Leaf Trade President Michael Piermont joins Ed Keating to talk about how his company powers the cannabis industry's leading wholesale cannabis marketplace and digital payment infrastructure as well as how the Leaf Trade team uses the Cannabiz Media License Database for research and business development.

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Cannacurio Podcast Episode 43 Transcript

Ed Keating:

Welcome to the Cannacurio podcast powered by Cannabiz Media. I'm your host, Ed Keating. And on today's show, we're joined by Michael Piermont, President of Leaf Trade. So Michael, welcome.

Michael Piermont:

Nice to be here.

Ed Keating:

Excellent. So tell me about the creation story of Leaf Trade. How'd you guys come to be, and I'm also curious how you landed in Chicago, too, because there's a lot going on there.

Michael Piermont:

Yeah, so Leaf Trade is headquartered in Chicago. We do have offices throughout the country. In 2015 and '16, when some of the early holders in Illinois started going live and applying for licenses, we found ourselves working and helping stores to manage their orders. And Leaf Trade was really born out of the first original six, seven license holders in Illinois. 

Now back then, they weren't Verano and GTI and Ascend, and they weren't the powerhouses we know them to be today. This was early days, maybe they had a SKU or two, and they were just trying to figure it out. And one of the big challenges was the compliance within the order management, the supply chain. And so that was, really, Leaf Trade was born out of an early need for a platform to help the B2B sales process.

Ed Keating:

Got it. Got it. And how about your background? Where do you come from before? Where were you before cannabis and what brought you here?

Michael Piermont:

Yeah, so I've always been a builder, finding nichey markets or gray areas in very compliant market. So was one of the first and early employees at Go Health, which B2B back office tools for health insurance agents. And then we developed a large marketplace. And then I started my own company called Amstat. Again, back office support for small gyms, personal trainers. We did a lot of payment, very similar. Worked with some other startups, had another one of mine, a B2C, but really turned into a B2B gifting marketplace. 

You see the theme here. And had always really been keeping my eye on cannabis both from a professional point of view, but also a personal passion, but wanted to stay in technology and saw all these companies popping up, plant touching. And Leaf Trade really became my way to take the experience mixed with my business partner, James Yee, and take his cannabis experience and build something that really, at the end of the day, we're solving supply chain and compliance problems all the way through.

And if you talk about a company like Verano or GTI, their operations look very different in New Jersey as they do in PA as they do in Illinois. So much so that it's almost like 70% of Leaf Trade in the last 30% is different in every market. And some of this is based on the stage that those markets are in. Some of them are based on the platforms that they have to use, the seed to sale platform. So they need to do things differently in PA because they're on MJ Freeway versus BioTrack.

Ed Keating:

Got it. Got it.

Michael Piermont:

So we realized early that bending and having Leaf Trade be the adapter in the market where everything can then go through Leaf Trade and finish out in their accounting systems, that's really our MO.

Ed Keating:

Excellent. Well and that definitely prefaces a couple questions I wanted to dig into. Could tell us a little bit about the piece parts of the systems, like the integrations and things that you do. Because in our view at Cannabiz Media and looking at the software stack, those on the B2B marketplace side cover a lot of ground. And I'm just curious, what piece parts do y'all have in place?

Michael Piermont:

Yeah. So for us, it's about getting the inventory and the data right. Because if the products are tested and ready to be sold in any format, some markets bulk, some prepackaged, some a mixture, we have developed a way where, whether it's Metrc, BioTrack, MJ Freeway, or now what we're starting to see is either cannabis ERPs or non-cannabis traditional ERPs come in, whatever the system may be, we can hook up into and get the inventory ready to sell inventory out. 

That's really important because once the inventory is set up correctly in Leaf Trade over and over, and it's repeatable, then that gives the seller the ability to show it on the marketplace. Once the retailer realizes, "Hey, there's actually up to date inventory, this isn't just a static menu," then it builds trust and they actually start putting in orders, not just, "Hey, Ed, I know you have this. Can you give me an actual inventory run?" And so it's funny, the back end and getting everything correct is really what drives our retail experience.

Ed Keating:

Makes sense. Now in terms of that data being available, are there other B2B companies that consume that? Because I know there are people out there who try and own the menu space, let's say, either in store or online. Does your data, it seems like it would populate that. Is that right?

Michael Piermont:

In some instances, yes. I would say a lot of the larger companies have created their own internal catalog that we help push in and pull out. In some instances people, believe it or not, keep B2B and B2C separate. They want the B2B data to then populate into the POS and stop right there. 

But I think for us, the exciting thing is connecting what's happening in the store to what you should be buying. And not only getting that data, "Hey, what are the things that sold last week?" I don't care about the things that sold last week. I want to know what's selling today and tomorrow and that way we can create auto orders and really streamlining the process and making better decisions and faster decisions. 

Because cannabis inventory is not open for business all the time. Some states don't have enough. Some states have too much. There are expiration dates. And so selling the right inventory to the right people at the right time is the most important thing, but you have to have everything lined up before you can do that.

Ed Keating:

So with that kind of, to me, seems like sophistication of SKU analytics and point of sale data and whatnot does that, have you sort of partnering with the larger MSOs or the bigger SSOs, as opposed to what are often called the traditional mom and pops? Or can everybody benefit from what you guys do? Because I imagine any store would want to know this, but can they all work with you to get there?

Michael Piermont:

Yeah. What's cool about our platform is we've seen the smallest folks, 10, 15 orders, this really replace their whole back office team or be the one system that they work in. They invoice out of it. And then we've also been able to connect to these large MSOs who may have their own middleware tech and they may want to pull from us and warehouse everything in their own data. 

So what's nice is we can kind of decide up and down the stack, what to turn off or where we want to point it, whether it's orders, and that's where it becomes very malleable around what the MSOs are doing. So much so that we've almost become an integrator when MSOs buy companies. 

For example, Verano bought Agrikind in Pennsylvania. The quicker they get Leaf Trade over the Agrikind assets, then they could start pulling that into their accounting system, and that's start counting their sales on their corporate ledgers. So we kind of be that, we're that glue that can kind of pull everything together.

Ed Keating:

Well, I'm going to take that a little further. It's almost too, though, that you're like a suction cup. The sooner you can glom onto their data and pull it in.

Michael Piermont:

Exactly.

Ed Keating:

And I would imagine at least in other industries I've worked in where there's been M and A, people want to know what kind of systems are in that target because, "Oh, you're already on Leaf Trade? That's a good thing." And that makes it more attractive. So very cool, very cool. 

And in terms of how you look at the market, one thing that I always like to dig into is, do you cover the geographic market in terms of your sales or is it more of a named account thing? Because obviously you've got a lot of great companies right down the street from you. But as you look across the US and figure out your sales teams, how do you view the world?

Michael Piermont:

Yeah, great question. So take it back to 2017. Our thesis was we think that the bigger companies are going to really have a big stake in where cannabis is going. We probably didn't even imagine how big those companies would get and how big of a stake they would have. 

So the focus was, let's nail Illinois. And what do you know? Those license holders started getting licenses in Maryland and PA and Ohio and New Jersey and Connecticut. But we really like the newly regulated, newly emerging, highly regulated markets. And so we really focused on call it east of Colorado early in our Leaf Trade history. 

Now that we've gotten really the majority of those license holders kind of east of Colorado, we own Illinois, Ohio, PA, Massachusetts, New Jersey, New York, Connecticut. We have started focusing on the west coast. So we've started to flip Arizona, Nevada, looking to Colorado and California soon and then add in Michigan. So we're not out there everywhere, but we are very focused on order of operations and there's a plan of what markets go when and why.

Ed Keating:

Yeah. Well it's interesting, Arizona's one that we've been looking at from just a data standpoint. Because in the early days it was crickets. There was no information. You couldn't even get a list of dispensaries unless you had a card in the state. And then slowly they've been making more available. And what's interesting is, even though they have adult now, it's still, to your words, sort of a highly regulated market. 

They're only giving us so many licenses. And licenses there, I think, are still pegged to the number of pharmacies. And if you've got a med license, you can get a rec license for $20,000 and off you go. So it just sort of repopulated the state with a whole bunch of new licenses in many of the same buildings. 

So that would definitely seem to fit your model. What about a state, sort of jumping ahead here, what about a state like New Mexico? Because a lot of focus on that state and kind of curious how you viewed it. Because that was also a rather regulated plant count based threshold environment, which is sort of unique.

Michael Piermont:

Yeah, I think we're not live in New Mexico yet. We've got some of our current clients who are there who want us to be there sooner than later. I wonder about the unlimited license that they have talked about. And does New Mexico become a Massachusetts where even though it's unlimited, it's really hard to get a license? Or does it become Oklahoma?

Ed Keating:

Right.

Michael Piermont:

So time will tell. We watch it, but we also haven't picked a bad market yet. And by bad, I mean that fits Leaf Trade. And so we slow and steady. We've never lost a customer and we've taken, I think, 40 of our competitors' customers. So I think the thing that we don't want to do is adhere to the market pressure and open up markets before we're ready. I also don't think that's good for the customer. And so we want to make sure we keep the experience as good as it's always been.

Ed Keating:

Yeah, no, that makes a lot of sense. Now earlier on you talked a little bit about compliance, which is something I've spent my whole career working on. So I always find this to be an interesting area. You've already mentioned that it's a big issue. It's something that you guys have to keep an eye on. Tell us a little bit about that. 

Let's say for example, when a new state comes on board, like I'm here in Connecticut. We're under process to get adult use up. New York and New Jersey are racing along as well. And someday Rhode Island may get through, too. But when a new state comes on board or sends up those signal flares, what does that mean for the Leaf Trade team?

Michael Piermont:

Yeah, well the good thing is we get these signals pretty early because we go into these markets really early. So I'm trying to think of an example. Here's an example, in Illinois when they went adult use, even if the plant, or I should say, the package, was coming from the same plant, but one was medical and one was rec, same exact product, same testing, they had to be labeled differently, both from BioTrack all the way into invoicing. You had to designate that this was going to medical and this was going on rec.

Ed Keating:

Wow.

Michael Piermont:

So there's just some check offs. With us, it's not that hard though because we can just add that in. There's an option, no big deal. In New Jersey, there's an approval on orders from the Department of Health. And I don't know how long that'll stay in place. So we built a little, essentially like a checklist that they can approve the orders. 

So there's always these little things, and usually there's two or three. Some of them are captured in other markets. Like Connecticut, there's a round robin thing where everyone has to be able to buy the same amount from the same people in the first three days, and then it opens up. So we've got rules in place that can adhere to that. 

So a lot of these rules, some of them are early, some of them go away, and it just depends. But all these last mile things we love because it's the little details that really can slow up the process.

Ed Keating:

Oh that makes a lot of sense. So staying with that sort of state thing, I was curious, and you referenced this a little bit earlier, what is your relationship with the state seed to sale systems and with the regulators, too? Do you have to interact much with them? Or since you're not a license holder, not a plant toucher, are you good? Or do you sometimes have to get involved at the regulatory side?

Michael Piermont:

We don't really get involved on the regulatory side. Our customers use our data or use our system to get involved with the regulatory. We have, before during some M and A, we've been the third party to send data to the DEA with some of these big mergers, but we don't have much interaction with them. 

As far as the seed to sale, we have a pretty good relationship with BioTrack and Metrc both on a local, "Hey, Missouri's got these changes. Hey, we're doing things in California differently than we're doing things in Ohio.” We're technical partners with them as well. And then we have mutual clients that we work on with them. 

We have a good relationship with MJ Freeway. I think their API's coming out sooner than later, so I'd say our relationship's not as far with them. And they're just in PA, so we have more interaction with BioTrack and Metrc.

Ed Keating:

Yeah, that makes a lot of sense. One quirky data question I wanted to ask you about as we talk about the states is, we always are looking at what are the states issuing, what information might be interesting to put in our product? And over time we put in things like violations from the state or patient count data, sales, et cetera. One of the things that we looked at and it wasn't really right for us is that states like Connecticut, Massachusetts, Alaska, and maybe one other publish state product catalogs. Is that anything that you guys have to feed into or is it something that the license holders take care of?

Michael Piermont:

The license holders. And again, we've been asked sometimes, but pretty much they have to report their numbers in sales and all that stuff. It may flow through us, but we're not usually involved.

Ed Keating:

Yeah. Yeah. I mean, I was curious because I know in some states the catalog is absolutely enormous because they want images, labels, weights. I don't know about prices, but it's a pretty robust data set. But I'm trying to think how does the public actually engage or interact with something like that because it's pretty massive?

Michael Piermont:

A lot of times they use that, Leaf Trade becomes the source of truth for their product catalog and they're pulling it out of Leaf Trade or sending them the link to the public storefront. But we aren't the ones who do it. They do it from our system.

Ed Keating:

Yeah, thank goodness. Right? So that sounds like it's not a fun project. One of the questions I always want to ask, have to ask on this is how does your team use Cannabiz Media to get to market and go to market? Or do you use it for research or how do we fit in to your role and what your team is doing?

Michael Piermont:

Definitely use it for research. We use it as we plan out these markets. What's interesting is if you were to look on the face, you'd be like, "Wow, Massachusetts has 250 licenses and Illinois is 80," or whatever, 12. But when you start using Cannabiz Media and start plugging in what connects to where, "Ooh, there's really four licenses, not 50," that kind of stuff, that's how we start all the markets. It's how we start the research. So we definitely use it.

Ed Keating:

Great. Well, it's good to hear. As a guy who runs a data team, it's always helpful for me to hear how people use it. And that last point you made is fascinating because I know in California with cultivation, yeah, there's a ton of licenses, but based on the research we've done in stacking up all the licenses that a farm has, you might get a farm that has 200, 300 licenses, and it's one opportunity for somebody on the sales side. But I think it also boils down to, it's the average for every grower has at least three licenses and that really shrinks down the number of license holders. It's not 10,000, it's 3,300, let's say. But you have to dig into the details to actually know that and figure it out.

Now sort as we wrap up, looking forward, what kind of challenges are out there that you're contending with now, let's say, that weren't around in 2017. I think both our companies are about the same age and have seen this market really mature and change a lot. What challenges are out there now for you and your team, Michael?

Michael Piermont:

Yeah, I think an interesting challenge that in 2017 we would all been thankful for, is now that cannabis is getting really big, you're seeing a lot of new people come into the industry very quickly and I think being thrown into the fire. And you know back in 2017 or '18, no matter where you were pointing, everyone's focus was pretty narrow because there was only so much you could do.

Ed Keating:

True.

Michael Piermont:

And so with focus getting wider, there's more people, there's more quote unquote non-cannabis folks or people who come. And I think they're really talented. There's a lot of really good people coming to the industry. I think the hurdle and the thing that everyone has to really work on is making sure that we're ramping them in, we're educating them on not only why we're doing things, how we're growing, we're training people on systems. 

It's like the new blood's coming in. And I think it's great. I think it brings a lot more energy and a lot more insight. But I think there's also challenges when, even if you look at a lot of the MSOs, growing that fast that quickly is hard. And so making sure that companies like ours and larger companies stick to their core value proposition is always a challenge and a focus with anybody in the industry.

Ed Keating:

Yeah. No, it's a great point. And it makes me think back to, as you described your background. You came in from another set of industries and brought all those lessons learned into what you do in cannabis, so it sort of has that vigor from all those other industries. And you're right. When we get transplants coming in from other industries who need to be onboarded, because we go through the very same thing. 

People think that we're just like any other market where there's perfect information like alcohol that's been around since the 1930s. We're not. This data changes all the time. And well, why isn't it this way? It's just not yet. And slowly you can move them from canna clueless to canna serious. But sometimes it takes time and not everybody can make that leap, but we certainly try to bring people along.

Michael Piermont:

Yeah, and I think it's a nice ... we try to be really focused on and really deliberate about who we hire. In some roles, we really like to focus on people who have industry experience. But it's also really healthy to get people who don't have industry experience, who say, "Why are we doing it this way?" "Oh, cause it's done that way." "Well, maybe we should look at it again." So, it's healthy, but it takes time and effort on both sides. And I've seen a lot of companies do it great. And I've seen some companies on their fifth CFO. So it can go both ways.

Ed Keating:

That's very true. So finally, looking forward, any trends that we should be looking out for? Any new things that you guys are going to be working on that you can share that may be happening in the future?

Michael Piermont:

Yeah. I think, we've always kind of focused on making sure that people can get the inventory up, like we said, making sure that they have all the guards and all of the different levers in place to sell, to fulfill the orders. And now, it's really about automating the payment cycle, so being able to push and connect and pull into their accounting systems and also pull payment is really important for us. We think that's it. That's the loop, creating the order back and forth. 

But what was really nice is, as you know, we work with all the large MSOs and they have a really, really big handle on the retail side. And so automating the payments on the retail side is almost just as important for them. Yes, everyone wants to collect sooner and automate that. But paying bills is tough, and in most states you have to pay separate bills per invoice. 

So imagine Curaleaf with a hundred plus stores and doing 50 orders a month per store. It's a lot of checks. So really, anywhere where we can save manual processes and automate them and help them focus more on their products and customer service and less on manual importing of inputting of orders, I think the better we'll serve everyone.

Ed Keating:

Excellent. Well, I've quoted this CEO before on the podcast. He's a guy, he used to run Thompson Reuters years ago, and they really changed their business. And a lot of it boils down to this simple question that they would go out and ask people in the legal and the financial business. What were you doing the 10 minutes before you used my product and the 10 minutes afterwards? And by doing that, they started to really learn what the true workflow was. And they would try and own a greater share of your day and eventually a greater share of your wallet. 

And I thought it's just a very clever way to be thoughtful in asking those great questions. And it sounds like Leaf Trade's doing a great job with that, Michael. So thanks so much for joining us today. It was really great chatting with you and look forward to hearing more great things that you're doing in the marketplace.

Michael Piermont:

Yeah, I really appreciate it, and we'll see you around.