When California started selling adult-use cannabis in 2018, Mike Beaudry was ready to bring his passion for the plant together with his decades of experience leading high-volume distribution companies in the natural and organic products industry.
When Beaudry understood that it was only a matter of time until cannabis would be legal, he began studying the industry. That was in 2014. Beaudry then moved to California in 2016 and spent 2 ½ years on due diligence before launching the company in August 2018. Today, HERBL is the largest cannabis supply chain solutions company in California. The company, which employs nearly 300 people, provides digital marketing tools and transportation solutions to help cannabis operators grow their businesses and brands.
Beaudry said he had to start the company in California because it’s the largest and most complicated market in the world, and if he could succeed in the Golden State, he could succeed in other states where cannabis is legal.
“My thesis was if it turns into a traditional consumer goods business, I have more than 30 years of experience and want to be part of it,” Beaudry said. “When I started looking at cannabis in 2014 and saw it was headed to legalization, I was excited because my experience merged with cannabis.”
In addition to its distribution and retail services, which include inventory management and SKU assortment testing and planning, HERBL also provides its customers with data and insights that can transform demand forecasts into a store-level customer experience and drive wholesale pricing strategies.
HERBL has built a scalable infrastructure that serves more than 850 California retailers and has earned exclusive distribution partnerships with industry-leading brands, including Pax, Cookies, Coda Signature, and Glass House Farms.
The company has five licensed buildings on three campuses in Santa Rosa, Santa Barbara, and Santa Ana as well as more than 40 heavily armored trucks — each equipped with seven cameras — to ensure safe delivery.
“It’s a cross between Brinks and a food service fleet,” Beaudry said.
About 20 of HERBL’s 30 salespeople call on dispensaries. The remainder spend time with brand partners talking about executing promotional and brand strategy in the market. Sometimes HERBL helps build a brand from the ground up; other times it works with an established brand to help build on the base it’s already started.
“We’ve provided quite a bit of input on various points of brand formation,” Beaudry said. “We’ve launched brands from zero and help with everything from naming and design and packaging to positioning.”
As the industry matures, Beaudry sees abundant opportunity for HERBL in California, but he’s also planning to expand into other states where cannabis is legal. With its recent acquisition of the cannabis distributor and software solutions business Blackbird, HERBL will expand into the Nevada market.
“We have significant plans to move cannabis throughout the country,” Beaudry said. “Any large market that has the population density and regulatory framework that fits our model, we’re looking at. It’s what I’ve done a big chunk of my career — scaling things across the country.”
While there is ample opportunity for expansion, the company still has some hurdles to overcome — namely banking. While HERBL has been banked from its inception, many of their clients aren’t.
“The industry is flush with cash, but the management of cash is not something a wholesale business is designed to do, so we had to set up processes to manage cash,” Beaudry said.
Then there’s Section 280E of the IRS tax code that prohibits marijuana businesses from taking federal tax deductions that are related to selling federally illegal goods. That forces cannabis businesses to pay higher taxes than mainstream businesses that are permitted to deduct expenses for marketing.
“That going away would be an important milestone for the industry,” Beaudry said. “Everyone suffers from a penalty tax.”
As the industry has matured, everything from sales and distribution to packaging and labeling has become more sophisticated, opening even more opportunities for HERBL, which offers its retail customers about 1,500 unique products from about 30 brands.
“We see it as creating a friction-free environment for the dispensary and helping them get the right products and brands to enable them to be successful,” Beaudry said. “The industry has really shifted to more of a CPG (consumer packaged goods) model.”