The #1 thing for CBD startups to focus on is supply chain
April 21, 2021
As a digital marketing expert in the cannabis community, I see new brands launching all the time with a great product…. and no plan for how to sell it. With so many options available in the world of cannabis (including both THC and CBD products) brands must establish a strong distribution strategy in order to stand out from the competition and build long-term customer loyalty.
Unlike groceries and consumer packaged goods, cannabis is not yet seen as the “necessity” that we in the business know it to be. Where consumers will travel from shop to shop to find their preferred brand of nut milk, most cannabis customers are unwilling to do the same. The abundance of choice on dispensary shelves coupled with the disparate nature of the still-nascent retail landscape means that cannabis consumers are likely to purchase whatever product is available at the first store they visit.
For brands, this means that keeping your cannabis product in-stock on dispensary shelves is absolutely crucial for success.
Cannabis brands looking to grow should focus on in-person retail before investing in direct to consumer marketing
“A lot of our most loyal customers first bought our products in stores, before they checked us out on our website,” says co-founder and COO of Shea Brand, Marie Arlet. Her company’s line of CBD skincare products are sold in hundreds of stores across the U.S., including 300 Whole Foods outlets. “Now our direct to consumer channel is growing alongside our steady retail business,” says Arlet, “and we wouldn’t have been able to get to this point without those partners.”
Looking at cannabis companies online makes it seem as if digital marketing, slick ad campaigns, and pricey photography are driving sales for direct to consumer CBD brands--but that’s mostly a facade. The truth is that unless you have a big VC budget to rely on, cannabis startups limited to direct to consumer channels will struggle with initial growth. As Greentrepreneur puts it
“You can't have sales if you don't get your product out there. You have to own the shelf.”
If brands need further proof that getting their product on physical shelves is imperative for success, they should look at what’s happening in new recreational markets. In-person dispensaries that opened last year in Illinois and Michigan sold out in record time, showing that customers aren’t picky about what they pick up in-store. The cannabis manufacturing experts at Roshi have also named in-store representation and the ability to reliably keep your product stocked on shelves as two of the top five things that successful cannabis brands should be doing in 2021.
Why cannabis brands must have a consistent supply chain to succeed
In order to achieve a robust retail business, brands need to ensure that their product will actually stay in stock on dispensary shelves. Without a consistent supply chain and a reliable distribution model, those hard-won wholesale relationships won’t last.
When it comes to cannabis, the entire process from plant to product involves a lot more difficulty than your average supply chain. With commercial hemp farming only having been legal in the US since 2018, the options for where you can source your raw ingredients are still limited. Add onto this the multiple layers of federal, state, and county level regulations, and you have a big problem to solve.
“Number one on my priority list for launching HOLISTIK was to find a partner who could grow the best plants,” says founder and CEO of HOLISTIK Wellness, TJ Stouder. His CBD Wellness company is currently bringing in about 50% of its profits from retail, and 50% from online sales. “Discovering our incredible greenhouse partner was the thing that convinced me to take that final leap and start the business.”
Stouder considers himself lucky to have linked up with a biodynamic greenhouse grower who can harvest their hemp crop 4-5 times per year while ensuring a non-toxic and clean growing process all the way through. “This gives us quite a bit of capacity and a head start on the issue of keeping things in stock.”
An article for Supply Chain Dive explores the many difficulties that producers face in securing consistent quality cannabis. These include regulation, cultivation, and the need for a true manufacturing pipeline in what is still such a young and disparate industry. Proactive Worldwide also identifies confusing inter-state distribution laws and a lack of support in banking or seed-to-sale software as key factors impacting the cannabis supply chain today.
Ultimately, supply chain issues will always result in a hindrance of growth and roadblocks for your brand’s success. Stouder told us that “being able to produce with consistency over time, and especially being able to handle capacity, has been so important in helping us develop our retail business.” He pointed out that it’s ultimately the retailers you need to please, because “they’re the ones who are expected to deliver for the customer on safety, efficacy, and transparency.” Experts at CannaCon reiterate this point, saying that “retailers want to work with cannabis producers who are reliable and offer consistent products to their B2C cannabis shoppers.”
As new cannabis brands come on the scene and established businesses look to expand in a booming market, this is the most important thing to keep in mind. Cannabis companies must address supply chain hiccups, solve sourcing and manufacturing issues, and establish consistency in their products before investing in marketing and direct to consumer experiences. Reliability at the point of sale is absolutely crucial for cannabis brands that want to stand out against the competition and succeed in the long-run.
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