About the Panelists
Sam Mallach is Executive Director at Always Pure Organics. He joined in 2019 and has a wealth of experience in the cannabis industry, spanning the last five years, and is responsible for ensuring APO has the best working processes. Sam leads on discussions with regulatory bodies in the UK and Europe.
Grass & Co
Jay Rosenthal: Great, thank you. My name is Jay Rosenthal. I’m the co-founder president of the Business of Cannabis. It’s great to be here today with Toby Gordon Smith. The UK CBD market is an extremely exciting space with a recent report from the CMC sizing the market at 690 million pounds. One of the brands that is turning heads with consumers and retailers and me alike is Grass & Co. Who have developed a unique approach of blending CBD with other botanical and vitamin ingredients. To provide a range of premium products with absolutely beautiful packaging, wonderful flavors and scents.
They’ve also have retail listings in Selfridges, Ocado, Amazon and now launching into Holland and Barrett. This is a business with an established growth platform, which we’ll talk about. And well placed to scale up and take a leading position in the UK and markets beyond the UK as well. I’m proud to be joined by Toby Gordon-Smith, who’s a CEO with a really strong background and track record in consulting in consumer goods businesses. And has built a blue-chip team, which we’ll hear about to support an exciting growth trajectory Toby. Thanks for being here.
Toby Gordon: Hi Jay. Thanks so much for speaking with me today.
Jay Rosenthal: Well, it’s going to be great. And if I’m correct, you’re going to give us a little bit of a presentation. Then we’ll come back for some Q&A at the end of it. Are you ready for that?
Toby Gordon: Yeah, absolutely, I’ll try to keep the presentation quite quick and then we can spend a lot of time on Q&A.
Jay Rosenthal: Great, go do it.
Toby Gordon: Great, so thanks very much everyone. I mean as Jay said the UK is a hugely exciting market. I’m not going to spend a lot of time talking about the market size, because I figure that the audience here at prohibition partners is going to be pretty well educated on the size and excitement of the UK CBD market. What I will tell you about is a little bit about Grass & Co. How I think we’re a little bit different and what is exciting about the opportunity that we see ahead of us. So, if we go to the next slide, so just quickly to introduce kind of where we are in terms of how we have established this brand.
Yeah, we very much started out with looking at the more established markets in North America and Israel and other places around the world. And took a very kind of data driven approach to looking at how to build a brand here. And ultimately is because you know what we were clear about wanting to do is this you know is bring the wonders of this CBD and cannabis more generally to the beneficial properties of it to a wider mastery stream audience. So, we really wanted to understand about how consumers see it and particularly how to bring it to a market. Where you know you are going to be reasonably restricted in terms of how you can talk about it.
So, what we started with for a very principal of having a very strong brand, building a great product range. And we’ve now established great retail relationships, which gives us a great platform for growth. In terms of how we’ve done that we move on to the next slide. So, we when you look at these more established markets, it’s very clear from the data you can see that the three main reasons that people are using CBD are for pain, anxiety and insomnia. Again, I imagine this is quite an educated audience. So, I’m sure that won’t be news to people. What we did is we developed these sub ranges ease calm rest to play against those opportunities.
And where we can’t really talk about what CBD does, what we do is we use these botanicals that we blend with the CBD oil to help signpost those use cases. So, you know people are familiar with the roles that turmeric and ginger can play in anti-inflammatory properties. And similarly, Ashwagandha and Chamomile in terms of the calming properties. Hops and Lavender in terms of you know your grandmother used to like hang bunches of lavender over your cots to help you sleep at night. So, you know we’re all familiar with these properties. So, we use these as a way of kind of signposting these unifications for consumers.
We also then use vitamins to give actually a claimable level of vitamins. Again, that are tuned into each of those need states. And apart from anything else it helps us support and general health claims, because under European law and European laws that even post Brexit the UK are continuing to adopt. In order to be able to even make a general health claim, you have to be able to make a specific health claim. And that specific health claim has to be one that is registered on the Essa health claim register.
So, we’re able to do that because of the vitamins we’re including in our products and that enables us to support general health claims behind the products. We then make sure that these products have really great flavors. And I mean you know again as many people will know the best way to absorb the CBD oil is to hold the oil in your mouth for around 90 seconds. We want that to be a pleasant experience for our customers. Because you know there are some oils that I’ve tasted in my time in this role. But I wouldn’t want to have in my mouth for one second let alone 90. So, yeah, we work hard to make those flavors really acceptable to consumers.
So, next slide, the next thing we do that I think is a little bit different is you know we’re trying to build a ritual around those consumer experiences. So, you know if you’re somebody who is struggling with insomnia, then obviously the CBD oils are going to help you. Kind of get into a restful state before you go to bed. But we also have other topical CBD products that again have different botanical blends that can help with that restfulness. We have pillow sprays and bath salts and other products that fit into the range. Now those products don’t have CBD in them because you know why would you spray CBD onto your pillow case or indeed you know from the bathtub perspective. You know why would you throw CBD into 70 to 80 liters of bath water. You know it’s frankly insane from my perspective.
We have these products in our range, because they fit together with that whole botanical and that whole aromatherapy kind of opportunity. And we build this ritual around this sense of you know whether it’s insomnia, anxiety or pain. So, next slide so the team that you know as Jay mentioned the team that I’m setting up here from my perspective you know my background is a combination of consulting and consumer goods. You know I’ve spent a lot of time building consumer businesses like this and that is absolutely in my bloodstream and my passion. From the consulting perspective, I spent time at Bailly company. And you know from an industry perspective I spent about five years at Diego and seven and a half years building out Glambi’s performance nutrition division internationally.
I’m building my team with some you know real blue-chip talent. So, you know for instance I’ve got a marketing director who has spent time at L’Oréal, GSK, Rude Health. I have a creative director who you know was behind the design of the curve brand. And in terms of how I’m building out this team, I am looking for those very strong blue-chip talents. So, that we can present very professionally to our customers and consumers alike. Next slide and that is also supported by you know pretty strong board. I highlight my two co-founders here Ben Grass Sasha for Muskie, they both will be floating around this virtual conference.
So, please do reach out to them to network into the business. But we also have very strong you know entrepreneurs and Angel investors on the board. We’ve got Paul Carter who has a background in senior management in GSK and other life science companies. We have Gavin South Nathan who is a very strong incredible kind of cannabis entrepreneur. Next slide please. So, the exciting news for us, you know obviously we have a direct consumer business that has been growing and growing pretty well through the COVID era with you know kind of strong online growth. But on top of that we’ve got these great national account relationships. We launched with Selfridges a while ago in 2019. But we’re recently now launching with Ocado, with Revital, with Amazon.
And we’ll be in store with holland and Barrett in June this year. Now Holland Barrett is the UK’s number one CBD retailer at the moment. So, it’s a really exciting step up for us and for the brand. But also, you know it takes this business to a different dimension. In terms of you know previous investment rounds we’ve been talking about you know investors coming on board on a journey. And you know we’ve got an idea to help us to bring it to reality. I think we’re now in a position where we’ve proven that the idea is real. And these retail relationships really help us to just kind of to become an established business. And for the story to be much more around scale-up investment rather than startup investment.
Next slide please. We’ve got a very strong kind of marketing background and quite a lot of stuff that you know as many people will be aware. There’s a lot of restrictions around how you market around the CBD category. The approach that I’ve taken is to create quite a adaptable but very professional internal marketing capability. Which enables us to really kind of go and push the boundaries and stretch into new areas. And when we find areas that really work for the brand, then we can double down and invest into those areas. So, if some of the areas we’ve worked quite well in in terms of paid search digital media etc.
I mean one area that I think around influence and marketing that’s worked very well for us is in terms of kind of stretching that into kind of sponsored podcasts. And for us you know we find that these relationships they only really work. There is a fine line between what works very well and what doesn’t work at all. The difference is when you find somebody who can talk really credibly about having a very strong relationship with a brand that is genuinely coming from their heart. Rather than what can be a very transactional relationship with influence, which I think that consumers can see through in this day and age. So, where you have that that that strong very authentic relationship that comes through in space and can be very powerful.
Next slide please. So, I think the story that we have here and obviously there’s plenty more content and plenty more detail behind every bit of this. Which I would be delighted to talk to people in more detail about. But ultimately what I think are selling here is a very strong professional team, really credible and valuable retail listings. And a great brand that consumers love and is proven to be one that can really scale up into this growing and exciting market. So, thank you very much. Jay let’s move to the Q&A, shall we.
Jay Rosenthal: Yeah, I’d love that and thank you for all that. Because I think it paints a great picture of where you are, where you’ve been where you are where you’re going. I want to start where you just finished and then we’ll go to a whole other series of questions, but about products consumers love. Because I think as the, and I don’t know if you’ve described this sort of internally as this, but like there is a there are consumers, they have limited attention, they want this product. But there’s lots of other products vying for their attention both in-store direct to consumer all of those things. Like how do you think about it what has been the response from consumers who are buying this product? Whether they’re buying it direct or buying it at one of the sort of other opportunities? What has been the response from those customers and how does it influence where you are going in the future?
Toby Gordon: Yeah, it’s a really good question. I mean if I started, so the value of having a direct to consumer business it means that you do have that direct connection with your consumers. And I think when we set up the business instead of the brand, we were thinking about what our target consumer should be and which way are we going to go with the brand. We kind of made that very kind of conscious decision to go for in terms of what we target directly. I mean obviously we like to be inclusive, but in terms of what we’re targeting we tend to target a kind of an older female consumer. And really looking for that person who is very influential within their community within their family unit. We would, I guess recognize that that consumer is going to be a lot more difficult to find than perhaps a millennial consumer that might be more tapped into digital media.
So, we recognize that might be more difficult consumer to find, but when you find them, we thought that we’d be able to establish much stronger loyalty with that consumer. And that tends to be kind of proving to be true. I mean I think if you go after that millennial consume, they’re easier to get. But I think you’re more likely to find that they’re going to be portfolio consumers that will easily shop around in across different brands. And so, the loyalty might not quite be there. I think the other thing that is absolutely fundamental to what we do and this kind of goes back to my kind of decade of sports nutrition experience.
I saw that category go through you know transition, where almost it started with you know a very niche category. Basically, kind of supplementing the lifestyle of these big bodybuilders and gym goers. And for them, it was almost a rite of passage that these sports nutrition products. It didn’t necessarily taste good or didn’t have a great mouth feel. But actually, that’s what you have to go through in order to get this protein into your body. I saw the category go from that to you know brands coming in and saying, why shouldn’t these products taste good. Of course, they should taste good and that was the only way that the category went from being kind of niche to you know exploding in the way that it did.
And we started right from that on day one, why should these products not taste good? Why should these products not have the most amazing kind of sensual aromas and scents around them? Why should they not be kind of top quality premium products? Yes, just because they’ve got CBD just because they’ve got cannabis derivatives in them, that doesn’t mean that people should have to put up with a bad taste or a bad kind of customer experience. So, you know we were absolutely went out there saying, ‘Look yes, this has got CBD in it but you know this should be an easy um choice for you to make between other products you might already be using in your life or in your daily rituals. And using this, that’ll fit in a really pleasant and a really enjoyable way.’
Jay Rosenthal: Yeah, when you describe your presentation, like I’m in Canada some of the oils that I tasted in the lead up to legalization even still. It’s like it’s good that they put them in pill form eventually because they just tasted awful. And then one company said, you know what peppermint not a bad carrying oil people and I was like well it was almost as if the obvious things seemed unlike, seem really challenging. Like no make it tastes good, make it smell good. And you were talking put in functional ingredients that people understand as a way to both deal with the regulations but also sort of adjacencies that people are familiar with.
And actually, that leads to the next question, because you talked about it in the framework of like what a consumer wants and understands. But also, as a guidepost as you said but also the regulatory environment calls for it, right. The idea that you need to sort of be compliant. Talk a little bit about sort of where the regulatory environment is now and how you think it’s going to be evolving you know in the next year or five years.
Toby Gordon: Yeah, so I guess in the UK market certainly we’re kind of lucky in terms of the you know approach that the UK FSA has taken towards to CBD. So, I’m sure there’s lots of talks still that has been since you know we started out here around normal foods. And what that means for the industry and how it’s going to be implemented across across different categories. And again, I spent a decade in sports nutrition not foods, was not novel to me we. You know we used to play around with novel food ingredients all the time in sports nutrition. So, you know I was very familiar with how that regulation works and how it should play out now. How it should play out and how it has played out are you know very different things. And almost you know we need to be grateful to the flexibility that the FSA has shown in terms of allowing this UK CBD market to continue to flourish. Rather than you know what they could easily have done, which is just you know ended it a couple of years ago.
However, look I mean you know it’s still challenging. The FSA is still wading through a whole load of novel food applications. We met the deadline as many other suppliers I’m sure did, and not just the March deadline but you know six weeks before the end of March deadline to allow for the two weeks of admin followed by the one month of validation. And we like many other brands are still waiting to hear what the FSA have to say about that. Now again, you know we’re hugely confident that the brand has being set up on a fundamental base of quality ingredients. You know things that we can really stand behind and from a regulatory point of view, which you know we accepted that the regulatory line was going to be fairly blurry.
We wanted to make sure we were going to stay on the right line of that. You know will be a blurry line. So, you know we’re very comfortable that we set the brand up, right. We’re comfortable that we’ve done everything that we need to do to get normal food validation. And ultimately look, you know we celebrate this move. I think you know everyone be aware that there are plenty of cowboys operating in a market. Like this that is you know high growth, so exciting and ultimately new.
There’s a lot of people who will try to cut corners and try to make a quick buck. That’s not our game, we’re in this for the long term, we’re in this for building long-term consumer relationships and ultimately long-term shareholder value.
But you know we embrace the fact that there is increasing clarity in these regulations. And that you know they’re going to be policed in a way that creates a level playing field for all of the people who are doing it right. Which certainly we are and plenty of other brands are too.
Jay Rosenthal: Yeah, I want to sort of, I don’t know if it’s zooming out or zooming in. But talking about how this relates to Brexit, right. Because the company sort of spans I guess both sides of that. Like what has it been a good thing for the industry and for Grass & Co or like or a bad thing, I guess. I don’t know if it’s so simple as that. But what do you think about that related to sort of the UK CBD market versus what’s happening in the rest of Europe?
Toby Gordon: I mean yeah, so look I mean in many ways you know our company at the moment is largely UK focused. So, you know Brexit on the whole has not been a massive challenge for us. But that said, we have had supply chain challenges. So, you know there’s not much cultivation of CBD that’s going on in the UK at the moment for various reasons. You know our suppliers are importing from other markets, be they European or the US. And Brexit has you know undoubtedly had an impact on that. Brexit has also had; I mean it’s the strangest of impacts on things like cardboard. So, cartons for our outer packaging has been really difficult to come by. So, yeah it has been challenging. You know it is one of those things that you know feels like it’s been a pretty big shot in the foot for the UK economy in terms of you know the complexities that we seem to be adding into everything.
I think, and so I mean I guess the flip side of that is that it has allowed the FSA to take a very different approach to the European Union from a regulatory standpoint. But I think they had the power and the ability to do that anyway even without Brexit. So, yeah, I mean we have had supply chain problems that we’ve had to overcome because of this, and ultimately you know so an opportunity for separation of regulation. But you know an opportunity that I think was there anyway what has happened though is the FSA are now kind of on their own in terms of having to replicate a novel foods processing problem. That the European Union are going to have to do themselves as well. So, you know you’re just doubling up the workload possibly unnecessarily.
Jay Rosenthal: Yeah, your presentation, there was something that really struck me and it was obviously the products are on shelves in store, the products are available direct to consumer. But the rest of it sort of the full complement of like experiential things that go along with the product, right. The eye shades for sleep, like the whole suite of things that become a consumer’s experience directly inter interacting with the brand. And I don’t know if there’s like all of you sat around a table with all of your varied backgrounds and said, we want to give people the full experience of what this product is. And the deeper that connection is the more they will you know be connected to the brand. But I just think in an era where marketing is so challenging the regulations are so challenging. Like the thinking about it there are ancillary or side-by-side products that people will want as well.
Like obviously it’s a great strategy. I wanted to sort of think about how that came to life, because I think it is really a very compelling positioning of the company.
Toby Gordon: Yeah, it’s a good question. I mean I think the way we approach it; I mean you know I’ve got a very strong consumer goods background. You know having worked with Diageo Galambia etc. and but also a lot of the consulting that I’ve done and has tended to have a very consumer-focused project. And again, you know my marketing director again L’Oréal, GSK, Rude Health etc. and a lot of the other people in the team from those kinds of solid backgrounds. And we’re used to developing products that have consumer insight at their heart. And that’s certainly the approach that we’ve taken in terms of building this product. We think about the ritual the life of the consumer that is using our consumable oil. But what else is going on in their life, how else are they dealing with what it is that they’re dealing with.
I mean I think in some ways goes in contrast against some companies who just think about themselves as if you think about yourself as a CBD company and that’s it. And you’re throwing CBD into every format that you think it’ll stick in. Then I think you’re missing a trick because you’re throwing things at a consumer that they’re just not going to understand and be able to piece together. You know when I see stands where there’s kind of brightly colored vape products on one side and then these kind of high-end skin creams on the other. I can’t imagine a retail environment where those two products sit side by side. Let alone a consumer that’s going to um going to want to use both of those products.
So, you know we try to put the consumer at the heart of everything that we do and we try to think about you know what is going to be in their ritual and their lifestyle ritual. That they’re trying to develop around, you know what it is they’re trying to address. What role do we want to play as a brand in that? And that’s what defines the product range that we build.
Jay Rosenthal: Yeah, last question. Because in your presentation you talked about the difference between startup financing and scale-up financing. I want to talk a little bit about that, because thinking from your perspective at your company. Like what would make the perfect investor from your perspective right now.
Toby Gordon: Yeah, it’s a really good question. I mean I think we’re at the stage now where we’re talking about kind of institutional investors. Whereas previously it would have been you know high net worth’s and family offices. I think you know ultimately when I think about kind of the challenges ahead of challenges are you know let’s get ourselves really heavily established in the UK market and then let’s start thinking about which other markets. We continue to grow into from a direct investment perspective. Now obviously in the background we’re also growing out from an international distributor approach. So, we have that export market strategy developing already.
So, anyone who can really come in and help with that is very attractive to us. So, I mean I kind of I think there are kind of almost two buckets that could be really attractive to us. One would be somebody coming in with a strong kind of cannabis focus and maybe upstream assets that can be very beneficial to us in the future. The other can be you know much more kind of traditional FMCG. You know venture kind of fund player for whom you know I think we present quite an exciting you know category growth story. But also, a very strong brand within that category growth story.
Jay Rosenthal: Well, I really learned a lot. I appreciate it. I love the brand, love the positioning. Enjoyed talking to you. So, Toby Gordon Smith thank you for being part of this and we look forward to connecting with you down the road and at other events just like this.
Toby Gordon: Jay thanks very much indeed. It’s been a great pleasure talking to you.
Jay Rosenthal: Great, thanks.
Toby Gordon: Cheers.
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