Are celebrity-branded cannabis businesses sustainable?
Guest post by Emily Fata, Founder of Green Pioneer
Cannabis has been an underlying theme in music and pop culture for decades. And capitalists are catching on. From Leafs by Snoop to Marley Natural to Willie’s Reserve, dispensary shelves are growing cluttered with familiar names and celebrities are chomping at the bit to take a slice of the billion-dollar market.
As California— the epicenter of music, culture, and media—votes to legalize the adult-use market in November, the synergy between celebrities and cannabis is emerging in full force. The Game, a Los Angeles-based rapper, recently bought a stake in a licensed dispensary in Orange County. Wiz Kalifa, Melissa Etheridge, and Oteil Burbrdige are just a few other musicians who have launched their own cannabis products in the past year. Musicians can be phenomenal sales reps, but is this a sustainable branding strategy or just a bubble waiting to pop?
In this study, we’ll dig in on some pricing data, interviews, and consumer psychology to determine whether this niche is sustainable in the long run. We’ll also hear from Josh Ginsberg, a musician and cultivator for High Street Cannabis Station, on the connection between music and cannabis and whether it’s possible to create an authentic cannabis strain that draws upon a genre or sound for inspiration.
What drives consumers to purchase these products?
Snoop Dog was the first celebrity to come to the market in November 2015 with a line of personally branded cannabis products. When the brand had a limited release at LivWell dispensary in Denver, it was Snoop’s fans who showed up to purchase strains like Tangerine Dream and Cali Kush, as well as chocolate bars, cannabis drops, gummies, and peanut butter cups. Customers came from multiple generations, which a representative from LivWell credited to “Snoop Dogg’s prolific decades-long career.”
Although Leaf by Snoop’s revenue has leveled out over the past several months, LivWell stated that the brand’s products have appealed to customers of all walks of life, “most particularly cannabis aficionados seeking high-end products and customers looking for unique experiences.” Ginsberg, who has been cultivating cannabis commercially in Colorado since 2013, did not disagree.
I would purchase a Snoop Dogg product based on his legitimacy as a pot enthusiast. I would find it hard to believe that he would promote a product that he not only didn’t enjoy himself, but believed wasn’t a good product for consumers.
Celebrity-inspired cannabis brands have another element working in their favor; their high-end packaging and designer branding can stand out on dispensary shelves. Leafs by Snoop tapped Pentagram Design Firms to create its “California cool” aesthetic, while Marley Naturals branding reflects the work of Heckler Associates, the creators of the Starbucks mermaid logo.
Can celebrity-sponsored products sustain price differences?
Despite the sleek, professional branding of celebrity products, the price points are only slightly higher than comparable strains sold in the same dispensaries. Price points for celebrity-branded products are approximately 17% higher than comparative products across the board, based on a weighted average of prices for strains, concentrates, and edibles from Leafs by Snoop, Marley Natural, and Willie’s Reserve. Customers end up paying between $.09 and $.17 more per serving of flower for a celebrity-branded product.[1]
The following table illustrates price point differentiation between celebrity-branded Indica strain versus the price point of a comparable non-celebrity branded Indica strain sold in the same dispensary.[2] As the market grows saturated with more celebrity-branded products, it is likely that these price points will be subject to degradation and will level out over time.
Is there potential for this niche industry beyond stamping a celebrity’s name on a strain?
A cynic might only say that celebrities and their marketing teams are just capitalizing on a market opportunity. But one only needs to go to an outdoor concert or listen to rap lyrics to see that cannabis has a legitimate connection to the world of music and entertainment. Is it possible to create an authentic brand that actually resonates with a particular song or genre? Ginsberg responded:
To be honest, and as much as I don’t want it to be, I believe marketing a celebrity strain is no more than slapping a brand sticker on a product. Having said that, celebrities like Willie Nelson, Snoop Dogg and B-Real of Cypress Hill have their own gardens, their own growers, and certain strains that are bred and grown by their specific facilities.
Ginsberg suggests that incorporating growing methodology and phenotypes[3] could be a better direction for cannabis branding, than utilizing celebrity names. “You can go into almost any shop today and find Durban Poison. The difference between one and the other is how they grow it and which phenotype they have, not that it has a Native Roots or a Sweet Leaf label on it.”
Consumer psychology experts reference the acronym FRED (Familiar, Relevance, Esteem, Differentiation) to determine whether a celebrity branding campaign will be a successful. As more and more celebrities and musicians sponsor cannabis lines, these products may lose their differentiation on dispensary shelves. According to Harvard Business School marketing professor John Quelch, who published the case study Marketing Marijuana in Colorado in 2014:
I see this as a low-cost vehicle for achieving brand differentiation. Overall I regard this as a relatively unsustainable model, but understandable given the fragmented nature of the local market at the moment.
Quelch’s case study may be outdated but his analysis is on point. At Green Pioneer, we recommend seeking investment and business opportunities beyond the current trends. The cannabis industry is rapidly evolving and creating or investing in a brand with forward-looking and authentic values is truly the key to sustainable success.
[1] Estimated “serving size” of flower is .058 grams.
[2] Marley Natural is currently only available to medical customers in Northern and Southern California. Willie’s Reserve and Leafs by Snoop are available to medical and adult-use customers in Washington and Colorado. Adult-use pricing data was used for Willie’s Reserve and Leaf by Snoop, while medical pricing data was used for Marley Natural. The prices for comparative strains excluded specialty or “Platinum” strains. Pricing data was drawn from Lucy Sky Dispensary, LivWell, and Harborside Health on 9/27/15.
[3] A phenotype is the composite of a plants’s observable characteristics or traits. A cannabis plant may have the same genetics, but each has its own distinctive growth rate, smell, taste, color, effect etc.
About Author:
Emily Fata is a financial analyst, writer, and consultant focused on the cannabis industry. She is the founder of Green Pioneer, a boutique consulting firm specializing in building financial models, creating investment narratives, and designing strategies for mindful, and effective capital raising. Emily has assisted a number of companies in Colorado, Washington, Nevada, Illinois, Florida, Oregon, New Mexico, Maryland, and California raise capital and successfully apply for state cultivation and dispensary licenses. She began her career as an analyst at Fundamental Advisors, a private equity firm in New York City. She graduated magna cum laude from New York University with a concentration in International Relations and Economics.
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