COVID-19 and a string of robberies have the cannabis industry on guard, but SPARC founder Erich Pearson remains optimistic about the future.
Erich Pearson was in the midst of another 16-hour-day working at his company’s Sonoma Valley farm when he took a break to reflect on the past four months.
“It feels like it’s been five years since COVID started,” says Pearson, the CEO of the San Francisco-based dispensary SPARC.
A common sentiment these days, Pearson’s personal mental fog understandably began when San Francisco’s shelter-in-place restrictions went into effect on March 17. After a brief period in which the city’s legal cannabis businesses were told to shutter all operations, pot shops were designated essential services and allowed to continue operations — albeit in a majorly modified form.
For SPARC, the pivot to delivery and curbside pick-up has ensured the lights stay on, but as Pearson explains, the overall volume of retail traffic lost to San Francisco dispensaries is hurting his bottom line.
“We don’t have the population during the day that San Francisco normally has,” he says. “Anybody who was commuting into town — the half a million or so people that come into San Francisco every day to work — they aren’t coming in to work anymore. Plus, anybody who lives in San Francisco who has the ability to work from home is leaving.”
SPARC has a large footprint when it comes to Bay Area cannabis brands. In addition to retail locations in the Haight, Mission, and SoMA, the company also has stores in Santa Rosa and Sebastopol. According to Pearson, retail sales have been notably stronger for SPARC’s North Bay locations, which is also where the operation’s cultivation, manufacturing, and distribution efforts take place.
That’s because, as a vertical company, SPARC takes cannabis from seed to sale. It also gives Pearson some unique options when it comes to promoting SPARC products.
One way in which Pearson hopes to steer his company through the stormy seas of 2020 is by expanding SPARC’s regional footprint by means of a custom developed e-commerce solution that integrates with the cannabis merchant solutions provider Treez. Based in Oakland, Treez offers an innovative workaround to the banking issues that make it impossible for dispensaries to accept most conventional methods of payment by instead relying on a bank-linked app similar to Venmo or Paypal.
Currently, the software counts roughly half of California’s legal weed retailers as customers. The issue, as Pearson detailed, is that many smaller operations lack the resources to properly customize their e-commerce platforms. That’s where SPARC comes in. By providing other retailers with access to the e-commerce platform SPARC customized for themselves, Pearson’s company in turn benefits by receiving what amounts to digital shelf space at other retailers.
“Other retailers can now integrate with our software so we can re-sell their inventory, and our products from our system,” Pearson explained in a follow-up email. “What that allows us to do is to have our website and our delivery available in their jurisdiction.”
By way of example, Pearson suggests how a hypothetical dispensary in Sacramento could leverage SPARC’s e-commerce system to generate orders for their stores from SPARC’s website. Even though the orders would still be filled by the Sacramento store, the trade-off is that SPARC expands their radius of service while also linking their products with a new customer base.
“That’s our shelf space game,” Pearson says. “People are doing everything they can to get their brands onto these retail floors. We’re going to actually offer our technology to other dispensaries and then just send them orders. In exchange for that, we’ll be promoting and selling our own brands. I can’t mention names yet but we’ve got a handful of big, big retail stores that are interested.”
While Pearson puts in long days on SPARC’s Sonoma farmland, he must also keep close tabs on what remains a heightened sense of alert for cannabis operators across the Bay Area.
Following a spree of organized robberies believed to have been timed to overlap with initial protests over the killing of George Floyd, there have been few arrests and even fewer assurances from local law enforcement that such crimes are a priority. While the tumultuous nature of legal cannabis makes the entire situation difficult to truncate, there’s a level of violence at play that’s become impossible to ignore.
Pearson admitted that, at least in terms of SPARC, the situation remains very uncertain.
“There was just a murder in Oakland on Friday night,” he said, referencing a shooting at a cannabis facility that left one employee dead and other injured. “Whether it’s the illicit market growing more cannabis up in the woods or robbers looking to rob, I think people are just feeling that law enforcement and resources are elsewhere.”
One small part of the future where Pearson did express optimism was the concept of cannabis appellations.
Long an integral component of the wine industry, outdoor growers like Pearson are eager to see action on this front. For him, qualifying sun-grown, outdoor cannabis from a specific geographic region is a huge opportunity to differentiate what SPARC does from the weed produced by indoor grows.
“It’s not the same to have a warehouse in Sonoma as it is to have a plant in the ground in Sonoma,” Pearson says. “I think a lot of the market still tends towards really frothy-looking indoor cannabis, but, over time, I believe consumers will start to understand that outdoor, organically-grown marijuana is not only healthier for you, it’s healthier for the environment too.”
In addition, Pearson argues, appellations can offer legitimacy and prestige to smaller outdoor cultivators desperate to make their pot stand apart from that produced by mammoth corporate grows.
“As federal law changes,” Pearson says, “I think having appellations that are the same names as appellations from the wine industry will lift those brands even further. You’ll be able to say you’re from Carneros or from Sonoma Valley. We can’t grow cannabis in Napa yet, but should Napa Valley allow that, it’s a brand. Being able to put those brands on your jars and your cannabis will mean something to consumers — and it should.”