MJBIZ - November/December - 46

DIY Distribution
Just like MSOs wooed Jaunty for its
license, so did distributors seeking
to get anchored in the New York
market. But Jaunty wanted to do its
own distribution, which can be a
costly proposition.
" Big distributors like Nabis at the
time would tell us, 'You're not going
to be able to distribute for less than
5% of your costs, which is what our
forecasts were,' " Guarino said.
Today, Jaunty is distributing at
2.2% of its costs and will likely end
up at 3.5% after the company adds
satellite warehouses.
Jaunty's distribution tactics
include subzoning delivery areas
and using " super small " vehicles,
which is possible because the
company doesn't distribute bulky
beverages, flower or pre-rolls.
In fact, Jaunty can fit $3,000
worth of vapes in a box that is 12
inches by 8 inches. Live rosin
needs to be refrigerated during
transport, so Jaunty uses dry ice,
he added.
Farm Partners
Another critical aspect to Jaunty's
success is the partnerships it has with
the farms that provide cannabis for
extracted products. Jaunty buys seeds
for the farmers, prepares the lands
for cannabis cultivation and provides
each partner farm with a harvest
plan. The company also provides
labor for harvest.
" The farm just needs to ensure
that they plant and that they keep the
stuff super clean and well cultivated
during the season. Then we pull it
down and either put it into freezers
and bring it to our facility or put it
into super sacks, " Guarino said.
Jaunty currently partners with
nine farms-including five that grow
marijuana for flash-freezing, while
the other four grow cannabis for
biomass, which is used for distillate.
Jaunty previously negotiated
terms with the farms and agreed to
pay by the pound, but it was difficult
to predict how much oil a pound
would yield, so the business' cost
of goods " was all over the place, "
Guarino said.
The contracts called for the
extraction to be completed within
six months, while Jaunty would pay
the farms an estimate every month
and then make up any shortfall
within a six-month period.
" You're both better
off because you're
going to get paid for
what comes out of
the flower that you
provided. "
- Nicolas Guarino, Jaunty
Because the company " made
good " on its contracts, all nine farms
agreed to a simpler model where
Jaunty extracts oil from flower and
then pays the farmers based on how
many kilos of oil it extracted. Jaunty
also provides farmers with access to
batch records and lets them visit the
facility anytime.
" There's a lot of trust involved in
that, but ... you're both better off
because you're going to get paid for
what comes out of the flower that
you provided, " Guarino said, adding
that the company planned to harvest
in October 2024, start extracting
in November and make the first
payments in December.
The current contracts call for
Jaunty to split roughly $375,000
between nine farms on Dec. 1,
Guarino said, adding that the farms
don't all get the same amount.
Additionally, Jaunty told the
46 November-December 2024 | MJBizMagazine
farms that to pay the $375,000,
they need to reach $1.8 million in
sales in November. If sales come up
short, they'll ask to delay part of the
payment until Dec. 15.
" Clearly, the word 'partnership'
is key, " Guarino said, noting that
the company shares financial
statements with its farm partners
and has not delayed a payment by
more than a month.
Such arrangements also have
made it possible to avoid having to
raise more money from investors,
Guarino said.
" The only way we can continue
to scale and grow is if our cannabis
inputs partners, which are the
farms, and our non-cannabis inputs
partners, which are our packaging
company and our hardware
company, give us good terms, " he
said.
" If they don't, we can't. It's that
simple. The cash flow just won't
allow for it, and we have to raise
more money. "
Potency Tax Break
Jaunty and other New York cannabis
businesses got a boost from the
governor this summer, when a costly
THC-potency tax was replaced with
a flat excise tax.
" Now that the state changed
their tax structure, we are in better
shape. Before June, I did't think any
small or medium operator was going
to survive, including ourselves, "
Guarino said, adding that the
change was essentially a 17% tax
reduction.
The tax change improved Jaunty's
margins after expenses from about
10% to 27%, Guarino said, adding
that the savings is being reinvested
in inventory.
After breaking even every month
since January, Jaunty has been
turning profits since June. " It's
allowing us to continue to exist and
grow, " Guarino said.
MJBIZ - November/December

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