Given how new the legal cannabis industry is, though certainly not new for a market like California since it’s the first medical program in the US, executives of many West Coast cannabis companies are looking for guidance and understanding of how to build technology and data infrastructures internally. Headset provides the operational tools to help them do that. With a data solution like Headset, operators no longer have to make blind decisions on what products to make or stock on their shelves.
Although my entire region experiences similar issues, California faces the most obstructive and severe challenges.
The first challenge in California is the profound limitations on licensing. There are 40 million people in California and we have 740 active cannabis licenses. To put that into context, Oregon has just over 4 million people and 800 licenses. This disparity is due to California’s heavy regulations where each individual municipality votes on their own cannabis policy. Basically, it’s up to the cities to decide on policies and how many licenses they will offer. It’s a slow moving process and will become even more challenging next July when Governor Newsom’s legislation to consolidate the licensing agencies into a single entity goes into effect. These limitations are holding us back from realizing the full potential for cannabis in California.
California also has some of the highest taxes on cannabis. This leads to narrow profit margins for all cannabis operators throughout the entire supply chain. Until we have some form of tax relief, it will be difficult for cannabis companies to prosper.
The third challenge is California’s thriving illicit market. It is reported that around 80% of the California cannabis market is illicit, which is a direct result of the challenges mentioned above. Due to high taxes, legal cannabis operators must raise prices in order to make a profit. The illicit market evades these taxes and thus can sell products at a lower cost, leading to a substantial price difference between legal and illegal cannabis products. Many consumers are more likely to turn to the $40 illicit cannabis product over the $70 product from a licensed dispensary because they aren’t educated on compliance and safety standards or why it is important to buy from a legal operator. The price disparity continues to push cost-conscious consumers into the illicit market, especially with the current state of the economy. Until we address these challenges and remove the barrier to entry for consumers to purchase legal, tested products, the illicit market will continue to flourish while the licensed businesses suffer.
The biggest opportunity is creating a fair and equitable industry. We are not just active players in the industry, but also decision makers. As new cities start to vote on cannabis policy, we have the choice to build equity into programs. For example, Los Angeles recently voted to grant licenses only to equity applicants up until 2025. This is a chance to craft policy that will create a fair industry and rectify some past wrongs.
Since the cannabis market is still in its infancy, and we don’t know what cannabis will look like in the years ahead, companies have the opportunity to build out their brands and design key messaging. Strict regulations surrounding social media and digital advertising limit the channels cannabis marketers can utilize, but there are many alternative ways to connect with consumers and educate them on a brand’s products. Making these connections is becoming more and more prudent as we are beginning to see people care more about a brand’s message and reputation than ever before. This opens the door for brands to tell their story outside of the simple CPG-type story through creative and innovative marketing strategies.
Farmer and the Felon, part of CannaCraft’s brand portfolio, is the first that comes to mind. They donate a percentage of their sales to organizations working with people affected by the War on Drugs, like Last Prisoner Project. Their brand is built around bringing this story to light, and they do so in a very connected and visually pleasing way. They effectively removed themselves from the standard CPG image to become an impact brand.
I’m interested in independent cultivators and small producers, so Swami’s Select is another brand on my radar. Co-founder Swami Chaitanya puts a considerable amount of time and personal care into the cultivation process. He sings to, talks to, and plays music for the plants throughout the growing process. Everything at Swami’s Select is about the plant. I appreciate the level of thought and care that goes into this process and find it truly beautiful. Cannabis is very connected to spirituality, so the level of intent put into the plant translates into an entourage effect when consumed.
I’ve worked in the technology world with mobile app developers since I graduated college. I entered the space the same year the iPhone debuted, and that experience in an entirely new industry made me realize I really enjoy working at startups and in emerging high-growth industries. I was eyeing the burgeoning cannabis space for two years before joining Headset.
I was introduced to Cy by an old co-worker who happened to be his neighbor. I was extremely interested in what Headset was doing. It was another few months until I was ready to leave the technology sector for another high-growth industry and by then Headset had really grown up. I took four months off to pursue personal growth and passions before joining the team with the task of getting the California cannabis market off the ground.
My daily work is focused on building the California, Oregon and Arizona markets as a whole. Each day I meet with companies from different parts of the supply chain and educate them on what Headset does, how to integrate a data and technology solution into their overall strategy and present interesting findings that we are learning. I set up these meetings to help bring their initiatives to life.
As the market leader, I am responsible for presenting all of the opportunities within the market and understanding the various nuances, from licensure and policies to recognizing who the movers and shakers are. I am the first connection point in the market and facilitate that information back to my team.
I am very ingrained in the cannabis community as a whole and personally involved in several associations.
I am a member of seven policy-related associations, four of which are in California. From the NCIA and CCIA to the ADA and ORCA, the organizations make up all parts of the supply chain, providing me with a deep understanding of what is happening in the market from a localized policy perspective. I’m able to network and interact with people in every step of the supply chain, all of whom are pushing forward similar policy.
I’m also involved with equity programs, including the Oakland program Make Green Go and Los Angeles’ equity initiatives, and I sit on the CCIA DISE committee. All of these groups are focused on fair licensing to ensure an equitable industry. It is beneficial to see the different view points since oftentimes an equity applicant is not sitting in the associations.
Additionally, I participate with thought leaders in attending industry events, being vocal in the market and sharing learnings on social channels like Instagram, LinkedIn and personal blogs. This group is essentially the heart of our community. It gives me a well-rounded perspective to better understand how all of these associations think and keeps me informed on what is happening in each state’s market.
If we are missing any piece of this healthy supply chain perspective, we are left with a limited view. Therefore, my approach is based on community involvement to gain insight into every piece of the supply chain, allowing us to build a strategy beneficial to the supply chain and help ensure we build a fair and equitable industry. We have new professionals coming from corporate backgrounds in CPG along with legacy operators who have built the industry for us, each with their own unique expertise and perspective. Our involvement in the community and relationships with these leaders shapes the entire strategy I’ve built for Headset within these markets.
People are the most important part of cannabis. We must grasp what is important to us as individuals while working together to build trust within the community. This is necessary to get through these turbulent times and to grow from a young market into a mature industry.
We recently discovered a massive change in customer wallet share. For the very first time, the incoming generation of consumers, Gen Z, the largest category of sales wasn’t flower, instead surpassed by vapor products. Typically, this category makes up the majority of sales, but COVID-19 may have influenced the purchasing preferences of Gen Z consumers away from inhalables. Although California saw a massive shift from inhalables to edibles and beverages, among other non-inhalable products, Gen Z’s step outside the norm is especially notable as older generations fade out of the market and Gen Z grows into it. Brands and retailers need to thoughtfully consider this data as they decide how to develop and market products tailored to the preferences of this incoming generation of new consumers.