After breaking his neck in a surfing accident and using medical marijuana in his recovery, Derek Peterson left a cush job at investment firm Morgan Stanley to start Terra Tech. Peterson positions the California-based startup as a “vertically integrated, cannabis-focused agriculture company.” It’s intent is to own its own supply chain, meaning that it will be responsible for producing sustainably grown cannabis, as well as handling extraction, distribution, plant science research, and even its own retail sales. Terra Tech’s network includes subsidiaries Edible Gardens (a brand of living herbs and leafy greens), MediPharm (which operates their growing chain of Blüm dispensaries), and a brand of extracts called IVXX (that would be 420 in Roman numerals) that’s currently sold in both California and Nevada.
Terra was the first publicly traded company to cross the so-called “green line” in 2010 by actually growing and selling the cannabis plant, as well as one of the first companies to disclose marijuana growing and selling on SEC forms. Currently running Blum shops in Oakland and Las Vegas, the company has three more locations slated to open up in Vegas and Reno over the next few months, with plans for many more in the months to follow.
As the cannabis market continues on its seemingly inevitable journey towards legalization, government regulation, and corporatization, we spoke Peterson to get a sense of what that future may look like.
How did you initially get into the marijuana business?
I became disenfranchised with working on Wall Street. After the 2008 credit crisis, I’d had enough of it and was looking to run my own business. I started to take a hard look at the cannabis space, and when I ran the numbers, the economics made a lot of sense. I also understood the value of cannabis as an alternative to traditional, more addictive drugs for pain relief.
I broke my neck in the summer of 2007 and used cannabis during my recovery. It was then that I developed a true appreciation for the medical application of the plant. Everything was aligning to make a move into the industry, so I left the comfort of corporate America and worked to take public one of the first cannabis startups.
How would you describe the current landscape of consumer transparency regarding medical marijuana? Do consumers generally know with any certainty what the ratios of cannabinoids and compounds are in the marijuana they’re buying?
There’s still a tremendous amount of uncertainty in regards to quality and consistency. New legislation throughout the country is improving significantly with mandated testing, but there are [plenty] of areas that still operate without regulation. That leads to the improper use of pesticides, improper handling of product, and wide swings in cannabinoid ratios. We’ve worked very hard on our IVXX brand of cannabis products to fill that gap, knowing that consumers are beginning to demand the same measure of consistency they demand in other areas of their lives.
We’ve developed a seed-to-sale process, which has allowed us to have a significant measure of control over the consistency and quality of our brand. We likely wouldn’t have been able to achieve that if we didn’t cultivate, do our own extractions, package and ship the product ourselves. The industry is moving more in that direction, but there’s a higher cost to operate with that measure of accountability. It’s part of the reason why I believe the industry needs regulation in place that will force third-party testing.
How is Terra Tech approaching this issue?
When you walk into a Starbucks anywhere in the country, you’re surrounded by the same design elements, and you get the same product. Our industry shouldn’t be any different. When you walk into one of our Blum locations, you know there’s going to be the same finishes, same color palettes, and the same level of experience that the budtenders are giving patients and/or consumers. Blum should be a very similar experience, whether it’s in Nevada or in California.
In addition, when they purchase one of our IVXX products, they know they’re going to get the same quality and experience at each one of our locations every time they come back. That consistency has drawn a level of loyalty from our patient base, and it’s why we have so much repeat business. We service close to a thousand patients a day at our Northern California location.
We really spend a lot of energy looking at traditional retail experiences in all areas, whether it’s food and beverage, clothing, or cosmetics. There are very healthy retail models that have been tested over a long time that work, and so we pull elements of those into our own business and adjust based upon our industry and specific needs for standardization. But most of it boils down to educated staff, quality product, consistency, and great service day in and day out.
What have been some of the main areas of interest from consumers, beyond THC content?
There’s a tremendous amount of interest in CBD for pain relief and inflammation. There’s a [growing] cross-section of consumers that are not looking just for high THC content, and would actually prefer not to feel high from the experience. So there’s been a tremendous amount of development of new products in all forms, from lotions to florals to sprays.
What have you guys learned through your research in terms of ideal ratios, or does it really depend on the user?
I think that there’s a certain amount of subjectivity in cannabis—people can have different experiences from similar strains. That being said, we still focus on standardizing dosing, and making certain the genetics truly are what we say. The product can be personal to different people; it’s a lot like wine in that way, in that it’s subjective to different people’s palates. [We] focus less on what one strain may do for someone, and more on the consistency. That way when a patient identifies what they prefer, they know they can return in the future and that same experience will be available on our shelves.