“Employees are always the most valuable asset within any successful business and my advice to other CEOs to enable their employees to thrive is this: hire the best employees you can afford, invest in their personal development, set ambitious personal and company goals, and provide them the resources and support they need to succeed. The company’s success comes from the employee’s success, not the other way around. At Sträva, we remain committed to challenging our coffee roasters and supporting their pursuit of the perfect bean, the perfect roast, and the perfect cup. We never want to lose sight of the passion and commitment to excellence that helped launch the brand.”
I had the pleasure of interviewing Andrew Aamot. Andrew Aamot is the co-founder and CEO of Sträva Craft Coffee, Inc., a specialty coffee roaster based in Denver, CO. Drawing upon over 20 years of diverse business experience, Andrew has led Sträva from its origins as a coffee roaster, to a leading, internationally recognized brand in the emerging cannabis/hemp infused beverage market. Prior to founding Sträva, Andrew earned his Bachelor of Science degree from James Madison University and then worked in the Information Technology (IT) sector managing a consulting practice focused on large scale enterprise solutions.
If asked five years ago if I would ever work in the cannabis/hemp market, I would have laughed…that thought had never crossed my mind. Even after co-founding Sträva Craft Coffee in the fall of 2015, I had no inkling that my career path would intersect with cannabis. It was a series of chance encounters with other business professionals through the Denver Metro Chamber of Commerce that led to the idea of combining coffee with CBD. I began to learn about the benefits of broad and full spectrum hemp extracts and became passionate about the potential for industry to positively impact people’s lives.
They say that scaling a business is more challenging than starting a business, and we’ve certainly had some interesting growing pains. One of the most memorable was in the wake of a moment of fame; in 2017 I gave a short interview which was later included in a documentary film about the cannabis industry. The film, The Legend of 420, was released on Netflix in December 2017 and the resulting flood of interest in Sträva and our products made for some wild days as a business leader. As welcome as the surge in business was, we were not prepared for it. I was on an international trip to Paris that week, and as the surge began (and grew) we realized we would soon run out of everything: coffee bags, shipping boxes, hemp distillate, labels and even coffee beans. We even ran out of room to store all the finished product — boxes were stacked floor-to-ceiling in our office. On the long flight home I desperately relied on the slow in-flight WiFi to email suppliers, order inventory, and line up the resources needed to meet demand and take care of our customers. As the days went on, the surge only grew, culminating just before Christmas. We closed out the month with 10x our normal monthly sales volume. I will never forget that stressful flight, nor that frantic month. The lesson I learned was to be prepared for the unexpected, and for better or worse, to enjoy the ride.
While getting Sträva off the ground, we worked out of my small Denver apartment for the first few months. All we had was a simple business plan and big dreams. One of those dreams was to roast some of the best coffee in the world and another was to sell it in beautiful packaging — ornate cylindrical cardboard tubes. With this premium idea stuck in our heads, we designed the package and labels and began talking to suppliers in China about manufacturing. Everything was going smoothly until I paused to consider the minimum order and how five pallets of this type of packaging would — or wouldn’t — fit in my little apartment. We realized then that big dreams are important, but practical, consistent execution is even more important. This lesson has stayed with me through the years and has guided many of my decisions about markets and products. While it’s easy to get caught up in the perceived “gold rush” of cannabis, we’re in it to build a strong, sustainable business. The keys to building any successful Consumer Packaged Good brand is to consistently deliver high quality products and high quality service, and incrementally expand the brand with unique, value-add products. Slow and steady wins the race.
One of the defining characteristics of the cannabis/hemp market is that it is evolving rapidly. To maintain leadership and relevancy, brands must constantly innovate and deliver value to consumers. At Sträva, we’ve embraced innovation as a core tenant of our business. At present, we are finalizing an expanded product roadmap and outfitting our production operation to deliver several new products during Q3 and Q4. What’s exciting about innovating in the cannabis/hemp market is that small businesses like Sträva can establish trends and shape the future of consumer products. We see an opportunity to introduce cannabis and hemp products to the mainstream by embracing approachable and health-forward concepts. We are also aiming to educate consumers about the benefit of broad and full spectrum hemp — beyond the buzzword CBD — and continue reaching new consumers through expanded offerings.
While it is true that numerous people played a role in making Sträva a success, I believe it is our customers who deserve the most credit. After releasing the first CBD infused coffee to the market in 2016, we were immediately encouraged by feedback from customers who found meaningful relief provided by the CBD infusion. The testimonials, reviews, and phone calls buoyed moral and instilled a greater sense of purpose in the whole Sträva team. What began as a business plan to deliver a great cup of coffee transitioned into a passion to deliver better quality of life. One of my favorite stories comes from Jay, a local Denver artist, who found that Sträva’s Restore coffee provided meaningful relief from back pain, anxiety, and depression. This relief allowed him to continue his career in painting and to find renewed enjoyment from writing and volunteering in the community. I feel like that’s something we can all relate to — a great cup of coffee that helps us live our best life.
At Sträva, our marketing strategies are shaped by opportunity, regulatory restrictions and by company resources. With first-to-market advantage, we seized the opportunity to benefit from strong word of mouth advertising. Our early customers offered rave reviews and word got around that we had incredible products. As we began to implement more traditional, structured marketing strategies, we quickly learned that regulations prevented us from accessing popular social and search platforms, leaving us with limited options. We have come to rely on grass-root local events and email marketing campaigns to keep in touch with existing and prospective customers and work to secure organic social media and traditional media coverage to expand brand awareness. As previously mentioned, we work hard to deliver innovative, approachable products to the market to expand the appeal and acceptance of cannabis/hemp into the mainstream.
There is a lot to get excited about in the cannabis/hemp industry and the three ideas at the top of my list are 1) cannabis recognition as the next superfood, 2) opportunity for small businesses, and 3) potential positive impact on the opioid epidemic. ***Each of these ideas warrants an in-depth conversation, and I’m happy to discuss each/those in more detail.
Three things that concern me about the cannabis/hemp industry are 1) the U.S. falling behind and giving up the opportunity to lead, 2) the preponderance of misinformation, lack of transparency and inconsistent regulation and testing, and 3) floods of low-cost, low-quality products from (unregulated) foreign markets.
Individuals looking to invest in the cannabis industry should ask questions fundamental to all investments, namely: 1) Do they understand what, and who, you are investing in? 2) What is their tolerance for risk? And, 3) What are their investment objectives, time frame and exit strategy? Investors should further ask 4) What aspects of the investment mitigates risk? And, 5) Is the investment diverse enough?
Given the excitement around cannabis and the stories of fast, easy money — literal buckets of cash being hauled out of dispensaries on the daily — it’s easy to get caught up in cannabis fever and to envy those that gambled and won. But investing is not gambling. To invest successfully in the cannabis industry today you need to understand the business model and have confidence that the management team can execute. There are a number of common business models today: some are built around securing a coveted license to sell cannabis to the public (a dispensary); some to manufacture cannabis infused products for wholesale distribution (a brand or licensed manufacturer); others to own land and property on which cannabis is grown (a real estate play); Or, to supply goods and services to those directly working with the plants (a supplier of lighting equipment, fertilizer, or seed-to-sale computer solutions). Each of the aforementioned business models comes with different inherent risks and rewards. What is common to all, however, is that an experienced and effective management team is key to successful execution. As the cannabis industry matures, more and more companies are attracting experienced management from traditional sectors such as pharma, consumer goods, agriculture, software, finance and more.
Risk is a key consideration when making any investment decision and risk is always correlated to reward, just as in all traditional markets. If you can’t afford to lose your principal, look for low-risk exposure to the growing cannabis market. A publicly traded company like Scotts Miracle-Gro, for example, supplies the industry with essential materials and is benefiting from the overall growth of the market. Risk is low. Reward is relatively low as well. If your appetite for risk is greater, consider a large company like Aurora Cannabis. Aurora Cannabis is directly involved with growing and distributing cannabis, but does so in legal markets, primarily in Canada. Aurora is focused exclusively on cannabis and is closely aligned with the industry’s evolution. Should the market continue to grow, so too should your investment. Finally, for those with long-term visions of wealth and an insatiable appetite for risk, small start-up companies in cannabis and hemp provide the most acute exposure to the industry. Many of these businesses will fail, but the ones who succeed will pay handsome dividends to their early investors. And, as the market matures and consolidates, significant capital may be returned through buyouts and public offerings.
Coinciding with the discussion of risk, successful investors set clearly defined investment objectives; they allow sufficient time for the investment to grow and they set realistic exit expectations. Scotts Miracle-Gro, for example, offers a 2% annual yield and an opportunity for capital appreciation over time. The company is publicly traded in the US and an investor can get in and out anytime they choose. Easy. Contrast that with investment in a young start-up business which pays no dividend, but presents opportunity for significant capital appreciation over time. A successful investor must allow time for the business to grow — several years at least — and must wait for a liquidity event to reclaim their interest. Without the right mindset, and without allowing sufficient time, this type of investment may prove frustrating, and unprofitable… you have to be willing to go along for the whole ride.
An investment without mitigating factors is merely a bet. What’s the backup plan? Remember, successful investing is about maximizing returns while minimizing risks. Successful investors know to diversify and to embrace diversity in their selected investments. Once again, Scotts Miracle-Gro, as a large, diversified business, is a good example of a business exposed to the cannabis market, but not wholly dependent on it. While the cannabis boom presents an opportunity to grow sales, the company will do just fine without it. Contrast that with a cannabis edible brand whose entire business depends on legal access to plant and markets. What’s their backup plan? If you take away cannabis, is there a business left? Can the business cope with changes in the law? Is the business adequately funded to meet new regulations?
Points four and five are related because diversity is a key factor in mitigating investment risk. To accomplish this, successful investors must either choose companies which are themselves diversified in operations, or invest in multiple companies should they be more specialized. A prime example of a well diversified cannabis business is Canopy Growth Corp. which has operations in eight countries, holds over 90 patents, holds interest in both medical and recreational cannabis and is publicly traded on the TSX and NYSE.
Employees are always the most valuable asset within any successful business and my advice to other CEOs to enable their employees to thrive is this: hire the best employees you can afford, invest in their personal development, set ambitious personal and company goals, and provide them the resources and support they need to succeed. The company’s success comes from the employee’s success, not the other way around. At Sträva, we remain committed to challenging our coffee roasters and supporting their pursuit of the perfect bean, the perfect roast, and the perfect cup. We never want to lose sight of the passion and commitment to excellence that helped launch the brand.
As a business leader, one thing that really gets under my skin is waste. While some excess and waste is inevitable, I aspire to a zero waste goal for myself and my operation, and I feel it’s an idea that can, and should, receive more attention from manufacturers of all kinds. Not only is it good for the bottom line, but it’s a practice which conserves resources and, in the case of Sträva and other food manufacturers, can help provide sustenance and nourishment for millions globally. I’m proud that, even as a small business, Sträva is doing its part. For two years now, Sträva has partnered with Brent’s Place, a local Denver non-profit organization that provides short-term housing to families who’s children are being cared for at Children’s Hospital. Anytime we produce too much coffee, we send over a care package to Brent’s Place to ensure their guests are able to start their day with a great cup of coffee.