- 1:58 – Will the hashish trade proceed to be male dominated?
- 11:02 – Educating, creating and retaining consumers
- 20:51 – GABY’s sole presence in California
- 24:10 – GABY’s merchandise and retail places
- 31:14 – GABY’s financials and enterprise mannequin
- 43:25 – Mergers, acquisitions and plans for growth
- 46:33 – The way forward for the hashish trade and the way GABY will match into the market
- 49:46 – Regulation reforms and methods to make the hashish market extra accessible for shoppers
TRANSCRIPT
Please word that transcription might not be excellent. We encourage you to hearken to the video, embedded above, when you want any clarification.
Josh Kincaid: Welcome again to In search of Alpha. I am Josh Kincaid, Capital Markets analyst immediately interviewing CEOs. My visitor immediately, Margot Micallef, is the CEO of GABY (OTCPK:GABLF). Margot, thanks for being with us at CEO Interviews.
Margot Micallef: Thanks. I am excited to be right here.
Josh Kincaid: Likewise. So, Margot, you are a winner of a number of enterprise management awards. Lengthy been a heavyweight on the earth of entrepreneurship, you’ve got bought 20 years of consolidation expertise underneath your belt. You have bought operational expertise overseeing a whole bunch of tens of millions of {dollars} in revenues from retail operations.
Your appointment to the us Ladies in Management Advisory Board comes out of a pivotal time within the trade, the place solely 22% of hashish companies are being run by feminine executives. However by comparability, Fortune 500 has a complete of 41 girls CEOs.
That is simply 8.1%. So within the 2020 2022 U.S., they have 12.3 million girls owned companies. U.S. girls owned companies generate 1.8 trillion a yr. It is 40% of US companies being girls personal the consensus. U.S. consensus is that girls owned companies are made up of just about 20% in 2018, however reported once more 1.8 trillion in gross sales, shipments, receipts or revenues, and make use of to over 10 million employees with an annual payroll of 308 billion. Having mentioned all of that, Margot, do you suppose hashish will stay a male dominated trade the place we at with that?
Margot Micallef: I feel it is changing into increasingly more a male dominated trade. So a few years in the past, once I first bought into the enterprise, there have been truly extra girls run companies in hashish than there are immediately. And you recognize, a part of the issue is that as we transfer into the mainstream, because the trade matures, you recognize, a few of
the previous kinds of doing enterprise come into this new nascent trade and the capital markets, for instance, you recognize, as a lot as we’re all reliant on them and as a lot as I’ve had success being reliant on them and elevating capital, they’re very nonetheless very male dominated and so they are inclined to finance male dominated companies.
So, you recognize, the rationale for that’s as a result of folks are inclined to do issues with with different those who they’re comfy with, like attracts like. So as a result of a lot of the cash is managed by males, it is given out more often than not to males.
What’s taking place now within the trade, within the capital markets trade is that increasingly more girls are beginning their very own funds, and they’re making a degree of seeking to fund feminine owned and feminine operated companies. So it is it is there’s excellent news and there is dangerous information.
The dangerous information is it is actually sluggish and I have been in enterprise, as you identified, for greater than 20 years. And this has been a problem that has simply actually grown in lots of steps. My new steps and however it’s not less than transferring ahead and is any person extra well-known than I after which meets as soon as mentioned, even sluggish progress is progress. So not less than we are able to look to that. However there’s nonetheless lots of work to be finished.
Josh Kincaid: Why do you suppose a few of the females that have been in medical did make that transition? I imply, I do know you did not interview everybody and ask him, however do you could have an opinion as a result of considered one of my favourite edibles manufacturers in Washington state known as ETA Lose.
She selected to not make the transition, however to be extra of a guide, you recognize, up and down the West Coast reasonably than doing it herself. Do you could have an opinion as to why a few of these feminine led companies did not make the transition from medical to the regulated market?
Margot Micallef: , I feel it is totally different for each lady, but it surely’s so it is onerous to generalize. However you recognize, the analysis that is been finished on why girls depart professions like regulation and accounting, for instance, earlier than they turn into senior companions or acquire any management within the of their occupation actually has to do with with competitors.
A variety of girls do not just like the aggressive atmosphere, not as a result of they do not wish to compete. They simply do not just like the type of the aggressive atmosphere. So any and that is my very own opinion. , I am speculating that in a medical atmosphere which is extremely regulated, girls know methods to function inside that atmosphere.
However because it turns into a free for all and because it turns into a bit of bit extra cutthroat. And I imply that with all due respect, girls turn into alienated and step again and step away from it. So I feel there’s a bit of little bit of simply totally different kinds of working and totally different consolation ranges in several kinds of working.
Josh Kincaid: However the hashish trade normally shouldn’t be simple to navigate for for anyone. We have seen lots of people which might be altruistic, nonetheless type of in enterprise, however not creating wealth type of a zombie firm, if you’ll.
Selections must be examined and reexamined always in mild of the ever altering laws and market forces. So Gabby appears to have responded effectively to the dynamics throughout the excessive share of feminine leaders. You are proud that fifty% of your leaders are females.
What is going on to be the catalyst to create that change in order that it sticks?
Margot Micallef: We’ve got to get extra feminine CEOs as a result of, as I mentioned, you have a tendency to rent the place your consolation degree is and ladies are comfy with different girls. I will let you know a narrative. This has nothing to do with the hashish trade, however I sat on a board as soon as for {the electrical} utility in Calgary, Alberta, and I used to be on the Company Governance Committee. Within the Company Governance Committee is the committee that truly recruits new board members. I used to be the one feminine board member on the time, so and I wasn’t the chair of the Company Governance Committee. I used to be only a member of the committee.
So we went out to recruit board members. We employed a consulting agency. They got here again and so they offered a listing of all male candidates. So it is onerous to be, you recognize, militant in conditions like that since you lose credibility.
So I simply gently requested, why is it that there aren’t any feminine candidates on this listing? And I used to be advised, effectively, given the standards that we established, there have been no females that have been certified to be placed on the listing.
I left it at that. We introduced on a brand new board member or two time evolves and I turned the chair of the Company Governance Committee and we have been out recruiting once more. And I went to the identical recruiting agency and I mentioned, Nobody, when you do not convey me a listing that’s not less than 50% feminine candidates, I cannot imagine that you’ve finished your job. And quantity two, I wish to see each good candidate, no matter whether or not they’re feminine or male. And they also introduced me the listing, and it did have many ladies candidates on this listing.
The opposite members of the committee have been males, so it was myself because the chair and two different males on the committee. Imagine it or not, it was very simple to return to a conclusion that probably the most certified candidates occurred to be girls.
And we introduced two girls on the board at the moment. So I feel if there’s an effort to fill the slate and fill the the positions and fill the chance with girls, not less than, you recognize, give them the 30 or 40% likelihood on a listing, there is a larger chance that they are going to get chosen.
However simply give them a chance.
Josh Kincaid: Let’s let’s transition to Gaby. Possibly one thing some firm title was influenced, possibly by a feminine that you simply inform the story. However Gaby is a California retail centered hashish firm and the proprietor of Mankind Dispensary, one of many oldest licensed dispensaries in San Diego, California.
So that you launched GABY as a well being, meals and distribution firm earlier than ultimately transferring into hashish, focusing at first on CBD merchandise for the mainstream after which THC merchandise, ultimately for the regulated trade. What was your inspiration? Was Gabby, your sister?
Margot Micallef: She was so my sister was Gabrielle. Gabby was her nickname. And we began the meals enterprise collectively and she or he cherished it. She ran it. She was primarily the the first chief in that respect. And he or she bought recognized with stage 4 lung most cancers and given 4 months to stay.
And he or she mentioned she was advised by the medical occupation that there was nothing they may do for her. So we determined to take that issues on underneath our personal consideration, and we tried all kinds of different therapies, together with hashish, which she was already a proponent of and a person of.
We did not recognize the hashish might need been serving to her from a medical perspective, but it surely alleviated signs and gave her peace of thoughts and relaxed her. So she ended up residing for 5 extra years and far to the chagrin of the medical occupation, who could not imagine that she was breaking all of their guidelines.
And he or she had actually good high quality of life, which is de facto vital. So when she did finally go away, I wished to do one thing in her honor and construct one thing that was a legacy to her. And so I made a decision to to proceed with the meals enterprise and broaden it into the hashish world.
We initially thought that hashish, THC and CBD would each be equally would transfer equally into the the buyer’s realm. However what we got here to comprehend was that CBD is is was extra challenged than THC. There have been no guidelines actually round launching CBD merchandise.
And so what we discovered was that buyers have been confused. There wasn’t lots of training. There wasn’t lots of requirements. You have been getting good and dangerous merchandise coming to market. The retail trade itself that the brick and mortar retailers.
Did not actually perceive in lots of them stayed away from it. A few of them put it on their shelf, however did not educate their employees on methods to promote it. And it is not a product that you would be able to simply go in and like shampoo and simply decide up a bottle and say, Oh, this may this may this may do
It is a product the place you need to perceive the nice and the dangerous. It’s important to perceive what the consequences are. It’s important to know what you are on the lookout for. So when shoppers are left to their very own gadgets, they usually decide up the mistaken product or they simply turn into overwhelmed and so they simply do not select something.
So we stepped again from CBD and got here to the conclusion that, you recognize, we’ll promote it on-line as a result of that is the place folks get educated and individuals who purchase on-line are inclined to have a greater understanding of what they’re shopping for.
And we’ll transfer into the THC house, which is extremely regulated, and we are able to abide by these guidelines and switch this right into a enterprise.
Josh Kincaid: How did you go in regards to the course of of teaching after which promoting? As a result of that is all the time been a problem that I’ve seen the place if the product sells itself nice, that is simple. However when you need to educate after which promote, I discover that to be very, very tough, convoluted, difficult.
The bartenders are alleged to be there, however now you’ve got bought supply, you’ve got bought on-line gross sales, you’ve got bought all of those elements that type of make it much more difficult if you stroll right into a retailer and see all of those SKUs.
What has been your technique or success in having the ability to get folks to grasp the product, purchase it after which turn into repeat consumers? What’s your course of for educating after which promoting?
Margot Micallef: So let me take a step again and offer you a macro perspective, after which I will provide the micro perspective. We we imagine that retail is the important thing to success of this trade and long run success of this trade.
The reason is is that the evolution of the trade depends on that mainstream shopper coming into the market, and it has been an elusive shopper thus far. And if you have a look at the retail atmosphere, it is not very inviting to that mainstream shopper.
, oftentimes the places are oriented in the direction of the normal shopper. Oftentimes, you recognize, the shows of the merchandise are in such a manner that you simply’re left to your individual gadgets and to guess it is oftentimes you need to stand in line to order your product and also you’re not likely certain what you are ordering.
, oftentimes the placement can be in an industrial location, which isn’t inviting to that mainstream shopper. And on and on. So you’ve got bought the issue with look, with location, with training and with consolation degree, in order that mainstream shopper shouldn’t be typically coming into the trade.
So what we do is we we body what we do in mankind from the angle of how do we have now to do that in order that we are able to invite that mainstream shopper however not alienate the normal shopper, which is vital, particularly in California, to uphold that hashish tradition?
So we begin primary with the placement we’re in a shopping center that is typically talking caters to that mainstream shopper. It isn’t downtown, but it surely’s in an in a location the place mainstream shoppers will usually frequent. It is a self-serve mannequin, so folks stroll into the shop, they will take the product off the shelf, they will have a look at it, they will contact it, they will examine it, they will examine it to different merchandise. They will get comfy with the notion of it. After which we have got salespeople who should not operating round filling orders, however as a substitute are strolling the ground, educating.
So we educate the educators by bringing in our suppliers to coach on merchandise. We educate them, typically talking, on the science behind the merchandise, and we educate them on methods to promote and the way to not to alienate the buyer, however to make ideas that is likely to be helpful to the buyer.
So when a shopper’s in our retailer and so they’re taking a look at our product, they could go searching and invite a gross sales rep to return and converse with them, or the gross sales rep would possibly, would possibly gently method and say, , can I aid you discover what you are on the lookout for or can I ask what you are on the lookout for?
And oftentimes that shopper that is not certain what they’re on the lookout for is coming in on the lookout for an impact, whether or not the impact is to get excessive, whether or not the impact is to calm down, whether or not the impact is for sleep, they’re on the lookout for an impact and so they’re not likely on the lookout for a product.
So our gross sales reps can can put them in that within the path of the merchandise that we’d advocate, that might give them the most effective end result for the impact that they are on the lookout for. And our employees loves it. I imply, the atmosphere in our retailer is so excessive power you might simply go and really feel good.
If you happen to’re not having an excellent day, go and stand in our retailer. It is it is hip, it is it is thrilling, it is energetic. , there’s issues occurring. You simply really feel good being in there.
Josh Kincaid: Yeah, it is fascinating. You talked about folks on the lookout for an impact. I might say most individuals for no matter it’s a restaurant or hashish are on the lookout for. That have and so the nice meals or the nice hashish is a cause to return again, but when the expertise is not there, it would not actually matter.
You could find good hashish at one other place that has an expertise. The truth is, there is a native dispensary right here in my city. I’ve the previous 5 – 6 to go to the one I would like as a result of once I stroll into this one, the joint, it looks like everybody bought their their pet ran over within the morning.
The morale the environment is, is sort of a cemetery, and I would reasonably keep away from that have in any respect prices and drive an additional quarter-hour to go to a spot that has a ten% decrease low cost. In different phrases, I am paying 10% extra and touring farther as a result of it would not have that have that they are offering.
Margot Micallef: I completely agree. And you recognize, I discovered this from my mother. My mother was an entrepreneur herself. She ran a small, dry cleansing enterprise, and she or he ran it in a small group the place there have been two or three different dry cleansing companies simply blocks away from her little enterprise.
She had the smallest enterprise with the oldest gear, and other people have been lined up out the door to return into her dry cleaners as a result of she invited them in. She would bear in mind their title, she would bear in mind their tales. She would ask about their children, she would ask about their household.
She would know what was on their thoughts. She had some folks that might simply are available and say to her, Oh, I simply was having a down day. I assumed I might simply are available and say hello to a dry cleaner.
Proper? So, you recognize, we have now that very same environment the place it is bought to be inviting and people who find themselves frowning or who, who, who faux or who act like their canine simply bought run over that day don’t have any place in our in our firm.
It is you have to wish to be there. And you recognize, one of many issues that we do to make folks wish to be there may be that we make all people a shareholder. Quickly, as as we acquired mankind, we issued restricted share items to all of our workers so that everybody is an proprietor.
So we wish them to deal with the shoppers as if they’re their prospects, not our prospects, however their very own prospects. So we create that type of alternative to create the connection. And I 100% agree with you. I’ll journey a lot additional and pay way more for the expertise.
And I feel all people is like that. Even people who find themselves worth pushed on the finish of the day will solely take a lot abuse for a reduction.
Josh Kincaid: What does that imply for manufacturers, although? As a result of if if individuals are are coming in initially to search for one thing that is going to be the very best on the lowest worth level, after which they discover their model and outline the product they like.
And that is type of, I feel on this trade, how model loyalty is being created is by worth comfort, in addition to simply discovering what possibly the expertise is that if it has a excessive Terpene content material and that is the expertise you are on the lookout for, that is what they will find yourself going in the direction of.
Are you seeing the trade evolving to create extra manufacturers or is it nonetheless simply transactional? What is the highest of the bottom worth factors?
Margot Micallef: It is each. , suppliers are endeavoring to construct their model. There’s challenges with that. So a model is a promise. So I can be loyal to a model if it fulfills my want frequently persistently. So which means it is bought to be on a shelf frequently.
It implies that the impact needs to be constant, means the worth needs to be comparatively secure and it needs to be accessible. So suppliers are endeavoring to create that type of an atmosphere for his or her manufacturers. There are millions of manufacturers on the market, and so a lot of them are struggling.
A lot of them are very small. The issue begins with capital. In an effort to to construct your stock, you should have capital and then you definately sit on stock till it sells. And you need to be sure that the availability that you simply’re you are counting on is obtainable and so they have capital points themselves in order that they don’t seem to be sure that they will convey to market the product that they want. That you should put into your product to proceed to develop your model and and have it persistently obtainable with a constant impact. So manufacturers are struggling. They get they know what they should do.
They’re attempting to do it, however they’re struggling to, in truth do it the the buyer. There’s nonetheless that conventional shopper who’s coming in on the lookout for the impact and who’s on the lookout for worth, and so they’re not on the lookout for the model.
They know what they’re on the lookout for and so they wish to get excessive. They need the very best focus obtainable for the for the buck, and that is all that they are on the lookout for. So we have now this mixture of shopper and provider. We have shoppers who wish to purchase manufacturers, however manufacturers struggling to be commonly obtainable and to have the ability to present that consistency and that model promise, some do. Most do not. And then you definately’ve bought the buyer that is simply coming in for that prime that simply needs to get regardless of the worth is and depart the shop. So it is it is actually a a symptom of a brand new trade that’s evolving right into a larger maturity.
The manufacturers will come as maturity comes.
Josh Kincaid: Yeah, I might say one of many manufacturers that appears to be proliferating, not less than proper now appears to be cookies as folks just like the the cultivar within the pressure and the consistency within the high quality and the piece of impacts all of these issues and so they bought into Europe.
So the large buzz proper now’s MSOs, you’ve got bought all these corporations type of speaking about stepping into new markets, no matter. However you are you are in California, you are within the fifth largest nation by GDP in the entire world. California is its personal.
It is personal mecca. And if you break that right down to hashish, I imply, that is the tradition is it runs deep in California with hashish. So inform me a bit of bit about why you’ve got chosen to harbor California as a substitute of going the usual route of an MSO.
Margot Micallef: Effectively, firstly, being centered in a single market, whether or not it is California or Washington or Oregon or some other market, I feel is far less expensive. And I feel it makes way more sense for operators to actually construct a presence in a single market.
Your capital is extra properly spent. It goes additional if you’re attempting to construct a model. Primary, as I mentioned, you want consistency. Effectively, when you’re creating infrastructure and you’ve got totally different suppliers in each market, not solely is that costly, but it surely’s inconsistent.
So how do you construct a model from market to market when you do not have constant underlying merchandise? Quantity two or three? All people’s going to want to return to California sooner or later. California is the tastemaker market. You may.
You begin a model in California is mainly a ticket to broaden in the remainder of the US, most likely Canada and certain the remainder of the world as effectively. So we selected California. It is the hardest market to reach.
But when we succeed, will succeed throughout the US and if we keep within the enterprise, if we do not get purchased out earlier than legalization happens and earlier than interstate commerce, it involves fruition, we’ll have the ability to roll out our manufacturers and our our manner of doing enterprise in different markets way more effectively than anybody who’s tried to return into the California market from one other one other market.
Josh Kincaid: It is a it is refreshing to listen to you say that since you point out it is extra capital accountable, financially accountable. However you are a publicly traded firm on the OTC for underneath ticker image BLF. So refreshing to listen to you say that it is a waste of investor capital.
However if you see corporations like MedMen (OTCQB:MMNFF) moving into and spending some huge cash after which type of plummeting and realizing that they wasted their investor capital so distinctive, very refreshing to listen to that, I suppose.
Margot Micallef: Effectively, you recognize, I have been an entrepreneur for a very long time and I elevate capital for plenty of years and I make investments my very own capital alongside my buyers capital. So I am enjoying with $8 million of my very own capital. So it forces you to be smart.
And, you recognize, we have by no means raised extra capital than we’d like. I imply, you recognize, MedMen raised a whole bunch of tens of millions of {dollars} and spent it very foolishly as a result of they’d an abundance of it. We have all the time been very cautious with what we elevate after we elevate and the way we spend it.
It is actually the one option to do enterprise and to to stay round. If you happen to do not do it that manner, you will discover buyers will solely make investments with you as soon as and won’t come again. And I’ve had repeat buyers who’ve invested with me six instances as a result of I’ve given them an excellent return and I have been accountable with their capital.
Josh Kincaid: Let’s, let’s type of return to mankind. Discuss a bit of bit about when you can infer based mostly on a few of the information you could have, who your prospects are, why folks would wish to purchase a few of your of your merchandise since you guys do curate and promote a various portfolio of merchandise, you could have your individual proprietary manufacturers, which is not obtainable all over the place. Washington state shouldn’t be vertically built-in. We do not have that choice. So that you guys have lulus and sort republic that is by way of mankind, manufacturing sort republic and distributing all types of manufacturers by way of your wholly owned subsidiary known as Wild West Industries. So inform me a bit of bit about these merchandise and why somebody would select these over a competitor.
Margot Micallef: So beginning with Lulus, Lulus is a really excessive finish chocolate model. Its sole sourced from Ecuador. It is sugar free. It is vegan, and it is mistaken. So it is a very excessive finish product, so it caters to that. Shopper who not solely needs to have have an impact, whether or not it is enjoyable or getting excessive, but it surely additionally caters to that shopper
who needs to take care of themselves. So if you go right into a dispensary, you’ve got bought that shopper who simply needs to get excessive and so they is likely to be those that go to McDonald’s subsequently or, you recognize, do not actually care about their well being and well-being.
However many shoppers do not lose that motivation to take care of themselves simply because they’re shopping for hashish. So there’s many merchandise on shelf that aren’t wholesome that could possibly be deemed rivals a number of chocolate merchandise or sweet merchandise or edibles.
However we’re catering into that prime finish shopper that may go right into a retailer right into a mainstream atmosphere and browse the again of the label and search for whether or not there’s an excessive amount of sugar or an excessive amount of salt, or what the components are, the way it’s made, the place it is made, and so forth. That is the buyer we’re catering to with the Lulu’s model.
With the Republic model, we discovered a distinct segment on this in our on our shelf that wasn’t actually being happy. So we’re not a excessive finish product. We’re type of, I might say, one step under center of the highway the place worth the place a worth model within the sense that you simply get good worth for the greenback that you simply spend. We’re not the most cost effective product on shelf, however we’re most likely probably the most value efficient product on shelf and type of public is now our primary vendor in our location, in our retailer.
Josh Kincaid: , there is a billboard for a gasoline station, and it says come and refill for your self and your automotive. And but for any person like me, I I’ve I can not take care of with dairy or wheat, you recognize, sugar or alcohol.
So there’s actually nothing in any comfort retailer throughout America must type of, you recognize, pack a lunch if I’ll go someplace to an occasion or no matter. So it is it is good to listen to. I do know California could be very distinctive when it comes to the vegan and the well being meals.
You simply do not even have that, you recognize, in Oregon or Washington. So a really distinctive tradition down there. Hopefully, they will lead the tendencies, although, when you see tendencies from cultivars. It all the time begins in California, turns into widespread in Colorado after which ultimately in Washington, possibly three quarters later.
So whether or not it is laws on automotive trade, hashish California undoubtedly leads the tendencies there and hopefully more healthy choices will can be obtainable down the highway.
Margot Micallef: And once more, because the trade matures and also you get that mainstream shopper who’s who’s trying actually for a holistic reply to what their wants are. I feel that that they are going to be pushed to that extra wholesome selection and that may, you recognize, demand begets provide.
Proper. In order that shopper comes into the market and begins asking for that more healthy selection, suppliers will begin offering it. I imply, that is how the natural trade grew. That is how the pure meals trade grew. That is how Gluten-Free grew.
, all of these tendencies have been began by the buyer, which is why it is actually crucial to get that mainstream shopper into the market. It opens up the chance for suppliers. For retailers, it creates a consolation degree with the Legislature legislators to debate position and to to to manage.
It offers native authorities consolation that they need to permit extra dispensaries as a result of we solely have 700 brick and mortar dispensaries in California for a inhabitants of 36 million folks, you recognize? And a part of getting the mainstream shopper into the market is making issues accessible for them.
So the important thing retains coming again to that mainstream shopper once more with out shedding that conventional tradition, which is so ingrained in California and which actually makes California particular and makes the merchandise which might be generated and that reach California particular as effectively.
Josh Kincaid: Inform me why the retail is particular. You have bought 20 years of entrepreneurial expertise. You have bought so much that you have finished. You are a pioneer within the trade, a number of a number of vertical retail basis, robust administration staff expertise in retail, all of that.
So out of your your retail expertise in different industries, home hashish retail totally different from others.
Margot Micallef: It is totally different and it is comparable. It is totally different due to the tradition is totally different as a result of there’s an ingrained perspective on what hashish needs to be. And there is additionally attend a reverence for the plant and for the merchandise that advanced from the plant that you do not discover essentially in, you recognize, natural oranges or natural tomatoes.
You do not have that very same vibe or that very same reverence for these merchandise. So you have to to start out from that perspective of no matter I do, I’ve to honor the plant. I’ve to honor the tradition. I’ve to honor the custom.
So, you recognize, that is primary. That is what makes it totally different. Quantity two, what makes it comparable is I wish to I would like an expertise. I need a product that is dependable. I wish to be handled effectively. I wish to be handled pretty.
I wish to pay a good worth. I need a constant expertise. All of these issues are precisely what individuals are asking for in that mainstream atmosphere. The similarity as effectively when it comes to retail with the mainstream atmosphere is what we search for after we both purchase or look to open a location.
You continue to need signage, you continue to need accessibility, you continue to need ease of entry, you continue to need an inviting expertise, you need all of these issues that we have a look at, whether or not we’re opening a dry cleaner, a gown retailer or a restaurant.
These are all elements that buyers that affect shoppers determination to return into your location. So, so there’s many issues which might be comparable constructed on a basis that could be a little bit totally different.
Josh Kincaid: Let’s swap gears a bit of bit discuss your monetary third quarter. So that you guys had a web lack of 4.3 million for the quarter, however revenues have been up 1,072% yr over yr. Revenues have been 9.5 million. I feel that is Canadian.
Margot Micallef: It’s Canadian.
Josh Kincaid: Gross margin for the interval. Continues to broaden with the corporate file of 39% adjusted EBITDA from persevering with operations improved to 600,000 Canadian from a damaging 1.3 million similar quarter final yr. How are you feeling about about these outcomes? What was possibly one of many the most important drivers of that of your progress?
Margot Micallef: The largest drivers is that we have gotten out of low margin operations. We have we have shut down cash shedding operations closely centered on retail, which is sort of worthwhile and fairly profitable and have lower prices wherever attainable and constructed efficiencies into our operations.
So we’re beginning to see the results of all of that tough work. We have been in a state of evolution for the final couple of years. , COVID pressured all people right into a state of evolution and compelled all people right into a state of of reconsideration of their their enterprise mannequin and their marketing strategy.
So we went by way of all of that and we bought extra environment friendly by way of COVID. We pivoted into supply and curbside throughout COVID. We lower prices throughout COVID. And now that COVID is is easing up and individuals are again purchasing once more, we’re taking the self-discipline that we discovered from that have and making use of it everyday to our operations
We truly seemed and I feel this was in April. We checked out each division of our of our firm and the style during which each determination was made in that division. And we recognized the place the weaknesses have been. We recognized with the duplication was we recognized the place the shortage of collaboration was.
, we recognized higher methods of doing issues and we begin, we took our keys are normal working procedures and we began revamping all of them and writing SOPs for these areas of the choice making course of the place there have been no SOPs.
In order that’s all foundational work, and we have mainly been engaged on the muse for the final couple of years. That foundational work shouldn’t be very horny. , you need not a press launch to inform all people, Hey, we’re revamping our SOPs or Hey, we discovered extra efficiencies and the way we might collaborate higher.
So that you simply hunker down and also you simply do it. And as an entrepreneur that is constructed plenty of companies. I perceive that and I perceive you bought to have that basis and you may’t be, you recognize, simply hype as a result of it would not survive.
I imply, once more, have a look at MedMen, have a look at a bunch of different operators on the market who have been all in regards to the hype who aren’t round immediately. We have constructed a robust basis and we’re persevering with to construct that robust basis, and that is the muse on which we’ll proceed to consolidate dispensaries in California.
Josh Kincaid: Are you able to inform us a bit of bit about a few of the low margin merchandise you determined to not keep it up anymore? Give it some thought as recommendation to rising markets and possibly some merchandise to not to promote?
Margot Micallef: Effectively, you recognize, for instance, we have been doing self distribution into third occasion retailers. And once more, you recognize, given the challenges that lots of these third occasion retailers have in simply staying in enterprise and paying their payments. That was a difficult division that we have been working.
And it was additionally very costly. We had gross sales reps all throughout the state of California that have been doing gross sales on our behalf of our personal merchandise. We had logistics those who needed to ship the merchandise and consumption the availability, and we had drivers that needed to truly ship it.
So think about that infrastructure to create to mainly promote our personal merchandise into third occasion dispensaries whereas throughout us. We began seeing distributors who have been way more refined and distributing on behalf of plenty of third occasion manufacturers stepping into a whole bunch of of outlets and way more effectively.
So we shut that down. We’re not doing our self distribution to 3rd occasion dispensaries anymore. We’re self distributing to our personal retail atmosphere, and we’ll hold doing that in the intervening time. Come the brand new yr, we’ll look at a 3rd occasion relationship with the distribution firm that may distribute our merchandise are proprietary merchandise into third occasion dispensaries in a a lot less expensive method. So within the early days, you needed to be way more vertically built-in than you do immediately. There’s there’s nonetheless worth in being vertically built-in, but it surely’s lessening. And as increasingly more operators get extra refined of their explicit vertical that they select, it turns into simpler to contract out that individual side of the availability chain. And as we get extra environment friendly in having the ability to try this, we begin to see higher margins.
Josh Kincaid: That is fascinating. So what you are saying is that though it is handy to have this vertical integration, it is now not obligatory as a result of there may be different gamers within the sport that may fill the voids, and you may solely give attention to what you are good at and subsequently with the very best margins are and also you type of can afford to eliminate the whole lot else that is noise and never producing the very best margins for you.
Margot Micallef: Yeah. And I might say that is not 100. We’re not hundred p.c there but, however we’re evolving into that type of a state of affairs. And so it is simpler now to search out any person who’s an knowledgeable of their explicit vertical. , it is even it was that you might solely actually get good margins when you owned cultivation and also you owned retail and also you owned the whole lot in between. And that is much less so the case now. I imply, we’re seeing in California that that the the uncooked materials has come down dramatically in worth and we all know that there is an abundance of provide.
, it simply must be regulated extra successfully in order that it goes into the proper channels. In order all of that evolves, as all of that occurs, we’ll begin to see many cultivation services turn into commoditized.
And I say many as a result of there are some which might be constructing a model round there, their explicit cultivar. There’s additionally the profit that Northern California has simply by being within the Emerald Triangle and having that historical past. There’s additionally a good thing about being having the terroir and the connection with the wine trade. So these manufacturers are are promoting at a reduction to indoor flower in the intervening time. However I imagine that indoor flower will turn into commoditized way more rapidly than northern outside groves which might be in these places that may construct a model and trademark that model round that have.
Josh Kincaid: Discuss to me a bit of bit in regards to the valuation proper now for Gabby Gabby from some evaluation I’ve finished appears to be like to be undervalued relative to its friends. Are you able to touch upon that? How is your organization positioned to create worth for buyers going ahead?
Margot Micallef: Effectively, I feel that we’re the worth play proper now. I feel we’re the most effective stored secret. And you recognize, a part of our drawback is that as a result of we have been actually foundationally oriented, actually constructing that basis and never being not hyping our inventory, you recognize, we do not have lots of people that learn about us.
So once I converse at a convention or I converse to buyers, they get actually excited in regards to the worth proposition and so they get actually enthusiastic about what we’re doing and so they get enthusiastic about our staff and our technique. They usually say to me, How is it that I do not learn about you?
Effectively, you recognize, folks do not learn about us as a result of we’ve not been on the market, you recognize, banging the drum and telling our story as a result of we have been constructing the muse. So when you have a look at Planet 13 (OTCQX:PLNHF) for example, I feel Gabby is a extremely good parallel to Planet 13.
And why I say that’s as a result of Planet 13, despite the fact that they’ve three places, they’re closely centered on 11 location, which is their superstore in Las Vegas. The majority of their income comes from that one location. We’re a one location play in the intervening time.
We’re aspiring to develop and I will converse to that in a second. So, you recognize, they’re they seem to be a very excessive quantity location that is centered on very excessive quantity firm that is that is centered on on actually one location. And we’re a excessive location operation as effectively.
And we intend to develop our enterprise identical to they’re aspiring to develop their enterprise. They’re increasing outdoors of Las Vegas, now, increasing into California. They’re nonetheless constructing that market. They’re increasing into Florida. We’re doing precisely the identical factor.
They’re buying and selling at 5 instances income. We’re buying and selling at 1.3 instances. So there’s I am not saying that, you recognize, give us 5 instances, however I am saying that as we get our story will get identified and as folks begin to make that comparability on their very own, I imagine that we are going to get revalued available in the market.
And proper now, what my job is is to get that story on the market. Now that we have got the muse, we have got the staff now. My job is to get the story out.
Josh Kincaid: There’s that 5 weeks extra of a and I have not look, I am not taking a look at financials, so I am not evaluating the underside line or something. However is it extra as a 5 x extra about reputation? Is that this extra about press releases than it’s about precise income?
Are you aware how a lot they make relative to you and are you comfy? Possibly explaining the distinction? Is it about reputation or is that this actually fundamentals?
Margot Micallef: I feel it is a mixture of each. , they are much, a lot bigger than we’re. They do about 100 plus in income per yr per yr. We do about, you recognize, if we’re evaluating to Canadian {dollars}, we do about 35 to 40 million.
So, you recognize, they’re greater than twice our measurement and measurement does matter as a result of buyers discover you when you’re larger. So I feel, you recognize, there’s that. I feel they seem to be a very well-run group. , they have been worthwhile earlier than many different operations have been worthwhile.
They they they actually come across a unique technique in having the superstore type of, you recognize, experiential location. I do not know when you’ve ever been to Planet 13 in Las Vegas, but it surely’s like going right into a on line casino proper in the identical manner that you simply stroll right into a on line casino and you might simply stand there and get entertained.
You stroll right into a Planet 13 in Las Vegas, and it is the identical is similar expertise. It is it is actually, you recognize, excessive power and it is constructed for leisure. , they have a VW bug that fills up with smoke type of like to duplicate the sensation of the sixties and seventies when all people was in there smoking proper and getting excessive off there, the secondhand smoke. So it is a enjoyable atmosphere. It is it is an uncommon technique. I am undecided that it actually works outdoors of California, outdoors of Las Vegas, however however they come across one thing totally different. They they bought revenues up there fairly dramatically.
They’re excellent at getting press releases on the market. , they’re going to subject a press launch if they’ve a file breaking day, which, you recognize, I feel that that is likely to be fascinating data to buyers. We do not have a tendency to try this, however I do not.
I respect them. I feel that they seem to be a good operation and I feel they’ve finished an excellent job of getting themselves observed. I feel we’re good operation and now our job is to get ourselves observed.
Josh Kincaid: I’ve not been there but. They’re alleged to have a hashish lounge I would like to take a look at subsequent yr throughout Weed Week with MJ Biz. However I can be again in Vegas in February for a unique convention and plan on checking that out price it.
So if you’re taking a look at increasing as a result of lots of these MSOs are stepping into different states, you are taking a look at simply increasing into California. So speak to me a bit of about mergers and acquisitions within the parameters you are on the lookout for in corporations that you simply’d like to accumulate.
You have been quoted as saying we’re projecting sustainable progress throughout key metrics as we transfer ahead with our plans so as to add extra dispensaries to the Gabbie retail portfolio, in addition to persevering with to enhance operational efficiencies and extract additional synergies from mankind.
So inform the investor viewers a bit of bit about your plans for growth.
Margot Micallef: So we have now three folks in our firm which might be centered on M&A which might be sourcing offers for us. We’re in discussions now with potential targets. We have a look at structuring our transaction in a manner equally to what we did with mankind, the place there’s three elements.
There is a share part, a money part and a vendor take again debt part. And most a lot of the targets that we’re speaking to are fairly amenable to that type of a construction. They they’d just like the shares as a result of they they wish to keep within the enterprise more often than not, and so they like the chance to develop alongside Gabby’s progress. A lot of them perceive that they should proceed to be a part of the consolidation technique. They do not have the wherewithal, the capital or the expertise to to develop on their very own, in order that they wish to be a part of a progress story.
So, in order that they’re very eager about taking our shares, particularly as a result of we’re so undervalued. A lot of them perceive that it is robust to get debt capital out within the hashish trade, in order that they must take duty for that and we’ll carry that financing.
Margot Micallef: And the market has been, you recognize, comparatively good to us when it comes to we have been capable of elevate capital to boost the money part of of the acquisition. We’re taking a look at some alternatives which might be that do not require any money up entrance.
And what we’re taking a look at are, typically talking, alternatives which might be already EBIT constructive or that we see a path to get them to EBIT positivity.
Josh Kincaid: So within the U.S., you’ve got bought go forward.
Margot Micallef: I will simply say I will additionally simply point out are our focus as a result of mankind is in so cal proper now. We’re closely centered in so cal operations and so cal goal as a result of we have now a hub and spoke technique the place mankind is the hub after which we’ll exit from there in so cal, if we discover a actually good alternative in NorCal that might kind the hub of our technique will replicate that technique, nor Cal. However as anyone who is aware of, California is aware of, California shouldn’t be actually one state at finest. It is two nor Cal. So Cal, extra probably it is three nor Cal, so Cal Central.
And a few folks even say it is greater than that. However we’re taking a look at it from from as three totally different markets and the buyer is totally different in these markets and the buyer is on the lookout for various things in these markets and the purchasing atmosphere is totally different.
In order that’s why we’re taking a look at a hub and spoke evaluation and technique.
Josh Kincaid: I wish to ask you a bit of bit about place your self to be that market chief in California. So within the US, the hashish trade is stuffed with large hopes, large fears. You have bought laws opening much more alternatives throughout the context of alternatives in California hashish retail.
On one aspect, trade is made up of a large number of unbiased retailers with a love for the trade that stems from pre legalization. And on the opposite aspect, there’s but undiscovered promise the way forward for hashish retail. So, Margot, what’s the way forward for the hashish trade and the way is Gaby going to place itself to be a market chief?
Margot Micallef: So when it comes to Gaby, we’re extremely centered, we imagine that retail is the important thing to success within the trade and we’re extremely centered on retail. We’re disciplined with our capital. We have an excellent staff and we all know that we have to invite that mainstream shopper in and we perceive the normal atmosphere as effectively.
So we have got the entire elements, we have got the recipe to success. We’re how I see the trade evolving proper now. It is type of in a tragic state. It is it is a it is like a brand new child that is being born and all people’s attempting to seize a chunk of it.
And the top result’s that it is making a little bit of a large number. So, you recognize, I imagine that the the regulators have to to face again a bit of bit extra and regulate way more softly, however implement the laws within the illicit market.
It is the reverse proper now. I imagine that the the legislators want to cut back taxes as a result of all people is aware of that when you create an atmosphere the place taxes are way more manageable and also you let corporations earn a revenue, they broaden and so they develop and also you get extra taxes.
So, you recognize, I feel that has to occur. I feel we have to create an atmosphere the place it is extra accessible. So jurisdictions that the place they’d a plebiscite and the plebiscite voted in favor of legalization are or opening up the marketplace for for hashish are nonetheless not open for enterprise.
So we have to hearken to the buyer. And in the event that they voted to to to permit hashish, then the the civic authorities have to get on with that and make hashish extra accessible to that native atmosphere. I feel we have to to extend the variety of retail places all through the state of California as a result of 700 places for a inhabitants of 36 million folks shouldn’t be sufficient places. And we all know that buyers will. They’re all the time on the lookout for comfort.
And proper now, one of many causes folks say that the illicit market continues to be as widespread as it’s is as a result of in some jurisdictions it is too onerous to go discover a dispensary and it is simply simpler to fall close to your native distributor than you’ve got been doing enterprise with for plenty of years and have her or him ship it to you. So we have got to make it. We have to ask that mainstream shopper in. We have to chop taxes, we have got to ease up on the laws.
We have to manage the illicit market and we have got to make it extra accessible and extra handy for for shoppers.
Josh Kincaid: Let me ask you want a two pronged method this query about methods to implement that from the highest down or from the underside up. Is it the court docket of public opinion from the underside up or is it from the regulators on the on the highest down?
The banking trade survives on self-regulatory organizations and SRO is the intermediary between the regulators and the precise banks. The SRO is who creates all of the laws and who’s the regulator. They mainly write all of the payments and provides it to the Senate or Home, the federal government after which that the lobbyists from the organizations creating all of that
In order that’s how banking works. That is how I feel the hashish trade needs to be working as a result of if we simply depend on regulators and the federal government who do not know something about hashish to put in writing the payments for us, we’ll be right here for a extremely very long time.
So is it going to be? Here is my query. Backside up with hashish cafes. I really feel like hashish cafes are the soul and the guts of the group. As quickly as a public can see that there is not a complete lot of loopy issues occurring and so they might see into the guts and window of the group through the precise consumption. Possibly that may change the minds, or is it going to be from the underside down with regulators? What’s it going to be the final word catalyst?
Margot Micallef: I feel it’ll be the underside up. And I completely agree with you. We want we’d like self-regulating our bodies. , the medical occupation, the accounting occupation, the the dental occupation, all of them self-regulate. And what the regulators outdoors do is implement the licensing course of.
So if you wish to observe drugs however you do not have a license, the regulators will come down on you and shut you down. However when it comes to of the physique of the way you, you observe your occupation, that is a self-regulating physique.
Similar with with plenty of totally different professions. And that is as a result of we perceive what we have to do to to to succeed. And you are not going to create an atmosphere the place the laws should not enforced or are ailing conceived or are too favorable to this to the operator and never favorable sufficient to the buyer since you simply you, you mainly lower your self off on the knees if that is how you are going to function. So a self-regulating physique, it takes extra duty for operations, however does it in a manner that is.
Extra sensible, so I completely agree with you, we have to transfer to that type of an atmosphere the regulators won’t ever regulate except they get pushed from the buyer from that mainstream and so they. And once I say they will not regulate, I imply they will not transfer when it comes to opening up the marketplace for hashish except they’re pushed by that, by that, by that shopper, by that mainstream. So I feel it is bought to be backside up. I feel the shoppers will form the trade, and I feel the regulators must again off and provides us extra duty to manage ourselves after which solely implement on the illicit aspect when the once they’re not licensed.
Josh Kincaid: Effectively, that is the half the place I’ll ask your Crystal Bong prediction, the place do you suppose the trade is heading? If you happen to needed to to look on this little crystal ball, what methods do you suppose the trade would possibly develop over the subsequent couple of years and possibly a few targets you need to to maintain up with the tempo?
Margot Micallef: And that is a troublesome query, so, you recognize, yearly the trade is rising, so yearly increasingly more shoppers are transferring into the market, extra licenses are being granted, extra operators are entering into the fray. So the trade continues to develop.
Proper now, it is truly a in a influential that is type of on the lookout for an influential trade. Legislators and regulators are listening due to the the economics that that hashish brings to to the municipalities and to the state and shortly to the federal authorities.
So so we’re already influential as a as an trade. And I feel will proceed to turn into influential. And I feel we’ll proceed to develop and as we develop economically, will the affect will broaden. And because the affect expands, we’ll have extra of a say in how we’re regulated.
And I feel as we have now extra of a say in how we’re regulated, the trade will turn into simpler to handle. And because it turns into simpler to handle, extra shoppers will come into this into the house. So I feel it is type of this self-perpetuating cycle that begins with, you recognize, the buyer and ends with the buyer.
However within the meantime, the trade continues to develop to to assist the calls for of that shopper.
Josh Kincaid: All proper. We talked so much during the last hour is something we omitted, something you wish to cowl at this level.
Margot Micallef: , I do not suppose so, I might invite folks to examine us out on-line and examine us out when it comes to investing in us and sharing the story. , when you like what you heard, inform different folks, as a result of that is our objective proper now’s to get our story on the market.
And I feel we’re we’re doing all the proper issues. We’re centered on the proper issues have been, I feel, we’re distinctive within the perspective of how we spend our capital and what our focus is. I feel we’re distinctive within the sense that we have now a macro perspective on retail, not only a micro perspective.
So I feel we have now lots of issues to supply, and I feel we’ll turn into increasingly more influential available in the market in California as we proceed to develop our enterprise.
Josh Kincaid: And so the place are you? The place are you obtainable at? So that you’re on the OTCPK. underneath the ticker image GABLF. That is a overseas image. So I am additionally assuming that you simply’re on the CSC, you are up in Canada. What about web site and social media?
Margot Micallef: So on Twitter and on LinkedIn we’re Gaby Inc. Gaby Inc.com is our web site. On Twitter, we even have MannKind Hashish and on Instagram we have now MannKind underscore San Diego.
And we have now hyperlinks to all of these websites on our web site. So we neglect what I simply mentioned. Go to WW WW Gabby Inc.com and there is hyperlinks to all of these social websites.
Josh Kincaid: You may get all of it there. OK. I feel with that, we’ll have a rule this one up. So I wish to thank my company. Margot Micallef, she’s the CEO of Gabby. Margo, thanks for being with us and CEO interviews.
Margot Micallef: Thanks. Thanks for asking lots of robust questions and actually making me suppose.
Josh Kincaid: You are welcome. Thanks. I am Josh Kincaid. This has been one other CEO interviews by In search of Alpha. Do not forget to love and subscribe.
Editor’s Observe: This text covers a number of microcap shares. Please pay attention to the dangers related to these shares.
