40 Under 40
For six years, Marijuana Venture’s editors have compiled an annual list of some of the brightest young leaders and influencers shaping the cannabis industry. Every year, we select 40 outstanding cannabis professionals from the hundreds of submissions we receive and candidates we nominate throughout the year. In addition to the leaders piloting their businesses to success in the varied segments of cannabis that normally populate our list, this year we have the pleasure of including several of the brilliant young minds that rose to meet the challenges presented by the ongoing pandemic and the national outcry for social justice.
It is our honor to share their stories.
Matt McGinn is taking the California cannabis beverage market by storm.
With a history of success in the food and beverage industry, particularly as an innovator of cold-brew coffee products, McGinn helped create several cannabis-focused companies that work synergistically with one another, giving his brands a dominant foothold in the Golden State and a solid foundation from which to expand nationally in the coming months.
As the CEO of Fly Beverage, McGinn does a little bit of everything, from product formulation and brand-building to logistics and business development. But he’s not one to dive hastily into a new market for the sake of growth.
“I don’t create products for me,” he explains. “I create products that I believe will solve problems for people. I make things that I believe will help culture and help influence society in a positive direction.”
That philosophy helped Fly Beverage’s flagship product, Uncle Arnie’s Iced Tea Lemonade, become the No. 1 cannabis beverage in California, according to Headset. Within 10 months of the product’s launch, it was carried by nearly 200 cannabis retailers, selling 17 to 37 units per day per dispensary and seeing a 100% markup on gross sales month over month.
The reason it’s been so successful is simple: It was specifically formulated to be the most potent and least expensive beverage on the market — $10 for 100 milligrams of THC.
“It’s $10 less expensive than almost anything that compares to it,” McGinn says. “I’m all about making cannabis affordable and competing with the traditional (unregulated) markets. I build products that will appeal to a legacy consumer because everybody else in this space is focused on appealing to the new consumer.”
Meeting Demand
McGinn’s growing cannabis enterprise spans multiple companies throughout the supply chain.
His first foray into cannabis was Spacestation, a beverage manufacturer and co-packer that he and Macai Polansky co-founded in December 2018. McGinn served as the company’s chief operating officer for about a year before shifting his focus to Fly Beverage, a brand house predominantly owned by Spacestation (Fly Beverage co-founder Bradley Mora is the CEO of Spacestation).
The Fly Beverage lineup includes Matt’s High Soda and Nectr, an infused sparkling water, but Uncle Arnie’s Iced Tea Lemonade accounts for about 95% of the company’s revenue. A line of gummies, based on the same low-cost, high-potency model as Uncle Arnie’s, is in the works.
But during this period of explosive growth, McGinn saw a lot of problems on the distribution side.
“We tried different distributors, and they all failed me,” he says. “We finally landed on one that was willing to allow us to help them.”
That company was HardCar, a licensed cannabis distributor that was struggling at the time. McGinn and Joe Zerucha, now HardCar’s president and CEO, eventually raised money and acquired the company in 2020.
“With Joe’s business know-how and business acumen, and my beverage experience and beverage distribution experience, we were able to significantly turn around the business,” says McGinn, who serves as HardCar’s chief strategy officer.
Zerucha says the company recapitalized and restructured, reinvested in its staff, improved its communications, stepped up its customer service and focused on business fundamentals to become cash-flow positive within a few months.
“We got in front of customers and vendors,” he says. “We re-established those relationships and established the trust. We got back to the roots of why the company was successful in the beginning.”
Since McGinn and Zerucha injected new life into HardCar, the company has been growing rapidly, “which is great, but it’s also terrifying,” McGinn says. The company is currently raising capital to facilitate its growth.
“The demand is here, but we need more trucks and we need more storage relationships,” McGinn says. “We have growing revenue streams that just need some more gas, and the gas is capital.”
Today, HardCar is a multi-faceted business serving different needs for cannabis companies throughout California. It’s somewhat unique in that it is licensed for both cannabis distribution and cash-in-transit, so HardCar can also provide armored delivery service of cash from cannabis companies to the Federal Reserve for tax payments.
The distribution side of the business includes not only transportation and delivery, but last-mile/dispatch services in which shelf-ready products are distributed to a network of more than 400 cannabis retailers. In addition to the primary responsibilities of shipping and logistics, distributors must also report taxes for each product distributed and collect payments, something McGinn says HardCar has become particularly adept at.
“None of our clients are owed money after 30 days, period,” he says. “Most clients are either net 15 or cash-on-delivery.”
Being a cannabis distributor, particularly in California, is an incredibly complex, but vital role in the industry, and it requires a significant amount of capital up-front.
“It takes a certain type of team to run a distro, and a certain type of crazy too, but we’ve got that,” McGinn says.
Fueling Growth
In addition to fine-tuning its operations and services, Zerucha and McGinn made sure HardCar’s clients were the right clients. HardCar is hyper-focused on beverages, which McGinn calls “the most burdensome form of distribution in the cannabis space.”
“We’re not for everybody,” Zerucha says, “but for the customers that we do work well for, it’s great.”
McGinn believes the potential for the cannabis beverage sector is tremendous. Cannabis-infused drinks sidestep the health concerns and social stigmas of smoking, and the rapid onset — 30 minutes on average — makes the high more similar to alcohol than typical edibles, which can take up to two hours for consumers to feel.
He thinks cannabis beverages could eventually be sold in convenience stores, bringing mainstream acceptance to an even higher level. Fly Beverage is currently raising capital to continue its growth in the California market, while expanding into Arizona, Massachusetts, Nevada, Oregon and Israel.
“It will be interesting to see what will happen in the next couple of years,” he says. “My prediction is that beverages are going to be exceedingly popular in new states — especially lower-dose drinks where the market is less of a legacy market.”
But in a market like California, McGinn believes low-dose beverages face a tougher path to popularity — a theory supported by the demand for Uncle Arnie’s.
“In my estimates, 60-70% of the consumers that go to a dispensary are legacy consumers,” he says. “They’re not going to pick up an edible that won’t get them high, but they will buy an edible if it’s affordably priced and it gets them high. So I created a product that 70% of consumers going to a dispensary will buy. We’re using our tech to disrupt the market and create more affordable products to give the traditional market a run for their money.”
Caffeine to Cannabis
McGinn’s first experience in the beverage industry came about from his love of coffee. He had worked as a barista and created a cold brew line that he sold dorm room to dorm room while he was in college.
“I just was obsessed with caffeine and cold brew,” he says.
In 2013, he founded Blackeye Roasting Co. in Minnesota. The company built out a 30,000-square-foot co-packing and cold-brew production facility, a roastery, two cafés in Minneapolis and scaled the brand into 35 states before McGinn left the venture for the rush of the cannabis industry.
The experience he gained in product formulation and distribution were invaluable when he made the transition to California’s highly competitive cannabis market, and he’s excited about the prospect of bringing his passion for coffee to the industry with several new products on the horizon that will bolster HardCar’s portfolio of beverages based on different price points and target consumers.
While Fly Beverage is focused on creating affordable products that compete with the legacy market, the company is not ignoring “tomorrow’s consumer” — a market McGinn believes will continue to grow as the industry develops.
“We’re looking for partners that come into the middle-of-the-road price point and the luxury price point because there is a market for that,” he says. “But you need the affordability play to get into the store with the buyers, because the buyers are legacy consumers.”