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🎙️ Sunderstorm, CEO, Cameron Clarke
We discuss market expansion (including Thailand), self-distribution, collaborations, balancing long-term investments while facing capital constraints, and more..
Footprint. Sunderstorm is currently in CA, NV, CO, and MA. The company plans to launch in IL soon. The company also announced in December 2022 plans to enter Thailand through an agreement with THCG Group Ltd. (THCG), a Thailand-based, vertically integrated medical cannabis license holder with existing cultivation, distribution and retail operations, including wellness centers. The company expects this market entry to bring meaningful revenue, and similar to being in Las Vegas, an important one to build the brand.
Expansion into new categories. While Sunderstorm has 40+ SKUs in the gummies category, it acquired Bounti Vapes (NV) in June 2023 to give a second go at the category, its previous play in the cateogy was Wind Vapes.
Collaborations. Sunderstorm likes to build stronger relationships with dispensaries by investing in collaborations with retailers (embarc). The company learn from the success of PLUS x Airfield Supply Co’s collobration.
Cameron Clarke and Keith, lifelong friends and business partners, started Sunderstorm in December 2014. Cameron talks through how this has helped them navigate the challenges of the cannabis industry with their diverse backgrounds
Sunderstorm aims to enter billion-dollar plus markets and initially targeted Nevada and Colorado for their potential progress
The importance of having the right partners in the cannabis industry–trust, consistent quality, and effective communication. The Company has found success by aligning their interests with their partners, managing challenges together, and leveraging local relationships for market understanding and expansion
Various collaborations and partnerships with different brands, including a successful collaboration with RNBW
Collaborating with dispensaries to provide products that consumers want by leveraging their R&D capabilities
The importance of owning distribution and relationships with retailers
Control their brand and be their own distributor, investing heavily in technology and building one of the best distribution platforms in California. Sunderstorm has expanded distribution to bring on third party brands, which would bring down their distribution costs and benefit the brands with their larger footprint in the state, while reducing their own costs
Decision to expand to Thailand given the favorable regulatory environment and the potential for a large market with both domestic and international opportunities
Sunderstorm has raised $10 million and is debt-free
Unique aspects of Sunderstorm–investments in technology, systems, automation, quality, and R&D
@0:15 - Cameron Clarke (Sunderstorm)
My own background is kind of diverse. It's really more of a serial entrepreneur. I've had a number of different types of businesses in my life. A few software companies, CPG. I was one of the original importers of Acai the US and we got it on the shelves at Whole Foods.
I think that helped me get an understanding about how to work with retailers in the cannabis space. I also have a fair amount of technology experience [as well].
That's been instrumental as well. So yeah, I think my diverse background and my partner, Keith Cich, his diverse background in finance and Wall Street, has been a great mix for us and has helped us navigate this incredibly challenging industry, the likes of which I've never seen in my lifetime.
So it's been interesting.
@1:24 - Dai Truong (Arlington Capital Advisors)
Yeah, and where did you and Keith first meet each other and what was sort of the idea or what drove you to start Sunderstorm back in December 2014?
@1:36 - Cameron Clarke (Sunderstorm)
Yeah, so Keith and I go way back to college. We're college friends, and we've been lifelong friends for over 40 years now, which is kind of hard to believe.
And we've been business partners. And I think that's, I think I always tell people that despite all the challenges that we see in this industry, I still believe that the most challenging thing in business.
It's picking your partners. I've had several different failures in my life because I made some mistakes there. But I've learned a lot and Keith and I have a really good way of working together and our friendship has held through all these years.
think that's really helped us be successful. His skill set is very different from mine and that's been terrific for us.
@2:30 - Dai Truong (Arlington Capital Advisors)
Give us an overview today of Sunderskorm and your footprint, scale and the products that you offer.
@2:40 - Cameron Clarke (Sunderstorm)
We started this company in 2015. I was doing a little bit of self-study Molecular Biology back then.
I have a little bit of a science background. When I learned in 2014-2015 that you could extract cannabis oil out of the plant. I wanted to jump into the industry because I realized that suddenly it was more than just a flower game.
Now you can make a variety of finished goods, finished products, and that was much more interesting to me, particularly for the medical applications.
So we dived in and we started with making edibles with the Kanha line of gummies. We also started with some vapes and we had the first nanotechnology in the industry where we launched a center strong scientific nanotechnology tincture that has been, over the years, really a terrific product.
Unfortunately, that market is really too small to really merit a lot of investment in today's world. And we all believe that if you can win in one category, you should focus on that.
That category. And that's pretty much what we did over the last few years. Let's call it four years. We really saw that we could blow it up and be successful in the gummy category, the edible category.
So we really focused a lot of energy and marketing dollars there. you know, today we're one of the top four brands, I think, in the entire country on edibles.
So that's given us a really great framework from which we can now do other more exciting things.
And so we are looking to enter into other categories and other markets today. And really, it's because we feel like we have a good base from which we can build the company.
We started in California in 2015. We wanted to wait until we could become a top 10 California brand before we actually set our horizons on other markets and other states. That occurred in 2019-2020.
So we started looking at other states and we decided to launch in three states simultaneously, doing all ourselves, or doing mostly all ourselves. So we launched in Colorado, Nevada, and Massachusetts. And those have been our MSO strategy markets for the last two to three years.
And now we're expanding into new markets from there. We're very careful about the states that we pick or the markets that we select.
Capital is hard to come by these days. So we want to use capital very wisely. And we want to make sure that when we go into a state that we have a plan to get to cash low positive with a minimal amount of capital investment and as short of a time frame as possible. So that is, you know, we look very, very carefully at each market before we enter and we do the due diligence to make sure that we can get to that, that we can move with that strategy.
So that's been our strategy.
@6:21 - Dai Truong (Arlington Capital Advisors)
And does that mean more mature markets? I'm just thinking about, you know, your home state, California, Colorado, Massachusetts, and Nevada, very mature states.
Or is that not necessarily the case, you know, obviously more mature states, better infrastructure. So would we see you getting into Ohio or Maryland anytime given that they are more nascent state as it relates to adult use.
@6:47 - Cameron Clarke (Sunderstorm)
Yeah, I think the way we looked at it and originally was that we wanted to be in a billion dollar plus market.
So that was kind of the initial filter. We looked at some of the mature states, let's call it, Nevada and Colorado, initially because we felt like we could make good progress there.
We also felt like Nevada was a market where you kind of have to be in Nevada if you're building a national brand because there's so much tourism, people from all over the country, and that really is a marketing play as much as it is a revenue play.
We had some opportunity in Colorado and we thought that we could be very successful there. In fact, to be honest, we found that market much more challenging than we had anticipated, so we learned a lot along the way.
And I don't think it's one of our bigger markets, it's definitely not one of our bigger markets today. So we'd rather focus on elsewhere where we could really make [money]. Massachusetts has been a great market for us. I don't think it's a mature market even though it's been around for a while. We entered that market as it was really heading into its recreational stride. And I think we timed it perfectly. And now we're one of the top brands in the state. We're very proud of that market. We have a great gross margin in that market. We're very profitable. And we have a good partner. And that's helped us to learn a lot along the way. And I think one of the big lessons we've learned is having the right partners. It's been a really valuable lesson.
@8:32 - Dai Truong (Arlington Capital Advisors)
And what's the right partner look like?
@8:35 - Cameron Clarke (Sunderstorm)
Yeah, I think that's different for everybody, right? We've decided that we really don't want to do licensing deals. We are very proud of the quality of our products. And we are firm believers that the definition of a brand is nothing more than trust between you and the consumer.
Right? In order to maintain that trust, you've got to have a consistent product. You've got to have high quality products and you've got to answer to the consumers when they have questions or challenges or there are issues which we all know happen all the time in this industry.
You've got to be able to manage through that quickly. And we really feel like the only way to do that is to do these things ourselves.
Where we do the manufacturing, we guarantee the quality. We know that it's safe, blah, blah, blah. Now, you know, in Colorado, we attempted to do it all ourselves, go alone, we bought a license, did it all ourselves, and I think that was more challenging than we had anticipated.
Whereas in Nevada and in Massachusetts, we fell under the licenses of our partners. And in both states, we've worked really great deals where our partners focus on what they do best, and we focus on what we do best, right? There's some shared costs, in Massachusetts, have a little bit of shared costs on the sales front.
But we handle all of our marketing, we do all the manufacturing. Our partner does the fulfillment. And something similar in Nevada, where our partner does the fulfillment piece and the compliance piece. And we do the sales, marketing and manufacturing. So I think the definition of a good partner is one where you know there's going to be challenges. You know there's always going to be hiccups. And you manage through, you make sure that the lines of communication are always open and that you work together to solve the challenges and solve the problems.
And I think in both cases, in both those cases, we definitely have great partners in those regards. And we also found that if partners are local, right, they're on the ground, they have relationships. They want to exploit those relationships, let's say maybe that's where we move on, where maybe leverage those relationships to help us get an understanding of a particular market, to help us get into certain retailers, and to build relationships as needed.
And we also structured the deals so that we were in the canoe together, right? We're both paddling upstream together.
One part where our interests are as aligned as they possibly can be. And I think that's one of the most important things, is to think through the relationship very carefully while you're structuring it, and discuss today, tomorrow, and the future, so that you understand what your partner's interests are and align them the best you can. And I think we've done a good job with that. And that's really helped us to manage through the challenges and make sure that our partners win when we win.
And that alignment is crucial.
@12:26 - Dai Truong (Arlington Capital Advisors)
Yeah, so if I take a look at your competitors, right, it's probably Wana, Kiva and Wyld . So you kind of Wana taking the strategy where they partner with Canopy-related companies for expansion here in the US. So whether that's TerrAscend or Acreage. Kiva has a bit of diversity in its partner, whether that's strong Single State Operators, Multi State Operators. I think Wyld is a bit more similar to yourself in that it's more of a reverse licensing model in these states.
So let's say, you know, exclude, Wana because they may have a closer relationship with some partners. When you're going into a State, what is the pitch and the differentiation that gets a partner to say, I'm going to work with Sunderstorm/Kana over Wyld or Kiva or any other options they may be presented.
@13:20 - Cameron Clarke (Sunderstorm)
Yeah, there's really two ways. There's really a fork in the road. There's a variety of nuances, right? As it always is, but I think the fork is really, do you want to license and have your partner do most of the work?
Or do you want to go in and do the majority or big chunk of the work yourselves? And again, we've chosen generally to do most of the work ourselves and leverage the skills of our partners, right?
So really understand from them what they do best. So I think, you know, for us, it's really a matter of just having good open conversations with the partners, understanding what they can do, what relationships they have, how they're operating today.
Maybe they just have a license, right? And they're very green in the industry. Well, we can come in and we can help them stand their business up and get it off the ground and accelerate their ability to leverage the value of that license.
I think one of the most important things is that early on we found, you know, I had a number of conversations with a number of folks in different states. And I just found that they weren't willing to really take a look at the value proposition that we offered, right?
And I think as time went on and as challenges in the industry, you know, as everybody started facing challenges in the industry, there were a number of newer players and then some older ones that just recognized that having a powerhouse brand under your wing or in your facility, gives you a lot of strength and accelerates your ability to make money, and to build something.
And so, these types of partners were much more flexible in the way that they were willing to structure deals.
And we were quite particular about how we wanted to structure the deal because we know what we can do.
We know that our ERP is one of the most sophisticated ERP implementations in the industry. So, we want to come in and do it and manage everything through our ERP.
We need to manage our construction. That's just an example, And for us because they're not recognizing the strength of what we bring to the table.
I think you just have to be honest with each other and figure out who has which strengths and let's leverage them so that everybody wins.
@16:12 - Dai Truong (Arlington Capital Advisors)
And you guys have done an interesting thing to work with some of your partners, especially in California, where you collaborate on branded products. So, can you tell us a bit more about some of those partners and sort of what's worked well and what hasn't?
@16:30 - Cameron Clarke (Sunderstorm)
So, we've taken a little bit in the white label side of the world. As California has become more challenging in the last couple of years, we looked for opportunities to leverage our strengths. And we found some good partners who were willing to work with us. And they wanted to have us do some collaboration products with them or help them build their businesses by providing them with good products. And on the flip side, they wanted to help us. So I think an interesting one is that we had a collaboration earlier this year with Insomniac, which is the owner of the EDC Festival in Las Vegas.
They have their own brand called Rainbow, RNBW, that they've been launching in California and Nevada for a little bit. And they're trying to get into more stores, and they're trying to build their brand. And for us, they have a massive audience. They've got a terrific ability to spread the word. And so we decided to do a collaboration together where we made a fantastic gummy for them.
There was really all around EDC, and a product that consumers could buy before EDC and take to EDC. You see and enjoy it at EDC while they're at the festival. And on top of that, we created a bundle of some of their products, right? Some flowers and pre-rolls. And bundled it all together into a package, which was kind of an EDC package that consumers could buy. And it was fun, it was playful, it was a great test of the relationship together.
They loved the gummy that we created for them. And consumers got a bunch of great products. It was a limited time offering and all that. But I think that's the kind of relationship that we did really valuable, because they helped us get some visibility into a consumer base that maybe didn't weren't so familiar with Kana.
And then for them, we helped them get into a number of stores. And help them get in front of consumers that maybe they weren’t unfamiliar with the RNBW brand. And we sent our field marketing team out and we promoted the products and talked about the brands and talked about, you know, the electronic music industry and the festival world. And it was just a fun, it was a fun collaboration all around. I think that's the kind of thing that we look for in relationships where, where we can offer best of breed products that can help our partners and then they can also help us in a way which, which helps to build up.
@19:40 - Dai Truong (Arlington Capital Advisors)
Now, are these things, short term, long term, because I remember, I think, at the beginning of 2022, you had a collaboration with Buddies. Is that still happening? Or are these things meant to be more sort of short term drops that people get excited about, come pick it up, learn about your brand and your partner's brand and move on.
@20:00 - Cameron Clarke (Sunderstorm)
I think that in most cases we deem these to be long-term relationships. They don't always pan out that way. The buddies' relationship was it was a shot for us to leverage both brands. You know, Buddies is one of the larger brands in California and probably the largest brand in Oregon. So they had a good following. They felt like working with them would be valuable for us. You know, Buddies had some challenges, so that relationship is on hold for now. But overall we really prefer to have longer-term relationships.
But it doesn't necessarily mean that we won't test things, right, to see how they go. The insomniac relationship was kind of an initial test to see how we work together and see if we can help them and how they can potentially help us. So I think that will be a good long-term relationship. And then it's some other white-label opportunities that we have. We've done one that's lasted a couple of years and it's a fantastic relationship for us and we're very pleased. And both companies help each other wherever we can. So, you know, I think we like the long term view. It's a lot of investment to do even these small collaborations. There's cost and time and energy and we're all short on staff and we're all short on time.
So, we have to make sure that where we invest our energy, there's a payoff down the road. And so I think we really have a long term view in these kinds of relationships.
@21:43 - Dai Truong (Arlington Capital Advisors)
And you also have one with embarc that's coming soon on a watermelon flavor. How do you think about those collaborations with retailers?
Obviously, you know, they can choose to have their own private label. Those products won't be sold at other retailers. So how do you think about the economic impact and the relationship building with a collab
@22:05 - Cameron Clarke (Sunderstorm)
It's interesting, actually, because we've kind of been looking at these relationships for a long time, probably over four or five years.
And we didn't really want to jump into it initially. We actually watched Plus, and we saw their collaboration with Airfield. And, you know, I was very impressed with how that worked out for both Plus and Airfield. So I watched that carefully for a while. And I learned from that. I really feel like, you know what, we need to do everything. The brands in California, in particular, but, you know, the country, need to build our relationships as tightly as possible with the retailers.
In order to navigate through the challenges of the industry, we have to work together, we have to team together to maximize the value to the consumer. And so now more than ever, I really feel like these relationships with our retail partners are incredibly valuable and incredibly important.
We're pouring a lot of energy into that right now. You know, you want to make sure that you give the retailers products that fly off the shelves, products that consumers want. You want to support them with marketing programs. And on the flip side, you want to get paid. Right? We've run some tests recently, the embarc is one, for example, where I think that's going to be a good collaboration for us where, you know, we've got a great relationship with them and this gummy we know is going to sell well and it's meaningful for them.
It's meaningful for us. And we've done a couple of others as well. For example, we did one with Caliva that we're excited about. So, you know, it also gives us a chance to really leverage our R&D. We have a lot, I mean, we're known for the variety of SKUs that we have, and we're trying to kind of pare that back a little bit, because it's hard to manage all these different products and SKUs.
But at the same time, you know, we do feel like doing these collaborations allows us to dip into our box of great R&D and goodies that we have and provide them to the retailers. And either Collab or White Label Opportunity, if the relationship makes sense. And I think we're going to see more and more of this in the future, and we're really enjoying doing these kinds of things. We just have to make sure that it makes economic sense. We have a limited amount of bandwidth in our R&D team, we have plenty of production capacity, so that's not a big deal. But at the same time there's their startup costs and you have to make sure That you can move enough volume to make sure that the relationship is profitable.
But in our minds, it doesn't necessarily have to be as profitable as our core business, because we know that we're going to get something of value from the retailer on the flip side, in terms of a better relationship.
So we're open to having these discussions, but we will not do these types of things if they're a lose, win, situation. It has to be a win win situatoin
@25:36 - Dai Truong (Arlington Capital Advisors)
And is that strategy helpful with potentially getting into other states where you have a dominant single -state operator, whether that's someone like Lume in Michigan or some of the MSOs in Florida that have 40–50+ locations?
@25:55 - Cameron Clarke (Sunderstorm)
I think there's always the challenge of entering into new states. There's always brands that have got an early start and have made a bunch of progress and are making a name for themselves. But I think one of the things that I've realized over the years, which has just been such a great surprise for me and I'm very happy to talk about it, is that it doesn't matter which market I go into. People know our brand. Our brand is known not just in the US, it's known around the world. A lot of people from around the globe come to Vegas or California, they purchase our products. When I went to Massachusetts before we launched there, there were a lot of budtenders that were very familiar with our brand, which I found incredibly surprising.
So, what I recognize is that even walking into a brand new market, there's already plenty of consumers that know the company. And that gives us a leg up on a variety of our competitors, certainly not the bigger ones because they're generally known in these markets as well, but a lot of the smaller ones. I think that helps us get to scale much more quickly. I guess I would just say that, yeah, there's always competition. There always will be competition. There's a lot of low price brands all over the country. We move into markets where we have a high level of confidence that we can get to profitability relatively quickly.
But at the same time, we're also very confident in our brand and our brand recognition and the quality of the products that we produce. So, I think we have a big leg up against a lot of our competition because of all the systems and the way we've treated our customers and the quality of our products.
@28:07 - Dai Truong (Arlington Capital Advisors)
And I want to touch upon another differentiation that I see between you and your competitors, which is you guys see your own distribution. Talk more about that decision to do so. How big is that distribution footprint today? Is it still a majority, heavy majority of dispensaries in California? Or is it less given some of the payment issues we've been hearing about?
@28:25 - Cameron Clarke (Sunderstorm)
So when I walked into the California market and started walking in the stores in 2014–2015, it took me about five seconds to realize that we've got to have a relationship with the retailers. We've got to own that relationship. We've got to be in these stores. This is a very challenging industry. And unless you're in the stores every single day, you're not going to understand the nuances and the evolution of the general evolution of the market.
So I said from the very beginning that we wanted to be our own distributor, we wanted to have these relationships, we wanted to control our brand. If there was a problem, we wanted to be able to solve it on the spot. Whether it was a sales rep solving the problem or whether it was one of our distribution employees or driver solving the problem. We want the retailers to understand that we're here to support them and we don't want to make their lives easier. And I think we've done an excellent job of that. So we built out our distribution ourselves from the very beginning.
The other thing I realized, and then this is in California, right? And the other thing I realized is that in order to be efficient, you've got to use technology to be able to deliver the goods as cost effectively as possible, to understand your cost structure, and to make sure that you had all the information at your fingertips or that your teams had all the information at their fingertips, to be able to manage through the challenges.
So we've invested heavily into our ERP and all of our systems. We have an excellent systems team here that manages the technology, manages the data, makes sure that everything is scrubbed and the information is valuable and that it's timely.
And so, we've built out, I think, one of the best distribution platforms in the entire industry in California. And so, I've always wanted to expand that. I invest in it because I know that I would want to expand it. And in fact, that's exactly what we're doing right now.
So, for the first time, actually, California, we're starting to have conversations with other brands to distribute for them. So we're stepping, we're dipping our toe into that. We just signed our first brand last week, and we will be distributing for them September 1st. And we're excited about it.
And I think we'll select a handful of other brands in the coming year or so, and distribute their products. And it's going to be great for us because it'll bring down the cost of our distribution further. And it's going to help these brands tremendously because we have one of the larger footprints in California. We have a powerhouse brand that is well recognized and loved by a lot of consumers and a lot of industry people and retailers. And we have this platform, which is very sophisticated. And we know that we have an incredible team that can do the day-to-day work. We have a lot working for us.
@32:00 - Dai Truong (Arlington Capital Advisors)
Was that always the plan or more so due to HERBL shutting down recently.
@32:03 - Cameron Clarke (Sunderstorm)
This is a discussion we've had for at least three years. So, you know, it's always been in our sights for quite a while, that this is an opportunity for us to actually expand our distribution. As I was investing in the systems and the technology and the SOPs and all of that, it was very clear to me that we could offer this to other brands, and they would benefit greatly from it.
But at the same time, it's a little tricky because you want to have complimentary, complimentary brands that work well with the kind of brand, so we don't confuse the retailers and the consumers.
want to have good partners where you can solve challenges, very similar to our partners in other states. And you just want to have an overall.
You don't want to do too much, you know, and so the distribution business is really a whole separate business unit.
It's so funny in this industry, I tell everybody that we run like four or five or eight different companies, right?
It's completely different businesses, right? And so it's, and the distribution is one of them. And that's a big challenge.
But at the same time, you know, it's a must have for us. It is how we, it is one of the ways through which we built our brand.
So to answer the question, it's been in our horizons. Erbil, I think, accelerated the conversation a little bit. to be honest, we've been having conversations with brands for at least, you know, six to 12 months on the distribution front.
And, you know, I knew there were going to be challenges for the standalone distributors. And I knew the brands were going to be looking for new homes.
So, you know, we built a home and we're happy to have this discussion.
@34:01 - Dai Truong (Arlington Capital Advisors)
That makes sense and you're probably seeing that contrast over the past nine years of having distribution in California and not having it in the other three states that you are in today and what a big benefit that may be to have the distribution, right?
@34:18 - Cameron Clarke (Sunderstorm)
Yes. I mean, in other states other than Colorado, you have a fraction of the number of retailers that you do in California.
So it's really much more valuable in California than it is in Nevada which has approximately 100 retailers.
So, you know, if we're going to build it, we're going to build it in California.
@34:43 - Dai Truong (Arlington Capital Advisors)
And I assume you're going to obviously do things differently than HERBL, but in your opinion, you know, what are the flags you're looking out for so you don't run into a similar situation with the distribution business. Because that’s not your core business so that it remains revenue generating, maybe profitable, but not something that's going to crush the entire company, should it go wrong?
@35:07 - Cameron Clarke (Sunderstorm)
Yeah, absolutely. And we've been looking at this very, very carefully. And to be honest, HERBL got caught in the way that we knew there was a challenge. It really has to do with getting paid by the retailers, right? And so we've been very sensitive to not over extending, not being too far over our skis, and potentially risking the entire enterprise by taking on too many accounts receivable.
So in general, I think HERBL's problem is they got caught between the commitment to pay vendors in 30 days, and the retailers extending payments well beyond 30 days.
So in our experience, we are either working with and talking to brands that are willing to take the AR risk on themselves, or brands that will work very closely with us to make sure that that risk is mitigated. And I think that's actually one of the biggest conversations. Retailers are in a very difficult position today. It's hard for them to make money. It's hard for them to pay their bills.
We're here to support the retailers and have good, open conversations with them, to help them through these challenging times. I tell my team, we are here to support them. We are in this canoe together. And so we've got to make sure that they survive and that they thrive. All this requires very intense discussions and open lines of communication and trust between ourselves and the retailers. And as we take on new brands, we've got to make sure that our brand partners understand what this means as well.
And so for example, this first brand that we signed up, they were very clear. They said “we don't need to have hockey stick in our growth. We're here for the long haul. So let's work on signing up new retailers slowly, carefully and efficiently without taking on too much risk.” And, you know, that's music to my ears. so I think that's really ultimately the story on our on our new distribution play is finding partners who view the world the same way we do and understand the inherent risk of of of of.
@37:31 - Dai Truong (Arlington Capital Advisors)
In your opinion, what is the number, and let's just talk about California, the number of dispensaries that are sort of good actors that agreed to payment terms and actually pay, know, what are the others that sort of are maybe okay, and then what are the numbers that are bad. And then for the ones that are bad. How do you guys deal with that?
You obviously still want them to have your products, but if they're not paying you, you probably cut them off. So how do you deal with that categorization of different types of retailers
@37:57 - Cameron Clarke (Sunderstorm)
CIt's a challenge. It's a massive challenge. I think for us, it really comes down to communication. Defining good, bad, really just comes down to lines of communication.
We see it all. We see retail partners who pay their bills like clockwood, happy to do so. We have great relationships with them. We see retail partners who are not communicative, and are very difficult in placing orders. They don't want to give us the information that we need in order to make good decisions about how to manage and help them through their challenges.
Then we see everything in the middle of that. We've sent a few folks to collections. We don't really find that collections does much for us. What we really find is that if we continue to work with retailers and help them through their problems and through their challenges and they're honest and open with us, we can usually find ways to fix the relationship at some point at some point in the future. And sometimes we have to make the decision to not sell to them for some period of time. Sometimes we make the decision to put them on COD only and give them some time to pay off the bills. Sometimes we put them on COD+ where they have to pay a little bit of the bill, the outstanding [amount], while we deliver orders on COD.
I think one of the most important things for us is that we want to make sure that we're on all the shelves. And that just can't really happen consistently today because of all these challenges. But we really work hard to try to stay on the 700-some odd shelves that we're in today. I think there's a huge chunk of the industry that is really struggling today. They're struggling to pay their taxes. They have been caught with the dropping prices. I think margin compression has been one of the largest challenges.
As all these lower price brands, products, brands come on stream, I think the retailers believe that they will sell more products if they sell at lower prices. But I think what's really happening is that they're selling the same velocity, but their margins are compressed. if you buy something at $5 and you sell it at $10, you make $5. You buy something at $10 and you sell it at $20, you make $10. So it's $5 versus $10. If the velocities are the same, then all of a sudden, your profit margins drop dramatically.
I think that has happened quite a bit to some of the retailers and has been painful for them. Our goal is to make products that are top of the line, premium, and cater to the consumer base that is willing to pay the higher price for quality products and know that when they get one of our gummies, that it's safe, it's delicious, it's consistent, and they're going to have the same experience as the gummy thye bought from us 12 months ago.
@41:59 - Dai Truong (Arlington Capital Advisors)
Yeah, it's kind of funny you bring that up, you know, earlier in the news today, I saw that there was a recall for salmonella for an edibles in Arizona.
So I think, you know, certainly passing testing and sort of having that recognizable brand that's trusted in any state that you operate is pretty key.
@42:21 - Cameron Clarke (Sunderstorm)
Yes, absolutely. And we are very, very particular and careful in every single one of our facilities to make sure that everybody has, that we have all the protections necessary to make sure that the facilities are clean, right, and that we don't have any of those problems.
You know, we were one of the first companies in the industry to be CAT3 compliant back in the day.
We have a zero pesticide policy. That means that even though the state allows a minimum level of pesticides and products, we don't allow
Any pesticides in any of our products, we make sure that anything we produce, we're happy to put in our bodies as well as the...
We wouldn't put anything in the consumers' bodies, we wouldn't put in our own bodies. We are very careful to make sure that all of our facilities are extremely clean and that everybody, whereas the proper accounts and protections.
And we haven't had any of these problems. And I think that's just a testament to the incredible work of our group.
@43:35 - Dai Truong (Arlington Capital Advisors)
I think that's a great way to transition to Thailand. So you guys announced in December of 2022 that you are expanding to Thailand being the first North American edibles companies to do so.
@43:49 - Cameron Clarke (Sunderstorm)
Can you tell us a bit more about that decision and how that's going and maybe some insights into the Thailand market?
Yeah, I think Thailand actually is one of the most exciting markets for this. It's an entire industry. About 12 months ago, the Thai government decided to de-scheduled cannabis.
And they allowed operators to open up very easily by just filling out a small form and getting some kind of very basic license.
So we had been chatting a little bit with a potential partner over there through a relationship that we had in Nevada.
They had medical licenses. They had been in the industry for a while. Really good, good people. So when I went over there in December, it was immediately apparent to me that this is going to be a fantastic market for us to open it up into.
For sure, there's political wins, there are some challenges there . It remains to be seen exactly how the regulated system will evolve. But it's no different than what we saw in California. So, over the years, we're just working over there the way we've been working in California. So I think there's somewhere between 5,000 and 8,000 retailers now in the country. There's 70 million people with 30 to 40 million tourists. We all know it's a massive tourist destination. And many of these tourists are familiar with the Kanha brand.
And so, you know, the retailers are hungry for the quality of our products. And the market's moving quickly. I think, you know, initially everything was in a kind of ziplock or mylar bags. Now it's starting to be some branding and some proper packaging. But we will be open and available for sale in that market probably, October timeframe. And we're incredibly excited about it. I think there's going to be a lot happening, this is being sold on almost every street corner. And there's a lot of excitement about them. And in fact, there's a lot of US citizens over there setting up shop right now.
So they're bringing the expertise to Thailand that we've had in this country for decades. That's going to help move that market along quite quickly.
And the ties themselves recognize the value of US brands and our technology and our cultivation experience and all that.
They want to move the market along quickly and be one of the top players in the world. I think for us, I think one of the tie domestic markets is exciting.
I'm even more excited to think it's even more exciting that we have the opportunity and possibility to export around the world.
So we are setting up our facility over there. We will cater to both hemp and cannabis in the domestic market.
We have a big deal for us. We don't have the opportunity in the US to export. We couldn't really build a global brand.
But through Thailand, I now have that opportunity. And to be honest, if you asked me, you know, eight years ago, if I was going to be a global cannabis brand, I would have probably laughed.
But I think today, it's actually in our horizons and we're going to get there. And that is one of the most exciting things for me.
You know, we all need good news these days. And for me, this is a big area of focus. And I'm keen to drive it.
@47:56 - Dai Truong (Arlington Capital Advisors)
And we expect Thailand to be a big or meaningful revenue contributor?
@48:02 - Cameron Clarke (Sunderstorm)
I do. I think they're just the tourist market alone is a massive opportunity for cannabis.
They're already flooding in. The tourists are already flooding to Thailand to go sit on the beach and smoke weed.
Right? mean, they love the concept. And so, and it's not just from Europe and the US. I mean, people are coming from Malaysia.
They're coming from Australia. They're coming from all over the world to come hang out in Thailand and consume cannabis.
And the ties themselves are excited about it because cannabis has been part of their Thai herbal medicine tradition for forever.
Right? And so, this allows them to incorporate cannabis, this powerful medicine back into their culture. So, you know, I think we have the opportunity to cater to.
To the tourist market for recreational cannabis. But we also have the opportunity to make incredible medicinal products that cater both to the Thai domestic market as well as the global market.
And we're going to have the opportunity to sell in farmer season, because of the medical licenses of our partner.
So we're in a different camp for most of the players.
@49:26 - Dai Truong (Arlington Capital Advisors)
Great. appreciate that insight. Last question for you. Tell us a bit more about the funding history of the company, how much raised to date and any plans for future capital raises.
@49:39 - Cameron Clarke (Sunderstorm)
Yeah. So today we've raised about $10 million. You know, I think which is, which is not a lot compared to a lot of our competitors and others in the industry.
We've been very frugal about how we spend more money. So we're proud of that. We're also debt free. There's not a lot of folks in the industry that can necessarily say that.
So that means that we don't have this news hanging over our head, which a lot of companies do. I think that in general, we're raising a small round right now, and we're actually getting investors to sign up.
It's not a lot, but it's enough to make sure that the company has the base that it requires to do new and exciting things that we're focused on.
And we're profitable. We were profitable last year. I think we're pretty sure we're going to be fully profitable for the entire year this year.
I think that's a testament to a lot of hard work from our team members. And I'm confident that one of the reasons that investors are stepping up and putting more money to the company today.
Is the fact that we're one of the few profitable companies in the industry. So, I think that's just the story today.
Raising capital is extremely difficult. We all know that. But I think this is the moment where capital starts to flow to companies that are focused on building a true business.
They're focused on top line growth, also bottom line growth. And it's a very tricky balance. And in general, Keith and I have talked about this at length over the years.
Should we accelerate our growth curve by focusing a little bit less on profitability? Or should we focus more on profitability and really dampen the growth curve?
And I think we've kind of reached a happy medium where we're investing for our future. But we're also maintaining profitability.
And we're building a good stable base. I have confidence that Capital will continue to flow to us and will allow us to enter new markets and make money and build one of the strongest brands in the industry.
@52:14 - Dai Truong (Arlington Capital Advisors)
Great, and that makes sense. few profitable companies in the space. So if you're one of the few, that's already a differentiator that investors will just see from other pitch decks that they're getting.
@52:27 - Cameron Clarke (Sunderstorm)
The thing is that investors have been fed a lot of crap and a lot of hyperbolic charts where the slope is far too steep and doesn't make any sense, doesn't make any sense.
And I think rightfully so that they feel burned and they're frustrated. And so even in our discussions with these investors, conversations are like, how do you know
We know you can get to where you can get, where you're going, And we point to what we've done in the past, and then we point to all the systems that we have in place, and the due diligence that we do on every market.
And we point to what we're doing in the markets, what we exist today, and we tell them how we've got there, right?
And so, you know, we want investors to believe in what we're doing, and in order for them to believe in what we're doing, they have to see how we view the world.
And I honestly believe that our perspective and our view of the world is on the market, and the way we operate our business is quite different than most of the players in the industry.
And I think that's, you know, I think that's at the heart of the conversations that we're having. It is incumbent upon us to convince the investors of why we're different.
And I'm happy to have these conversations, and to be honest, I'm proud to have these conversations, because I know that I can show them.
Elements in our business that no one else has. You know, our investments in our technology, our investments in our systems, our investments in automation, our investments in quality, our investments in R&D, all these things that we've done are quite different from most other brands.
And so, you know, it's cost us a lot over the years, but it's built a very stable company, a very stable business.
And again, we're proud of that.