Marijuana Brands: Are Willie Nelson and Snoop Dogg on the Right Track?

If you think that branding is not important for the future of America’s marijuana industry please reconsider.  Just reflect upon the lowly hot dog. Almost immediately that earworm of a song,”I wish I were an Oscar Mayer Weiner” pops into your consciousness.

America’s marijuana industry is no different than the hot dog industry. Branding is quickly becoming critical in determining the success or failure of many marijuana businesses.

America’s legal marijuana industry generated revenues of $6.5 billion in 2016, a 30 percent increase over 2015. Predictions indicate that the industry is on track to generate annual revenues of $20 to $30 billion in 2021.

Two  U.S. Industries which achieved growth rates similar to what we’re now seeing in America’s marijuana industry were cable television in the 1990s and the broadband internet industry in the early 2000’s. Cable television grew in the 19 percent range and the growth of broadband internet was close to 29 percent.

Twenty-eight U.S. states plus the District of Columbia and Puerto Rico, have or soon will have medical marijuana. After last November’s ballot initiatives, eight states have or will have adult-use, recreational marijuana. California, with a population of almost 39 million people has the potential to dwarf the sales of all those other states combined.

America’s legal marijuana industry, especially in the western states, has experienced rapid growth and continues to evolve.  However, product differentiation and product branding are in their infancy when compared to most other industries.

Increasingly in many of the Western U.S. states including California, Colorado, Washington, and Oregon, dispensaries and retail stores have similar, “me too” products. For example, If you visit a dispensary or retail store in a western state and ask for a vape pen cartridge, the budtender will likely show you three or four similar products. Due to the lack of distinctive branding and the lack of consumer awareness of the brand, it can be a challenge to differentiate one vape pen cartridge from the other.

The industry’s move toward branded products provides tremendous opportunities for existing state-licensed marijuana businesses, entrepreneurs seeking to enter the industry, and businesses seeking to establish brands. Most importantly, branded marijuana products allow growers, processors, retailers and dispensaries the ability to reap a larger profit.

The app and online website, Leafly, lists 2100 marijuana strains, and hundreds of vape pen cartridges, waxes and concentrates capsules and tinctures. As America’s marijuana industry becomes more mainstream and continues to grow at breakneck speed, this increasingly large number of marijuana products reinforces the need for distinctive branding.

For growers, processors, and retailers, brands are critical to building customer loyalty, creating and sustaining consumer trust and introducing new products that are relevant, innovative and trendy.

Currently, much of the marijuana industry is based on customers being “sold” products by budtenders. Budtenders are the gatekeepers at dispensaries and retail stores, and are key to the success of the business.  Generally, budtenders suggest that customers or patients take a whiff of various strains contained in apothecary jars, or follow their recommendations regarding concentrates or edibles. This is a throwback to how most medicine and consumer products were sold at the turn of the 20th century, over a hundred years ago.  As pre-packaged marijuana and marijuana products become more common, the role of the budtender will change, however they will continue to be the key to suggesting the purchase of specific marijuana products in dispensaries and retail stores.

The Challenges in Launching a National Marijuana Brand

There are numerous challenges in establishing a national marijuana brand. Products need to be produced and sold in a state in compliance with each state’s marijuana licensing requirements and regulations. Since marijuana is illegal federally, this eliminates producing a product in Colorado and shipping it to Oregon, Washington, or anywhere else.

Entrepreneurs interested in launching a national brand have two choices. They may be able to obtain a production license in an individual state, which would allow them to manufacture and distribute their products in that state, or, they can seek to license their brand and products to licensed growers or processors on a state-by-state basis.

Licensing a brand to a grower or processor creates its own set of challenges. Key for the brand owner is to have influence and control over the manufacturing process to ensure quality control and consistency of the final product.

A brand with a good formulation, excellent quality control, and consisting of one or more popular products can be destroyed by a licensee in a state who produces and sells substandard products. With the popularity of social media, poor quality products in the marketplace in one state can destroy an entire national brand.

The Difficulty in Obtaining Shelf Space

In many states, obtaining shelf space in a dispensary or retail store in is a challenge.  In states that allow integrated ownership of grow facilities, processors and retailers or dispensaries under common ownership, a new brand may find itself competing for shelf space with the store’s proprietary product line.

Frequently, the budtender is encouraged by the store’s management to sell its brand, as it likely provides a higher profit margin. This may create a barrier to entry for new brands, somewhat similar to trying to convince Walmart to carry a new line of cola, when they already sell Coca-Cola and Pepsi products as well as their own private-label cola brand.

Celebrity Brands

Celebrities including sports figures, movie stars and musicians have been used to sell products for decades. Marijuana is the latest “hot” item for celebrities to market.

Many of these celebrities, including Miley Cyrus, Wiz Khalifa, Snoop Dogg, Willie Nelson, Whoopi Goldberg, and even the estate of a deceased celebrity such as Bob Marley, are jumping on the branding bandwagon. They are, or have indicated that they will be lending their names to a variety of products including strains, concentrates and extracts, edibles, and even marijuana-infused bath salts.

Snoop Dogg and Willie Nelson have been described as the world’s two most identifiable marijuana advocates and users. Rappers such as Snoop Dog and Wiz Khalifa view their association with a marijuana product line as an extension of their persona, and of course, a way to cash in.

Snoop Dogg launched his line of marijuana products in 2014. His “Leafs by Snoop,” features a variety of concentrates, edibles, and strains of flower, all represented as personally being selected by him. Industry chatter in Colorado indicates that Snoop is being paid around $2 million annually for associating his name with the Leafs by Snoop product line.

The 83-year-old Willie Nelson, who is best known as the king of outlaw country music, has had a long relationship with marijuana.  Willie has been arrested for possession a couple of times, the last time in 2010. One of his best songs that references the plant is “Roll me Up and Smoke Me When I Die.” He launched his product line of Willie’s Reserve with the pitch to “indulge with confidence,’ which has become the brand’s slogan.

IN 2016, Wiz Khalifa, who has generated social notoriety from toking on a joint while walking on a red carpet, created his strain, Khalifa Kush. The rapper is also endorsing the Raw line of rolling papers.

In 2015, the singer-songwriter, Melissa Etheridge launched a line of marijuana-infused “wine tinctures.” Etheridge, who is a breast cancer survivor, credits marijuana with helping her get through chemotherapy. She describes her wine tinctures as providing an herbal smell with the “weed taste,” and providing “full body relaxation.”

Described as the “original stoner celebrity,” Tommy Chong launched his Chong’s Choice brand back in 2015. Despite the regulatory and operational challenges of launching a brand in multiple states, his brand was the first to be available in more than one state, and Chong’s Choice currently is produced and marketed in six states.

The original focus of Whoopi Goldberg’s and Maya Elisabeth’s “Whoopi and Maya” was on marijuana products formulated to end the pain associated with menstrual periods. Whoopi and Maya have expanded their line to now include products that provide other health and medical benefits. The product line now includes edibles, tinctures, topicals and even a soothing bath product.

Celebrity product branding is not limited to marijuana, concentrates, and edibles. During her 2014 Bangerz tour, Miley Cyrus endorsed a line of 24-karat gold wrapper rolling papers under the Shine brand name. With the low price of rolling papers and the trend toward extracts and concentrates, it’s questionable whether the dollar volume of the Shine product line will ever be significant, despite Miley’s branding.

Bob Marley died in 1981, but that didn’t stop his descendants from launching the Marley Natural product line. Marley’s association with marijuana is legendary. The Marley Natural product line was launched with Bob Marley’s saying as a tag-line,  “Here is a thing that gives you a little time to yourself, so you can live.” In addition to marijuana products, the product line now includes body care products and smoking accessories.

Not to be out done by the descendants of Bob Marley, Anita Thompson, the wife of the deceased Hunter S. Thompson who died in 2005, announced in late November that she had saved her husband’s favorite marijuana strains. Anita Thompson indicated that she had kept twelve bags of the gonzo journalist and writer’s favorite marijuana and hash. She stated that she was having the DNA analyzed and would be cloning her husband’s favorites to be launched under a new brand.

In general, the response to celebrity marijuana brands is mixed, both by the industry itself as well as by consumers and patients. Many younger consumers are turned off by commercialization and branding. Older customers are generally more comfortable with branded products. They frequently feel that a celebrity-endorsed, branded product line, provides a “seal of approval,” and that the marijuana product will provide the desired recreational effect or medical benefit the consumer is seeking.

Typically, celebrity-branded marijuana products have a higher selling price than similar non-branded products. A recent study in Colorado indicated that the average selling price for celebrity-branded strains of marijuana flower and extracts were at an approximate 24 percent premium to non-branded products.

Snoop Dogg’s “Leafs by Snoop” averaged a markup more than 11 percent higher than a comparable non-branded product.

Willie’s Reserve commands an estimated 50 percent premium to non-branded equivalent products. At one recreational store in Denver, an eighth of an ounce of Bubba Kush was slightly over $31, and a gram was $11. At the same store, an eighth of Willie’s Reserve OG Bubba Kush was $45 and $15 per gram, a significant premium.

Surprisingly, Tommy Chong’s “Chong’s Choice” had no premium.

Conclusion

The challenges of having to create a national marijuana brand on a state-by-state basis are daunting.  But the lure of establishing brands that could be the marijuana equivalent of the “Oscar Mayer Weiner” continues to entice marijuana entrepreneurs.

Mr. Friedland is CEO of INTIVA Inc., director of CannRx, a founder of Israel Plant Sciences and has other involvements in the cannabis industry in the United States, Canada, and Israel.

Jeffrey Friedland is the author of ‘Marijuana: The World’s Most Misunderstood Plant,” which is available in print and Kindle editions athttp://www.amazon.com/author/jeffreyfriedlandAmazon.