The nascent cannabis industry is undoubtedly profitable, with the global marijuana market projected to be worth $73.6 billion by 2027; however, it is also high risk. Firms looking to cash in on cannabis’s immense popularity often have to spend large amounts of money and time building cultivation and manufacturing facilities, securing the required licenses, and building a brand — all with no guaranteed return. While plenty of cannabis companies can weather the risk and build a successful brand all on their own, some have opted for a less risky and costly route: white labeling.
A common practice among mainstream businesses, white labeling refers to when a product is produced by one company but packaged, branded and sold by another company. For instance, plenty of products sold under the 365 brand at Whole Foods Market aren’t produced by Whole Foods but rather other companies. Although these firms manufacture the products, Whole Foods is in charge of branding, marketing and selling them.
According to Daniel Yi, managing partner and chief strategy officer at Inanna Manufacturing, white labeling represents a significant opportunity for the nascent cannabis industry. Plenty of entrepreneurs with innovative ideas are unable to enter the sector because they can’t get a license or because they can’t secure enough capital. Partnering with an established brand, like Yi himself did, can help them get their products to the shelves.
Four years ago, Yi white labeled his products under the then-successful MedMen Enterprises brand. Inanna Manufacturing, which is based in Bellflower, California, holds a Type 6 cannabis-manufacturing license and produces cannabis-infused products such as topicals and gummies. However, the company does not handle cultivation or extraction. Yi notes that there are plenty of individuals who have knowledge and experience cultivating cannabis, adding that there’s no need to spend capital on cultivating when you have a “great retail concept.”
Another California-based firm that chose to go the white-label route is Old Pal. The company provides packaging and marketing services for about 100 cultivators who are licensed to grow or manufacture cannabis. The growers provide cannabis flower and vape cartridges while Old Pal packages, brands and promotes these products through its network of marijuana retailers. Presently, Old Pal has products in about 350 cannabis stores — all without a cannabis license and with a small team of 29 employees in one office.
Rusty Wilenkin, chief executive of Old Pal, says that if the firm had been vertically integrated, it would have needed a team of 40 cultivators and 20 drivers as well as a compliance department. White labeling has allowed Old Pal to cut down on its costs and reach a larger segment of the consumer market.
The success of white labeling doesn’t mean all firms not doing it are struggling. Not in the least! For instance, Gage Cannabis Co., a relatively new vertically integrated cannabis firm in Michigan, has made huge inroads into becoming the top brand within the state.
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