One year after the legalization of recreational marijuana, Oregon’s pot industry is booming with more than $400 million in projected sales in 2016.
But like any new industry, pot entrepreneurs are faced with the challenge of building a strong brand and developing new products to attract underserved customers.
The industry has to work fast to establish itself as a leading manufacturer and retailer of marijuana products because cannabis will probably be legal in the United States in a few decades, predicted Renee Spears, creator of Smuggle, a cannabis products retailer.
“We have a slim window to brand Oregon as the cannabis capital of the world,” said Spears, who spoke as a panelist at an Oregon Business Hot Topics Cool Talks breakfast event on Tuesday. “This is Oregon’s moment.”
One advantage Oregon marijuana growers have over other jurisdictions is access to the plant’s diverse genomes, said Jeremy Plumb, founder of Newcleus Nurseries, a commercial cannabis cultivator. The diverse strains of the cannabis plant that are cultivated here make it possible for Oregon retailers to sell a variety of cannabis products.
“We are sitting on a treasure trove,” said Plumb. “There is no limit to the products and categories.”
In some ways the state’s pot industry mirrors the emergence of Oregon’s craft brewers, which have evolved as leading creators of artisanal, unique-tasting beers. But Plumb sees the potential for cannabis to also be branded as a wellness product because of its use in pain management.
“People are comparing (the cannabis) sector to beer and wine,” said Plumb. “But it has a social, therapeutic outcome.”
The state’s pot sector also has the potential to bridge the state’s urban-rural economic divide.
Agricultural companies, in particular, stand to benefit from the growth of the cannabis industry by employing sophisticated growing techniques to help cultivate the plant. Cannabis production is known for its intense energy and water use, making it an ideal sector for more efficient farming methods.
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As the cannabis industry matures, it will be increasingly important for businesses to build their brand to distinguish themselves from the competition, said Spears. Her company, Smuggle, specifically targets women and baby boomers, which she says is an underrepresented market.
“If you want to stand out, you need to build a brand right now,” said Spears.
Claire Kaufmann, northwest regional director of BDS Analytics, a cannabis industry research firm, said she does not see a lot of smart branding of cannabis products.
“When it comes to branding, sometimes (companies) can get ahead of themselves. Brand expression needs to resonate with customers,” she said.
As the pot industry grows it is inevitable that big businesses will move in and aggressively compete with the state’s craft growers and merchandisers.
Scotts Miracle Gro, the maker of garden maintenance products, is one multi-national corporation that has entered the pot market nationally by selling fertilizers and soils to cannabis growers, as well as lighting and hydroponics equipment.
Kauffman predicts large businesses will make a big move into edibles and cannabis concentrates in particular.
A lot big money is already considering investment in the state’s pot business, said Vince Silwoski, an attorney at Harris Moure.
He does not see big money directed at the pot growers market yet.
Silwoski expects pot companies’ access to traditional banking services will expand as more states legalize recreational marijuana use. Marijuana businesses have to deal in cash because most banks deny credit card processing.
“We are close to a tipping point,” said Silwoski. “We will see the banking thing change in the next couple of years.”
Check out this clip from panelist Claire Kaufmann below.
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Jeremy C Plumb Saturday, 29 October 2016 16:31 Comment Link
If I may, I'd like to offer a bit more context to try to show what I meant.
I believe that Oregon has played, and can continue to play, an outsized role in the modern world of cannabis genetics. The multi generational cultivators I've heard about or met, in an overly broad way, tended to be smaller scale and more experimental than anywhere I have travelled. There has been as cannabis positive environment here, as anywhere in the world - in some ways more than Northern CA in my view, at the least slightly different.
The early dutch seed companies certainly benefitted from some of the diversity of Oregon hybrids, that's pretty well documented. My personal take is that over the last decade of prohibition era growing, there was a lot of scaling of producers, production size grew and more people came into it. More so in CA than anywhere. In a "closed" / prohibition market there were no incentives for smaller yielding, interesting, and diverse cultivars. The hegemony of the popular cultivars from CA grew. The lineup consisting of primarily; Sour Diesel, OK Kush, and Blue Dream, more Cookies in the last 5 years. Its clear that in CA on the whole, and places CA exports prefer known brands. Which makes sense to me, as its what the market knew and felt comfortable with. The huge range of cultivars dwindled proportionally, as productions grew in scale. There are many exceptions, and easily some of the most standout efforts in breeding and preservation anywhere in the world are from CA (Coastal seed!!). But on the whole, that's what I saw. All that I have to go on is my own experience, and there are many angles.
In southern and northern Oregon, I saw a huge array of diverse cultivars. The scale of the productions were, and are, smaller. There's an unbelievable price consciousness and sensitivity to uniqueness, to special stories. There's an even more intense care (which can border into outright snobbery) and care for the depths of the craft. This is entirely subjective, but its true for me.
There are amazing hybrids everywhere, especially where statewide legal programs are happening. I should mention that I grew up in Sonoma county, in Northern CA, and have been in both places all my life, as my family still lives there. I've lived in Oregon the last 16 years. I'm sure that I'm biased between the two, but I feel that I grew up in the heart of the most influential cannabis culture internationally. And now get to watch it mature in some senses. Its so wild. Genetics are key. Many people have underestimated their significance. It is one reason that Newcleus has interviewed hundreds of strains over the last many years.
There are all sorts of strange hybrids that haven't been seen on Harborside's shelves here. Its exciting to see scaled plant breeding programs come online. Being able to select from a much larger population over time, and not fall into the pitfalls of small scale plant breeding experiments. Creating unintended genetic bottlenecks are a significant side effect of small scale hybrid programs.
We have happen to have Phylos Bioscience in our backyard, doing the most cutting edge version of cannabis Genomics availble, now offering genotype services to breeders and cultivators. This will allow breeders to work smarter and will act as a means of certifying plants as at least being the same genetic. Every other horticultural crop has used this to develop mature consistent seed lines, something absent in the modern genetics of cannabis, in any state. Oregon has a chance to lead here.
On an aside, chemists in Oregon have been including in some cases, more minor cannabinoids and terpenoids than any lab in any state. Many of us have had access to that info for 5 years. This has allowed for a pretty special vantage into possible relationships between genotypes and chemotypes. I see this as another part of the small structural advantages that are being used in building a regional craft sensibility and authority that is true to Oregon's vision, which has something to do with becoming the epitome of a given craft.
I don't mean that just as an overly provincial, quaint notion. I see at as in inspiring state of mind, one that is not so purely bottom line oriented. Where values / ethics, and talent help in a special way for people to pursue a unique relationship with the plant. In any case, I'm excited about anyone who's getting to do that work wherever they are. It's an exciting time.
I hope this all helps explain why I see OR as having some advantages going forward.
Adam Wednesday, 26 October 2016 10:33 Comment Link
"One advantage Oregon marijuana growers have over other jurisdictions is access to the plant’s diverse genomes, said Jeremy Plumb, founder of Newcleus Nurseries, a commercial cannabis cultivator."
This is flat-out incorrect. Growers in California, Washington, and Colorado - to name the states with the most intensive cultivation activities, in addition to Oregon - have access to thousands of different genetics. Varieties are not confined to any one state and growers can easily breed new varieties by pollinating female plants with male pollen, I've done it myself at home. Additionally, I previously managed a cultivation facility in Denver and in a two year period my operation grew in the ballpark of 150 different genetics, all in one medium-sized facility. I imagine California farmers are, on the whole, growing the most unique varieties overall, due simply to the size and scope of production that occurs there, which far surpasses that of any other state.
Bongstar420 Tuesday, 25 October 2016 18:58 Comment Link
The revenue YTD is $160mil retail...wholesale is 2.5x less. That is $64mil gross for all the growers. There are 800 growers waiting for OLCC licenses.
$400mil for 2016 is beyond specious. Even at $400mil, that is only $200k gross per grower.
Obviously there will be a shake out. The winners will be fat cats and premium small caps.