Nathan Todd, President of LuvBuds, shares his experiences in the cannabis industry, starting from selling clay pipes and smoking accessories out of his knapsack to building multiple brands and ventures. Nathan also discusses how LuvBuds partnered with Order.co to provide customers with flexible payment terms, and after seeing the value of Order.co’s platform, the LuvBuds team began using it to automate their own purchasing process.
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You have over three decades of experience in the cannabis industry. I'd love to hear what initially drew you to the industry and how your experiences have shaped your passion for your work.
I was a very fortunate to travel the world as a child and be exposed to a lot of really interesting political thought and religious thought, because of my father and my mother.
I lived in the United States my entire life until I moved to Costa Rica when I was 15 years old. A lot of the guys that like to hang out with had little clay pipes, hacky sacks, knickknacks and things that they sold.
They sold pipes for 1, 2 or 3 dollars, just incredibly cheap, back in 1993. And I thought, you know what? I could probably buy $100 of these, bring them to the US, and sell to my friends. I did that and made some pretty good money and then decided — I'm going to take that money and do it again.
I went back and forth a few times a year to visit family. And I don't think my parents had any idea, but I had backpacks full of clay pipes and all sorts of weird little hippie knickknacks. By the time I graduated high school, I really enjoyed what I was doing and I was making good money. I started traveling all over Central America by bus and hitchhiking — just living this really fun life.
I'd buy really cool knickknacks and a lot of smoking accessories, which were very rudimentary at the time, and I’d bring those back to the US. I just kept doing it and that led to all sorts of companies, primarily Festival Outfitters. Festival Outfitters grew to be the largest merchandise vendor at music festivals for a number of years. We'd do 75 shows a year and made really good money. That allowed me to support my wife, three children, and put myself through undergraduate and graduate school.
I was going into law school to pursue international law to follow in my dad's footsteps and then realized after the first year of law school that I was making more money than my professors by pursuing all these side businesses. And, I really enjoyed doing it. I thought, why don't I just try this full time?
Funny enough, my first full-time year was the first year I ever lost a lot of money. So it really made me think. And of course my dad was like, “go back to school, dude.” I thought, well, if this is the worst it can get, I think I want to give it one more shot and I'm really happy did.
That led to building out e-commerce platforms and brands. My first brand was the grinder company called CaliCrusher — that's grown to be a big international brand and it’s still successful, I still own that and have other people operating it. That led to starting Humble & Fume, which we took public on the Canadian stock market about two years ago.
I realized that my beard was turning gray and I was getting old too fast. So, I decided to step away from that and focused on other things. I started a credit card processing company for this industry years ago. I joined a couple of boards of different companies in the last couple of years and then moved to Colorado, so my wife and I moved up here to be semi-retired. We bought a house in the mountains, started going hiking, skiing and living the life.
And then, Brett Harris, who founded LuvBuds, called me down to have lunch with him. He said, “I'm creating a parent company and some other entities that I'm going to start up in Puerto Rico for tax benefits. I need someone to be the president of LuvBuds.” I thought, “No way, I'm not doing it,” because I was really enjoying not working so much. But it was pretty neat — and he said, “Name me what you want,” — which I did, and he accepted.
I didn't want to jump into anything. Once I looked under I was very fascinated and surprised — this was the first and only one that cracked the code to selling accessories to dispensaries. Everyone else is pretty good at selling accessories to smoke shops, vape shops, bodegas, convenience stores. But no one I've ever been around has really figured out how to do it with dispensaries. And they had.
The founder, Brett Harris, realized that there is a IRS code called 280E that prevents cannabis businesses from deducting expenses. That led him to realize that accessories could be this piece of a dispensary business where they could actually deduct that portion. Additionally, accessories tend to have a margin that is significantly higher than actual cannabis, which most people don't realize. So, he decided to create a consignment business called LuvBuds, where he would put certain accessories into the dispensaries in Denver in 2015. That's right when Denver went recreational, so it was a really perfect timing and entry method.
Most dispensaries that I've interacted with that haven't had “the LuvBuds treatment” generally make 1% of total revenue from selling accessories, and in some cases, significantly below 1%. We've had experience getting people to 8 to 10% of revenue, which once again, great deduction, great margin, great extra revenue, extra profitability.
So how do you get from half a percent or 1% to eight? It takes us getting into the thick of it with with customers and understanding their layout. Our goal is really to make the buyers of these MSOs and dispensaries look like geniuses. The way we can do that is, we have data on sales that go back 7 or 8 years. We know what people buy, where they buy it, and how much of it they buy, and if they're going to buy it based on where it’s placed in a store.
And then we can help with the planogram and the shelving displays. Through all of this, we developed phenomenal relationships with brands, and we can represent those brands and provide special deals to these dispensaries.
You spoke about how you have access to market data, knowing exactly what people are buying. Which products have been most successful for LuvBuds, and based on that data, are there any new product lines or innovations that you're currently working on, or planning to launch in the near future?
There's a lot to be shared on that. You always have staples and you have price points. You know, there's $10 pipes, $15 pipes, $25 pipes. There's $25 water pipes and $50 water pipes. It’s easiest to look at other industries and say — what is the model? In most industries with retail, it's a “Good, Better, Best” model. We strive to provide something good, something better and something best in every category.
It’s also important to understand the socioeconomics of where your dispensary is located. In a relatively poor socioeconomic area, it's hard to push a $250 to $500 vaporizer, and it’s much easier to push a $10 battery or a $50 vaporizer at the top. Really understanding your audience is key.
We also try to keep things fresh and exciting. You have the staples, like the $5 pipe, but it’s important to keep it exciting within those categories, change it up.
We have a fantastic deal that we negotiated recently with Turning Point Brands, which owns Zig-zag. We're debuting Zig-zag in a way that it's never been debuted in the dispensary space before, which I think will gain them some significant market share and gain more margin for those dispensaries.
Since I've come on board, I’ve brought in a lot of relationships that I've had in the past. We've launched with Puffco, GRAV, PAX, and numerous brands that LuvBuds was not carrying in the past.
We're about to launch a new brand called Revelry, which does higher fashion small proof bags than all the ones out there. And that opens up another kind of income stream for us because we don't currently carry that product line.
Now we're actually picking up products that we wouldn't have picked up before, and they've worked out really well in other dispensaries and outlets. So it's a very diverse question — there's a lot to it.
How did you first hear about Order.co and what made you interested in pursuing that partnership?
One of our team members that brought it to me. What I found very unique about Order.co was that it had a very high level of sophistication. Things were thought out very, very well.
And for us in particular, we're experiencing insane growth. We have terms with most of our vendors and we're always trying to renegotiate for better terms. But having customers that expect the same — to maintain that type of growth — it's really hard to give out net 30 to everybody and net 60 to some. That was incredibly enticing for me. Meeting with the Order.co folks for the first few times, the biggest thing in the back of my mind was like that this might give us a little cash flow and breathing room to maintain this type of growth without having to throw more cash or fuel on the fire.
The idea was, let's see if we can negotiate something with you guys that made sense. And when we started diving into that, the cost structure is very reasonable. The the people that we've interacted with are incredibly intelligent people and fun to be around.
It makes sense for us to bring some of our really big MSO relationships to you guys for multiple reasons. One, they get access to ordering everything else through you, the GL codes and all, but then they also get a access to our catalog still. And you know, maybe if they have a net 30 with us right now, they can have net 60 with you — and that's huge. Beneficial to them and us.
We just joined the other side of it, where now we're purchasing for all of our business needs and I love it. Our VP of Operations was ecstatic — big smiles and high fives because it streamlines everything for us. We can have each department order for their department and then your departmental VP can approve a purchase and it can go all the way up to your CFO.
The orders go out, everybody gets their product, everything's on one invoice, and every item is coded. Obviously what you guys have built is very powerful. We first realized it on the selling side and are now realizing it on the buying side — it’s a great match.
You started on the seller side, by taking advance of Net Terms as a Service, but then you became a customer of Order.co - using us to handle your purchasing. How much time do you think it's going to save you for your purchasing processes?
It's already saving a lot of time. The knowledge of where we can go with it, because we just got started, is really exciting. We're cutting out a number of suppliers that we've been with for ages and we're also trying to convince a number of those suppliers to be on the seller side for you guys so that we can continue to buy from them and support them.
On the selling side, you guys have already have a few very good dispensaries ordering from us through your side. So there was automatic benefit.
And I know we've brought a few MSOs to you guys that are excited to be with you now.
How do you anticipate Order.co’s Financial Offerings, like capital advances and net terms, to impact your overall growth strategy?
For our size and volume, the benefit to the selling side is going to is going to be the terms that we can provide to to the customers. We don't generally provide many terms to customers since it's not something that makes sense with the current rate of growth. You being able to provide that is phenomenal.
Another area where we can really help with your business and with our customers is providing them with the capital advances. On the purchasing side, I believe we've already looked into a capital advance because we're buying some new machinery for our new entity called Swag Supplies, basically a white label service. So we actually built out our own print shop, which is a very big learning process. We still are adding machinery to thar and we are considering using you as a finance partner for some of that machinery.