How the Cannabis Industry Is Embracing the CPG Model
The legal cannabis industry has rapidly developed, but it is still a business in its nascent stages. Federal illegality and volatile capital markets create a challenging environment subject to frequent winds of change. Yet, operators are finding ways to compete, thrive and drive the industry forward. The cannabis business may still be very green, but the players responsible for pushing it forward are finding ways to adopt the strategies and business models that have been proven in more established consumer packaged goods industries.
What do the CPG and the much-discussed “Cannabis 2.0” models look like for multi-state operators and cannabis brands today, and what comes next?
Cannabis 1.0
Looking to the past paints a picture of just how far the cannabis industry has come. Cannabis 1.0 existed largely before widespread legalization. Quality control and measurable potency, let alone different form factors, were of little to no consequence. The focus was mainly on access with differentiation in products mostly lumped into two groups: indica or sativa flower.
As state legalization, both medical and adult-use, moved forward in more states, access was no longer the main concern. Regulations set the bar for quality and a suddenly much larger consumer base, some of whom had never used cannabis, meant companies needed to know more about their products, educate their customers, learn what those customers actually want and provide it. Legalization sowed the initial seeds of Cannabis 2.0.
Cannabis 2.0
The term “Cannabis 2.0” is often applied to different form factors. For example, edibles and beverages are classified as 2.0 products. But this more mature stage of the industry is about more than just different types of products. “It’s all about the brand and the flavor and the form factor. It’s less about the substance itself,” says Nick Kovacevich, CEO of Greenlane Holdings.
For cannabis companies, both brands and MSOs, the product itself remains foundational, but branding has become paramount as well. With so many different products available, companies need branding to create differentiation and consumer connection. “What we’re seeing now more than ever in the industry is a focus on consumer insights in the product development and brand-building process,” says Adam Grablick, COO of Kiva Confections.
Cannabis brands are looking for ways to stand out, creating the foundation for what they hope to be will a lasting place in the evolving industry. “What puts a brand at the forefront of cannabis is the people—the community they serve, the team they build and the people who execute the brand vision. Those elements create a brand that can stand the test of time,” says Tori Cole, VP of Marketing at Cookies.
The people of Cannabis 2.0 are increasingly sophisticated, both in the professional and consumer spheres. The booming industry is luring people from more established industries – finance, agriculture, retail, CPG and more – with the promise of using polished skills to build something new.