NEW YORK, Feb. 14, 2019 /PRNewswire/ --
Cannabis companies are noticing a shift in the industry, with many businesses moving away from a cultivation-oriented focus and embracing the importance of branding. The Supreme Cannabis Company Inc. (TSX-V:FIRE) (OTC:SPRWF), Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB), Canopy Growth Corp (TSX:WEED) (NYSE:CGC), Curaleaf Holdings Inc. (CSE:CURA) (OTC:CURLF) and Green Growth Brands (CSE:GGB) (OTC:GGBXF) have all been making forays into the realm of cannabis branding and building retail awareness.
Most experts agree that cannabis operators will need to focus on emphasizing retail experiences. The problem is that most companies have a production-oriented mindset, with a management team and corporate philosophy that shows. There are some exceptions to this, however, and those businesses that go against the grain already have a massive advantage over their competition.
A First in Cannabis Retail History
While cannabis companies have been opening up dispensaries all across North America, there has been a distinct lack of significant partnerships until today. America's largest shopping mall operator signed an agreement recently with Green Growth Brands (CSE:GGB) (OTC:GGBXF). Simon Property Group, Inc. (NYSE: SPG), an S&P 100 company that owns some of the country's top malls, will let the cannabis company open 108 retail stores across their retail centers.
"We are constantly on the lookout for cutting-edge new concepts, like the GGB shops," said John Rulli, Simon Malls President. "We are committed to adding new and dynamic retailers and uses to our shopping destinations, and the GGB shopping experience is exactly the type of innovation our customers want and expect from us. We're excited to work on the GGB launch, and look forward to a long and deepening relationship as we build this network together."
On February 13th, the company announced the opening of its first retail store - a Seventh Sense CBD Shop at the Fayette Mall in Lexington, Kentucky. Located in a prime location of the mall adjacent to the high-end and high-traffic retailers, the Seventh Sense CBD shop retails high-quality botanical therapy CBD-infused personal care and beauty products including CBD-infused body lotion, muscle balm, body wash, bath salts, sugar scrub, bath bomb, lip balm, and face oil.
For cannabis companies, opening over 100 dispensaries across the country would be a dream come true. Instead, most have had to adopt a slower approach of either building or buying out multiple dispensaries in each state. Many of these stores also aren't built on prime real estate. The competition is fierce, and companies with brands that are most influential with buyers are the ones that win these locations.
The Importance of Prior Retail Experience
There are many strategies for helping expose cannabis to potential customers. With some statistics indicating that the majority of Americans haven't tried marijuana, it's up to companies to change the public perception of consumption. Many businesses talk about improving the retail experience and revolutionizing the use of branding; few follow through with these promises.
Most cannabis brands are segmented by traditional customer demographics, such as high-end luxury, low-end value brands, etc. The most common approach has been to bombard customers with as many options, strains, and prices as possible, a strategy most retail executives know to be mediocre.
Instead, companies enjoying the most success are those that use brands to appeal to emotion. Most dispensaries are lucky to generate revenues of $6,000 per square foot. In contrast, a Las Vegas dispensary called "The Source," owned and operated by Green Growth Brands (CSE:GGB) (OTC:GGBXF), sees revenues of up to $14,000 per square foot. By following this brand-centric approach, this store alone boasts revenues 130 percent above average.
Much of this success comes from the company's management team. Green Growth Brands (CSE:GGB) (OTC:GGBXF) CEO Peter Horvath brings his decades of experience leading Victoria's Secret, American Eagle Outfitters, DSW, and other brands. Another figure to note, CMO Scott Razek, also has a 25-year tenure as a marketing executive in many of those same companies. Both executives left behind lucrative corporate roles in mainstream industries for the sheer growth potential of cannabis.
Back in 2018, Jim Cramer on CNBC's Mad Money would describePeter Horvath as being "the first CEO that's going into retail that's actually been in retail" With this new deal under his belt, it's clear that the company is becoming perhaps the strongest cannabis brand and retail presence in the market.
First Mover Advantages in Auxiliary Markets
While cannabis retailing has focused mainly on traditional plant products, there's much to be said for alternative product lines. CBD-infused edibles, beverages, and topical oils are a market estimated at being worth $4.1 billion by 2022, with the CBD market in general projected at $22 billion. At the same time, these products attract different types of customers with different profiles and can't be marketed to in the same way.
One of the leading companies in the CBD-derivative space is Green Growth Brands (CSE:GGB) (OTC:GGBXF). In particular, they have been developing a patent-pending process to make a water-soluble version of THC and CBD, allowing consumers to enjoy any beverage of their choice.
Green Growth Brands (CSE:GGB) (OTC:GGBXF) also has a high-end Seventh Sense brand that brings a unique line of CBD-infused beauty products to the market. Unlike most other cannabis products that are sold in specific retail locations, these products can be sold in drug and grocery stores. This gives Seventh Sense products exposure to potential consumers and markets that otherwise wouldn't feel inclined to go to a dispensary.
Companies also need to be aware that while conventional retail expansion is good for the industry, they can't ignore the prevailing trends. Analysts have been warning of the "retail apocalypse" as 50 percent of all malls in America are expected to shut down by 2023. Green Growth Brands (CSE:GGB) (OTC:GGBXF) is also one of the leaders in this area. By focusing equally on their online distribution channels as well as growing their physical locations, they lower this risk while their competitors continue to play catch-up.
Further Cannabis Developments
Graduating to a new listing on the Toronto Stock Exchange (TSE), The Supreme Cannabis Company Inc. (TSX-V:FIRE) (OTCQX:SPRWF) had a number of new developments. Most notably was that its Q2 sales saw a 359% increase over last year. The company has also made its first shipments of its high-end cannabis brand 7ACRES across various provinces.
As one of Canada's top cannabis producers, Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB) recently announced it's second quarter financial results much to the anticipation of the industry. While revenues were well above expectations, the company is still operating at a loss as shareholders saw a $238 million loss over the three months ending in December 31st. Much of this is due to falling profit margins on regular cannabis plant products.
A major feather in the cap of Canopy Growth Corp (TSX:WEED) (NYSE:CGC) was receiving a Hemp license in the state of New York. Announced last month, the company will be investing up to $150 million in its New York hemp operations. This also marks the first international expansion the Canadian company has undergone.
Multiple assets in the state of Maryland have been acquired and rebranded under the new ownership of Curaleaf Holdings Inc. (CSE:CURA.CN) (OTCPK:CURLF). These acquisitions include a 21,000 square-foot cultivation facility, a 1,000 square-foot processing plant, and two separate 1,000 square-foot dispensaries. The company invested $30 million USD in acquiring these assets as it seeks to further consolidate its presence in the state.
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