A Funny Thing Happened on the Way to the Pot Dispensary...
Pennsylvania-based Tom Newmaster of FORCEpkg set out to explore the wild west for an exclusive series on the evolving business of legalized cannabis.
Medical marijuana is legal in my neck of the woods. But I wanted to observe the industry in full bloom, so I took a trip to Colorado where both medical and recreational cannabis have been legal since 2014. In four short years, the industry has matured rapidly—and the consumer along with it. In fact, when I approached the first dispensary, the door opened and, instead of young hipsters, out came a group of proper-looking adult women. Each carried a bag containing their favorite variety. Once I entered the store and began talking with the bud tenders, I got a real education on the state of the industry. I even dared to carry samples back with me across state lines—not weed, but packaging!
Remember the Wild-Wild West Early Days of the Internet?
If you scroll back in your memory, the early days of the Web were an unregulated heaven or hell, depending on your perspective. It was an “anything goes” environment; you could buy things without paying taxes, download the Top 40 for free and launch an online business. Trouble is, most of those startups failed. States like Colorado are the Petri Dish for the burgeoning cannabis industry. We’re far from arriving at a dominant model, but in contrast to the sometimes-haphazard days of the early Web, the businesses I saw operating were extremely well thought out.
Along with traditional buds (smokables), dispensaries sell infused baked goods, beverages, candy and a variety of snack products. Then there’s medicinal cannabis, a whole other product category. The formulas are different. And so is the way the packaging is labeled. Many times recreational products feature higher THC-content. Medicinal cannabis tends to rely on CBD oil (though there are medical products with THC that are often used for patients being treated with chemo, for instance). In states like Colorado, where both recreational and medical are sold, the former comes with a tax of 12.9 percent, plus local/city tax (in the Denver area this can total 24 percent), while the latter is taxed 2.9 percent, plus local/city tax (in the Denver area this can total 7 percent). In 2016, the state of Colorado collected $150 million in marijuana tax money. And that number is climbing. Is there any question, as the federal government sees the potential for tax revenues and jobs, that big business won’t be jumping into the game full force?
Cannabis Packaging: More About Psychographics Than Psychedelics
You might think that cannabis packaging would offer some sort of nod to the days of The Grateful Dead and their mind-bending album covers. There is some of that for sure. But on the whole, cannabis packaging has the feel and sophistication of the connoisseur. There’s every format, including pouches (see-through and coated), folding cartons, plastic jars, elegant wrappers for candy bars—everything from the simple to the luxurious.
Zoots, a handcrafted small-batch edible manufacturer, incorporates a mainstream big brand strategy into everything from cookies and brownies to hard candy and drops/concentrates. You’ll also see products like District Edibles that use spacey high-tech looking plastic containers and foil labels to gain a competitive edge.
Labeling Regulations Are Rigid
A great source of information at the dispensary are the bud tenders who work the counters and help customers understand the effects of the vast spectrum of products. The regulations on medical marijuana are different from those on recreational. They are also different within each state. This affects not only the regulatory content required on each package, but the package design itself. Edible products must be in opaque packaging—buds can be visible. Medical marijuana, like any other drug, is required to show dosage—in this case the amount of CBD or THC. Cannabis products are required to be child resistant. Whether bottle, bag or folding carton, the product must feature some kind of lock. In some states, you can provide a visual window to showcase the product—in other states you can’t. Edibles run the risk of tempting children—they come in the form of lollipops, candy bars and in bright colors
Edibles have the THC symbol printed/stamped/sprayed/embossed on the actual product. This is an area that will no doubt be in play as the federal government examines the industry going forward.
Are Brand Owners Paying Attention?
Molson Coors is already engaged with its Canadian Unit to develop a cannabis-infused beverage. This makes sense for a beer company because this is a category well acquainted with the regulatory world. With so many beer brands struggling to maintain their shrinking market share, cannabis beverages offer a huge opportunity to make up those lost revenues and attract a whole new group of fans. Tobacco companies are already a big player. According to High Times, “Tobacco companies have always paid close attention to pot, but as a rival and as profit. Now they’re just waiting for the green light.” And big pharma won’t be left out. So far, these companies are holding off due to the state-by-state nature of the business. Also, there is fear among consumers that prices will soar once big pharma enters the picture. For the time being the jury is out. But this whole industry is in a state of change.
Business models are another interesting area in this emerging category. My next article will look at the current models and which are best suited to go national.
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