It is no secret that the cannabis industry is ripe with opportunity. However, discussions often position this growth in future terms. Well, that future is now.
The cannabis industry has seen meteoric growth in recent years, spurred by the legalization of recreational use across the U.S. Combined medical and recreational cannabis sales could reach $33 billion in the U.S. by the end of 2022 — and global sales are projected to reach $55 billion by 2026.
With legal cannabis products poised to become the largest-growing new CPG segment in the U.S., companies are seizing this opportunity with the launch of exciting new brands and retail concepts. And cannabis has the opportunity to grab market share in multiple expansive CPG categories, including alcohol, medicine and wellness.
“When you think about existing consumer product categories and you think about the potential of what cannabis is going to be, it is incredibly significant,” says marketing veteran Cory Rothschild, now national retail president of cannabis and medical marijuana company Cresco Labs, which operates its own retail banner, Sunnyside. “And those use occasions are not just in a narrow percentage of adults’ lives. You are talking about 21- to 81-year-olds who have very different needs — a huge percentage of the U.S. adult population with parts of their lives that cannabis can make better.”
The strategy for bringing this coveted CPG category to market may not be as different as you think. Branding, marketing and customer strategy, e-commerce, brick-and-mortar retail and the overall customer experience can leverage lessons learned in traditional categories. However, legacy stigma and complex regulations that vary from state to state and across international lines make this exciting category also a very tricky one.
Branded for Normalcy
Due to the reach of cannabis across categories and the number of people it can impact, the drug is on the path to normalcy. “Something used by that many people will be, by definition, normal,” says Rothschild. “It literally has to be normal because so many people will be using it in so many different parts of their lives.”
This sets the stage for powerful branding opportunities. “It means that the brands that exist in these categories will be some of the largest brands in the world,” says Rothschild. “Because it is in an industry that needs education, because it is so new and growing up so fast, and because there is legacy stigma based on the way it has been regulated in the past, brands are very important to help people understand the category, trust the category, set expectations and deliver on them.”
Jason Vegotsky, CEO of Petalfast, a first-of-its-kind, route-through-market platform for the cannabis industry, believes heightened competition in cannabis markets across the U.S. is forcing companies to implement new branding strategies. “It’s a new era in the industry where brands need to race to the bottom on price or back up more high-priced products with quality,” he says. “In this competitive landscape, brands must figure out how to connect on a deeper level with the consumer, which is why more companies are opting to invest strategically in brand building.”
The 2021 BDSA and IRI industry report “What’s Next for Cannabis as a Consumer Packaged Good?” found that: “Brand alone doesn’t seem to matter at the surface, but a good experience, trusted recommendations and brand familiarity does.”
Rothschild believes the industry will see the emergence of big brands. “Not unlike other categories, there will be scaled brands and retailers that drive a consistent experience that you know and can expect. Those will have the lion’s share of the category,” he says.
Vegotsky predicts that the brands that can successfully scale through multi-state expansion will be in the best position for long-term growth, especially brands that have broken through in the competitive California market and expanded east. Vegotsky highlights Wyld, Stiiizy, Wonderbrett, Lowell, Cann and Kiva as cannabis brands to watch.
Through education and raising awareness, brands will introduce consumers to cannabis products that can help with health concerns and support social aspects of their daily lives. From options to address issues such as insomnia, muscle soreness or anxiety to beverages that can be offered at a backyard BBQ, this is the path to normalcy.
In fact, the cannabis beverage category has been gaining a good deal of market traction. Beverage brands are highlighting the benefits of this alternative and speaking directly to consumer hot buttons — plant-based, low- or no-calorie, same session quality and less likely to induce a hangover.
“If the basic deliverable of alcohol can be done with cannabis, you are starting to think about a structurally better value proposition than one of the largest categories in the U.S.,” says Rothschild.
Marketing & Customer Strategy
When building brands and customer bases from scratch, there are endless opportunities for innovation. While cannabis regulations can pose numerous challenges, these restrictions raise the bar for innovation and push teams to create breakthrough ads, inventive packaging and clever social posts. Education across marketing channels plays a key role in customer strategy and efforts to achieve normalcy.
Rachel Soulsby, senior director of marketing at Agrify, a provider of advanced cultivation and extraction solutions for the cannabis industry, believes that as the sector matures through the end of the year and into 2023, marketing tactics will mature alongside the space. She emphasizes the importance of providing free education and doubling down on consumer base values, from a heightened focus on video assets and staying in tune with changing social media algorithms to live and virtual events.
Soulsby also recommends leveraging wellness propositions. “The wellness sector is booming, just like cannabis is,” she says. “Find alignment with brands and influencers in the wellness space that want to link arms.”
Connecting with Products
The pandemic helped the industry stretch boundaries in many ways, especially advancing technologically via robust e-commerce and POS systems. This means cannabis brands are now gathering consumer data like other categories and leveraging that information to better connect with their customers through target marketing.
Similar to traditional CPG, one of the first places a consumer interacts with a product is on the shelf, so product packaging plays a significant role in brand recognition.
Cannabis consumers also are much more likely to shop by ingredient, in terms of strains, terpenes or percentage of THC, Rothschild notes. But he hopes branding efforts can help change that. “Most people don’t walk down the chip aisle and shop ingredients; they are picking favorite brands and flavors and the quality for the type of event,” he says. “That’s what brands do for us in all parts of our life. That’s what we need in cannabis, and packaging plays a significant role.”
Rothschild also emphasizes the need to find more sustainable packaging options. “It is required by law to have all the layers of packaging, so it is on us to find ways to make sustainable solutions, so cannabis doesn’t become one of the most polluting industries,” he says.
Unlike other CPG categories, a major cannabis retail challenge is that most consumers can’t see the product until after purchasing it. This is another area where Rothschild hopes to see a change in the future. “These regulations for control and safety are understandable when you are starting a new industry,” he says. “So, how can we do that responsibly? I think a lot about that because it would change the experience for millions of people who come through our doors and help them find a product that is a better fit for them.”
Depending on local regulations, retailers are exploring options such as products under lockable enclosed glass or employee-driven interactions. Retailers are also leveraging digital platforms and incorporating sounds and scents in the retail environment to give customers the best sensory experience currently possible.
The Evolving Dispensary Experience
Brands continue to raise the bar on the dispensary experience, exploring multisensory strategies, nostalgic references, unique collaborations, com-munity connections and event planning that positions them at the heart of culture. The in-store experience plays an important role in transforming consumer perceptions of cannabis. This is a way to normalize cannabis shopping, reinforce brand relationships with savvy customers, and connect with and educate new or potential customers.
As competition increases and product offerings become similar over time, the dispensary experience will become a true differentiator.
The COVID-19 pandemic forced dispensary owners to fine-tune design and systems, and to leverage technology for maximum shopping efficiency. With more efficiencies in place, retailers are using the technology to constantly analyze the dispensary experience to make sure they are elevating the customer journey for different types of shoppers as well as different customer journeys.
Just like Sephora, Total Wine or the local hardware store, dispensaries need to support the in-and-out, express trip, the browsing experience to gain familiarity or a longer, consultative purchasing process. “We have to find a way to address the different customer needs if we are going to be a scalable retailer that everyone knows about,” says Rothschild. “We have to win on the experience we deliver.”
Brands and retailers are advocating and pushing boundaries to continue to enhance the customer journey and be at the center of culture.
With products in hand, customers are limited to certain places for consumption. This is what’s next in the cannabis customer journey. Industry innovators are exploring this opportunity in states and locations where they can. This includes the emergence of cannabis lounges, the integration of visible grow facilities within dispensaries, concert experiences and the evolving topic of canna-tourism.
If there are brewery and winery tours and wine country destinations, why not the same for cannabis?
Cannabis Retail Spotlight
Here are a few examples of brands bringing unique designs, features and events to round out the customer experiences in the markets they serve:
Thrive, the largest independent cannabis retailer in Nevada, currently has eight locations across the state. Each store prioritizes efficiency and security within a sleek minimalist design, and a few unique features depending on the location. The Southern Highlands location highlights an innovative, automated conveyor belt that delivers orders to customers, while the North Vegas location offers a drive-thru. The recently opened flagship off the Vegas Strip will also open a consumption lounge in the near future.
When it comes to immersive shopping experiences Jushi Holdings Inc., a vertically integrated, multi-state cannabis operator, is committed to raising retail expectations. Their reinvented motto “Beyond Hello” is focused on retail experiences that engage all the senses and establish a place at the heart of culture. These sensory experiences are aimed to create a “retail scene” that mixes art, performance and curated, designed products. The company is engaging consumers with a variety of experiences. Tasteology/Astrology comprises pop-up events for the Tasteology brand — real fruit, cannabis-infused gummies and chewable tablets. To play on the tarot-card theme of the brand, Jushi offered tarot card readings in its Massachusetts dispensaries.
The Artist Tree evolved its brand with the community aspect front and center. Each store (currently six locations) is also an art gallery that showcases revolving exhibits from local artists. Aside from hosting art shows, contributions are made to arts organizations and art supplies are gathered for donations. There are in-store presentations by artists and participation in arts-related events. The Artist Tree in West Hollywood, California, features a cannabis lounge adjacent to its retail location.
Superette (French for mini supermarket) launched in 2019 and has received multiple awards for its brand identity and store design. The brand banks on the familiar and making a relevant connection to normal daily life experiences. The nostalgic shop designs recreate memorable diner, deli, bodega, flower shop, candy store and subway newsstand experiences. They are hyperlocal-focused with each new immersive shop experience adapted to its surrounding neighborhood. The most recent, The Annex, is a 500-square-foot, Italian-deli-inspired store immersed in a student-centric neighborhood in Toronto. In 2021, Superette opened Sip ‘N’ Smoke (pictured), a first-of-its-kind “express” cannabis retail concept located in Toronto’s Trinity-Bellwoods Park. The 690-square-foot kiosk serves only pre-rolls and infused beverages that are meant to be enjoyed at the park. The walk-up location and cafeteria-style shopping experience push the retail boundaries.
Sunnyside is the first national retail brand of multi-state operator Cresco Labs. There are currently 53 Sunnyside dispensary locations with plans to expand to 150 locations by the end of 2023. This expansion will bring their retail experience to 17 states and make it the most expansive cannabis retail footprint. Focused on building an optimal and efficient experience in the midst of the pandemic, the company is now leveraging the bright, welcoming atmosphere and passionate staff to enhance interactions and education. The clean, fresh design is increasingly enhanced with digital screens and projections, QR code educational touchpoints, and music to create a full-sensory experience and inviting culture for staff and customers.
Wyllow’s 500-square-foot Los Angeles dispensary captivates customers’ senses while a dedicated Atelier guides their shopping journey — a truly immersive cannabis experience designed by Space Objekt. The storefront is clad with cone-shaped mirrors and provides a perfect selfie moment. The design takes inspiration from Wyllow product packaging, incorporates sustainable materials derived from hemp and makes architectural nods to the neoclassical era. Multicolored lights, backlit product displays and four appointed guest seats create a lush, jewel-box setting. Customers are further delighted with an interactive terpene-based scent installation as well as curated soundscapes (by sound artist Intriguant) that layer sounds of nature with spoken word and details such as the rolling of paper.
