Yahoo Finance Breakouts presents Benjamin Witte, Founder & CEO of Recess:


I THINK OF CBD AS THIS MANIA, STARTING TO WORK ON THE IDEA RIGHT NOW, DEFINITELY NOT AS WELL-KNOWN AS TODAY, OR AS PREVALENT, BUT THE CRYPTO CURRENCY, AND TRYING TO START THE 2000 CBD OIL COMPANY, THE NEW BEVERAGE LAUNCHING EVERY SINGLE DAY, A LOT OF PEOPLE FRANKLY LAUNCHING THESE COMPANIES DON’T RECOGNIZE HOW CHALLENGING IT IS, TO CREATE HIGH-QUALITY PRODUCTS THAT ARE COMPLIANT. AND SO MAYBE THEY’RE USING SYNTHETIC FROM CHINA OR SOMETHING LIKE THAT, AND SO WHEN I TALK ABOUT THE REGULATION BEING REQUIRED, I THINK IT IS TO ENSURE THAT THE PRODUCTS OUT THERE ARE VERY HIGH QUALITY. >>HOW DO YOU THINK ABOUT THE COMPETITION? WE THINK ABOUT SPARKLING WATER AND BEVERAGE SPACE, LIVE FAST AND DIE YOUNG. IT REALLY HAD ITS PEAK, NOW WE HAVE THESE OTHER COMPETITORS COMING INTO THE SPACE AND TAKING MARKET SHARE. SO HOW DO YOU STAY AHEAD OF THAT?>>THE MOST INTERESTING THING ABOUT RECESS IS THE NUMBER OF DIFFERENT CONSUMPTION OCCASIONS THERE ARE FOR THE PRODUCT. TOTAL ADDRESSABLE MARKET FOR BEVERAGES, ALBEIT CAN POTENTIALLY GET, WHAT ARE THE TIMES OF DAY AND THE USE CASES SOMEONE CAN DRINK IT, AND DRINKING IT EVERY WAKING HOUR OF THE DAY, WHEN THEY GET UP IN THE MORNING TO START THE DAY,, MAY BE INSTEAD OF A COFFEE, COUNTERINTUITIVELY, DRINKING IT BEFORE BED. THE CORE USE CASE IS 10 AM-4 PM, AT YOUR OFFICE, A SUBSTITUTE FOR COFFEE, IT WORKS REALLY WELL, THAT FITNESS LOCATIONS, BEFORE OR AFTER A WORKOUT, BARS, RESTAURANTS, NIGHTCLUBS, AS A SUBSTITUTE FOR ALCOHOL, PEOPLE ARE SERVING WITH BOTTLE SERVICE. WHEN YOU THINK OF THE USE CASES, THEY ARE COMPETING AGAINST A DIFFERENT PRODUCT. AT YOUR OFFICE THEY ARE DRINKING RECESS — AND THEY ARE BUYING IT IN SPITE OF SPIN DRIFT, THE COFFEE SHOP, COMPLEMENTARY IN A COFFEE OR SUBSTITUTE, AT NIGHT A SUBSTITUTE FOR BEER, WINE OR ALCOHOL, A MIXER, A SUBSTITUTE FOR RED BULL, IT IS A TOUGH QUESTION ANSWER. THERE’S A LOT OF DIFFERENT DIMENSIONS WE ARE COMPETING ON. I THINK MORE ABOUT IT THAT WAY. OBVIOUSLY THE CBD BEVERAGE CATEGORY IS RAPIDLY EMERGING, AND LITERALLY A NEW BRAND, LAUNCHING EVERY SINGLE DAY, I DON’T SPEND THAT MUCH TIME THINKING ABOUT THAT. NOT THAT CATEGORY SPECIFICALLY, I WOULD LIKE TO THINK THAT I DON’T THINK THE COMPETITION EXISTS YET, AND MORE FROM LARGER PLAYERS, ONCE THE REGULATION CLARIFIES.>>HAVE ANY MAJOR PLAYERS ACTUALLY STARTED TALKING TO YOU? I THINK LIKE A COCA-COLA, A PEPSI, SOME HUGE BEVERAGE PLAYERS WHO MIGHT WANT TO START HAVING THESE CONVERSATIONS SO THAT WHEN THE REGULATION IS UNLOCKED, THEY ARE THE ONES WITH THE PRODUCTS AND BRANDS THAT ALREADY HAVE A BIG FOLLOWING?>>YES. >>ANY NAME SPECIFICALLY?>>THIS ON A COUPLE OF PLAYERS. WE HAVE HAD CONVERSATIONS WITH THEM.>>WHO ARE YOUR INVESTORS RIGHT HERE, YOU ARE IN CBD, THE GRAY AREA, WHO IS REALLY WILLING TO TAKE THE LEAP AND GET AHEAD OF THE INDUSTRY WITH YOU?>>WHEN I WAS FUNDRAISING BEFORE I LAUNCHED, IT WAS DEFINITELY A GRAY AREA, A LOT OF THEM HAD VICE CLAUSES, WHICH PREVENTED THEM FROM INVESTING IN SUBSTANCES LIKE THIS, AND WE — WE VERY DELIBERATELY HAVE NOT TALKED ABOUT OUR FUNDRAISING STRATEGY. AND OUR INVESTORS, WE LIKE TO HAVE WHAT WE CREATE SPEAK FOR OURSELVES, IN MY OPINION TOO MANY BRANDS FOCUSED TOO MUCH ON PR AROUND FUNDRAISING. AT SOME POINT WE WILL TALK ABOUT THE FUNDRAISING AND DIFFERENT INVESTORS WE HAVE TO SUPPORT THE COMPANY.>>DO YOU HAVE BALLPARK HOW MUCH YOU HAVE RAISED MONETARILY?>>A COUPLE OF MILLION DOLLARS. >>YOU’VE TALKED ABOUT THIS, HOW BEVERAGES THIS BRAND DRIVEN SPACE. HOW DID YOU DO IT FOR RECESS? IT IS VERY TONGUE IN CHEEK, AND ARE DRIVEN. HOW DID YOU CULTIVATE THAT? >>THE FIRST THING I WOULD SAY IS OUR FIRST LINE OF THE WEBSITE , WE CAN THE FEELING. DESIGNING FEELINGS IN A CERTAIN WAY. WHEN YOU DRINK ANY FUNCTIONAL FOOD BEVERAGE OR SUPPLEMENT, THE PERCEIVED EFFECT IS A COMBINATION OF THE EFFICACY OF THE INGREDIENTS AND HOW THEY INTERACT WITH US INDIVIDUALLY, THINK ABOUT CAFFEINE, SOME PEOPLE CAN’T DRINK COFFEE, SOME CAN HAVE A ESPRESSO BEFORE BED. I THINK CBD WILL IMPACT EVERYONE SLIGHTLY DIFFERENTLY, BUT IN THE CASE OF CBD, THE MISSION OF RECESS IS TO REDUCE STRESS AND ANXIETY, IT’S ALMOST LIKE WHAT YOU DON’T FEEL AS WHAT YOU FEEL, THE OPPOSITE OF FEELING STRESSED AND ANXIOUS IS FEELING, NOTHING SO TO SPEAK, SO IN THIS CASE, I THINK YOUR EXPECTATION ABOUT WHAT TAKING A RECESS IS GOING TO DO YOU IS MUCH MORE THAN THE CBD, SO THINKING ABOUT CREATING A BRAND, WE WENT TO THE NAME AND MESSAGING TO KIND OF SPEAK TO WHAT WE ARE OFFERING, AND SO THE FEELING THAT YOU CAN DESCRIBE, CALM COOL AND COLLECTED, NOT TIRED OR WIRED. THIS IDEA FEELING BALANCED, AND CALM, AND ABLE TO FOCUS, KIND OF A PRODUCTIVITY EVENT TO IT, SO RECESS IN THE WAYS A PRODUCTIVITY COMPANY, WE WANTED TO FOCUS ON ESTABLISHING A NEW CONSUMPTION OCCASION IN PEOPLE’S LIVES, THINKING ABOUT THE CONSUMPTION OCCASIONS RUN COFFEE, HOW BIG A MARKET IS, IN THE MORNING AT 2:00, WE ARE KIND OF CREATING A SIMILAR NEW — VARIOUS, TAKING A RECESS, I THINK A LOT OF CONVENTIONAL WISDOM WOULD HAVE BEEN TO DO A BRAND SIMILAR TO LIKE A FIJI WATER, LIKE A WHITE CAN, VERY BLISSFUL, BUT I WANTED TO CREATE THE RECESS WORLD THAT TRANSPORTED PEOPLE, AND SO WE CREATED THIS PSYCHEDELIC VAPORWARE WORLD, AND THE COLORS WE USED WERE INSPIRED BY SUN SETS. I GREW UP ON THE BEACH IN CALIFORNIA, I WATCHED SUN SETS WITH MY MOM, THAT WAS LIKE TAKING RECESS TO ME. PASTELS AND COLORS IS BOTH CALMING AND THE GRADIENTS AS REFERENCE TO SUN SETS.>>>YOU TALK A LITTLE BIT ABOUT CANNING A FEELING AND BEING MORE COMPARABLE TO THE CUFFING INDUSTRY, WE THINK ABOUT THE ENERGY INDUSTRY. DOES THAT TAKE A COORDINATION BY ALL THE PLAYERS IN THE SPACE? IT FEELS LIKE ALL THE CBD PLAYERS ARE SAYING WE ARE A CBD COMPANY, BECAUSE BY SAYING THAT YOU CAN GET A LOT MORE CUSTOMERS?>>BUT NOBODY TALKS ABOUT THEM, THAT’S THE DIFFERENCE. WE ARE PITCHING A NARRATIVE, AND OUR BRAND IS KIND OF A SOCIAL COMMENTARY ON LIVING IN 2019. ONE OF OUR TAGLINES IS IN ANSWER TO MODERN TIMES, THE WORLD HAS GONE CRAZY AND WE ALL NEED A RECESS. WE USE HUMOR, TONGUE-IN-CHEEK KIND OF BRAND VOICE DELIBERATELY. IN SOME WAYS IT IS MAKING FUN OF MILLENNIAL CULTURE AND BRANDING, AND SO I THINK ALL OF THESE OTHER CBD BRANDS ARE SAYING CBD REDUCES ANXIETY, AND WE ARE SAYING IT IS A ANTIDOTE TO MODERN TIMES, HOPE YOU FEEL CALM, COOL AND COLLECTED, WE DON’T MARKET IT, IT IS NOT THAT INTERESTING. CONSUMERS DON’T WANT TO HEAR 50 FACTS ABOUT HEMP ALL WEEK. THEY WANT TO HEAR ABOUT HOW IT MAKES THEM FEEL AND ENGAGE WITH CONTENT AND EXPERIENCES THAT ARE THOUGHTFUL AND CLEVER, AND DEEPLY ENGAGING. MOST IMPORTANTLY, EVERYTHING WE DO IS DESIGNED TO CREATE MEDIA BUZZ, WHICH HARKENS BACK TO MY COMPANY OUT OF SCHOOL, HOW DO YOU CREATE MEDIA AS A BRAND, AND CBD, YOU CAN SLAP IT ON A LABEL IN CELLS AND PRODUCTS, BUT OVER TIME IT WILL BE JUST LIKE EVERYBODY THAT EVERY OTHER CATEGORY, AS WELL.>>DIRECT TO CONSUMER AND ON RETAIL SHELVES, WHAT INFORMED DOING BOTH STRATEGIES, ARE YOU SEEING MORE PAYBACK FROM ONE OF THE OTHER?>>WE LAUNCHED DIRECT TO CONSUMER ONLY, TWO BLOCKS AWAY, DELIBERATELY, MANY DISTRIBUTORS, WANT TO MEET WITH US, MANY OF THEM WANTED TO MEET WITH US, AND ON PURPOSE I SAID NO, I WANTED CONSUMERS’ FIRST INTERACTION TO BE WITH THE WEBSITE AND THE BRAND, THE PURPOSE AND EMOTION, OF WHAT TAKING RECESS IS, AND HAVE DISTRIBUTORS AND RETAILERS COME TO US, AND THEY JUST KIND OF WORKED A LOT BETTER THAN WE THOUGHT IT WOULD. SO WE DID 40 TIMES THE FIRST MONTHS PREDICTED SALES, 5000 BACK ORDERS AFTER ONE MONTH TO AND IT WAS JUST ME AND MY PARTNER THE TIME, SIMON, IS THE ONLY TWO FULL-TIME EMPLOYEES, WE HAVE SOMETHING HERE, THE BUSINESS PLAN FOR THE PAST YEAR HAS BEEN IN SOME WAYS SLOWDOWN IN ORDER TO SPEED UP, HAD TO BUILD AN ORGANIZATION IN THE SUPPLY CHAIN AND KIND OF LUNCH THE FIRST TWO MARKETS, NEW YORK AND LA, IN PREPARATION FOR THE FDA, KIND OF CLARIFYING THE REGULATION, WHEN THAT HAPPENS, THAT’S WHEN THE GAME BEGINS. IT FEELS LIKE CV IS EVERYWHERE, BUT ESSENTIALLY NOWHERE, BECAUSE IT’S NOT IN NATIONAL RETAILERS YET, IT IS NOT WHOLE FOODS, OUR TARGET, AND TRUST ME THEY ALL WANTED THEIR. THEY ARE NOT GOING TO MOVE UNTIL THE FDA CLARIFIES THINGS FURTHER. WE ARE BUILDING AN ORGANIZATION READY FOR THAT MOMENT. >>IF THERE IS ONE RETAILER YOU WOULD LOVE TO SEE IT ON THE SHELVES OF, WHICH ONE WOULD BE? WE HAVE AIR ONE IN LA, BRISTOL FARMS, I WOULD SAY WHOLE FOODS YES.>>WHAT YOU THINK IT IS ABOUT THE BREAD THAT WORKS WITH IT?>> IT IS WHERE YOU BUILD NATURAL FOOD BRANDS. A LOT OF MY FAVORITE KIND OF PLACES ALL THE RESTAURANTS, AND PLACES LIKE THAT, A MAJOR RETAILER STANDPOINT. THAT IS WHERE YOU WANT TO BE.>>QUITE A FEW OF THE NATURAL FOOD STORES AROUND NEW YORK, THAT’S GOING TO BE A STRATEGY AS WELL, WHAT IS HEADCOUNT RIGHT NOW, HOW MUCH HAVE YOU GROWN FROM A YEAR AGO TO NOW, 25 FULL-TIME EMPLOYEES, NEW YORK AND LA. MANUFACTURING PARTNER IN THE HUDSON VALLEY AS WELL, ABOVE 10 EMPLOYEES NOW.>>WHERE DO YOU SOURCE YOUR CD AND YOUR EMULSIFIER, IT IS AN OIL, YOU PROBABLY NEED SOME TECHNOLOGY TO GET THAT TO DISSOLVE EVERYTHING? WEAKER IT’S A FUNNY STORY, WHEN I CAME UP WITH THE IDEA, THERE WAS NO CONCEPT OF WATER-SOLUBLE CDB — CBD, AND I HAVE TO FIGURE OUT HOW TO MAKE IT. LITERALLY STARTED CALLING FARMERS IN KENTUCKY, HOW DO I PUT THIS IN A DRINK. THE FIRST PERSON I CONNECTED TO WAS A RANDOM GUY, HE RAN A PART OF NEW JERSEY, OPERATING OUT OF A WAREHOUSE THAT LOOK LIKE YOU’RE WALKING INTO A BREAKING BAD FACILITY. [ LAUGHTER ] I STARTED EXPERIMENTING WITH WHATEVER HE GAVE ME.>>HOW DID YOU FIND THEM?>>I CAN THE FARMERS NAME, SOMEBODY WHO WAS BUYING IT FROM, DEVELOPING A PROCESS TO MAKE IT WATER-SOLUBLE. AND OVERTIME, EVERYONE IN THE WHOLE INDUSTRY WAS BECOMING MORE SOPHISTICATED AND EVERYONE RECOGNIZED WITH A LARGE OPPORTUNITY OBVIOUSLY CREATING ALL THESE DIFFERENT APPLICATIONS FOR CBD WOULD BE. AND SO ULTIMATELY ENDED UP WORKING OUT OF A GROUP THAT’S WITH A GROUP OUT OF COLORADO, WHICH IS REINTEGRATED, EVERYTHING FROM THE CULTIVATION, THE PROCESSING, AND THE EMOTION TECHNOLOGY, WHICH ALLOWS IT TO BE WATER- SOLUBLE.>>AS SOMEONE WHO IS ON THE HEMP ROUNDTABLE, YOU DO LOBBING ON — IN DC, WHICH STATE YOU THINK IS NEXT ONE TO LEGALIZE CANNABIS, WHEN DO YOU THINK FULL LEGALIZATION WILL HAPPEN? >>HEMP AND MARIJUANA WILL BE 2 FUNDAMENTALLY DIFFERENT THINGS. AND SO WE HAVE ACTUALLY TRIED TO AVOID STATES WERE RECREATIONAL CANNABIS AND MARIJUANA WAS LEGAL, AND CONVENTIONAL WISDOM WAS TO LAUNCH RECESS IN CALIFORNIA. THEY CANNABIS COMPANY, PART OF THE CANNABIS INDUSTRY, THAT’S WHAT YOU WANT TO BE ASSOCIATED WITH, DELIBERATELY CHOSE NEW YORK BECAUSE I WANTED TO ESTABLISH THE BRAND OUTSIDE OF THE CALIFORNIA MARIJUANA ECHO CHAMBER, AND COUNTERINTUITIVELY, ONE OF THE ONLY GROUPS THAT IS OPPOSED TO THE PROGRESS OF HEMP AND CBD IS MARIJUANA, IT IS A SUBSTITUTE, AND IF IT’S IN WHOLE FOODS, MAYBE YOU’RE NOT GOING THERE, WE TRY TO SEPARATE US FROM THAT LEGISLATION. NEW YORK IS VERY FOR LONG, CALIFORNIA’S VERY FAR ALONG IN THE BILL, ILLINOIS, EVERY STATE IS ACTIVE, I ANTICIPATE AN UPDATED STATEMENT FROM THE FDA IN DECEMBER ABOUT THE PATH AHEAD. >>WHAT DO YOU THINK THAT IS GOING TO LOOK LIKE? >>IT’S NOT GOING TO BE THE END OF THE ROAD YET, BUT NEXT STEPS, HERE’S HOW WE ARE THINKING ABOUT THINGS. MITCH McCONNELL INTRODUCED A CLAUSE INTO THE LATEST BUDGET AROUND ENFORCEMENT DISCRETION, ACKNOWLEDGING THAT THE FDA IS TAKING A LONG TIME, AND DIRECTING THEM NOT TO ENFORCE — BAD ACTORS UNTIL THEY COME UP WITH GUIDELINES.>>>I WANT TO INFORM THE LIVE STUDIO AUDIENCE WE WILL BE OPENING THE STUDIO FOR QUESTIONS, WE WILL GO AHEAD AND TAKE THOSE JUST COUPLE OF MINUTES.>>>WHEN YOU THINK ABOUT THE FUTURE OF RECESS, WHAT DOES THAT LOOK LIKE? ARE YOU GOING TO THINK OF — STICK WITH BEVERAGES, OR OTHER FORM FACTORS, WHERE DO YOU SEE THE BRAND GOING?>>I LOOK AT RECESS CREATING PRODUCTS, YOU CONSUME IN YOUR BODY. RIGHT NOW IT IS JUST BEVERAGE, ONE LINE, BUT YOU CAN SEE A WHOLE LINE OF BEVERAGES THAT ARE KIND OF OBVIOUS. WE COULD DO THINGS LIKE DISSOLVABLE TABLETS AND POWDERS, VARIOUS FORMS OF ADDITIVES. WHEN YOU THINK OF ALL THESE WAYS THE PPA — PEOPLE ARE USING CBD, ADDING IT TO HIS MOVIE, COCKTAIL, WE COULD CONCEIVABLY DO ANY OF THOSE. IT’S A QUESTION OF WHAT MAKES SENSE FOR US AND WHEN, THE BRAND OF RECESS IS MUCH BIGGER THAN CBD OR JUST THE BEVERAGE, I LOOK AT US, I HATE THE TERM LIFESTYLE BRAND, A LIFESTYLE BRAND, FOCUSED ON CREATIVE’S, THE COMMUNITIES WE FOCUS ON OUR MUSIC, FASHION, ART, DESIGN, INTERNET CULTURE, YOU CAN SEE US CREATE INTO A CONDO — A PARALLEL MERCHANDISE, AND EDITORIAL, COLLABORATION DRIVEN APPROACH. THERE’S A BUNCH OF DIFFERENT BUSINESS MODELS THAT ARE KIND OF COMBINING INTO HOURS, KIND OF A DROP MODEL, KIND OF LIKE WHAT SUPREME DOES WITH THE BRAND, AND EDITORIAL, A TOUGH BUSINESS TO MAKE WORK RIGHT NOW IF YOU’RE JUST SUPPORTING A — THE BENEFIT OF BEVERAGES, THE FREQUENCY OF USE AND PURCHASE, AND THE DISTRIBUTION YOU GET LEAD TO BRAND MARKETING 101. WHY DOES RED BULL PAY PEOPLE TO JUMP OUT OF ROCKETS AND STUFF? THEY WANT TO CREATE THE BUZZ AND AWARENESS, WE WILL DO THAT IN OUR OWN WAY, CONTENT EDITORIAL EXPERIENCES, AND MERCHANDISE.>>THE GOAL IS TO BE ESSENTIALLY KNOWN AS THE BEVERAGE BRAND, THAT IS THE CORE PRODUCT. >>THAT IS THE CORE PRODUCT BUSINESS MODEL. RED BULL MUSIC, A CONTENT, MARKETING AND EXPANSION MARKETING THAT MONETIZES, THROUGH SELLING CANS. RED BULL EFFECTIVELY ENABLES THE ENTIRE ACTION SPORTS COMMUNITY TO EXIST THROUGH SPONSORING EVENTS AND THE ATHLETES, AND MY MISSION IS TO REALLY DO THE SAME THING WITH CREATIVE’S. AND REALLY ENABLE CREATIVE’S TO MAKE AMAZING THINGS THAT ARE BUILT ON TOP OF THE RECESS PLATFORM. >>>GOING BACK TO THIS THEME OF TAKING A RECESS, YOU TALKED ABOUT ADDRESSING THE MACRO ANXIETY ECONOMY. I THOUGHT THAT WAS AN INTERESTING POINT. >>STRESS AND ANXIETY HAVE BEEN AROUND FOR AN ETERNITY, BUT ONLY THE PAST COUPLE OF YEARS THAT IT IS SOMETHING THAT IS COMING TO — IT HAS BECOME MORE EXTREME, PEOPLE HAVE ACKNOWLEDGED IT, AND FEEL VULNERABLE ABOUT IT AND TALK ABOUT IT. SO I THINK THERE ARE TWO CATEGORIES OF ANXIETY ECONOMY EMERGING, CONSUMABLES, THINGS LIKE CBD, MARIJUANA, AND XANAX, OPIOIDS, YOU COULD EVEN CALL, THE EXTREME ENDS, WHY DO PEOPLE USE VARIOUS DRUGS. >>DOES THAT CONCERN YOU THAT YOU HAVE LUMPED THOSE TOGETHER AND OPERATING IN THAT SPACE? >>NO, WE ARE CLEARLY IN A TRANSFORMATIONAL TIME IN HISTORY, DUE TO TECHNOLOGICAL CHANGE, ALWAYS BEING CONNECTED HAS MADE US SOMEWHAT CRAZY, I THINK IT IS NATURAL THAT WE ARE TRYING TO FIGURE OUT HOW TO FEEL MORE CENTERED AND IN CONTROL. AND SO THAT IS THE RISE OF VARIOUS FORMS OF CONSUMABLES, HARMLESS AND BENEFICIAL LIKE CBD , AND LIFESTYLE CHOICES. MINDFULNESS, MARIE KONDO, TIME WELL SPENT, THESE ARE BOOMING BECAUSE PEOPLE FEEL MORE STRESSED AND ANXIOUS. RECESS HAS THE ABILITY TO BE THE LARGEST BRAND IN THE SPACE.>>IF YOU ARE NOT THE FOUNDER AND CEO OF RECESS, WHAT YOU THINK YOU WOULD BE DOING? >>A VERY GOOD QUESTION, I HAVEN’T THOUGHT ABOUT IT, I SPENT THREE YEARS THINKING ABOUT IT, UNTIL I STUMBLED UPON THE IDEA OF RECESS, SO I HAVEN’T SPENT MUCH TIME THINKING ABOUT IT, SOMETHING THE SIMILAR CONSUMER BRANDS, OUR EXPERIENCE, THAT SPACE, BUT RECESS KIND OF CONNECTED A LOT OF THINGS I HAVE ALWAYS BEEN PASSIONATE ABOUT, I’VE ALWAYS LOVED POLITICS AND STRATEGY AND DESIGN, AND LOVED TO COOK, IT REALLY CONNECTED A LOT OF MY PASSIONS INTO ONE IDEA, AND I DIDN’T REALIZE THAT WHEN I STARTED WORKING ON IT, BUT THE DOTS CONNECT BACKWARDS.>>>WE ARE GOING TO GO AHEAD AND OPEN THE FLOOR FOR QUESTIONS, SO IF WE HAVE OUR FIRST PERSON WHO WANTS TO GO AHEAD AND COME UP AND ASK A QUESTION, PLEASE STEP DOWN TO THE MICROPHONE. >>I THINK I NOTICED YOU ARE POP UP ON BROADWAY RIGHT NEAR ACTUALLY, CAN YOU TELL ME WHAT YOU GAIN FROM THE POP UP AND HOW IT WORKED FOR YOU?>>THE FUNNY STORY, THE ORIGINAL INSPIRATION WAS THAT THE COMPANY WAS BASED MY APARTMENT, WE NEEDED AN OFFICE, AND SO THERE’S ALWAYS THAT’S THERE’S ALL THIS EMPTY RETAIL SPACE, WHAT WE MOVE INTO A GROUND FLOOR RETAIL SPACE AND PUT THE OFFICE IN THE BACK AND DO SOME TYPE OF ART ACTIVATION UP FRONT. THERE WAS LITERALLY NO PLAN, WE FOUND A GREAT SPACE, AND I HEARD MY FRIEND, FRITZ, MY BROTHERS FRIEND FROM COLLEGE, 24 YEARS OLD, HE KNOWS HOW TO BUILD THINGS, AND IF YOU WANT TO MAKE THE SPACE WITH ME, ALL THE WHILE, EVERYTHING STARTED MOVING FASTER, WE ARE NOT GOING TO FIT IN THE OFFICE, OR WE ARE NOT GOING TO FIT IN THE BACK, DECIDING TO TAKE THE WHOLE SPACE, WE WANTED TO CREATE A SPACE THAT FELT LIKE YOU WERE WALKING INTO THE FEELING THAT YOU FEEL WHEN YOU’RE DRINKING A RECESS, OR LIKE INSTAGRAM, THE WORLDS ARE VERY MUCH ALIGNED. IT SERVES A COUPLE OF PURPOSES. AGAIN, THAT EXPERIENCE OF IT, A PLACE FOR PEOPLE TO SAMPLE BY THE PRODUCT, THAT IS BY FAR THE LEAST IMPORTANT, AND THE MOST IMPORTANT IS TO SERVE AS A COMMUNITY GATHERING PLACE FOR THE CREATIVE COMMUNITY IN NEW YORK CITY, SO WE HOSTED AN AVERAGE OF THREE EVENTS PER WEEK FOR EIGHT MONTHS, WITH VARIOUS BRANDON CREATIVE PARTNERS, THAT RECESS I RL, IT WORKED BETTER THAN WE’VE EXPECTED, SO WE ENDED UP, INSTEAD OF KEEPING IT OPEN FOR TWO MONTHS, WE KEPT IT OPEN FOR EIGHT MONTHS. IT HAS INSPIRED THE MARKETING STRATEGY, CREATING THESE EXPERIENCES, OF VARIOUS KINDS, THAT PEOPLE WANT TO ENGAGE WITH. AND STEP AWAY FROM THE PHONE FOR MINUTE. AND SHARE WITH HER FRIENDS. >>TO PLANT OPEN ANOTHER RECESS I RL, AND THAT LOCATION? >>WE WILL DEFINITELY BE OPENING OTHER RECESS I RL’S IN THE COUNTRY AND HOPEFULLY THE WORLD, I THINK THERE ARE DIFFERENT VERSIONS OF RECESS IRL’S WE CAN CREATE. >>>THE NEXT QUESTION? >>VICTOR HUGO GUTIERREZ. YAHOO FINANCE ALWAYS BRINGS THE BEST OVER HERE. IN NEW YORK, BASICALLY WE RELAX WITH BOB MARLEY AND INSPIRATIONAL CIGARETTES TO LOOSEN THE MOOD. SO [ LAUGHTER ], IN YOUR TWO YEARS AS AN EXPERIMENT, FROM THE PREVIOUS INTERVIEWS, YOU ARE EXPERIMENTING HOW TO FIGURE OUT, I’M CURIOUS AS WE THROW THESE RECESS LUNCH PARTIES, HOW DO INSPIRATIONAL CIGARETTES AND THE USE OF THE BEVERAGES OF, WHAT IMPACT OF THE BODY, YOU PROBABLY HAVE FIRSTHAND KNOWLEDGE? WEAKER INSPIRATIONAL CIGARETTES, LIKE MARIJUANA? WEAKER OF COURSE. [ LAUGHTER ] I CAN SAY THAT THE YOU KNOW THAT I CAN’T SEE THAT, YOU KNOW. >>THEY COMPLEMENT EACH OTHER NICELY.>>>SOME PEOPLE CAN GET TO BLUR ME WITH MARIJUANA. EVERYTHING I SEE IS UNDERWATER, SO I HAD TO CALL THE EMERGENCY ROOM, AND BEST EMERGENCY ROOM EVER. EVERYBODY DOES BECAUSE YOU WANT TO BE MINDFUL OF EVERYONE’S TIME. >>MY QUESTION IS, IT LOOKS LIKE IF MARIJUANA BECOMES LEGALIZED, THAT KIND OF ACCIDENT WILL HAPPEN A LOT, WHAT IS YOUR TAKE ON THAT, THANK YOU? BECAUSE WE ARE NOT A MARIJUANA COMPANY, THANK YOU, I DON’T THINK IT’S APPROPRIATE FOR ME TO COMMENT ON THAT. FIVE HEARD PEOPLE TALKING ABOUT EDIBLES, HAVING BAD TIMES. >>CBD OF COURSE, HAVING EQUAL TO 0.3% THC, NOT PSYCHOACTIVE. >>WHAT YOU HAD IS NOT IN RECESS. YES.>>NEXT QUESTION?>>>THANKS FOR THE PRESENTATION, THIS IS PRETTY INTERESTING. I WAS GOING TO COME UP WITH THIS QUESTION FIRST, IT IS NOT PSYCHOACTIVE. SO IN TERMS OF THE PITCHING, CALM IN A CAN, THAT ONE’S FOR YOU, CALMNESS, HOW DO YOU MESSAGE TO THAT, IF IT’S NOT PSYCHOACTIVE? >>WHAT CBD IS DOING IS IT IS INTERACTING WITH A NERVOUS SYSTEM CALLED YOUR ENDO CRAB ANNOYED SYSTEM, MAINTAINING — ENDO CRAVANOID SYSTEM. KEEPING YOU BALANCED, THROUGH THE BRAND, THE NAME, THE MESSAGING, EVERYTHING WE DO, I DON’T THINK SOMETHING NEEDS TO BE PSYCHOACTIVE IN ORDER TO MAKE A DIFFERENCE IN PEOPLE’S LIVES.>>MEANING IT DOESN’T WORK IN THE CENTRAL NERVOUS SYSTEM AT ALL TO PRODUCE CALMNESS? >>PSYCHOACTIVE THIS MEANS IS GOING TO AUGMENT YOUR BRAIN’S ABILITY, WHEN YOU ARE STONED, YOU SMOKE A JOINT, THC IS WHAT IS PSYCHOACTIVE. CBD IS NOT.>>THANK YOU.>>IN YOUR CBD IS HAVE DERIVED. THERE ARE A COUPLE OF DISTINCTIONS, AND MARIJUANA DERIVED AND HAVE DERIVED. SO YOU HAVE GONE WITH HEMP DERIVED AS A PLAY.>>YOU’RE RIGHT ON WITH THE BRAND, THAT’S THE BIG THING, HOW MUCH TIME AND ENERGY DID YOU SPEND ON THE FORMULA AND IMPROVING THAT MAKING SURE THAT YOU MAINTAIN YOUR COMPETITIVE EDGE IN THE CAN? >>YES, IT TOOK ME SIX MONTHS TO CREATE THIS FORMULA, FORTUNATELY I WORKED WITH SOMEONE WHO DID, AND EVERY WE CAN FOR SIX MONTHS, WE ARE IN THE PROCESS OF CREATING SOME NEW FLAVORS, AND MAKING SOME SMALL ADJUSTMENTS TO THIS, THERE IS ALWAYS ROOM FOR IMPROVEMENT. SPENDING A LOT OF TIME ON IT, AND MAKING A LOT OF INVESTMENTS IN OUR SUPPLY CHAIN TO ENSURE WE HAVE A PRODUCT THAT IS SUPER HIGH QUALITY, AND COMPLIANT, IT IS VERY IMPORTANT FOR US.>>>I’M GETTING THE IDEA FROM WHAT YOU SAID, YOU DON’T NEED A LICENSE TO SELL YOUR CBD PRODUCTS AND YOU ARE MANUFACTURING FACILITY DOESN’T NEED A LICENSE IN ORDER TO MAKE THE PRODUCT THERE, IS THAT CORRECT?>>YES. FOR NOW. THAT IS THE WHOLE POINT. WE WANT THE REGULATION TO TELL US WHAT TO DO.>>WHAT ABOUT INTERSTATE COMMERCE? CAN YOU TRANSPORT RECESS BETWEEN STATES? THAT’S GOOD AND DANDY BECAUSE OF THAT? >>YES, AGAIN, MARIJUANA AND HEMP ARE DIFFERENT THINGS.>>>DO WE HAVE ANY OTHER QUESTIONS FROM THE AUDIENCE? GO AHEAD, STEP UP TO THE MICROPHONE.>>>SO I’VE NOTICED A LOT OF CONTROVERSY AROUND THC AND CBD, DO YOU HAVE ANY QUESTIONS THAT PEOPLE HAVE WHEN YOU’RE SOURCING A, IS THIS A CONVERSATION YOU HAD RECENTLY?>>QUITE CONFIDENT THAT OURS IS NON-GMO, BUT IT IS A HUGE THING WE ARE TALKING ABOUT IN THE HEMP ROUNDTABLE AS THE REGULATIONS AROUND FARMING AND CULTIVATION CONTINUE TO BE CLARIFIED. IT IS SOMETHING DEFINITELY THAT WE WOULD PRIORITIZE.>>>I HAD A QUESTION ON THE BRANDING, WE’VE SEEN A LOT OF DIRECT CONSUMER COMPANIES, WITH LIFESTYLE BRANDING, THEY SEEM TO BE HUNDREDS OF THEM COPYING THE SAME SORT OF AESTHETICS. DO YOU SEE US GETTING TO A BUBBLE WITH THIS TYPE OF AESTHETIC, AS WE SEE MORE COMPANIES COME OUT, KIND OF PLAYING TO THE LIFESTYLE INITIATIVE? >>I TOTALLY DO. I SEE BRANDS COPYING RECESS ALL THE TIME. THERE IS THE AESTHETIC AND THEN THERE IS THE MESSAGING. I THINK THE KEY IS NOT THE VISUAL BUT MORE ABOUT OUR NARRATIVE. AND OUR COPY IN HER MESSAGE AND OUR MISSION. THAT IS WHAT COMES ACROSS, — OUR COPY AND OUR MESSAGE. WE ARE IN THIS BUBBLE, WE HAVEN’T SPENT ANY OF THE MONEY ON ADVERTISING, VERY DELIBERATELY, THE DAYS OF BEING ABLE TO BUILD A BRAND BY JUST CREATING A NICE AESTHETIC AND WATCHING SOME INSTAGRAM ADS TO SUPPORT IT ARE KIND OF OVER. YOU HAVE TO KIND OF BE NARRATIVE DRIVEN, CONTENT AND EXPERIENCE DRIVEN.>>WHEN YOU THINK ABOUT THE INVESTMENTS INTO RECESS, IS IT FOCUSED ON THE PRODUCT SIDE AND SUPPLY CHAIN AND DEVELOPMENT, OR MORE ON CUSTOMER ACQUISITION COSTS, NOT TRADITIONAL ADVERTISING, BUT THAT WE CAN MORTAR LOCATION TO BRING PEOPLE ONTO THE BRAND, WHERE DOES MOST OF THAT INVESTMENT SPEND LIKE? >>INVESTING A LOT IN INNOVATION PRODUCT AND SUPPLY CHAIN. ON THE MARKETING SIDE, WE ARE NOT DOING THAT MUCH YET. WE ARE DOING A LOT, BUT NOT NEARLY AS MUCH AS WE WILL BE DOING A YEAR FROM NOW. ON THE MARKETING SIDE, WE ARE IN THIS INFRASTRUCTURE LANE STAGE OF THE BUSINESS. THE PROCESS OF CREATING A BRAND- NEW WEBSITE WHICH WILL HAVE AN ENTIRE FOCUS ON EDITORIAL AND CONTENT, AND THE ABILITY TO SELL MERCHANDISE THROUGH THESE PARTNERSHIPS. IN THESE ARE THE TYPES THAT WE ARE GOING TO BE KIND OF LEARNING, HOW TO CREATE CONTENT ON SKILL, CREATE MERCHANDISE, AS I SAID, THE GAME HASN’T REALLY STARTED YET, SO WE ARE STILL KIND OF MOVING SLOW AND KEEPING OUR POWDER DRY, UNTIL NEXT SUMMER, REALLY WANT TO ACCELERATE THINGS. >>WHAT IS THE VISION FOR CONTENT? IS THERE ANY KIND OF BUZZ FEE TYPE THING, WHAT KIND OF EDITORIAL VISION DO YOU HAVE ON THAT? >>OUR BRAND IS PRETTY WEIRD, IT ALLOWS US TO GO WITH A LOT OF DIFFERENT DIRECTIONS. SO ANYTHING FROM POETRY AND FICTION, TO CREATE PROFILES, YOU NAME IT, WE CAN DO IT, WE ARE DOING A LOT OF THINKING NOW, WHEN YOU LOOK AT INSTAGRAM, WE HAVE KIND OF DEMONSTRATED THAT WE ARE PRETTY CAPABLE OF COMING UP WITH INTERESTING IDEAS, THE PERSONALITIES, FOR EXAMPLE, A LOT OF DIRECTIONS THAT WE CAN GO. USER GENERATED CONTENT IS A VERY INTERESTING OPPORTUNITY, BECAUSE OUR BRAND IS FOCUSED ON DESIGNERS AND CREATIVE’S, AND THEY ARE TRULY OBSESSED WITH THE BRAND, WE WILL DO A LOT TO ENABLE THEM TO CREATE THEIR OWN TYPE OF RECESS CONTENT THAT WILL SYNDICATE OUT, THAT IS A LONG-TERM BET FOR US, BUT WE ARE VERY KIND OF — VERY POSITIONED TO BENEFIT. >>IF YOU LOOK AT SOCIAL MEDIA, ANY KIND OF CONTENT THAT NOW HAS ADS, IS THAT SOMETHING YOU WOULD CONSIDER AS WELL, MONETIZING THE CONTENT THAT YOU WOULD BE PUTTING OUT? >>YOU CAN TALK TO MY TEAM, THE IDEA OF MARKETING THAT MAKES MONEY, BUT MONETIZING THE DIFFERENT ASPECTS OF CONTENT, AND EXPERIENCE, AND MERCHANDISE THAT WE CREATE, ULTIMATELY BEVERAGES A BRAND MARKETING EXERCISE, RED BULL AND MONSTER, COCA-COLA AND PEPSI ARE JUST COMPETING ON MARKETING AT THE END OF THE DAY, SO THEY MIGHT HAVE TO SPEND ALL OF THEIR MONEY ON TELEVISION ADS AND IF WE CAN SELL PEOPLE T-SHIRTS AND iPHONE CASES AND HATS, SELL TICKETS TO EVENTS, THAT DECREASES THE AMOUNT YOU HAVE SPENT ON MARKETING. IT IS PAYING FOR SOME OF. THERE ARE A LOT OF DIFFERENT PARTS OF OUR BUSINESS OVER TIME THAT WE CAN MONETIZE, WHICH ALL SERVE TO TRY TO SELL THE BEVERAGE. >>>LOOKING AT THE FLAVORS OF RECESS, WHAT IS YOUR FAVORITE? >>POMEGRANATE HIBISCUS.>>WHY IS THAT?>>IT HAS THIS RICH — IS RICH AND FULL BODY LIKE A FINE WINE. I THINK THERE’S A LOT OF TRUTH TO THAT. SOMETIMES IT FEELS KIND OF HEAVY, IT’S MY FAVORITE, DIFFERENT TIME OF THE DAY. P GENDER — PEACH GINGER, AND POMEGRANATE HIBISCUS IS ALWAYS MY FAVORITE.>> ON THAT NOTE, BEN WITTE, CEO AND FOUNDER OF RECESS, THANK YOU FOR BEING WITH US. >>THANK YOU. [ APPLAUSE ]

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