Presidential Celebrates Ten Year Anniversary with Multistate Expansion

Presidential Cannabis Company is as deeply rooted as any cannabis brand in California, especially in the southern half of the state, where its distinctively packaged high-end infused prerolls have held a place on store shelves since the 215 days, when most shops still sold joints as an afterthought, a loss-leader, and not as the top-shelf form factor they frequently are today.

As a general category, prerolls have been grabbing market share in recent years and consumers show no sign of lessening their love of rolled weed. After hovering around 10 percent of sales in 2020, prerolls accounted for 12.6 percent in the first half of 2022, according to Headset, and were the third-largest form factor in the industry, reaching $752 million in sales from January through June of this year.

As a subset, infused prerolls have also become dominant enough to warrant their own line on many dispensary menus, and Presidential has further refined the category by focusing on Moon Rock prerolls, which are potent concoctions made from strain-specific flower, high-concentrate distillate, and coated in kief. Distinguished by their flavors, Presidential Moon Rock Prerolls are the only type of product the company has ever considered making, and as co-founder and CEO Everett Smith explained to CBE during a recent call, the company is going to ride that singular vision anywhere infused prerolls are consumed, which is everywhere.

The first stop beyond California, where Smith insisted there is still a lot of room for Presidential to grow, will be Nevada and Oklahoma, which will see Presidential on the shelves within the month, said Smith, who used his time at the recent MJBizCon – where Presidential had a booth in the Hall of Flowers section – to meet with Nevada pot shop operators and businesspeople from other states. A productive event for him, he gave the experience a B+ to an A.

As even-keeled as Smith comes off – a trait that must have served him well in competitive and sometimes crooked California, as he and his business partner, John Zapp, built the company up from next to nothing – the move into new states after a decade of hard work has clearly lit a fire under the basketball player-turned-entrepreneur, even though the expansion means more work.

“I’m from Las Vegas, and John is from Oklahoma, so those two markets naturally made sense to us, and they both presented themselves around the same time,” he explained. The process has been somewhat time-constrained because of how Presidential does business. “We do things a little differently,” said Smith. “We’re not doing royalty deals and things like that. Our bread and butter, the thing that makes our product special, is our manufacturing process.”

That means setting up shop. “We come in, we rent space, we pay a royalty to use the licenses, and then we hire teams and send our guys from California to train people to do our bread-and-butter, which is the infusion process. We’re trying to partner with people that have strong sales teams and distribution channels instead of manufacturing, because we do that ourselves.

“We learned from California that bread is buttered with great sales and distribution,” he added. “That’s what we’ve done in California just by knocking on doors over and over and over, and that’s how we plan to go into new markets. We’ll go and negotiate a deal with someone who has open space in their facility and a license, and we’ll bring in our equipment, hire people to do our manufacturing process, make sure the quality of the raw material is where we need them to be, and all the processes are going the way we need them, and then we also do all the packaging ourselves.”

A potentially very expensive proposition, Smith said Presidential was lucky to find a great partner in Nevada who also helped connect them with the right sources. “We looked at maybe 10 different farms, found three or four that we really wanted to do business with, and negotiated deals with them’ he said.

Staffing was not as easy. ‘It has actually been a huge problem for us, and slowed us down tremendously,” said Smith. “We’re still working through that now. We had to send people from California out there, and they have to go through the paperwork process in Nevada, which is a lot more tightly regulated than California. There have been a bunch of different hurdles we’ve had to cross, and then factoring in significant capital. We’re a self-funded company, so we haven’t taken any outside capital. We’re expanding and doing all these things ourselves, so we’ll see how the journey treats us.”

Did that mean that everything he had achieved and is achieving in California is what’s funding the expansion? “My partner and I are both really conservative guys,” replied Smith, “and we’re really good with our money as well, so we’ve been able to take our money and help the business expand. That’s a testament to my partner,” he added. “He knows how to run the margins up and keep the costs low. And he beat a lot of different things into my head over the 10 years we’ve been business partners, and he helped me financially as well.

“That’s how we grew the company, and in California we’re still growing,” he added, “We haven’t scratched the surface of what we can do, and that’s our goal, so we need the capital in California to grow California’s business, because we do everything ourselves; we are the manufacturer and the distributor; and then we will be able to take those profits to help expand across the country.”

Currently, Presidential is in 350 to 420 California dispensaries that order on a regular basis, said Smith, but the number of stores only goes so far as a metric. “Only about 120 of those shops are good-paying customers that you can rely on,” said Smith. Still, the competitor in him likes knowing that people are enjoying his products. “I want to be in all the shops. Also, if there are something like 900 shops and we’re in 400, that gives me a barometer of where I’m at in the market and where I can go.”

In such a rough market, where so many businesses – retailers included – are late paying bills, how does Smith manage the hundreds of stressed retailers he still wants to work with, but which may not be able to pay him? “We try to be COD as much as possible,” he said. “That’s how we made a name for ourselves in this industry. Our vendors know that when we order something, we come and pay for it.

“And it’s relationship-based,” he added. “We’ve been dealing with a lot of people for a long time, so we’ll give them terms – seven days, 14 days – we try to keep them as low as possible and work with people based off relationships, but on the back end, we have a policy where we’re not going to deliver another order until the previous order is paid for. And luckily for us, we are one of the top-sellers in a lot of these dispensaries, so they can’t really afford not to have our products on the shelves. That gives us a little leverage to make sure that we’re all doing good business.”

Another piece of leverage Presidential has is its longevity, which has helped spread the word as the industry evolves. “We’ve found that a lot of people from the 215 days went on to become buyers and managers at different shops, and then some of their people went on to be buyers and managers at different shops. They knew us from when they were working as a budtender, so now we’re starting to get a good foothold where people are calling us, and when we go into shops, they already know about us, and they’ve been waiting for us to come in, and we found a bit of rhythm there.

“Our problem for a long time was just being able to keep up with demand,” he added. “But we’re in a place now where – when a lot of companies invested in marketing – we invested in manufacturing and upping our production. So now we can really go and push hard on expanding across the state. We have a really good stronghold in Southern California, but our Northern California foothold is not that strong, so that’s what we’re working on for next year. If we want to get to be a $20-$30-$40 million-a-year company, we really need Northern California.”

The company now employs somewhere between 40 and 50 people, said Smith, up from the four-man team they started with years ago. The investment in people and equipment has paid off. “During COVID, we really exploded, and we weren’t really ready for it,” said Smith. “Now we’re ready to rock-and-roll, we’re ready to go full-speed-ahead on expanding to other states so we can hit those targets we were talking earlier.”

Presidential was always priced competitively even back in the day, but it wasn’t inexpensive. I asked Smith if the product was conceived as a top-tier brand. “Absolutely,” he said. “I think we’re the best value on the market because of how we make the moon rock, combining high-quality flower with high-quality distillate, and then putting kief on top; the kief and the flower all single-sourced from the same strain. The way we do things, the quality of our product, the way it’s packaged, and the support we give our clients, I think where we’re at price-wise is good for everybody. We make our money, the stores can make their margins, consumers seem to be happy with the price, and it’s a beautiful thing.”

In fact, the drop in prices for raw materials has been something of a boon for Presidential. “Even with the exotic strains, all the prices have come down,” said Smith. “With the position we’re in, we’re happy being here. Our prices have stayed the same, and all of our raw goods have dropped pretty dramatically, so we’re in a good spot.”

Other factors weigh in Presidential’s favor, said Smith, even as they face the numerous challenges that come with new states with regulations more onerous even than California.

“In Nevada, everything’s a lot smaller than it is in California, and there are extra steps you have to take,” he said, “but what I do know is our resiliency, our creativity, our consistency will serve us well in any market, because of the battles that we’ve already fought in California and the onslaught of brands that have come and gone. I just know we have a quality product, packaged nicely, ready to go into a 7-11 right now, and the quality is there. I think we’ll be able to withstand anything if we show up every day, do the fundamentals, and stay focused on what we’re good at – sourcing quality products, putting them together, and making an even greater-quality product. packaging it nicely, giving the consumer a fair price – and I think we’ll be fine in any market.”

Presidential is a one-trick pony, but it’s a pony with a kick. Smith has been asked many times about the singular fixation on infused prerolls, and it is what it is. I was just curious if they might one day come out with a high-quality flower-only preroll. Smith said he’s not a cultivator, so it would just be an exercise in white-labeling, and he already does collaborations.

“That’s we’re known for, doing a lot of collaborations with people,” he said. “I like to take their quality product and do what we do to it but give the grower their just due as well.

“I read a book, Blue Ocean Strategy, and it really just struck a chord with me about just staying focused, finding a niche, and dominating a niche,” he continued. “And that’s what we are trying to do with Presidential. We want to be the infused preroll Blood Kings of the cannabis industry and see how far we can take it, because we have a rare opportunity to do something special.”

When it comes to understanding the consumer and trends in the marketplace, Smith is a big fan of data, and lots of it from various sources. He uses data from BDSA, Headset, Weedmaps, Leafly, to name a few, and also from sales reps and their stores. He also does a lot of in-store demos, where in-person interactions with consumers and patients are invaluable. Last but not least, they go by what they like. ‘We are the culture that we are trying to sell products to right now,” said Smith. “I’m 37. We built this brand around stuff that me and my friends would like to smoke.”

But more generally, while new form factors like beverages and edibles and exotic concentrates get a lot of attention, lots of people smoke cannabis in every state. For that reason alone, “I think we have opportunity to really do something big with prerolls,” said Smith.

As far as the actual process of branding, getting the Presidential name stuck in consumers’ heads, Smith believes in marketing fundamentals – bright packaging, strong taglines in retail spaces, and utilizing brand ambassadors whenever possible. “These methods haven’t changed in decades, and they are still working even with all this new social media stuff,” said Smith.

Had Presidential been able to avoid counterfeits? “We haven’t,” said Smith. “In Las Vegas, we actually ran into guys from New York saying they were selling our products in the dispensary, a guy in Michigan, a guy in DC. At first you want to get pissed off, but now in my mind, I’m thinking there are people in these markets that we want to go to that already know our product. They’ve tried our products, liked our products, and are looking for our product, so it pisses you off, but if you can make something good from it.”

That must have made him want to get into New York with a vengeance. “Absolutely,” he said. He had only recently visited New York City for the first time as an adult. “We went to Hudson Yards up to the edge and looked down at the city, and it gave me chills. I was like, ‘Yeah, we have to figure out a way to come to New York City and bring Presidential here.’” But other big cities beckon as well, including Chicago, Houston, Philadelphia. “I want to see what we can do,” said Smith.

That said, while the dueling sirens of caution and opportunity beckon Presidential at every turn, it will be opportunity that rules the decision-making day. Even the idea of partnering with someone on manufacturing to cut costs and make life a little easier holds little solace for Smith. “Honestly for me, it’d be hard,” he admitted. “I’ve been burned.” This is true for almost anyone who has been around as long as he has, with similar lessons learned.

At any rate, as Smith surveys the current landscape with an eye to the future, his plans do not necessarily require setting up in every state. “Eventually, we’ll be able to put our products on trucks and ship them across the country and that way keep the quality of the product consistent or more consistent than having to go to each state and use product that may not be quite as good as California or Nevada. It makes it hard to have a national product that’s like a Hershey’s bar, where no matter where you buy it, it’s always a Hershey bar.”

I noted that experienced cannabis consumers might expect a little variety in quality from harvest to harvest, or at least will not complain about it, and asked Smith if Presidential markets to a new consumer or an established one. “I think there’s a way for you to do both,” he said. “The way we do it, according to Weedmaps data, 70 percent of people still make their decision on what they want to buy in the store. So, we like to put a lot of brand ambassadors in a lot of our key stores, so when you do go in, whether you’re a new client or our existing one, we are there to make you feel good, to talk to you with you about the last time you experienced our product, and all that makes a difference. So, I like to do both. My goal is to be like Nike. It doesn’t matter if you live check to check, it doesn’t matter if you have $500,000 in the bank, I guarantee you’ve got Nike in your house.”

And, like Nike, “As long as we introduce new products, they buy them, and it doesn’t really harm the sales of the other products” said Smith. In his case, of course, instead of new designs and colors, the difference comes in flavors and strains. “The different flavors, that’s our core product,” said Smith, “and then to introduce strains, we do collaborations with farmers.”

Presidential will also play with limited drops, which cannabis lovers always appreciate if they can get their mitts on it. “We’re actually going to be dropping a limited drop probably the top of next year, with Ball Family Farms,” said Smith. “They grow indoors in living soil, but they are craft cultivators, so they can only grow so much. We’ve already got two or three of our top clients who have stores across the state that are going to have it exclusively. It’ll probably last two or three days because they’re just going to go so fast.”

With a small team and a lot on his plate, Smith works just about every day, he said, but it also is clear that the conservative nature of he and his founder combined with the fiscal discipline that comes with using your own money has made Presidential a lean machine. As he looks to 2023, a possible recession, and presumably a much weaker consumer, is Presidential being as cautious as ever?

“Absolutely,” affirmed Smith. “That’s just who we are as a company, and who we are as people. If you look at the data, you’re going to know how you’re going to allocate your money smartly, especially with the economy tightening. You can’t spend too much money on marketing and find strategic ways to get the most out of your money. But that’s how we operate on a daily basis, so I think having that discipline will allow us to persevere.”

And will it also open up opportunities for acquisitions by Presidential should the market continue to sour, resulting in distressed assets for sale? “That’s what our goal is,” said Smith. “I don’t ever want to wish anybody’s demise, of course, but the discipline allows us to have extra capital to be able to pick up assets if they do go awry along the way, instead of having to worry about if we’re going to make payroll.”

Our time up, I asked about anything new. Bringing Presidential to Nevada and Oklahoma were top of the list, of course, but the company also just launched its mini prerolls in California and is working on collaborations with Rove and Ball Family Farms. Michigan as well is on the drawing board, said Smith.

As far as having to raise capital to fuel further expansion, it is not in the works, but neither is the possibility rejected out-of-hand, said Smith. “The right opportunity has not presented itself and we haven’t really looked for it,” he said. “We just have done what we know to do, running the business and growing it, and it’s working for us.

“What I do need is good people, good partners, that have licenses and facilities that are looking for good brands, so that we can both make money,” he added. “We can expand our brand using their facility and they can enjoy some of the revenue from what we make there because they’re giving us the opportunity. So, we’re looking for people that we can do business with and help expand our business. That’s what we’re looking for.”