Marty Sumichrast, Chairman and Co-CEO of cbdMD, Discusses Mergers & Acquisitions in the CBD Space, Consumer Trends, and Advice For Teams To Thrive

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AUTHOR: Heather Allman

PUBLISHER: CANNABIS LAW REPORT

 

Interview With Marty Sumichrast, Chairman and Co-CEO of cbdMD

 

Alphia and Tilray will be closing its merger in Q2’21. This deal among many others contradict 2020 predictions of a market downturn for CBD this year. Almost one year into COVID, did the pandemic drive M&A for CBD, rather than squash the industry?

To answer this and other questions, Marty Sumichrast, Chairman and Co-CEO of cbdMD, talked with us in April 2021 to give us his views on mergers and acquisitions in the CBD space, his insights on legalization, challenges and his advice for those in the space, and the mission and values behind cbdMD.

Marty Sumichrast, CEO of cbdMD

 

Cannabis Law Report: Tell me about cbdMD. Why CBD? 

 

Marty Sumichrast: cbdMD is a public CBD company (NYSE  American:  YCBD) that goes beyond giving consumers access to quality CBD products. Our mission is to bring education, awareness, and accessibility for all to the CBD marketplace. We offer a diverse variety of alternatives for customers seeking CBD products – from athletes who need training recovery, to pet owners prioritizing wellness for their beloved furry friends, and even to consumers in the UK who are looking to enhance their everyday health and wellness.  

 

At the end of the day, our number 1 goal is to provide everyone access to Superior Broad Spectrum CBD products. Beyond just our wide array of products, we have an incredibly expansive online marketplace accessible to consumers all across the globe.  Through a number of industry breakthroughs, innovative products, industry-leading manufacturing methods, and exceptional marketing efforts, we’re proud to say that cbdMD is now one of the most recognized and trusted global health & wellness CBD brands in the highly competitive CBD product space. 

Most recently, we’ve sponsored the consumer-focused SPAC, Adara  Acquisition Corp, a newly-organized blank check company. We also just announced the formation of cbdMD Therapeutics, a wholly-owned subsidiary, for the purpose of isolating and quantifying the company’s ongoing investment in science to its existing and future products, including research and development activities for therapeutic applications, as they relate to pain, inflammation, sleeplessness, and anxiety. 

As for ‘Why CBD?’, there’s no one-size-fits-all answer. To put it simply, CBD and other cannabinoids help support your endocannabinoid system, which plays an important role in your day-to-day health.

CBD is an incredibly popular wellness tool among college students, working parents, elite athletes, and active seniors alike, and CBD products make a huge difference in millions of people’s lives all over the globe. 

There’s an abundance of ways to experience CBD, and you can even mix and match products to suit your individual needs. With options like pain-relieving topicals, tasty gummy treats, capsules for easy daily use, and dedicated sleep formulas, there are endless possibilities for integrating CBD into your daily life.

 

CLR: What is the mission and vision behind cbdMD? 

 

Marty: cbdMD’s mission goes beyond the traditional production, sales, and marketing of CBD products. Of course, we want cbdMD’s products to become a regular and useful part of people’s everyday lives. But our vision stretches far beyond that. We aim to provide consumers with the right tools to make informed, personal decisions about their health and wellness.  This is precisely why we prioritize awareness and education in our marketing and customer service departments.

 

 

 

CLR: Anything particularly challenging about running a premium brand in today’s market? 

 

Marty: Biases and misinformation about cannabinoids are some of the biggest challenges we face as a premium CBD brand.  This is an obstacle on both the consumer and financial fronts. The rapid expansion of the CBD space has created fertile ground for companies that do not have the interest nor bandwidth to go through the necessary steps to formulate high-quality products on a consistent, accurate basis. The result is a great deal of confusion about regulatory issues, dishonest marketing, a glut of poorly produced products, and substandard customer service.  These issues can alienate large segments of consumers since their expectations aren’t always met in their initial experience. First impressions are key to a new segment like this one, and many companies do not rise to the challenge. We combat these issues the only way we know-how. We lead by example and build trust by investing time and energy into doing things correctly.

 

CLR: How did you get started in CBD?

 

Marty: We acquired cbdMD in December 2018. Our company was originally called Level Brands, and we were looking for an opportunity to enter the CBD business. We closed the transaction on December 21, the day after the Farm Bill was signed into law on December 20, 2018.

 

 

 

CLR: Who taught you about or how did you learn about business? Do you have a mentor concerning CBD? 

 

Marty: While I don’t have a specific mentor concerning CBD, I can tell you who taught me about business. My father got me involved in the business world early on, back when I was in my early teens. When I graduated from college, I helped him with some of his real estate dealings in Washington, DC, where I’m from, so that’s how I initially became involved. From there, I became interested in the Wall Street world of investment banking and, fortunately, it led me to cbdMD and where I am today.

 

CLR: What is it about the position of CEO and Chairman that most attracted you to it?

 

Marty: I actually served as Chairman and CEO prior to the acquisition. I think I’ve always been my own boss and consider myself an entrepreneur, so that’s what attracted me to becoming the Chairman and CEO of cbdMD.-  What do you enjoy most about your job? The upsides? I think that the ability to build a company, the ability to attract great people, to motivate everyone around you – I think those are the things that I enjoy most about my job. 

 

But, beyond that, the upside is that I can set my own time and do what I’m passionate about, although demand sometimes dictates what I do, so I obviously have to be flexible. I have a lot of responsibility as well.

 

CLR:  How is your actual job different than the job/role you thought it would be? 

 

Marty: I’ve been fortunate to serve as a leader of all the companies that I’ve been involved in, so my job really isn’t any different than what I expected, as my experience prepared me for what I was getting into.- What are the downsides of being an executive? Obviously, there’s a lot of risk and there’s a lot of responsibility.  And it’s a job that requires 24 hours a day, seven days a week attention. You never know when something is going to happen, or when an opportunity is going to arise. So, you’re always available, you’re always online, and you’re always ready for anything.  

 

You’re going to have to make a lot of decisions, and you hope the decisions you make are good ones. So I would say the downside is you can get boxed in a little bit, and there can obviously be a lot of stress.

 

 

CLR: In the June edition of CBD Business Times, 34% of respondent consumers have been using more Cannabis and CBD since the 2020 COVID-19 crisis started.

In case of our current crisis, Cannabis and CBD have been deemed, or defaulted to being, an essential service. Why is quality CBD and Cannabis crucial right now more than ever?

 

Marty: think that we’re all taking self-care and wellness more seriously than ever before, and the events of 2020-2021 are a large factor.  Along with the physical health concerns people are facing these days, people are recognizing the importance of smart mental health routines – especially if they reside in states of relative isolation due to stay-at-home orders.

From my view, this has been a trend for some time, but recent circumstances have certainly accelerated people’s interest in maintaining optimal health.

 

 

 

CLR: How have consumers changed since you started in the CBD space? 

 

Marty: Early CBD adopters among consumers have become increasingly sophisticated, passionate, and exacting in their standards for CBD. And we’re happy to see that. Those consumers often serve as our greatest ambassadors in online forums when new adopters have questions. And as time goes on, we’re continuing to see the demographics broaden

 

CLR: What type(s) and/or demographics of consumers are you seeing now? 

 

Marty: Our regular customer base really hits all adult demographics, and we’ve seen a surge in both interest and demand across the board – both in America and overseas – which is why we recently expanded into the United Kingdom, officially launching cbdMD’s direct-to-consumer website exclusively for customers in the U.K. In particular, we’ve seen an interesting trend involving significant growth among  Active Seniors (55+), who report using CBD for temporary relief from daily pain and discomfort, Working Parents (35-54), who are seeking alternatives to enhance their overall health and wellness, and Millennials (25-40), who are turning to CBD to help manage stress and promote better sleep.

 

CLR: What consumer product or service demand do you see trending currently? 

 

Marty: To reiterate what I highlighted earlier, it’s clear that the events of 2020-2021 have led to an increased focus on maintaining self-care and prioritizing overall wellness. Not only are consumers turning to CBD now more than ever to support a healthier lifestyle, but we’re also seeing many pet owners opting for CBD alternatives to provide those same benefits to the pets in their lives. In part, we think that’s why Paw CBD, our award-winning, hemp-derived product line for cats and dogs, has become one of the fastest-growing brands in the pet CBD space.  

This year alone, Paw CBD has experienced record quarters of net sales, expanded its partnership with regional grocer Save Mart to now include Paw CBD products in 100 additional store locations in the western U.S., and Paw CBD even made its national television debut, airing its first-ever TV ad campaign during Puppy Bowl XVII. In addition, CBD supplements have been one of the fastest-growing wellness product categories in the last decade, and market research experts expect hemp-based products to continue to dominate the global CBD skincare industry. 

For that reason, we recently launched cbdMD Botanicals, a luxury CBD skincare product line that fuses our patent-pending Superior Broad Spectrum CBD formula with select plant-based oils and nutrients – all without the use of harsh chemicals. This is particularly exciting for us, as the beauty market is an entirely new market with a lot of promise and opportunity. Between our status as a CBD innovator and track record of continuing to produce best-selling products across multiple categories, we feel confident that cbdMD Botanicals is perfectly positioned for the coming boom with a unique opportunity to provide innovative products far into the future. As it pertains to products, we see heavy interest in the convenience and flavor of our CBD-infused gummies from new users, and experienced users gravitate towards tinctures for their versatility. 

On the service side, we’ve seen increasing adoption and use of our  Autoship program as CBD products become an important part of our customers’ daily lives.

CLR: Why is CBD M&A  on an upturn for 2021, and what sparked this trend in 2020? 

 

Marty: There was obviously a big push in the CBD industry in 2019 with a lot of new companies emerging after the passage of the Farm Bill, and so the market became very crowded.  Then, in 2020, I think that many companies that began offering CBD products naturally started to pull back.  And, of course, the pandemic certainly affected that dramatically.  As we head into 2021 with the new administration, there is currently new cannabis legislation being considered, and I do believe that could potentially impact CBD. Overall, I think that a lot of CBD companies have effectively thinned out, and it’s really a two-horse race, with cbdMD among the two brands leading the pack.  And, now, the larger companies are all seeing what’s going on and saying, ‘OK, we want to break into the biggest CBD market, which is currently the US market.’  There was one CBD company that went public in Canada, so there are obviously some offshoots. But clearly what sparked this trend is that the CBD industry has somewhat matured and the bigger players want in. So, it’s going to be very interesting to see what happens

 

CLR: In what US regions will CBD see the most growth? 

 

Marty: CBD use is historically higher in states where cannabis is fully legalized in all its forms. So it would make sense that the greatest growth potential for CBD, and hemp products in general, would be in states where full legalization hasn’t taken place.

 

CLR: What do you expect to see as it pertains to M&A  in the CBD industry for the remainder of 2021?

 

Marty: I think that it’s only going to heat up, and I think it’s going to be a very interesting 2021.-  What future impact does cbdMD actively strive to make in the growing national CBD space? From founding national holidays like National CBD Day and National Hemp Day, to assembling the CBD industry’s most elite roster of top athletes on  Team cbdMD, we consider ourselves trailblazers in the CBD space. Through a number of industry breakthroughs, innovative products, industry-leading manufacturing methods, and exceptional marketing efforts, we’re proud that cbdMD has quickly become one of the most recognized and trusted brands in the highly competitive CBD product space. We have every intention of transcending the label of ‘CBD brand’  to become a leading international health and wellness brand. Certainly, our primary focus is our Superior Broad Spectrum products. But we believe we’re in the business of helping people build better routines that contribute to a higher quality of life.  That’s our goal, anyway, and I like to think that we’re succeeding.

 

 

 

CLR: In your opinion, what are the biggest challenges faced by Cannabis and CBD executives — that are possibly not faced by other business counterparts — especially when it comes to this industry? 

 

Marty: From the cannabis perspective, obviously, that’s a whole different situation because it’s currently federally illegal, so those issues are very systemic. However, on the CBD side, the issues are somewhat of a banking issue in my opinion, although I think that’s somewhat been resolved. With regards to advertising, the CBD product category is not available to the majority of mainstream media and mass retail. So, when you’re selling other products in categories in which you can advertise anywhere you want and sell anywhere you want, it’s a much different avenue.  Those are essentially the two biggest challenges in my opinion.

 

CLR:  What business-related advice that you know NOW would you want to offer yourself when you just started out in the CBD market? 

 

Marty: Oddly enough, I think that we actually gave ourselves good advice. I look back, and I’m really pleased with our original philosophy, and with what ultimately became a winning strategy for us:  To focus on the brand and to focus on building the core business.  To not get distracted by this concept that you need to be vertically integrated, which turned out to be a total and absolute falsehood. Unfortunately, a lot of companies that went that route were unable to find success for the most part. 

The third thing we really focused on was the smaller retail and brick-and-mortar side. So, those three things were the core for us, and they continue to serve as the foundation of our company as a whole.

 

CLR:  What aspects of companies are succeeding in CBD, and what can companies do to thrive given the current market? 

 

Marty: The leading companies in the CBD industry, cbdMD included, have invested heavily into current good manufacturing processes, quality control, established best practices for their product categories, and the right personnel to oversee all of that.  That’s the foundation on which the house stands. No amount of marketing prowess can or will replace that. That’s what builds trust with consumers, and by extension, partners and retailers.

 

 

CLR: Keeping up with the customers: Why CSR is no longer enough. Let’s go beyond Corporate Social Responsibility. Talk to me a little about “positive impact” and what that means for you at cbdMD? 

 

Marty: Aside from just our products, I believe that the messaging behind what we do is just as important. From our view, the best way for cbdMD to positively affect people’s lives is to arm consumers with accurate information. It all starts with the proper messaging and education around our products, and the plant that they come from. Obviously, we want to attract customers, and we believe we’re making the best product available. But if people use our educational materials to make sound, informed decisions about their health, and even if they ultimately choose another brand because those products better fit their lifestyle, we’ve still made a positive impact. 

That commitment to education and awareness is what separates us from the overwhelming majority of our competitors, and it’s something we won’t budge on.  And it’s especially important considering how many CBD companies so blatantly, and dangerously, misinform consumers. Not to mention, misconceptions and misinformation have led to the false narrative that the impact of cannabis is mostly negative, when in reality, the benefits are seemingly endless. Ranging from clothing to building materials to everyday wellness products, the sheer versatility of cannabis and CBD can positively impact the world – and all of us – in more ways than one.

 

CLR: What do you do in your line of work currently that you feel makes the most impact and why?

 

Marty: I think it always starts with superior quality products. Our education-based marketing can only take us so far if we don’t execute on the development and manufacturing side. That’s what ultimately builds trust with our customers and puts them in a position to meet their wellness goals.  And whether you look at it in big numbers or on a granular level with individual customer feedback, we clearly see that we’re helping people succeed.  That’s a really satisfying feeling, and it guides what we do every day

 

CLR:  What are you most currently passionate about at cbdMD? 

 

Marty: I’m going to sound like a broken record here, but helping people.  After all, that’s why we launched cbdMD. We recognized how people wanted another choice, another option for taking back control of their health. Ultimately, our goal is not only to provide that alternative – but to make it accessible to everyone. Every time I read about a customer’s positive experience or hear a feel-good story about how our products have helped someone, it validates all the time and effort we put in every day. In my position as co-CEO at cbdMD, I’m most passionate about building respectful, effective relationships between everyone involved in this endeavor – employees, partners, retail customers, wholesale customers –the list goes on.  

And many of the best ideas, the game changers, come from all levels of our company.  They come from customer reviews. I feel like everyone needs a seat at the table, and I believe in learning from mistakes.  That’s how you meet the small goals that lead to big breakthroughs.

 

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