By Michael Kamins, co-founder and partner at OpenNest Labs.
Whether non-cannabis companies are looking to enter the cannabis space or existing cannabis companies need help with some aspect of the value chain, we’ve set up OpenNest Advisory to help these folks navigate the industry. From finding the right supply chain partner to setting up clinical trials, product testing, and understanding how best to take their product to market, we’ve been well-positioned to help brands out.
We recently brought on a CPG client looking to add CBD to their line of products - not an unlikely move given the general trend of CPG companies exploring hemp. We’re excited about these kinds of opportunities because we see an opportunity to push toward large scale hemp adoption in mass market retail and e-commerce with an existing customer base.
Our scope with the client involved:
● Leveraging what we are already doing for our brands
● Immersing ourselves in their brand
● Doing in-depth market research
● Vetting supply chain partners
● Testing products
● Setting up and executing consumer trials
● Advising on consumer education and go-to-market
1. Consumer Education is Key
We learned the importance of educating consumers as part of a company’s overall strategy. For those of us who have been immersed in cannabis (either on the industry or consumer side), we may sometimes forget how little the average consumer knows about cannabis products. For example, many consumers don’t even really know the difference between THC and CBD, let alone what it means for a product to be full spectrum, broad spectrum, or isolate.
2. Strong Medical Relationships & Insights Will Give Rise to the Best Products
We learned how important it is to build relationships with the medical community, which is why we’re partners with the Wholistic Research and Education Foundation and UCLA Medical (relationships we leverage for our advisory clients). While cannabis research is still nascent, it is growing and has to inform product testing and development. Efficacy and transparency are critical: none of us wants to sell a product we wouldn’t feel comfortable using on ourselves or for our families. By partnering with the right researchers and medical professionals who have or will undertake clinical trials, we can better understand how cannabis interacts with the body. This is absolutely critical for product sophistication and for educational content to build trust, transparency, and adoption. As a recent Nielsen forecast explained:
“Nielsen’s Thinking Beyond the Buzz study found that medical advice is a major motivator to hemp-based CBD trial. In fact, nothing aside from free product trials is more convincing than a health care practitioners’ guidance: 50% of hemp-CBD interested adults said this would motivate them to try a hemp-CBD product, versus 16% for a family member’s recommendation, versus 17% for a friend’s recommendation, versus 15% having the product manufactured from a familiar brand.”
3. CBD Pricing Will Have to Drop
Where CBD is concerned, there is a major differential between the cost of goods sold compared to the retail price. When brands think about marketing, they need to have consumer insights to understand the best price that leads to higher conversion, as opposed to just pricing a product high for the sake of optics. In reality, there isn’t a huge difference in quality between pricier and cheaper CBD products.
4. Companies are Shifting to Direct-to-Consumer and Subscription Models
That e-commerce is on the rise stating the obvious, but the explosive growth of CBD e-commerce sales amid COVID-19 was unprecedented and unexpected. A heavy wave of anxiety has swept the world, and people have turned to CBD for their health and wellbeing. People who have already felt the positive benefits of CBD have increased their consumption, and adoption from new users has accelerated. Shelter-in-place orders, followed by a very slow reopening of retail will continue to drive consumers to discover CBD brands over the internet that know what the hell they are talking about, advocate for their communities, and provide and prove their mission and values are meaningful. This is where the evidence-based educational content comes in especially handy. Effectively reaching CBD consumers to drive them through the conversion funnel requires an understanding of marketing and legal nuances that is very specific to this industry.
5. There’s Still LOTS of White Space
As we sifted through data and insights to help guide our client’s go-to-market strategy, we noticed a few glaring gaps in the market: significant audiences that are going unserved or underserved; prevalent use cases that are being overlooked; and opportunities for pricing that could make for a very competitive offering.
Helping clients navigate the cannabis industry, both on the THC and CBD side, is part of OpenNest’s core serving offerings. Where CPG and CBD are concerned, the opportunity for growth is massive. “While the regulatory roadmap remains ambiguous, one thing is clear: The next decade for the hemp-based CBD market has the potential to be a game changer for the traditional CPG and retail industry.”
Michael is an experienced community builder and culture marketer with expertise in building brands via non-traditional marketing channels. He is co-founder and partner of OpenNest, a cannabis venture studio with a diversified portfolio of consumer products, media and technology businesses that are driving cannabis adoption as a force for positive change. Michael is also co-founder and partner of Trailblazers, a cannabis executive leadership think tank, and a corporate officer of the Wholistic Research & Education Foundation. Previously, Michael led music partnerships and growth at TikTok, the world’s most downloaded app in 2018 with over 2B downloads. He holds an MBA from UCLA Anderson.
The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
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