Innovating the Future of Cannabis with Nick Guarino the CEO of Naturae

In this groundbreaking episode of “Green Horizons,” hosts Eric and Isaac are joined by special guest Nick Guarino, a trailblazer in the cannabis industry. Together, we navigate the complex landscape of cannabis business, discussing innovation, regulation, and the future of this burgeoning market.

This episode is tailored for business professionals looking to deepen their understanding of the cannabis sector and explore new opportunities for growth and sustainability.

Key talking points include:

• Navigating Regulatory Challenges: Nick shares invaluable insights into the ever-evolving regulatory environment surrounding the cannabis industry. Learn how businesses can stay compliant while pushing the boundaries of innovation, and what changes we might expect in legislation across different regions.
• Innovation and Technology in Cannabis: Discover the latest technological advancements that are revolutionizing the cannabis industry. From cultivation and extraction to distribution and sales, explore how cutting-edge tech is creating efficiencies, improving product quality, and enhancing customer experiences.
• Market Trends and Consumer Behavior: Delve into the current trends shaping the cannabis market and how consumer behavior is driving change within the industry. Nick, Eric, and Isaac discuss strategies for businesses to adapt and thrive in a competitive landscape, focusing on sustainability, brand differentiation, and customer engagement.

This is the must-listen podcast for professionals in the cannabis industry seeking to expand their knowledge and stay ahead of the curve.

Join us for a thought-provoking discussion with Nick Guarino that will equip you with the insights and strategies needed to navigate the future of cannabis business successfully.

Transcript:

00:01 Eric:
This is the Roots to Risk Podcast hosted by Eric Schneider, alongside Isaac Bach. Roots To Risk brings you insights, the latest stories, and long form discussions about the cannabis industry. You’ll hear interviews with industry leaders and their perspective on current and future trends, how they’ve built success and what challenges they have faced. Our goal is to facilitate candid conversations and provide informative content for the cannabis community at large. Let’s go. Hey, Nick, how we doing today?

00:31 Eric:
Thanks for joining us on the Roots to Risk podcast.

00:34 Nick:
Absolutely. Doing good. Thanks. Thanks for having me.

00:37 Eric:
Yeah, absolutely. I think a, a great place to start. Would if you could just provide some background on the organization and, and your background as well, how you got into the cannabis space would just to love to learn a little bit more about Nature A and as well as yourself.

00:52 Nick:
Yeah, yeah, sure. So natural, a natural Ray’s been around now since 2017. Um, we’re, we’re about to be six years old. Um, and, and I guess I’ll give a, a a bit of background about myself first and, and then get into the, the founding of naturally and I’ll, I’ll just be quick. I mean, I, I I, we started naturally right out of, uh, I was coming right out of college. I actually didn’t, didn’t finish the last semester there. Um, with, with a couple of my colleagues and, and roommates from college. Um, really focused on, on the non-psychoactive cannabinoid side of things.

01:24 Nick:
And it made sense for me because my, uh, my family is like four generations of, of an agriculture family business. And we’ve, we’ve been working in specialty agriculture forever. So just generally that translated very easily because it’s, it’s really, you know, biological units that yield an X amount that are very sensitive and require specific climate and temperature.

01:45 Nick:
Um, and, and, and then secondly, honestly, I’ve, I’ve, I’ve been a huge stoner since I was like 13 or 14, and I love cannabis. And so this seemed like, like an opportunity to get involved in the industry in one way or another. And, and we always thought, all right, if, if, if we get very good at, at extraction with CBD at cultivation with CBD, with Feminized Hemp, it’s, it’s, it’s gonna be a training ground for whenever adult use recreational, uh, uh, cannabis comes online in New York. Um, I I, I don’t think we, we planned on it being or taking as long as, as it did and being as tough as it as it was.

02:21 Nick:
But, but, but that’s really the story. I mean, we, we, we decided to, to apply for the New York CBD license and we went fundraising for it. Um, um, and we, we were able to, to get financing on a farm and on our, on our extraction facility.

02:39 Nick:
And, and then it was five very tough years in, in, in the CBD space really as, as wholesalers of, of oil of, of, of distillate CBD oil to other white labelers and other manufacturers. Um, um, and, and then of course in 2022 when the conditional program was opened up, that all changed. But, but the foundation of the company was really a, a cultivator and extractor. Uh, and, and we’ve always focused more on the extraction side and been extractor extractors at heart, um, and, and wholesaling of, of kilograms of oil.

03:14 Nick:
That, that was really the start of it.

03:16 Speaker: 3:
That’s awesome. I think, um, you know, one of the things I wanted to ask you just based off of, it sounds like you and your family’s background is, um, you know, what have you noticed as kind of some of the major differences between how like cannabis or hemp crops operate versus other ones? Is there much of one, um, much of a difference, or is it pretty uniform to how most other agricultural products, you know, function from a growth perspective?

03:40 Nick:
I would say there’s a ton of parallels for specialty crops there. There’s cer, it’s certainly not, not there, there’s a lot of differences with just standard row crops like corn and soy and et cetera. They’re, they’re very different for, for sure, um, because they can’t take all the same chemicals and, and they’re consumed and ingested differently and, and et cetera. Um, but, but it is, there are a ton of parallels between let’s say, like specialty dairy or, uh, or, uh, strawberries as a crop or tomatoes as a crop. And then, and, and cannabis.

04:12 Nick:
I mean, they’re incredibly similar.

04:17 Eric:
Very cool. And, and so the operations today, Nicholas, are you guys now operating in either medical or, or recreational cannabis at nre?

04:27 Nick:
Yeah, so that was, that was then the, the part of the story that I didn’t cover in, in, with, with natural. So then in, in 2022, New York came out with this conditional program where all of the suffering that we, that we had in hemp, you know, just a quick number with hemp, it was, we, we were selling distillate for 5,000 a kilo, and the company started, and by the end, when we stopped CBD operations in February of 2022, we were selling it for $65 a kilo. Wow. So like a 99% drop there in the wholesale. And so we learned very quickly that what, what we really needed to do was, was if we had the opportunity to establish our own consumer brands, our in-house brands where pricing is, we know pricing is gonna compress, but that it’ll, it’ll compress a lot later.

05:13 Nick:
And, and when the conditional program opened, they said to be able to produce products and distribute them in New York, in the, in the adult use market, you have to have had two years participating in the hemp program that we, that we had established.

05:25 Nick:
So, so it sort of allowed us a, a, a first mover advantage with, with our, uh, brand jt, which is our distillate brand that we put out. And then, and then we decided after a lot of conversations with, with different MSOs, with different out-of-state brands that, that wanted to do white label deals or licensing deals that, that we just weren’t able to ever quite get to agreement, but generally always ended on good terms. We decided we wanted to, to launch a portfolio of, of extract based products and, and just focus on extract based products, not touch flour or pre-rolls or any of that category because it’s what, it’s what we’re good at.

06:01 Nick:
And also it’s what we consume all, all of the management and all the owners in the company. And, um, and it’s a very important market and it’s consistently growing. Most of the new consumers that are coming in are buying vapes.

06:11 Nick:
They’re buying gummies. So, so we, we decided to go with that and, and we launched JT in January, which is a distillate brand. Um, and then we launched Resonators, which is a hash and hash rosin brand, uh, all under, under our in-house brands. Um, and, and then finally Jumbo does. So when, when, when we got those to the market, it was, it, it, it really changed the business from, okay, we can just put kilos of oil into a box, put a UPS label on it, and UPS will take it anywhere across the country to now we have to manufacture our own lines of products.

06:47 Nick:
Um, so, so scaled manufacturing was something that we had to get under our belt on most categories very quickly, like November, December of 2022. And then we have to distribute them to, to all the stores as well, um, and, and physically take them there. And, and we’ve had the time this year, thankfully. I mean, that’s one of the positive spins that you can put on the slow rollout for smaller companies. We’ve had the time to establish the infrastructure on both of those new businesses for, for the company as a whole.

07:17 Eric:
Yeah. I guess, uh, that, that leads me to my next question, Nick, is like, how was that transition from, you know, producing hemp CBD to the, the THC market? Were there any other nuances or, you know, hoops to jump through in order to get operational or because you had a lot of the existing infrastructure? It was, it was a pretty seamless process.

07:41 Nick:
Um, and it, it, there was some challenges. I I, I would say somewhere in the middle of, of, of what you just said, like it, it was, we, we understood everything we needed to do for distillate production. Um, hash in solventless extraction has been something new, but, but we’re killing it with it because we’ve had a lot of very experienced help. Um, but with distillate, uh, it was really changing the inputs we had to, in the post-processing, uh, uh, be a lot more careful with, with our, uh, with our refining and purification process just in general and have far stricter parameters, because with CBD, the purity of the distillate wasn’t so important.

08:16 Nick:
So that’s, that’s an equipment based challenge that, that we had, was just getting distillate that was gonna be 90% plus CHC ’cause that’s what the market needs. Um, but, but we got that under our belt.

08:27 Nick:
And then the other thing was just a lot heavier compliance, uh, for sure. But we brought on a, a quality manager early in 2022 for our, for our, at that point was gonna be our third GMP audit. We’ve already been GMP for, for over three years. So he came on and he really established like a sustainable compliance and training model for, for the production. And, and with that, we are, we’ve been able to handle the production challenges, but I will say it’s a completely different world from the CBD days, days, like there was no careful inventory management and CBD and all, every single gram was encountered.

09:00 Nick:
Like right now, every gram any waste, any, everything is recorded through a track and trace system. So just challenges and things to get through, but not nothing that was like, oh, we’re, you know, maybe what you were referring to. Like, oh, we’re gonna have to invest 2.5 million in CapEx to make this work now. Nothing like that. Just, just adjustments really.

09:21 Eric:
What about headcount? Have you guys had to, to bring on, you know, in addition to the, the compliance position that you brought on, just, um, has the organization grown over the past year since, you know?

09:33 Nick:
Yeah, definitely. I mean, we, in, in 2021 and 22, I, I was running all of the equipment. We had five of us who were just the managers and, and partners there, um, who were just running the facility ourselves to fulfill, like, split contracts for CBD and some white label tincture deals that we had. So it was just us five for, for a good 18 months for, for a good period, even not taking pay. Um, and now we’re, we’re at 27 people working and, and, and everybody’s got wages that they’re super happy with, which we’re, we’re constantly working on, on trying to improve that.

10:05 Nick:
But, but yeah, so we’ve, we’ve gone from like five people to 27 people.

10:10 Eric:
Wow, that’s awesome growth. Well, congratulations on, on that first and foremost. That’s incredible.

10:16 Nick:
Yeah, no, thanks, man. Yeah, yeah, it’s, it’s, it’s challenging, but it’s also, it’s great to have the, the place filled and, and everything operating and everything cranking, you know, it’s really nice. Yeah.

10:25 Speaker: 3:
That’s amazing. I mean, I think obviously you guys are going through some of the transitional phases now, but what else are you really excited about in the next 12 to 18 months? Obviously getting <laugh>, getting stores open and things of that nature, but what’s really getting you excited about the growth potential of the business?

10:42 Nick:
Yeah, I mean, the, the <laugh>, you said the first thing, obviously just, just having more stores and having people, I, I mean, just generally having accessibility because we can’t even talk about enforcement or the illegal market if we don’t even have legal stores for people to go to. So definitely excited about that, excited about the variety of licensees that that, that we’re gonna have. And, and the wholesale market that’s likely gonna develop now that there’s, they’ve opened up licensing for, for additional processors, extractors, there’s gonna be some great white label facilities that show up in the state that, that are gonna allow for, for, for better production, more consistent production.

11:21 Nick:
Um, I guess just, just in our case, I’m, I’m super excited about our hash program and our, and our SOLVENTLESS stuff. I mean, just last night I tried like six different flavors of, of, uh, hash that we’re harvesting from the fields last week and this week.

11:36 Nick:
Um, and I am, I’m stoked because this year we really planned our genetics from the beginning. We, we, we, uh, trellised the field, we made sure that everything was, was just in perfect order. And then during harvest, now we’re actually trimming, we’re, we’re using buffers to, to get the material out. So we’re gonna have super high quality material coming from outdoor. And, and I’m just excited to sort of prove that with the extract based category, you can use outdoor raw material and, and provide products to the market that are close in price to the unlicensed market, um, without all the extensive overhead that’s involved with growing indoor.

12:17 Nick:
Right. So I, I’m, I’m very excited about the Solventless stuff, and that’ll be in the next couple of months that, that those, that those flavors start getting released, we’re gonna be releasing them as as cold cure and, uh, as fresh press as well, and as full Mel, um, depending on the strain. So that’s, that’s gonna just really round out the, the concentrates portfolio for us. And I think the New York concentrates category in general is gonna continue to, to become better and better. So I’m just excited about that. That’s, that’s kind of my favorite product personally.

12:48 Speaker: 3:
Yeah, that’s what I was gonna ask. I mean, there’s a lot of, you know, in more established markets, obviously, than New York, the, the customer base has certain, um, flavor and product profiles, I suppose. Have you guys, what have you guys noticed in New York? Like what you anticipate, um, that being, and are there any products that you guys are, um, thinking are gonna be more successful than others just based off of what you’ve done on the CBD side? Or is it gonna be kind of a, a find out and tinker as you go?

13:19 Nick:
I mean, so I, I guess on a category level, I could say it, it appears that New York is gonna be, is gonna be closer to like a 50 50 split between extracts and, and flour. So starting there. And then another thing that, that I think will be different or exceptional about New York is that the, the demand for gummies is, is very high here. And I think just gummies by themselves outside of even edibles, just gummies is a category is gonna be, uh, uh, or let’s just say, I’m sorry, let’s just say edibles as a category is gonna be a, a, a way more important category than it is in any other state, just because of the amount of tourists that there are and just new consumers, new, new people going into cannabis that just never considered smoking anything in their lives.

14:04 Nick:
Like, they just wouldn’t smoke a vape, they wouldn’t smoke anything, and so they go right away to a pack of gummies. So, um, I, I think that’s, that’s the one thing I could say is exceptional. And then the, the New York’s flour is gonna improve dramatically right now with these new licenses that are gonna come out, um, and that are gonna allow for indoor growing. Um, so by, by this time next year, you’re gonna see, in my opinion, comparable flower to what’s in California, because most of those facilities are gonna be built out by guys from California anyway. Um,

14:35 Eric:
Yeah, we have a, we have a client that, um, they brought in expertise from, uh, from California into a, into a hemp operation for that exact reason. So that’s funny you say that.

14:47 Nick:
Yeah, I mean, in our case, even we have Alex Kpa Mill, um, he’s, he’s, uh, an ex he’s been extracting since like 2003, and he was like in the high times 100 most influential people in cannabis. He has a brand called Critical Concentrate. It’s a legacy to legal brand in California. Um, and we licensed it. We’re working with him. He’s been, he’s been consulting in our Solventless program and setting everything up and helping us with genetics. And it just, we got along so well that at some point we were like, why would we even make a house brand for this? You already, you have a brand that’s got your soul in it.

15:18 Nick:
This is a concentrates brand, let’s just bring your brand on. So, so we have one skew of critical concentrates out right now, pineapple Haze, um, and it actually won the Excelsior Cup in New York, got first place for concentrates, which was cool, but, but, but, um, but yeah, he’s from California and I mean, he’s been, he’s got 15 years of experience, you know, in the last eight of those with Solventless before that it, it’s been hydrocarbon. So he’s just, he really really knows his stuff, and I don’t think we’d be able to bring this level of product that we’re gonna bring this season if we didn’t have him on board, you know, like,

15:52 Eric:
That’s amazing. And, and one question that I had is, there’s obviously the, you know, the, the argument about outdoor versus indoor flour, does that have the same, I would say, you know, differentiation with extraction as well, like extracted products, if the flowers grown outdoor or indoor, like does it have as much of a material difference?

16:16 Nick:
Certainly not with, with distillate like that, I can tell you hands down, you’ll just find absolutely no difference. And with, with rosin, with solventless products and with some hydrocarbon products, um, actually let’s even leave Hydrocarbon out of there just in Solventless and Solventless, you, you could find, I mean, it’s, you have to work really hard to do it outdoors. So I guess what I would argue is you can, you can achieve the same quality with solventless extract based products outdoor, you can’t really do that with smokable flour, right?

16:52 Nick:
You can do it if you, if you work very hard with the other cat, with the other extracts, uh, extraction types, absolutely no difference. I mean, you can, you can get the same exact quality from indoor outdoor, so it just doesn’t make sense as an extractor, as an extract based company to invest in all of the overhead, um, to run, you know, an an indoor grow that’s also has the scale to, to supply your extraction, uh, uh, demand.

17:22 Eric:
Makes a lot of sense. And for, and for you guys, like obviously where the New York market is right now, um, uh, you know, hopefully fingers crossed is gonna look very, very different in 2024, you know, how are you guys gearing up for that? And, and I’m sure it’s so challenging to kind of predict what demand is gonna look like given, you know, there, there really isn’t a ton right now, but there could be a lot more in the coming months, you know, know, how do you guys prepare for best case slash worst case scenarios and, um, wanted to just have a better understanding of that?

17:58 Nick:
Yeah, like, I mean, if we had a crystal ball, that would be great, but you, you’re, that’s one of the biggest challenges what you’re talking about. Just like, and especially because we’ve had such a roller coaster here, like it hasn’t just been steadily, this is what’s gonna happen. Yeah, yeah. We knew, okay, it’s three stores per month, we’ll count on that. But essentially, essentially we know that we have to switch our plan pretty often. Like right now, we’ve, we’ve changed our minds as to what December is gonna look like a solid three or four times since August, um, because of the injunction situation. However, when we, whatever, whatever that conclusion is, then the number of stores that we say we, we think based on that day’s regulatory environment are gonna open, then we just use our historical average sales per store per month.

18:41 Nick:
And we say, okay, minimally, we have to have that in inventory and production for next month.

18:46 Nick:
If we assume these stores are opening, let’s assume that those stores, even if, you know, even if we know for a fact, okay, this is a store in Potsdam, it’s not gonna do our average because it’s not gonna be the same as a, as a store in, in, in Manhattan. Um, we still just sort of conservatively for production sake, conservatively take the approach that all of these stores will at least sell that average, and we produce that. And then, like for example, we will get caught with our hand, with our, with our pants down a little bit occasionally because there’ll be an injunction suddenly and none of those stores are gonna open.

19:17 Nick:
So then inventory will build up, um, and, and we’ll have to stop production focus a little bit on r and d, work on more flavors for our gummies, for example, so that we can just have those ready to go whenever it’s time. But it’s this constant back and forth between what sales thinks is gonna happen and what really happens and, and, and what production can forecast or not. I mean, it’s pretty tough for sure.

19:38 Eric:
That makes a lot of sense. Yeah, I’m sure it’s, it, it’s quite challenging, obviously, to, to forecast and, and you know, to your point, right, like not every store is gonna be doing remotely the same volume. I think that there’s gonna be a lot of, um, you know, the, the variance Yes. That that’s the worst. Uh, it is gonna be, it is gonna be pretty incredible, right? Like, you know, you look at like a small operator in Potsdam New York versus like Union Square Travel Agency in New York City, you know, is gonna be very different.

20:11 Eric:
So, um, but no, I, you know, it’s been, it’s been great to, you know, is there anything else, Nick, that we didn’t touch on that, you know, we we should know about, uh, nature A and, and our viewers should know about?

20:25 Nick:
No, I mean, I, I think that covers it. Just that, that we’re, we’re focused on, on providing super high quality extract based products as close as we can in price to the unlicensed market. That’s, that’s, that’s the pitch.

20:38 Eric:
Love it. And, and just to wrap things up here, Nick, we’re gonna just, uh, ask you a few, a few fun questions, uh, not, not cannabis or business related. Gonna turn it over to Isaac and then we’ll wrap things up and get you, uh, back upon your day.

20:52 Speaker: 3:
Yeah. So, so Nick, um, you know, I know you mentioned you have some little kids, so when you, when you need a, a music to a song to get you, uh, get you going for either early morning workout, just get you through the day or before ami and you know, what’s at the top of the playlist for you.

21:08 Nick:
Um, it changes often, but lately it’s been that song called, uh, edamame

21:14 Speaker: 3:
<laugh>. Okay. <laugh>,

21:16 Nick:
That song’s great. I’ll all that song to get me going in the morning. For sure. I

21:21 Speaker: 3:
Love it. Um, next one is, is there a book, um, that, you know, you’ve maybe read once or a few times that you turn back to or pull pieces of for advice that you think it’d be valuable for people to look into?

21:35 Nick:
Um, yeah. Yeah, actually there’s, there’s a book called Who Moved My Cheese, um, by Dr. Spencer Johnson. It’s super short. It’s literally like a 40 minute read, so it’s a very easy one to even like hand out to team members and to, and to people in your organizations. But yeah, who Move My Cheese is great. I mean, it just, it really, it really helps with, with, with, with organization and, and scaling of, of, of people in your company and understanding different profiles and et cetera. I think it’s, I think it’s awesome.

22:06 Speaker: 3:
I love that. Yeah, I think that’s, uh, definitely something a lot of people, um, could probably benefit from looking at. And then, uh, you know, finally, I know, you know, backstage we talked about a few of the various places we’ve lived, but, uh, you know, do you have an all time favorite restaurant you’ve been to that, uh, you know, if people are in a, a certain area, highly recommend people check out?

22:28 Nick:
Oh, that’s a good one. An all time favorite restaurant

22:31 Eric:
Or a go to, you know? Yeah,

22:35 Nick:
I guess in, in New York City, my, my favorite pizza in New York City is in a place called, uh, pte.

22:43 Speaker: 3:
Interesting. I haven’t heard of that. One.

22:45 Nick:
Pizza and then a RTE Arte. So pte really

22:50 Speaker: 3:
Interesting. Damn, when I come back to the city, actually need to check that out.

22:54 Nick:
Yeah, it’s awesome. They make like, like classic, uh, Neapolitan pizzas. They’re really good there.

22:59 Speaker: 3:
I love that. Um, well, awesome, Nick, really appreciate your time. E did you have anything else you wanted to, to add? No,

23:06 Eric:
No, I think it’s, it’s always great and, you know, for me selfishly and for us being in New York, it’s always great to, to catch up with a New York operator and learn more about your operations and, and what you’re most excited about for the next 12 months. So just really appreciate the time, Nick, and, uh, good luck with everything, obviously in the, the coming months as the rollout happens. I’m sure it’s gonna be pretty, pretty chaotic, but hopefully it’s, it’s good chaos, you know?

23:32 Nick:
Yeah. Hopefully we make it to the other side. No, absolutely. Thank you guys for the time. This was super fun. Thank you.

23:40 Eric:
All right. Another one in the books ib. What, what were your thoughts?

23:43 Speaker: 3:
Uh, definitely very informative. I think his, uh, you know, explanation of what it’s like going through the transition from, um, you know, the CBA and hunt market to what they’re doing now on the THC and, you know, uh, cannabis touching side is extremely interesting. Um, you know, and what he talks about from the New York marketplace in general was super informative.

24:08 Eric:
Yeah. And I know, I know you know a lot more about this than I do with your masters in Cannabis Science and Therapeutics, um, but I thought it was really, really interesting to hear that the differences in the products that they’re manufacturing and, and also the impact of indoor versus outdoor. Um, obviously we’re, you know, a part of the industry, but don’t know the, the nitty gritty as much as those guys. And I thought he did a really good job of, you know, explaining all of that in a very easy You

24:38 Speaker: 3:
Mean dumbing it down <laugh>?

24:40 Eric:
Yeah. For me, for me specifically, yes. Maybe not for everybody listening, but I appreciated it.

24:45 Speaker: 3:
No, I, I agree with you. You did a really good job of explaining that. And, um, it is always interesting to hear like the, how big of a difference indoor versus outdoor is when it comes to certain aspects of, um, product side. So, uh, definitely helpful, um, for him to provide that context.

25:03 Eric:
Yeah. Next time, uh, I’m at a, a New York dispensary, I’m gonna look up some of those products and, and try ’em out and, and excited to see what, uh, what’s on the docket for nature a moving forward into 2024. Absolutely,

25:15 Speaker: 3:
Man, man, uh, looking forward to the next one of these.

25:19 Eric:
Absolutely, brother.