CEO Tripp Keber Personifies Dixie Elixir’s Success

dixie

e·lix·ir (əˈliksər/)

  • A magical or medicinal potion. “An elixir guaranteed to induce love.”
  • A preparation that was supposedly able to change metals into gold, sought by alchemists.
  • A preparation supposedly able to prolong life indefinitely.

Like its top-selling product, Dixie Brands is an elixir-like entity made up of active compounds malleable enough to be represented in a variety of forms and used for a variety of purposes. It’s a multifarious quality that turns out to have been very useful for the Delaware Corporation, which was formed in June of 2014 for the purpose of making Denver-based Dixie Elixirs & Edibles into the first national cannabis brand, and more. The reason is simple: In a business as volatile and unpredictable as cannabis stubbornly remains, in order to create a durable national brand whose core activity is the manufacture of mostly psychoactive consumable products made with compounds from a plant still illegal under federal law—but increasingly legal (if highly regulated) under many states’ laws—smart businesses have no choice but to design and deploy flexible, scalable and replicable business strategies that are themselves under constant review.

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“The only thing that has been consistent in this industry has been change,” Dixie CEO Tripp Keber says in late June as we settle in for the first of two interviews, this one following a guided tour of his state-of-the-art office and manufacturing facility on the outskirts of Denver.

Keber should know about change. Since 2010, the youthful 47-year-old single dad has been on an entrepreneurial tear guiding Dixie on a steady upward trajectory through a literal Wild West environment in which new existential challenges still confront them on a daily basis from both expected and unexpected directions. It’s a big risk/bigger reward playground that offers a natural appeal to a man of Keber’s full-speed-ahead temperament, and one that keeps him fully engaged day in and day out.

Indeed, as successful as Dixie already is, having established itself as a rock star brand in its home state of Colorado, both the company and Keber, as its public ambassador and dealmaker, have extended their reach via numerous other investments, ancillary companies and partnerships, many of which are soon to be announced. Keber adds that 2015 and 2016 are seminal years for Dixie Brands, when it will bring to fruition a level of controlled expansion into new markets (i.e. states) that few companies are in a position to replicate. But the argument can also be made that because of the unique nature of the American cannabis industry—developing step by step and state by state over several years—the Dixie Brands/Tripp Keber story is one that by definition cannot ever be repeated by anyone else in this space, for the simple reason that there will only be one mass movement that results in the end of 80 years of cannabis prohibition, and we are in the middle of that movement. In that sense and for the purposes of this article, the Dixie/Keber story, in addition to offering instruction on how to build a national brand under adverse conditions, also tells the story of the evolution of the industry as an industry.

The Incredible Edibles Market
Because of the segregated nature of the cannabis industry, in which the core product cannot be legally transported in any form across state lines, and where businesses that engage directly with cannabis products must be self-contained with each state, it’s hard to get a big picture evaluation of the actual size of the potential national market or its future potential. But extrapolating data from states like Colorado helps paint a picture of steadily rising revenue, especially when it comes to infused products like those made and sold by Dixie.

“These are telling times,” Keber tells me. “The state of Colorado is getting rich, making $76 million last year, of which $40 million went to the building of public education institutions; this year it will do $100 million conservatively. We did $700 million as an industry last year just in Colorado, but we did $351 million in 2013, with the industry doubling. And keep in mind, we did $700 million with as massive shortage of marijuana. As an industry, we ran out of marijuana in February!

“Now we’ve got that solved,” he adds. “You’ll still potentially see compression in margins and profit, but now you’ve got largescale commercial farmers that are very efficient. Marijuana has been commoditized.”

More to the point, the infused-products percentage of that growing market also continues to expand exponentially, according to Keber, who explains, “47 percent of that $700 million made in Colorado was derived from 4.8 million infused products. When we got into this business in 2010, infused was less than 5 percent of a $60-70 million market, because manufacturers simply did not exist then at the scale they do now.”

Keber declines to state Dixie’s revenue, of course; like all of the companies he owns outright or has a piece of, Dixie is 100 percent privately owned. But read between the lines, and a picture comes into view of a company with imminent and future expansion plans that should put it on track to become a bone fide billion dollar company.

“By the end of 2015, you should see Dixie Brands fully operational in Arizona, Nevada and Oregon,” says Keber, adding, “Washington State is also something that we have all of our energies focused on from a licensing agreement perspective, and with great confidence we will see that come to fruition. Obviously, we have Colorado and California licked.”

California may not be exactly “licked” yet, in the sense that many dispensaries have yet to carry Dixie branded products—indeed, only one officially carries its products in the greater Los Angeles-area at the moment—but Dixie Brands does now have a solid presence in the Golden State courtesy of its licensing deal with Indus Holdings, which operates a brand new manufacturing plant in Salinas, California, and the state’s direction toward a tightly regulated model for infused products all but ensures that the Dixie brand, with its long-established manufacturing standards, will become a fixture in the California market.

At the very least, as Keber explains, “These are five or six markets that we are focused on from an operations and biz dev side, and we continue to build up our teams in these markets because these are highly complicated matters. However, as we begin to take these markets down, like in California, we’re starting to get good at it and develop models that are replicable. Soon, states like Florida and New York will also come online, markets that are truly massive. Then, when you layer on the likelihood that Arizona and Nevada are going to legalize for adult use, these are markets that are going from several million to north of half a billion, and are rapidly approaching a billion dollars in sales, similar to what is happening here in Colorado.

“To put this sort of growth in perspective,” he adds, “it only takes one or two markets to create what I would call a successful company, but it will require half a dozen plus markets to create a company what is worth a billion dollars.”

But it will not stop there, insists Keber. “I believe with delusional confidence that multi-billion dynasties will be created in cannabis just as they were following the repeal of alcohol prohibition—the Seagrams, Bronfmans and Kennedys. I’m not suggesting that Dixie or I will be one of those dynasties, but I guarantee you that they will be created and, more importantly, that I will know these individuals. So I guess Dixie has as good a chance as anybody, right?”

Setting the Bar High
Keber’s confidence in the Dixie brand comes in no small part from his belief in the quality of its products as they have been developed alongside the ongoing evolution of state regulations. He explains, “Colorado probably has the longest track record creating a regulatory framework focused on compliance, which allows me as a manufacturer to wake up every morning knowing what is expected of me. This regulatory framework related to infused products does not exist anywhere else other than potentially in Washington state. So now we’re going to recreate the framework in other markets. Whereas in most states people are still manufacturing to the lowest common denominator, which includes the cellophane packages heat-sealed with an adhesive label slapped on them, at bare minimum I’m going to bring our platform to market and create the highest standard for packaging and labeling in the nation. This will be unprecedented territory we get into as we break into these new markets that have no regulatory framework, and we are going to have to create a high bar.”

He is also fully aware that certainly at the state level, but also at the federal level, standards will be put into place probably even before the federal government ends cannabis prohibition once and for all.

“We welcome interaction with the Food & Drug Administration (FDA), which among other things deals with food manufacturing and quality assurance,” he tells me.

Not surprisingly, testing is also high on Keber’s list of activities that must of necessity be done to exacting standards. Recent research conducted on infused products in California and Washington State, and then also in Colorado, resulted in findings that extensive discrepancies between the amount of THC (or CBD) listed on the labels, and that actually contained in the products, with levels sometimes higher and sometimes lower than the claimed amount. One of Dixie’s products was tested in research sponsored by the Denver Post, with the amount of TCH listed on the label more than what was reported to be in the product.

When asked about the results, Keber said he was very well aware of the results in both the California/Washington and Colorado research, but said the testing protocols used in both cases was less than desirable.

“Unfortunately, they took them all to one lab,” he explains, adding, “Most of these tests are undertaken by publications that are under strict budgets and may not have the ability to triple test or use multiple peer reviews, and so I think they go to the effort but not necessarily the extent they need to go to.

If you take a random selection of infused products,” he continues, “you have to send them to no less than two, and probably no more than three tasting facilities, and then you have to laser in, because in most cases these laboratories do not have the appropriate analytics or are not necessarily experts in testing infused products. There’s a dramatically different testing methodology when testing sativa the flower using GS, or gas chromatography, versus when you’re testing infused products using a process called HPLC, or high-pressure liquid chromatography, and that’s mass spectrum. Every single product that we test is tested using HPLC, which will likely give you the most accurate readings because it provides the most detailed analytics.”

He adds, “As a manufacturer, we have a fiduciary duty to the consumer or medical marijuana patient that no one will be overdosed, because if you have the intent to consume 10 mgs and ultimately consume 100 mgs, it’s going to be a vastly different experience. But equally as important, we do not want a customer to be defrauded. If they paid for 100 mgs—and that’s generally how products are priced, on a per mg basis—they don’t want to receive less than that amount. So, in addition to all Dixie Elixirs & Edibles products being lab tested up to five times, but no less than 3 times, they are also sent to multiple facilities to determine what we call peer review.

“I can speak for myself, but also dozens and dozens of other infused products manufacturers,” he continues. “We are obsessive when it comes to ensuring the mid/max variance in our products, meaning no more than 10 mgs above and no less than 5 mgs below.”

Keber is no less proud of the standards Dixie is setting with its new elixir containers, and especially the company’s most recent innovation for its flagship product, the “BTSM certified, childproof, tamper-resistant, resealable dosing platform. This was not a platform that existed anywhere—we had to create it to the tune of $300 plus thousand dollars, and I am so proud of our team.”

The decision to create the new dosing cap was actually one borne of necessity; namely, new state regulations promulgated in February 2015 that, according to a press release issued by Dixie in April, “fundamentally changed the packaging and dosing of all edibles in Colorado. In an effort to create safer products and a stronger industry, the State and cannabis companies like Dixie worked together to define these new regulations which elevated the child-resistance of all packaging, and limited single-serving items to no more than 10MG of THC per serving. Multiple serving products are now required to be easily divisible into 10MG or less servings, and compliant packaging must be re-sealable to child-resistant state after first opening.”

No matter the motivation, the resulting product is potentially a ground-breaker for Dixie and consumers of its products, as well as an indication of advances that can be made in collaboration between industry and government, as well as an example of Dixie’s flexibility as a company, a theme that repeats itself time and again, as it will in the months and years to come.

dixieDesigning the Future
As Dixie Brands moves into California, with its environmentally sensitive environment and years-long drought, its promise to export responsible manufacturing, dosing and labeling practices with it wherever it goes will be met with new challenges with few easy answers. It’s a situation with which Keber is well acquainted. “Whole ecosystems are being destroyed in California because people are growing on the sides of hills and just dumping chemicals,” he tells me. “It just has to stop. I’m no environmentalist, but at a bare minimum, tax it, track it and regulate it.”

With a stake in California now, Keber is also fully engaged in influencing the development of new laws and regulations in what until now has been a mostly unregulated environment.

“Literally, there is no packaging, labeling and dosing requirements in California, because there’s no regulatory framework,” he tells me. “What Dixie represents as it enters the state of California is five years of intellectual property, five years of standardization on testing, on packaging, on labeling, on dosing, that generally speaking the infused product manufacturers based in California have not focused on. There are great brands in California, of course, like Kiva and Bhang. These are guys I know personally and have sat next to for years; they understand the importance of the things I have talked about as much as I do.”

When asked about the extent of his lobbying in Sacramento, he says, “I sit on no less than a dozen boards, but three that are certainly germane to California are the Marijuana Policy Project (MPP), Council for Responsible Cannabis Regulation (CRCR) and then of course I am a founding member and re-elected board member of the National Cannabis Industry Association (NCIA), all of which have a very strong voice at this table.”

Things are so fluid in California that Keber is limited in how much he can talk about lobbying strategies. For instance, he mentions that he is about to read “the final consensus documents that are the product of five and a half months of hard work in collaboration with all aspects of the industry,” but cannot say any more about the document other than to explain, “It’s been generated by CRCR and is really a summary of what we’re putting forth related to AB 266. I’m not at liberty to discuss its contents right now.”

AB266 is the bill sponsored by Assemblyman Rob Bonta and others that would impose a regulatory and licensing framework on the commercial medical marijuana industry in the state. A combination of two bills from the last session that no one could agree on, AB266 has found unprecedented support among members of the industry who, according to Keber, could not agree on anything. Despite his reticence regarding the CRCR document, Keber says the process in California has brought together people who normally cannot “agree with what day of the week it is, let alone something as complicated as this,” and he remains optimistic that solutions will be found that are “going to afford manufacturers, cultivators and retailers ample opportunity to do business in a state that already has tens of billions of dollars of cannabis being sold in any given year. This is going to be a model that allows this plant that at worst provides a new level of wellness, to be taxed, to be tracked and to be regulated, exactly or similar to what we are doing here in the state of Colorado.

“I can tell you, we will not get it right the first time, just as we have had dozens of iterations here in Colorado, because this has never been done before.” He adds, “The only advantage that California has that maybe we didn’t is that it can look back to what has successfully worked in other states, and also what has failed.”

Philosophically, and somewhat controversially, Keber advocates for more regulation, a position that may endear him to regulators but which also puts him at odds with some members of the cannabis community, which he readily acknowledges. “Candidly, as a businessman, that position makes me slightly unpopular in markets like California, but I’m not going to shy away from it or from the fact that I’m interested in profiting from our industry. But I am equally interested in reinvesting in other businesses and helping this industry flourish, and I’m also interested in supporting research in Post-Traumatic Stress Disorder and all the other corporate philanthropy things we do. The misperception is that I’m lighting Cuban cigars with hundred bills, but it’s just not the case. We don’t have the luxury of taking profit out; we just continue to reinvest it.”

If he sounds defensive, it’s because as an outspoken and successful company owner with only a shade over five years in the industry, Keber has received more than his share of criticism, mostly from the activist community.

When asked why he thinks he is such a polarizing figure, he responds without hesitation, “The industry has traditionally been controlled by a few names and faces, who I am not going to name, but who I have immense respect for. That spotlight can be very bright and also addictive, but there is a new breed, a new generation of businessmen and more importantly, businesswomen coming up through the ranks. At the end of the day, I do not apologize for not having a strong relationship with the plant, and I do not apologize for initially getting into this business to make money, but now I want to be as charitable as I am profitable. We give away hundreds of thousands of dollars a year—my money, this company’s profits—to support agencies in this industry.”

Indeed, when at one point I mistakenly use the term “divisive” instead of “polarizing,” Keber bridles. He doesn’t see himself as divisive, and with good reason. His reputation as an investor who brings people together partly explains why he can’t go to the carwash without being hit up by someone pitching him. Not a day goes by, he adds, when he is not inundated by calls, emails and other queries from people seeking their fortune in cannabis. He isn’t complaining.

“I’m also notorious for buying and selling companies,” he points out. “I don’t get attached to a company. If anything, I get attached to the people, because that’s generally what’s going to make the difference unless it’s some sort of disruptive technology.”

The Disruptive Nature of Change
As we talk, it occurs to me that the industry’s inherent unpredictability makes these talks little more than a snapshot in time. Mere months from now Dixie could be a very different company. As Keber points out, “I’ve got a whole boardroom full of people who will be announcing a deal within the next 10 days, and it’s going to be incredibly exciting.”

It’s just another example of the company’s unique capacity for change, which has been such an essential ingredient in its success, even as it persevered through tough times only a year ago. “In 2014,” explains Keber, “we suffered, we toiled, with one foot in the grave and the other on a banana peel. In 2012 and 2013, until early 2014, I was building this facility hemorrhaging money. My partner would tell me, ‘Bro, we’re 20, 30 percent over budget and we’re not even close to being done,” and we couldn’t make product fast enough to meet demand. We didn’t have the oil because we didn’t have enough flower! I call it the graduating class of 2014. Now, in 2015, the brand is prospering.”

Things have improved so much that Dixie has substantially scaled back the number of outlets offering its products. Keber explains, “In the state of Colorado, there are 550 outlets, but in 2015 we changed our format to address the old 80/20 rule that says that 20 percent of the retailers handle 80 percent of the market. So we now serve about 175 retail locations in the state, and our revenue is increasing exponentially every single month.”

Into the Future
As it expands into new markets, Dixie is also busy mining areas of innovation. One old product that is new for cannabis that Keber singled out for special mention was point-of-sale vending machines—like the one sitting in his lobby—that could ultimately offer a seemingly endless variety of infused products beyond just flower. But Keber became truly lively when describing the virtues associated with single dose products, such as those carried by his Dixie One line.

“These are going to be incredibly influential for those people who don’t want the Maureen Dowd experience, but want a very safe and predictable euphoria or anti-stress experience that comes with that one glass of Chardonnay. I think the Dixie One experience is going to really set a new bar and a much lower bar that will lead a lot of other manufacturers to follow suit, because we are killing it.”

While his flagship product remains the elixirs, Keber also mentioned a product that has not even launched yet, but which he thinks will be huge—a THC-infused personal lubricant designed to enhance a woman’s sexuality previously marketed as Foria.

“This is a powerful product that has a little bit of history in the market but didn’t have the appropriate manufacturing and branding partner,” says Keber. “We’ll start distributing it commercially in August, and it’s just the first skew of this type that will bring cannabis into a person’s sexuality, while also bringing a lot of science to bear.”

There are many other moves in play for Dixie, including forays into Canada, from where they will be in position to “hopscotch into other markets,” and yet a fundamental question remains: how can Dixie, after individually setting up operations in multiple states, pull it all together after federal prohibition ends, which Keber suggests could be as soon as 2017.

Unsurprisingly, there is a big picture scenario. “When prohibition ends, the idea is for our affiliate partners in these six market, and another 6-10 markets next year, to be assimilated under Dixie Brands,” he explains. “The question will basically be the same for each of them: Do you want to own 100 percent of a $10 million company or 10 percent of a billion dollar company?”

It sounds like a no-brainer, an incredible vision of hard work rewarded, but all the talk of expansion and success on a scale unimaginable only a few short years ago brings Keber back down to earth as the interview comes to a close.

“I’ve been rich and I’ve been poor, and I’d much rather be the former,” he tells me, “but when I read a letter from a soldier who came back home, abused alcohol or opiates, and is contemplating suicide, and then discovers my product just through happenstance, and it saves his life, I’m reminded why I do this. What really fucks me up are the letters I don’t get because someone took their life.”

dixieHis voice tenses, catching momentarily in his throat. “I’ve been accused of being an amoral, bloodsucking vampire who doesn’t deserve to participate in this space, but I’m not that good of an actor, this is something that gets my ass out of bed every morning. I didn’t say I have to go to work today. It’s an honor and a privilege, but for my soul it’s really a blessing to have the chance to create jobs, pay taxes and build a billion dollar company while having the ability to potentially change or save a life. There aren’t too many industries than can do that.”

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