How to Not Get Squeezed Out by the Coming Cannabis Market Consolidation
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The cannabis market has been a boon for entrepreneurs in Colorado, Oregon and Washington, but the winds of change are starting to blow. For those businesses that are "just getting by" it will soon be time to face reality. Walk into any retail cannabis outlet and you can see it yourself -- there are way too many weed brands to choose from today. As a result, there is constant chatter on the street about a massive wave of consolidation coming our industry’s way. It makes sense. In the West Seattle area alone there are over 20 retail shops!
Consolidation is a natural and necessary business force in any emerging industry, but there are ways to mitigate the damage, protect your brand and ultimately survive. As an entrepreneur who has morphed from the haphazard early days of medical dispensary ownership to today’s wild west-like retail environment, I have learned some unique survival methods over the past decade and would like to share them with you.
Win the competition for talent.
The value of a good budtender in a consolidating cannabis market cannot be overstated.
Recently I visited several Seattle pot shops and found one major commonality amongst all of them -- the first products the budtender suggested were the cheapest items they had in whichever product category I had asked for. I did not ask for the cheapest options or even for a good deal. Yet, three out of the four budtenders who helped me never asked me more than one question about my wants and needs.
Americans expect to be treated in a certain manner in a retail environment. If the experience doesn’t meet or exceed their expectations, they will quickly go next door. For me, employing the best staff is paramount, for the reasons stated above, but also because a good percentage of my customers are senior citizens. Addressing their unique needs requires budtenders who are well-educated on the myriad nuances involved with cannabis and CBD products. Big mistakes here not only hurt your brand, they could also hurt your customer and lead to a lawsuit.
Winning the talent competition right now should be the highest priority for cannabis entrepreneurs. The timing is ripe. Industry reports suggest that, for various reasons, finding the best talent is easier in a consolidating marketplace than in a thriving one. Now is the time to find those employees you can build your business around around. In his bestselling business book, From Good to Great, author Jim Collins, writes:
“...leaders of companies that go from good to great start not with “where” but with “who.” They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats. And they stick with that discipline—first the people, then the direction—no matter how dire the circumstances.”
Show brand ethos.
In markets where the consumer has buying power you must convince me, the buyer, that we share the same ethos. Show me the origins of your brand and how it came to be, provided it is compelling and meets the ethos of your target audience. It might be the sole reason they buy anything you sell.
A good example from the food industry is Clif Bar & Co., an independently-owned company that thrived during the consolidation of the energy bar market, largely by means of dramatic storytelling about the brand’s creation and identity. The company’s creation story is famous in some foodie circles and skillfully sums up the reason for Clif Bar’s entire existence. In summary, Clif Bar founder Gary Erickson is an avid cyclist and according to legend was 50 miles from completion of a tough, 175-mile ride in 1990 when he started to “bonk.” He needed to eat, but only had a Powerbar left and wouldn’t stomach another one.
Clif Bar’s creation story should not be confused with messaging. Its employees live and breathe this story every single day. Can you apply this example to your cannabis brand?
Look for opportunities to collaborate with competitors.
Find new ways to look at your competitors. Perhaps they should be viewed as collaborators or coopetition as opposed to competition? There are so many opportunities to work hand-in-hand with your competitors to make each other’s business better. For example, two competitive brands could sponsor an initiative to remove the abundance of plastics waste created by the cannabis industry. That type of campaign would benefit the image of both brands almost equally.
This is not a concept unique to cannabis. Adam M. Brandenburger and Barry J. Nalebuff recently published a book called, Co-Opetition: A Revolution Mindset that Combines Competition and Cooperation, which explores the benefits of this growing mentality in a tough business climate. If you are a cannabis retailer, consider the following passage from the book and how it applies to your business in ways you might not have thought of previously that have nothing to do with marketing.
“Although competitors are often seen as parties to fight over market share with, it is actually perfectly possible to collaborate with as well. On the supplier side, competitors could combine forces when purchasing similar raw materials. By bulk purchasing altogether, you are able to negotiate discounts and lower the cost per unit.”
In my opinion, coopetition is part and parcel of the human survival strategy. What did early humans do to survive, when daily life was a constant competition for food and shelter with other, sometimes dangerous mammals? They banded together.
Unfortunately, I know a lot of cannabis entrepreneurs that subscribe to the theory that the best thing you can do to survive as a business owner during the coming consolidation storm is to put on your business hat, go lean on staffing and grind it out from a marketing perspective. They would rather invest in complicated guerilla tactics rather than implementing sound simple business strategies such as investing in the best talent, creating a culture around a brand’s creation story and cooperating with competitors. Let them. Instead follow the models of those brands that not only survived consolidation, but thrived.