The cannabis market is booming—not just across the United States, but all over the world. In domino fashion, stigmas are falling and people are embracing a new perspective on cannabis. Not long ago, the war on cannabis was in full throttle. Now, old-school growers and opportunistic entrepreneurs have stepped forward to claim a piece of the proverbial pie.
It’s important to examine data for how states fare after launching a legalized cannabis market. Pre-existing cannabis markets, like in Colorado and California, will exhibit different trends over time than brand-new markets like Oklahoma. For instance, the Washington state market grew 100 percent from 2015 to 2016. The following year, the rate declined to about 33 percent. Going into 2018, the growth estimate was about 10 percent, according to Headset. It’s easy to see the trend: an initial explosion cools down over time. Who is still standing once growth plateaus? That’s the important question.
Cannabis legalization presents a massive opportunity, so it’s no surprise big capital and investment is rolling in across borders and state lines. Multi-state operators (MSOs) are growing in size. Take Curaleaf, for example, which plans to operate seventy-one dispensaries in fifteen states by the end of 2020. This is a new kind of cannabis business. They scale by acquiring licenses and operators. Market share can be bought and sold like any other commodity.
When it comes to growing and feeding the plants, no two cultivators offer the same philosophy, feeding recipe, or training protocol.
Depending on where you are, different market forces will work for or against you. New states like Oklahoma have comparatively lax regulations that have inspired hobby growers and opportunists to stake a claim. Then there are states like Illinois, in which a publicly traded real estate firm is acquiring three of the seven total cultivation licenses.
In maturing markets, recent data show wholesale pricing for cannabis is increasing. Last year reversed a downward trend in pricing over the previous four years. But in any market, new or mature, overproduction and saturation can occur.
The days of easy sales at premium prices are getting farther away from us. So, how do growers face the changing tides and establish a sustainable cultivation business?
At one time, being a skilled grower was enough to command high prices and constant demand for product. Now, with increasing competition, MSOs, and price volatility, growers are wondering how to ensure their product sells and how to stabilize margins to ensure longevity for their business.
In general, indoor-grown product will command a higher price solely because of the cost of inputs and higher THC levels. But some outdoor growers can command top-shelf pricing for their flower. How do they do it?
Beyond the commodity-versus-premium comparison lies another variable: branding. We won’t name names, but crappy product can and does command a high price if it’s wrapped in premium branding and packaging. It’s all about the first impression.
Good branding coupled with low-quality product may not prove successful over the long term, though. As customers mature in their preferences, they learn which brands offer the best value. If product smells good, tastes good, and feels good, it always will command a good price, special packaging or not. With so many choices on the shelf, why would a customer go back to the same over-priced brand when they can get a much better smoke from another?
Here’s a tip: invest in a good designer or design agency to lead the branding process. Don’t try to wing it yourself or hire someone from 99designs. Take the time to develop your brand positioning and messaging. Even if consumers love your product so much they don’t care what the packaging looks like, the package needs to be memorable so they’ll be able to find your product the next time they want to buy.
Your favorite brands, as simple as their marketing materials may seem, all have a very strong brand framework. Take the time and make the investment to create one of your own.
Science as art
Some cultivators are truly passionate about mastering the art and science of growing. Factors like aroma, flavor, and effects are achieved through breeding efforts in search of the perfect combination of genetic traits. When it comes to growing and feeding the plants, no two cultivators offer the same philosophy, feeding recipe, or training protocol. There are a million ways to create great weed.
As customers mature in their preferences, they learn which brands offer the best value.
The pursuit of next-level cannabis is responsible for decades of crossbreeding in California’s Emerald Triangle—where cannabis breeding got its start—and beyond. In fact, cannabis may be one of the most bred plants in the world.
The absence of standardized growing methods and consumers’ differing preferences for strains and effects provide growers huge opportunities to define their style and product offering among an ever-growing field of competitors.
Here are some ideas to get you thinking about how you might position yourself to stand out in the crowd:
• Are your genetics unique? What is your best strain and what makes it so? (Run that full terpene analysis!)
• Do you use full automation or give each plant your undivided attention?
• Do you use customized formulas? Think schedule, feeding, topping or super-cropping, and curing methods.
• What’s your personal story? You can build a powerful brand based on who you are, where you come from, and why you do what you do.
Another way to gain recognition and brand awareness in a competitive space is to leverage others’ networks. Together, two brands cast a bigger shadow than either does on its own.
Take for example the hip brand Space Coyote. The company infuses its joints with high-quality cold water hash from the respected Humboldt brand Nasha. Space Coyote was a startup in 2019, but its partnership with Nasha gave the company a bit of authority right from the start, which makes a big difference for a nascent brand.
Now, Space Coyote lends authority back to Nasha. As Space Coyote’s pre-rolls grow in popularity, Nasha’s reputation increases as well. The partnership allows two complimentary brands to up each other’s games.
Think co-branding on packaging, or co-sponsor an event for the cannabis community or consumers. Cross-promote each other through social media, in email, and on websites. Good partnerships boost brand awareness.
Be sure to pick a trusted partner. Your reputation will depend on theirs. If they make a blunder and get bad press, your name is on the line, too.
Manage profit margins
However your pricing strategy may look, keeping a close eye on margins and profitability is crucial to sustained success. Large grows with hefty investment can afford to work with slim to no margins. For them, market share can be more important than raw profit.
Other businesses survive from harvest to harvest. Healthy margins are extremely important. Being able to reinvest in the business should be every grower’s goal.
Pay attention to margins ahead of when everyone else starts to squeeze. Increase prices, lower costs, or rely on an economy of scale, but stay one step ahead of the competition.
Efficiency comes in many forms: labor, cost of inputs, equipment choices, energy savings, even genetics. One grower made huge efficiency improvements by examining data about time and task management, environmental conditions, and plant batch analytics, then using the trends they noticed to modify their operations.
Hand-watering, for example, was incredibly expensive: Watering alone accounted for 30 percent of the cultivator’s labor costs. Initially, they implemented more efficient watering practices, but that made only a small difference in man-hours. After crunching more numbers, they invested in an auto-watering system. The investment paid for itself in two months.
The point is, there are efficiencies to be gained everywhere you look in your organization. Data can play into your competitive edge. This is especially true for those with multiple grow rooms or facilities.
Data is power
Software that collects and analyzes data in order to help businesses make informed decisions should be on everyone’s radar, as it can provide demonstrable competitive advantage. Most third-party software systems handle compliance by integrating with track-and-trace systems like Metrc or BioTrack. Cultivators probably also want built-in utilities for tracking employee productivity and providing performance analytics.
While all-in-one tools seem like a good idea, stacking purpose-built software can have a greater impact. Adding cultivation-focused software can address inefficiencies and improve production quality and yields—especially in the cannabis industry, where there are unique scenarios and data points many general-purpose software tools just don’t address.
The more accurate and more comprehensive your data, the smarter your business decisions can be.
Ella Alpina is marketing manager at Trym, a farm management and compliance software company. Prior to Trym, she launched a licensed cannabis business in California and before that, founded and led a full-service marketing agency. She has worked in the cannabis space since 2014 and is passionate about the intersection of technology and cannabis.