Exclusive Interview with 1906 Co-Founder and CEO Peter Barsoom
Since launching in 2017, edibles company 1906 has been focused on creating a new product category: functional cannabis. It sees the opportunity to offer high-functioning adults an alternative to alcohol and pharmaceuticals as they navigate daily life, according to Co-Founder and CEO Peter Barsoom. Barsoom last spoke with New Cannabis Ventures in April 2019, and he checked in to discuss an innovative new product, new markets and continued expansion. The audio of the entire conversation is available at the end of this written summary.
New Team Members
Over the past year and a half, 1906 has made some additions to its leadership team. Jackie Cornell has taken on the role of Chief of Policy and Health Innovation. She has a long career in public health, previously working for the New Jersey Department of Health where she helped regulate the state’s medical market.
Chonie Bradley joined 1906 as Vice President of Finance. She previously served as the Vice President of Finance with Anne Holland Ventures, the company behind MJBizCon.
Market Reach and Expansion Philosophy
1906 currently has a presence in Colorado and Oklahoma. Within the next couple of weeks, it will be launching into Illinois and Massachusetts as well.
The company is working toward becoming the top brand east of the Rockies, according to Barsoom. When considering potential markets, the 1906 team likes limited-license markets–medical, adult-use or about to become adult-use. States like Illinois, Massachusetts, Maryland, Pennsylvania and New Jersey are appealing. But, the company finds markets with low barriers to entry interesting as well. It has built success in markets like that with its Colorado and Oklahoma operations.
1906 expects to be in four markets by the end of this year, and it plans to launch in three or four new markets next year.
The company’s growth this year has had to take place during the COVID-19 pandemic, which has driven the company to embrace an agile and lean strategy. With such a capital-tight market, 1906 is approaching expansion into new markets with a capital-light mindset. It is reaching new markets through partnerships, but it is taking a unique approach.
Instead of developing traditional licensing agreements, 1906 has created a mobile tableting operation. Through this initiative, a truck contains all the necessary equipment to create the company’s Drops. 1906 establishes a relationship with a local operator, taking up less than 750 square feet in their facility. Within just a few weeks, the operation can produce 3 to 5 million tablets of the 1906 Drops, according to Barsoom.
The mobile tableting operations allow 1906 to expand into new markets with a consistent set of equipment and without a significant capital investment. It is able to retain ownership and control of its manufacturing processes and intellectual property. The company is able to capture 50 percent of wholesale revenue through its partnership deals, according to Barsoom.
1906 views its competition through a lens wider than just the cannabis industry. Products that people use to manage and enjoy their lives, whether it is a cup of coffee, a glass of wine or a sleep aid, are competition for 1906’s products.
The company’s products, divided into different effects, are made with a combination of cannabinoids and other plant medicines. At the beginning of this year, 1906 launched its Genius effect, designed for cognitive focus. This product has a personal meaning for Barsoom. Diagnosed with ADD as a teenager, he has used Ritalin and Adderall for most of his adult life. While those medications worked for him, there are side effects. He hopes Genius can provide a potential alternative for cognitive focus. Already, Genius has become a top-selling product in Oklahoma, according to Barsoom.
1906 has also launched its line of pressed tablets: Drops. These swallowable pills offer a way to experience cannabis in a traditional medicinal format. The Drops, available in any of 1906’s different effects, are controlled-dose, allergen-free and calorie-free. Barsoom sees this as becoming the future of cannabis consumption.
Previously, 1906 was excited about beverages, but now, the company has stepped back from this product category. Barsoom still sees opportunity in the long-term, but he thinks that social consumption will need to take off first.
While beverages are on the backburner, 1906 has a robust innovation pipeline. The company is working on extended-release tablets for its Midnight effect. Sleep is a major issue for millions of people, and 1906 sees an underserved segment in that market: people who don’t have trouble falling asleep but struggle to stay asleep. This new product will target those people.
1906 is also developing products to address women’s health and different types of pain.
1906 raised $18 million last fall, and now, the company is in the process of raising a bridge round. This senior secured debt note, which is mostly funded, will help provide the necessary capital to reach profitability, according to Barsoom. The company expects to hit this milestone by December. After that, funding will become driven more by opportunity.
When allocating capital, 1906 carefully considers R&D projects as well as new market expansion.
In terms of future capital opportunities, Barsoom is carefully watching the opportunities that are currently on the sidelines. The outcome of the 2020 election could mean an influx of new, large institutional players into the market. Additionally, Barsoom is watching to see how SPAC money will be chasing deals in the industry.
In its first month of operations in Oklahoma, 1906 exceeded revenue expectations by three to four times, and Barsoom expects this trend to continue. Once the company reaches profitability in December, he anticipates the company will generate significant operating cash flow. As the company moves forward, its team tracks important metrics like same-store sales, labor productivity and return on investment capital.
While 1906 is highly focused on its innovation pipeline and expansion into new markets, the company is not losing sight of its responsibility to social justice. 1906 supports initiatives like the Last Prisoner Project and advocates for the creation of economic opportunities for people affected by the War on Drugs and for the end of mass incarceration. Barsoom sees the potential for cannabis to be a positive force in society, but he thinks the industry has not yet done enough to support and progress social justice issues.