Saucey, Emjay Merge to Form Data-Rich “Amazon of Regulated CPG”

As beverage alcohol giants continue to flirt with a potential entrance into cannabis products, one company is already planning their marriage.

In the first step towards its goal of scaling a “best-in-class vertically integrated vice platform,” the newly formed Pacific Consolidating Holdings (PCH) announced today its acquisition and merger of two pioneering companies in the alcohol and cannabis delivery space: Saucey and Emjay. Private equity group The Inception Companies, a private equity firm whose portfolio includes investments in cannabis-related companies such as MedMen, PAX, Weedmaps and BDS Analytics, is also a partner in the new entity. The size of its stake in PCH was not disclosed.

Through the combination of shared logistics technology and cross-category customer data, and with Saucey CEO Chris Vaughn and COO Daniel Leeb as the its management team, PCH is aiming to become the “Amazon of Regulated CPG,” according to a press release, while enhancing the company’s ability to extend license applications and make further acquisitions in the space down the road.

“If you are in alcohol and you aren’t thinking about cannabis, then you aren’t thinking very far ahead,” said Vaughn.

In leading Los Angeles-based Saucey, which launched in 2014 and which currently operates in 23 markets across the U.S., Vaughn had been tracking the legalized cannabis movement in California for some time. While following how local regulators were developing the rules around delivery, the company was also hearing increased interest from its own customers in cannabis products, with over 70% of respondents in a survey expressing a desire for such. The positive response the company received after launching CBD beverages through its retail network helped encourage further exploration of the space.

Saucey found a unique partner in Los Angeles-based Emjay. The vertically integrated company, launched in 2019, operates its own delivery and retail platform, allowing for a wide selection of products at competitive prices. Rather than paying Saucey a subscription fee to use a tool that helps sell other brands’ products, Emjay is selling its own. According to a press release, Emjay became profitable earlier this year and is growing at 25-30% per month.

More importantly, Saucey’s management has served as an outside advisor to Emjay, as the latter is one of a handful of companies to have built its own infrastructure around Saucey’s licensed digital logistics platform. However, the merger doesn’t mean that customers will be able to order a pre-roll with their six-pack of beer, as the two ordering and fulfillment systems are separate entities operating under separate legal frameworks. For shoppers, the most apparent synergy between Saucey and Emjay will be the ability for the app to use location data to point them in the direction of a nearby dispensary from which to order, or vice versa. Customers can also use the same credentials to log in to both sites, and receive product recommendations based on purchasing history.

But the two companies are unified in their shared digital infrastructure, which produces the cross-category insights that could prove as or more valuable than the products themselves. To that end, both are aiming to expand their customer base and therefore their collective data stockpile; PCH is seeking to add 100 team members in the next few months to fill key roles in growth and analytics and help climb through the “mountains of data” the company has accumulated.

“In conversations with all the big alcohol companies, everyone is focused on how cannabis will affect the alcohol industry, and vice-versa,” he said. “Everyone in cannabis thinks they are going to adopt everyone from wine or craft beer, but they have no idea. And to be able to have the cross industry knowledge of what happens to a customer when they cross these industries is something that everyone from every major alcohol retailer to every major alcohol brand to call the big cannabis companies are dying to know.”

Like many other California cannabis entrepreneurs, Vaughn is watching how other states with legalized marijuana are approaching regulations specifically around delivery. He noted that having an established footprint in 24 states with Saucey gives the company a base from which to expand should markets open up, but that many state laws around cannabis delivery, as currently written, make the service complex and inefficient for legal dispensaries to offer. Though its ability to influence individual state regulatory boards crafting policies may be weak, Vaughn believes that the data can help shape an “investor thesis around vice as an industry,” which he defined as “highly regulated, age-gated products” rather than inherently dangerous or disreputable items. When examined through the lens of the rise of e-commerce and delivery apps, that thesis is enhanced.

“I think the long-term insights and value that will come out of the work we are doing is something that nobody else has in the world. No alcohol company has it, no cannabis company has it, and everyone wants to know what that crossover is,” he said. “We’ve talked to giant retailers in certain states whose sales on the alcohol side are leveling off — is that because of the rise of alcohol e-commerce, or because cannabis is now legal in the state? That will be tremendous strategic value.”

In the meantime, PCH is balancing future growth with more immediate concerns, like finding operational efficiencies within the two combined companies and expanding its geographic footprint within California and beyond. Along with representing 37% of total U.S. cannabis sales, working in the state with the most advanced cannabis market and most mature consumers will provide the kind of rich data and insights, Vaughn noted, that will help PCH understand the emerging demand in newer areas, like Florida.

“Imagine if alcohol prohibition ended today — how would the brick-and-mortar landscape be built out over the next five, ten, twenty, thirty years? There probably wouldn’t be a liquor store on every corner,” he said. “That’s what we are seeing in cannabis.”