Charlie Cain

Vertical integration (legal in some markets) allows cannabis businesses to capture both the wholesale and retail margins on product and provides opportunities for product exclusivity and competitive differentiation. A recent survey of cannabis retailers found vertically integrated recreational retailers reporting profitability at more than twice the rate of stand-alone retailers.^[1] That additional margin potential comes with the cost of significant regulatory, operational, and competitive complexity.

Continued state-by-state and eventual federal legalization is almost guaranteed, and several pieces of legislation currently under consideration would legalize cannabis commerce between states. As the regulatory environment changes, growing and processing will shift from the outskirts of major cities like Los Angeles, Seattle, and Denver to lower cost regions of the country and eventually the world. The inevitable result: a tsunami of mergers, acquisitions and bankruptcies as the thousands of small growers and brands unique to each state are suddenly exposed to national competition. As of mid-2020, five states (CA, CO, OK, OR, WA) had issued an incredible 13,000 cultivation licenses!² Canada has issued just over 350 cultivation licenses, and consolidation is already happening there.  

Over the next 5-10 years, the value and supply chains in the cannabis industry will evolve in roughly the same fashion that the broader consumer products industry has over the last two centuries. We transitioned from largely disconnected economic communities, where almost everything was made by hand locally, into today’s interconnected global economy where very little is made locally. There will be thousands of winners and losers, but a few brands should emerge from this battle as the cannabis industry’s version of Anheuser-Busch InBev ($134 billion market capitalization), Phillip Morris ($145 billion) or Starbucks ($138 billion).

Cultivators and Processors

If you’re currently a cannabis cultivator, processor, or consumer products brand, then vertical integration might be in your best interest. Ultimately you have a choice between going horizontal (doing what you do in more places) and going vertical (owning more of the supply chain in your current market). 

There is a place in the market for purists, artists, and anyone truly brilliant at their craft. Personally, I hope the best breeders, growers, extractors, and product formulators will stay focused. If you have the best process for producing extracts that express the beauty of the flower, then please be a contract extractor and get rich while raising the quality of extracted products internationally.

Most cannabis businesses are not ready to be the best in the market at what they do today, and would be made stronger and more profitable by vertical integration (where allowed of course). The cannabis supply chain is guaranteed to change in dramatic and predictable ways over the next five years. Growers and product brands will be thrown into competition nationally and maybe even internationally. Many companies on the west coast in particular will be too small to compete effectively with the much larger operations currently forming on the East Coast. 

Our recommendation for smaller cultivators and processors is to grow where possible, but focus on brand building over pure wholesale revenue. Those that are able to build a strong brand by consistently delivering on their customer promise should be able to adjust their supply chain as needed. Brands can grow their reach and profitability while changing where and how their product is grown, extracted, and manufactured as their business and the market grows. Make your customers happy, grow your reach, and your brand will have power and value regardless which segments of the supply chain you operate in. 

Retailers

Retail offers the best risk-adjusted ROI in the cannabis market. Modern logistics put product brands and everyone in their supply chains at risk of significant additional competition come legalization. It’s likely that cannabis retail will always be carefully regulated in ways that both limit the number and location of stores and prohibit e-commerce (because shipments may be received by those under 21). Even if cannabis is treated like alcohol, all markets will require licensing, and many will restrict their number and location. Even in markets with home delivery, retail stores drive the vast majority of the revenue (and can typically themselves make deliveries and thus expand their reach). 

Local growth in cannabis retail competition will be limited in many if not all markets. As a result, cannabis retailers face the prospect of significant revenue growth as current consumers abandon the illicit market and public consumption continues to grow broadly.

While vertical integration does offer additional margin potential, there are two reasons a proficient retailer might choose to vertically integrate:

1. Tax strategy. 280E prevents retailers from taking deductions for common business expenses like inventory storage and handling, security, and compliance. Vertical integrated companies can pay for a portion of those expenses through the production side of the business and therefore reduce a company’s overall tax liability. While tax treatment has a significant impact today, it’s unlikely that 280E will remain an issue for long. Several bills currently under consideration at the federal level, including one originally co-sponsored by Vice President Kamala Harris, would resolve the issue and allow all cannabis businesses to deduct all standard operating expenses.
2. An inability or unwillingness to expand geographically. There’s a special romance and beauty to a local small business that operates seed to sale. While these will never be giant companies, they will always have a place in the market and the hearts of consumers, much like local craft brewers with a few retail outlets.

Most retailers benefit from being a customer’s trusted and independent source. A retailer in many markets can buy from a large range of growers and product brands and is free to change their assortment at will. Once you have your own product line, you lose the veil of impartiality, lose the option of simply not buying a low-quality harvest, and expose your business to risk even if the retail channel thrives.

^[1] Marijuana Business Daily

Retailers who already outperform the competition thanks to a compelling customer promise and strong brand are ready to expand. In the following sections we’ll cover real estate strategy from a regional level, dive into the specifics of choosing a strong retail location, and then touch on the pros and cons of vertical integration. 

Real Estate Strategies

First to Market

When faced with the admittedly significant obstacles to finding good real estate for cannabis, many retailers take an opportunistic approach, rushing to be “first to market” for fear that all the good opportunities will be gone quickly. This typically results in poor real estate decisions and brands spread across locations with entirely different customer bases. The only cases where we’ve seen the first to market strategy deliver obvious wins are those where owners sold in the very early days at the peak of irrational exuberance (and often before the business was fully operational). 

It’s true that some of the first stores in new markets have made incredible amounts of money in a short period of time. It’s also true that in most cases, their performance has since been surpassed by better-run stores in better locations. There will always be new opportunities, and as time passes more commercial landlords become open to cannabis. Speed won’t overcome bad real estate. Bad real estate will eventually lose.

Customer Promise

The best real estate available by traditional metrics (cost vs. traffic potential) may not be the best real estate for your brand and your customers. Strong retailers choose locations based on their customer promise and brand. If you’re all about convenience, then gas station-anchored shopping centers in high density areas may be the obvious solution. A premium or luxury brand needs premium or luxury neighbors. 

Hub-and-Spoke

Many successful retail brands follow a hub-and-spoke market strategy where centrally located flagship stores build brand equity and consumer awareness while more efficient and profitable satellite stores capture consumer demand more broadly and capitalize on your brand equity. A hub-and-spoke model in a large city allows for a large number of stores in a dense geographic area, making both staffing and marketing dramatically easier and more efficient. Most forms of marketing cost the same whether you have one store in the market or ten.

Choosing a Retail Location

I’ve spent the better part of 20 years sourcing small-footprint retail real estate in more than a dozen major metro areas across North America with companies ranging from startups to Starbucks. “Location” is often cited as the most important factor in retail success. In cannabis, finding great real estate is more complex, and even more important. A great location is not sufficient to guarantee success, but it is the most significant single factor. 

The seven keys to success for a cannabis retail location include:

1. Visibility
2. Population
3. Traffic and Parking
4. Adjacencies
5. Size and Layout
6. Competition
7. Regulations (setbacks, buffers, and zoning)

1. Visibility

Visibility is the most efficient form of customer acquisition. According to a recent survey in states that have legalized recreational cannabis, 36% of adults 21+ are current consumers. Choosing a location with good traffic and high visibility is the most efficient way to build a customer base. 

Visibility is driven by a combination of factors including:

1. Placement: a free-standing building is more visible than a corner unit, and the corner is more visible than an in-line space.
2. Frontage: the width of your store on the street matters far more than the total square footage.
3. Façade: a building where each space appears differentiated offers better visibility than one with uniform color patterns and signage.
4. Sight lines: pay attention to the visibility of a location for drivers and pedestrians from likely angles. An otherwise great location may be obscured from most traffic by trees or even a curve in the road. Depending on traffic, drivers may never see a storefront they pass every day unless it is visible from a quarter mile away.

2. Population

The size of the local population is critical to your success for obvious reasons. Less obvious may be some of the nuances to analyzing market size and potential. Pay close attention to local demographics. You can find broad demographic data by zip code for free online, including population size, age, education, income, and more. Also investigate daytime vs evening population counts. In urban areas, you may find that the daytime population is several times that of the residential base due work and traffic patterns. A good commercial real estate broker should be able to provide this data.  

A best practice in retail is to build an equation to estimate the addressable market size. For example:

We could continue the back-of-napkin math by estimating that each customer spends $100 per month, which would give us $3 million in annual sales (a pretty average result across many markets). 

In a market with a lot of competition, you may need to split the population further. For example, does your store target the 50% of consumers who buy their groceries from the big chain store, the 25% who buy from the natural market, or the 25% who buy from the discount grocer?  

3. Traffic & Parking

Traffic is a key factor in location quality and retail performance. Many cities publish traffic statistics online, and a decent commercial real estate broker should be able to provide you with vehicle and/or pedestrian traffic counts for busier roads. More important than total traffic numbers, pay close attention to the type of traffic. Consider foot traffic, vehicle traffic, and accessibility (how easy is it for vehicles coming from either direction to enter your parking lot?). Commuters are typically focused on getting from point A to point B as efficiently as possible and are less likely to stop along the way than those running errands. Tourists may or may not be great customers, but they are definitely less likely to drive regular repeat business. 

Parking is the single greatest predictor of success in cannabis retail. The only scenario under which I would open a store without convenient (ideally free) parking is if there is STRONG pedestrian traffic (e.g., an urban “high-street” retail corridor). Even then, you risk being out-positioned by a store that’s easier to access. We’ve watched urban cannabis retailers fall from over $700K per month to under $200K when competing stores with free parking opened nearby. A suburban store without dedicated or easily accessible parking is almost certainly a terrible idea. 

4. Adjacencies

Adjacencies refers to the other businesses surrounding your retail location. Restaurants and nightclubs attract traffic primarily on evenings and weekends. Empty storefronts nearby are more likely to attract homeless and graffiti artists. A budget pot shop in a busy gas station plaza with convenience and liquor stores is a very safe bet, but a premium cannabis retailer trying to be the Apple of cannabis may do surprisingly poorly in this same location. Similarly, pawn shops, convenience stores, and payday loan shops are poor neighbors for a cannabis retailer trying to create a premium shopping experience. When choosing a retail location, consider whether your target customer is likely to shop the other stores in your area, and whether the broader environment enhances your brand and business or distracts from it.  

5. Size and Layout

Does the size and layout of the site support your intended use? The ideal size of a cannabis store depends a lot on your customer promise and planned shopping experience. In most scenarios, 1,500 to 2,500 square feet is ideal. Smaller stores force compromises (assortment size, inventory capacity, customer capacity, merchandising, staff comfort, etc.). Much larger than 2,500 square feet and you lose financial and operational efficiency, and disrupt the energy and flow of the store. 

6. Competition

The final key to success for a cannabis retail location is local competition. Your primary goal as a retailer should be to become “the best” in your local market at delivering on your customer promises. 

Plot on a map the logical outlines of your market. Which communities and trade areas are you a part of? How far do you reasonably expect customers to travel to frequent your store? Within your local market, where are the existing cannabis retailers, and where would zoning permit a competing retailer to open? Finally, what are the competitive differentiators and customer promises effectively delivered by your local competition? I encourage my clients not to shy away from competition, but rather to be intentional about tracking competitors and to allow that data to drive how they choose (and win) their battles.

7. Regulations (setbacks, buffers, and zoning)

The first six keys to success are universal to all retailers. Regulations at the state and federal level make finding good real estate for cannabis a surprisingly difficult task. Those same obstacles can also make well-positioned retailers extremely profitable. Most cannabis licensing regimes dictate strict setbacks or buffers, blocking off significant segments of most developed areas. In Washington state, cannabis retailers must be located at least 1,000 feet (about 3 city blocks) from schools, playgrounds, recreational centers, childcare centers, public parts, public transit centers, libraries, arcades, AND other cannabis retailers. In combination with city zoning limitations applied to all retail businesses, these regulations allow for the creation of local monopolies in select areas. It’s possible to secure a position as the only cannabis retailer in a trade area. That’s a competitive advantage not available to most other retail businesses. 

Federal law prevents major financial institutions from providing services to the cannabis industry, and this dramatically complicates the real estate search. I’ve had eager landlords back out upon finding that their national bank is threatening to call all of their lines of credit if they lease to a cannabis business. Since most commercial landlords have multiple properties leveraged by mortgages, this obstacle dramatically limits the available real estate and complicates the search. I’ve had commercial realtors decline to support cannabis searches because of the degree of difficulty. That said, this space is quickly normalizing, and both the stigmas and the regulatory obstacles are falling quickly.

Cannabis Retail offers incredible return-on-investment for investors and entrepreneurs able to time the market and stomach the risk and regulatory complexity. The industry is high-risk and high-reward on average, but seven years after the first recreational retail store opened in Colorado, clear patterns have emerged. Today there is a proven recipe for success.  

The world’s largest cash crop is being legalized in the world’s largest economy. Cannabis brands that achieve broad consumer awareness and loyalty will grow from startups to billion-dollar brands at historic speeds as the obstacles fall away. Every cannabis brand in North American is effectively a startup. Cannabis should be the greatest show on earth for the next decade. The winners in this race will be among the largest consumer brands in the world. 

Opportunity profile

Consumer demand: It’s hard to imagine ANY new product or industry offering the short-term growth potential of legal cannabis. Legal revenues in the US are expected to surpass $20 billion in 2021, roughly doubling over the last three years alone! Despite meteoric growth, the legal market is still only 1/3 the size of the existing illicit market. An estimated $60 billion in US illicit cannabis sales is ripe for conversion as legalization spreads and markets mature.^[1]

According to a recent survey, 69% of adults 21+ in legal US states are open to consuming cannabis, and 36% have consumed recently. (By comparison, 54% of adults report having consumed alcohol in the last six months.^[2])

In addition, the legalization of cannabis and launch of retail stores is big news in any market, so cannabis retailers benefit from significant press coverage driving high public awareness of these newly legal products and retail outlets. 

Barriers to competition: In most states or provinces, opening a new store requires buying an existing retail license, as no new licenses are allowed. (Canada and California are notable exceptions, though complex bureaucratic processes and municipal prohibitions still represent significant barriers to new competition in many regions.) 

In addition, all markets in the US and Canada require some combination of buffers or setbacks between cannabis retailers and some combination of the following:  

• Other cannabis retailers
• Schools
• Childcare facilities
• Parks
• Transit Centers
• Rec/Community Centers
• Places of worship
• Children’s arcades

These buffers, combined with local zoning restrictions, create opportunities to secure prime retail locations with limited local competition from other cannabis retailers.

Economics: Retail profitability varies dramatically: driven by regulatory variations, local market dynamics, and the operating proficiency of each retailer. That said, it’s not uncommon across markets to see proficient retailers deliver per-store revenues of more than $6 million annually, with 25% EBITDA and 15% Operating Income. 

In many markets, revenues are growing far faster than store counts, driving record profits among savvy retailers. Washington state hasn’t granted new licenses in several years, but sales grew almost 30% last year alone.

Cannabis retailers operating successfully under the current regulatory and tax structure stand to profit even more as the market legalizes and normalizes. 

IRS Section 280E prohibits cannabis businesses from taking standard business deductions (only COGS are deductible.) For many retailers, the removal of 280E will effectively double their after-tax profitability. The least efficient retailers will see an even greater benefit, as many are paying federal income taxes on gross margin while booking real world losses. 

Retailers with strong brands are also positioned to take advantage of other forms of market normalization as they occur. Removal of consolidation limits would allow stronger brands to acquire underperforming locations. Legalization of delivery will allow the strongest brands and organizations to reach customers far beyond the footprint of their physical store locations. Relaxation of restrictions on investment and banking will drive even more investment into the best performing brands. 

Risk: As stated at the outset, the incredible opportunities of this market are in part offset by unique risks. 

Regulatory Risk

• An expansion in the number of available retail licenses would increase competition
• A reduction or elimination of buffers and setbacks would open new areas to cannabis retail, increasing competition
• Delivery could be allowed in more markets, increasing competition with local retailers
• Tax increases could drive sales back into the black market
• Further restrictions could be placed on cannabis marketing
• Legalization may never happen

Business Risk & Complexity

• Investors/Owners/Managers are subject to significant personal financial scrutiny (e.g. several years of tax returns and documentation of all assets, liabilities, and business interests.)
• Debt investment is difficult to collateralize given regulatory restrictions on license ownership and transfer.
• Many federally insured banks are unwilling to service property owners engaged in cannabis retail or leasing to cannabis businesses. 
• Break-in/theft risk is higher than in other industries, and inventory cannot be insured.
• Regulatory violations may jeopardize license.

While the risks are real, remember that in most markets, licenses were given out by lottery and without regard for business readiness. A meaningful percentage of the cannabis businesses struggling today simply lack the relevant experience or expertise to thrive in increasingly competitive markets. An experienced team can largely mitigate operational risk. Proficient retailers in high-growth markets rarely fail. 

Valuations: Across legal markets, regulations have dramatically restricted the size, reach, potential, and current value of cannabis brands. Licenses are limited; store counts are limited; access to capital is often limited; and sales across state/provincial lines are prohibited. 

Retail valuations across most geographic markets hover around 1x annual revenue, with adjustments made on the margin to reflect unique strength or weakness.  Returning to the WA state P&L example above, the average Washington retail store doing $3 million in revenue would be valued at $3 million, while top performers are often worth $6 million or more.  

As legalization continues, and specifically once 280E is repealed and cannabis businesses are taxed as any other business, normalized valuations would apply. In traditional specialty retail markets, brands are valued with a multiple on earnings. 10x EBITDA is common, with high growth specialty retail industries often seeing multiples of 15x or even 20x EBITDA. 

There is a very real opportunity to acquire retail assets pre-legalization and have them double in value (or more) over the next 3-5 years even with nominal sales growth. 

^[1] New Frontier Data

^[2] BDSA Consumer Research

Retail is an art. It’s common to see stores with similar locations, assortments, and prices drive shockingly different revenues. What is it that makes customers choose one store over others that appear so similar? When stores are competitive on the basics, customers choose based on how the retail experience makes them feel. The only pot shop in town could throw a cash register on a display case and turn a handsome profit. The best stores in crowded markets have to work hard to stand out, but they are usually rewarded with 2-3x the average sales and 5-10 points of extra profit. In retail, it pays to be an artist and an innovator. 

Most cannabis retailers still follow the original dispensary retail model where each customer approaches the sales counter and is guided through the process by a single budtender. As recreational chains replace medical dispensaries, there has been a growing trend of well-funded retailers opening beautifully merchandised stores designed to encourage self-shopping and discovery. These new strategies offer exciting potential to drive sales while limiting labor, but many self-shopping strategies are failing to deliver a compelling retail experience.

In my last article I explored the origins of the guided-shopping dispensary model, the trend towards self-shopping to drive profitability, and the unique advantages, challenges, and efficiency impacts of each retail strategy. (For more, read Cannabis retailers abandon the dispensary model in search of greater profits.) This follow-up will explore the most common self-shopping mistakes, fears, and fallacies in cannabis retail. Finally I’ll conclude with how and where self-shopping is being done right with incredible results.

Common mistakes

The four most common strategies for enabling customers to self-shop are menus, digital kiosks, featured product displays, and impulse displays. These are good ideas, but all fall short of delivering an optimal experience. Customers can only self-shop effectively when they can view the entire product assortment with sufficient price, size, and other information to answer the most common questions and allow comparison between similar products.

Menus are incredibly common in cannabis retail. Unfortunately, I’ve yet to see a menu that provided sufficient information for a customer to make an informed purchase decision. Whereas restaurant menus offer a handful of options complete with descriptions and ingredients that enable customers to compare options, most cannabis menus simply offer a list of product names and prices. 

Paper menus are easy enough to read, but are difficult to keep current as the assortment changes, and very time consuming to maintain (unless automated). Digital menu displays can be integrated with your POS inventory and updated automatically. 

Unfortunately, most cannabis retail assortments are far too large to fit on the typical 2-3 wall-mounted monitors. The most popular approach is to shrink the font size and then scroll or flip through the product options and categories. The rule of thumb in overhead menus is to use at least a 30pt font for product listings. Most cannabis menus are closer to 15-20pt, and are therefore unreadable for customers who aren’t standing directly in front of the sales counter (defeating the objective of enabling self-shopping). Even then, if all that’s visible is product name and price, it’s a poor retail experience. 

Digital kiosks, tablets, and online menus have become increasingly common as most markets now allow online ordering for in-store pickup (a.k.a. curbside pickup or click-and-collect). I’ve seen these tools used with great success, but very few retailers populate their digital menus with enough product information (pictures, pricing, size options, product descriptions, THC and terpene percentages, etc.) to deliver a compelling shopping experience that rivals either a normal e-commerce experience or a well-merchandised retail store. Even when all of this information is provided, customers overwhelmingly prefer physical product displays to standing in-store and clicking through digital product pages. 

Featured product displays are a great idea and a retail best practice. Unfortunately, unless the entire product assortment is visible, customers lack the context and confidence to make a purchase decision.  I appreciate seeing that a product is featured, but before buying I really want to understand what other options are available and at what price. Is this the only product on sale or the only one featured? Unless all product options within a category are displayed, most customers simply bypass featured displays and proceed directly to the sales counter to talk with a budtender.

Impulse displays are designed to increase basket size by presenting customers in line or at the point-of-sale counter with options to add onto their purchase. This is another retail best practice, but impulse displays are a poor replacement for traditional product displays. It’s awkward to browse backward and forward along a display when a line of customers is standing directly in front of it. Point of purchase displays are effective for add-ons, but if you can’t look over the display until you’re standing in front of the budtender, it’s not an efficient or comfortable self-shopping environment. 

In most cannabis stores today, customers must wait to browse the assortment until they are at the sales counter and standing in front of a budtender. This is a wildly inefficient process that results in high labor costs and low customers satisfaction.

Common self-shopping fears and fallacies

Many cannabis entrepreneurs in new markets expect the majority of their traffic will be curious new consumers seeking basic product education. In reality, knowledgeable customers outnumber curious novices by a wide margin even in the first few weeks of a new market. Even in newly legal markets, most customers have been consuming cannabis for years. In short order, confident regulars who prioritize value and convenience will vastly outnumber curious novices seeking expert consultation. 

One fear about shifting to a self-shop retail model I’ve heard again and again is that customers will be unable to remember what they want to purchase long enough to ask for it at the sales counter. This fear is overblown. Cannabis data insights company BDSA reports that average transaction sizes across markets ranges between 1.1 and 2.4 items per transaction. I’ve seen a half dozen strategies deployed to help customers remember what they want to purchase, from pen and paper, to product cards, to empty packaging that can be displayed and picked up like any normal retail product. The vast majority of customers ignore these, and have no trouble remembering the 2-3 items they want to purchase. The final common fear about moving to a self-shop retail model is the difficulty of creating and managing all the product information and pricing materials that should be presented alongside product displays. Developing and managing these displays can be complex and time consuming, particularly in cannabis where assortments change rapidly. At the same time, managing the merchandising displays may be easier on budtenders (and labor budgets) than sharing basic assortment, product, and price information with each customer during each transaction. And since most retailers now present their assortments online, there is already a compelling reason to invest the time in developing and managing information on each product in your assortment.  

Self-shopping done right

After a couple years of trial and error with a chain of stores in the Seattle market, my team landed an approach to self-shopping that resonated with customers and proved manageable for the stores. In response to the limits of regulations and cannabis packaging, we redesigned stores to allow customers to browse the entire assortment, compare products, and make purchase decisions independently. At its core this process included:

1. Install enough merchandising fixtures to securely display the entire product assortment AWAY from the Point of Sale. Create different fixtures for different types of products to highlight and differentiate. 
2. Design signage templates for each product category, including way-finding, brand-level detail, and individual product cards with detailed product information, price, and size options. (Templates allow signage to be customized and printed in-store while retaining a professional appearance.)
3. Draft custom copy for most products in the assortment for use in online product pages and in-store displays (similar to shelf-talkers in a wine store).
4. Employ low-cost cashiers to quickly process transactions, and a smaller team of highly compensated consultants/educators/specialists trained to answer more detailed product questions.

In the years since, I’ve seen this basic approach replicated in successful retailers across North America, particularly in Canada where federal legalization and easier access to capital is spurring the growth of national retail brands. This strategy for creating a self-shopping retail experience is likely to be prohibitively expensive for the smallest retailers and incredibly profitable for larger chains. The cost of designing and producing assets for one store is roughly the same as the cost for 5 or 10 stores. When broader assortment strategy is set at the corporate office, and marketing and merchandising assets are created centrally for a chain of stores, the cost of developing and maintaining a self-shopping environment ends up being a fraction of what it costs to guide each customer through the entire shopping process during each visit. 

It should be self-evident that the best possible retail experiences allow customers to shop in whatever way they prefer. I believe the guided shopping experience is the most common approach to cannabis today ONLY because it is easier to design, maintain, manage, and execute. As regulations in new markets permit larger brands and retail chains, retail investments are growing quickly and driving a shift toward self-shopping models that drive sales and customer satisfaction while reducing costs. 

The best retailers put tremendous thought into each step of the shopping experience and are rewarded with incredible sales and profitability. While retail at this level is an art, and larger players have obvious advantages, the basic principles of delivering a compelling retail shopping experience can be adopted to improve results for retailers of any size. 

As a Cannabis retailer, your reason for existence is to provide consumers the opportunity to shop for and buy cannabis products. Designing a retail store that meets minimum customer expectations is easy, and mostly just requires common sense. Designing a best-in-class customer journey requires a deep understanding of how strategic decisions affect your customer experience and profitability. The most important of these decisions is whether you will encourage customers to self-shop, or pair them with a budtender to guide the shopping process. Each strategy comes with unique advantages, challenges, and impacts on efficiency and profitability. 

Self-shopping is the norm in high-volume retail, while a guided retail experience is typical for selling products that are complex, customizable, and/or very expensive. For example, grocery stores, big box retailers, and most clothing stores are designed for self-shopping, while jewelry stores, high-fashion clothing stores, and specialty retailers like the Apple Store try to pair customers with a trained salesperson to guide the process and provide appropriate information and assistance. 

Most cannabis retailers still follow a guided shopping model where each customer approaches the sales counter and is served by a single budtender. In the past few years there has been a growing trend of well-funded retailers opening beautifully merchandised stores filled with customer-facing product information designed to encourage self-shopping and discovery. These new strategies offer exciting potential and sobering challenges–particularly for small retailers.

Why guided shopping is the norm in cannabis

The first “legal” cannabis stores in the US were medical dispensaries.  The one-to-one guided shopping experience was appropriate for early (and limited) product assortments, low transaction volumes, and the sensitive nature of patient conversations. With early markets first legalizing medical sales only, the template for cannabis dispensaries remained pretty static from the passage of San Francisco’s Proposition P in 1991 through 2014 when the first recreational cannabis store opened in Colorado.

Even as recreational cannabis spread to new markets, the dispensary style of retailing dominated for several reasons. In most markets, strict regulations prohibit customers from handling cannabis products, forcing retailers to keep inventory locked up or behind the counter. Small batch sizes and inconsistent supply meant that retail assortments changed on a daily basis, and fixed merchandising and static menus were challenging. Even if a retailer were willing to invest in enough display merchandising to show their entire assortment, there wasn’t much to see! Historically, most cannabis product brands were extremely small businesses with limited resources for slick packaging and marketing materials. In this environment, the budtender served as guide and tastemaker.

As markets and suppliers grew, the larger cannabis brands invested more in product packaging and in-store display materials. Over time, cannabis stores incorporated displays for packaged products like vapes and edibles, while still offering static or digital menus to show the bulk of their assortment. The trend toward more attractive and effective display merchandising has been clear in most markets, but there is a big difference between offering a menu and a few featured displays, and designing a store that allows customers to effectively self-shop. Creating a compelling self-shopping experience requires displaying the entire product assortment with sufficient price, size, and product information to answer the most common customer questions and allow comparison between similar products. 

The advantages and disadvantages of guided shopping

The primary advantage of the guided shopping model is a reduction in cost and complexity driven by smaller sales floors, fewer expensive display fixtures, and less labor spent managing merchandising displays (including product information and pricing signage).  The primary weakness of the guided shopping model is increased labor expense. I’ve seen cannabis retail labor budgets (including managers) range from 8-9% of revenue up to >30%. Labor is one of the few expenses retailers can control, and yet the cost of cutting labor is extreme when the entire customer experience relies on a high-quality budtender interaction. 

In a guided shopping model, every step in the process (other than waiting in line) requires budtender assistance, and it’s common for average transaction times to hover around five minutes. Because each customer must be guided through the entire process by a budtender, transaction volumes are limited by the number of budtenders on the sales floor. If your in-store customer count exceeds the number of budtenders at any time, those customers have to wait to even begin the shopping process. Two budtenders averaging five minutes per transaction can complete 24 transactions in an hour. If customers were able to browse the assortment with full pricing and product information on their own, transaction volumes could theoretically double without increasing labor.

Finally, it’s critical to understand that the guided shopping model itself is a deterrent to many customers. Customer satisfaction falls when customers have to wait in line and then feel the pressure of a line behind them. Pressure to make a decision discourages new product discovery, limits basket size, and increases the likelihood of buyer’s remorse. Most importantly, many customers simply prefer to have the option of browsing and learning about products on their own.

In summary, the guided shopping experience is easy to design, maintain, manage, and execute. It is the most common approach to cannabis retail today, but may not be the best way to maximize customer satisfaction and retail profitability. As regulations in new markets permit larger brands and retail chains, we’re seeing a shift toward more efficient and profitable self-shopping retail models. 

The advantages of self-shopping

Cannabis stores designed to support self-shopping are becoming increasingly common, particularly in Canada (where federal legalization allows for much larger product and retail brands), and east of the Mississippi (where tighter limits on competition drive more sales into fewer stores and brands). The advantages of a self shopping retail model include increased volume potential, labor efficiency, easier budtender training, increased basket size, and improved customer satisfaction. 

Increased volume potential and labor efficiency  are both driven by shifting the burden of basic discovery (assortment, product info, and price) from the budtender to the merchandising displays. Instead of budtenders spending most of their time answering the same basic product and price questions for each new customer, they are freed up to focus on processing transactions and answering more detailed questions. 

Retailers who invest in developing high-quality merchandising displays that are rich with product information will also benefit from easier budtender training. While the best budtenders are able to convey impressive product knowledge, credibility, and charisma, even superstars benefit when accurate product information is presented and reinforced with every customer interaction. Quality merchandising and product information consistently results in an overall improvement in budtender product knowledge and the average customer shopping experience. 

Self-shopping can also drive higher basket sizes (larger average transactions) by allowing customers to browse the assortment and discover new products at their leisure, instead of wasting time in line and then feeling pressured to decide quickly. Budtenders still have the option to up-sell, cross-sell, and add-on to each transaction at the point of sale. 

Featured product displays and impulse cases at the point of sale are foundational retail best practices, but unless all product options within a category are visible, customers lack the context and confidence to make a purchase decision. I appreciate being able to see what is featured or on sale, but before buying I really want to understand what other options are available and at what price. Is this the only product on sale, or the only one featured? Unless all product options within a category are displayed with sufficient information to answer the most common questions, most customers simply bypass both menus and displays and proceed directly to the sales counter to talk with a budtender.

Creating a compelling self-shopping experience requires displaying the entire product assortment with sufficient price, size, and product information to answer the most common customer questions and allow comparison between similar products. 

The takeaway

It should be self-evident that the best possible retail experiences allow customers to shop in whatever way they prefer. Budtenders should absolutely be trained to answer questions and guide the customer through the assortment. But how many customers really need or want that service every time they shop? Imagine if the staff at your local grocery or liquor store tried to guide your purchasing each time you visited!

The guided shopping experience is the most common approach to cannabis today because it is easy to design, maintain, manage, and execute. It may well be the most efficient and profitable approach for small retailers. As regulations in new markets permit larger brands and retail chains, the average retail investment is growing and driving a shift toward better merchandising and self shopping models that enable higher transaction volumes at lower costs. The key question is whether the customer will ultimately prefer the personalized service of the independent retailer, or the buying power and shopping experience offered by larger chains.

Retail is an art. It’s common to see stores with similar locations, assortments, and prices drive shockingly different revenues. What is it that makes customers choose one store over others that appear so similar? When stores are competitive on the basics, customers choose based on how the retail experience makes them feel. The only pot shop in town could throw a cash register on a display case and turn a handsome profit. The best stores in crowded markets have to work hard to stand out, but they are usually rewarded with 2-3x the average sales and 5-10 points of extra profit. In retail, it pays to be an artist and an innovator.

We’ve seen the same pattern play out consistently in new cannabis markets across North America. In the early days following legalization, curious consumers will pay 2-4 times current illicit-market prices for the variety, peace of mind, and novelty of legal weed. In this environment, even terrible retailers realize short-term profits. 

As markets mature, they enter a second, more sobering phase. Rising supply drives down prices. Increased retail competition leads to discounting and margin compression. The novelty of “legal weed” fades, and the illicit market proves resilient thanks to low prices. Consumers gravitate to retailers who earn their trust by offering consistent value, inventory, and service. The performance gap widens between winners and losers. Soon the market is littered with retailers on life support, desperately searching for an investor or buyer. 

A rising tide sinks boats that can’t float.

Case Study: Seattle

Washington state cannabis sales in 2020 were up an incredible 30% over 2019. The top ten stores in Seattle (all in at least their third year of business) saw sales rise by more than 40%! On the other end, 33% of Seattle stores saw sales decline, with 18% declining by double digits. Even in a market with 30% overall sales growth, a third of existing retailers are facing declining sales and a crippling loss of market share. 

The cannabis market is no different from any other retail market; only the pace of development is different (thanks to the size of the existing illicit market). As markets mature, customers vote with their wallets. The results aren’t close. How does a cannabis retailer thrive in a competitive market? Retail winners and losers are separated by their ability to efficiently deliver on something as fundamental as it is overlooked: a compelling customer promise. 

The most important measure of a retailer’s readiness to expand is NOT current store revenues. The most important indicator of future success is your ability to consistently deliver on a compelling Customer Promise. 

What is your customer promise?

It’s common sense to suggest that happy customers drive financial success. Many retailers make the mistake of trying to delight every customer, and in doing so end up delighting no one. Successful retailers understand the importance of carefully selecting a compelling customer promise, communicating that promise clearly, tracking performance against the local competition, and consistently following through on delivery. I’ve toured hundreds of cannabis retailers across North America and seen the books for half of them. Retailers delivering on a compelling customer promise are rare, and often shockingly successful. 

Common customer promises include: largest selection, lowest prices, highest quality, best value, deepest discounts, most convenient, exclusive products, knowledgeable staff, and best shopping experience. Even a promise to be the cannabis retailer “for people like you” can be compelling for customers who identify strongly with a consumer niche (seniors, veterans, environmentalists, social activists, medical patients, partiers, connoisseurs, etc.). 

Some retailers make their customer promise explicit through marketing materials, customer communication, and brand and design choices. Others quietly live by a strong internal code that drives behavior and decision making. Even retailers that have never consciously defined their “customer promise” still communicate who they are and what they value through every choice they make about how to manage and present their business. 

Unfortunately, it’s also true that most cannabis retailers are unable to articulate a unique or compelling customer promise. I’m often told that a store has the “best staff” or “best assortment,” but when pressed to defend that claim with evidence, the owners and managers stare back blankly. These companies have an aspiration, but no clear competitive advantage. As performance stagnates and staff loses heart, they grasp at an ever-changing menu of tactics in search of a winning strategy. 

Readiness checklist

1. Competition

Some cannabis retailers are clear on who they want to be, and they work hard to deliver on their promise. But the competition is often just as motivated. The only way to win in a competitive market is to be clear about where and how you intend to win, and then closely track competitive behavior to ensure that you’re staying one step ahead. In a mature market where customers are familiar with local retail options, there is little value in being the store with the second lowest prices. You may be able get away with this in a new market, but it’s just a matter of time before word spreads and your customer finds your competition. It’s critical to commit to customer promises where you have the will and ability to deliver better than your local competition. 

2. Consistency

Failing to consistently deliver on your claimed customer promise is worse than having none at all. Inconsistency destroys customer loyalty and drives away business. Even one bad experience can shake a customer’s relationship with your brand and cause them to consider alternative stores. The last time I shopped at Lowe’s was eight years ago. I bought a microwave at 20% off and was shocked to discover that Home Depot’s regular price was even lower. Both stores are convenient to me, so I’ve never been back to Lowe’s. They broke my trust. It’s not enough to have great prices some of the time. 

3. Culture

One of the more common and pervasive failures occurs when a company’s culture does not match up with or support their customer promise. A retailer that claims to offer the best quality or value, but refuses to mark down stale product, they communicate to staff and customers that they’re willing to trade customer satisfaction and loyalty for short term profits. A retailer that promises great customer service undermines that promise if they clear inventory by urging budtenders to “promote” unpopular products with questionable efficacy. (Both examples are the norm in this industry, not the exception.) 

On the flip side, a strong culture that is aligned with your customer promise is a powerful way to ensure long term performance, employee engagement, and customer loyalty. 

4. Efficiency

Efficiency is a catch-all for your ability to make the customer experience as smooth and easy as possible: easy to find, free parking, quick service, clear and informative signage, easy to shop merchandising, etc. Efficiency in this case is not a measure of cost, but of customer experience. Making all product information available at an in-store digital kiosk may be supremely efficient for the retailer, but it’s a tremendous source of friction and frustration for a senior who just wants to talk to a real person. The opposite of efficiency is anything that creates friction or irritation in the customer’s experience. If two stores have similar assortments and prices, customers will overwhelmingly choose the one that makes shopping easier for them. 

A well-realized customer promise IS your competitive advantage. It will attract employees and customers who value the same things you do. Retailers who find their niche and serve it better than anyone else take the first crucial step to building an iconic brand and an enduring business. 

Cannabis professionals tasked with building long-term brand equity and customer loyalty face a daunting task. Each state and province in North America represents a distinct market with unique and ever-changing regulations and competitive environments. Each is at a different stage of maturity, with trends and patterns forming and dissolving at a rate that makes market data obsolete within months. Research into consumer preferences blurs the lines between dramatically different markets, producing scattershot results that leave even well-funded teams in the dark. 

So what’s a cannabis brand to do? Is the best strategy to target the highly-competitive “red ocean” of existing cannabis enthusiasts? Or do you sail into the clearer blue waters where your gut and market research suggest there may be an unmet need? Without question there’s a huge market of new consumers ready to begin their cannabis journey, but what do they want, and how will their preferences evolve? 

The cannabis industry humbled me, and forced me to rethink many of the benchmarks and best practices in my toolkit.

I’ve worked on the front lines of legal cannabis for the last five years, participating in brand and product launches across nine different states or provinces in the US and Canada. Before joining the cannabis industry, I worked for Starbucks as a Vice President responsible for retail operations, new concept development, and international expansion. I know how to build brands, launch products, and drive sales in traditional consumer product markets. The cannabis industry humbled me, and forced me to re-think many of the benchmarks and best practices in my toolkit. Over the last five years I’ve observed four consistent trends in consumer preferences and purchasing behavior across maturing markets in North America. 

These trends fit a classic model that provides context for understanding and predicting the cannabis customer life cycle: The Consumer Adoption Curve. This time-tested model describes the way new products and behaviors spread through our culture. Smart phones, organic foods, and even abstract ideas (like approval for cannabis legalization) follow the same pattern: Popular acceptance builds support among a loyal few, which swells until it tips into the mainstream, eventually gaining broad acceptance as the new normal. 

Understanding how the adoption curve applies to the cannabis industry is critical when choosing your target customer and predicting their evolving preferences. The end goal is to design and deliver an experience that delights existing customers while also appealing to the next wave of potential customers who are still unsure whether your brand is right for them.

According to a recent survey in US states that have legalized recreational cannabis, 36% of adults 21+ are current consumers (compared to 29% nationally). An additional 33% are accepting of legal cannabis, but have not consumed within the past six months. This tells us that while recreational cannabis has achieved mainstream acceptance, we have not yet reached the tipping point where a majority of US adults are active consumers. (For comparison, 54% of adults have recently consumed beer, wine or spirits.)

Cannabis brands that target the cannacurious appeal primarily to non-consuming segments at their own peril. They risk finding themselves with neither a current base of customers, nor credibility with the existing enthusiasts who drive the success of new products and influence those further along the adoption curve.

Cannabis markets, competitive environments, and consumer preferences evolve rapidly following legalization in each unique market. When we understand historic trends in cannabis adoption across mature markets, we gain a powerful guide to future success. 

New consumers follow historic consumption patterns regardless of cultural affiliation.

New consumers may not embrace everything they see in cannabis culture, but all consumers, from the cannacurious to the self-identified stoner, are heavily influenced by that culture and its trends. The “experts” in the market are the enthusiasts, budtenders, and home growers who have access to the widest range of products, and sufficient product education and cultural expertise to make confident buying decisions. With regulations limiting traditional consumer marketing and acquisition strategies, new customers often base purchase decisions on one of the following:

• Product popularity and the wisdom of crowds – The bestsellers today are those preferred by heavier or more frequent consumers. In surveys and focus groups, non-consumers or novice consumers consistently indicate a preference for ingestible over combustible formats. According to market data from Headset, combustible formats (flower, pre-rolls, and concentrates) outsell ingestibles (edibles, beverages, and tinctures) by a factor of 5-1 in the most mature licensed markets (WA and CO) over the last 24 months. 
• Friends and family –According to a 2019 National Survey by the Canadian government, 39% of consumers received their cannabis from friends and family. Novice consumers seek the advice of those with more experience and knowledge about cannabis.
• Budtender recommendations – When facing a sea of unfamiliar options, customers rely on retail sales professionals (budtenders) who recommend products based on a combination of personal experience and popular demand.

All three of these decision drivers send new customers down the path of the traditional cannabis enthusiast and work AGAINST brands and products that target the “cannacurious” without also achieving credibility with existing consumers. 

Customer education drives purchasing behavior.

1. THC and CBD percentages are the most obvious measure of efficacy, and novice consumers AND less educated budtenders tend to focus on the THC “bang for your buck” offered by various products.
2. After developing familiarity with the effects of THC and CBD, customers often turn to the Indica vs. Sativa classifications to dial in the desired effect profile, from sedating to stimulating. Cannabis science progressed past these classifications long ago, but most brands find shortcuts easier than customer education, and myths are persistent where regulations create obstacles to education. 

(At the end of 2019, Leafly finally stopped categorizing strains by Indica/Sativa/Hybrid, writing that while these categories describe the appearance of the plant, they DO NOT predict how the strain will make the customer feel. The company debated this change internally as far back as 2015, but avoided moving until they believed that the broader market was ready to embrace more accurate but complicated concepts. Brands and marketers still relying on these confusing and outdated categories are missing an opportunity and risking their own credibility.)

3. More sophisticated customers, budtenders, and cannabis brands no longer focus on THC or Indica/Sativa, but instead on quality indicators like aromatic profile. Terpenes play a starring role in driving both the perceived potency and the unique effects of different strains of inhaled cannabis. In the end, our own senses (smell in particular) are by far the best indicators of product quality, and different people respond in different ways to the same strains and terpene profiles. When combined with personal experience, a strain’s aroma can be the most reliable predictor of its effects. Developing a personal palate for cannabis is the only way to consistently select the right product to deliver a desired effect. 

I worked with a cannabis retail chain in Washington State from 2015 to 2018, and watched the steady trend of customer conversations follow this well-worn path of product education. I saw this same trend play out at a far faster pace following the opening of adult-use retail stores in Canada at the end of 2018. The speed at which customers are educated (and change their purchase behavior) increases as more consumers become “experts,” and more brands build marketing around modern cannabis science instead of perpetuating lingering myths from the days of prohibition. 

Consumer preferences evolve predictably with consumption habits.

1. In focus groups and surveys, non-consumers typically express a distaste for “smoking” and a preference for ingestibles, disposable vapes, “discreet” product formats, and low potency products. 
2. Influenced by expert recommendations and personal experience, casual consumers who become repeat customers often develop loyalty to a handful of brands or products that deliver a consistently positive experience. Customers may stay in this safe zone long-term even if the frequency and amount they consume stays low. 
3. As consumption and tolerance increase, consumers tend to move away from ingestibles, low-end vapes, and “discreet” products. In addition to being more expensive per dose/serving, these products are also less effective than inhaled cannabis, thanks to terpenes and other compounds that add depth to the cannabis experience and make up the entourage effect. Many consumers who are unaccustomed to THC, or who consume infrequently, will find a 5mg mint “very effective” despite the low dose and lack of complexity.
4. As consumption of terpene-rich flower and extracts increases, enthusiasts delight in trying new brands, products, and strains. Now comfortable with larger doses of THC, they confidently explore the world of cannabis and develop strong preferences based on personal experience. (Frequent consumers rarely display the brand and product loyalty found in beverage alcohol. This is due in part to the inconsistent, small-batch nature of cannabis, and in part to the body’s tendency to become less sensitive to repeated exposure to a specific strain or terpene profile.)

Cannabis brand loyalty is driven by authenticity, credibility, and trust.

In a highly regulated market where product brands lack direct marketing access to consumers, and sensory shopping is limited by packaging regulations, budtenders and informed friends have the greatest influence over brand/product perceptions and purchase behavior.

You may be able to design a product and packaging combination that scores beautifully in focus groups with uneducated consumers and the cannacurious, but if budtenders and enthusiasts don’t buy your story and believe in your product, it won’t sell. 

This does not mean that all products should be formulated for heavy consumers with high tolerance. All too often cannabis marketers try to position low-quality products as premium based on nothing more than an aspirational brand. This is a mistake. Even if your cannacurious target consumer doesn’t know any better (yet), their friends and local budtenders probably do know better. A distillate vape cartridge may be “ultra-pure”, but that doesn’t make it premium .I could market ethanol as “more pure” than wine or whisky, but even a great marketing campaign wouldn’t make it sell.

For example, I had the opportunity to consult on what went wrong with a premium brand and product rollout in California that was backed by a multi-million-dollar marketing budget. My client launched the product in nine high-volume stores and offered significant marketing support, training, and cash incentives to encourage budtenders to promote the brand. I toured the market after launch. When asked about this very high-profile brand, budtenders aggressively sold AGAINST the brand, sharing that while the products were “good”, they did not warrant the premium price point. This was the case in eight of the nine stores. With budtenders actively discouraging purchase, sales were terrible. In my experience, budtenders are not automatically opposed to high-profile brands and slick marketing, but “corporate cannabis” pays a particularly high price when cultural tastemakers determine a brand to be inauthentic and untrustworthy.

So let’s review the trends: 

1. New consumers follow historic consumption patterns regardless of cultural affiliation.
2. Customer education drives purchasing behavior.
3. Consumer preferences evolve predictably with consumption habits.
4. Authenticity, credibility, and trust drive cannabis brand loyalty.

I’ve seen these trends combine in predictable ways over the past five years. For example, focus groups of likely customers who are not current cannabis consumers are often worthless.

The preferences of a curious potential customer begin to change as soon as they enter a real store with real products, prices, and expert budtenders providing even basic information. They ABSOLUTELY change when experiencing their own body’s unique reaction to different products and strains.

There is no corollary in beverage-alcohol to the tremendous range of physical and cognitive effects found in cannabis. Customer education also plays a very different role. In cannabis, marketing doesn’t have as much influence over the customer as it does in other consumer products. Cannabis will impact your mood more noticeably than even the boldest shade of lipstick. 

A dab rig looks like hardcore, scary drug paraphernalia to many people. A bit excessive with the torch and all, right? The cannacurious customer rarely enters the market wanting to buy a dab rig or expensive extracts to go in it. But once you learn to see past the buzz of THC, the difference in flavor and effect between a distillate vape pen and live rosin on a rig becomes impossible to forget.  Suddenly dabbing feels more like brewing a precious gyokuro in a handmade Japanese teapot. Building your brand and products around the preferences of curious non-consumers is like doing focus groups for a new sports car design with people who have never driven before. Many of the shapes in the design of a sports car stir visceral memories and feelings, but only in those who have experienced the thrill of driving fast. 

I’ll close with a real-world example of how these trends combined in Canada in 2019. I spent most of the year in licensed Canadian retail stores and the offices of adult-use brands. My first question to budtenders was always, “Which brands have the best flower?” I also spent some time developing familiarity with black-market players and culture in Vancouver, Calgary, and Toronto. These deeply credible tastemakers would routinely make fun of any branded swag I had picked up along the way, while they themselves sported gear from 7ACRES. As far as I can recall, 7ACRES was the first (and for a long time only) adult-use flower brand to skip over THC potency and Indica/Sativa and start the budtender and customer education conversations with terpenes. Their slogan is “Respect the Plant.” Their marketing is explicitly targeted to enthusiasts. As the year progressed, I heard more and more budtenders in licensed stores answer my question about the best flower by pointing me to 7ACRES.  

In 2019, 7ACRES won “Craft Grower of the Year” at the Grow Up Awards, “Brand of the Year ” at the Canadian Cannabis Awards, and their “Respect the Plant” campaign won “Best Marketing Campaign” at the O’Cannabiz Awards. By building a brand that was credible to the cannabis enthusiasts who predated legalization, and investing in customer education, 7ACRES placed themselves squarely in the path of evolving consumer preferences for legal cannabis. By contrast, NOVA Cannabis (one of the first large retail chains backed by one of the largest licensed producers) installed graphics in more than 20 stores proclaiming that “INDICA more commonly contains higher CBD to THC ratios which may be suitable for the evening, when relaxation is desired.” That’s not a typo – it’s just plain false, and an epic credibility gap. Last month, Aurora Cannabis sold off its stake in NOVA’s parent company Alcanna, locking in nearly an 80% loss on their CA$138 million investment in two years.

In the end, cannabis brands would do well to hire marketers and leaders who are themselves cannabis enthusiasts, who understand the product and the consumer, and who can apply a critical eye to the mountains of confusing market research and conflicting data coming out of this highly fragmented and inconsistent industry.

Without question, cannabis companies need experienced, professional leadership. The most successful leaders will approach this industry with humility and curiosity. The past offers a map to the future. It’s time more of us learned and applied the lessons!