40 - Dai Truong (Arlington Capital Advisors)
And are you guys leveraging a lot of influencers on social media to do that today?
@5:45 - Bryan Gerber (Hemper / HARA Supply)
Yeah, totally. probably have about two or three hundred influencers that we've worked with on a monthly or every other month basis to seed products out, get new products to them for testing.
they're kind of like not only just a sounding Ford, but also a billboard at the same time.
@6:04 - Dai Truong (Arlington Capital Advisors)
I want to go back to when you first started the company around 2015. I think you had a few competitors and you've outlasted them because you went and vertically integrated the company.
So walk us through that landscape then and sort of what pushed you to become vertically integrated.
@6:24 - Bryan Gerber (Hemper / HARA Supply)
Yeah, so early on, once we started scaling past a thousand boxes, it was really difficult to just go to like a random distributor and say, hey, I need a thousand bonds, the same color, the same style, and I needed it to be delivered in 30 days, right?
Because we didn't have cash flow to five months and months and months worth of inventory. And so that was really difficult.
So that's when we, and I had this dream of being like the first subscription box to have only American made glass in the box, but I don't know if you've ever tried sourcing or manufacturing something here in the
It's almost impossible. We literally make nothing here. It's pretty insane to me. So we had to go overseas to do that.
I think truly what kept us in the lead above the other boxes was really that product innovation. We were basically making products before people even knew they needed it or knew they wanted it.
So I think that's really powerful. I think a lot of companies that are innovating on their CPG side are winning when they take that approach.
Apple does that. They make features that don't make sense today but totally make sense tomorrow. We've really had that ethos since late 2015.
We kept the three C's in mind, you've got content, community and commerce. We really garnered the community. Through social influence and social proof and activations and different influencer marketing and things like that.
And then content, we produce all of our content in-house. We make it fun. make it educational. And then commerce, we've got a really great website.
It's easy to shop on, not too many bells and whistles. We've got a really great conversion rate and a low balance rate.
so I think keeping all of those factors in mind and then coupled with the product innovation really just was a recipe for success.
While I feel like other boxes were just cycling in other people's products and brands and it was kind of the same stuff over and over and over again.
While we were innovating and changing every month, everyone kind of stayed the same.
@8:44 - Dai Truong (Arlington Capital Advisors)
You know, that's really amazing. You have that insight back then because even some of your inspiration for a subscription box, you've outlasted some of those inspirations or at least certainly made more money than that because they weren't vertically integrated because it's much tougher to do that.
@9:03 - Bryan Gerber (Hemper / HARA Supply)
Yeah, no, totally.
@9:06 - Dai Truong (Arlington Capital Advisors)
And then let's talk about how many retail distribution channels are you in today? How do you get more into additional mass market sea stores, or more mainstream retailers or dispensaries?
@9:21 - Bryan Gerber (Hemper / HARA Supply)
Yeah, totally. Currently, it's difficult to say, I can tell you that we self-distribute to about 2,000 retailers. However, we've got probably two or three hundred wholesalers and distributors that are more on the cash and carry side.
That it's really hard for us to tell how many stores were actually in once it goes to the distributor.
We can ask them and get data back as much as possible. But really, with the smoke shop world, kind of like a ghost town in terms of data and reporting.
Information, so it's not like alcohol or sea stores where they're reporting cigarettes and other tobacco products and alcohol sales.
So we're kind of in the dark when it comes to total mass retailers. But I would say we're probably in about anywhere from 3,000 to 5,000 retailers.
We self-distribute about 30, 40, 50% of those. And then the other ones we rely on are distribution partners.
And that's mainly for the smoke shop world and dispensary world. In terms of sea stores, which is a new vertical that we've gotten into this year with a few of our new products, we're self-distributing to about 700 stores, I would say now.
And then we are so close to getting onboard into Kormark and E.B. Brown, which will open us up to over 5,000 retailers.
So we're super excited about that. We're in the final stages of getting on boarded there and Travel Centers of America is bringing it in.
One of our new products into some of their California locations to test it there. And then we're going to be getting into a lot more corporate chains after that.
@11:09 - Dai Truong (Arlington Capital Advisors)
On the self distribution side is that company owned vehicles that are going to these stores or are some of them small enough that you're just shipping from FedEx, UPS or USPS.
@11:21 - Bryan Gerber (Hemper / HARA Supply)
Yeah, most of them are, you know, depending on if it's a big chain, we will LTL a pallet to a sorting facility and then they'll dish it out.
However, a lot of retailers want us to ship straight to their stores. And a lot of them don't have very sophisticated ERP set up.
So for example, every store for a chain called Smoke or Friendly has to order individually from us. So we basically set up online accounts for each of their 300 locations so that each store manager can go on and just buy whatever they need to fill the store that sold.
And so we self-distribute to that. However, once we get into a quorum arc, then we'll start actually shipping through the quorum arc to some of these retailers.
And we do not have a fleet of cars. We are using UPS and LTL mainly for our wholesale purchases.
And we ship that out of our 40,000 square foot in Las Vegas.
@12:25 - Dai Truong (Arlington Capital Advisors)
Got it. Thanks for explaining that to us. Let's bounce a bit over to sort of, you know, that landscape.
So for both companies, let's start with HEMPER.
@12:35 - Bryan Gerber (Hemper / HARA Supply)
Is there really any competition today in your view? So I hear this from a lot of the CEOs and distribution companies that all rave that our class products sell through is awesome.
We have great velocity. And it's because we have, like I said earlier, totally turned out Turn the traditional water pipe collection into a collectible, theme-based sneaker collection.
And our products are really unique and they're priced economically, so they're priced to move, and they're really fun. And they just make you smile and you don't know why.
And I think that our ethos behind that and our glass has allowed us to create better skew penetration in our distribution partners as they test the glass.
And it's so different from what's on the market than they see success with that. They try some of our accessories.
They realize the accessories are unique and innovative. They see success with that. And then they say, hey, you know, they eventually call me and say, hey, we've got 200 products from you guys.
Now, what do you think we're missing? Right? then it's our duty to give them and fill the holes that we believe they're missing in terms of what products that do so well for us that they don't have.
And then also we do protect them on the retailer side, right? So oftentimes we'll get retailers saying, hey, you know, I buy currently from so and so distributor.
However, they don't have your full catalog. And so we'll actually call the distributor and tell them, hey, we got a couple calls from some of your retail clients.
They're claiming you guys don't carry the full catalog and they want to buy certain products. We would prefer not distributing to them and not taking business from you and want to protect you as the distribution partner.
Please bring in an excuse so that you can fulfill their needs. And so it really works in our favor because we don't want to self distribute to retailers.
We want the distributors who do well at self distributing to them to take that on. We just want to focus on product development.
@14:55 - Dai Truong (Arlington Capital Advisors)
That makes sense to kind of stay in your lane and focus on something that you guys do extremely
@15:00 - Bryan Gerber (Hemper / HARA Supply)
@15:02 - Dai Truong (Arlington Capital Advisors)
So what about on the cone side? Help us understand the landscape there. It seems like there was sort of a gap in the market.
Hence, you had an opportunity to enter and have done very well, 1.2B cones annually. What does that look like from a competitive landscape standpoint?
@15:20 - Bryan Gerber (Hemper / HARA Supply)
Yeah, so I want to make a big differentiation. There's a ton of middleman cone companies out there that you can buy cones from.
Whether you get those cones is still a mystery. We are direct manufacturers, which means we own and operate our facilities.
We're able to prioritize, speed things up, move things around. Pretty much all flexibility from a consumer standpoint that they're looking for from an MSO or a cannabis brand.
And so we are the largest manufacturer. We produce over 100 million cones a month for the market. There is really only, I would say, about two other competitors.
Those are the other direct manufacturing companies. If you take, for example, a custom-conned USA who is more of a middleman, they're buying capacity from companies like us or other manufacturers.
They can't really do the same maneuvering prioritization, customization that we can do. So we go into the conversation as a standpoint from a solutions partner approach instead of a one-size-fits-all.
We get involved with the product development teams at the MSOs. We get involved with the marketing teams. We truly understand what the vision is to bring to market.
And we go and produce that for them. don't try to pigeonhole them into something that we know we're confident and we can produce.
We love innovation. We love moving. We're always down to try something new, whether it's a connoisseur infused blunt with a glass tip or ceramic tip with a cigar band.
They want us to increase the humidity or the GSM on the paper. We'll go above and beyond deal with raw material suppliers and we'll bring that product to market.
I think that's really important to differentiate because everybody's looking to bring their version of what the Coca-Cola can is going to be eventually.
I think everybody's really trying to figure that out right now. When I hear companies are overpaying for blank cones and they don't have their branding on the filter tips, I'm saying, you guys are losing so many opportunities for that post-cannabis sale transaction where they're posting photos on Instagram and social media.
They're hanging out with their friend groups. They're at parties. That's a blank cone with your brand missing and you're not getting that Kodak product.
And oftentimes brands are saying, wow, we would love to come out branded products. We just haven't been able to find a good supplier for it.
And so please, everybody listening, come to our supply because we are here waiting willingly, to help bring those products that you want to see come to fruition to market.
And it's not a one size fits all model. It's truly a custom house, ODM, OEM, whatever you need, we will do it.
@18:29 - Dai Truong (Arlington Capital Advisors)
So it seems like a pretty compelling sales pitch to MSOs or brand or dispensaries to use your company.
It's more of a matter of time before some of the other MSOs. I saw somewhere that 17 of the top 30 MSOs today are customers.
So is it just a matter of time before some of these customers or not customers are over?
@18:51 - Bryan Gerber (Hemper / HARA Supply)
Yeah, I think with a lot of the turnover on the C-suite side, nobody's really paying attention. And I think that once I'm able to get to the C-suite,
CEO, CFO, or COO, and I say, it's a really simple value prop. I want to save you money, which is directly going to hit your bottom line, and I want to bring exactly what you want to bring to market.
It's pretty simple, right? So once someone in the C-suite level hears that, they disseminate it, and we move forward pretty quickly.
When I'm dealing from a bottom-up approach with a procurement officer, whether they're getting a kickback from some other company, or they love the buyer at the other company, and they don't like me because I'm a little bit more aggressive, or whatever it may be, that is going to be the demise of a lot of these companies, where you've got 20 stakeholders in an organization making bad decisions.
And there's a reason why a lot of these MSOs are losing nine figures a year, seven figures a year, eight figures a year, because they've got people making bad decisions based on emotions or whatever else it might be, right?
When I have a very candid conversation where it's Super save money, bring exactly what you want to bring to the market, conform it to your automation equipment, whatever it might be.
It's music to their ears, right? And a lot of people are looking for companies like us. They just haven't heard of us or haven't really been thinking about the cogs in that wheel.
And so it's kind of our job to get in front of them and create intros and make them understand.
Like we truly can save you money and not only can we save you money, we can bring exactly what you want to bring to market.
@20:32 - Dai Truong (Arlington Capital Advisors)
Yeah, I got to imagine just saying that you work today with Zig Zag, with RAW, with Jeter, Stiiizy. Some of these customers should be really compelling for someone to say, oh, if they're using it, I should also be using, you know, horror supply.
@20:48 - Bryan Gerber (Hemper / HARA Supply)
Of course. Yeah, that social proof aspect is totally there. You know, when we set up that our horror supply show was like a haul of flowers, for example, you know, we've got some of our core brands that we produced for it.
out the show with their. The people see that Stiiizy and Jeter and Claybourne and VIOLA and all the big brands, Timeless, all purchase from us.
It gives them a sense of security. think that's another thing to touch on is that while maybe a middleman cone provider like a custom cones USA could deliver on their first order of 100,000 cones, let's say, I think the real caveat is could they produce a million cones in the same time and actually scale with your business.
Because if you look at certain markets, like for example, we were looking at Michigan last night and a company called Dragonfly is exploding on the pre-roll side out of nowhere and over 150% growth rate.
That's what keeps this industry so exciting and people on the ball is that there's a ton of, you know, no
People bodies coming out of the woodwork and exploding overnight and can a middleman company that's buying packaging from China or buying cones from China or what it might be, can they even scale with you?
I think that's a really big thing for the MSOs to realize is that they need to be betting on companies who've got cash flow positive e-badad businesses and that can really help them scale.
Not just, can you save me a half a penny or do I like you better? It's got to get out of that world.
@22:34 - Dai Truong (Arlington Capital Advisors)
Yeah, definitely has professionalized like every other CPG industry.
@22:38 - Bryan Gerber (Hemper / HARA Supply)
Yep. We're creating true infrastructure for this industry.
@22:44 - Dai Truong (Arlington Capital Advisors)
So let's go back to funding. How much have you guys raised to date when was your first funding round?
Who invested and what was the vision at the time and where are you today with regards to funding needs.
@22:51 - Bryan Gerber (Hemper / HARA Supply)
So we bootstrapped for the first three years of the business, and then in early 2018 we raised a million dollar seed round from Evolution Corporate Advisors.
And that was with Greg Smith, who's been awesome. And then shortly after that, we raised a series A round, about, think, nine months after our seed.
And then we had Evolution Corporate come back in, and then they brought in Poseidon to lead the round. And we raised about 1.5 million in that series A.
And then about nine months after that, so bringing us to 2019, right before the cones exploded, we did a convertible note for about 850,000.
And then right after That we went cash flow positive and then hadn't needed to raise any more after that.
We had a clause where we could have pulled in up to, I think it was 10 million into the series A, but because we grew so fast, the money would have been too expensive and we would have been so I'm glad we didn't because we didn't need the money and we didn't have to dilute ourselves as founders, so it actually ended up working out in our favor.
However, moving forward now, we're completely self-sufficient. We haven't raised since 2019. We're no real debt on the business, which is awesome.
At this point, we are out in the market looking for a strategic investor to come in and help. Plus scale even faster.
we haven't found that yet, we're talking to a few folks. And so there should be some exciting movement, you know, towards the end of this year or beginning of next year and a lot of exciting things happening.
@25:14 - Dai Truong (Arlington Capital Advisors)
Thanks. I appreciate you pointing that out because yeah, I saw there was an article that the company did a $10M Series A back in December, 2018. So it's great to know that that was up to $10M and you only took $1.5M of it.
I'm sure it sounds like an option you're very happy about. But unfortunate for Poseidon and Evolution VC that they didn't have more company.
@25:39 - Bryan Gerber (Hemper / HARA Supply)
Yes, no, we're very happy that once we did the convertible note, which was 850 grand, we raised roughly about three and a half million call it total.
We went cash flow positive. Obviously, the investors are super ecstatic. You know, we've got over 15% Epidah margin.
So, you know, things are looking cool. Great. And. We're able to experiment more and test and iterate and get out there.
We're going after the mass market convenience store play this year. Obviously, that's super expensive, but it's really exciting that we're able to self-fund these projects and just keep building.
@26:18 - Dai Truong (Arlington Capital Advisors)
Wow, 50% EBITDA Margin. So I assume obviously labor is a very low with 4,000 or more employees in India.
What else are you doing to kind of keep costs low and that EBITDA margin so high?
@26:32 - Bryan Gerber (Hemper / HARA Supply)
So we're pretty lean here domestically. We're at about 60, 65 employees here in the States. Most of them work out of our Las Vegas headquarters here.
So, you know, I love the mindset of, you know, we're even though things have been roses, we're always bootstrapping.
I love bringing in people into the team that not only can but want to wear multiple hats. And, you know, I look for the jack of all trades, especially when we're dealing with so many different things, B2C, B2B, CPG.
You know, there's a lot of movement and you've got to be able to handle the cadence. And as you know, e-commerce cadence is insane, let alone trying to take on mass market convenience and then let alone trying to deal with the cannabis industry in general.
So it's definitely been challenging, but we found a lot of A players that, you know, And us to pivot and move and test and just kind of break through that stigma of like 18 layers of middle management.
And, you know, that's probably why a lot of the bigger tobacco companies that are clients are dealing with us because we don't have red tape here.
We make a decision. We move forward in less than 24 hours, you know, and a lot of the bigger behemoths can't do that at this point.
So I think that's what keeps us interesting and exciting and just keeping the, you know, moving We're the finish line.
@28:02 - Dai Truong (Arlington Capital Advisors)
So what's the end goal here then? So you'll look to take money from a strategic if one's going to provide a lot of value, especially as it relates to distribution.
What can we expect three, five years from now for the company yourself?
@28:17 - Bryan Gerber (Hemper / HARA Supply)
Yeah, I think a big priority is for us to find the strategic, keep staying involved. Myself and my co-founders were only 32 years old.
We started the company when we were 23 years old. So we've got a lot of gas left in the tank, a lot of ideas.
We're just really coming into that corporate executive role. And we've all had to grow up at different stages. all, some of us are getting married this year, some of us are having kids, and a lot of us were college roommates.
So we've seen multiple stages throughout our life. While we're all still getting along, we would like to grow this thing a bit faster and obviously take a wealthy benefit.
The presence itself and as you know, as an entrepreneur, you know, when you have all of your assets in one asset, you know, it's, gets a little nerve-wracking as you start building a family.
And so, you know, taking chips off the table will be nice. I think finding a strategic going to help us distribute more product into more stores and just kind of playing on a larger, you know, playing field, right?
I think we've done a great job at building the business with the resources that were at our disposal and obviously, now, we're doing, you know, we've done over $200 million in sales in the last few years.
And, you know, for what we've raised, for what we're doing, we're heavily under-capitalized for our business. And so we're excited to see, you know, when that strategic presence itself, you know, taking that opportunity, growing it faster and just playing on a bigger field, you know?
@29:53 - Dai Truong (Arlington Capital Advisors)
And let me, let me ask you this then. So, you know, a lot of the interviews you've done, there's, quotes that,
@30:00 - Bryan Gerber (Hemper / HARA Supply)
King of cones. I've seen some of this is to keep your title, but where did that actually originate? Yeah, the King of Cones was originated from my PR agency, Coining the King of Cones.
@30:19 - Dai Truong (Arlington Capital Advisors)
I know you started actually, you know, your entrepreneur journey was a Hawaiian shaped ice, right?
ParadIC. So if you think of it as like snow cones, I guess, I don't know, if you thought about it that way before maybe, but it has a double meaning, right?
@30:39 - Bryan Gerber (Hemper / HARA Supply)
Yes, no, for sure. It's, you know, I don't 11, you know, they're Coining him the King of rolling papers.
And so, you know, we went with King of cones instead, you know, we didn't want to, I don't do anything with booklets.
So we wanted to keep that title separate, but yeah, no. I guess I could be considered the king of bonds, king of cones, king of a few things.
@31:06 - Dai Truong (Arlington Capital Advisors)
But, yeah. Yeah, that's a pretty good one. So a good move by the PR agencies to do that.
@31:13 - Bryan Gerber (Hemper / HARA Supply)
Yes, no for sure.
@31:15 - Dai Truong (Arlington Capital Advisors)
So let's talk about some of the challenges in the business. things have gone really well for you since the inception of your first company, your second company.
@31:24 - Bryan Gerber (Hemper / HARA Supply)
So what are the challenges that you face or are facing today? I think the challenges are just a leap from having a new industry.
think with the cannabis industry in itself, obviously, there's very little infrastructure. There's a ton of turnover, not a lot of sound business decision-making going on.
so I think just working through a lot of that has been pretty difficult having a three month conversation with one executive, but then all of a sudden they're getting completely replaced and I have to restart the conversation with a new one.
And that happens. It happens every day, every week, every month, there's turnover. So that's definitely been a challenge. i think another challenge has been on the collection side.
Luckily, we've been very blessed not to get stiffed with much bad debt. We've been able to collect from most, if not all of our customers.
So gauging whether to give terms out or floating in certain companies, delivering products without payments. That's obviously another difficulty is just understanding are these people insolvent or they solvent?
Where are they? Because a lot of them aren't publicly traded and a lot of the publicly traded ones, like at this point they've got such a big head start.
They're not really going to fail. They'll just get kind of bailed out. So I know we can extend ourselves there and not extend ourselves over here with kind of a smaller brand.
And so that's been a challenge obviously. And then the other one has just been finding personnel, right? Having a career in cannabis is such a
The new concept, right? Finding people with experience in this industry has been difficult. You know, it's cool that I can go hire someone from Gatorade, but they're going to know nothing about the nuances of this industry.
And it's probably going to be, you know, a short-lived role. And I think we could probably see that from, you know, the herbal kind of demise where you've got the most stacked C-suite team in the industry, yet you can't figure out how to pay your bills or pay Or pay your customers or your clients.
And while, you know, I think Mike Baujy is an awesome guy and really smart, I think that bringing in the smart players from all the big brands, Gappone Depot, this and that UPS, it's not really what you need.
You need the jack of all trades. need the people who are willing to roll their sleeves up, you know, work 12 hour plus days and are just scrappy and, you know, to win because they have a passion to win, not.
Because. They were put in this position from their previous life. And so I think that's been a difficult thing.
It's just finding those A players. But as you know, finding A players pays dividends comparatively to a B or a C player.
So I think that's kind of the stage we're in now. It's just really betting on these A players, paying more for them, and just locating them has been a challenge.
Obviously, on the logistics side during COVID there were pick-ups, speed bumps all over the place. Luckily, I think we're kind of through all that mess with logistics rates coming through the roof and supply chain being disrupted.
That was obviously difficult. So coupling the Cannabis industry on top of that was more difficult. And I would say, know, that's...
And a lot of the last thing I would say challenging wise would be a lot of the software and payment processing stuff.
A lot of the bigger ERP software won't accept our business. They look at us as high risk, and so we haven't, we either had to build it ourselves or finagle working with different ERP systems or enterprise software companies.
Just explaining that we're not playing, touching, we're not really in the cannabis industry. We're a cog in the line item.
I say, I would be our biggest challenges to date.
@35:25 - Dai Truong (Arlington Capital Advisors)
Yeah, going back to getting paid in this industry and even, you bring up HERBL, I think one of my observations in addition to not having that mix of CPG logistics, but really cannabis experience is that they may have taken on more customer risk, you know, Raw Garden leaving was sort of a really big risk for them, which happened.
So they ended up with a bunch of AR that they could get paid on. And I think the other rest is just, like you mentioned, getting paid.
So how do you guys manage or what systems do you use or, you know, spreadsheet or whatever? I kind of figured out, Okay, hey, this person hasn't paid us, Will they?
Have they been past due for a certain amount of days, like past 90 days?
How do you guys kind determine if someone is still a good customer or will become a good customer again?
@36:18 - Bryan Gerber (Hemper / HARA Supply)
Yeah, so we take deposits on most orders because most things are custom. So we take anywhere from the 30 to 50% deposit, which typically covers us and the event something does happen.
And then we just gauge based on AR aging and history. And then obviously, now, I've got a pretty savvy controller here who, you know, has worked at five different big accounting firms.
And he's a CPA. And so he can read 10 Ks and financial statements. So, you know, one customer has got 500,000 cash on their books and they owe us a million.
Obviously, we're not extending terms next month, right? I think because our product is replenishable, that also keeps customers a little bit more honest, because they need preroll, they need cones to fill, to put on the shelf to make money.
i think with the HERBL situation, they sell cannabis to dispensaries. Herbal's not the only distributor. They can buy other weed or other cannabis products to put on their shelf at the dispensary, so they can rob Paul to pay Peter differently than a cannabis company could to me.
Right? If that makes sense.
@37:30 - Dai Truong (Arlington Capital Advisors)
Yeah, it makes total sense, because that's a lot of what California cannabis was doing. you're getting paid, or you intended as a retailer not to pay someone, you just find another brand or vendor to provide that same category of product.
I guess going to that point, if the deposit is 30 to 50%, if for whatever reason, they don't pay the balance, it feels like you can actually change some of the customization and probably sell that to another customer and get face value if not even a bit more than what the original terms?
@38:05 - Bryan Gerber (Hemper / HARA Supply)
Yeah, I mean, if it's blank, of course we can flip that around and sell it to someone else. If it's custom, we unfortunately cannot sell it to anyone else.
Unless it was, for example, something generic, like it says, like, Siti, the hybrid or income filter tip. Yes, something like that, I could probably resell.
But if it's somebody's custom brand, there's nothing other than to just throw the product away.
@38:33 - Dai Truong (Arlington Capital Advisors)
Yeah, I was thinking you just changed the tip, but keep the paper or you think you have to kind of, it probably just costs more to do that.
So you should just throw the whole thing away.
@38:43 - Bryan Gerber (Hemper / HARA Supply)
Correct, yes. We try to hold the customer, you know, the feet to their fire, you know, sometimes they just go out of business.
@38:53 - Dai Truong (Arlington Capital Advisors)
Yeah, unfortunately, and that's something you have to plan for working in this industry.
@38:59 - Bryan Gerber (Hemper / HARA Supply)
@39:01 - Dai Truong (Arlington Capital Advisors)
How do you manage the India team, given that about 60 to 65 in the US, but 4000 in India?
How do you manage that?
@39:13 - Bryan Gerber (Hemper / HARA Supply)
Yeah, so my two other business partners are Jane Henry, both alternates living in India throughout the year, operating our facilities and managing them.
And then we also have a few US-based employees that actually are on the operations and engineering side that do live in India most of the year as well.
So we have a few folks that are partners that live there, and then we've got a few senior employees that operate out of India as well.
@39:54 - Dai Truong (Arlington Capital Advisors)
That makes sense, and how often are you going over there?
@40:00 - Bryan Gerber (Hemper / HARA Supply)
If you want to know something funny, I was supposed to go for my first time in March 2020. And COVID canceled my trip.
And there's really only like two good times to go into India due to different varying weather issues, whether it's too hot or it's monsoon season.
There's only one or two months out of the year that are good to go. And so I actually have not gone to India yet to see our facilities.
So I've been selling billions of cones from the comfort of my seat here in Las Vegas, Nevada.
@40:46 - Dai Truong (Arlington Capital Advisors)
Yeah, that makes sense. It's pretty much from December to March and really early March that you should be in India.
Otherwise it gets very hot. But unlike Vegas, there's no air conditioning available.
@41:00 - Bryan Gerber (Hemper / HARA Supply)
Correct. Yes. Trust me, I get shit from my co-founders all the time about when I'm coming.
@41:15 - Dai Truong (Arlington Capital Advisors)
Oh, okay. call it eight months from now.
@41:18 - Bryan Gerber (Hemper / HARA Supply)
That'll be an interesting trip for you then. It will be. I've never been to that part of the world, so I'm excited, nervous all at the same time.
@41:31 - Dai Truong (Arlington Capital Advisors)
So let's go back to the business. Are there any other sort of categories you think you'd enter? Given that you do have two businesses that are a bit different, that do have similar-ish customer base, really, I think one is more B2C and the other one's more B2B.
So any line of sight into other business or is this enough for you and your team to focus on?
@41:58 - Bryan Gerber (Hemper / HARA Supply)
So. I think for the foreseeable 12 months, this is pretty much what we're going to be focusing on. We've recently added more packaging stuff and some cartridge innovation.
We'll probably be entering the vape market here shortly on the CPG side. We've got some really cool products in development that we're really excited for.
But for right now, we're pretty busy and we've got Inter-Tibac coming up in September, which is the largest tobacco show in Europe, which we're preparing for.
And we've got MJ Biskon following that. So two really big important shows. So we've got a lot of preparation and a lot of new products coming out that we got to focus on selling before we can come out with other stuff.
As for right this second, we're pretty much in the zone where we're playing. Playing however, opportunity always comes across as you get bigger and as you're in the game for longer the deal flow increases.
So we get stuck across our table all the time and I could see us possibly playing more into the automation infrastructure side for pre-roll filling or processing and stuff like that.
We've made a couple strategic investments, one in accelerant manufacturing and one in another company that's still in self-mode. And so yeah, definitely some exciting stuff on the horizon but yeah, we're good to go right now and where we're playing.
@43:39 - Dai Truong (Arlington Capital Advisors)
On the Vape front, are you saying you'll get into providing Vape hardware to some of your MSO customers?
@43:47 - Bryan Gerber (Hemper / HARA Supply)
Yeah, right now our MSO customers trust us and I think if we can extend that trust into other categories, it really just turns into
The play for us, what more can we get them to buy, they are eating justice with these products, why not trust us with these other ones?
@44:10 - Dai Truong (Arlington Capital Advisors)
That feels like a really competitive space to enter. I'm curious when or I guess since you guys are entering it, what sort of tactics you'll take to separate from the noise because there's definitely a lot of competition, a lot of companies in that space.
@44:28 - Bryan Gerber (Hemper / HARA Supply)
Yeah, no, totally. So it's definitely on the innovation side. We're focusing on flavor and other materials like Rosin and things that are becoming more popularized but don't really have the hardware for it.
A lot of companies just reuse the same center post cartridges, like everyone else. And you know, we've developed a couple unique innovations behind the cartridge and also, you know, like an e-rig product that really moved the needle.
Forward in terms of innovation, where a lot of people are just kind of stuck in the same look and feel and technology where we're really focusing on moving the needle forward and creating products that differentiate themselves based on heating components or flavor components or things like that.