Cannabis entrepreneurs hoping to succeed in a sector that's expected to be worth billions of dollars in sales need to understand the power of brands.
The industry is expected to follow one of two models as more U.S. states legalize cannabis for medical or recreational use. For some, that's the alcohol model, in which branded product is distributed to retailers. Others are expecting a retail-brand model, in which the seller controls how the brand is produced and presented to the public.
For Smoke Wallin, president of Vertical Cos.,[1] a California-based cannabis company with some big ambitions including a plan to take its wellness unit public, it’s a no-brainer.
“Cannabis is going to evolve just like every other packaged-good category,” Wallin told MarketWatch in an interview. “There are dozens of form factors, including topicals, smokables, beverages, edibles, and within edibles there are baked goods, tinctures, mints — our belief is that with each form factor certain brand sets will emerge.”
Wallin should know. A former chairman and president of the Wine and Spirits Wholesalers of America, his long career in the alcohol business started at National Wine & Spirits, which he helped grow into a $1 billion company with more than 36,000 retail customers and a workforce of 1,500.
‘Cannabis is going to evolve just like every other packaged-good category. There are dozens of form factors, including topicals, smokables, beverages, edibles, and within edibles there are baked goods, tinctures, mints — our belief is that with each form factor certain brand sets will emerge.’
“Vodka has no taste or smell, so how do you persuade customers that one type is better, or even different, than another? It’s all marketing,” he said.
Vertical’s strategy is to create a portfolio of what it expects will be the biggest cannabis brands, once the burgeoning sector matures. The U.S. cannabis sector is expected to be worth about $20 billion by 2022, or up to $50 billion if cannabis were fully legalized for recreational use as it is in Canada, according to GMP Securities analyst Martin Landry.
Vertical already has more than 35 brands of THC-based products, and more than 50 brands of CBD-based products in development.
Read now: In ‘the marijuana ghetto’ at Davos, Canopy Growth found its American pot partner[2]
Related: Canopy’s proposed U.S. deal is a boon for the U.S. cannabis sector, says this investor[3]
THC and CBD are ingredients found in the cannabis plant; THC is the psychoactive ingredient that creates the “high” associated with cannabis, while CBD is nonintoxicating but is widely held to have wellness benefits.
The Vertical portfolio includes brands such as Instant CBD Strips (InstantCBD); Trees by Game, the brand associated with West Coast rapper The Game;...