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The Emerging Cannabis Channel: Calyx Brands

Life is full of coincidences.

When I was at my first Industry event in the summer of 2014, I ran into an old entrepreneurial acquaintance, Rich Masterson, who I had known some 18 years ago when I was Director of Marketing for the Newspaper National Network in New York and we were talking to potential vendors to build our first website.

At that time, Rich was CEO of US Interactive, a web development company out of Philly that he was a founder of, and, where he would eventually cash out and go on to use the sizable proceeds of that sale to pursue opportunities of his choosing until that fateful day we met again in Denver. Rich introduced me to his partner, Scott Berman, at one of his current successful gigs, Audience Partners (a targeting software company with many applications including its highly successful patented technology available for political clients via Campaign Grid), and we had a chance to catch-up over lunch and then a beer later that evening.

What we found out was that we were all at the NCIA first national conference that summer to get involved with the Cannabis Industry.

I was there to soft launch CBE Press, and they were there to explore opportunities to invest in the industry. We agreed to stay in touch and had several conversations about ways that we could partner, but never found the right fit but did although we did indeed renew a friendship that had started years before.

Later that fall at the Marijuana Business Daily conference in Las Vegas, I met Dakota Sullivan, who was also talking with Rich and Scott about ideas on how to enter the industry. The group had an idea percolating about entering the industry as a new channel player — in an industry that hadn’t yet established the distribution channel that would be needed to bring new products to the consumer. That would ultimately be through direct sales forces calling on doctors, pharmacy chains, and independents to licensed cannabis stores, and they were exploring a model not unlike what existed in the pharmaceutical field where the influencers and prescription writers (the doctors) were given sample to try on their patients for drugs later sold at the local RX. dakotaCOO Dakota Sullivan

That spring, at ArcView DC, Dakota and Scott pitched their concept and secured seed money to launch the Cannabis Rep Network (CRN). Their business model focused on setting up tours of local dispensary owners and buyers that would entertain the products that the CRN would showcase at these local dispensary tours.

For a set fee, non-competitive cannabis products (edibles, oils, tinctures, waxes etc.) would sign-on for the tours and train the CRN’s team to represent their goods in hopes of gaining distribution the old-fashioned way — store by store and chain by chain, first in California and then in Colorado. CRN was successful in their attempts and began hiring a team to develop relationships with vendors and retailers in their roll-out markets.

As the CRN team was building their idea, capital, and team, entrepreneur Chris Boudreau was in the cannabis space making a decent living building a variety of businesses.  After graduating from Fresno State with a degree in finance and a minor in real estate, Chris worked as a stock broker’s assistant before joining the banking world where he worked as a mortgage lender before moving into to commercial banking. By age 30, he was the head of underwriting and then head of credit administration before his entrepreneurial calling led him to begin exploring and vetting ideas to enter the rapidly developing Cannabis Industry in his home state. Chris photo

CEO Chris Boudreau

Over the next several years, Chris would build one of the larger cannabis delivery services in California, serving markets throughout the state as well as a one of the best dispensaries in San Diego (which is currently closed as it prepares to re-open in the regulated marketplace). The dispensary served as an incubator for Chris’ vision of creating a formal channel to help manufacturers of cannabis products gain distribution at retail locations throughout the state.

He formally started working on the concept by testing products at his stores to determine consumer interest and demand. In the process, Chris formed relationships with more brand developers in the space than anyone else. In 2015, he launched California Holistic Transport,

The vision also clarified itself as the new California Medical Marijuana Regulation and Safety Act of 2015, and it mandated that all cannabis products sold to consumers had to be transacted through a licensed distributor by 2018. With the writing on the wall, Chris considered ways to raise the capital to develop his idea, and knowing Dakota, approached the CRN team.

The rest, as they say, is history.

CBE published a press release sharing the merger announcement and creation of Calyx Brands a couple of weeks ago, and the quote supplied by Christopher Male, Managing Director of Anslinger Capital and a board member of CRN’s parent company, does a nice job summarizing what the merger means.

This exciting merger brings our teams’ many complementary skill sets together under one roof – from sales, marketing and inventory management to warehousing, security and transportation – and positions us as the industry’s leading distribution platform.”

The combined entity has two distinct offerings: The Calyx Rep Network that runs its product sampling and tour arm; and, Calyx Distribution that represents brand sales. The well-trained sales and marketing teams are designated to serve retailers throughout California markets for over 100 brands generating complimentary revenue, as well as distribution and sales revenue. They provide brand feedback for product development and marketing sales and promotion initiatives, as well as lead generation for brands that rely on their own dedicated sales force.

Chris and Dakota are bullish on their 2016 prospects.They expect to generate seven figures in revenue as they build and improve the model, and prepare to move into additional states like Washington and Oregon this year with a goal of becoming the first truly dedicated national broker and distributor serving the Cannabis Industry.

 

Cannabis Business Executive Background Information

Company Name: Calyx Brands

Year Founded: 2016, as the result of a February merger between Cannabis Rep Network and California Holistic Transport. Each of the merged companies was originally started in 2015.

Ownership structure/operating entities: C corp with board and investors

Management Team:

  • CEO: Chris Boudreau
  • President & COO: Dakota Sullivan
  • Colorado GM: Jeffrey Kennedy
  • VP Business Development: Marc Levine
  • NorCal Sales Manager: Jesse Schulman
  • SoCal Sales Manager: Ty Wertman
  • Brand Manager: Kiki Fuller

Headquarters: Oakland and San Diego, California

Website: www.GoCalyx.com

Industry Segment/Category:

  1. Wholesale distribution;
  2. Events/Networking,

Current Markets/States Served: California and Colorado

Current Number of employees: 15

Market Strategy/Goal:
As the first full line wholesale distributor in legal cannabis, our goal is to provide between 10-25% of all the products sold within our target accounts

2014 Revenue: NA

2015 Revenue: Since both companies that comprise Calyx Brands were founded during 2015, revenue was minimal

2016 Projected Revenue: Calyx Brands will produce revenues in the seven figures but we’re still too early stage to publicly share projections

Product/Revenue Mix:

  • 50 percent wholesale distribution commissions and fees;
  • 50 percent brand ambassador “sales tour” fees

Expansion Plans:

Exploring expansion of sales tours to Washington and Oregon. Also planning an expansion of wholesale distribution to Colorado, as well as possibly Oregon and Washington, within the next 12 months

Financing strategy: Completed $500,000 seed round in 2015, and now in discussion for A round in 2016. Both are preferred equity

 

Rob MeagherRob Meagher

Rob Meagher

Rob Meagher, CBE’s Founder, President and Editor-in-Chief is a 30 year veteran of the media world. His career has spanned from stints representing the Washington Post, USA Weekend, Reader’s Digest, Financial World & Corporate Finance to the technology world where he worked at International Data Group and Ziff Davis where he was part of the launch team for The Web Magazine, Yahoo Internet Life, Smart Business and Expedia Travels before starting his own marketing and Publisher’s Representative Firm. He also ran all print and online media sales and marketing for the Society for Human Resource Management before partnering with Forbes and then Fortune to create Special Sections covering a variety of topics. Rob, who started CBE Press in 2014, can be contacted at [email protected]

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