Editor's Note: Download the audio version below and click here to subscribe to our newsletter.
This week, Steve Gutterman, CEO of Falcon Brands, joins the Cannabis Equipment News podcast to discuss life at the helm of California's largest cannabis company.
Steve Gutterman spent most of his career in financial services, but the cannabis industry enticed him because it was the first industry that reminded him of the early days in online financial services.
But he says cannabis is no different from any other industry: you have to run a good business to be successful.
To remain California's largest cannabis company, Gutterman says Falcon Brands blends authentic "O.G. street cred" with world-class professionalism. The company consists of professionals from Pepsi, Coke, Ford, E-Trade and Black & Decker, as well as industry pioneers. He says it combines precision and professionalism with a passion, and it's proven to be a good pairing.
The cannabis market continues to evolve. A few years ago, bigger was better; companies wanted more licenses in more states. But now, Gutterman says it's better to be deep than broad. He came to Falcon after positions at Harvest and General Cannabis because it's one of the largest companies in California, and the company is focused on building on what it has already built. According to Gutterman, Falcon is the largest cannabis taxpayer in California, making it the largest company — or at least the most honest.
Scaling in cannabis
In nearly every other industry, it's easy to realize economies of scale that simply aren't possible in cannabis. If a cannabis operator is located in 10 different states, it needs 10 different operations working nearly autonomously. Maybe the company saves a bit on HR, accounting, technology and leadership, but Gutterman says that's about it. He says the most successful cannabis companies are the ones that have done many things really well in their state(s) of operation.
Falcon Brands has generated more than $100 million in annual revenue for the last three years. Gutterman attributes its success to creating some of the best brands that customers love, like CRU, Grand CRU and High Garden.
Falcon has a small cultivation footprint but is planning on building and acquiring more. The company also operates highly automated manufacturing and processing facilities in the state, and it runs one of the largest distribution centers, delivering product to 300 to 350 dispensaries every week.
Being one of the largest wholesale buyers of flower in the state is an expensive proposition. Every pound Falcon can grow themselves represents a significant savings. The company is looking at adding outdoor, greenhouse and indoor cultivation to support new product development. The company is also hoping to add dispensaries — it currently has one — and initiate a delivery component. Despite the investment in cultivation, Gutterman stresses that Falcon will "always be buyers."
Gutterman says it took six years for Falcon to be an "overnight" sensation. A great brand is more than a cool-looking logo; he says it's about delivering on a brand promise of consistent quality and professionalism.
Gutterman is fanatical about the quality of Falcon's products, and the company is constantly checking in with customers and dispensaries to make sure it remains in good standing.
Operationally, Gutterman says Falcon leans into automation and tries to do as much as it can to automate not just processes but the flow of information (for example, using ERP systems).
When it comes to the product line, Gutterman believes that flower will remain the dominant way to consume cannabis. He says that it could dip below 50% of market share in mature markets but still remain on top. He's bullish on flower, vapes and edibles, but reticent when it comes to the emerging beverage market.
"In the cannabis industry, it feels like we're just trying to replicate successes in other industries," Gutterman says. He believes issues with consistency and efficacy, pains with shipping and storing, as well as difficulties displaying beverages at dispensaries make it a hard sell. Just because it has been an effective medium for alcohol doesn't mean it's the most convenient way to consume cannabis, he says.
Gutterman admits that very little is known about the cannabis plant, but Falcon will continue to develop new products as the industry learns more about it.
Despite onerous taxes and regulations, Falcon plans to expand in California. However, the company is also looking at new, mature markets. He is confident Falcon can replicate its success in Colorado, Nevada, Oregon and Washington — states in which you have to be better to win, not just hold a license.
Falcon Brands serves 2 million customers per month, and Gutterman will continue to run the business like a world-class consumer packaged goods company as it scales for the future.
Please make sure to like, subscribe and share the podcast. You could also help us out by giving the podcast a positive review. Finally, to email the podcast or suggest a potential guest, you can reach David Mantey at David @cannabisequipmentnews.com.
