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Interview, Part 1: Smoke Wallin, President, Vertical Companies

April 16, 2019

Drinks industry veteran Smoke Wallin transitioned to the cannabis business early last year, becoming president of Vertical Companies, a vertically integrated producer and distributor of cannabis and hemp CBD products with operations in California, Arizona, and Kentucky. SND’s Danny Sullivan met recently with Wallin to discuss the parallels between the beverage alcohol and cannabis markets, as well as Vertical’s brand portfolio and distribution operations.

SND: Where do you see Vertical’s place in the cannabis industry?

Wallin: One big difference in cannabis compared with beverage alcohol is the allowance for vertical integration. We’re able to grow, cultivate, extract, manufacture, distribute, and, if I want to, retail. But our company strategy is focused on building brands, not becoming a big retailer. We have 35 brands of cannabis that have either already launched or are launching in different categories, as well as hemp and CBD separately under our Vertical Wellness company. In the licensed system, California is so much bigger than everywhere else. We believe the big brands that will become national brands are going to start in California.

SND: How are you approaching the brand-building process?

Wallin: If you win in California, you have a real brand. It’s pretty open, and the marketing tools we have are similar to those in the alcohol world. We have celebrity brands and events, and we can do live tastings (or their equivalent) at events. We have billboards in L.A. We have some restrictions—social media companies won’t let us do a direct spend, for example. But we’re partnered with rapper The Game on his brand, Trees, and he’s talking about it on Instagram to millions of followers. We’ve also partnered with brands that are working in Colorado and Nevada. Those markets have had adult use for a few years more than California. When we see a winner there, we’ll take it to California and look to expand it.

SND: What are some examples in Colorado and Nevada?

Wallin: In Colorado, one of the major retailers is called Starbuds—no relation to Starbucks. They have 13 stores and sales of about $100 million. They have a brand called Kaviar, which is an extract and high-end pre-roll brand. We’re handling manufacturing and distribution exclusively in California. In Nevada, the No.-1 edible brand is called Evergreen Organix, and it also happens to be the highest-priced edible. Evergreen Organix is a premium line of products, and it’s in about 40 stores. Evergreen does approximately $30 million a year on its portfolio. So we’ve exclusively licensed that brand for the state of California, and we’ll start producing it this month.

SND: How has the transition from beverage alcohol to the cannabis world been for you?

Wallin: I’ve been involved in cannabis for 15 months now, and it’s moving so fast that it’s like drinking out of a fire hose. The similarities between the beverage alcohol and cannabis markets include the state-by-state regulatory framework, a licensed system of producers, in some cases distributors, and then the retailers or dispensaries. In terms of the differences, in cannabis there are so many different forms of product. You start with the flower, but can also extract the oil to create vapes, edibles, beverages, patches, tinctures, lotions, and medicines. That was probably the biggest learning curve for me. And we’re still in the very early days of the business, so the possibilities are huge.

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