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How to Grow a New Cannabis Business Amid a Pandemic

By Hannah Deacon
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The COVID-19 crisis is plunging the global economy into recession, changing consumer behavior and the world of business. Cannabis businesses are no stranger to operating in a challenging landscape. The constantly evolving legal status, regulatory hurdles and social stigma has forced founders in this space to be nimble and more financially wise with their capital.

While the market has experienced a seismic shift that has already attracted investors to inject capital into the cannabis industry and seen neighboring industries, including tobacco, alcohol and pharma, come into the fray, COVID-19 will change key industry structures and operations. To succeed and cultivate value, cannabis companies must adapt to the new realities of the marketplace to be well positioned for continued growth after the pandemic subsides.

With social distancing guidelines suddenly forcing brick-and-mortar retailers to move their businesses and customer experiences online and disruptions to the supply chain due to international travel and business directions, some businesses will struggle to stay afloat.

As consumer behaviour and online shopping patterns adjust to a new way of living (affecting B2B sales, online ordering, deliveries and manufacturing), leadership and strategic thinking will be paramount.

By understanding where the challenges and opportunities lie, cannabis businesses can thrive. Here are some focus areas and tactics to consider:

  1. Targeted consumer segmentation through social media

When starting a cannabis business, it is key to understand who your core consumers are and what they want from their products. This has become even more acute because of the pandemic with consumers flocking to all sorts of health-focused products including CBD.

With everybody spending more time online, social media use is on the rise. Executing a social media plan to include influencer outreach can increase brand visibility, build a solid consumer base and create brand advocates.

Instagram is essential to a cannabis business building an online presence but it’s important that it doesn’t become a “hard sell, please buy me” channel. Plan and make Insta-worthy content that educates and entertains followers to increase engagement, click-through rates and leads. Brands may want to pair with an influencer on either a gifting or paid-for basis which will mean the brand appears in a potential customer’s feed as they interact with their favourite accounts.

PlugPlay, a California cannabis brand, stays relevant with creative posts like these.

The art is finding key influencers whose audience is one that you would like to interact with. This type of positioning will allow cannabis businesses to reach a new audience or group of people.

  1. Marketing and PR

In times like these, many companies choose to pull back on communication activities and expenditures for fear of spending too much for what they perceive as little return, however, marketing and PR, when executed well, can be the lifeline of any business.

With so much noise in the market about the “next best thing in cannabis”, effective marketing and PR can distinguish brands that are credible and offer a strong value proposition to those that are all smoke and mirrors.

The current needs of businesses and consumers are much different than they were just a few short months ago, so it’s important to understand these needs and spending habits while combatting negative perceptions of cannabis.

As cannabis companies are not able to advertise like mainstream companies, a strong public relations and marketing strategy will enable firms to communicate their identity, build trust, shift perceptions through media coverage, enhance reputations and reach customers, partners and investors.

  1. Cost cutting

Businesses in every sector are cutting costs to keep their businesses afloat. This needs to be done strategically and requires senior leadership teams to explore cost reduction strategies and streamline non-essential costs.

This may mean further consolidation of cannabis companies and supply chains to manage cash flow and maximise resources. Companies may even look to create strategic partnerships with complementary businesses in the industry or push some firms towards mergers and acquisitions.

Business models will evolve as cannabis companies identify inefficiencies and reconfigure their operations and messaging. This could range from assessing their R&D capabilities, agricultural assets, manufacturing chains or route to market.

  1. E-commerce capabilities
Pivoting to e-commerce is nothing new, but getting creative with product offerings and marketing initiatives will set you apart from the typical CBD retailer

The postponement of countless CBD Expos, trade shows and cannabis conferences are creating new demand and opportunities for businesses. To reach prospective wholesale clients, investors and connect to their customer base, firms are entering the digital marketplace. Digital events, Zoom investor pitch panels and email marketing and sampling is on the rise and expected to grow over the coming months.

CBD brands should work in parallel with their retail partners to influence product samples in digital offers and create a touchless transaction. Buying products online is going to become a permanently entrenched habit, even when restrictions are fully lifted so it’s worth looking at how technology can support and enhance sales while offering a smooth customer experience.

  1. Industry Relationships

Everyone in the cannabis industry will be affected by COVID-19 so maintaining positive relationships is vital in these tough times. Calling investors or partners to tell them what is going on with your business or checking in on others in your ecosystem means information can be shared to iron out any issues and help generate ideas to future proof the business. “A problem shared is a problem halved!”

COVID-19 is creating incredible business challenges. As we navigate the new normal, it’s important to adapt and grow. As more products come to market and brands/services develop distinguished offerings, expectations will change so cannabis businesses need to be ready for greener pastures.

Cannabis Industry Journal

Infused Products Virtual Conference Coming on March 31

By Cannabis Industry Journal Staff
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Cannabis Industry Journal

In the midst of a global pandemic with schools closing, businesses asking employees to work from home and events being canceled left and right, we have one event that will remain scheduled: The Infused Products Virtual Conference on March 31. The event is complimentary for attendees to register. Click here to sign up for this virtual conference.

On March 31, the event will begin with a presentation from the folks at Cresco Labs: Applying Food Science Principles to Cannabis Edibles. Marina Mincheva, Director of Manufacturing Quality Assurance and Stephanie Gorecki, Director of Food Sciences at Cresco Labs will deliver this talk. They will discuss what a research and development process looks like for creating cannabis-infused edible products, how to then commercialize those products and developing CPG products with input from marketing and quality.

Ellice Ogle, CEO & Founder of Tandem Food LLC, will deliver a talk on the importance of food safety culture in the cannabis space. Kathy Knutson, founder of Kathy Knutson Food Safety Consulting, will follow that talk with a discussion of GMPs, HACCP and how cannabis companies can apply preventive controls. The last presentation on the schedule is The New Canadian Edibles Market, where Steven Burton, Founder & CEO of Icicle Technologies, will discuss edibles regulations in Canada, a current state of affairs of the Canadian infused products market, as well as what US edibles companies can expect when it comes to new regulations.

To learn more about this virtual event, see the agenda and register to attend, visit the website here.

Marguerite Arnold

Canadian Regulatory Authorities Struggling To Define Rules

By Marguerite Arnold
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Marguerite Arnold

Now that Canada finally has a date for the recreational market start, the federal government, provinces and other regulatory authorities are beginning to issue guidelines and rules that are going to define the early days of the recreational industry.

These include regulations on retail trade, medical sales and use. However this is precisely where the confusion is growing.

The Government Will Continue To Run The Medical Cannabis System

In a move to protect patients, Health Canada has announced that it will continue to run the medical part of the market for at least the next five years. In good news for medical users, this announcement was made against calls from the Canadian Medical Association for the medical infrastructure developed on Canada’s path to recreational reform to be phased out. The reason, according to the CMA? Many doctors feel uncomfortable prescribing the drug because of a lack of research and a general lack of understanding about dosing.

Both patients and advocates have expressed support for continuing the medical system. This includes organizations like the Canadian Nurses Association who fear that if a focus is taken off of medical use, producers will ignore this part of the market to focus only on recreational sales.

In the future, after legalization, Health Canada will also continue to support more research and trials.

Provinces Are Setting Their Own Rules For Recreational Sales

Despite early statements, the recreational market is still in the throes of market creation and regulation. The laws are also changing in progress, a situation one regulator has described as building an airplane as it hurtles down the runway for take-off.

Athletes in Canada are still banned from using any kind of cannabis.For example, Ontario, the largest provincial market, is also delaying private sector sales in retail shops until next year. It is also moving away from a government-run dispensary model. Government sales will begin in October, but private dispensaries will have to wait until next April to open their doors (and existing operations will have to close their doors while they apply for licenses). This is also a reversal of the regional government’s position that it would only allow government-controlled shops to sell recreational cannabis.

But perhaps the largest unknown in both national and provincial policy outside of retail brick and mortars is in the area of online sales. A major fight is now brewing in many places where the established industry is now siding with the government about unregistered dispensaries (see Ontario) and established if not registered producers are competing directly with the government not only on main street but online as well.recreational users are beginning to sound alarms that they do not want the government to have so much personal information about them

Retailers with a web presence operating in a grey space will continue to pose a significant challenge to the online system now being implemented by the government for two reasons. Product availability (which will be far more limited on the government-run sites) and privacy.

Beyond the lack of diverse products and strains to be initially offered via the online government portals, recreational users are beginning to sound alarms that they do not want the government to have so much personal information about them – and point specifically to the differences in the regulated alcohol industry vs. the new regulations for the recreational cannabis market.

Beyond Market Rules, There Are Other Guidelines Coming

The Canadian military has now issued guidelines for active duty personnel and cannabis. It cannot ban it from soldiers entirely of course, and as it stands, the situation will be ripe for misunderstandings. For example, soldiers are prohibited from consuming cannabis 8 hours before any kind of duty, 24 hours before the operation of any kind of vehicle or weapon and 28 days before parachuting or serving on a military aircraft.

The only problem, of course, is being able to enforce the same. Cannabinoids, notably THC, can stay in the body for up to 30 days for casual users long after the high is over.

Athletes in Canada are still banned from using any kind of cannabis. The reason? They are subject to the Canadian Anti-Doping Program (CADP) under which the use of cannabis will still be prohibited.

That said, the Canadian Hockey League is reportedly now examining how to revise how it addresses the issue of medical use.

California Rolls Out Licensing For Cannabis Businesses

By Aaron G. Biros
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Last week, the Bureau of Cannabis Control issued the first licenses for California’s new market. The first license went to Moxie, a cannabis distribution company out of Lynwood.

The search feature for the list of licenses issued so far

As of the publication of this article, the Bureau, the state authority tasked with leading the regulation of the industry, has issued 43 temporary licenses. So far, four laboratories have received licenses, along with a number of retailers, distributors, microbusinesses in both medical and adult-use markets.

The labs to receive their temporary licenses so far are pH Solutions, Steep Hill Labs, Pure Analytics and ORCA Cannalytics. Judging by the number of temporary medical and adult-use licenses awarded so far, it appears the Bureau is trying to issue a similar amount for each sector, distributing the number of licenses between the two equitably.

You can find the list of licensees here, and search between the dates of 12/15/17 to 1/2/18 to get the most up-to-date list of licenses awarded. “Last week, we officially launched our online licensing system, and today we’re pleased to issue the first group of temporary licenses to cannabis businesses that fall under the Bureau’s jurisdiction,” says Lori Ajax, Bureau of Cannabis Control Chief. “We plan to issue many more before January 1.”

According to the press release, temporary licenses are only issued to applicants with prior local authorization in the form of a license or permit from the jurisdiction where the business is. Those licenses will become effective on January 1, 2018. The temporary licenses will work for 120 days, or May 1, 2018, after which businesses will need to have a permanent license to continue operating.

More than 1,900 users have registered with the Bureau’s online system, and more than 200 applications have been submitted, according to the press release.

The various regulatory bodies in California have worked diligently for months now to roll out proposed emergency regulations, setting strict requirements for manufacturers, growers, retailers and testing labs. Manufacturing regulations, including specific labeling, packaging and processing requirements, give a good snapshot of how regulators plan to move forward. Testing requirements could also be significantly firmer, with rules for documentation, sample sizes, sampling procedures, storage and transportation.

Yet when the adult-use sales become fully legal on January 1, 2018, those regulations will not be fully implemented.

Donald Land, a UC Davis chemistry professor and chief scientific consultant at Steep Hill Labs Inc., told The Associated Press, “Buyer beware.” There will be a six-month range where existing inventory will be allowed on the shelves, products that might not meet the standards of the new rules. So dispensaries will get half a year of sales before all products have to meet the new, stricter testing requirements.

Going Beyond POS: Innovations in Dispensary Software

By Aaron G. Biros
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In a highly competitive market, dispensaries use wide product selections, competitive prices, rewards and loyalty programs to stay relevant and attract new customers. Many of those tools used to make the retail space more efficient require analytics to stay on top of their performance metrics.

At their SE 7th Ave location in Portland, Oregon, Cannabliss & Co. uses Baker software to better connect with their customers and track sales. According to Kevin Mahoney, manager of that dispensary, they use Baker’s software for things like their online menu, online ordering, text alerts and a rewards program.

Cannabliss & Co. SE 7th Ave location
Cannabliss & Co. SE 7th Ave location

Located in an historic firehouse built in 1913, Cannabliss & Co. was Oregon’s very first medical cannabis dispensary. Now that they offer both recreational and medical cannabis, their product inventory has expanded, their sales have grown and they have a wider customer base.

IMG_7545After using Baker’s software platform for almost a year now, Mahoney says he has seen great ROI on text alerts and the analytics. The online ordering and menu features have not only highlighted sales trends, but have made budtender-customer interactions easier. “We don’t want our budtender using the menu as a focal point of the conversation, but this allows for us to highlight particular specials or strains on our menu that gets eye attention right when the customer gets in,” says Mahoney. “Moving past the point of sale, it allows another conversation to happen organically, which keeps the customer engaged.”

On average, Baker sees conversion rates close to a 5% range per campaign. “That check in option is phenomenal; we get to see how many people actually came into the store from any given text alert,” says Mahoney. “In my mind, text alerts are preferable to email alerts; they can’t be marked as spam, it is easy to delete or opt out and takes much less time.”

Kevin Mahoney at his SE 7th Ave location
Kevin Mahoney at his SE 7th Ave location

Mahoney says the online ordering feature that Baker offers is a big selling point too. “Having an ordering service is absolutely terrific,” says Mahoney. “They can come in and out in less than five minutes with their full order by using the online ordering portal.” Mahoney says they see a real draw in this feature because it lets customers treat their dispensary like a takeout window at a restaurant.

Baker just launched a software platform designed for delivery service that a dispensary in Bend, Oregon has been using for two months now. With Portland legalizing cannabis delivery services recently, Mahoney is eyeing Baker’s software for his online ordering and delivery. “When the time comes, that is something we are very interested in pursuing.”

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Analytics allow users to track the success of campaigns

In August of 2016, Baker secured $1.6 million in seed funding, led by Former Salesforce Executive Michael Lazerow, according to a press release. “Baker has created a solution that is clean and easy to use and can help dispensary owners engage their shoppers like never before – online, mobile, social and in-store,” says Lazerow. “I witnessed first-hand how Salesforce supercharges its customers’ businesses and I’m inspired to see Baker driving the entire cannabis industry forward with this same intelligent approach.” In 18 months of business, Baker has worked with hundreds of dispensaries, helping them build better connections with over 100,000 customers. At Baker, we believe the cannabis shopping experience should be as comfortable and personalized as it has become in every other retail environment,” says Joel Milton, chief executive officer at Baker. “With expertise in cannabis, data and technology we have created an industry-specific tool that allows dispensaries and brands engage with customers and build brand loyalty through a personalized shopping experience.”

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Text alerts are customizable and easy to send out

According to Eli Sklarin, director of marketing at Baker, the number one reason why patients and customers choose a dispensary is because of products on the shelf. “We originally started the platform in 2014 so people could order ahead and wouldn’t have to wait in lines at the dispensary,” says Sklarin. “In 2015, we saw more dispensaries than fast food establishments in many cities. Once inventory started to settle down, we saw a need for the dispensary to better connect with their customers.” The three core products that Baker offers are online ordering, connect SMS & email and the check in & loyalty program.

Their entire suite of software options is specific to the cannabis retail space. “Our customizable program is designed to help dispensaries catch customers and keep them coming back,” says Sklarin. “The software can give a snapshot of who their customers are, insights into the overall health of their dispensary, sales per day of the week, monthly promotions and other basic analytics that help them understand their customers.” Things like strain alerts can help retain customers, allowing dispensaries to notify certain groups of customers when products are back in stock. Whether it’s a customer who prefers a particular brand of edibles or concentrates, these software tools can help dispensaries get the right message to the right customer.