Cannabis Boxes Curated by Celebrities Are Big Business
Free Book Preview Cannabis Capital
Why did you start Hemper? What was the need in the marketplace that was not being met?
I was in my last semester as an information systems major at George Washington University. I was purchasing rolling papers and other cannabis accessories from Amazon but noticed I had to re-order frequently, in part because friends were coming to me when they ran out. I started wondering if there was a way to automatically replenish my supplies. Amazon didn’t offer that option, but I discussed the idea with Ravjot (RJ) Bhasin and Henry Kochhar, who became my two co-founders. At the time RJ subscribed to BirchboxMan, which sends a curated box of grooming products every month, and I realized that would be the perfect model for smoking accessories. I finished college on May 18, 2015. We shipped our first boxes the next day.
What was your point of difference?
We recognized that most of the cannabis accessories on the market were a throwback to the 60s. They were Cheech-and-Chong stoner-type products that were boringly designed and named, poorly manufactured, and with very little appeal to the 21- to 35-year-olds who are today’s heaviest cannabis users.
We decided to offer subscription boxes with more useful and interesting products like premium glass pipes, and use the boxes as a Trojan horse to build a larger lifestyle brand with diversified products and services. It’s three years later, and we have nearly 8,000 monthly subscribers along with a rapidly growing business selling individual products through both our own website and third-party brick-and-mortar retailers like head shops and convenience stores.
Hemper is not just a cannabis accessories subscription service. We also design and manufacture our own products, sell a large and diversified portfolio of individual products through our online store, and distribute products through the retail channel. Again, we are building a lifestyle brand, not just focusing on boxes alone.
In terms of the boxes themselves, Hemper offers more functional products without the filler items like lanyards and snacks that come in other subscription boxes. We also offer better quality and design since we create and manufacture most of the box components ourselves, and we deliver a better value. (Our $30 box delivers $100 worth of product versus $45 or $50 from other providers.) In addition, our popular celebrity-curated boxes set us apart and usually sell out almost as soon as we start shipping them. They have unique designs that we create specifically for the influencer we’re working with, and they become collectors’ items.
Tell us about how your collaborations work with celebrities.
We identify influencers that fit the brand and have strong social followings, like disc jockey Flosstradamus and rappers Ty Dolla $ign, Fetty Wap, and 2Chainz. Then we show them a selection of products that can be specially branded for them, ask them to pick about 10 items for their customized subscription box and offer them a profit share. We just signed a deal with RICO NASTY, an up-and-coming rapper who is currently on the cover of The FADER magazine, for a box that will include a new all-in-one cannabis container/grinder. These boxes usually sell out almost as soon as we announce them and become collectors’ items.
In fact, these celebrity-curated products are in such high demand that we’re in the process of changing our program to make these items available individually. Instead of bundling each influencer collection in a box, we’re going to begin releasing two products from every new collection per week for a month. This will not only enable non-subscribers to purchase them but also help us sustain interest and command the premium prices these ‘designer’ items deserve.
What two bits of advice would you give to entrepreneurs just starting off in the cannabis business?
First, decide which vertical you want to enter in this market. Accessories? Marketing? Packaging? Consulting? Licensing? Dispensary? Identify your niche and the competitive advantages you can bring to it before jumping in.
Second, run your idea up the flagpole with other people in the business world. Don’t worry about anyone stealing your concept. You might get some valuable feedback that will either strengthen your business proposition or prevent you from making a mistake, find an investor, or otherwise put you in a better position than if you had kept your plans to yourself.
What are the biggest challenges you face and how are you overcoming them?
Marketing is a major aggravation. We can’t use Facebook or Google ads because both platforms prohibit advertising by cannabis-related businesses, so we’re forced to use other channels like influencers and niche ad networks that cost 5 to 10 times more and have a smaller pool of prospects. Eventually, given the momentum of the marijuana legalization movement, Facebook and Google will likely change their policies. We’ll have a big party when that happens because it will enable us to reach more people for far less money.
We have also hit some bumps in the road with payment processing. Several banks and five payment processors have dropped us over the last three years because we are considered high risk, despite the fact that it’s perfectly legal to sell cannabis accessories anywhere in the country. The problem started shortly after launch when we went from selling $10,000 in subscriptions to $50,000 in a single month. Our second processor even held on to $150,000 in proceeds for six months while they decided whether to keep us or dump us. The processor we’re using now is our sixth, and it looks like we’ve finally found a keeper.
Are you able to send boxes to states that do not have legalized marijuana?
Yes, definitely. Cannabis accessories are not illegal in any state. We also ship internationally. Marijuana consumption isn’t limited to the U.S.
What do you see as the big growth areas in the business at the moment?
This industry is in its infancy with cannabis legalization on a roll across the country, so there are growth opportunities in every channel. We have an aggressive new product development pipeline, we’re expanding our subscription options with higher price points and a new customization program, we expect to quadruple our retail presence from 700 stores to more than 3,000 over the next 18 months, we’re exploring other avenues like pop-up shops, and we’ve even been approached by marijuana dispensaries that are interested in partnering with us. With initiatives like these as well as the likelihood that more states will decriminalize marijuana, we expect our revenue to climb from nearly $5 million last year to $12-15 million next year.