From AdWeek: Who Will Become the Starbucks of Pot? Handful of startups want to be America’s favorite marijuana brand
“As Joe Hodas, CMO of the edible cannabis brand Dixie Elixirs, observes: “The closer you get to the plant, the fewer the people involved.”
This has absolutely been my experience as well. The cannabis industry is a lot like high school. Everyone knows everyone. It will be like that for some time, I think. There is a dichotomy though between the old guard activists who have been in it for the long haul and the newbies who see it as a business opportunity. So proud of @CherylShuman and her daughter Aimee. It is great to see women being so successful in a typically more male dominated industry.
By Robert Klara | July 27, 2014 | Adweek.com
During a typical Fourth of July weekend, 1500 Esperanza St., a whitewashed deco warehouse in the Boyle Heights district of East Los Angeles, is deserted. But this year, a line snakes down the broken sidewalk out front and wraps around the bend of Union Pacific Avenue, as 4,000 people suffer the searing heat for an event called the California Heritage Market.
While many cities boast farmers markets, this one is unique: It’s the first in California—and likely the entire country—devoted exclusively to pot.
Here, some 50 growers proudly peddle their homegrown weed, not only in the form of dried flowers and buds but also the myriad products that can be concocted from them—from cooking oils, tea and candy to ointments, sunscreen, even soft pretzels.
Cheryl Shuman surveys the crowd with satisfaction. Not only did she help organize the event, but her own brand of weed—Beverly Hills Cannabis Club, a favorite of celebrities with gated mansions up in the Hollywood Hills—is the most recognizable product there. Scratch that. “We were the only branded product there,” she boasts during a phone interview a few days later.
While all the vendors here are expected to bring to market only the finest-quality herb, very few, apparently, showed up having taken Marketing 101. “Growers were coming up to me and asking, ‘How do we make ourselves different? Maybe we should come up with a logo and a name,’” Shuman reports. “The branding of cannabis doesn’t exist yet.”
There is a good reason for that. Since the federal government still classifies pot as a Schedule I controlled substance and only two states (Colorado and Washington) permit its sale on a recreational basis, market conditions are not exactly ripe for branding. “You have 20 states with some form of legalization, a number of them very restrictive, and a small customer base. So there’s not a national opportunity,” explains Taylor West, deputy director of the National Cannabis Industry Association. But, she hastens to add, “I think we’re likely to move in that direction.”
That’s actually happening fairly quickly. Industry watchers predict that 14 states are likely to adopt some level of legalization in the next five years. (The New York Times over the weekend even came out in favor of legalization.) They have powerful incentives to do so. Not only do most Americans favor legalization (58 percent, according to a 2013 Gallup Poll), but legal cannabis amounts to tax revenue for cash-starved municipalities. Colorado, for example, is on track to collect $134 million from its first year of legal pot sales. And while the DEA still publicly pledges to eradicate marijuana, a growing number of elected officials, including President Obama, are of the belief that the feds have better things to do than go after stoners. If the legalization trend continues at a pace many expect it to, the legal marijuana market—worth an estimated $2.57 billion today—will hit $10.2 billion by 2019.
It translates to a veritable gold rush for pot start-ups (“ganjapreneurs,” as they’ve been called)—companies that market everything from vaporizers to fashion-forward receptacles for your stash. But feeder brands that exist for pot are justifiably separate from actual brands of weed, which are still pretty rare. As Joe Hodas, CMO of the edible cannabis brand Dixie Elixirs, observes: “The closer you get to the plant, the fewer the people involved.”
Bath soak, for a truly trippy dip.
That said, there are a handful of brands out there, and they’re growing. And that has raised some questions among traditional marketers. We all know that every category, from European imports to beauty products, has its leading brands, so which are the brands shaping up to dominate cannabis? Is the day coming when we could see a Marlboro (or Starbucks, or Mercedes-Benz) of pot?
Ron Throgmartin thinks so, and believes his company is a contender. “We saw the opportunity to come into this because there are no specialty brands in the market,” says the CEO of Kirkland, Wash.-based Diego Pellicer. Named after a legendary hemp grower in the colonial-era Philippines, the brand is sold through dispensaries, though its ambitions go well beyond that. “We’re hoping to create the Apple of marijuana,” Throgmartin boasts.
It’s not a surprise that some of the best, brightest and most ambitious entrepreneurs have designs on the space—Diego Pellicer’s seed money comes from Jamen Shively, a former corporate strategist at Microsoft. But building a cannabis brand isn’t as easy as throwing money at it.
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