(upbeat music) - Welcome to "Forum 360."

I'm Stephanie York, your host today, and thank you for joining us for a global outlook with a local view.

Today, we are here with Pete Nischt, vice president of compliance and communications at Klutch Cannabis, and The Citizen by Klutch, a company that provides medicinal cannabis products in Northeast Ohio.

We're talking about the different types of cannabis, medicinal uses of cannabis, and Ohio's recently enacted law allowing for recreational uses of marijuana.

Thank you, Pete, for joining us today.

- It is my pleasure.

- Awesome.

Well, tell me a little bit about yourself and your background.

- Yeah, so I've been in Akron for a long, long time now.

I came here for college and never left.

So I'm an attorney by trade, I've got an MBA.

And kind of stumbled into the cannabis industry through, you know, I guess a couple of different situations that led me here.

But I spent some time in local politics and worked as a civil prosecutor for the county for a couple years as well, and then found myself here.

- Okay.

So what is your role at Klutch Cannabis?

- So I'm not a day-zero employee, but I started pretty early.

So my first day was the day of our first harvest back in January of 2019.

My job was to kind of start and build our compliance team, and it has changed over time.

So I've done some operations, you know, managed a couple different teams.

But, generally speaking, right now I run our compliance team, and our marketing team, and our logistics team.

And then, I also handle government affairs and communications.

So a lot of legislative and administrative advocacy.

I'm a liaison to the main trade association in the state.

And so that's enough to make sure every day is a little bit different than the day before.

- Okay, so we're gonna go back to the basics.

What does Klutch do?

Do they grow and sell cannabis?

Where are the growing operations?

Things like that.

- Yep, yep.

So yeah, we do everything now.

- Okay.

- So we've got a large cultivation and processing facility located in North Hill, in Akron.

It's a pretty nondescript building, so you wouldn't know it if you drove by it.

But we have a large grow there and a big commercial kitchen, and some extraction rooms, and that sort of thing.

So we make a whole host of products, almost anything you could imagine.

And then, we also have two stores currently.

So we've got one in Canton and one in Lorain that are doing really well, that started here in 2023.

- Okay, so I'm gonna go back even more basic.

Cannabis, marijuana.

Same thing?

Different things?

- Yeah, so cannabis is the plant that we're talking about.

- Okay.

- There are a couple of different strains of cannabis that are naturally from different places in the world.

They've all kind of been bred together for different purposes.

Marijuana is really a legal term now that refers to what you would traditionally think about as cannabis.

So like a psychoactive, you know, flower product, or a concentrate, or something that has a medicinal or recreational, you know, effect on someone.

- Okay, now growing this stuff, is it indoor, outdoor?

- We're all indoor, yeah.

- Okay.

- So it's pretty difficult to grow in a state like Ohio.

- I wondered if Ohio had good soil for that.

- Well, so Ohio does, but you have a lot more control indoor.

So, you know, we've set ourselves up to create a pharmaceutical-grade product.

So very, very high quality, very, very high level of control, you know?

- Sure.

- And really what you're doing is you need control of the whole environment.

You're recreating, you know, an entire ecosystem that this plant needs to thrive in.

So everything that it needs, we have to give to it in precision doses, whether it's CO2, or light, or nutrition, or anything like that.

Water.

- It's a science.

- It's a science, yeah.

It's a science as well as an art.

And so indoor lets us have a lot more control over all those different variables.

- Especially in Ohio, when it could be 80 in the morning and 20 at night.

- Exactly, yeah, exactly, exactly.

- So what is Citizen by Klutch?

- So The Citizen by Klutch is our retail brand.

So it's a sister company that we started.

The first store, like I said, opened I think in January of 2023 in Lorain.

And it's just the name of the brand.

Yeah, it's our retail brand.

- So what is THC and CBD?

And are they both controlled substances?

If that makes sense.

- Yes.

So, yes, I believe they're both controlled substances.

They're treated very differently and they have different effects.

They're both cannabinoids.

So cannabis is the main plant that we find in nature that produces cannabinoids.

So cannabinoids are compounds that interact with your own endocannabinoid system.

So we all have an endocannabinoid system and it controls all sorts of things, appetite, sleep, mood.

It's connected to the immune system.

- Okay.

- How we perceive pain.

All sorts of things.

So your body naturally produces its own cannabinoids.

And so those cannabinoids, you know, depending on the shape, there's a lot that, you can go down the rabbit hole on this.

- Yeah, I don't need super scientific.

- But they all have different effects.

- I know that there's this THC and CBD.

And it looks like CBD you can buy online, but you can't buy THC, and it gets a little confusing.

- And that's changed now.

But, generally speaking, THC is what we think of as the main psychoactive compound in cannabis.

- That makes people feel high?

- Yes, exactly.

CBD is something, it's what I would term a minor cannabinoid, in that it is naturally present in much lower concentrations.

However, people have figured out how to breed cannabis plants to produce more CBD than THC, and so that is kind of what kicked off this whole hemp market.

- Yes, right.

- All right.

So there are CBD products that are actually now FDA approved, and they're used to treat, you know, epilepsy, spasticity, things like that.

- Okay.

- And there's also now, this has gotten really complicated over the past 10 years or so.

- Right.

- There's also now CBD products that are ubiquitous in Walgreens, and grocery stores, and online, all kind of stuff.

All kinds of places.

And those do probably have some amount of CBD in them, although I'm not sure that I would call them therapeutic doses of CBD, if that makes sense.

- It does.

- So like, you know, somebody that has a drop of like CBD in their coffee in the morning is not getting near the impact that, like, somebody that's taking something like Epidiolex, like an FDA-approved drug.

- Sure.

- But there may be some medicinal value as well to this.

- Sure, and plus psycho value, like when you're giving yourself something, you know, there is something to be said for, "I think this is helping me so I feel better," and stuff like that.

- Sure.

- So Klutch primarily grows and sells marijuana products or cannabis products for medicinal purposes.

Correct?

- Yes.

- Tell me what type of medical issues someone might use cannabis for?

- So, I'm a good example, so Crohn's disease is one.

There is a small, but growing, number of conditions.

So, you know, cancer, migraines, arthritis, chronic pain, Crohn's disease, MS, all sorts of things, and there's a full list online that you can look up.

If you just type in medical marijuana controlled program qualifying conditions, there's 25 or 28 different conditions, you know, depending on how you count it up.

- Is cannabis medically accepted as a medication in the physician world, do you think?

- You know, I think there's growing acceptance.

I think that what's difficult I think for clinicians is that it doesn't really fit a traditional pharmaceutical framework.

It's a plant that grows in the ground.

If people weren't out ripping up the plants, it would be growing on the side of the road all over the place.

And it's also, while not unprecedented, it's a little different to find a single plant or a single drug that can impact so many different systems in the body and mean so many different things to so many different kinds of people.

And the reason why that's so is that it goes back to this endocannabinoid system, but that's a relatively new thing that we're still trying to understand.

So I think that there's a growing recognition amongst healthcare professionals, doctors, that this really can improve the quality of life and help a lot of people.

I think that the other thing that's happening is we're not used to dealing with a drug that can be both medicine and a recreational substance, which also kind of throws them for a loop.

I mean, and I understand where that would give somebody pause.

Right?

- Sure.

Are they really coming in for this illness or this pain?

Or are they coming in to get medicine to get high?

- Right, but, you know, it's relatively benign.

Not that there aren't certain risks associated with it, there's risks associated with drinking too much water.

Right?

- Sure.

- But it's relatively benign.

And I think that every year there are hundreds, if not thousands, of studies that come out from all over the world showing, you know, the amazing kind of potential that the plant has.

And we're just dealing with the plants right now, I mean, we're only scratching the surface.

So, you know, 10, 15 years from now, we see federal legalization, you know, research will be able to be conducted that's federally funded, you know, more robust, large sample sizes where we'll really be able to start to play with a lot of the compounds that are in the plant.

I mean, there's thing that we haven't really discovered yet.

And there's probably over a 100 known cannabinoids that are in very, very small concentrations in all of these.

- Well, I just can't believe it's not like ground down, put into pills, and sold through CVS.

I mean.

- Right.

- Because lots of medicines are.

- Right.

- Like, you can do that.

And like, at some point, I think we're gonna be seeing CVS, I mean, I don't know, I say CVS, it could be Rite Aid, it could be Walgreens, could be any of those.

- It's possible.

You know, we do see Epidiolex.

So there's a couple of these, there's Epidiolex and a couple other drugs like it that have FDA approval.

- Okay.

- That are, you know, either synthesized cannabinoids, Marinol is another one that's like a synthetic version of THC that's used to treat the symptoms of chemotherapy, like with cancer patients.

- Sure, nausea and things like that?

- Nausea, yeah, absolutely.

It stimulates appetite, that kind of thing.

May help with pain.

And that's been around for a long, long time.

So we do have a couple of these models that are starting to form.

I think we're literally, we're just scratching the surface.

- We are.

- So we have these two things happening in tandem now where we have, you know, this burgeoning medical industry that is probably destined to help millions of people.

And then, we also have, you know, a recreational substance that is going to maybe look a little bit different, but essentially, when it boils down to it, it's almost the same thing, and it's gonna be kind of happening side by side.

- Wow, how popular is the medicinal cannabis industry in Northeast Ohio?

- I mean, I think it's popular.

I think, you know, the last count I got last week was that there are 175,000 registered, active patients in the state.

You know, I would venture to guess that maybe 10 or 12,000 of those are in Summit County.

- Okay.

- There's more in Cuyahoga County.

And that's just two counties, that's not all in Northeast Ohio, so there's a lot.

This is a big population center in the state, and so there's a lot of people using it.

- Sure, and how many cannabis dispensaries are there in Akron?

- So in Akron, and maybe I'll lump in Cuyahoga Falls, I think there's two in Cuyahoga Falls right now and three in Akron.

- Okay, in Northeast Ohio, how many are there?

- Not sure in Northeast Ohio, offhand, but there's about 115 right now active in the state.

- Wow.

- Yep.

- How does this compare to like, you know, Colorado and like where it really took off?

- Yeah, so like Ohio is like cannabis 2.0 or cannabis 3.0.

So a lot of the lessons that were learned early on in the cannabis industry out West have been acted on here.

- Good.

So when we came out, we already knew the pitfalls?

- Exactly.

So it's a little bit more controlled.

This is a limited-licensed state.

So I think places like Colorado, Michigan, California, Oregon that have, you know, hundreds, and hundreds, and hundreds of these things everywhere, Ohio is never really gonna look like that.

And I don't think we want it to, frankly.

I mean, we're gonna do it- - We're a little more conservative here.

- Yeah, exactly, yeah.

But, you know, certainly, you know, it's hard to look at the number of liquor stores in the state, I think there's hundreds and hundreds of those, and we're just probably a small fraction of that.

- So I wanna remind our viewers and those who may have joined late, that we are here with Pete Nischt, vice president of compliance and communications at Klutch Cannabis, and The Citizen by Klutch, a company that provides medicinal cannabis products in Northeast Ohio.

We're talking about the medicinal uses of cannabis, and we are about to talk about Ohio's recently enacted law allowing for recreational uses of cannabis.

So let's talk about the forms of cannabis.

I mean, when I was in college, you only heard about people smoking it or baking it in brownies.

Right?

- Yeah.

- So can you even buy the smokeable form now at a dispensary?

- You can, but you cannot legally smoke it.

- Okay, tell me about that.

That doesn't make any sense.

You can buy it, but you can't smoke it.

- There's a couple quirks to Ohio's program.

So one of them is that traditionally, like if you bought cannabis in Michigan or Colorado, the typical package quantity would be an eighth of an ounce.

Ohio mandates that we sell it in 10th ounce increments, so 2.83 grams.

So you can get 2.83 or 5.66, or 14.15, or 8.49, or something like that.

- Okay, whatever.

(laughs) - Whatever.

So the other thing is that we are a no-combustion state.

So we can sell flower to people.

- Flower means like the leaves?

- Not leaves.

- What are they?

- So we're all used to seeing the, you know, the five or seven-leaf caricature of like a cannabis leaf.

- Yes.

- Flower is what we're after.

So that's the medicinal, that's what has medicinal properties or recreational properties.

And it's literally the flower of the female cannabis plant.

So that is what you typically would've found, that's what you would've purchased in college.

- Okay, not me.

Let's be clear, but yes.

- Not you, but that's what somebody would have.

That's what I may have.

- Yes.

- And that's what people would've rolled into a joint and smoked.

- Sure.

- All right, so you can do that.

It is going to be legal now that Issue 2 has passed.

My understanding is it's not legal to use it for products purchased in the medical program by medical patients.

- Okay.

Okay, you're an attorney, you have your law degree, as do I. Reformed attorneys, I like to call it.

- Yeah, exactly.

- I bet you were working hard on the law that came out, or at least trying to understand it.

It recently passed for recreational use of marijuana in Ohio.

Tell us about this law.

- Yeah, so there was a group called the Coalition to Regulate Marijuana Like Alcohol that put this together a couple years ago now.

It's an initiated statute, which I think is a better vehicle for this kind of thing, because that means that it can be changed and tweaked, you know, as we learn more.

The legislature can have their say as well, you know, that kind of thing.

- [Stephanie] But they know that the citizens want it?

- But the citizens want it.

I mean, overwhelmingly, I think it had a 14-point lead, so 57% of people that voted on it.

- Were you surprised by that?

- You know, it came dead inline with the polling.

- Okay.

- And I personally was not surprised because I think, so part of what happens when you're in the cannabis industry is that you have to come out, right?

"Hey, like, I actually support this," and you think that's gonna be a big deal.

And people kind of look at you sideways at first.

But then what happens is family gatherings when you're at your work or when you're- - Grandma so and so finds it helps with her cancer treatment.

- Yeah.

People start coming out of the woodwork and saying, "You know what?

I actually use it too and I get all my stuff from Michigan.

I've been getting it from Michigan for years," and that kind of thing.

So just, you know, surveying my neighborhood.

And I had an individual, you know, that I was friendly with.

He was like, "Well, you know," finally, I mean, I've known him for a year or two at this point.

And we were talking about it one day and he's like, "Well, just so you know, that house, that house, that house, that house, that house, like everybody here uses it."

So I wasn't surprised.

- Wow.

- Just because I think that's a good, once you come out of the closet, people are willing to be honest with you about it.

And I think that in a state like Ohio that's a little bit more socially conservative, there's still a taboo about talking about it.

- There is, there is.

- But there's not necessarily a taboo about using it in the privacy of your own home.

- Okay, were you afraid with the very conservative nature of our legislature that this wouldn't pass?

Or now that it's passed, are you afraid that the constraints are gonna be so onerous that it's not gonna get off the ground like people want it to?

- So I think that the legislature probably has a lot of people that have had a similar experience to me.

Okay?

- Yeah.

- Meaning that it's now a topic of conversation, and they probably have people coming out of the woodwork who wouldn't normally say anything that are saying, "Hey, actually, I go up to Michigan and I get gummies and I give 'em to my mother, because, you know, it's the only thing that helps with her migraines," or something.

- Right.

It's the only thing that gives her appetite.

- Appetite, you know, I think that's happening.

I think, you know, the other thing is that they're probably looking at their districts and seeing how many more people voted in favor of it than against it, even in conservative districts.

And I think it won in the vast majority of legislative districts in the state.

- Wow.

- So I think that that's why we're seeing the governor, as well as members of the legislature, saying now, "We're gonna respect it.

We're not repealing it.

We recognize that people wanted this, and so we're gonna move forward and we're gonna let them have it."

I think that, you know, what concerns me really about changes, and I think that probably everybody expected there to be maybe some changes.

What concerns me about the changes is our market's ability to compete with all of these other sources of cannabis in the state.

And what I mean by that is that I don't really see there being multiple markets for cannabis.

Like, there's not a legal market, and an illicit market, and a Michigan market.

There's just one market filled with consumers, Ohioans, that are making a decision on a daily basis where they're gonna purchase those products from.

- Right.

- All right.

They're getting hit up on Instagram to buy psychoactive hemp products.

- For sure.

- Ads are, I mean, I get half a dozen of them a day pushed to my phone for flower, and gummies, and all kinds of stuff that really claim to do the same thing that the products we make do.

People have found it really cheap and easy to go to Michigan where things are plentiful, the taxes are low, that sort of thing.

They also are really comfortable in a lot of parts of the state just going down the street and purchasing from somebody that they've known for a long time that either grows it, or procures it, and then resells it, okay?

And so in order to compete with those, we have to be regulated in a way that allows like our value proposition to prevail here.

So this isn't really, like, our market does not behave any different than like any other market in the country, or in any other industry.

At its foundation, it's a commodity.

It reacts to regulation the same way.

Simple, like, supply and demand issues are very much at play here.

You know, they affect price and availability, and how much people can grow, and that kind of thing.

So what we're worried about is that, you know, regulations would be put in place and statute that would make our products uncompetitive.

And that that would essentially- - More onerous for you to put out there than for the person down the street that's growing five plants.

- Exactly.

I'll give you a couple examples.

So right now Michigan has a 16% tax rate, all in, on cannabis.

There's a 10% excise tax at the state level, that's a retail tax.

And then, there's a 6% sales tax.

They don't do local sales tax like Ohio does.

So Issue 2 put in place a 10% excise tax at the retail level.

And then, also applied sales tax.

So for us that hovers around like 16.5 to 17.8% depending on what county you're in.

If you do the math, you're already at 16.75 to 17.8% compared to Michigan's 16%.

- Right.

- All right, so that is more or less like right in line, I would say that we hit the sweet spot there.

If we went to like a 26% sales tax or a 30% sales tax, like all of a sudden the products become less competitive just based on price.

- Pricing it out of the market.

- You're pricing people out of the market, and they're gonna keep going back to the suppliers that aren't taxed or- - Yeah, if you can get the same thing for cheaper, you're gonna go for cheaper.

- Illicit is no taxes.

Hemp, psychoactive hemp is just sales tax.

Michigan is 16%, and the products are probably cheaper 'cause they're more plentiful there.

And then, we would be taxed, you know, out of control, right?

So people aren't gonna purchase.

The same thing is gonna happen with the potency cap.

So like people that are gonna participate in this market have an expectation that they're gonna be able to purchase the same kind of products in Ohio that they would purchase, you know, in Michigan, or Colorado, or maybe in the illicit market.

Right?

- Right.

- Ohioans, when they voted on Issue 2, voted for what I think are reasonable potency caps for flower and concentrates.

And we would be one of the only states in the country that has legalized recreational cannabis that has potency caps.

But, like I said, they're reasonable.

If we would get something that's, I think, more extreme, you know, like a 50% potency cap on vapes and concentrates, what that does is it essentially monopolizes the kind of, or creates a monopoly on the kind of products people want to purchase and hands it over to the illicit market, and to Michigan, and maybe to Pennsylvania, if the legalize next year.

- Where you have to buy twice as much to get the same effect that people want.

- Exactly, exactly, or you'd use twice as much.

- So you just priced yourself out again.

- But, you know, also for those products, it necessitates us to like add in filler and things that people don't wanna ingest anyways.

Right?

- Right.

- So like what we're hoping is that we find some common ground in that, like, we need to have a program that is not going to drive people away from the products that we make.

There's already been a gonna be a premium, because we are regulated, there's inventory control, compliance, quality, safety, security regulations.

All these things cost money, and I think people are gonna be willing to pay for those things.

But they're not gonna be willing to pay for them if the same product is available for much cheaper from a different source.

- Do people still need a medicinal card?

And do you suggest they get it?

- Yeah, I do.

So right now we're in this limbo period where it's legal to possess and use and to grow it, but sales haven't been turned on yet.

So, like, I'm not allowed to sell it to you at our dispensary yet.

We expect that to happen around September.

So in order for people to kind of continue to get the same safe, clean, tested products that they're getting, we are recommending that you keep your medical card.

And I think also, like, so I came to this, you kind of asked what my background was, I kind of came to this because I have Crohn's.

So, you know, I'm somebody that I think has benefited from a doctor-patient relationship in this context.

And I think that a lot of people still will benefit from a doctor-patient relationship.

- Well, I have like 20 more questions to ask you, but we're out of time if you can believe it.

So thank you for the interesting discussion about marijuana and cannabis.

Who knew there were so many different types and forms and all the medicinal uses for cannabis, including cancer, Crohn's, arthritis and more?

I particularly appreciated your perspective around the legalities of recreational use of marijuana in Ohio, and what companies, well, we were gonna get into what companies should do with HR, but we didn't quite get there yet, so maybe I'll have you back on to talk about that.

- Okay.

- So thank you for teaching us about this and I look forward to talking to you again.

Thank you for joining us.

I'm Stephanie York.

Thank you for joining us today for "Forum 360" for a global outlook with a local view.

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