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The origin story of Hara Supply, Hara Brands, and Hemper is one of good old-fashioned entrepreneurial gumption, courtesy of Bryan Gerber, a business prodigy of sorts who at the ripe age of 31 already has a sticky moniker: The King of Cones. The reference is not to ice cream cones, of course, but to cones used to make cannabis prerolls, of which Gerber, through Hara Supply, produces more than 100 million every month, validating the regal reference. Hemper, a subscription business Gerber founded in 2015, sends members a box every month with 10-12 items valued at $100-150, for $40, per the company. Hara Brands, a four-time inc. 5000 company, which Gerber founded in 2018, is a diversified accessory and lifestyle company whose subsidiary brands include Hemper, Goody Glass, KRYO and Smokefiends. It’s a lot to manage, but as Gerber recently explained to Cannabis Business Executive, it all stems from an interest he had already cultivated as a college student.
“I started the company a week after I graduated from George Washington University in DC,” explained Gerber. “Originally, the concept was Birchbox for stoners. I was buying a lot of rolling papers and combustible products off Amazon, and they didn’t really touch other tobacco products category very much. There also was no subscription-based stuff around it due to payment processing issues, so my buddies would come over and buy a pack of rolling papers from me for $5. I was like, ‘This is crazy; you can walk 20 minutes down the street and get a pack for $2.’
“But nobody cards,” he added. “It was about convenience and instant gratification; that’s the whole millennial mindset. We launched Hemper.co on June 1, 2015. It was a monthly subscription box that had about 10 items in it, and you paid about $30, so $1 a day got you all your essentials, and I introduced products that you didn’t even know you needed.”
That last part turned out to be key. “The way we started thinking about it was that there are certain categories – preparation, cleaning, odor eliminating, glass, vaporization – and we just started introducing people to different products,” said Gerber. “About six months into it, we launched this guest-curated concept, which was basically smoke like Snoop Dogg for a month. We worked with popular YouTubers at first, and then we started working with celebrities and other people, and that’s how the original subscription model exploded. By month six, we had over 1500 subscribers and were making six figures in revenue.”
Marketing was organic. “We would have the YouTuber pick the items, and then they would unbox it on their YouTube channel, and we would use Instagram and other social media tactics, not paid advertisement, because we can’t do paid advertising,” he added. “That’s how we got traffic to the site.
I noted seeing cannabis subscription models around that same time, but few gained traction in terms of subscribers and scale. “2015 was a massive subscription economy year,” recalled Gerber. “Birchbox had just raised a hundred-million dollars; Dollar Shave Club was exploding, competing against Gillette. I really did a lot of deep-diving on this, and my takeaway from the whole thing was, why did some subscription boxes six succeed and why did some fail? If you look at Birchbox and every product in the box, you could go purchase it at a Sephora or ULTA Beauty or Bloomingdale’s that day. If you looked at Loot Crate, similarly, they just exploded because it was all limited-edition. You couldn’t get it at stores. I landed on product development as the key driver for how to keep the subscription box fresh and scaling.
“But I knew that being in cannabis, I wasn’t going to raise $100 million for a subscription box,” he continued, “so I ended up converting the subscription box into basically our Trojan Horse marketing outlet. We were able to deliver brand-new products to customers overnight, and it was more or less a paid test market. They pre-paid for the boxes, I paid for mold fees and tooling in China or India, got new products distributed into the subscription box, got feedback from thousands of consumers, and I took that data to my retail and distribution partners and said, ‘Hey, guys, I just sold 10,000 of these things in a month, people are loving them, and you should sell it into smoke shops and dispensaries and everywhere else.’”
The next step was inevitable. “We started developing our own products and releasing them through the boxes, and that’s where we not only started making our own stuff, but we were vertically integrated after the second year on manufacturing most of the stuff, and then we just became the authority. I sent people stuff new fun gadgets that they didn’t even know would make their sessions easier or faster, better, stronger, or whatever.”
The Secret to Successful Curation
There may in fact be no secret to successful curation in cannabis, but that has not stopped Gerber from employing whatever methodologies were at hand. “Back in the day, obviously, it was a lot of intuition,” he admitted. “Me, as the consumer, was advertising to other consumers, so I was picking the items, I was advertising the boxes on Instagram, I was running the site, so what I picked was something that I would buy, and there just happened to be thousands of people that really liked how I curated the boxes. We also branded a lot of custom limited-edition stuff, and that was really fun. One box we made with a celebrity model named Madzilla was like a color box, and we put in a custom four-pack of Hemper-branded Sharpies you can use to color in the box.
“We started working with all walks of life,” he added, “and I just figured out the manufacturing and curation part and just really sat down and was like, ‘Would someone really buy into this? Would I spend 50 bucks on this, or 30 bucks?’ If I said yes, we moved forward, but it really was a lot of intuition. Today it’s much more data driven; previous sales history, new product development, things like that, and our sophistication level has gotten much higher in the last five years than in the previous four. We’ve been around for about nine years, and in the beginning it wasn’t an Excel sheet of data points but me picking items I thought made sense, and people liked it.”
One cannot discuss cannabis accessories without talking about a product supply chain that pre-COVID invariably originated from China. But today, Hara Supply employs thousands of people working at production facilities it operates throughout India. “We’ve been able to pretty much replicate most ancillary products out of India that normally people were getting out of China,” explained Gerber of the shift. “Glass manufacturing, prerolled cones, rolling papers, grinders, silicone products, plastics, things like that are all now coming out of India, where normally we’d be relying on China, but throughout COVID, we completely diversified the supply chain. And because you have better labor arbitrage in India, most of these products are actually cheaper. You just have to work through a little bit of a nonsense layer.”
Hara has been producing products for several years. “We started manufacturing our second year in business, so 2016,” said Gerber. “We have over 300 products that we’ve developed in-house, and if you’re including color variances, probably about 1000 SKUs.”
The regular introduction of new products is an essential piece of the Hemper business model. “Every month we launch a new subscription box, so every month you get a brand-new glass piece,” said Gerber. “On the accessory side, we have a rollout strategy where at least one new product is released on a monthly basis, so I would say you’re roughly looking at about 100 new products a year. Of course, everything is not a winner. Keep in mind, the awesomeness of the subscription box at this level is that I can develop a product, it’s still a prepaid test market, I issue that product through the subscription box, I get feedback from people, and if they hate it, I’m scrapping it, and will never go to retail with it. But if it comes back and people love it, I go to my retail and distribution partners and say, put this on the shelf immediately.”
Which begs the question, why don’t more dispensaries sell cannabis accessories and merch? “I have these conversations with MSO CEOs weekly,” said Gerber. “Right now, MSOs are mostly hovering right around a half a percent of revenue for merchandising, and my pitch is we can get this to 5 percent. This can easily be a $25 to $50 million business line item for them that they’re not really even focusing on. Basically, everybody says, ‘It’s in our top five priorities, but we’re stuck in our top three priorities, so we would either have to bring in a full team to handle this or find a merchandising partner.’
“We actually are a merchandising partner for a few of the big MSOs,” he added. “We self-distribute to the MSOs, we develop products, we private-label things for them, and we’re actually driving this conversation. I keep telling the CEOs, ‘You’re losing the accessory sale to the smoke shop or the convenience store, and now you’re losing the cannabis sale to the smoke shop and the convenience store that’s selling Delta-8. Do you want to get completely kicked out of where you guys are in terms of your positioning, or do you want to start advertising to consumers and bring in people that don’t need to leave and go around the corner to a smoke shop or convenience store or gas station to buy their preparation goods?’ They should be able to buy everything at the dispensary.”
Is the CEO mindset that they want their own branded accessory products on their shelves, or are they willing to share? “Both,” said Gerber, “but yes, a lot of the big MSOs are trying to private label with their own brands. Curaleaf, for example, wants all Grassroots products in their stores.”
The barriers to opening up these potentially significant revenue streams appear almost self-inflicted. “The biggest issue for these MSOs right now is self-distribution,” explained Gerber. “They’re looking for someone like me to warehouse all of these products for them. They’re barely giving us any type of commitment, and then they want me to self-distribute to 150 or 200 retail locations over 150 plus retail locations, because they don’t want to do it. But if you don’t focus on it, it’s never going to grow, so what’s happening is a lot of procurement officers are turning a blind eye to the merchandising side, because it’s not really relevant. But the problem is, it’s a self-fulfilling prophecy. If you ignore it, it’s going to stay at half a percent of revenue. If you focus on it, it’s going to grow.”
That said, the upsides remain a tantalizing target. “I think there’s major growth potential for these dispensaries on the merchandising side,” said Gerber. “I have very candid conversations with CEOs weekly about this and we’re all trying to help them figure it out. Right now, my business is basically about 60 percent manufacturing product and 40 percent is our own branded stuff.”
It is a situation that defines the complexity of the accessories/merchandise side of the market. “We have two sides to our company,” Gerber explained. “Hara Brands is the branded CPG side of our business, the Hemper smoking accessory products. Hara Supply is our private labeling manufacturing side that self-distributes to different MSOs and brands in multiple states and countries around the world. At this point, we ship cones everywhere – Israel, Canada, Australia, South America, Europe – so that’s not an issue for us.
“It’s when these MSOs want me to carry random stuff, like vape batteries or Puffcos, products I don’t really sell many of, that I don’t want to bring them in,” he continued. “So that’s kind of the problem. For example, I’m working with one MSO right now where they’ve got a merchandising program with one distributor and I’m just going to sell my products to that distributor, who will distribute to all the retail stores. I would rather that scenario than us self-distributing to another 200 stores. We already self-distribute to over 1000 smoke shops.”
A Greener Lane
Assuming there is always a solution to everything, I asked Gerber what he believes will solve the accessories conundrum, such as it is. “I think it’s been really interesting on the ancillary side,” he said. “Greenlane, for example, was the hot girl in the room for how many years. Everybody wanted to be distributed by Greenlane, everybody wanted to be at the parties, everyone wanted to be at the Champs tradeshow booths, and now look at them. They can barely stay afloat. I think there’s been so much overspending and crumbling that who is the hero in our industry right now? Who is the North Star? Who is distributing really well? Who’s getting to stores? Who has a great product offering? I can’t really name anyone right now. You look at the Windships of the world, I think they’re even going out of business. It’s like nobody has been able to figure it out, and a lot of these people are just now realizing, ‘We need to make our own stuff and self-distribute things that we make 60-plus percent margins on.’ Hello. I’ve been preaching this since 2015.”
I asked what he saw as the headwinds Greenlane had to contend with. “I think it was a couple things,” said Gerber. “Greenlane went from $50 million in revenue to about $180 million in revenue pretty much because of Juul, which was running off a 10 percent margin. After rebates, that ended up basically making no money, so they puffed up their business on a fictitious robbing Peter to pay Paul model. Once they lost the Juul contracts, everything started to come to light. ‘Wow, we don’t actually sell things for a profit, and we’ve got way too many employees. Oh, wow, we’ve got $80 million in inventory. Oh, wow, that’s a big issue. And we’ve been telling people we’ve got six distribution hubs.’ That was a lie. They only had one and everything else was a 3PL (third-party logistics).
“They over-promised and under-delivered,” he summarized. “Everyone and their mother wanted to be distributed by Greenland, and they never hit any of the goals. I think there were a multitude of issues, such as overspending, not selling things at a proper margin, and overpaying. I’ve interviewed multiple people from Greenlane, and it’s astounding. They realized they needed to start making their own stuff and building their own brands too late when the show was already over. They had VIBES for a little bit, but they kind of screwed that one up, too.”
It’s odd because the entire accessories sector seems to have so much potential in this industry. “It does,” agreed Gerber. “We’ve turned the subscription box into a really fun novelty based monthly package. We’ve turned collecting bongs into sneakers, and I think that’s why we’ve been so successful on the subscription side. We’ve got our own product development team here, we’ve got our marketing team here, our content creation team here, and we just tell a great story. We’re innovating in this OTP (other tobacco products) category, and basically delivering people stuff they didn’t even realize they needed.
“I think that’s our secret sauce,” he added. “We are the customer, we know how to develop the stuff, and we are vertically integrated with most of these products, so we’ve got great margins and we’re able to do things most people can’t do, like rebate programs, back-end programs, spiffs for retailers, all different types of stuff that people just aren’t really thinking about or able to do because their margins are so tight.”
I asked how much their subscription base fluctuates over time. “It’s pretty consistent,” said Gerber. “Unless we pull out like a glass piece for one month that people just didn’t like, and then we see a decent bit of churn, maybe 15 percent on a month like that. On the months where people love it, we might see 3 percent, so it really depends. Our job at this point is to deliver stuff people cannot live without.”
Right now, he added, Hemper has a little over 30,000 subscribers in about 105 countries. Given their reach, it seems obvious that once the barriers come down and Hemper can throw cannabis into those boxes, it will have developed the subscription base to do it just that. “That and paid advertising,” stressed Gerber. “If I could run real paid advertising today, I’d be a billionaire. I’m not even kidding. We drive more traffic organically than most companies do, paid.”
Cannabis is a global industry, to be sure, but the United States remains the company’s largest market. “The U.S. is definitely our biggest market for combustibles and cones, and I can tell you I’ve done over $200 million in top-line revenue.”
I asked about best-sellers. “In terms of glass,” said Gerber, “our number one bestselling piece since it came out in 2018 has been our UFO Bong. People love the UFO. In terms of accessories, I want to say the number one product has been the Quick Hitter.”
Coneheads
Considering the consistent and even rising popularity of prerolls, I wondered where the growth is in the preroll cone market. “We produce about 100 million cones a month right now, and we supply most of the big rolling-paper companies with their cones,” said Gerber. “We also supply a lot of big tobacco guys, a lot of the big MSOs, a lot of big vanity brands – the Jeters and Stiizys of the world. In terms of growth, the preroll category is about convenience. Americans are lazy and will always look for convenient options, and now the multipacks and connoisseur-infused has really exploded, and people are looking for the preroll version of the 12-pack of beer. I think as the category scales, we will need more cones, and as automation on the preroll side comes into fruition, people will be able to fill more cones, which means they’ll make more cones, which means they’ll need more cones. And because bulk flower is still the number one category, people are still buying eighths and filling their own cones. They don’t care about the preroll so much, and just need the ability to take their 15-to-20-minute preparation down to two minutes.”
I noted that prerolls used to be sold as an afterthought in the dispensary. “When I first got to LA in 2017, prerolls were the budtender sitting at the counter of the black-market dispensary filling dust into a joint and packing it with a shoelace,” added Gerber. “That’s what prerolls had been known for, and probably up until about 2020, nobody really took them seriously. Lowell Farms was really good at pioneering that lane, and there might have been one or two other brands that focused on it, but they were really pushing that agenda.
“In terms of why we’re selling more prerolls, it’s the trends,” he added. “People are into micro-consumption, they want smaller joints, so the Dog Walkers are popular, or they want the big two-grammars, so you’re talking really big cones. I think the multipacks have pushed the agenda for why prerolls have become so popular; convenience, once again, and the quality of the weed has gotten better, too, so it’s not just the dust from the pounds at the bottom of the bag anymore. It’s now premium cannabis that is being put into prerolls, especially with the infused, where you’re getting 50 percentage points of THC, so five puffs on this thing and you’re getting crazy high. So, there’s been different trends, and now we’re in the world where it’s pretty much a price game, and then you’ve got the connoisseur market, which is looking for infused and kief-coated, and all this other crazy stuff.”
What about the automated rolling machines? Had he seen any major advances there? “In terms of the automation side, we work with a lot of them, and I looked at all of them, and nobody has really figured it out,” noted Gerber. “Our cones work great in a lot of the machines, and in some of them, if the cone is literally not perfect, it won’t work. We actually did a strategic investment in Accelerant Manufacturing about two years ago, which is more of a processing-as-a-service model. We give you the machine for free, and you pay per joint filled. I thought I liked that model, because a lot of these companies have opex and capex constraints, so they’re looking for opportunities to bring in automation without breaking the bank and issuing a quarter-million-dollar check. So, we did a strategic investment there, but other than that, it’s all over the place. Some are good for this example, some are good for that example, but I don’t think there’s a clear winner quite yet.”
How important is the cone to the final product? “There are two types of cone rolling,” replied Gerber. “There’s a style called overlap, and there’s a style called straight-line gum seam. With overlap, you roll a cone from a rectangle; with straight-line gum seam, you cut off a right angle and make it a trapezoid, and it’s a straight-line gum seam. Where you start is with the paper quality: the GSM (grams per square meter), the thickness, where’s it from, what it’s made out of, things like that. Then, in terms of smoke availability, is the filter tip placement correct, is the airflow proper?
“When you get to the preroll packs,” he added, “it’s a little bit different, because you’re like, ‘Okay, was it the 18-year-old kid on the line who was high who filled this too tight, or did the automatic machine just suck for five minutes or something? You don’t really know what the issue is, so I think if you’re talking in terms of pure quality, you have to talk about the paper. That’s the first step.”
Paper is also a singular differentiator among brands. “Every major rolling paper company sends me their paper, and I convert them into cones for them,” said Gerber. In terms of how seriously Hara takes its paper, “We take it very seriously,” he added. “It’s the most important aspect. We procure paper from the oldest French company in the world, which is now owned by Republic Brands. I think it’s the smoothest.”
Looking to the future, Gerber said he wants to up the game for companies in the cannabis space. “My goal this year for the cannabis-touching side is creating better relationships with the c-suite people, and then creating relationships where I’m not being quoted-out by five competitors,” he said. “I’m creating long-term partnerships with these companies, trying to get them to realize that saving a half-a-cent here and there doesn’t mean they should be moving manufacturing partners every month. They should really be focusing and betting on certain people, the ones who can actually scale, like I can. You see a lot of big brands out, and the reason why they’re scaling is because I’m feeding them a lot of cones. If you don’t have the cones, you can’t scale your prerolls. So, just creating better relationships on that side, and trying to garner more convenience stores, more smoke shops, more dispensaries for our branded products, and then just trying to support the THC companies as much as I possibly can without going broke.”
He also has other mountains to climb. “Right now, we’re going after a mass-market convenience store play,” said Gerber. “I’m getting some of our branded products into c-stores. We want to be the category leader for what the Green Zone looks like in convenience, and how c-stores bring in more paraphernalia products without looking like a head shop.”
What would that look like, I asked. Would Hemper provide the display? “The point of purchase display, correct,” replied Gerber. “After working with all these tobacco companies, I realized that they’re all trying to figure out how to be the category leader in what we’re calling the Green Zone in c-stores.
“So, I’m trying to get one-hitters into Circle Ks and 7-11s, or I’m trying to get cones into the stores,” he added. “We go to these convenience store shows, we signed up for this broker network, we’re investing a ton of money into shows, and we’ve onboarded almost 600 convenience stores since October of last year, which is amazing. We’re onboarding a ton this year as well, and we’re developing products that are innovative and unique and serving different purposes for different markets.”
As far as product innovation goes, Gerber stressed that the less-is-more model has proven to be the winner. “I can tell you that the companies making the most money in this industry are selling products for less than $5,” he said. “Those are the rolling paper companies. They are making billions a year in sales. Puffco, by comparison, is doing $20-$25 million a year maybe? That’s peanuts compared to what these tobacco companies are doing. So, I’m focusing on $5 and less. At some point, we are going to focus on the tier three products, which I would call a Puffco, but I’m going to let this patent war between Puffco and Focus play out and see what happens.”
In the meantime, the Las Vegas-based team of around 70 employees continues to brainstorm new products. “The product development team would consist of myself, one of my partners, Ty Tran, our VP of Product Development, Randall, our Director of Product Development, Gabe, and our Junior Industrial Designer, Reid. The five of us get a little stoney baloney in the afternoon, sit in a room, and say, ‘All right, if we’re going to reinvent the one-hitter, what would it look like?’ ‘If 7/11 was going to sell a one-hitter, what would it look like?’ We just throw ideas around and prototype, we have 3d printers here, and we’ve got what we call the lab. We’re iterating, testing, iterating, coming up with new ideas, rapid prototyping, and like I said, we launch 100 products a year, with maybe 10 of them real winners.”
Gerber started the company when he was 23 and had just turned 32 years of age, young by any measure. “I’ve still got a lot of gas left in the tank,” he said. “I’m still cranking 80 plus hours a week, and I’m getting married in December of this year.”
That said, Gerber can envision an endgame for the business in the form of a sizeable acquisition. Would such a buyer come in the form of Big Logistics? “No,” said Gerber. “It’s Big Alcohol, Big Tobacco, or Big Pharma. Those are our only options. Those are the only people who have enough cash on their balance sheet to give entrepreneurs like me the number we’re looking for, and that we’ve had in our head throughout all of the dark times to make it worth it.”
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