Cannacurio Podcast Episode 38 with Scott Campbell of METER Group

METER Group CEO Scott Campbell joins Ed Keating to talk about how his company’s products help cannabis and hemp cultivators connect science, engineering, and design to improve productivity as well as how his team uses the Cannabiz Media database to connect with qualified sales leads!

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Cannacurio Podcast Episode 38 Transcript

Ed Keating:

This is a Cannacurio Podcast by Cannabiz Media. Your source for cannabis and hemp license news directly from the Data Vault. Welcome to the podcast powered by Cannabiz Media. I’m your host Ed Keating, and today, we’re joined by Scott Campbell, CEO of METER Group. Scott, welcome to the podcast.

Scott Campbell:

Thank you.

Ed Keating:

So, in doing research about METER, it talks about delivering real time, high-res data that helps fuel production and processes for the food quality, environmental research, urban and ag sectors. That’s a lot there. Could you unpack that for us and help us understand more what METER Group does and especially in the cannabis space?

Scott Campbell:

Sure. METER Group is a company that was started 40 years ago by my dad who was a university professor at Washington State and had an idea for a sensor to measure something called water potential, because he was a soil physics professor. And basically, that is the history of the business for the last, I would say 35 years, is as a test to measure business. 

So, we make sensors that go into areas like, you mentioned food processing. So, we make a sensor that measures something called water activity that tells you whether or not a product is going to mold. And so we sell that to companies like Nestle, Unilever, General Mills. And, we also make sensors that are sold to researchers for measuring the natural environment. 

And that’s really how we got into the cannabis business was, we make a sensor called the TEROS 12, that is the most accurate sensor at determining the water content and electrical conductivity of growth substrate that cannabis plants might be grown in, specifically media like Stonewall and Cocoa.

And so as a result, we take that data now and we develop a software and cloud computing expertise that allows customers to increase their productivity and quality throughout that whole process, whether it’s on the cultivation side or on the post-harvest processing side. 

And so it was really our heritage in that test and measure space, combined with the software and cloud computing capability, that made it possible for us to address this big question that is in the cannabis industry, which is, how do I consistently and with highest quality, increase my grams per square foot per year of product that I’m making?

Ed Keating:

Right. Wow. That’s great and what a cool history. I mean, in fact, you guys have been around so long. I think as I’ve gone to trade shows and talked to people, how long have you been in the business? Three years, four years, five years. Never have I heard 40 years, so that’s really very cool. 

Now, you sort of touched on this, in terms of the value chain, this is obviously something that’s sold, I’m assuming, primarily at the cultivation level because it’s down in the substrate and that’s really where you’re going to find those kind of people. 

So, that measurement of water and other things, does that ever make its way into other parts of the complex growing process, or even the processing process where people have to know, yeah, so is it sort of throughout, I mean, probably not at the store level, but at the other parts of the value chain?

Scott Campbell:

Yeah. So we don’t do really anything on the retail side and our sensors and analytics probably aren’t that useful there, but-

Ed Keating:

Right.

Scott Campbell:

But, it speaks a little bit to our history, because when we started out with the AROYA product, and AROYA you might hear the name. But, what we call our business unit that makes this product for cannabis, we call it AROYA. So it just makes it easy to reference that team. And that product and when we started out, it was just a product that helped growers, so these are directors of cultivation or VP of cultivation type folks, see what was happening in the root zone and make better decisions. 

And that comes down to something that has become a buzzword in the industry, but has been overplayed a little bit, called crop steering. So we started out saying, “here’s what you can do to increase the yield in on the cultivation side.”

You measure your TEMP-RH, VPD light in the growth space, but you don’t know what’s going on in the substrate. So, here’s these sensors and here’s the data to help you understand how to improve the feeding of water and nutrients to your plants, okay. So, that’s how we started-

Ed Keating:

Mm-hmm (affirmative).

Scott Campbell:

When you referenced, Ed, the directors of cultivation type people, that’s where we started. And so that’s still where a lot of our customers are, and really, that was the strength of the product and when we launched it. 

But as we’ve gone along, we added a couple of other pieces that are critical to the business. The first is, post-harvest processing. And on that side, we’re saying, just don’t over dry the product. Okay, it’s a very simple concept. Everybody should be precisely measuring and executing to, what we call a water activity, when they’re drying the plants.

Because if you over dry them, you’ve dried off weight that you could have sold and you’ve hurt the quality of your product. Because if you over dry, it hurts the terpene profile, it destroys terpenes to do that. So, we added that piece to it. 

And then on top of those two pieces, which are cultivation and post-harvest processing, because we needed the data to be able to run analytics for productivity, we also happen to know all the plant inventories and it just so happens that if you know this data, you can sync it to Metrc to make the regulatory side easier for those states which, for those cannabis producers who operate in Metrc states. 

So, that’s what the platform is today. But I think the crux of your question is, who else in the organization would need this information or would it help? Let me just talk about somebody like the CFO.

Ed Keating:

Yeah, that’s what I was thinking because it appears to be so Metrc rich. You know, if I were the CFO or the COO, I’d be sitting there with my calculator, my spreadsheet being like, okay, this product here has really helped us improve our margins. Et cetera. So yeah, tell us more about that.

Scott Campbell:

It really comes down to a question, as a CFO or a COO at a cannabis company, how do I tell if we’re winning or we’re losing, come in every day, are we winning or are we losing? And the simplest metric that exists for that is grams per square foot per year. 

Because you can look at everything on the cost side, you can look at what’s happening at retail, you can look at your wholesale prices, but if you’re not consistently and even, we don’t preach perfection, we preach progress. 

So, if you don’t have a system that is consistently measuring whether you are improving your productivity over time, you don’t know if you’re winning or you’re losing. And as a CFO, that’s going to drive the profitability of the business is, are our grams per square foot per year increasing, week in, week out, month in, month out. So it can be a critical, like a KPI for the organization. Are we getting better on this or are we getting worse?

Ed Keating:

So, when I see you at MJBiz in a couple weeks, is that going to be on your T-shirt? You guys will have that, gram’s per square foot per year, talk to me.

Scott Campbell:

Well, and so first of all, yes, we’d have to have those T-shirts made, we don’t have them in stock. The reason why is a lot of people do talk about grams per square foot per year, but what are you going to do to actually influence that number? 

And what we’re saying is let’s keep it simple. It is properly feeding water and nutrients to plants on the cultivation side, and then not over drying your plants on the post-harvest side. This is the thing that so many companies don’t get right. 

And we know that they don’t get it right, because the majority of substrate in the cannabis industry, does not have a substrate sensor in it. Most rooms in the industry still do not have substrate sensors. So that’s kind of where we started and the platform as a whole is much larger than that today.

If you don’t even have that step, then you’re missing out on a tremendous amount of value. So I mean, and just one more thing I’ll say about that, is that industry as a whole is focused on growth at this point. And so, super high prices, 40% year over year growth in retail sales, most of it is, how can we fill this demand? 

But the focus is going to shift in the future to productivity, which is how productively can we meet the demand, and the producers that succeed and thrive in that atmosphere are the ones who can continuously improve the productivity of their operations.

Ed Keating:

Excellent. So a couple questions. One, when you mentioned the whole compliance thing, it made me think about, what about hemp? Because hemp, I think, has some real issues where, depending how it’s dried, cured, et cetera, you could certainly have hot hemp, which means you’re in trouble or could be in trouble or it’s a crop you have to get rid of. 

So, I wanted to ask is hemp a component of your marketplace and who you sell to, or is it mostly cannabis traditional?

Scott Campbell:

Yeah. So most of our customers are in indoor greenhouse growing cannabis space. However, just one month ago we launched an outdoor version of our product, which we’re really excited about, which is a great fit for hemp and outdoor grown cannabis. 

And as you mentioned, getting a hot crop in hemp is a big potential problem. I mean, one really basic question is, was the hemp crop over dried, because if it was over dried, it’s possible that the percentage by weight of THC in the crop is too high. So, it’s a really simple, it gets back to this thing of don’t over dry your product, which is part of what our platform does.

The other thing is that for hemp on the productivity side, if you are trying to harvest hemp and then extract the CBD out of it in order to, because that’s your business, that process is driven by how productive you’ve been able to be on the cultivation side, and it comes down to being able to stress the crop, lightly water stress the crop, or stress it with nutrients at the correct time to increase the number of buds on a plant to be able to bulk on them later in the flower process. 

So the same principles apply, it’s just that we actually use a different sensor for that. Indoors, it’s a EC sensor because we’re measuring something called core water EC, and outdoors it’s something called water potential, because the product’s being grown in natural soils. But that’s the only difference. The same concepts still apply of putting water stress on the crop at the right time to increase the total yield, which works just as well for hemp and CBD, as it does for THC outdoors, as it does for THC indoors.

Ed Keating:

That’s great to hear and sort of looking back on what the hemp industry has gone through these last couple years, over supply and things drying out in barns for a couple years, from 2018, I mean, they could certainly use all the help they get. 

But that does lead me to my question about, sort of what is your customer like and who is your customer? So you mentioned director of cultivation, that makes sense, but are these metrics so sophisticated that you’re really selling mostly to big MSOs and giant SSOs, or is this something that customers or farmers at a variety of levels of complexity, can benefit from?

Scott Campbell:

Yeah, that is a great question. I think our experience so far has just been that it has been the small to medium size grows that are taking up technology the fastest and have the ability to move the quickest. So, we do have wonderful MSO customers, but most of the MSOs are still focused on that volume question, are focused on growth and footprint and getting space through distribution. You know, they’re not focused on operational efficiency at this point. 

So, we actually find that we have a lot more success with medium size and small growers than we do with large accounts, because with the MSO accounts, because the MSOs haven’t really woken up to how critical maximizing cultivation efficiency, and post-harvest processing efficiency is. And they also take a lot longer to move. They’re like large ships that turn very slowly. 

And, I know we’re still talking about a nascent industry and that growth is happening kind of before our eyes, and we might look back in 10 years and see the MSOs of today, which we see as big, as maybe relatively small, but within the industry, they’re still relatively large. 

If we talk about somebody who has four or five states and 20 cultivation facilities, it’s much harder for them to make a commitment than it is for somebody out there that has a 10 or 20,000 square foot grow in a single facility, to make that commitment and to change what they’re doing to access this extra productivity that I’ve been talking about.

Ed Keating:

Yeah, sort of tanker ships versus speedboats. That’s sort of what came into my head as you were describing that. So no, that’s very helpful, and it does kind of make sense where from what we’ve seen, and looking at the data too, where are these big MSOs putting their efforts, into a lot of M&A, and you’re not going to get to those operational efficiencies for years, if ever, in some ways, I think. So, that definitely makes a lot of sense. So a challenge, no doubt. 

But I also think that as the industry matures, these types of ROI metrics are going to be really important. I mean, as you described it before with the grams per square foot per year, it’s that one universal metric that is longitudinal. It’s a little bit like a Net Promoter Score in a business like ours and software, how are we doing, and we can measure it over time.

It’s one question we’re pretty much asking and you track those answers over time and it gets to the root of, are we winning or are we losing, how are we keeping score, as you said. So that’s great to hear, and it’ll be interesting if we do get to a situation where cannabis can start crossing state lines. People are going to start building giant facilities. And then, the pennies, nickels, dimes, whatever that can be extracted really start to matter even more. 

So it seems like, obviously, you guys are well positioned. Now, I was curious, sort of have to ask, how does your team utilize the Cannabiz Media platform? Where does it fit into your marketing or sales team efforts?

Scott Campbell:

It’s been great for us so far because we have been looking for a place that aggregates information on people who are producing product, and allows us to slice and dice that, as we’re looking for specific areas to target, to communicate with customers. 

And really, because of the state of the industry, we hadn’t found before Cannabiz Media, a place that was aggregating that well, and in a place that was actually actionable for us, so that’s been a huge help. 

And just an example of that, as we’ve launched the outdoor platform, now we can go and search on something like that and say like, well, who does Cannabiz Media know about that are players in this area, and specifically target them with a message that’s tailored to somebody who deals with problems of growing outdoors versus indoors. 

So, for us, it’s been a huge boon and it was something that we were looking for, for a while before we found it.

Ed Keating:

Oh, well good. I’m glad you found it, and as the data guy, it’s good to hear that you’re finding things that are helpful in there. We’re constantly searching for new information, we just saw that, well, this one may actually matter, Washington DC just released recently, the list of applicants for a couple licenses that they had available, and I think one of them is for Grow. So, I don’t know how many, but there’s only like one license they’re going to give out, or two and a hundred people applied for them.

It’s interesting, there’s still a lot of interest there. And, we keep our eyes on that, and Illinois and some of these other places that are trying to push things forward. So that takes me into that sort of the looking forward part of the podcast of what’s happening out in the industry, and how does that affect METER Group and others? 

So one question I always ask our guests is, as new states come on board, does that have any implications for you? When is it right to get in there with say, let’s say, New Mexico or New Jersey, or looking way down, New York, Connecticut, when does that matter to you?

Scott Campbell:

The states, I mean it’s such an interesting market, because really there aren’t many markets that have developed in this way. I mean one that I can think of might be, I don’t know, let’s say online used car marketplaces or something. I mean, you have to have a critical mass of demand and supply, but it’s not really national, it’s mostly regional in nature. 

And we see the states as falling into that category of, okay, we have to have a one-off effort in those states to communicate with the licensees and to be able to target them based on whose applied for a license and who’s actually getting up and going and producing. 

So the states for us, and I don’t know if it’s the same way for other people, they kind of make this market a little bit more manageable because we can see how it’s expanding and growing. It’s a highly fragmented marketplace because of that. 

And as opposed to, I can compare it to Canada being a nationwide legalization and looking at how the LPs up there are trying to execute. And in some cases, some of those LPs are so massive with millions and millions of square feet of grow space that it’s not possible to really wrap your hands around and say, well, where’s the value being created and, what problems are they trying to solve? 

I think for us, the state by state approach has been helpful because it gives us a geographical area of focus for a certain amount of time, and we can say, well, where California is now, we expect New York to be there in three years, because you know, it took California way longer to get there. But all that knowledge from California is going to migrate to New York a lot faster. 

So it helps us to conceptualize where the customers are, what problems they’re thinking about solving, because the New York producers, the New York legal producers are trying to solve problems that in California, they don’t necessarily think about anymore. 

So, that’s kind of how we think of things in state by state. We don’t see it as a challenge, as a relatively small business still trying to grow, it’s been, I think, somewhat helpful to us to have the market evolve in this way.

Ed Keating:

No, that makes sense, because it allows you sort of, from a strategy standpoint, to go in the markets with intent, as opposed to trying to pull out the ocean, like, oh my goodness, where do we go next? 

Georgia just released six licenses. Six grows. I think two of them are a 100,000, four 50,000. Is it even worth it for you guys to go try and get that business? Maybe you already know some of those people, but versus in Oklahoma where there’s a ridiculous number of growers. I think it’s now over 10,000, but I think most are very small. Are they the nimble ones you talked about before, or are they couple guys growing it in their garage or barn or something like that? 

So yeah, it does give you a chance to at least assess these markets as they come online and see how it plays in.

Now, before you talked a little bit about the Metrc compliance angle and how that plays in. Is that ever a part of how you decide which states to go into, or most states are Metrc now, there are certainly some that are BioTrack and Akerna, but does that matter as much, like Connecticut doesn’t have one. Yeah, they probably will, but is that just a small benefit to your customers to be like, oh, you can talk to Metrc, that’s great, that’s another plus or something.

Scott Campbell:

Yeah. My perspective on Metrc is that we spend a lot of time developing for that end use in California, and we do have some good customers who are getting a lot of value out of the platform. I don’t, I mean, I think it depends on how serious the state is with compliance, and I know California just came out, just consolidated all of their efforts into the Cannabis Board there. So maybe they are getting more serious about compliance. 

In most cases, we have found that Metrc compliance is still kind of this nuisance that people are willing, that they’re kind of dealing with on the side, and not really a fundamental concern of the business. And so I think if the states, and I know Colorado is more serious about this, we find high demands in states that have regulatory reinforcement action around track and trace.

We find more demand for products like Metrc compliance in states like that. So it’s not just the Metrc states, whether they use Metrc. And I’m not saying that I think the regulatory action should be higher, I’m saying that the producer’s perception of whether it’s a critical business concern is driven by how strict the regulatory infrastructure is in their state. And if that’s not super hype, it’s not top of mind for them. Then for us, Metrc doesn’t really help a lot. Having that interface doesn’t really help much. 

So I think to answer your question, yes, it does, if a state is a Metrc state, it does make it a little bit more attractive us to go into. I can say that the vast majority of customers that we have are still just looking to our platform for increasing productivity, and if they can get some Metrc interface out of it, that’s nice to have.

Ed Keating:

Got it. Now, in terms of who you work with, it made me think of some of our customers who have sort of these integrated greenhouse management systems where they come in and they run, they construct, they build, they do a lot of this stuff. Do you work with those folks? Do they bring you in, or how does that work? Or are you independent of them and sort of running on your own circulatory system, if you will.

Scott Campbell:

Yeah, it’s more the latter and where that becomes more relevant for customers is the interface to control systems, things like irrigation control. But unlike countries, like Holland for example, or even some of the systems that made their way into Canada, the industry is so fragmented that most of the solutions that people use are pretty one-off. And for greenhouse or indoor controls, it’s kind of treated like HVAC, which tends to be pretty regional and specific. 

Most of the companies we see they’re medium to small size system integrators. They’re not companies like Preva and Hogan that own the global indoor growing market and put in million dollar systems in places. Just people are not big enough for those companies right now. 

Most of the solutions they’re trying to implement, I’ve seen Honeywell Building Management Systems being used at cannabis grows. I’ve seen everything from a basic thermostat system through TrollMaster, though — lots of these things are smaller, not really enterprise tools, and so we don’t have a big connection with them. I think that’s going to happen more as the industry grows and the average size of a grower increases. 

But the place where we do find that it’s helpful to collaborate is on something like an irrigation control system, because we can set up the way the grower wants to grow in something we call a recipe, and then it can get executed through a control system. 

And that is just barely starting. We do surveys of our customers, like what systems are you using for environmental controls and irrigation control? And it’s just, it’s 20 or 30 different systems. There’s not a lot of consistency site to site.

Ed Keating:

That makes sense. That does. We’re in the end process of doing our point of sale software survey, that’s hard to say. And last year, I thought we’d hit the high water mark. I think we were at like 64 vendors and thinking, you know, it’s crazy. 

We found even more this year, even though the top five vendors control about 60% of the market. So that leaves like 70 people fighting for the other scraps. So it’s definitely a crazy, crazy market. 

So, but speaking of the market, the last question I want to ask, so I think it was last week that you acquired a company called Drying Technologies, and how do they fit into what you offer and what will this mean going forward for METER Group?

Scott Campbell:

What Drying Technologies does is, they model the drying process and make it more consistent and repeatable. And so our purchase of them allows us to launch tools at customer sites that look at what’s going on in your drying rooms. 

So let’s say you have five different dry rooms and you have different, let’s say that you have multiple harvests in these dry rooms. Let’s say that you have 10 harvests in the five dry rooms. They’re all at different states of the progress toward being dry and ready for processing. 

And what we’re able to do is to model that process and tell you in real time where each of those batches is, so that you can predict the day that they’re going to be done, and make sure that you don’t overdrive them.

So, it’s really an operational kind of execution thing where we try to provide those insights to the post-harvest process team, so they know when the product is coming out and they can plan their staffing for then bucking and trimming product post-harvest, and they never have a situation where one of those batches is going to get over dry. That’s the idea behind the acquisition of Drying Technologies.

Ed Keating:

It makes a lot of sense. I think back to past industry I was in, that was really a lot of compliance technology in the legal, financial, in other spaces. And we had a CEO speak and he had redone the whole company and a lot of it boiled down to the simple question that they asked us. They went out to their various marketplace, and they’d say, what were you doing the 10 minutes before you used my product? And the 10 minutes after? And as they got smarter, they started to own a greater share of day. 

And it sounds like that’s sort of what you’re doing too, where you’re understanding what happens to that plant as it moves through the process and how can you help those people with the great metrics and results. 

So congratulations on the acquisition and it sounds like you’re really in a great position, Scott, with METER Group.

Scott Campbell:

Ed, let me just make one point about that, because I really like that point. People often ask me, who do we compete with? And there’s plenty of competitors. You know, if you go out and look at people who might be measuring substrate might have something they call cultivation management software or things like that. 

We classify ourselves as a Cannabis Production Platform, which means we do the whole thing. But the thing that we compete with the most is whiteboards and Google Sheets. It’s taped calendars on the doors of grow rooms.

Ed Keating:

Called Self. I used to work in an industry where we call that self. People would do it on their own.

Scott Campbell:

Right. And we see everybody using those systems, so we know that they’re important. And we don’t mean to say that those paper based tools, or kind of lightweight based tools, are a bad thing. They’re actually hard to replace because they work quite well. 

So we consider that to be the challenge we wake up every morning to address is, how can we give people the tools that improve on those pieces that they have right now? 

And if we can replace whiteboards with task lists, if we can replace feeding schedules nutrients with an automated process that lets the grower accomplish what he or she’s trying to do but does it automatically, that’s where we feel great about having delivered that product into a customer’s hands.

Ed Keating:

That makes a lot of sense. So, Scott, thanks so much for joining us on today’s podcast. This was a great discussion. I’m your host Ed Keating. Stay tuned for more updates from the Data Vault.