Lessons From California - Brands In Cannabis, Part II  August 13, 2021

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It’s been a few months since we last checked in with our brand new “Antarctic IPA” consumer, so we thought we’d check in with them, or at least see if we could find some data that supported our thesis that when consumers first discovered a new product category in cannabis they “want to try some different types and experiment before settling in on a definitive brand of choice.” In this environment, what then gives a company’s valuation and revenue potential protection is not just a punchy brand, but a consistent underlying infrastructure -- the ability to get on dispensary shelves and stay on the shelves thanks to sales execution and consistent distribution.

Building brand affinity among consumers who are new to a product is extraordinarily difficult when they have nothing in their internal database to compare it to. Oftentimes, even if the interaction with the product was delightful, it emboldens the customer to try other types in order to experience more of that category. Eventually, they may come back around to the first brand that they enjoyed but it's often a long and circuitous path.

We see this trend when looking at flower sales. The top-selling cannabis brands in California in 2019 were Flow Kana and Candescent, two brands that pride themselves on consumer education and also increasing transparency and accessibility in the cannabis space. Both of these values are incredibly important, but it looks like after consumers were introduced to legal cannabis by these brands they quickly started experimenting, oftentimes landing on bulk brands such as Pacific Stone or with higher-end, premium brands such as Cannabiotix - which went from last in our cohort in 2020 to be on a run rate to being the #1 selling flower brand in California. (Disclaimer: granular retail sales data is not always accurate, but can generally show trends well)

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