I got the opportunity to catch up with Erik Hultstrom today and jumped at the chance. I first met the longtime grower around 2015, when, as founder of the Cultivators Alliance and co-founder of the Southern California Coalition, he was a constant and effective presence at city hearings and industry meetings where the future of the cannabis industry was being hotly debated. A veteran member of the Los Angeles cannabis community, he also was the founder and CEO of Legacy Strains, a licensed cannabis brand featuring old school strains that is dormant for the moment but could (and should) be resurrected when the time is right. Its genetics are tucked away for safe keeping by Hultstrom, who has faithfully and skillfully tended to them for years.
“My first grow was in early 2006,” he said of his early foray. And it was four-light grow in a bedroom of a house I was living in with a bunch of people who all worked at a dispensary in West Hollywood, LAPCG, under the leadership of Don Duncan.
“From that room,” he added, “which was basically a side hustle, I was successful enough that I expanded into a loft downtown, and then to a garage in Sherman Oaks, and at one point I had three small grows. Then, around 2014, most people were scaling into warehouses or had done so already, and so I scaled up to a warehouse. I found a partner who was a real estate person, not a cannabis person, who thought that this seemed like a good investment and purchased the building and became my partner and I was the tenant, conducting my cultivation. At the time, there were no permits and that’s how you met me; I was organizing all of the indoor growers to lobby for permitting.”
Fast forward a few years, the city and state started issuing licenses, and the regulated industry, such as it is, began its fateful journey to a marketplace that today is still very much finding its way. Inevitably, former advocates had to shift focus in order to keep their businesses afloat in an overregulated and unforgiving environment where hard work was simply not enough.
“Pretty much what happened is that everything was getting tough,” said Hultstrom. “There was what I’ve termed a large investment bubble that came into our industry, and we’ve all seen how overproduction has affected commodity prices over the last year. I wasn’t a well-capitalized organization. We were bootstrap, and we were struggling day to day. And everything fell on my shoulders. I kind of realized that what I was doing wasn’t scalable. And it was just a real big slog unless I could figure out how to clone myself. I didn’t have a solid business partner; everything fell on me, from the cultivation to the sales to everything.”
Things were coming to head at the same time COVID reared its head. “It was getting there as the pandemic started, but then the pandemic temporarily inflated commodity prices for a good seven or eight months, and all of a sudden, everything was nice again. We were definitely struggling with our day-to-day operations and keeping our doors open, and then the pandemic hit, and the prices went up, and I got an offer for my permit. And I was looking at my operation, and I felt I couldn’t go much further without a better support team around me to pull off what we were doing. And so, it allowed me to break from my business partner, I was able to get my IP back for myself and basically split and get out of there. At the same time, one of my best friends, Ryan Jennemann at THC Design, their company was doing very well, and I could see he needed more help. So, for me, part of it was if I closed down, I could go work for my buddy Ryan, and then help them make the jump, because I could see consolidation was going to happen, and I knew with my lack of capitalization that I was just going to struggle being competitive, and so it made it made a ton of sense to me.”
He sold his license in August of 2021, one year ago. I asked Hultstrom what it was about THC Design that made it more survivable in today’s conditions. “THC Design is also a bootstrap company,” he said, “but Ryan is just a lot smarter than I am. THC Design has built such a great robust company, they captured a lot of market share, and they were in a much more sustainable place. A lot of the leadership and the company was very driven, competent, and understood the market, and it wasn’t a one-man show; they had a solid team of people. And since they had a solid team of people, they were able to build out the infrastructure to support the people. So, to me, kind of coming from being an old-school activist, which is where Ryan was as well, I just wanted to be on a team of pre-prohibition people that that were still moving forward. There are so many companies now that had nothing to do with the industry back before regulation, and for me, it was important to be with a bunch of my pre-regulation people as well to move forward.”
Currently, he is in the marketing department. “I’m managing a large team of brand ambassadors, as well as creating all of the educational materials for our brand ambassadors in the field. Brand ambassador is a job that I did at Legacy for years. Here, they’re our ground-level marketing team; they go out to the shops, they educate people about our brand, they educate people about the history of the industry. I try to impart all of the knowledge that I’ve gotten over my 17, almost 18 years, in this industry and try to get them to communicate it as well as I can.”
Based on that experience in the Los Angeles market in particular, what did he see happening in the near to mid-future? “I think it’s going to kind of continue that only the strong are going to survive,” he said. “And I think we’re going to be going through kind of an industry cull, because anybody who’s been in this industry for a reasonable amount of time has since the pandemic seen the wild swings in commodity prices, and just the general volatility in our industry. Part of it was overproduction. I liken this to the dot-com bubble bursting, where you don’t need six companies selling online dog food. And it’s similar with the cannabis industry. There’s a huge oversaturation of shops, there’s an oversaturation of illegal cultivation, and we’ve seen a period over the last six to eight months where the commodity price is oftentimes cheaper than the cost of production.”
What trends has he seen in terms of price points, and quality versus lesser-but-cheaper cannabis? “I do have the benefit of our brand ambassador team,” he said. “One thing we do is the team goes out and they collect anecdotal data points from consumers, and then we aggregate all of that here, and we try to make sense of it. And while I think there are a lot of swings in trends in the cannabis industry when it comes to retail, I have started to notice seasonality differences. I find that people look much more for sativas in the summer, you know, and also looking for more of an entourage effect than necessarily a sativa.
“But also, as economic times tend to get a little tougher for the average consumer, we’re starting to see a larger market share going to the budget flower as opposed to the premium flower brands,” he added. “I think demand is always going to be there for premium products, but with just the inflationary pressures on their weekly budget a lot of people are being pushed into more of the budget brands. This is the good side of the oversupply story for the consumers because the budget brands are in a very good place to bring in quality for a low price, just because there’s so much out there and the commodity price is being pushed down because of oversupply.”
What does this mean for whatever smaller growers still remain? “Well, most of the people I knew that go back over a decade didn’t survive as long as I did,” said Hultstrom. “It’s just a case with any new industry emerging; there’s going to be consolidation. And even back a decade ago, I understood enough about business growing up around it – my dad was a small businessman – that I understand the trajectory of industries. One aside: when I was young, my dad was a wood manufacturer and he got into snowboarding back in 1989, and in 1989, nobody really even knew what they were. It was the very beginning of the industry. And I’ve actually gotten to see a lot of parallels with how the snowboard industry matured to how the cannabis industry matured. One of the things my dad told me is that when he started all the companies were owned by snowboarders, and about 10 years later all these same companies were owned by lawyers. And I’ve always thought about that looking at the cannabis industry. We see a lot of companies that were owned by cannabis growers or enthusiasts and we’re now kind of going to that as well where they tend to be owned more by lawyers than people from the industry. It’s an interesting life experience to hear about it and then see it happen in a parallel fashion with this industry. It’s something that’s always interested me and it’s just the way things evolve.”
Speaking of evolution, Hultstrom may also be evolving but he is a cannabis lifer, isn’t he? “Oh, yeah,” he said. “When I said 17 years, that’s 17 years in the regulated industry. I’m 44 years old, and I’ve been selling cannabis since I was 15 years old. When I was 15, I never realized that it could be a career, that probably didn’t happen till I was about 30, but this is what I do. I love this industry. I’ve loved watching this industry evolve. It’s completely fascinating to me, you know, Of all the things that are intellectually curious to me, watching how commodities and industries form has always been one of them, and so having the opportunity to combine two of my biggest life passions, which is that and cannabis, is something I feel very lucky to do. I feel like this industry found me more than I found it, so I never want to go anywhere. I want to work in this industry my whole life, because it’s like a child I helped raise that I get to watch grow up. I mean, many people helped raise this child that is the cannabis industry, but I want to keep watching her grow up.”
And who knows what the future will bring? “My genetics are safely stored,” assured Hultstrom. “The Afgoo X Maui Wowie, the Master Kush, the Sour Diesel, the Platinum Cookies, the Trainwreck. I have all of these here, I own the intellectual property, and at some point I would like to get a small 5000-square-footer and go at it again. As far as selling my permit, I kind of got one of those offers that was just too good to turn down, and I always figure at some point I’ll get the opportunity to cultivate again. One of my huge loves is growing the plant, and so someday I intend to relaunch Legacy Strains with these strains.
“But there are all kinds of factors work against you,” he added. “One of the biggest things that I struggled with was the potency monster where if it’s not testing at 35 percent THC, nobody wants to look at it. These legacy strains that were grown in the 90s and early 2000s, nobody even did potency testing, so nobody bred towards that, where today a lot of the breeding is specifically done towards potency testing. But I think there’ll be a place for it.”
We had to end the call, but Hultstrom had a final thought he wanted to share. “Cannabis is something that saved my life, and I think a lot of people who care so much about this plant are in the same boat,” he said. “If I didn’t have it, I don’t know where I would be, but it wouldn’t be as great as things are now. And I think it is something that no matter what, can never be duplicated, that this connection that cannabis consumers have is very special and unique to this industry and this plant. I think for companies moving forward, it’s a recognition that you can’t fake; you either understand this connection or you don’t. I don’t think there’s a way to pretend to understand this connection, and so I do think that to have a successful company moving forward, the values and the identity of this industry are something that people are going to have to understand and they’re going to have to live, and I think the companies that become the most successful will be the ones that can successfully blend the culture along with a general corporate competitiveness. The corporate structure rules business because it finds efficiencies and eliminates waste better than anything else does, and my belief is the trend to harmonize this is what’s going to allow people to survive moving forward, and I hope to help further find that harmony.”
The post Catching Up With a Los Angeles Legacy Grower appeared first on Cannabis Business Executive – Cannabis and Marijuana industry news.
