The state-legal cannabis industry has come quite a long way, all things considered. After decades of racially motivated prohibition and the proliferation of anti-cannabis propaganda, Americans in dozens of states can now legally access the controversial plant. Dozens of states now allow medical marijuana while nearly 20 states have passed recreational cannabis legislation, building a massively lucrative state-legal cannabis market and attracting plenty of new businesses. Coincidentally, a lot of the talent drawn to America’s nascent cannabis industry is from the consumer packaged goods (“CPG”) space, and these experienced professionals are applying techniques they learned to the young but lucrative sector.
Consumer packaged goods companies have been around for decades, and they have pretty much standardized the techniques for taking a CPG from initial development all the way to profitability. But since the cannabis industry has legal and regulatory considerations that most other industries don’t, mostly thanks to its federal status as a Schedule I Controlled Substance, leaders in the cannabis space have been careful with how they apply CPG techniques. Presently, most forward-thinking cannabis companies are using a variety of different form factors collectively called Cannabis 2.0.
While the industry was still in its infancy, Cannabis 1.0 was the main model. It mainly consisted of cannabis flower lumped into two categories: indica and sativa. There was limited product differentiation and few standards for product safety, but as the industry grew, states began setting regulations for product quality, the market saw an influx of different cannabis products and the customer base grew. Leaders in the cannabis space are now leveraging CPG techniques to ensure their products remain marketable and relevant as the industry matures.
With the cannabis market now proliferated with all kinds of products, including edibles, concentrates, and beverages, branding has become especially crucial, says Greenlane Holdings CEO Nick Kovacevich. Branding will allow cannabis companies to create differentiation and better connect with their customers. This will help cannabis companies carve out portions of the ever-increasing cannabis market as more consumers purchase cannabis products. And to cater to the growing consumer base, Cannabis 2.0 products are diversified to meet different consumer needs and wants, just as in the CPG space.
Curaleaf CEO Joseph Bayern is also chiming in, noting that CPG companies achieve profitability by understanding their customers’ needs and developing better products than their competitors to meet those needs. Cannabis companies that are looking to expand past state borders have also been held back by the patchwork regulations governing America’s state-legal cannabis space. To work around this, multistate operators are installing individual operations that can produce products that meet local, state and municipal standards and ensure customer satisfaction.
Companies in the cannabis space are also adopting CPG strategies such as upper and lower funnel marketing and good-better-best pricing that have had success for consumer packaged goods companies, says Adam Grablick, CEO of Kiva Confections. Moving forward, he says, cannabis companies will need to focus on positioning, segmentation, product points-of-difference, and evolving consumer needs and wants to ensure their brands stay competitive.
As the industry grows over the coming years, we are likely to see a lot more innovation from sector players such as Red White & Bloom Brands Inc. (CSE: RWB) (OTCQX: RWBYF) as the fight to consolidate market dominance intensifies.
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