These days, everyone’s talking about supply chains and the challenges they’re facing when it comes to sending and receiving virtually anything from one part of the world to another. As you might expect, since cannabis is still federally illegal, it comes with its own set of challenges, and relies on complex networks that aren’t easy to untangle.
Fortunately, there’s people like Peter Huson. A former rocket scientist, Peter is Chief of Operations at Backbone–a fully customizable supply chain management platform that tracks production compliance, cost of goods sold, yields, and audit reporting data in real-time. He provides producers with data-driven insights that help them scale their businesses and grow their teams.
Prior to joining Backbone, he co-founded the Northern Nights Music Festival, which was the first music festival with legal cannabis sales. He is also the co-founder and COO at One Log Cannabis Business Park and Compliance Officer at Mesh Ventures, as well as a holder of over 50 cannabis licenses across the supply chain.
Today, Peter joins the podcast to talk about creating new systems to solve age-old problems, the intersection between cannabis and tech, and how everything in this business can be tied back to the Grateful Dead.
- The key problems unique to cannabis supply chains across states and in different countries.
- What Backbone is doing for cannabis that Oracle and SAP are doing for other industries.
- Why the cannabis industry is all but guaranteed to get simpler and tighter over time–and how cannabis plants’ uniqueness challenges standardization.
- How Peter launched a music event with legal cannabis sales.
- How he foresees the cannabis industry developing in the years to come.
“The cannabis tracking on a day-to-day basis that you have to report to the government is the most strict reporting in any industry.” – Peter Huson
“No matter what happens, don’t forget to give back to the Grateful Dead for all that they have given to us.” – Bill Walton
- Northern Nights Music Festival
- One Log Cannabis Business Park
- Mesh Ventures
- Sage Intacct
- Celadon Pharmaceuticals
- Oracle NetSuite
- Emerald Cup
- Live Nation
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Rick Kiley: Hello, everyone, and welcome back to another episode of The Green Repeal. I am, of course, one of your co-hosts, Rick Kiley. I’m here with Jeff Boedges. I am in New York City today. Jeff is across the river. What’s going on, man?
Jeffrey Boedges: I’m in the Garden State, and the leaves are starting to change. It is another beautiful day here in paradise.
Rick Kiley: See, I told you, we always talk about the weather. So, look, today, we are welcoming Peter Huson. He is the Chief of Operations at Backbone, which is a fully customizable supply chain management platform that tracks production compliance, cost of goods sold, yields, and audit reporting data in real-time. Simply put, Backbone provides data-driven insights that will enable producers to scale their businesses and grow their teams. Before becoming the COO at Backbone, Peter co-founded the Northern Nights Music Festival, which was the first festival with legal cannabis sales. And then he went on to lead the management of compliance and operations for both the Northern Nights Tree Lounge and Outside Lands Grasslands, paving the way for future events in California.
Additionally, Peter is the co-founder and COO at One Log Cannabis Business Park, Compliance Officer at Mesh Ventures, and today, he successfully acquired over 50 cannabis licenses across the supply chain. Now, that is a lot of licenses. We’re going to talk about that. And on top of all of that, he’s also received a Bachelor of Science in Mechanical Engineering from UC Santa Barbara, a Master of Science in Aerospace Engineering, subcontracting for NASA, and a Ph.D. in Structural Engineering from UC San Diego.
Rick Kiley: So, Peter, welcome to The Green Repeal. Thank you for joining us today.
Peter Huson: Thanks for having us, me.
Rick Kiley: And us, I mean, you should say us, it sounds like you’ve got enough degrees there for like four people and essentially…
Peter Huson: That’s what my advisor always said, us is more powerful than me.
Rick Kiley: That’s nice.
Jeffrey Boedges: Yeah, yeah, yeah. That’s why we always send emails that way, especially one’s asking for money. We really need that money paid today.
Rick Kiley: So, you are our first, I believe, actual rocket scientist on the show. I’m going to call you rocket scientist. Hopefully, that’s okay. And I’m just curious, with all of that background, when did cannabis enter your story, and then start your career?
Peter Huson: I’m very proud of saying, when did you shift from getting high literally to figuratively?
Jeffrey Boedges: Yeah, we sneak in on the rockets and stuff.
Peter Huson: Oh, what’s funny? I mean, I think that in many places, it started in high school. I think that I figured out about junior year that if I put the math and science classes first and second period of the day, then the rest I could handle and do my thing. So, from very early on, I think maybe I slowed down the wheels and allowed me to be a little bit more present with folks and not trying to go nine miles an hour. So, I think it’s been highly effective in slowing things down a little bit for me.
Rick Kiley: Got it. I’m glad you mentioned it. I was a math major in college and I went to a college there. There was a lot of cannabis use. And I always found that the mathematics and cannabis did not work for me. That was like to have that thinking down. So, alright, if you’d figure that out…
Peter Huson: It’s nice. Like I put it this way, right? You got a hard thing that you’re solving and you’re like in it and actually stepping back for a second and a little medication, allowing you to kind of reframe why you’re so sucked into the minutia and kind of go back to look at like what the actual problem you’re trying to solve here.
Rick Kiley: Yeah.
Jeffrey Boedges: Right. Yeah, reframing it.
Peter Huson: Yup, absolutely.
Jeffrey Boedges: Yeah, I think that’s why people are in– one of the big reasons behind microdosing and some of the other trends right now because people are trying to basically be able to free-form solve different types of problems.
Peter Huson: Yeah, especially like when you’re done with work for the day and you have to go talk to your kids right afterward, it’s nothing like a beautiful rosin gummy, right?
Jeffrey Boedges: Exactly.
Rick Kiley: No comment. Yeah, I’m not sure if my kids listen to this podcast yet.
Peter Huson: That’s a good point. Probably mine well in the future.
Rick Kiley: I doubt we can hide really at this day and age. So, look, can you give us a little walkthrough of your career path in Cannadis, cannabis? I combined, by the way, Canada and cannabis there, Cannadis.
Peter Huson: That’s actually a big A. I’m doing a lot of Cannadis right now, so.
Rick Kiley: Alright. That’s nice to hear.
Peter Huson: Yeah, I put it this way, right? Working on nuclear weapons in the Department of Defense for grad school is great than paying for school and very interesting to get yourself kind of understanding how the world works, but at the end of the day, it’s not necessarily the most beautiful thing at the dinner table and telling everybody all the joy that you bring into the world. And so, I kind of just did a 180. I used to go up to reggae on the river growing up here in Northern California. And I kind of joke around and say that there are some marbles there that needed to be refound.
My mom is from El Salvador. And so, we like to host events. I’ve always hosted parties all of my life. And so, if you’ve always been hosting parties, the obvious trend is you must throw the biggest possible party and check that box off. And so, we went up there when Reggae on the River stopped to start a music festival called Northern Nights, which is on the border of Humboldt and Mendocino counties, right in the heart of the cannabis business.
Jeffrey Boedges: Yeah, I think they grow some cannabis around there..
Peter Huson: And so, as we started to put that event on, obviously, festivals are very culture-centric, right? And there is no way that you’re not going to start to realize that the majority of the people who are sitting there asking you to help you, they may not be able to talk about what they do, but you get an idea of what they’re doing. And so, when legalization came, they saw that I was getting all of the permits in both counties. And so, they’re like, “Wait a minute, you talked to the cops, you talked to the Board of Supervisors. You talked to all the people that we don’t want to talk to, like, can you go help us and deal with that stuff too?”
So, I started to get permits for a lot of the locals in the area. Word got out that I was good at it. And again, coming from my dissertation and other things, like I’m not going to say that permits are hard to get, but at the same time, the regulations say like you shall and your application says, I will. It’s like you can go through the rest of the motions. And so, I started to kind of get into it, and as I started to do so, like, oh, you helped him with that, like can you start my LLC for me? Oh, QuickBooks, oh, can you do that? And so, I started to get myself deeper and deeper just because I thought it was an interesting problem and I had never really gone through that before. And that kind of just accelerated.
And so, I started to get more and more of them, started to help more and more of these folks. And after a while, I was like, okay, well, some of you have paid me, the other ones are going to pay me one day, and they’re like, you know, why don’t you just be a partner? You just be involved. And so, it’s like, okay. I’ll never forget the first time when someone said, “Hey, Peter, you’re going south to the bay, right? Can you drive this?” And then I was like, “Wait a minute, bro.” Like, “What are you talking about?” And the answer was like, “How do you think they get to the clubs, bro?” Since the dawn of time, right?
Jeffrey Boedges: Did you say that’s Dr. Bro?
Peter Huson: Oh, thank God, Dr. Bro. Got it, right? And so, it was really eye-opening to kind of see how transactions were happening. And that’s right when we had to do Sequoia, which is like a tobacco stamp thing in Humboldt for a little while before metric, and so, started to kind of realize that operating 10, 12 licenses on that Sequoia System. And after that first year, I was looking at kind of the transactions and I was like, I can’t even tell what the hell we did. How the hell is the government going to tell what we did? I just started to really start to open our eyes and say, there are going to be some issues because of these regulatory systems and the framework that they’re putting out, I see that it’s going to help them in one capacity. It’s not going to do anything for my business.
And if you think about the California supply chain specifically, like I said, since the dawn of time, it’s been farm-to-club direct. And all of a sudden, there are all of these middle supply-chain licenses for the first time. So, we were like, okay, bottleneck there, distribution, processing, manufacturing, like no one has ever had those types of activities in this industry before. That’s where the bottlenecks are going to be. That’s where the brands are going to be. And so, we really started to focus on that. And that’s right around the same time. To be honest, the reason we’re actually talking to you, it all stems back from the Grateful Dead. And I’ll tell you that story.
Everything in Northern California, when it comes to music and drugs, all comes back to the Grateful Dead. And actually, where it came down to is one of my business partners on a bike ride down from the tip of Alaska to Tierra del Fuego. No, small, that’s no big deal, right? Small of a bike ride. And one of the legs was here in California, and Bill Walton and his group were doing for folks who have different needs, they were assisting them with disabilities. I think they all joined on the bike. And so, we get there and we’re chatting with Bill afterward, kind of letting him know we’re involved in the cannabis and what’s his thoughts, and he’s like, “Guys, there’s one thing I want to tell you, that I will make some introductions to you, some really great folks and people who are interested, but I want you to remember one thing that no matter what happens, don’t forget to give back to the Grateful Dead for all that they have given to us.”
Rick Kiley: Wow! That’s a good quote.
Peter Huson: So, I keep that in the back of my mind because at the end of the day, one of these days, Bill is going to come back, he’s going to say, “Where is that Grateful Dead? Did you give the money back to the Grateful Dead?” So, it’s going to come back full circle, but anyway…
Jeffrey Boedges: I think, don’t you have to reward Ken Kesey at that point, though, too? I mean, he’s got to get at least an honorable mention.
Peter Huson: I try to be careful in the politics of all that happened because another planet, a lot of those executives all came from Bill Graham’s team, right? And it’s all very deeply intertwined up here. And so, anyway, fast forward, a few introductions from Bill later, we’ve got a venture fund that we’re investing in the middle of the supply chain trying to get it. Oh, what’s your inventory valuation? Like, yeah, right, dude, right? It’s like I can do, I make millions of grams. And so, we started to just really realize that there weren’t really any systems that were ever going to support just to get basic things for people to actually do due diligence on.
So, at that time, that’s where we tapped our Silicon Valley network. And I thought I had missed the tech boom, and I was like, great, I’d studied freaking weird mechanical and structural engineering while you guys were all selling loans and making a quarter million in 2007 as 22-year-olds while I’m sitting there in grad school. I almost jumped out of grad school to sell loans, I’m glad that I didn’t, but at the end of the day, we really started to accelerate that. We tapped a Silicon Valley network and our CEO, Rajesh, 20 years ago, was at a company called NetSuite, used to be NetLedger at that time.
And so, about that time is when Salesforce and NetSuite were kind of neck and neck in terms of what was going to happen in their growth. Rajesh had really said, “Guys, you really need to redefine what we’re doing here. We need to get something in the hands of the operators who really want to start doing automation, AI.” He knew it was coming and going to a platform approach. NetSuite said, “No, we’re just going to go ahead and be a POS company instead of buying a bunch of hardware for POS.” Well, the rest is history there, right?
Salesforce1 platform, you know where they’re at. It’s not that NetSuite did bad. Getting acquired by Oracle is not a bad thing, but we’re just definitely had a thorn in his side about how Salesforce, they did what he wanted to do. And so, when we tapped him for this project, he did not want to do another startup. He had just sold his last one to Microsoft, but when we told him what we were trying to do, and then it’s federally illegal so there is no SAP or Oracle, the big monsters and elephant in the room can’t touch it yet. It’s like, oh, okay, like, I can actually start what I wanted to do 20 years ago and see if I can get this, scratch at it.
So, he had the foresight to go ahead and get his network and grab some people from Sage Intacct from Intuit and really brought some heavy-duty financial and ERP developers to us. And my job was to go ahead and assemble a team of cannabis operators, I call them disgruntled cannabis folks who are just like, I don’t like this company. I really want to help. I want to help multiple companies. And so, we kind of said, “Alright, let’s bring some really solid enterprise technologists with a bunch of us, weird cannabis people, and let’s blend these two internally and try and see if we can solve these problems that are happening in cannabis.” And so, that’s what we’ve been doing for the last four years is really understanding what the true problems are, and not just from like a CBC or ERP standpoint, but from a supply chain standpoint.
This is a very interesting market that we live in multiple licenses. Distributed supply chains can’t transact interstate. So, we’ve been really looking at this from a supply chain lens and trying to see how we can solve some of the problems that some of the older systems haven’t been able to solve.
Jeffrey Boedges: Wow! That’s a mouthful.
Rick Kiley: Alright. So, you answered like four of my questions already.
Peter Huson: Sorry.
Rick Kiley: Well, no, it’s good. Preemptive answering is always a good thing. So, I guess, who you’re working with right now? I think that’s really the question.
Peter Huson: We’ve got about 100 customers right now. Some of the very interesting folks I work with, I’m sure you guys are familiar with Cookies.
Rick Kiley: Yep.
Peter Huson: Maybe familiar with TerrAscend, another big MSO on the East Coast, and we’re also working with folks like in the UK, a company called Celadon Pharmaceuticals. They actually have a federal UK license to go ahead and import, extract, grow, and export.
Rick Kiley: Got it.
Peter Huson: So, we’re in the international markets. We’re in Israel as well. We’re in Canada. And then, also, we don’t discriminate on THC percentages, so you have your cannabis whatever the hell you want to call it. We kind of operate in all, we’re in about 16 states, four countries right now and have some big players in there, but it’s bad luck to mention them. So, I’m not going to talk about them.
Jeffrey Boedges: Sure.
Rick Kiley: Fair enough. And so, are all these companies, like you said, there are multistate operators, so it’s like larger supply chain groups?
Peter Huson: It’s a mix. I would say, let’s put it this way, right? There is a very sweet spot right now in this industry where people are saying, okay, cool seed-to-sale system, but I’m not going to run my business with that. And then, they’re looking at what are my options? And it’s like, “Oh, go, look at a Microsoft Dynamics and Acumatica,” and then you look at your operators and you’re like, “Dude, I do not need a system that requires 10 Ph.D.’s to operate the system.” So, we fill that gap to say right at that sweet spot where you’ve built your own kind of full ERP and your spreadsheets, you felt the pain, maybe a 25 to 50-person company, and you’re ready to make the next jump, but we kind of catch you there and say, you do not need to get that drastic and go all the way up. Let’s catch you and help you guys scale, right? And so, that’s the sweet spot where we get people at that mid-level and help them get to full ERP.
Rick Kiley: Got it. So, you’re filling the gap between like spreadsheet management and a gigantic system.
Peter Huson: A behemoth, giant SAP implementation, and nobody will get it.
Rick Kiley: Yeah. Well, it’s funny because we’re talking to Oracle NetSuite right now because we’re having a meeting with our own core business. So, it’s funny to hear you talk about these things.
Peter Huson: You want a demo?
Rick Kiley: I do, but not on this call, but yes. Yeah, absolutely, especially…
Jeffrey Boedges: So, I’m sorry. Go ahead, Rick.
Rick Kiley: No, no.
Jeffrey Boedges: No, I was going to say on the international side because we haven’t had a lot of international folks, Canadian, but really no Brits, no Israelis, no other.
Peter Huson: Portuguese, Colombians.
Jeffrey Boedges: Portuguese, Colombians. Well, Colombians, we’ve had on here, but they were on the gray side. My question actually, though, is what are the differences when you start to go internationally? And are you then going against the NetSuite’s where if these are able to do international, that’s more, pardon the pun, in their sweet spot? So, are you battling against those guys outside of the US?
Peter Huson: So, for sure, it’s pharma level, right? The transactions that are happening. They will get really scared when you say it’s pharmaceutical, it’s not that bad, right? It’s GMP, GACP, good agricultural and collection practices, good manufacturing practices, everything that you require on the FDA anyway, but then what happens is that each country is going to have its own kind of requirements. So, for example, I think maybe in Germany, you can’t sell anything over 24%. So, every single country is going to have their own regulations about what you can import and what you can’t export. And so, what we’ve done is start to develop profiles on a per-country basis so that people can actually get flagged and say, “Oh, these are the countries that I can sell to, these are the countries that I can’t.” That’s somewhat standard, obviously, here in the US. If anyone wants to know where we’re at with federal legalization here, I know there are a lot of people talking about it.
Jeffrey Boedges: That’s our last question of the day.
Peter Huson: We’ll put it this way. Right now, we’re sitting at it. The FDA is pointing at the DEA, saying, “You do it.” And the DEA is pointing at the FDA and say, “You do it.” And so, that’s kind of where it stands right now. And if you kind of understand the history of why the DEA had been involved in all of this, they can’t be on the Cloud. They have some very ancient reporting structures. And so, at the end of the day, though, they’re not that difficult if you really kind of take a look at it. And so, what we found is actually, and this is actually very much I want to make sure like this is very clear, is that cannabis tracking on a day-to-day basis that you have to report to the government is the most strict reporting in any industry. It’s unheard of that you have to, and so, when you do that, think about it, they’re requiring you to put that information into a system every day. Think about how much data is available because usually, you don’t have to do that every day.
So, what it lends itself really well to is that you’ve got kind of the stick that says you must report every day. You’ve got the carrot, though, that says, hey, if you report every day, then you can get live cost of good. You can get live visibility into what’s going on. And so, we kind of balance that together. And by doing so, it’s like now, when a vertical farmer for spinach comes and says, “Hey, guys, I’ve got these problems. Can you solve my problem?” And I’m like, “That’s it?”
Jeffrey Boedges: I thought you’re going to say, “Are you entering data on spinach every day because I think that can help it?
Peter Huson: No, what was interesting about that, though, you look at potatoes, you look at all of these other industries in vertical farming, and AgTech obviously is very hot right now, right? And actually, if you had to talk in a nice way, you guys want to get a discount, see if you can get Uncle Larry and talk to him about vertical farming, but that’s a different story.
Rick Kiley: Uncle Larry.
Peter Huson: That’s just the name for– okay, anyway, it’s a joke and that’s why anyone who’s worked on that…
Rick Kiley: Alright.
Jeffrey Boedges: Got it, got it.
Peter Huson: I don’t worry there. I’m going to call…
Jeffrey Boedges: That’s a Silicon Valley joke, you have to…
Peter Huson: Yeah, it is. Yeah, anyway. But the bottom line there is that like, oftentimes, the problems that they’re having are the same things that were just said 20 years ago, right? It’s like they’ve got these beautiful environmental systems and sensors and all of this stuff that they’re working with. They’ve got some financial needs that are necessary, and trying to tie those two together becomes a little bit like people first, for whatever reason, it becomes like a huge, huge thing. And what we found is because cannabis is so specific in terms of those exact parameters that the system actually a dumbed-down version of Backbone can solve other verticals.
And what’s interesting about that is that when we entered this space, people get surprised when we sat back on that cannabis is not our end-all, be-all. Cannabis is just a window that is allowing new systems because Oracle and SAP are not here right now. It’s allowing us to redefine how MRP, how supply chain, how AgTech can work. And so, we’re just using this as an advantage to basically bringing a new way to look at things. I mean, these systems are 20 years old, guys.
Jeffrey Boedges: How do you evaluate potatoes, though, the same way. So, it’s like this potato is super strong, dude.
Peter Huson: Well, I know. You’re exactly right. It’s like when someone said, “I have this huge, huge ERP that we’ve built and I just needed to sort my potatoes in A, B, and C,” and it’s like, “Okay, thank you.”
Jeffrey Boedges: Yeah, you got that in your wallet.
Peter Huson: It’s pretty straightforward.
Jeffrey Boedges: Yeah.
Rick Kiley: Okay, alright.
Jeffrey Boedges: So, can I ask a quick question, though? So, like…
Peter Huson: Yeah.
Jeffrey Boedges: Are you good at this? And obviously, you are, but are you good at it because of your background? Do you feel like being trained as an engineer, which is a meticulous, mathematical, disciplined approach, has made it easier for you to take on these types of what I would call, you’re going in and really taking the knot and untangling it for people?
Peter Huson: I’ll answer in two ways. The first is, is that one of my– I think I have to, in terms of giving back, not to the Grateful Dead, but to some other people, is that I want to go back to find sophomore year me and that group in college in mechanical engineering and go to them and say, “Hey, guys, I know that the thermal combustion engine is really important, but there’s also a ton of people who are not as qualified as you were making a ton of money in tech.” And tell them, like your brain already works with mapping. You understand accounting because it’s just accounting. And the amount of shit that you’re about to do, excuse my French, sorry…
Jeffrey Boedges: No, that’s perfectly normal.
Peter Huson: The amount of stuff that you’re about to learn that is maybe going to land you at $100,000 a year for the rest of your life, you can stop that and go into a little bit more computer stuff, a little bit more sequel, learn a little bit about these things, and you will excel immediately in product dev services. And so, that’s the first one is that I do think that it’s overtraining. However, on the flip side of that, it actually was a challenge in the sense of classically trained engineers were very how do I solve the problem here, like we’re the worst husband, right? You can drive your wife nuts because you always want to solve their problems, immediately. And what are they asking? I just want you to listen. I don’t want you to solve it.
Well, technology is actually very similar. Good technologists, what they are is, they’re really good bartenders. They just listen to the problem. As Rajesh always says to us, the customer is the expert at the problem. And so, make sure that you’re getting the problem definition that you’re listening to it. And I’ve actually had to untrain myself in terms of trying to solve it and more just be better at asking the right questions about further defining the problem. And that’s been kind of, I would say, but on that end, from a problem-solving standpoint, getting creative and just kind of, yeah, I would say, absolutely, the training helped me. Is it probably overtraining? Would I go back and not do the six years of weird BLAST work? Probably.
Jeffrey Boedges: You should do a TED Talk on this.
Rick Kiley: Yeah. Well, you got those stories. It’s just like you can’t take those BLAST years away. Like, those are…
Peter Huson: No, I get it. And my friends give me sh*t, too. I still don’t really like the doctor stuff. And at the end of the day, it’s not even a real doctor, right? So, I’ll wait…
Rick Kiley: What’s a real doctor? You did a lot of work. So, it’s important to recognize that. So, what I’m curious is you talked about the differences that you need to be able to apply to your system to make it work in other countries. I’m curious as things sort of unroll here in the United States, when we look at the alcohol beverage industry the way that compliance works and it’s done in the states, it’s different state by state, different rules, different regulations, different tiers. I’m curious, if you think the standards in the country are going to differ state by state and if the work you’ve done across the country might apply?
Peter Huson: It was funny that actually, it will– I guess put it this way, first and foremost, is that I know, and again, it’s not me putting anybody down, but I know that everybody thinks that they’re doing the magical secret thing in cannabis that nobody else is doing. Well, secret, to everybody here, everyone’s doing the same type of thing, right? It’s just they’re calling it different things. They have slightly different variations and processes. Every strain is different. So, fundamentally, though, it will at a federal wage, it’s just going to go back to just very FDA, pharma, right? It’s going to go right back. So, it will get simpler, it will get tighter in a lot of ways, but you are not going to redefine the wheel there.
Now, the big, big difference, though, with cannabis specifically, is that every strain is different and that every potency is different and that every harvest is different. And so, you get these big organizations were like, I want to do standard costing and I want to be able to plan around that. Well, it’s like, okay, that’s fantastic. We’ll go ahead and set a parameter, but every single batch, every genetic, everything is so different that that is what makes cannabis so unique is the amount of variations, genetics, terpenes, you name it. It is one of the most unique plants in the world with the amount of different variations that it can produce, which makes things a little bit different for folks to track and for systems to be able to follow. And so, I think that’s the biggest thing, I think like why we’re here talking today, the uniqueness of this plant, even on a data-centric side. It’s different than what anybody else has done before.
Rick Kiley: So, to use another like booze comparison, so we work on a spirit. Let’s say, it’s like Johnnie Walker Black Label, which is a blended whiskey, and when people are producing and distilling whiskey, and it ages in barrels like, you get tremendous– I mean, there’s a significant amount of variation, right? And so, what the master blenders need to do is they create a roadmap, which they then pull samples from all these different things in order to sort of create the same consistency across every single time, right? So, is it your sense that, and I don’t know if this is possible, but these folks who are making brands, and you can go buy tinctures or something less so on the flower side, but people are trying to, I think, create that same sort of consistency so that people, when they’re trying to take a certain amount, they know what they’re getting, they know what they’re expecting.
Jeffrey Boedges: The caveat question to that, though, Rick, because I think it can go that way.
Rick Kiley: I didn’t even finish the question, man.
Jeffrey Boedges: You didn’t? Well, sorry, I thought you were there.
Rick Kiley: It was long. I was just curious like…
Jeffrey Boedges: You’d been going on like 10 minutes.
Rick Kiley: I have long question, sometimes. And I’m grand about coming to just like, does the system that you have in place help people with managing that process so they can get that consistency of the final product?
Peter Huson: Absolutely right, and the regulations, they’re going to define a lot of that. They have to be able to have a certain milligram and a certain dosage. So, I think it from a THC perspective, but I guess, put it this way, how we think about it in California, is an ongoing joke here is like Central Valley distillate. You don’t want to be smoking on Central Valley distillate, right? So, here is a great example, you’ve got these mega-farms in the Central Valley, and people are producing mass distillate, recombining with other terpenes, and that’s got its own kind of bucket for people who want to buy. You look at the Emerald Triangle right now. What everybody is doing is they’re fresh frozen everything, and all the beautiful solventless is coming from the Emerald Triangle.
Now, you’re seeing that solventless, they have equipment and machinery, used to be done in buckets. There’s new equipment that’s allowing solventless to come at scale, and that’s the whole argument about the full spectrum, the entourage effect. And I think that’s what people are really starting to learn about. I don’t think it has to be a buzzword anymore. It’s just kind of like it’s very, very obvious if you’re going to get high and smoke a Central Valley distillate cart versus a– even in hydrocarbon. Arcata actually has been in Humboldt, they have the most unique blend and the most unique single-source strains. And there’s a huge difference in terms of the experience that you’re having. And fundamentally, I think what we’re trying to go with our system is to say you’ve got a database of all your genetics. You’ve got a database of all of those harvests that happen.
Now, you’ve got a database of all of the certificates of analysis. You can start to map some pretty beautiful things about the growing conditions, the manufacturing environment, the genetics that were involved, and then their whole range of products that occurred from there and getting that visibility. And let me kind of put it back to the farmer, and that’s through the supply chain. We’ve always been going kind of seed to sale, but the information from sale to seed has usually been a six to nine-month process, and that doesn’t help with demand. And so, the way that we think about it here at Backbone is you look at retail, you look at what you would call sales velocity, how quickly things are selling.
With that information, if you can get that back to the farmer instead of six to nine months, make that window two to three weeks, then that farmer that’s sitting on that ice cream cake or wedding cake that nobody wants to sell, nobody wants to buy anymore because the market is flooded with it, then you want to make sure, as the farmer, as the nursery, that your inertia is low because you’ve got that information really quickly, so don’t sit on those ice cream cakes long anymore.
Jeffrey Boedges: Now, you can change, yep.
Peter Huson: Get them out and pivot very quickly. And so, we can get that connection and that feedback loop moving more quickly.
Rick Kiley: Yeah.
Peter Huson: The farmer is going to be growing what’s going to be hot on the next round. The retail is going to be getting that information, and they’re going to be able to buy stuff that will fly off the shelves, and nobody is sitting on a bunch of cream cake cakes.
Jeffrey Boedges: Yeah, I got one observation and one question. For the observation is, is I feel not like blended scotch, but more like wine. This is operating and acting a lot more like wine, where there is accepted and expected variation from year to year, from vineyard to vineyard or in this case, from grow to grow, right? So, I think that’s kind of where I was going to actually pivot from what Rick was saying earlier, but then, the question would be like, do you guys have plans to also use that content, very powerful content on what’s hot and what’s going to be good, that you can actually then start going directly to the consumer and say, “Here’s the next thing for you”? Do you guys have that type of outlet? And is that in the plant?
Peter Huson: Absolutely, right. And what’s funny is that when you start to get to that place, then you get all the crypto kids, they’re like, “Oh, we’ve got to do a blockchain QR code, and that will tell you exactly where it came from, and all of those capacities,” which is a very interesting approach, to say and turn around that you’re going to buy something. It’s got a QR code, you scan it, and it’ll tell you exactly the farmer that it came from and the exact person that processed it and what that guy smoked that day that made that look so good. So, we have that data available. I think what we’re trying to do is just make it not a, “Oh, I have a blockchain QR code that is the most…”
Jeffrey Boedges: Yeah, it seems a little overly complicated.
Rick Kiley: Yeah, you were making me think, Jeff. I wonder if like there become years where wine crops are particularly good, and you can get any certain agent and you’ll find it’s an extremely good vintage and you do that and you can put wine on the shelf and leave it there for a while, but I’m wondering if even the possibility just you get to be predictive, like knowing the agricultural and the performance of certain seeds and strains and how they do, you could be like, this strain, this year, this climate, guys, this is going to be the best ever because of these certain growing conditions. Like, are we at the point where you can get to a special like, you know…
Jeffrey Boedges: Is anyone talking about weed futures? I mean, that’s really what we’re talking about.
Rick Kiley: Oh, yeah.
Jeffrey Boedges: Yeah.
Rick Kiley: For sure.
Jeffrey Boedges: And there are other things. So, people are buying stuff on a futures market.
Peter Huson: They’re doing it on the hemp side. We’re seeing a lot of people, especially in the Chicago markets, trying to create these hemp exchanges and starting to set up futures. I’d say that number one is it’s not going to be like wine quite yet. I don’t think anybody wants all the weed unless you’re into that CBN, and…
Rick Kiley: It doesn’t age well.
Peter Huson: Right, and well…
Jeffrey Boedges: Man, if I got some weed for you, buddy. It’s been around for like five years.
Peter Huson: Well, you know what’s funny, to tell you the truth is actually the new people to cannabis who don’t want to get that high, they’re the ones you get people to say, “I can get some of that older stuff.”
Jeffrey Boedges: You got some crack.
Rick Kiley: Right.
Peter Huson: No, you got some crack weed because…
Rick Kiley: You got some shake from the 90s, please?
Jeffrey Boedges: Some more seeds and stems.
Rick Kiley: Yeah, everybody wants what they smoked in college. It’s like I could do this all day. I’ll be fine.
Peter Huson: In California, it’s got a cool appellation project. And what’s interesting is, I was at Meadowlands two weeks ago, an event out here in California with a lot of leadership out here and…
Jeffrey Boedges: Yeah, Meadowlands is producing something else here, yeah.
Peter Huson: Yeah, I met a dude. He’s part of the TRIBE. He is out in New Mexico and he’s trying to go ahead and for all the federal tribes out there who are trying to get into the cannabis space, he was asking me questions. He’s like, “Hey Peter, what have you guys seen in California? I really want people to understand the inputs, not just the genetics, not just the location, but the inputs that are specific to our culture, to our region, that we want to go ahead and document because there’s a lot of value.” However much love and spirit shamans went into it, whatever it is, at the end of the day, I think it’s in that same right, so it’s a function of your genetics, it’s a function of your inputs, it’s a function of obviously, the appellation, but I think that, absolutely, but those data sets are still yet to be kind of established. And so, I think…
Jeffrey Boedges: To where we bring the Grateful Dead back in. Our inputs are only Grateful Dead music.
Peter Huson: There you go. And then, Bill gets his cut.
Jeffrey Boedges: Yeah, Bill gets his cut.
Peter Huson: Or actually Jerry, he signs up The Jerry.
Jeffrey Boedges: Jerry rests more peacefully.
Peter Huson: There you go. There you go.
Rick Kiley: Okay. Well, listen, I do want to ask you. We’re talking a little bit about music, but I want to talk a little bit about these festivals because we are event producers, event people in our right. And we kind of went out of the order, I thought we were going to go. But I’m curious if you can tell us a little bit about what it was to sort of bring this festival to life that had legal cannabis sales associated with it. Like, I think I would expect we would see more of these types of activities in the future the way that you would go to a festival and buy beer.
Jeffrey Boedges: Do you really think people want to smoke pot in a concert, though, Rick?
Rick Kiley: I think in America, we’re free.
Peter Huson: Do you really think that they don’t want to smoke the weed that they hid in their balls?
Jeffrey Boedges: There you go.
Rick Kiley: Are people still hiding weed in their balls? That’s an unusual spot.
Peter Huson: I don’t know how you, but in the festivals, we all really put it in right there.
Rick Kiley: I put it in my sock. I was a sock guy, and also, the inside of the brim of the baseball cap.
Peter Huson: Oh, that’s so good.
Rick Kiley: That was popular with the joint prerolled, yeah. It always looked like a banana.
Jeffrey Boedges: I was always the guy who hide it in plain sight until right before I got to the security gate and then I would just freak out, pouring down sweat.
Peter Huson: At the same time, though, like here’s the deal, right? You can get past that in the sense of like if you’re providing special products. It’s not every day that you’re going to get a super infused rosin gummy that you’re going to get a beautiful solventless cart, like these things aren’t necessarily available at your typical dispensary. And so, I think by creating products that people normally wouldn’t be able to have, like these beverages, the cans and a lot of these beverages that are coming out, I mean, those are cool experiences to try that you’re not going to get anywhere else. And so, it’s like, sure, like an off-the-shelf eighth of weed. If you want to buy it at the festival, you want to do your thing, but as long as you’re making it kind of exclusive to that event, I’m not saying make an NFT about it, you guys can talk about that separately. So, that’s first and foremost, but the biggest thing that you’ll see and that we’ve seen a lot of this, first, to start out in California, the way that it works, and I’m sure it’ll be in your guy’s realm, as well, is the cops that everyone’s going to be scared about it, they’re going to say, “What do you mean? Like, there’s a weed garden and a beer garden? And like, what happens in between?” It’s like…
Rick Kiley: Happiness and music, man.
Jeffrey Boedges: Yeah.
Rick Kiley: Probably some tacos.
Jeffrey Boedges: The hot dog garden, there’s the funnel cake garden here.
Peter Huson: But it’s interesting, it’s kind of a dangerous question, right? Because it’s like this concept of someone being high and drunk, it’s like the government doesn’t know what to do with that. I don’t know, what are you going to test them for? So, first and foremost, it’s just like the understanding that, come on, for music festivals, the government has been turning a blind eye to what the hell happens in a music festival for years. So, they really felt depressed too, whether they’re like, how do you handle the high and drunk zone? And like it’s a music festival, bro. I’m not going to answer your question. It’s not going to put him on blast.
Jeffrey Boedges: When I was a kid, I remember they had a public service announcement that was drugs and alcohol, don’t mix.
Peter Huson: There you go, right?
Rick Kiley: Yeah.
Jeffrey Boedges: You can do one or the other, but don’t mix them, yep.
Peter Huson: Look, they’ve got medical things. You’ve been doing this, as I said, since the dawn of time, right? People have been doing their thing. And so, the big thing is that when it starts out, they say, “You have to go into the corner where no one can see you, and it’s got to be fenced off, and you can’t look in there.” And it’s like, people ask you, “How did the weed sales do year 1? Now, your festival, it’s like, well, think about a beer, right? It’s like if you had one beer garden out in the corner of your music festival, like, how do you think that beer garden is going to do it?
Rick Kiley: This is the only place you could get beer, or would people have to sneak it in their balls?
Peter Huson: That’s a lot, but overall, it’s part of the normalization. So, what we’re doing this year at Northern Nights, is we’re going for multiple cannabis gardens. Just like beer, one at each stage, right? And then, if you can go ahead and have the right brand and at the right location, and you start to normalize it, then it can start to become a normal concession business. So, I think that’s the biggest thing is just the normalization, the regulators getting over the hump of the fact that…
Rick Kiley: So, what did you have to do, though, in order to get the legal status? Like, was it permitting with the host city? Like, who had to sign off on it? And how to go about doing it?
Peter Huson: California was pretty cool when they first rolled out the regs because they knew that this was coming and they rolled out a temporary event license, okay, and a cannabis organizer license. However, everything was usually based on the local jurisdiction as well. And so, what the state said is it’s based on a local, we’re just going to allow it at fairgrounds because that’s owned by the state.
Jeffrey Boedges: Right.
Peter Huson: Classically, everyone thinks about like the Emerald Cup in high time, the big vendor events, where you got 5,000 vendors, and everyone does their own thing. We’ve been looking at it more of the concessions model, one distributor, one retailer, do your thing. Then it was the local jurisdiction, so you got to get their buy-in, to get the local jurisdictions to buy-in. We had to write AB 2020, which is a bill here that allowed outside of fairgrounds to have cannabis events. So, that was kind of our big win.
Jeffrey Boedges: Okay.
Peter Huson: And then, now, it’s just about the local jurisdictions going off and saying, and it’s not that hard, right? You can go to a local jurisdiction. It doesn’t have to be complicated that you already have a special event permit process in your local jurisdiction. Use that as the framework. Use the regulation from what the state has. Put the two together and say, you have to follow our local event permit and you have to follow the state regs. Move forward. It doesn’t have to be more complicated than that, but people definitely make it more complicated than that.
Jeffrey Boedges: Does it got like the Yankee Stadium, like pricing model, though, where it’s like $20 for a joint? I mean…
Peter Huson: I mean, there’s a lot of people buying on that, right? We’ll see. I don’t foresee any smoking happening, but we’ll see beverages, and you’ll see CBD products as roll-out, and that’s for sure.
Rick Kiley: Yeah, I think the beverage, it’s a great spot for the beverage, but the nonalcoholic THC beverage space festivals…
Peter Huson: In the markup, that’s the other big thing, right? Think about it from the markup, if you’re at a festival, it’s like costs you $2 to pour it, and you charge them 15 bucks for it, right? It doesn’t necessarily work in cannabis. The taxes, the margins, everything is a little bit different, but I highly recommend if you’re thinking about putting events on in a certain jurisdiction or wherever you’re going to do it, get a handle on what actually works at these events. Two packs of gummy, free rolls are low cost to make. Beverages, that’s something people are used to. You need to start getting into vape carts and eighths and a lot of the other things whether at such a price point, that’s not a one-to-one as it is with alcohol.
Rick Kiley: Some good advice here, people. I’m curious when you’re selling tickets to the festival, is the legal weed, the weed garden, do you feel like it’s a part of the value proposition? Like, do you think it helps sell tickets? Or it’s just like…
Peter Huson: Big time.
Rick Kiley: Yeah.
Peter Huson: It’s a cool experience, right? I mean, all the novelty wears off, but I think right now, it’s so rare to be able to do that, that absolutely, and it’s about the experience of it, right? That’s the other big thing that I know everybody says it, but I’m saying like, make it a lounge. That’s what everybody wants it and then smoke with. They want to sit down, they want to lie in a hammock, right? They want to chill and they want to do their thing. And so, I think that’ll be the biggest thing is all the cool infrastructure and lounge environments, whether you’re in the trees, whether you’re in a jazz club, what have you, right? I think that’s going to be the name of the game because it is a little bit different. It’s not a bar, it is much more of a lounge.
Rick Kiley: Yeah.
Jeffrey Boedges: That’s what I was going to ask you, consumer behaviors, are they sitting around the table? I’m just thinking about like, if I’m getting high with my friends, we’re almost always at a table with music in the background, and it’s just you can…
Rick Kiley: And more.
Peter Huson: Or playing frisbee, but it’s the big opportunity for education because music festivals typically are where people go and say, “I’m going to go somewhere and do something new. I’m going to be myself. I don’t have to worry about my work, my kids, my other thing. I’m actually going to let loose and I’m going to try new things.” And so, giving them that opportunity, it’s like they’re perfectly ready to try anything.
Rick Kiley: Yeah.
Peter Huson: So, I think that’s the coolest thing from a normalization standpoint. I really do feel music festivals will actually encourage normalization for those folks who don’t typically go somewhere, but once a year, I go to this one festival, and that’s where I let loose. Well, guess what? We’re going to give you a great cannabis education over there as well.
Rick Kiley: Got it. Got it. And so, I mean, you started to see more festivals pop up with legal weed sales now?
Peter Huson: Oh yeah. I would just put it this way. The big boys are here. And when I say the big boys, I’m talking about the Live Nation’s, AEG’s. They all see it and they want it in.
Rick Kiley: Of course.
Peter Huson: And so, no questions asked. I think we started it here. I think it will be difficult to compete now that the bigger promoters are all going to get their hands on it. At the end of the day, though, it’s about distributed supply chains. And that’s what really Backbone is all about, is that you’re going to have to go into a jurisdiction. Let’s say you’re a brand, just like you’re talking about your wine example, right? You’re going to say, well, I’ve got a bunch of money and I want to– I live in, let’s say, New Jersey. I live in New Jersey and I’ve got a bunch of money and I want to start a brand and I want to sell out an event that me and my buddies, I’ll go to. And then, I want to be the coolest guy ever. Well, how are you going to do that? You’re going to have to source genetics, find a farmer, get someone to produce it, slap your label on it, and make sure that that’s all compliant.
What we’re really working on from the Backbone lines is that person, you can come to us and say, “What do you want?” And we’ll give you a menu. We call it supply chain virtualization here. We’ll give you a menu. Oh, you want those tannins from that application, and you want a Native American grew it from over here and they put those inputs in it, and here’s all their things. Well, here’s your list of 20 of the farmers. Here’s your list of five of the manufacturers, and give me your label. You pick who you want to pick, and all of a sudden, you’ve got your brand selling out at an event. And I think that’s kind of the opportunity here.
Jeffrey Boedges: Okay, I feel like there’s a corporate gifting angle there, too. I think. Cupertino needs to be sending out Apple weed for Christmas and just going to put it out there for the holiday.
Peter Huson: Well, Amazon will be here sooner than later, right?
Jeffrey Boedges: Right.
Rick Kiley: They always show up. They always show up.
Jeffrey Boedges: And you mentioned some of the big providers, but I like the ones that are more independent, like what’s going on with Coachella? Do they have the weed lounge yet, or what?
Peter Huson: It’s a publicly-traded stuff that everyone’s got to be careful with, right? You’ve got to have some of your portfolio partners or, okay, taking a little bit of risk and de-risking the bigger gun. So, I think that was we’ll just start to see is you can get people who– Goldenvoice is named after a weed strain after all.
Rick Kiley: So, justifiably, you mentioned there, though, like, so if I were starting a brand in New Jersey and worked with you, like are all those growers and then extractors and whoever else you mentioned that are sort of available through Backbone, are you just as part of the value offering connecting the people who are your clients? Or do people have to– audition is the wrong word, but do they have to go through some processing?
Jeffrey Boedges: Are you Angie’s List for weed?
Rick Kiley: Yeah, yeah, yeah.
Peter Huson: What’s your KPIs? What are you looking for? What’s your capacity with your throughput? Can you get it done? And I guess, here’s a better way to frame it. The rest of the world, we don’t feel it in the US right now, but the supply chains across the world are broken right now, right? COVID hits really hard.
Rick Kiley: They’re broken here, too, sorry.
Peter Huson: Right, but we don’t necessarily see it as much. I’m not saying like we’re not– you get to go to the market right now, right? In other countries right now, it’s gotten real bad. And so, what we’re doing is using as when we set out to do this project is to say, let’s use cannabis as the example that we can go ahead and say there is a new way to think about AgTech. There is a new way to think about supply chains. There’s a new way to think about ESG, for that matter, and put those pieces together to say we can do this in a different way. And what has that been for cannabis culture all along? I’d say we’re not big corporate, we are individuals. and we do things a different way. And so, I think for us on that same note, it’s not just for cannabis.
We’re testing the waters and trying to break it in one of the most difficult supply chains to operate in, turn around and go into coffee, go into cocoa, go into electronics. Apple can switch their supply chain in a heartbeat because all they have to do is say, “I’m going to move my entire supply chain based on capacity fully virtually to Thailand.” You couldn’t do that in the past. And so, that’s the type of quick movement. Everything is digital. Everything is virtualized now, that with the amount of data that’s available, you do not need to stand up a giant, buy a building, buy all the equipment, and do all of that, you just find somebody else with the same capacity, put your SOPs in place, and all of a sudden, you’ve moved your entire assembly line.
Rick Kiley: But at this point, though, still, you would need to be operating limited to the state that you want to do business in at the very least, yes.
Peter Huson: In one capacity, but if you’re an MSO, you’ve got all of your entities and all of your ways that there’s a way that MSOs work right now that you operate in third arm’s distance, Canadian, reverse, whatever you want to call it, but…
Jeffrey Boedges: Seeds on the briefcases going across state lines.
Rick Kiley: Alright, cool.
Peter Huson: Well, I don’t know about that.
Jeffrey Boedges: It’s just a movie idea, maybe, I don’t know.
Peter Huson: It’s in Tesla, that’s what those tubes are all about with Tesla.
Rick Kiley: Oh, right, yeah. Yeah, maybe we could just fly him up in some of those rockets and drop them in..
Peter Huson: There you go, both sides.
Rick Kiley: Right.
Peter Huson: In the rain cloud.
Rick Kiley: Never cross state lines. Alright. Well, Peter, look, I think we’re close to the end of our time. I think you are in a unique position here. We conclude our show is the same way. We try to talk about when cannabis will be federally legal in the US. We ask everybody to put a prediction up there. Curious to what your thoughts are around when we might expect the state shackles to come off and have the…
Jeffrey Boedges: Yeah. And when that does, are you guys…
Rick Kiley: Hearing you and the FDA talk nicely to each other.
Jeffrey Boedges: Are you guys public yet? Can we buy some stock because I like what you’re doing, man?
Peter Huson: Next year, I’d say it’d be a good time to have a conversation about stocks.
Jeffrey Boedges: Alright. Yeah, maybe you just let me know like a week ahead, that’d be great.
Peter Huson: Yeah, I don’t think we’re going to have to do that, but on the flip side of that, I’d say, look, I don’t see the untangling of this mess getting done, especially with the DEA now starting to give out licenses here, right? I mean, I would say five years minimum, and that also depends, or maybe it doesn’t, but here’s the thing, right? There’s also a play here where it never becomes federally legal, but guess what? You’ve got certain people who have gotten bulk DEA licenses; therefore, the DEA can continue to get paid which is the most important to all of us, right?
And so, I would say that there is, and I hate to be a Debbie Downer here, but if you don’t have your eyes on that this thing is going to be a pharmaceutical grade and that’s how it’s going to get transacted, you’re missing the boat here. I strongly feel this is going to end up just like pharmaceuticals are going to end up, which is going to be medical that are GMP tracked that are done in that fashion. And at the end of the day, there’s going to be those trends, and we’ll see how that goes. And really, it’s going to come down, then the battle’s going to be is wait a minute, why is the DEA getting all this money? Why isn’t the state government or other pieces of this, the IRS, and more folks getting tax on that side? So, I think we have a long way to go, and everything that I’ve seen before, the DEA is really going to release its clutches from this thing, unfortunately.
Jeffrey Boedges: Yeah, I wish we had another hour because I really want to dig into DEA licensing, so that’s not something we’ve really discussed.
Peter Huson: Well, you can look it up. It’s called a bulk manufacturing license, and the University of Mississippi has been the sole person for a long time for research. They just issued their first one to VRC. I think there are about another 30 applicants out there, but I would very closely watch what’s happening there because those transactions with international cannabis companies are already happening.
Jeffrey Boedges: Okay.
Rick Kiley: Alright. Well, we learn something new every time, Jeffrey. So, thank you, Peter, you have been a wealth of information. It’s really interesting hearing about what you guys are doing, and I wish you the best of luck, and hopefully, we can stay in touch and talk again in the future.
Peter Huson: Yeah, absolutely. Thanks for having me. Appreciate everybody’s time here out there listening, and lots more of the good fight to happen here. So, thank you very much.
Jeffrey Boedges: Awesome, yeah, hope that we see you in Vegas next week.
Peter Huson: Cool.
Rick Kiley: Bye.