Cannabis’ New Story is a Lesson in Defining New Markets
By Lindsay Cottman
The cannabis industry is growing like a weed. Recreational marijuana’s progress along the path of state-by-state legalization is doing more than shattering a decades-old taboo: it’s creating a market worth more than $6.6 billion in 2017, with a potential of $55 billion. It’s no surprise entrepreneurs are flocking to the market by opening dispensaries, investing in farm operations, and selling all manner of marijuana paraphernalia, from vape pens to edibles to clothing and accessories.
The challenge marijuana faces in going mainstream is almost without precedent. While 65 percent of voters think that marijuana should be legalized for recreational use, there are still big segments of the population skeptical of weed — and decades of stigma supporting their perception. Not since the end of Prohibition has a product gone so quickly from illicit to (economically) irresistible.
Cannabis was first introduced into American culture shortly after the Mexican Revolution, and the psychoactive plant was largely decried as “the devil’s harvest,” “an assassin of youth,” and “a deadly scourge.” Although attitudes towards cannabis loosened ever so slightly, the herb became increasingly associated with artists and counter-culture types during the latter part of the twentieth century. While 30 states have legalized marijuana in some form (nine recreationally), adjusting the entire perception of marijuana use will be essential to reaching the market’s potential.
Of course, where there’s potential, there’s capital. Venture capitalists, entrepreneurs, and visionary enthusiasts have decided to take advantage of the opportunities available in this burgeoning marketplace. Since legal weed’s early beginnings in California, the marijuana business has benefitted from new state markets and a technology boom that’s displaced the sketchy, neighborhood weed dealer with the convenience of GrubHub.
All of this leaves the industry at an inflection point: a core group of early adopters have embraced marijuana long before it was legal, and continue to be its strongest advocates in pushing forward legalization. Achieving the potential of the market means not only keeping pace with new laws and new innovations, but determining how to authentically connect with new audiences as marijuana goes mainstream.
Moving Beyond The First Toke
Making a market, or disrupting an existing one, is a radical event. Consider the example of meal kit delivery service Blue Apron. The company sought to disrupt grocery chains and restaurants alike — and succeeded. Blue Apron was a massive hit when it came to market, growing its revenue from $77.8 million to $795 million in just two years. As the first of its kind, Blue Apron ushered in an era of innovation that upended the food industry and the way people cook.
Successful disruption breeds something else: imitators. In 2012, Blue Apron was only competing against German-based HelloFresh for U.S. customers’ business; the wide-open market meant fast growth, and made differentiation simple. Turn the calendar to 2018, and there are dozens of meal kit companies vying for consumer’s attention, including niche players that cater to everything from plant-based fare and gluten-free options to Keto and Paleo meals for fad dieters.
Cannabis is on the cusp of that same imitators phase. Although the number of dispensaries has multiplied in recent years, the weed industry remains fairly niche: it’s only reached about 11 percent of its potential. Early adopters are still driving the cannabis space’s growth, and they tend to be customers who were already buying the product before it was legal to purchase. Today’s cannabis entrepreneurs are the pioneers in their spaces, which means they’re still enjoying little to no competition, serving a passionate market, and are able to ride the wave of legalization to growth.
The space is going to become more competitive — quickly. A market that’s larger than video games will have significant entrants, and as competition heats up, leaning into the old tropes of Rastafarian flags, patchouli, and tie dye won’t draw in the mass market. Innovators in the cannabis industry must begin speaking to a broader audience now, while also fighting against traditionally negative perceptions of the product and those who use it. Like many innovators in new markets, though, many cannabis entrepreneurs don’t know how to reach new audiences and differentiate themselves from the growing pool of competitors.
A Budding Breakthrough
The West Coast, as well as states like Nevada and Colorado, are riddled with high-end cannabis shops. Take Barbary Coast, for example, one of San Francisco’s first and finest recreational cannabis dispensaries, which offers “swank décor and a heady menu.” Decked out with rich brown leather booths, a luxurious hardwood bar, and vintage velvet couches, this location has ambiance for days. Ajoya in Louiseville, Colorado is another fine example of stylized design; with its sleek white furniture and futuristic lighting, the shop looks like something out of the space age. Los Angeles-based company The Green Easy brings a touch of class to its space with marble floors, clean glass countertops, and top-of-the-line crystal chandeliers that dangle from the ceiling.
While each of these businesses employs distinct design elements to communicate their brand personality, the overall objective is the same: to draw in new customers and provide a unique experience.
Dispensaries leverage this approach by making the purchase experience palatable, particularly for new users, but they’re not the only ones rebranding the stoner stereotype. The market for high-tech smoking devices is exploding, with brands like Pax and Firefly leading the charge. The newest wave of options are equipped with every feature from advanced convection heating to Bluetooth and accompanying smartphone apps. Increasingly user-friendly vaporizer technology is transforming how cannabis is consumed, appealing to techies and the gadget-obsessed. Even Pax’s package design evokes a familiar feeling: “As you unwrap its concise white packaging, you’ll feel like you’re opening up a new iPhone.” Shepherding these products into the mainstream by co-opting a recognizable aesthetic is just one small example of how cannabis brands are molding public perceptions.
Appealing to new customers is crucial for the industry to succeed long-term. Although more than half of American adults have tried marijuana, only 22 percent of adults smoked weed at least once in the past year, with an even smaller percentage of the population smoking on a regular basis. For a true cultural shift to happen, and for the industry to reach its full potential, new users need to enter the fold.
All for Culture, and Culture for All
Successful cannabis vendors understand that in order to achieve sustained growth, they need to keep the authentic nature of weed culture intact, while evolving it to be accessible.
Many boutiques offer extensive menus, and much like the wine list at a five-star restaurant, these menus are often several pages long. Seasoned veterans might know the difference between indica and sativa, but less experienced users will likely struggle to navigate such an expansive array of products and strains. Knowledgeable budtenders are on staff at all reputable dispensaries to provide guests with insights and tips on what they might want to try, easing the burden of choice for the unfamiliar smoker. Empowering customers with information is the first step in democratizing cannabis for all users.
Businesses that can market to the long-time marijuana smoker, convincing them that their brand is better than others, while simultaneously encouraging curious nonusers to try their product first will come out on top. Pot companies that will be the most successful know that widespread adoption is necessary, and the simpler they can make the purchase and use of marijuana, the better it will be for their bottom line.
Seeing Differentiation Through the Haze
Persuading the mass market to embrace recreational marijuana usage (both personally and culturally), and making it comfortable and accessible for them to enter the market, is only half the battle. The diversity of options available through legalization means cannabis entrepreneurs face another challenge that all business leaders, regardless of industry, know well: differentiation. From devices to dispensaries, brands will need to create a genuine connection to their customer if they want to stick around for the long haul.
Like the spirits industry, cannabis companies are fundamentally lifestyle brands. Those that want to be successful can look to their alcoholic brethren for an established blueprint on how to achieve success.
Bluecoat American Dry Gin, was, America’s most established gin brand. Their inception pre-dated the explosion of the craft spirits market, but as they continued to sell based on their unique tasting notes and unparalleled quality, they lost market share: very few drinkers select spirit brands based on taste. As part of an effort to recapture their lead in the market, Bluecoat aggressively pivoted away from selling the features and benefits of their gin, and embraced the lifestyle of the discerning drinker who wants Bluecoat in their glass.
The “benefit” of gin consumption, like cannabis, is difficult to differentiate between brands. In Bluecoat’s case, an authentic story that placed the drinker at its center, and celebrated their quirky, independent spirit paid dividends — cannabis brands can see this both as an example of how easy it is to lose the market lead, and how the authenticity of story is key to staying ahead.
Several cannabis vendors are rethinking how they connect with customers. Denver-based company Verde Natural, for example, is captivating audiences with lifestyle-oriented branding. Ads depict young people hiking and mingling with friends around campfires, driving home the authentic, down-to-earth vibe Verde Natural seeks to evoke.
Brands — especially those establishing a beachhead in a nascent industry — need to first craft their story; their immortal message that anchors all that they do, before they can begin to build upon that solid foundation. More ganjapreneurs would do well to incorporate their personality into and beyond their product lines. Experimentation with different strains can only sustain the market for so long, before loyalty is established and shared purpose means more than anything else.
There’s still a great deal of uncertainty as to how exactly these marijuana entrepreneurs will adapt and differentiate their brands as the market grows and saturates. One thing is certain: as more mainstream users embrace marijuana, cannabis brands will be increasingly expected to deliver a unique experience rooted in an authentic purpose. What’s essential is they start now.
Lindsay Cottman is an associate at Woden. Whatever your storytelling needs may be, Woden can help. Read our extensive guide on how to craft your organization’s narrative, or send us an email at email@example.com to discuss how we can help tell your story