Podcast Diaries: The Cannabis Conversation E22

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The Transcript:

The Cannabis Conversation, a European perspective on the emerging legal cannabis industry.

Welcome to The Cannabis Conversation with Anuj Desai, where I explore the new legal cannabis industry by speaking to the professionals that are helping to shape it. Apologies for not having an episode last week. It was a combination of business and pleasure. Business is that I'm working on a few different ventures, all very exciting. I'm hoping I can share with in the next few weeks. The pleasure side of things was that the weather was very good or at least very hot for at least a couple of days, so I took a few days off to relax.

But we're back again and we've got a great episode now with a guy called Henri Sant-Cassia, who is CEO and founder of CBD Virtue, a CBD business, but also has got lots of other ventures in the cannabis space and he's going to be giving us some insights into growth prospects in Europe and a bit of Asia as well. Enjoy.

Today we've got Henri Sant-Cassia on the show. Henri is CEO and co-founder of CBD Virtue, and he's also the chairman of the Cannabinoid Trust, amongst a few other ventures that he's working on. Henri's going to talk to us a bit about some insights into the CBD industry, both in the UK, Europe and further field as well. So welcome, Henri. How are you?

Good evening, Anuj. Very well, thanks. How are you?

Yeah. Good. Thank you for joining us today.

Pleasure.

It'd be good to ... Yeah, I guess we'll start with a bit about CBD Virtue and you and your background, if you don't mind.

Okay. I guess I started in this industry on two fronts. I had an organic farm in Northern California where we were producing marijuana as things were on the cusp of legality and illegality, and things were moving very, very quickly. At the same time, I started doing marketing work for a Spanish Dutch CBD company called [Cannipar 00:02:24], so I saw the industry from the Californian end, which is very progressive, almost a free for all, and then the Dutch end, which was highly organized and very regulated and very focused on CBD specifically as opposed to full-blown marijuana.

So I saw it at both ends. The legalization process in California didn't go as many of the growers were hoping. The rumor was that it was driven by pharmaceutical lobbying and the idea was to clean out all the smaller growers. So when the bottom fell out of the market, we sold the farm and my first thought was I wanted to stay in the industry. So I came back to the UK. I've got an old friend, Lee Burke, who is heavily involved in mental health who'd also noticed CBD was kind of up and coming. Probably 15, 16 months ago we just started importing raw materials. We started experimenting with formulations, looking at the market, building a brand and just jumped into ... at that stage, it was very, very early. There was only a handful of companies and we've built it from there really.

Fantastic. CBD Virtue has a range of products, and you also ... do you white label products for other businesses as well?

Yes. There's an increasing amount of manufacturing in Europe or the countries where products are resold. I think because by the time you've shipped transatlantically, you've paid duty, you've relabeled, you're not left with much margin so there is quite a lot of manufacturing. Because we've got a bottling plant cosmetics, manufacturing facilities, people that start up new brands are coming to us and asking us to manufacture as a white label. So we do a lot of that. We've got the standard ranges of products; edibles, e-liquids, tinctures and cosmetics. What we're doing now is a combination of looking at what's happened in North America and also looking at what's happened with non cannabis product. So normal cosmetic products, normal edible products, and how those are listed and taken up by big retail chains. So instead of having a couple of cosmetics, we've increased the range to 30 or 40 products, more price bands of products, more complex products, and also looking at some of the more newsworthy things like soft drinks, alcoholic beverages, treats like muffins, flapjacks, marshmallows. You name it.

I mean, if you look at North America, virtually anything that you can put into your body is CBD. There's CBD toothpaste, there's CBD beard oil, and there's also a lot more complexity in terms of blend. So at the moment you walk into a British shop and you just buy CBD. If you walk into an American retailer, you're looking at cannabinoid blends, which have other cannabinoids, terpene blends, blends that may include things like vitamins, ginseng, turmeric. It's a lot more sophisticated. I think you'll see that in Europe now. It will start to take off in the way that all these things do.

Yeah, I'm sure. So, I mean, that's a really good intro. Thank you for that. You and I met actually at the Europe CBD expo, which was on a few weeks ago at London [inaudible 00:00:06:28].

We did.

But we both saw quite a few different sellers of different things, quite a few American brands looking to try and break into the European market. What were the interesting things that you saw there, do you think, or could you see some trends from the types of businesses that were there? I think what you were alluding to before is that we're a little bit further behind in the market maturity compared to California. What was your general take on what you saw?

I think the first thing was the growth and the quality increase compared to the first CBD show, which was at the NEC last October, I think it was. Last October you had the most basic brands that looked like 1990s clip art. Cheap packaging, a lot of what you might call chancers and already those had all gone, you had much higher quality brands. You had a few quirky edible health food brands already. You had much more sophisticated offerings, much better packaging. Fewer firms as well. It was smaller than everyone expected.

So that was quite striking. Most people I talk to say the USA is probably two to three years more advance, but it's catching up very, very quickly. I was surprised by the quality, the professionalism so it was an interesting show. It was small. It was very business focused. There weren't many consumers there. I think what that shows is unless these events are very heavily marketed, consumers haven't yet got the interest to go. There are obviously a lot of CBD buyers. There's a lot of marijuana users. I think it's about 11% of the British population use some form of marijuana. But what they're not doing is attending shows, like they might attend a vape show or an American cannabis show. That sort of mass hysteria hasn't hit yet.

Yeah. We had Sal Noble who obviously put on that show. He was on as a guest a few weeks ago. One of the things that he said was that given that the consumers have very little knowledge about what CBD is, being able to present it to someone is actually really kind of useful. But I guess in terms of getting punters and consumers in through the door, the challenges that exist for every business in this industry in terms of being able to advertise on social is probably a bit of a hindrance.

It's a massive hindrance. Even when those social media bans or policies are lifted, things like television advertising, which has sort of started, it's going to be very expensive to reach consumers. Until the market size catches up with the cost of marketing, it's actually very tough out there. Given what's happened in technology, which has kind of slowed a bit, the explosion in the market generally, globally, there is a vast amount of untapped capital. You've got North America investors that are sitting on big gains, but their market's saturated. You've got Europe opening up as an investment area and you've got Asia, which will probably be, in the future, the largest production and consumption hub for cannabis in the world. All these factors are ... I'll come back to that in a second, because that's also very interesting, Asia. But all these factors mean there's a lot of money or capital that wants to deploy into cannabis.

What a lot of these people don't want to do is take back some single firms because that's inherently risky. They also don't have the insights into the market because it's so new. It's not like oil and gas or biotech or something that's been established for a while. It's brand new and because of that, I think a lot of larger investors want to fund structure to spread risk, to make sure they're exposed to more of a balance of companies and get that expertise behind their investment.

So we've begun putting together a new cannabis in hand fund called the cannabis fund and we're looking at Europe and Asia as the growth markets. That's why I think you'll see a lot of excitement over the next three to five years as America and Canada and mature. You've got other countries. Africa is going to be big, I think, in terms of production of biomass. South America, places like Columbia. There is a lot that's going to be done in other areas, but I think it's Europe and Asia that are going to really take the lead.

That's really interesting. I mean, I've read a lot about Europe being the biggest market, but we haven't really heard much about Asia. Before we go on to that topic, in terms of the fund, or just generally your insight, will investment cover a wide range of businesses within cannabis or are you thinking of certain areas that will be bigger than others?

Oh, no. Wide range definitely. If you segment the market, you've got things like biomass, genetics, extraction, manufacturing, retail, technology, things like AI to up their yield on grows, provenance technologies like [Cobodol 00:00:12:32]. There's a pretty wide spectrum all the way down to things that Sal is involved in when he put that show on, which are B2B services, banking, insurance. There's a very wide spectrum of things and some areas, and I'm thinking particularly about cultivation and to a certain extent extraction, there's an awful lot going on.

So I think for investors it's attractive to have other areas that maybe there's less competition, there's more barriers to entry. It's more sophisticated. So I think you'll see investors looking at a whole basket of services, startups, mature companies that need follow on funding, companies that are looking to IPO, technology. I mean, absolutely everything. It's almost like its own universe and it's got bits of the other normal universes in it, but it's completely separate. I do think investors, from the conversations I've had, they do want that elements of diversity.

Yeah. Yeah. I think the more we learn through this series, but just generally, there is so much more to cannabis than just growing and selling and there's a million different support type businesses that are out there and growing. So it makes for a very exciting time.

It does.

So yeah. If we could just follow up on the bit that you talked about Asia. I think that's a bit of a new one for the listeners actually. So, yeah, we'd love to hear your insight on that.

So the most obvious thing about Asia is the population size. China, 1.4 billion, India very much a question mark. No one's really sure, but probably around a similar size if it hasn't already overtaken. You add in Indonesia with 300 plus million. You've got a vast population. You've got an increasingly wealthy middle and upper class in India and China. You've got a lot of wealth in Australia, New Zealand, which I've bolted on to that. You've got wealth hotspots like Singapore, Hong Kong. So as a market, it's vast. It's bigger than Europe, it's bigger than America in terms of size and because of the speed of the economic growth, it's rapidly catching up. In terms of spending power, it's a very attractive market. Number one, it's a bilateral market so there's enormous scope for growing. China's already, I think, number two, in terms of [inaudible 00:15:16].

There's a lot of agricultural land there if you think in terms of palm oil and how that transformed whole sways of the globe. Also, if you had Russia into that, and just in terms of landmass, which is partially Asiatic. There's a vast amount of growing. There's a huge population that want these innovative products. It's attractive because they're still at a stage where Western products have a special cachet to them. To say that you've got Swiss CBD or San Francisco cookies, or a German pharmaceutical product, that carries a very significant weight in terms of brand value. They're also brand new markets. So I think people that have seen the growth in North America, they've seen Europe's potential, the really forward thinking people are thinking, "What if I go into India with seed funding? What if I can get a Japanese brand established or a South Korean retail chain?" Because it's cheaper, there's vastly less competition, huge first mover advantage, and potentially it could dwarf everywhere else that you've got investment.

It's a quirky area. There are various reasons why it lags behind in terms of cannabis, which on the face of it is surprising. India with Ayurvedic medicine, Chinese medicine. You've got cannabis use going back millennia there. However, since the Second World War, you've had a lot of Western pressure to clamp down on drug trafficking, drug use. There's very conservative governments. So for example, the use of cannabis in Asia is about 2% by population size. In America it's 8% and Europe it's 7%.

So there isn't that much usage generally, but that will definitely grow. What you are definitely seeing is the same liberalization that has hit Europe and America and various other places like Uruguay and the [inaudible 00:17:34] in Southern Africa. That is now happening in Asia. Japan's got a CBD market and even the Russian health ministry has just announced that they are importing cannabis for study. So quite a few countries have got medical. If China opens up fully, that's going to be absolutely huge.

Yeah, definitely.

So to me, it's probably the most interesting market, and in fact ... but in terms of growth and opportunity, Asia is definitely the up and comer.

Well, yeah, you set a very enticing prospect there, so everyone needs to get over to Asia and see what's going on. That's really useful to hear that angle. Obviously we're European focused on this podcast, but it's essential to know what else is going on in the world. So thank you for that.

Oh, I agree. I think a lot of European countries have got to think beyond their domestic markets because there's so much capital in the space that it is apparent to anyone that's studied it in any depth that the next phase of the market's development is multinational companies. So you're going to see German companies exporting back to North America, exporting to Asia, potentially growing in Africa or South America. All these things will become interlinked and I think that in Europe ... and America's equally guilty of this, there is a slightly insular, "There's enough going on under our noses." But that misses the point. We will have a truly global industry, I think certainly within five years.

Yeah. Yeah. I guess probably one of the biggest things is that at the moment it's a very, very fragmented legal situation and regulatory situation in all of these jurisdictions. As those things start to smooth out, I would imagine it would make the ability to produce on mass and distribute a bit easier.

I agree, but I mean, I'm sure your legal experience tells you that where there is jurisdictional difficulty or a hotchpotch of regulations. If a company is smart enough or has the resources to get legal opinions from 12 countries established, those are the companies that really flourish as opposed to people that just say, "Well, it's too much, it's overwhelming." I hear exactly what you're saying. It is a bit of a nightmare. Even moving stuff to Europe's difficult enough, let alone getting it into Saudi Arabia. But that will change and the more that legal expertise comes into the industry and says, "Actually, this is solvable. This is what you need to do in Australia. This is how you do New Zealand. This is an Indian lawyer I can connect you to." Once consultancies and legal advisors are able to make those connections, it will open up the market for the really forward thinking companies before it gets easy.

Thank you for that, Henri. So let's just move on to a little bit more about your personal story before we finish up. This podcast is mostly about cannabis, but there's a bit about it which is about career change. Namely, the fact that most people have to come from a different industry or doing something different before they arrive at cannabis. What were you doing before the organic farm in California and what made you choose to do this quite different thing?

For me, I've always jumped careers. So I studied law like you. By the time I finished university, I had an internet company back in the pre-Google tech internet days. Worked in technology startups for seven or eight years. Wasted a few years traveling and generally being an idiot. I worked a little bit in California, in Hollywood, as a script doctor. I had a script doctoring company and always had-

What's a script doctor?

You'd go in and you amend terrible dialogue, unrealistic characters, hopeless plots with holes. You basically tune up scripts. I mean, we were very much at the chancers end of the market, so we dealt with truly hopeless projects. But I got a lot of experience doing it. I learned all about marketing and bedded in in California. Then when that came to an end, because I found Los Angeles quite a depressing place. Sorry, Los Angeles. I went north sightly, went to San Francisco and fell in love with it because San Francisco is so progressive and so marijuana oriented. I mean, it is literally everywhere. I mean, even going back five or 10 years, it's always been endemic all over California and San Francisco is sort of plus 10.

So I was exposed to it. It wasn't a huge jump because I'd always moved around a lot. What I saw was how much money people were making and when I did decide to switch careers, that was very comforting. I wasn't moving into something ... if you think about something like Bitcoin, when that very, very, very first appears and it was being traded by geeks on exchanges, and it was worth a fraction of a cent, that would have been a very risky career move. Now this was different because while cannabis was illegal, it was generating vast amounts of money. It was palpably a big industry, even before it went legitimate and that meant jumping wasn't so difficult.

I'd already done tech startups and there are a lot of parallels. Same kind of hype, explosive growth, lots of cowboys, few legitimate players, a lot of capital going into the market, big bars. It had distinct similarities. But because I'd already done that, I thought, "Okay, I've just got to repeat what I know, but adapt it to this very quirky marketplace." So I think your jump is arguably a lot more dramatic because you've been in a very structured corporate type background. You jumped a very long way, whereas I was hopping around already. So I think what you did was a lot braver. For me, it was more of a natural progression.

Thank you. Well, let's see how it turns out, but yeah. No, it's ... Yeah, I guess when you look at it, and I was talking about it with some other people, I think now certainly ... I was talking to someone who's being advised, "Oh, this is going to ruin your career. Why are you doing this? You've got a great reputation. You're going to throw it away for all this." I think it's gone so far past that now. It's a meaningful size market already, but will be a far, far bigger market.

Yes.

Yeah. In terms of bets, it feels like a less risky one, although there's still some risk involved. But yeah, to finish off with my customary last question, which is what did your family say when you told them you were going to be working in cannabis?

I come from a relatively conservative, old money background and I'm Maltese, and Malta had draconian drug laws for many years. I mean, really heavy penalties for even very minor cannabis possession, which is very different to the UK. I was surprised because they found out when I was in Malta with my extended family and it turned out that my parents' generation, and they're in their 70s, people in Malta at that age and that conservative Catholic upbringing, very anti drugs, were obtaining CBD already on the quiet to deal with age related problems. Arthritis, glaucoma, chronic pain, poor sleep. They'd already latched onto it and I didn't actually have to explain it and justify it and say, "No, it's not cannabis." I didn't have to go through any of that because organically they'd already discovered it and that really surprised me. So it wasn't a huge ... They didn't know I was growing in California. So hopefully they're not amongst your listeners and that will be-

Well, I was going to say, if they're listening then you're rumbled, basically. Yeah, so basically you'd prepared yourself for a bit of a ... not an argument, but some comeback and they'd already been on to it.

Yeah. I mean, my preparation was I was going to stress, "I'm setting up a medical company, a pharmacy," because I've got a medical background. My father was a surgeon. So initially I was going to spin it that way, but there was absolutely no point in the end. What did your parents?

They were a bit confused. They said to me, "Yeah, I don't think you should bother with this. I think you should focus on the law." I told them after I'd started doing this podcast actually and I had to explain to them what a podcast was, but yet I think when they realized how much research I'd done into it and I'd been speaking to some very smart people, they did think, "Okay, there might be something here." I can't say they've really brought it up a lot since I told them. So maybe they're just waiting for me to, I don't know, hit the jackpot and then they can start talking about it. But let's see.

Yes. Well, I'm sure you will. I think it's just a matter of time.

Fingers crossed, fingers crossed. Cool. Cool. Well, Henri, thank you so much for joining me on this week's show. We'd love to have you back again at some point. We've got a few other things to talk about, but in the meantime, I wish you well.

Thank you very much, and thank you for having me. It's been a pleasure talking to you.

No worries. Take care.

Thanks for joining me for that episode. Henri's a great guy, very knowledgeable and gave a very interesting perspective on the emerging Asian market, which I've certainly not read a huge amount about, but obviously will be a big area of growth. So good to know about areas further afield than Europe and North America, which is probably getting the most amount of attention.

I am still working on Product Earth, which, for those that don't know, is August 23rd to 25th. Stony Barton near Coventry. It's a festival meets expo, so cannabis and hemp businesses meeting festival goers who are into a bit of music and camping. So hopefully I'll see some of you there. As I mentioned, been very busy over the last few weeks. Post corporate life is starting to work out and there's lots of fun things going on, so I hope I'm able to talk about a few of those in the upcoming weeks.

As ever, if you're enjoying the show, please subscribe, share. I'd love to get a bit of interaction as well. So if you yourself are interested in coming on the show or if you know someone who you think would be a great guest, please feel free to drop me a line and let me know. Cool. Okay. Until next week, please take care. Cheers.

 

Show Notes:

In this episode, we speak to Henri Sant-Cassia, a Cannabis entrepreneur who is CEO and Co-founder of CBD Virtue, a UK based CBD business, and Chairman of the Cannabinoid Trust.

Together, we speak about growth prospects and trends in Europe and further afield in Asia.