Katie Stem spent her high school years in pain from then-undiagnosed Crohn's disease. As a science student, who worked in a lab dissecting cadavers, little did she know she would grow up to found Peak Extracts in 2015, manufacturing a variety of cannabis products in Portland, Oregon. But to paraphrase Steve Jobs, you can only connect the dots looking backwards. Stem turned out to be quite a polymath, and all her varied experiences — cadavers included — have brought her to where she is today.
In her mission to help consumers control both the dosage and the effects of cannabis, and to uncover which cannabis strain works best for which ailment or mood, Stem and her business/life partner Kate Black have focused their efforts on three main products: strain-specific chocolates; "Rescue Rub," an all-purpose topical for pain and inflammation; and extracts formulated by a process that retains the character of the original flower material.
In a conversation with Stem, we set out to learn how she got started in cannabis, what led her to focus on "strain-specific" products, and what the future holds for Peak Extracts.
How did you learn to do what you’re doing?
I grew up in a small college town in the middle of nowhere — Pullman in Eastern Washington — where it was easier to get a job in a lab than at a place like McDonald’s. Plus, I was really interested in science and always had been. My mother was a scientist, a virologist, with a specialty in retroviruses, and I spent a lot of time in her lab. Then, she went back to school to become a pharmacist and I enjoyed helping her study. I’d quiz her with flash cards. I learned a ton about pharmacology by helping her go through school.
Then, I got a job as an apprentice in an anatomy and physiology lab where I did dissections of cadavers for use at medical schools. It takes hundreds of hours of work to prepare them to be used as teaching aids. When I went to college two years later at Carlton in Minnesota for a pre-med degree, I did oncology and neurology research in various labs I worked for. After graduation, I worked in the neuroscience department and did memory and pharmacology research — specifically [on] NMDA receptor antagonists, a class of dissociated anesthetics, and how they act on memory.
All this led to what I do now. And, all the pharmacology and neurology research I did helped inform my later research with herbs. My last lab job was in 2004 to 2006 in Portland, where I studied green tea extracts, fish oil, alpha lipoic acid, and their effects on multiple sclerosis. And that got me away from science, so to speak, and got me interested in Chinese medicine and herbal medicine. So I got a masters from OCAM — Oregon College of Oriental Medicine. I’m a nationally certified acupuncturist and herbalist, as well.
I synthesized my Eastern and Western backgrounds. I knew all about extraction by taking chemistry and pharmacology, and I knew about herbs from my Chinese medicine background. Those were the tools I needed to start our extraction company.
And what about the business side of things?
My father is a business professor. I come from a great deal of privilege in that regard. He is an amazingly smart businessman with an MBA, and a PhD in economics. I grew up listening to and learning from him. Then I learned how to start and run a business in Americorps, where I spent two years after graduating from college. I was in a really cool subdivision of Americorps called Entrepreneurial Corps. They teach you as much as they can in an immersive environment about corporate formation, business, and HR practices for two weeks in D.C., and then they let you work for a non-profit. I worked for a super cool educational cooperative in Minnesota. My job there was to start businesses for their non-profit in order to employ disabled adults and teens with emotional behavior issues. I wrote business plans, grants, and worked on income models and profit margins.
So, I had good skills to run a business and then I started my own acupuncture practice in 2010. I’d been running my practice for about five years when we started Peak. Kate [Black], my girlfriend and business partner, ran an interior design company and a painting company. So, she is also good with business.
How did you get the funding for that?
Peak is entirely self-funded. We started really small and went without pay for several years in order to keep reinvesting in the company.
To get started, I took all my savings and borrowed a little from family members and bought a $30,000 extractor, our first machine. We used that to bring in money to buy our first chocolate tempering machines and then we took on $20,000 in investments to do our build out and buy a second extractor. Then I took out a home equity loan to finance the rest.
Where do your ingredients come from?
We collaborate with three or four different farms. We’ve been working with them for years and share their values and love their products. It’s important for me to trust the grower and have access to strains that will neatly fit into all these categories because that’s important for reproducibility and customer satisfaction. We found some people we love and we take the material and we process it in house. We have the extraction equipment and control everything from the plant material through to the finished product.
What are your top products?
Peak Extracts' current product line offers THC products, plus various ratios of THC:CBD products.
We’ve got chocolate, rescue rub, cartridges, and tinctures. The tinctures are relatively new but selling fast, and I’m thrilled. About 80 percent of our business was chocolates and 20 percent was topicals. Then we added on the cartridges and that took up about a third of our business, and now tinctures are outpacing the cartridges. We might end up selling more tinctures than anything else next year. And soon we’ll be rolling out a CBD hemp-only line
Why chocolate? And how does that process work?
First, I’m a huge fan of chocolate in general. More important, as someone who has Crohn’s disease, chocolate was something I could eat that didn’t require mechanical digestion. Crohn’s can be a spasmodic condition; anything [you eat that’s] rough or bumpy or requires a lot of contractions will make symptoms worse. Eating things that melt or get absorbed without too much grinding or crunching can help. Chocolate melts and can be digested easily. I can eat chocolate without it pissing off my system.
Plus, chocolate provides a nice matrix for the hash oil. Because it’s so fatty it helps with absorption, and the THC dissolves into the chocolate so it’s easier to dose uniformly [so that] it’s absorbed much better and more quickly. It’s an ideal way to take cannabis, in my opinion. And there are also endogenous and phytocannabinoids in chocolate and anandamide, that bliss chemical.
We go through a very large processor in California for our couverture [high-quality chocolate, which contains a higher percentage of cocoa butter compared to other ingredients]. We use couverture which is raw, untempered chocolate — about 70 percent dark chocolate — that’s already been conched [a type of processing] and milled. We make our own oil, infuse, and then temper the chocolate in it.
You use the term “strain-specific.” Tell me about that.
We want to create a reproducible experience even though there’s going to be variation in experience from one strain of cannabis to another. Because of that, we categorize the effects [of a particular cannabis strain] based on a rainbow. People tend to gravitate toward a certain color, and that’s the whole idea. If you pick a certain color it should be pretty darn similar to any other strain of that same color. People will come up to us and say, “I love the purple for sleep.” That’s our heavy indica. Or “I love the blue; the blue is really great for PTSD.”
It’s fascinating to me that so many people have the same experience that I did [finding a way to work around the pain of eating when you have Crohn's], which is that the strain matters so much in terms of the way you use it medically. Most people — if they’re a really big user of our product — will have more than one color on hand. “This is what I like for day time use” and “This is what I like for nighttime,” and “If I’ve hurt my back this is the one I use.” I love that — that people are being able to tailor their needs and be able to control their medicine.
Can you lay out the color coding system?
The color coding system evolved as a way for us to convey the effects of the different strains without the consumer having any knowledge of their genetics or traits. We divided them into archetypes with the following profiles:
Orange/Bright Sativa: The most energizing, clear, lucid possible. Almost no body buzz, no “stoned or dopey” feeling. C-99 and Durban poison are the prime examples here.
Red/heavy Sativa: Energizing, but with a body buzz. People typically experience racing thoughts and also couch lock, but there are a subset of people who rely on this for sleep. Gorilla glue and Sour Diesel are the best examples.
Blue/bright Indica: Lucid but still relaxing, must have the indica strains (typically blueberry) that are good for pain, yet it’s not as dopey/stoney as our heavy indica. Examples: blue dream, blue magoo.
Purple/heavy Indica: These are the most sedating, most body effects, typically best for pain and night time use. Examples include granddaddy Durban, Hindu Kush.
Most consumers agree that although the sativa/indica thing is largely meaningless due to increased hybridization. As the land race strains exemplify, there is really a difference between the cerebral, high energy effects of one of the original sativas versus the stoned, sedated effects of the indicas. That’s what we attempt to categorize with bright versus heavy, which could also be stated as lucid versus mellow or high versus stoned. We settled on “bright” because people felt the word “lucid” was pretentious and the word “clear” was confusing since we use full spectrum whole plant extract. "Heavy" is a much better word than "dopey" or "stoned," but they’re all getting at the same idea.
Long story short, we want people to know what they’re getting into when they eat our chocolates or tinctures. Control and predictability are everything with edibles.
And what about the Rescue Rub?
I started my practice as an herbalist in 2010 and I developed a salve for arthritis, muscle pain, sprains and strains, based on a 1,000-year-old formula for blunt force trauma that I found in one of my books. I modified it and started using it in the clinic. A friend suggested I add cannabis oil to the product. I’d been using the formulation for years and then I added the cannabis oil to it and it worked much better. That’s how Rescue Rub was born.
[When it came to using the right strain], we did a bunch of clinical trials. We found that a blend was most beneficial. We use a blend of indica and sativa and different terpene [aromatic compound] profiles. It’s the only product we make that’s not strain-specific because we want it to be consistent from batch to batch and sort of a general all-purpose product.
In future, we’ll be producing a lotion and a Tiger Balm type of thing that’s a little bit stronger feeling and smelling than the original Rescue Rub, which has a nice and neutral scent.
Who are your customers?
We have a wide demographic. We’ve been intentional about trying to keep it accessible to all genders and all ages. It seems like we’re more popular in our brands among the older set because it’s not as heavy hitting. The younger set tends to want something that’s stronger or more intense. Ours is more about predictability and tailor-ability, so there are a lot of older people who use our chocolate — people 75 plus, which I think is just so wonderful because a lot of these people have never experimented with cannabis whatsoever and now they’re like, “This is great for my arthritis. I can sleep through my back pain or shoulder pain.” Our vape pens are mostly used by younger people and our Rescue Rub is popular with baby boomers and the older set primarily, but it’s popular among all demographics.
What does the future hold?
Right now, we distribute only in Oregon. But we’re going to expand into the hemp CBD space, which allows us to sell in other states without having facilities in each state, which we would need with cannabis-derived products containing THC. So we’ll continue to sell THC products in Oregon and hope to soon expand into other adult-legal markets such as Michigan, California, et cetera..
We are also going to launch a CBD-only line using hemp-derived CBD, which will allow us to ship nationwide. Our first step is to get CBD-only Rescue Rub out to market, as there has been a huge demand for that product nationwide. For the moment, the FDA has prohibited the sale of CBD in edible products so until they modify that stance we'll have to refrain from producing our chocolates and tinctures for national consumption. The regulations can be confusing.
Do you see yourself going public?
I’d like to take the company public. To move where we want to move, we’ll need access to "real money," especially to compete with these companies that have multiple millions of dollars of buffer. That’s what really worries me is competing against companies that can operate at a loss for a couple of years and then we would get starved out. Much like the way that Starbucks and Walmart operated, they came in and underpriced and starved out the competition. I see that happening with cannabis already. There are three large companies in Oregon already that are consolidating. We had a big account that found a competing brand and they dropped us. They have like 15 locations. It was a really big hit. We know it could happen with a couple of our other customers, as well.
There’s a majority favorability for cannabis legalization across the country, and a part of it is that people are realizing it’s not that big a deal. And putting people in jail for it is beyond stupid. And then we have people like [former House Speaker] John Boehner who are hopping on board because they know they can make a ton of money; 97 percent of the funding in cannabis goes to white men — which is frustrating thing for us to deal with as an all-female run company. But that’s how it is right now and how it will be mainstream.
The sea change was a couple of years ago where people were like, "this is going from an underground thing, which is not healthy and we’ll never get anywhere” to “we want it to be mainstream.” But we don’t want it to be pushed too far into the mainstream where those of us who fought for this to happen the whole time are no longer allowed access. I see that happening and that’s really unfortunate because the people most confident in investing their time and money into the cannabis space are the ones who are doing it with people who look like them. It’s becoming a white, older male industry and that’s happening quickly and I don’t see that changing. They already have the money and they’re going to make more of it and will dominate the marketplace even more. We’re going to have to fight for our place at the table.