Interviews

Derek Peterson, CEO & President Of Terra Tech Talks Entrepreneurship And Branding

Derek Peterson is a versatile multi-faceted businessman with a proven track record of success

Derek Peterson, the founder, President, and CEO of Terra Tech Corp is a versatile businessman with a proven track record of success. Derek sat down with us to talk vertical integrations and serial entrepreneurship in the cannabis industry.

 

 

Marijuana Retail Report:           Can you tell us a little bit about Terra Tech and how you decided to take the leap from  Wall Street to the retail marijuana industry?

 

Derek Peterson:          The leap for me was kind of driven by just a kind of a distaste I ended up developing on my prior career path, which was finance and investment banking. I had started my career in 2000, so most of my career in finance was implosion. It was the dot-com implosion, it was September 11th, it was the credit crisis of 2008. I just became disenchanted with the industry and essentially really started to look around for some other options and opportunities.

There was a lot of discussion going on at that time about cannabis and its development. CNBC had that special, Marijuana Inc., that came out. I just started to kind of look at the industry from kind of an analyst perspective, a Wall Street analyst perspective, and when I started to dig into the numbers. There weren’t a lot of them back then. There wasn’t a lot of kind of quantifiable data, but when I did start to kind of assimilate some of the data that was out there the thing that was really kind of the proverbial light bulb for me was the sales revenue per square foot.

If you look at your average retailer, like a Target or Walmart, they’ll do a couple hundred dollars in revenue per square foot. If you look at some of your higher end retailers, like a, I don’t know, a Cartier or a Louis Vuitton, you get 1,000, 1,500 dollars in revenue per square foot. There’s one outlier on the planet. It’s Apple computer. That does a few thousand dollars.

What I was finding with these retail dispensaries specifically was a lot of them needed to be small. They didn’t want to be overly overt in nature because they had to hide from the Department of Justice still to a certain degree, because it wasn’t the climate that it is today or what it was six months ago. Because of that, they had small facilities, but they were doing a tremendous amount of revenue. I saw the revenue per square foot of a lot of those places that I was looking at were three, four, five thousand in revenue per square foot. That’s really kind of what developed my major interest in the space and caused me to kind of jump in and start to build the company.

ADVERTISEMENT

 

Marijuana Retail Report:          Terra Tech is extremely diversified. How did you decide which parts of the market to tackle?

 

Derek Peterson:          A lot of it was legislative-driven. It was, say, risk reward and legislative-driven. When we first started the company we started off as an equipment provider. We manufactured lights and carbon filtration and those types of things you would utilize in a grow room. As the industry started to progress, and as Obama and Eric Holder came out and began to develop new thought approaches to how we’re going to treat states’ rights, we then began to start to kind of cross that proverbial green line.

The first course of action was we began to start to develop permits throughout the Nevada marketplace. They happened to be going through a legislative process. A tremendous amount it was just dictated by kind of the risk climate from a political standpoint, coupled with the available legislative stuff that happened to be out there. At that time, again, it was Nevada, and then obviously in California, there was the beginnings of some regulated market develop there that we decided to jump into as well.

 

Marijuana Retail Report:          Edible Garden, a subsidiary under your umbrella, has deals with some of the biggest names in the marketplace, ranging from Kroger all the way to Walmart. How did you guys manage to bridge the gap from medical cannabis to organic home produce?

 

Derek Peterson:          Well, that was done as a hedge. It was, again, at that time where, California especially, we had Department of Justice was cracking down on dispensaries. People were getting arrested and compliant operations were getting closed up. I didn’t want all our eggs in one basket, so I tried to think of an industry that we could kind of work simultaneously with developing the cannabis industry, so at the same time, it was a hedge but also a synergistic hedge. What I mean by that is if we woke up one morning and the feds decided to really crack down and stifle the industry we at least had some semblance of a business model that we could continue to build and develop and grow without having to call it a day and shut the entire company down. That kind of synergistic hedge, as a fast forward in the current political environment, has turned into very a kind of synergistic relationship for us with the industry. It’s been very complimentary because the stuff we do on the agricultural side, we’ve been able to bring a lot of those standard operating procedures and protocols over cannabis side. That commercialization of cannabis has really given us some tools to be able to push the envelope a little bit, figure out better ways to cultivate, reduce our cost of goods. At the same time we’ve built a tremendous infrastructure in the Northeast that with Chris Christie stepping down in New Jersey, and the two candidates running to replace him are very favorable for not only expanded medical but also adult use, and that gives us a firm footprint in that marketplace. Again, what kind of started off as a hedge has become just a little bit of luck and a little bit of kind of strategic planning has turned into a great compliment for the company on a go forward basis.

 

Marijuana Retail Report:          With IVXX, another company in your portfolio, you have high-end cannabis products. What was the process of initially bringing that brand to market?

ADVERTISEMENT

 

Derek Peterson:         Well, we just thought there was a huge void in the marketplace with quality-designed products. You look at every other industry in the world and people spend most of their effort and energy on packaging and marketing. It just wasn’t being done in our space. There was some amazing product that’s being cultivated and being essentially put into these little, tiny jars, glass jars, paper bags, Ziploc bags, you name it. We really wanted to push the envelope and began to design a wholesale division and a wholesale product line that was catering to the upper echelon consumer base that was out there. If you look at our products, if you look at the packaging, it’s almost like what you would see in, say, a high-end cosmetic or a high-end piece of jewelry or something of that nature. That’s what kind of gave us some shelf space that we probably wouldn’t have otherwise been able to get out of the gate because we really differentiated ourselves from the competition. It’s the same thing we’ve really tried to do on the retail side is bring a homogenized, consistent approach to the industry so that people can get the same product month in, month out. Same experience month in, month out, location to location. You don’t tolerate that anywhere else in any other industry except for the cannabis industry. If I go get a latte in San Diego at Starbucks I expect to have that exact same product and service experience in Boston. That currently doesn’t exist in the cannabis industry, and that’s one of the things we’re trying to solve, both on the wholesale level with IVXX, but also on the retail level with Blum.

If you look at our products, if you look at the packaging, it’s almost like what you would see in, say, a high-end cosmetic or a high-end piece of jewelry or something of that nature. That’s what kind of gave us some shelf space that we probably wouldn’t have otherwise been able to get out of the gate because we really differentiated ourselves from the competition. It’s the same thing we’ve really tried to do on the retail side is bring a homogenized, consistent approach to the industry so that people can get the same product month in, month out. Same experience month in, month out, location to location. You don’t tolerate that anywhere else in any other industry except for the cannabis industry. If I go get a latte in San Diego at Starbucks I expect to have that exact same product and service experience in Boston. That currently doesn’t exist in the cannabis industry, and that’s one of the things we’re trying to solve, both on the wholesale level with IVXX, but also on the retail level with Blum.

 

Marijuana Retail Report:          Considering Blum is in the Nevada market now after starting in the California market, can you tell me a little bit about the process of starting a dispensary like Blum? What were some of the challenges of going after the two state market?

 

Derek Peterson:          Yeah, that’s a good question. We see it as twofold. We see it as we need to go after multiple locations in order to have brand penetration. There’s no way you’re going to get brand penetration having two or three stores in the same state. We also knew to begin we weren’t able to go into multiple markets. If we’re flying out there and starting to work in seven different states, we just don’t have the bandwidth or infrastructure to be able to accomplish that. We didn’t want to get out over our skis, for lack of a better analogy, and crash and burn. Our way to kind of develop broad brand penetration for both the wholesale brand and the retail brand was to focus on what we thought were two core markets. California obviously, sixth largest economy in the world and it speaks for itself. We wanted to make sure that we were able to have coverage throughout that from both the wholesale and retail level.

Now, Nevada’s an hour away, so that was a great other location for us to be able to focus on because it’s close in proximity, it’s easy to get to, but the beauty of Nevada is not the patient base or the consumer base that lives in state, it’s the 40, 45 million people that travel into really what is essentially a few square miles every year. We’ve got a great saturation through both Reno and the Las Vegas marketplace, and we’ll be distributing our wholesale brand out there as well. That was not only a great place to get additional penetration in and of itself, but you get brand exposure internationally because you’re driving a consumer base from all over the globe there. That was a natural selection for us. That was a way for us to get a lot more kind of airtime for our products, almost what we would’ve gotten if we had gone to six or seven other states. That was the decision behind jumping the border between those two states. Those are our primary focuses and we’re kind of sticking with those until, say, New Jersey where we have the synergistic Edible Garden footprint already developed.

 

Marijuana Retail Report:          You also have MediFarm under your Terra Tech umbrella. Especially having dispensaries now in two states, and trying to go national once regulations and laws are in place, how does MediFarm manage to deal with the web of laws that seem to change both from day to day and from county to county?

ADVERTISEMENT
ADVERTISEMENT

 

Derek Peterson:          That literally is probably one of our deepest divisions because of what you just said, the administration, the legislation navigation associated with it, because it’s not only what you’re dealing with states by states and the different rules and regulations they have around the way you grow, distribute, package, narc it, etc. and so forth. You really lose a lot of economies of scale because of that differentiation associated with that.

We’ve got to constantly balance that state level kind of … The state level differences and dichotomies even at a county level. In Nevada, for example, that state operates a lot differently than California operates, but even within the state itself, Reno operates different than Clark County. Clark County operates different than the city of [inaudible 00:10:56], which operates different than Henderson. You’re going to see that in California. What happens is once the states pass their rules and regs, the first thing you see is the major cities, municipalities, will then develop additional regulations and legislative hurdles over and above those. What we’ve had to do in response to that is we’ve got a very deep government relations and legislative team. We call it our compliance team, because not only is it a publicly-traded company, we’re having to balance the rules of being a publicly-traded company, but we’ve got to balance that against all the other legislative hurdles.

We’ve built a very comprehensive department that’s able to monitor what’s going on with the changes of laws, make sure we’re adhering to the rules and regulations, essentially, like, I said, a compliance department to make sure we’re in complete adherence with both state, local, and national as much as we can, rules and regulations.

 

Marijuana Retail Report:          Does the current federal administration’s attitude towards cannabis concern you? How will that affect your grow strategy moving forward?

 

Derek Peterson:          It does concern us. I think anybody that it doesn’t concern, with the rhetoric that’s been coming out from there, is taking things a little bit too lightly. That being said, we’re not the market that we were four years ago. The only piece of legislation they didn’t pass nationally was Arizona, which is a very red state, but I think it only failed by one or two percentage points.

We’ve got a tremendous amount of swing states that have passed regulated cannabis and we have a tremendous amount of bipartisan support that we didn’t have a few years ago. We have a really well organized activist community around the industry. We’ve got a huge business community with major thought leaders that are close to the administration, like Peter Thiel, who that have invested and put their capital into the industry. We’ve got a lot of things going for us that we didn’t have originally, as well as quantifiable data points.

ADVERTISEMENT

What I think is Jeff Sessions isn’t doing this to hurt anybody. I think he actually genuinely thinks he’s doing this to protect people, but the science and the data is telling everyone else otherwise. I think they’ll either begin to start to be open and learn about that, or they’re going to meet with severe and swift resistance across the activist and business forefronts. I think they’ll be a point of contention and there will be a lot of arguments and things happening over the next, say, 12 to 24 months. It’s something we’re used to at this point and that we’re monitoring. Is it affecting our grow strategy? Somewhat. We’re simply being smarter about where we spend our money and where we go so that our activities are the safest and most effective activities that we can possibly take, rather than just recklessly grabbing market share.

 

Marijuana Retail Report:          Having a background in finance and in money management, what do you see happening with the industry as a whole in terms of credit card processing, being able to make deposits with a bank in safe and secure manner? Do you see federal regulation on the way or do you see states taking the first stab at that?

 

Derek Peterson:          Well, I think for the states who are already taking a stab at that like California, the Board of Equalization, which is the tax collecting authority, this has become very cumbersome to them administratively in terms of dealing with the cash. There’s no audit point for them to go into a bank and reconcile everything and see if everybody’s been upfront about the sales and whether or not they’ve paid the associated tax. To me it’s just a matter of time before we see something like that happen, but, again, we’ve got a lot of chaos with the current administration on a multiple of subjects. We’ve all got to get used to making sure we know how to operate effectively and efficiently as much as possible on a cash basis and work with our vendors and the people that we transact business with to make sure there’s continuity until we can have some broader reform. I know on a state level and a federal level there is tremendous movement in the space, but it’s … I don’t know if now’s the time we’re going to necessarily see it happen, but it needs to happen eventually.

 

Marijuana Retail Report:         Well, you guys are obviously one of the most vertically-integrated and diversified brands in the cannabis industry. What’s next for you and for Terra Tech?

 

Derek Peterson:         We’re really looking forward to massive growth in the space and that comes along with massive financing. If you pay attention to what’s going on in Canada right now, which is a very kind of federally-developed marketplace, which is a lot like what it would look like here if we got our act together from a federal standpoint, you see the big Wall Street banks up there or the Canadian financing banks raising 50, 75, 100, 150 million dollars for a lot of these companies. They’re going out and they’re grabbing market share not only in their current markets, but exporting to Germany, Florida, Arizona, and Las Vegas.

I’m really potentially looking forward to an opportunity where we can get some real significant financing for a lot of the lead companies in this space and they can really use that to grab market share and continue to grow their businesses. Until then, we’re going to have to kind of, I hate to use the term, but limp along a little bit on this fragmented approach. Again, the fragmented approach has been a double-edged sword. The fact that we’ve had this dichotomy between state and federal laws has created a lot of headwinds for all of us, but it’s also given us kind of an incubated environment that we wouldn’t have otherwise had. If we were federally legal three years ago, would big alcohol, big tobacco, or somebody have come in and really just developed this and all the kind of fragmented cottage industry players would’ve been pushed to the side? There’s two sides to that coin and we look at it from that perspective.

ADVERTISEMENT

On a go forward basis, we’d really like to see the federal situation resolved as well as the banking issues resolved. We’d also like to see people be able to go out and get traditional financing, equity and debt-based financing, to really execute on their business models. That’s really what we’re in it for and while we’ve had to take a step back on some points with the current administration, we look forward to the eventual leap forward.

 

Marijuana Retail Report:          Derek Peterson, chairman, CEO, and president of Terra Tech, thank you so much for your time today.

 

Derek Peterson:          I appreciate you guys covering us. Take care.

 

Stay up-to-date!

Get all the news and info straight into your inbox that you need to help grow your business.

Click to comment

Leave a Reply

Your email address will not be published.

  • Flourish Software
  • www.cbdforlife.us
To Top