Through COVID and Beyond: California Dispensary Operations with KindPeoples CEO Khalil Moutawakkil
An Interview with the CEO of KindPeoples Khalil Moutawakkil
What's it like owning a dispensary in one of the coolest surf towns in California?
It's amazing, honestly. I try to say with a straight face that I'm from Santa Cruz, born and raised here and that I run an amazing cannabis company across the street from the hospital that I was born in. So I'm incredibly lucky in that regard. And I get to do what I love. But more than that, we've been able to share those passions with our team. We now have approximately 80 employees, give or take, and now our staff transmits those passions into our community, and it's fabulous.
What were you doing before cannabis? What was the driving force that made you jump into creating a cannabis business in your hometown?
What was I doing before cannabis? I like to say my eighth-grade homework. I've pretty much always been in cannabis to some degree. During my formative years, the passage of Prop 215 took place. That's when I had my foray and began as a cultivator, which was a 15-year career. And at that time, things were much different, to say the least. This was a time when you might get a call from your buddy at two o'clock in the morning to help him out with loading up his entire grow into a Uhaul truck. We've come a long way since then, but it was also a really beautiful time in the sense that it was very rootsy and authentic. I was able to provide cannabis to all the various medical collectives that were popping up in Santa Cruz and the Bay Area. And that was the budding start for my career in cannabis as well as KindPeoples.
It's been a regulatory roller coaster since you got started; what were some of the significant regulatory hurdles that you had to jump through over the years?
It's been frustrating. There's no question about that. But it's also been key in advancing the industry in so many respects, and there are growing pains that I think we've just had to accept as a nascent industry that came out of nowhere. I mean, we came from underneath the rock and told the whole world, "Hey, here we are, and we want to be legit." Well, now we're getting with what we asked for. More specifically, I would say that having to work with multiple layers of government really complicates things. Prop 64 was passed under this premise of local control, so we are very much controlled at the local level, from zoning to buffers, hours of operation, signage, and all of those types of details. But then there's this whole other big brother layer at the state level with the BCC (Bureau of Cannabis Control) that can be really complicated, especially when the local and state regulations are not in alignment with one another.
Where are your dispensaries located? And why did you choose those two locations in Santa Cruz?
Our first location is on Soquel Avenue. It's pretty tremendous. It's right off of a key exit as you head towards the beaches on the east side of town. It's our local spot. It has a huge mural done by a local artist on the front of the building. The interior is 5,00 square feet and really embodies that spirit of Santa Cruz, which is very counterculture and old school if you don't know. I grew up around a lot of tie-dyes, to give you an idea of what kind of town we are.
Our second location opened initially in 2017 but was tucked away in a less desirable industrial area. We moved to Ocean Street, which is the main tourist drag as you come into Santa Cruz on Highway 17 from Silicon Valley. And boom, you get introduced to our billboard right away, which is awesome, super proud of that, and then straight down the road, we're on the right-hand side. That dispensary was built out of an old Chinese restaurant that was just gross. We completely renovated the whole thing from the ground up. We were able to design the space using eco-friendly materials and remodel it in a way that was most relevant to the modern cannabis retail theme.
Based on what you've learned, what do you think makes you a great cannabis operator, applicant, or potential partner?
When I think of a good old school cannabis operator, the number one virtue that comes to mind is grit. It's just the ability to grind through whatever, whether it's regulations, stigmas, banking solutions, or technological solutions that aren't offered in cannabis retail. Whatever it is, it always seemed a lot easier from the outside looking in. I've seen it time and time again, whether it's players from the alcohol industry or software companies, they come into the space, and they think they can apply what they've learned from other industries to cannabis. To the extent that they can thank you so much because we need as much of that as possible. But it's always more challenging than they realized. So yeah, I would say resourcefulness. Also, I think of the importance of being authentic to and having empathy for your community and your staff. I really hope that that is the future of cannabis retail across the country.
How many of your core team have been with you since the beginning?
I'm very proud to say that our leadership team has been there, more or less, since the beginning. And most of our exempt employees as well. So you know, you generally get hired at KindPeoples in an entry-level position and work your way up. We do our very best to train you and to keep you and develop trust over time. I'm proud of that and not having a lot of turnover in that regard.
What have been some of the key people that have made a significant impact as you've grown?
The first thing that comes to mind is having that person on your staff that is just relentlessly organized. Because in cannabis, you often come across individuals that are big dreamers, and they've just got their foot on the gas, go, go, go, we can make this happen. That's great, we all need that, but at the same time, we all need the brakes, too. We all need to be put in check, and we need someone that knows how to implement realistically and keep things tight and efficient. Especially as we move into a time where there is more and more competition, we all need to become hyper-efficient in our operations for the sake of survival.
How did Coronavirus impact your operations? What were some of the practices that you implemented right away to adapt and survive?
It's been eye-opening. We were used to dealing with cannabis challenges, but not like this. Going back to that grit, we certainly had to dig deep. But I can honestly say, looking around our community, we have done exceptionally well and are already stronger than we were before COVID. It boiled down to focusing on our fundamentals. Operations certainly had to change, but we're still doing the same thing for our community and our customers at the end of the day. That said, everything in our operations got upended. We were no longer able to serve cannabis in the store. We developed curbside processes and relied heavily on our automated systems. Our online sales skyrocketed from 4%, which we work hard to get to, to about 50% at their peak. That's hundreds of online orders coming in daily when previously we might get a handful here and there. We brought all of our inventory out on the sales floor and used the space to fulfill online orders. Customers came to the front door to pick up their online orders or for a consultation via an iPad. And luckily, we have a very robust menu system and catalog that we were able to use to do consultations at the door.
Were there other things that you had to adapt to?
Yeah. I think your listeners are well adapted to all the COVID cleaning protocols, which we are certainly doing to the maximum extent possible. But beyond that, we had to change the way we do business internally—the way we hire, for instance. Right out of the gate on March 17, we lost about a third of our staff. Many of our team members just decided they didn't want to come to work and potentially be exposed, and how can you blame them? So our recruitment increased by 300% - 400%. We had to change the way that we filtered that recruitment. We had to change the way we onboarded. We automated many of those systems to ensure that our employee training for all those new staff members was efficient.
On the customer-facing side, we focused on mitigating the stress and the anxiety of our customers. It's scary, the number of cases rises and falls, and our team is on the frontlines. We had to be compassionate, empathetic, and communicate all of our cleaning procedures and let them know that this is a safe space. We offer cannabis medicine, and we are here to help our customers ease their anxieties and alleviate suffering during this tough time.
Where do you see the future of cannabis retail going? What are some trends that you've witnessed this year?
Let's talk about it from the business side. My true hope is the customer, and the patients are the ones that benefit the most. So when I think about whether or not prop 64 has been a success or a failure, more people are getting products from a legal marketplace, and that's a good thing. Are there trials and tribulations along the way? Certainly. Am I pissed off about taxation and regulations and the prices that customers are paying at the register? Certainly. But look, we have to start somewhere. As we head out into the future, the supply chain is only going to get stronger. Increased competition and economies of scale will dictate higher quality and more economical products for customers, both being good things. I think we will see more jurisdictions, especially with budget concerns relating to COVID open to cannabis businesses. So I have faith that the illicit market will transition more and more into the above-board market over the coming years, and that makes me happy. I think everyone wins under that circumstance. I don't necessarily take issue with the illicit market, per se. But why not bring customers into a market that's regulated, tested, and affordable.
How do you guys select your products, especially now, as you've got more options in California?
We have a purchasing matrix that weights and dictates the way we purchase and who we choose to buy from. One of the strongest dictators of who we work with is how professional you are. Do you show up when you say you're going to show up? Do you bring the products you say you're going to bring? Do you have your certificate of analysis ready? Believe it or not, even some of the larger companies are not able to pull that off. On our end, we work hard to provide consistency for our customers. The number one complaint we get is how come I do not see this product that I fell in love with last month on your shelf this month. So that's a huge issue for us.
We don't have a ton of local cultivators here in Santa Cruz. Still, we do carry as many as we can on our shelves, and we weigh them heavily to ensure that we can keep it local and give back to those cannabis businesses that are also supporting our community in the same ways that we do.
Has KindPeoples been thinking about offering store-to-your-door service? Whether in-house or by partnering with a local delivery company?
Yeah, we've had an amazing amount of conversations around the idea of subscription services and delivery, which we conducted in the past and shut down due to a lack of demand, believe it or not. Subscription services are a really interesting idea; one of the issues we're currently working through is a payment solution. We've got an economy of consumers that are all accustomed to Amazon, and I'll tell you that little old KindPeoples in little old Santa Cruz, we are not going to be able to pull off Amazon-type service. So we need to show our customers the best possible service that we can provide. Without the ability to take credit cards online, it's really challenging to say, "Hey, sign up for this, $99 a month amazing bundle of products, and we'll deliver it to your door, but you have to come into the shop to pay." No one can hardly wait five seconds for a page to load, let alone be bothered with anything more complicated than what Amazon can provide.
You have a unique story. Your team has pulled off some amazing things to establish your business, capture market share, scale your operations, and navigate COVID-19, among other things. It sounds like the world needs more KindPeoples. What are your current thoughts on expansion over the next few years as we start to come out of Coronavirus?
I think we're trying to balance the two opposing worlds, so to speak, where on the one hand, we want to be able to grow organically. And on the other hand, we don't want to get too far over our skis and overextend ourselves and end up like the Med Mens of the world. We're very proud of our cap table being very simple. You know, it's my partner and myself. We don't have a Med Men to answer to, right. We haven't been issued stock from some publicly-traded company that has a majority of our board. So we're growing at a pace that works well for us, and we're biting off chunks that we can chew down, and amid a looming recession, the election, and all these other uncertainties, it's a challenge to figure out what our next move is. So, right now, we're dipping our hands into some new initiatives. One of those is organic licenses. We are looking at what new jurisdictions are opening up around the state and how we can get a stronghold there. We're also approaching several different companies for potential strategic partnerships, both on the retail side and the supply chain side. I think the future of KindPeoples lies in our ability to remain authentic in our ethos and value system. But we also need to be able to compete with pricing and quality. Frankly, that will get harder and harder to do if we don't have our hand in the supply chain with some vertical integration or by securing contract manufacturing relationships. So a number of those irons are in the fire currently.
I've seen many companies similar to yours that started with one location, then opened a second one, and were growing and had strong internal teams, then they didn't think bigger and stalled out. Does KindPeoples currently have any of its own products? Do you white label anything?
It's not something we currently do. We made a very conscious choice in 2018, at the beginning of legalization, to say out of all types of businesses we could start, let's do retail. Thank goodness that we chose that route. It was one of the smartest decisions we made. This decision enabled us to focus, stay true to our customer base, and capture market share. But as we move forward, I don't think the MSOs were wrong. They came in, and they said, you're going to need vertical integration, you're going to need a certain amount of scale at the retail level, you're going to need to be able to compete on margins. But they executed poorly, and they're paying the price for that. I think the most amazing thing in the California industry right now is the opportunity available to local roots cannabis businesses over the next four years. It's an open runway for us to spread out. We can take advantage of the fact that there's not a ton of capital pouring into the state right now. Take advantage of the fact that many MSOs are scared shitless of California because of their perceptions around taxes and regulation. I'm happy for them to feel that way. It allows the rest of us the opportunity to take advantage of a 40 million customer base market; that's essentially the heart and soul of culture across the globe.
What was unique to you about retail? What drove you to decide to focus on this business type?
The consistency of demand and the upward trajectory that we know will continue ostensibly for decades as the illicit market slowly and slowly gets stamped out of the space. We don't see the volatility in retail that we see in the supply chain. For example, the idea of having a fire decimate your crop is just devastating. I mean, how do you lose an entire crop and come back from that that's not insured. In retail, we take hits. We're customer-facing, it's brutal, day-in and day-out you've got to be there with your customer base. But it's that tangible, one-on-one experience with customers on a day-to-day basis that is not just rewarding on a personal level but is also a very consistent business model.
For entrepreneurs entering the industry, what are some of the biggest things that you think other retail CEOs should know to succeed?
I have to think that KindPeoples has been so successful in our market because we know our community. That may sound cliche, and to an extent, of course, it is. We were the only collective that opened up that had local operators. And at that time, there were plenty of other collectives that had already opened their doors. And you can feel that when you walk into a retail space, there are the ones that just sort of clash with the environment, and then there are the ones that feel so natural when you walk in. You can't buy that. It has to be done from the ground up. There have to be employees that come from your community. There has to be involvement with local nonprofits. There has to be a give-back component. And these things are good for sleeping well at night and good for business.
Are there any other challenges that you foresee on the road ahead?
Yeah, one of the items that come up most often in our risk assessment is what happens when and if you can efficiently ship cannabis across the state. There's this delivery lawsuit that's happening right now in California, which is quite controversial. At the end of the day, I want the customer to win. I want there to be more cannabis spread across the state of California. But at the same time, I think we need to strike a balance and realize that there are a lot of small cannabis businesses are just starting to tap their roots, and you know, if an Amazon-like or Ease-like company can quickly and efficiently ship at scale across the state of California, their buying power, ability to partner, and their ability to cash flow could decimate all of these mom and pop cannabis businesses that have paved the way, and that that would be a sad day.
I'd love to see KindPeoples spread across the country because there are so few dispensaries that have a soul. And you're an authentic cannabis company that came from the roots of California, and you went through the hoops of compliance. It's an incredible success. If anyone is interested in potential partnership opportunities, what's the best way to get in touch with you?
Check out our website at kindpeoples.com. We've got a tremendous website with tons of information about who we are and how to contact us. You can always reach out to me directly. My email address is khalil@kindpeoples.com, and I'd love to hear from you.
Final Thoughts from Nic
I invite anyone with potential opportunities in California or other states who think KindPeoples might be a synergy to get in touch. In our years of licensing work, we found that 95% of the time, when a team wins a license, the application has partners or equity owners on the application that have operated compliant cannabis businesses in other jurisdictions. These partnerships show regulators that you can be trusted, and you are no stranger to navigating the regulatory landscape. So if you're putting together an application, reach out to Khalil Moutawakkil and his team to connect. A strong network of advisors and partners is invaluable in this industry.
Visit KindPeoples or Get in Touch
- Website - https://www.kindpeoples.com/
- Email - info@kindpeoples.com
- Facebook - https://www.facebook.com/Kindpeoplessantacruz
- Twitter - https://twitter.com/kindpeoplesrx
- Instagram - @kindpeoplessantacruz
KindPeoples Dispensary Locations/Menus
Phone: (831) 471 - 8562
Hours: 8:00 AM - 10:00 PM PT Daily
Phone: (831) 515 - 4114
Hours: 8:00 AM - 9:00 PM PT Daily
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