The last few years in cannabis have been a challenge to say the very least. During COVID-19, with cannabis businesses being deemed essential, many people in the industry thought they had received a golden ticket. That being increased demand, consumption and prices on the rise. That would turn out to be a short-lived scenario. Prices would drop, and competition would get more fierce as companies competed for the same sale space. Being operators in California we understand the absolute necessity for a distribution company that not only covers the state from retail to retail, but to be a true partner in business, to every client both large and small.
That understanding was confirmed when we had the pleasure of sitting down with Luke Frances, a fellow drug war veteran and currently the Director of Business Development from HERBL Solutions.
HERBL is the leading cannabis supply chain solutions company in the largest cannabis markets in the U.S. and actively delivers to 1000+ licensed retailers in CA. Founded in 2016, HERBL brings the top cannabis retailers and best-selling brands together through innovative technology, unparalleled service, a dedicated sales team, and high-security, state-of-the-art facilities and fleet.
Their dynamic assortment of exclusive brand partners spans multiple states and includes companies both large and small, multi-state and legacy, the most recognized in the world, and the upcoming and disruptive. With deep respect for the OGs who blazed new trails, HERBL built a best-in-class team, Tier 1 technology platform, and statewide infrastructure and operations to bring business to cannabis.
From the East Coast to Cali
Luke’s path to the California legal industry began over two decades ago on the east coast. Like most of us who have been involved with marijuana long before there was an official industry, Luke got caught up on cultivation charges, with the help of a federal informant of course. Once free from that harrowing experience and the respective punishments he incurred, he and his wife moved west and landed in the much more weed-friendly area of Sonoma County, California.
Not looking to repeat that east coast situation all over again, Luke and a few associates began bringing flowers from their grower friends in the area into dispensaries in the Bay area, helping them build a “legal” pipeline for their product.
“I had a 12-lighter and a Toyota Tacoma, which qualified as a micro-business in NorCal. Little did we know we were actually vertically integrated way back then.” Luke quips, hinting at the nostalgia of a time that is gone, but certainly not forgotten by those of us who lived it.
Leading into Prop 64, he saw the writing on the wall for the traditional market and began searching for his next opportunity. He was looking to continue to build and expand his network of contacts across the state and help his friends succeed at the same time, enter HERBL solutions. Luke joined the team in early 2018 as one of the first sales reps, working with brands and retailers alike to establish long-lasting relationships.
Distribution, A New Era
Prior to legalization, the majority of operators took their products directly to retail without an intermediary and were cashed out immediately. It provided an opportunity for the dispensary owner or buyer to really get to know the main person behind creating those flowers, concentrates, or edibles, and to understand who that brand is and what they stand for. It also provided a smooth, efficient process that usually left everyone happy.
The reality is that the distribution license’s main function early on was as a tax collector for the state, paying cultivation taxes to operators and collecting excise taxes from the dispensaries, while the state agencies were still understaffed and ill-equipped to do so.
In addition to it inserting a brand new layer into the supply chain, it also caused a disconnect for a lot of small brands that weren’t able to self-distribute to retail. It left them at the mercy of their chosen distribution partner, and that partner’s ability to help market/sell their products for them, not just deliver them.
“The role of the distributor is to provide unfettered access to the market and to the true potential of a brand and to act as a stabilizing force for that brand. Ultimately we want to be an exoskeleton, to be the supportive function for the entire industry.”
“Doing so allows our brand partners to put everything else to the side and really just focus on their brand and building that business. In cannabis, because the industry is nascent and there’s so much left to build, the distributor ends up also being an advisor, working collaboratively with the brand and helping them understand the market as it shifts.”
HERBL assists their brand partners with everything from consistent pickups, A/R management, forecasting production to align with sales projections, providing timely data insights, and providing feedback from the sales team to give them the greatest chance for success. They act as a source of intelligence for brands about the state of the market which is crucial in a state the size of California, with truly diverse buying areas like Los Angeles, San Fransisco, and the Emerald Triangle that each have their own unique trends and nuances.
It’s that partnership-oriented model that allows HERBL and their brand partners to thrive, because they are truly invested in each other’s success. Because they are a full-service distributor, they take a stake in the inventory on hand and selling it with their sales team, which sets them apart from last-mile only or 3PL distribution models.
Looking Towards the Future
With MJBizcon on tap next week in Vegas, we asked Luke for his take on the California market for the rest of this year and on into 2023.
“Price compression is going to continue, I don’t think we’ve seen the end of it. Retail consolidation will continue via mergers and acquisitions both within California and with more influx of MSOs. Both of those will continue to add additional layers of complexity to an already challenging market. Having a strong distribution partner will help you navigate these new demands and be in the right position to adapt and overcome.”
With regard to category trends, Luke feels like a lot of the prerequisites for the beverage segment to take off are finally there. “The majority of shops now have on-floor coolers, and distributors are starting to upgrade their infrastructure to handle volume beverage delivery as well.”
For those of you wondering how you can get involved in the industry, he provides these words of wisdom in closing. “Know what you want to do, but also know what you don’t want to do so you don’t spread yourself too thin. Don’t be afraid to put yourself out there and feel uncomfortable, otherwise, you won’t ever experience the necessary growth.”
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