10 Questions With Caliva CEO Dennis O’Malley

10 Questions With Caliva CEO Dennis O’Malley

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O’Malley discusses the future of California’s cannabis market and the importance of a strong web presence in the industry.

November 14, 2018

As the adage goes, “Getting on top is easy, but staying on top is difficult.” When Business Insider ranked Caliva as America’s top dispensary in 2016, CEO Dennis O’Malley knew that while the national recognition was likely to increase business, it also placed a target on his back. To fend off the competition and remain at the top, the vertically integrated, San Jose, Calif., company has expanded exponentially: It has hired more than 200 employees in the past year; increased services offered to include delivery, online ordering and online budtender chats; and remained hyper-focused on product quality and consumer experience—all while continuing to supply other California dispensaries with wholesale product.

Cannabis Dispensary spoke with O’Malley about the cannabis company’s social media ambassador program, the importance of web presence, the future of California’s cannabis market, packaging challenges, and more. The CEO also offers advice for those looking to open a dispensary in the world’s fifth largest economy.

Scott Guthrie: Within the past year you’ve hired more than 200 employees. What has caused the massive expansion and how have you gone about finding and training that many people?

Dennis O’Malley: As a vertically integrated company, our dispensary is a key part of our business in which we get to showcase a lot of the hard work that happens in our production facilities, in addition to the products that we produce for retail. We’ve also seen that there’s been an increase in demand in terms of consumers asking for us to be able to deliver Caliva products in a convenient way—so either pickup or delivery. A large portion of those new employees have been hired for the production and distribution of Caliva products. Being able to recruit locally for that really takes a small army of HR and marketing people to be able to go through the vast amount of people who are interested and ensure that we’re hiring the best candidates that believe in what we’re doing at Caliva and that are uniquely suited to be qualified at their jobs. We’re up to about 300 people now and still growing.

Guthrie: California has had struggles implementing its adult-use program. Being a large, vertically integrated company, what has been the biggest challenge navigating the state’s new market and regulations?

O’Malley: We took our lumps in Q1 of this year. What we found is that in Q1, for us, it was difficult to find the right testing lab. It was difficult to find the right packaging providers, and it was challenging to try to meet the right regulations both in terms of having certified, compliant product from third parties in our retail store, as well as being able to find other retailers to sell our products into. But we did that early. We got through most of it by the end of March. What we found was that the hardest part for us, in terms of the July 1 regulations and moving forward, was actually trying to find partners who had gone through that process early on as well. What we found was the vast majority of companies were still in that transition of trying to find an approved testing lab and trying to get to childproof packaging, and I think most of that is behind most of the brands out here. But there are still challenges for us to acquire the right amount of inventory from other brands into our retail. And then on the flip side, the demand for Caliva products has been so high, we’ve been balancing how to ramp up production to meet demand.

“There are limited vehicles for any cannabis company to actually advertise, and we truly believe that the best advertising that we can do is actually from our great customers.” Dennis O’Malley, CEO, Caliva

Guthrie: You have a Caliva Ambassador Program for social media. Who can be ambassadors, and do you feel the program has helped your brand position?

O’Malley: There are limited vehicles for any cannabis company to actually advertise, and we truly believe that the best advertising that we can do is actually from our great customers. Ambassadors to us are people who are credible in the industry, who are discerning cannabis connoisseurs and their evaluation of cannabis products and cannabis services is something that somebody can look to as a point of reference when they are making a purchasing decision.

For our ambassadors, we look to a couple different places. We look to our existing VIP customers. We look for people who have shown interest in Caliva externally, and then we reach out to people that we respect in terms of their general product reviews and coverage around cannabis.

They give us internal feedback around what they’d like to see in products and product concepts. They are our best marketing by far because the authentic content they create is 100-percent driven by them. They do a much better job of telling our story than we do.

"Vertical integration for dispensaries provides a large advantage on a cost basis and a flexibility basis," O'Malley says. All photos: © Jack Hutch

Guthrie: On your website, you have an option to chat [online] with a budtender. Are customers speaking with real budtenders, and why is it important to provide access to budtenders outside of the dispensary?

O’Malley: We get over 1,200 chats a month. Customers absolutely talk with budtenders. What we find is that out of those chats, people are asking for products around pain, sleep and anxiety, and it’s generally newer consumers who would like to gain the confidence that Caliva is the right place to purchase a product. The chats are really centered around, “Hey, I have some type of state that I need some relief on,” or, “I’m trying to achieve this type of state, what do you recommend for this?”

We’ve changed the title of budtenders to wellness consultants. Our average time that a new consumer spends with us has gone up from about three minutes to about 15 minutes.

Guthrie: You do a large amount of wholesale to other dispensaries. What considerations went into your packaging to help your brand stand out in other stores?

O’Malley: That’s probably been one of the most challenging things that we’ve had to face. Individual product packaging is actually fairly easy and straightforward, but the reality any dispensary owner faces is that taking an individual package and displaying it is difficult if there’s not a point-of-sale purchase display. So we spent the same amount of time on how our individual products would be displayed within a point-of-purchase display as we have on the individual products themselves. Since every dispensary has different regulations based on its location, we’ve had multiple different display options based on the regulations and based on each different dispensary. That’s been the main challenge. But it’s been really important for us to make it super easy for our third-party dispensaries to know how to display our products. We think we’re uniquely qualified because we, unlike most wholesalers, run a dispensary. So we know how hard it is.

O’Malley inside Caliva, where, on average, new consumers spend 15 minutes with a wellness consultant.

Guthrie: You offer delivery service. What was the incentive behind this, what percentage of your business is delivery, and do you see delivery as a major part of your business model moving forward?

O’Malley: The incentive behind it was to make sure that we can provide people with the most convenient way to get their cannabis. In addition to delivery, pickup has been a big driver for us, too. Pickup orders are just as popular as delivery orders because customers are cutting through the lines. Delivery and pickup services are the fastest-growing parts of our business.

But, I’d say that there is no substitution for in-store consultations. There’s no amount of chats that will get somebody comfortable to purchase cannabis for the first time. So, our retail footprint and our dispensary are still extremely helpful and extremely important. But after customers come in and they’ve spent time with us, we want to make sure that we have convenient ways for them to either pick up their cannabis or have it delivered to them.

Guthrie: What do you think California’s cannabis market will look like a year from now?

O’Malley: I would hope that we would have twice as many dispensaries as we have today. I think it’s well documented that California is greatly underserved in terms of the number of places that consumers can actually buy cannabis. So, I think that’s one.

Number two is: A year from now, it will be harder and harder for people to continue to pass the Phase Three of testing and compliance where there’s over 200 different compounds, including metals, tested in oil. I think you’ll see a concentration of providers who have invested upfront to ensure that they have clean raw materials to produce their product. I think you’ll see them really going out ahead of the market. Then I think consumers will seek out brands that they can trust—brands that they’ve had a good experience with that are easily accessible. Consumers will also want to have an understanding of where the products are produced and how the products are produced with some level of transparency. I think you’ll see in a year that there will be a big emphasis on brands—and when there’s a big emphasis on brands, there will be a big emphasis on word-of-mouth marketing around those brands.

Guthrie: How important is web presence for dispensaries in this nascent industry?

O’Malley: It shocks me today to see how many websites haven’t done the No. 1 step you want to take, which is to make your website secure, which is just having HTTPS*.

*Editor’s note: HTTPS stands for “Hyper Text Transfer Protocol Secure.” HTTPS “is the secure version of HTTP, the protocol over which data is sent between your browser and the website that you are connected to. The ‘S’ at the end of HTTPS stands for ‘Secure’. It means all communications between your browser and the website are encrypted.” Source: InstantSSL.com

I was doing a random search today on a couple of different providers that we wanted to carry in the retail store, and five out of eight of them had a nondescript or nonsecure website. If somebody is not putting the work in to make their website secure, it is challenging to think how a customer could actually order online. A secure web presence that’s informative, that has accurate inventory and in which somebody can interact with you online is critical. Consumers these days go through a journey where they’re using a number of different touch points to make their decisions. Customers want to ask questions both around where they’re going to buy and what products they’re going to buy. As a cannabis producer and retailer, we have a responsibility to provide that information to our consumers.

Guthrie: As a top-ranked dispensary in America, how does Caliva plan to evolve in order to maintain the standards and consumer experience you’ve set?

O’Malley: We simply have to provide a world-class consumer experience. The information and education about our products has to be better than the rest. Our product selection needs to be more robust. We have to have products and inventory, and then we have to be able to produce awesome products for Caliva.

The things that you’ll see us coming out with, which will continue to help us innovate, include additional types of payment methods—whether it’s gift cards, debit cards, credit cards, additional flexibility around delivery in terms of delivery windows and subscriptions—and then different loyalty programs that we’ll have for different consumers. You’ll see some exciting things coming out from us in Q4, but we are obsessed about providing the best level of consumer experience and the best products available for customers.

Guthrie: What advice would you give someone looking to open a dispensary in California?

O’Malley: Vertical integration for dispensaries provides a large advantage on a cost basis and a flexibility basis. If that is not an option for you—to sell your own flower, oil or products—then I would carve out a niche. I’ve found that many dispensaries go after the same type of crowd and have the same type of marketing, and sometimes that’s effective. But, I think the innovation that dispensaries can have to cater to a niche market, if you’re not vertically integrated, has a way to go. I haven’t seen that out there in the market and I would highly encourage newer dispensaries to be known for something, given that the dispensary marketplace may get crowded over the next year in California.

Editor’s note: This interview has been edited for style, length and clarity.