CFN Insider: Big Brands in Cannabis


Ryan Allway

January 22nd, 2018

Policy, Top News


Participants:

Alexander Lawson
Jeffrey Britz
Joe Hodas
Dooma Wendschuh
Announcer

Alexander Lawson:

What’s in a name? For an increasing number of cannabis companies, the name of the game is branding.

Jeffrey Britz:

Brand recognition is everything. Unless people are having porn delivered to their house, they don’t want it to come in a brown paper bag.

Joe Hodas:

This is not happened for free or with one or two people. It requires a heavy lift across the organization as well as financially.

Dooma Wendschuh:

All too often, I see the cannabis industry as an industry that’s putting the cart before the horse. You see a lot of products that have really snazzy packaging, but it doesn’t really hang together. You’re not sure what it stands for.

Alexander Lawson:

Coming up, we talk with three cannabis branding gurus on what it takes to get your product off the shelf and keep your customers coming back. Hold on. You’re about the get on the inside of the worldwide cannabis industry. This is CFN Insider.

Announcer:

You’re listening to CFN Insider, your inside access to the business and financial world of marijuana. Whether you’re new to the cannabis industry or a savvy investor, or a business leader, CFN Insider uncovers the industry’s most current and critical insights, the very information you need to succeed. In each episode, you’ll hear straight up from top insiders and thought leaders in the cannabis industry, brought to you by CFN Media, the leading digital media network dedicated to the world of cannabis business and finance since 2013. Visit us at cannabisfn.com. Now, here’s your host, Alexander Lawson.

Alexander Lawson:

From the start, a lot of companies in all phases of cannabis production, distribution, and retail have faced serious challenges in getting themselves recognized. In many of the states where cannabis is permitted, there are heavy restrictions on advertising. In some places, there are very strict guidelines on packaging. Consider this episode Cannabis Branding 101.

Jeffrey Britz:

There’s a reason that Coca-Cola spends all that money, and that IBM spends all that money, and Mercedes spends all that money. Brand recognition is everything.

Alexander Lawson:

Jeffrey Britz is CEO of Cannabrands. That’s a company that trades on the Canadian stock exchange under the symbol JUJU. Britz has signed up Julian Marley, son of reggae legend Bob Marley as the face of JUJU Royal Ultra Premium cannabis. He says that, given the challenges distinguishing your product from another in this business…

Jeffrey Britz:

It ain’t easy. I think that’s why people are trying celebrity brands, because there’s a connection there. There’s something they know. We planned to open Julian Marley’s stores, and if you were walking down the street and saw ABC Cannabis and CBD Cannabis and XYZ Cannabis, and then saw Julian Marley Cannabis, where would you shop?

Alexander Lawson:

That goes for consumers, he says, and for the companies that are beginning to buy into the cannabis industry by scooping up or merging or partnering with companies that have already established footholds.

Jeffrey Britz:

You’re going to find that as it becomes legal to transport the product interstate, the competition is going to be horrendous. It already is very difficult in Washington and Colorado. Prices are way down. They’re going to come down here. It’s going to be tougher and tougher to make money without a brand. Brands are going to be a necessary component of a successful company. Some of the major growers, that’s obviously Constellation’s thought for buying into Canopy.

Alexander Lawson:

Constellation is, of course, a giant of the alcoholic beverage industry. As you first heard on CFN Insider late in 2017, Constellation is paying about $191 million for a stake of less than 10% of Canopy Growth Corporation. That’s a medical marijuana company in Canada traded on the Toronto Stock exchange under the symbol WEED. It’s a long-term play, because as Canada legalizes marijuana in 2018, infused beverages won’t be the on menu at first, and that very strategy is what Britz is aiming at.

Jeffrey Britz:

I entered this business for one reason, to in five or 10 years from now, sell out for a major, major price. When I saw an opportunity to get my hands on the Marley that looked and sounded the most like Bob, I was all over this.

Alexander Lawson:

That’s CFN Insider tip number one. If you have the wherewithal, consider buying the brand that best suits you by investing in a celebrity name. In this case, a name like Julian Juju Marley. Now, Marley is a name rather synonymous with cannabis in its smokable form, but what about cannabis in other forms? Here, celebrity power may not get people to try your product. What about packaging?

Joe Hodas:

That became really one of the early hallmarks of Dixie as a brand. We knew that there were going to be a lot of consumers coming into the market that had never previously either tried edibles, or certainly were not familiar with Dixie.

Alexander Lawson:

That’s Joe Hodas. He started out in the cannabis business as the chief marketing officer at Dixie Elixirs. That’s a Colorado-based maker of edible products.

Joe Hodas:

The first contract with the consumer, as I call it, really was the packaging, so that when people saw it on the shelf, if they felt like it was a quality, if they saw a quality brand expressed, that would give them a level of confidence that perhaps the other parts and pieces, the ingredients, the consistency, the testing and everything else behind that brand more equally of value.

Alexander Lawson:

Dixie Elixirs makes a variety of products that include drinks and candies and drops and topicals. Early on in his experience at Dixie Elixirs, Hodas made an important discovery.

Joe Hodas:

What I didn’t know was just how much regulation was going to be a driver of innovation in our industry. It’s something I’m fond of saying, that regulation drives innovation, but really and truly, that’s the case. In the last four years now, we have changed our packaging and/or had rules significant enough to require changes to our business model over four times. That’s just in Colorado alone, and every market that we go into has their own set of state rules that require changes, and the adaption to regulation on a regular basis. That really is a big part of the job.

Alexander Lawson:

For example.

Joe Hodas:

When we first entered the Nevada market, we felt that we had packaging that was going to be compliant with their rules and regulations. What we didn’t realize is that, despite the fact that we thought we were doing the consumer a good service by adding the target dosage on the packaging itself; in other words, if we have a 100-milligram elixir, even though Colorado requires the test results to say specifically the amount of THC, so it could be 100.5 or 98.6 milligrams of THC, we still have that target dosage, because those labels, the test results and all the additional compliance stickers that the dispensaries and the manufacturers put on the packaging sometimes comes off. It was good to have a target dosage on there. The state of Nevada said, you only have the exact amount of the THC in the package. All of our packaging slowly became non-compliant, because we had a target dosage on there.

We had to change all that packaging to meet their regulation. Of course, six months later, once they implemented their own fully legalized version of regulation in the Nevada market, they actually changed that rule. Our old packaging would have worked. It became a moot point, but in the meantime, we had two different types of packaging. Then, when we entered Maryland, which just happened this week, in fact, we’re very excited to be there, but they are a much more medically-oriented, pharmaceutically-focused state as it relates to the regulations. All of our packaging had to change once again for that market. Everything from changing the names of some products. For example, instead of them being called mints, we call them tablets in Maryland. As well as taking off all the color from the packaging, so they’re pretty monotone as far as the color schemes.

Alexander Lawson:

That’s got to be tough on the marketing department.

Joe Hodas:

Yes, it does. It drives them to distraction. It drives them to pulling them hair out. It also makes it really challenging to create a consistent and unified brand across all the markets that you’re in.

Alexander Lawson:

That brings us to CFN Insider tip number two. Realize that your packaging is your first real contract with the customer, but also realize that you may have to change the packaging, depending on the state you’re operating in. With the various regulations, different in just about every state, how do you maintain a brand like Dixie Elixirs?

Joe Hodas:

The ability to maintain a brand lies in a few things. One is the actual products themselves. While packaging is critical, we also have to make sure that our manufacturing partners in each market are meeting the standards that we have for those products before they reach the consumer or the patient. Assuming that that is all in place, and by the way, we’re doing audits on a regular basis, and we’re ensuring that they’re purchasing key ingredients and packaging directly through us, so we can ensure that the quality is there, then we know that that consumer or that patient is going to have a good experience with the Dixie product. That’s a big part of the brand promise, is making sure that they have a good experience. Secondarily, we also really try to leverage PR as a channel.

PR has probably been our most cost-effective and best channel for communicating brand outside of advertising and packaging, because the advertising is limited in markets, and also will vary, depending upon what those markets allow. We can’t always necessarily have the same message. A good example would be, we created some great videos for our elixirs here in Colorado that we were able to share on social media and some other platforms, but it was a very consumer-oriented approach to that particular product. Maryland, as I was mentioning earlier, has a very medically-focused market. They, too, sell a Dixie elixir. However, that type of an approach, that very consumer-oriented approach, wouldn’t really work in that market. We really use PR to try and express thought leadership, to engage business leaders as well as customers and patients in a way that none of those other platforms allows us to.

Alexander Lawson:

But Hodas says, while PR is a valuable and highly cost-effective tool when it comes to getting your brand out there, you have to realize one thing.

Joe Hodas:

What has to be understood is that, with public relations, you don’t control the message always. The difference between advertising and PR is a basic of marketing is that, in advertising, you pay to control your message. In PR, you don’t, but it has a little bit more validity. It’s really creating opportunities to express thought leadership, and it has to do with speaking engagements, government relations. Then, local media as well as national media, and finding those stories and those angles that allow us to talk about the things that we want to talk about, whether it’s compliance, whether it’s testing. We just worked with Kitchen Toke magazine, a new publication.

By the way, there’s new media platforms in the cannabis industry almost every week. They’re very food-oriented and focused. It gave us an opportunity to really brag on our kitchen and all of the production aspects of our company, and how that leads to quality. Those are the types of opportunities that allow us to convey messages that I think work across all markets, but you just have to know that you don’t always get to control that message, and sometimes there are opportunities that either don’t work out and/or sometimes the message isn’t exactly what you intended to come across.

Alexander Lawson:

Right there, you have CFN Insider tip number three. Realize that public relations can do a lot of the heavy lifting you need for your brand, but also realize that in this lane, you can’t always control the way your message is played. As you can consider branding to include name and logo, consider the long run. That’s the message from Dooma Wendschuh, leader of the Province Brand of cannabis beverages. Wendschuh suggests you brand is really the soul of your corporation.

Dooma Wendschuh:

We started this company with a chief marketing officers as one of the founders, someone who has extensive experience marketing luxury adult beverages. Very shortly afterwards, the first person we brought on was an art director and a product designer. I’m not saying that marketing necessarily should be done in-house. Marketing is perfectly suitable to outsource to advertising agencies and marketing firms, etc., but your brand, no one can create your brand besides you. When I look at branding agencies, I don’t think of them as terrible organizations, but I think of them as organizations for a certain type of entrepreneur. The entrepreneur who’s maybe a little checked out, who wants a quick paycheck, who maybe has an okay product. Maybe he’s focused on product, but just doesn’t understand how to sell it. If you want to build a world-class business and you want to build a world-class brand, you need to have that capability to develop the logo, the image, the mythos, the brand viables, everything that every product you’re ever going to sell stands for in-house.

Alexander Lawson:

Wendschuh says branding is more than a name or a pretty package. He says your brand can be the best weapon you have in your corporate arsenal, especially in the cannabis business.

Dooma Wendschuh:

In Canada, we have similar limitations on advertising. You know what that does? It makes a level playing field. Our company has a valuation now of $15 million. We are on the same playing field with a company like Canopy Growth, that has a valuation of about $4 billion. We’re both marijuana companies, and we’re both subject to the same restrictions that prevent us from being able to advertise. Even though they have a $4 billion valuation, they can’t necessarily outspend us. We could theoretically outthink them, and not picking on Canopy, but it’s true for all the big cannabis companies here in Canada. The fact that you have a lot of money in any other industry would mean you’re definitely going to win, because you can buy more ads. You can get more eyeballs. You can put your product’s name in front of more people, and they will buy it.

In Canada, there’s this equalizer, which sounds like there is in many of the U.S. states as well. There’s this equalizer, which is the law. The law says we can’t advertise these things. How else are you going to get the product out there? It’s earned media. It’s about that story. It’s about creating a story so compelling that journalists have to cover it, and they want to cover it. Not that you’d pay them to cover it, but they really want to cover it, because it’s an exciting story. At Province, our entire business is built on a crazy story. A story that doesn’t make sense. That juxtaposition of a story that shouldn’t make sense and it shouldn’t be possible is very attractive to the media. We are brewing the world’s first beer brewed from cannabis. If you know anything about beer, you know it’s brewed from barley, because barley has carbohydrates, these grains.

The grains can ferment and turn into sugars, and the sugars can eventually ferment and turn into alcohol. If you know anything about cannabis, you know it doesn’t have any carbohydrates. Right there, you’ve got something that perplexes the journalists and media. How did you do this? Every interview can start off with them saying, how did you do this? It doesn’t matter what type of a business you’re building, but if you can create a story like that, a story that people want to know how you make it, they want to know how did you achieve this thing that seems so difficult. They want to know something about your product. It will get you airplay, and airplay is not just the news, necessarily, in this era of influencers and bloggers. It’s everyone on the Internet, and it’s also word of mouth.

Alexander Lawson:

To that end, he says the story of your brand must be cohesive, with a real beginning, middle, and end, and this important, the story of your brand must also be true.

Dooma Wendschuh:

Absolutely, because we’re programmed to spot falsehoods. We’re programmed to identify with authenticity. The best brands in the world are the ones who have historically been the most authentic. Authentic doesn’t mean folksy. It has a connotation these days that authentic is synonymous with craft or artisanal. That’s not necessarily true. A brand like Walmart is very authentic. It stands for low prices. It stands for low prices so much that sometimes it underpays its workers, and that’s what you’d expect it to do. That is authentic.

Alexander Lawson:

Finally, Wendschuh says now is the time for your cannabis enterprise to develop and tell its story.

Dooma Wendschuh:

This is an industry where anything is possible. We are pioneers. We’re cowboys. Everyone likes to compare the cannabis industry to the Wild West, but I think what everyone forgets is that if you were actually in the Wild West, it wasn’t that great. You had con men and grifters and gunslingers and bands of criminals roving through. Most folks you’d meet would just as likely shoot you as speak to you. I think there are a lot of dangers, a lot of pitfalls being in an environment where you can chart your own destiny, but that is precisely the environment we’re all in, in this industry. We have the opportunity to do what eventually happened with the Wild West, which was it created tremendous economic growth, and it really built the United States.

We have this opportunity. I think the cannabis companies out there, a lot of them are looking at other industries and benchmarking and seeing what others have done, and trying to emulate it. Oftentimes, trying to emulate it without adapting and modifying it for our particular and unique industry. Oftentimes, taking practices that have worked well in other industries were the products were better developed, and trying to apply those to less-developed, less mature products in our space. It’s early days, but I think there is room for folks who are going to be thoughtful about what makes this a unique industry.

Alexander Lawson:

Which brings us to our final CFN Insider tip on branding. Tell your story. Find your place in the unfolding history of the worldwide cannabis industry. Be honest and true to your own origins. Of course, create a high-quality, unique product, because as Dooma says…

Dooma Wendschuh:

If the product’s not great, you never want to try it again. You’re going to sell exactly one to that person, and that’s not how you build a business. Similarly, that name has to be supported with the world, with the brand, with something that means something.

Alexander Lawson:

With that, you have the inside scoop on the worldwide cannabis industry. Business support for CFN Insider comes from Frank Lane at CFN Media and John Carn at Human Factor Productions. Our music is composed by Britton Hayes. If you’d like more information on this program, if you have a question or a suggestion, contact us. Our email address is info@humanfactorproductions.com. You’ll find us on Apple’s iTunes, on Google Play, and at cannabisfn.com. Please subscribe to CFN Insider and don’t forget to rate us. I’m Alexander Lawson. For all of us here, thanks for listening. We’ll be back soon with another addition of CFN Insider.

Ryan Allway

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.


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