Today, many forces are at play in making California’s legal cannabis market arduous, including overproduction, the illicit market, diminishing wholesale prices, and more.
In a special 90-minute webinar July 26–presented by Cannabis Business Times and Cannabis Conference–seasoned California operators provided insights and actionable tips for how plant-touching businesses can navigate these and other challenges.
Here are 10 key insights from Angela Pih, vice president of marketing for StateHouse Holdings; Jocelyn Sheltraw, director of industry relations at Headset; Claudio Miranda, co-founder of Guild Enterprises; and Nikki Lastreto and Swami Chaitanya, co-founders of Swami Select, from their participation in the “Navigating California: Tips From Seasoned Operators + Experts” webinar.
Editor’s note: These takeaways have been edited for style, length and clarity.
1. Sales are retracting to pre-COVID levels.
“During COVID, right [at] the start of the pandemic, we saw sales spike. … There were long lines for cannabis stores. People were panic-buying cannabis, just like they were toilet paper. And then, a few months into the pandemic, we started to see a bit of retraction. And for the past 12 months, we’ve been seeing sales declines. … Just know if that’s what you’re experiencing in your business, you’re not alone. The market as a whole is really retracting back to pre-COVID levels, but regardless, I think we still need to just remember, this is very exciting if we think about how big the market already is. Other, more mature markets [like] Colorado [and] Oregon, they’re also experiencing similar retractions back to pre-COVID levels.” – Jocelyn Sheltraw, Director of Industry Relations, Headset
2. The lack of licensed retail outlets continues to strain the market.
“We have a bit of an unequal marketplace. … As of May, … we have 971 [retail] licenses that have been issued. This doesn’t mean that all of these stores are open and active stores, but I think we could all agree that 971 stores is just simply not enough retail outlets. … There are actually more brands than there are retail stores. Over the last 90 days, we counted 1,168 brands that exist in California. So, this creates an unequal dynamic in our state. … Sixty-eight percent of our cities are still banning cannabis, … but we’re … starting to see a lot of cities realize the [economic] impacts of cannabis and put cannabis on the ballot. So, this is going to change, [and] it’s changing quickly. …
“The unregulated market is two times larger than legal sales. So, again, we want to help operators come into the legal market. We want to create this opportunity. It really starts with conversation with our policy makers and helping them understand that these current economics are just not sustainable for cannabis businesses. When you take into account the high cost of compliance and high taxes–we know in this industry, we’re taxed three times higher than alcohol or tobacco. So, when you pair that with some of these dynamics, it just doesn’t make for a very sustainable industry, which I think is why many of us are experiencing a lot of challenges in our businesses right now.” – Jocelyn Sheltraw, Director of Industry Relations, Headset
3. Own multiple parts of the supply chain, when possible.
“When we were doing our own distribution is probably when we did best as a company, when we owned more licenses or … controlled more parts of the supply chain. And as we began to outsource those pieces, that’s where we started to run into some more challenges. … In an ideal world, it’s good to control … as much of the processing [and] as much of the distribution [as possible]. Obviously, what comes with that, though, is more complexity to your business.” – Claudio Miranda, Co-Founder, Guild Enterprises
4. Focus on the local market.
“For those that are observing the distribution market, there are a lot of distributors that are in trouble right now. There’s a lot of consolidation that’s happening. … Should you need to rely on a distributor, how can you mitigate your risks there? One thing that we’ve done at Guild Extracts … is to try to stay more local, and generally speaking, … that could be just a good practice in general from an environmental perspective, but certainly from a control perspective. In the Bay Area, we’ve got a really strong, well-established reputation and name. We do that within the state as a whole, but certainly more in the Bay Area. And we can reach our customers and our dispensary partners more easily and readily within the geography that we can service and have the highest touch with right here in the bay area.” -Claudio Miranda, Co-Founder, Guild Enterprises
5. Choose a knowledgeable partner when pursuing celebrity partnerships.
“I really do think that it’s very important that you have somebody behind you that knows what they’re doing. … I think, whatever you can do, have a personality, get it out there, let people know that you’re authentic. Find out what your strengths are and play to that.” – Nikki Lastreto, Co-Founder, Swami Select
6. Diversify your revenue channels and streams.
“Diversify your revenue channels, revenue streams, [and] one other quick tip is also [to diversify] categories you’re operating in. At Guild Extracts, we’re primarily a concentrate brand, but we’ve also got into cartridges [because] we’re seeing that cartridges are increasing in market share as a category. So, now, starting to diversify for those companies that are able to diversify their product line, certainly that comes with its own challenges. … I would say stick to your swim lane and don’t spread yourself out too thin, but in this case, maybe spreading yourself out a little bit and hedging your bets and looking at other product categories where maybe that price decline isn’t as aggressive, you might be able to hold onto that brand integrity and that premium pricing a little bit easier than maybe the main category you’re operating in. That’s also something to look at.” – Claudio Miranda, Co-Founder, Guild Enterprises
7. Have an authentic brand story.
“Have a true and authentic brand story that can be clearly communicated. Have a group of people who are so passionate about your brand and your products [to where] whenever they speak and educate, whether it’s a consumer, budtender, or a store buyer, they’re able to get that passion through [to who they are speaking to].” – Angela Pih, Vice President of Marketing, StateHouse Holdings
8. Social media is a brand driver.
“We try to have the budtenders come out and visit our farm. We’ve done that in the past. It’s getting a little more difficult as they’re further away, but then they experience firsthand what it’s like to grow cannabis in the middle of the mountains, up at 2,500 feet with the cleanest air and cleanest water in the world. And so, they get a feeling for the brand there. And the other thing, … [is] the whole idea of social media now is [it’s] one of the drivers of branding. So, we are on social media, we’re on Instagram, Facebook, YouTube and all these things.” – Swami Chaitanya, Founder, Swami Select
9. Educate your budtenders.
“Make sure that budtenders have actually tasted and experienced your product or your brand. You cannot expect somebody to credibly recommend your product or brand if they haven’t tried it. So, how can we compliantly sample widely so that budtenders can speak credibly about your products? When I was on the brand side only, we had retailers tell us less swag, more education, [and ask us] ‘Just teach our budtenders how to sell and really support your business [because] they probably don’t need another lanyard or a T-shirt.’” – Angela Pih, Vice President of Marketing, StateHouse Holdings
10. Craft your story.
“You still have to craft your own story. You still have to be able to have a face to the company. I think we’re seeing the societal shift right now where people want to work with trusted people and companies. … Let’s remember that cannabis is a very personal thing to people for many different reasons. It’s touching people for recreational reasons, medicinal reasons, economic reasons, … social justice reasons. It doesn’t matter what the reason is; it connects people to their core and our responsibility as faces of our companies is to tell that story. When we see a lot of companies not doing that, I hope that what people can take away from this is that they really [need to] craft that story and really be as authentic as possible.” – Jocelyn Sheltraw, Director of Industry Relations, Headset
Editor’s note: Pih, Sheltraw and Miranda will also be speaking in various educational sessions at the 2022 Cannabis Conference Aug. 23-25, 2022, at Paris Las Vegas—the industry’s leading event for plant-touching businesses.