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🎙️ Petalfast, CEO, Jason Vegotsky
Petalfast currently views itself as the #3 cannabis distributor in CA, with the goal of becoming the #1 or #2 distributor by year end. The company has doubled revenue over the past 3 months.
I spoke with Jason yesterday and wanted to upload this before the Sweet 16 starts today as I had Jason give me some of his picks. He likes Alabama to win it all but also like FAU/Tennessee and Creighton. Jason played Guard at Bucknell in the 2006 tournament, winning their First Round game as a #9 seed vs. #8 Arkansas, before losing to #1 Memphis in the Second Round.
Also, these write-ups are intended to be slightly cleaned-up notes from our conversation, so definitely listen to the full podcast.
Background. Jason Vegotsky founded Petalfast in August 2020. He was previously President at KushCo, after the company he co-founded, Summit Innovations, a leading distributor of hydrocarbons to the legal cannabis industry, was acquired by KushCo ($3.2M cash, up to 2,560,000 in shares) in April 2018.
Company Overview. Petalfast is a Cannabis Growth Agency (sales, marketing) helping cannabis brands scale in California, Arizona and Massachusetts with plans to expand to additional markets. Petalfast took a business model from the food and beverage space (natural food space). Their business model is very comparable to Acosta, Advantage Solutions, or C.A. Fortune—some of the largest selling agencies in the natural food space. They used to call themselves brokerage houses but have since transitioned to being called sales agencies. Petalfast took that business model and applied alcohol beverage principles.
Acosta and Advantage Solutions are multi-billion dollar businesses.
UNFI / KeHe looks more like a NABIS.
HERBL looks more like a Southern Glazer's Wine and Spirits (Full-service)
Petalfast in California is an 18-person salesforce, it’s a 6-person brand management organization, with 13 territory field managers that handle merchandising and training. They have about one hundred brand ambassadors that can flex up and do all the demo activity throughout the state
Helps with A/R Collections but not 100% responsible for it
Third Largest Cannabis Distributor. Jason views a Distributor as providing logistics + sales support. In the natural food side, those two businesses are separate businesses. Whereas Petalfast’s two largest competitors, HERBL and Kiva Sales & Services (KSS) provide full sales and logistics provider (3PL), Petalfast partners with NABIS for 3PL while they handle sales. Having a full-service offering would expose Petalfast to holding inventory and AR, so they chose to focus on sales. Jason expects Petalfast to be in the #1 or #2 spot as a Distributor by the end of 2023. Jason notes that the top 3 distributors all have 20-30 brands and are figuring out how to take on more brands. For Petalfast, that’s starting another selling division.
Customers. Recent customers include Find Wunder, America Weed Co., Old Pal, Freshly Baked, Solis, Yummi Karma, Sip Elixirs, Emerald Sun, and Wonderbrett.
Business Model. Brands pay 5% of revenue or $15,000/month, whichever is greater. Petalfast’s revenue has doubled over the past three months and have been making money. In October/November 2022, Petalfast was representing $2.5M-$3.5M in topline sales/month, for March 2023, the company expects to do $5M-$6M/month, and expects to double again in the next six months.
Saying “No” to 90% of Brands and Building a Second Selling Division. Petalfast says no to 9 out of 10 brands that wants to come on as a customer. In addition, the company is building out a second sales division so sales representatives can work with competing products without conflict (for example, a different team would represent FIND WUNDER and Artet). When considering which brands to bring on board, Petalfast looks at an overlay (for example, how Pernod Ricard overlays with Southern Wine & Spirits).
Markets. Compeitive markets where there is open competition for shelf space fits best for Petalfast to enter the market. Ideally, around when price compression hits is when Petalfast looks to enter the market.
Michigan has the market dynamics that Petalfast looks for but the regulation doesn’t make sense. In Michigan, you can only hold inventory for 48 hours
Missouri is still a limited market to a degree
Fundraising. The company has raised $10.3M to date from Merida, Arcadian, WGD Capital and a Family Office from the Beverage Alcohol space. The Family Office is learning about the Cannabis industry alongside Petalfast with a longer view on returns.
Shortly after launching in August 2020, Petalfast secured $2M from Merida through a previous relationship (Merida was invested in Summit Innovations) with the firm and shortly after, another $2M was raised from.
Shortly after the Merida investment, Petalfast raised $2M from Arcadian Capital and other undisclosed in November 2020
Petalfast raised a $3.8M Series A led by Merida in December 2021. WGD Capital and other undisclosed investors also participated in the round
The Company raised a $4.5M round in September 2022, with $1.5M at close and another $3M in tranches
👋 The Highly Objective Podcast is hosted by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors.. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party. The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.