Beverage of Choice: Exploring the Cann and Green Thumb Industries Partnership
“There are a lot of people who want to incorporate cannabis into their lives recreationally without the fear of getting too high,” said Cann co-founder Luke Anderson
Recently Green Thumb Industries (GTI) and Cann beverages made headlines on a partnership arrangement that brings a leading cannabis beverage into the GTI network of dispensaries and retailers. This is a fantastic combination, taking the best selling cannabis beverage brand (consumer dollar spend) and combining it with a leading cannabis retail network.
The Beverage category is small but growing, accounting for roughly 2% of all cannabis sales, and previously a missing element to the GTI portfolio. This partnership benefits GTI’s product assortment and basket sizes at retail, and drives Cann exposure beyond their home state of California. It is a good start, but will need further investment to really capture the opportunity.
The Green Thumb (GTI) Brand Strategy
The Cann partnership brings a new group to GTI’s stable of notable brand partners, including Beboe, Dogwalkers, Dr. Solomon’s, incredibles, Rythm and The Feel Collection. It’s a variety of brands with origins from all over, but most of the partnerships are with brands originally developed outside of GTI’s core markets of Illinois, Florida, Maryland, Massachusetts, Nevada, New Jersey, Ohia and Pennsylvania. Their brand collection covers most categories of cannabis products, even smaller ones such as Tinctures under the Feel Collection, most likely a valuable category in the many of the medical markets they are in. Some of their brand partners have a long history, such as Incredibles, an original Colorado edible company within its early medical days that transitioned into adult-use. As part of the incredibles partnership, the brand has two distinct presences, Incredibles Colorado (through Medically Correct) and the Incredibles products under GTI.
The Missing Link: Beverages
A Beverage category product was long overdue for GTI, and Cann is the first category leader GTI has brought in to the fold, which is a testament to their strong positioning in the market.
The GTI strategy is about bringing brands from markets where they don’t have a direct retail presence, and licensing those brands to produce and distribute in their stores outside of the brand’s core market. As in the case of Incredibles, it may result in a split of the brands product offerings, not uncommon in licensing structures where the licensee in a new market may make a subset of products within the brand portfolio. It’s a synergistic strategy, as the retailer (GTI) gets an existing brand, with the ability to leverage much of the product innovation work (one of the value creation methods for CPG) in external markets done by the brand, and the brand (Cann) gets a broader reach and a path to mass-market opportunities, without direct investment into each fragmented market.
Introducing Cann
The Cann product currently leads in California from a dollar sales perspective. In February 2021, their sales at retail in California exceeded $1M. In the context of all category sales, this might not be particularly notable, as the top brand in California did over $23M in revenue in February. But $1.1M taken in the context of the Beverage category, Cann accounts for 23% of total dollar spend on Beverage in February.
Cann set itself apart by innovating within the category. Taking a different approach from higher potency (10mg+) beverages it brought to market a 2mg of THC per drink product — specifically targeted for social consumption with clean, mainstream branding you might see in the seltzer or canned wine category. With 2mg of THC per drink, the intention is that you can have more than one without overdoing it. This is the polar opposite to competitive brands, like Uncle Arnies which provides 100mg in a single serving and ranks just behind Cann in terms of dollar sales in February 2021.
A premium product with a premium price tag
Cann’s positioning is respective of its pricing. On a per milligram of THC basis, Cann’s equivalized price comes out near the top of the charts at $1.69 per mg for their Lemon Lavendar 6 pack (containing a total of 24mg CBD, 12mg THC), pre-tax. In addition the single serving variant of Cann’s Lemon Lavender Social Tonic (4mg CBD, 2mg THC) has a per mg of THC price tag of $2.89. To put this in context, a single serving competitive sparkling water product Lagunita’s Hi-Fi Hops Unplugged Sparkling Water (18mg CBD, 2mg THC) clocks in at $3.31 per mg of THC, pre-tax. With Cann, you get a $0.42 savings although you are getting 14mg less CBD with Cann.
The Cann consumer profile
Generally a premium price point attracts a customer who has a higher disposable income, and that is generally the case for older generations. Millennials might not be considered older, but in 2021 the ‘cuspers’, or those that are the first of the generation are in fact turning 40.
In fact, the audience for Cann seems to match the audience from some of its more prominent celebrity investors: Gwyneth Paltrow, Baron Davis, Rebel Wilson, Ruby Rose, Darren Criss, Casey Niestat, Tove Lo, and Bre-Z.
It’s useful to look at this in context as well, asking the question is the Cann consumer profile the same as the general Beverage category consumer? You can see below that in fact Cann overindexes significantly on Female Beverage consumers, particularly Millennials and underindexes on Gen Z, heavily with Male Beverage consumers.
How Cann is leveraging the value creation playbook
As part of this series of essays, I work to tie brand strategy back to the the strategy leveraged by mature Fast Moving Consumer Goods (FMCG) on value creation. In the context of the Cann brand, I think they are executing on this playbook well in a variety of ways.
1. Perfected mass-market brand building and product innovation.
Product innovation is key, and Cann came to the California market with brand positioning for social consumption, with a low-dose (2mg) product. They aren’t the only 2mg Beverage in the market, see Lagunitas Hi-Fi Hops Unplugged, but they were the first to position as a social, lifestyle brand. This strategy seems to be working, but seltzer style products are heating up and we’ll soon see a more competitive framework from brands like Rebel Coast.
2. Built relationships with grocers and other mass retailers that provide advantaged access to consumers.
A relationship with GTI is core to the mass retailer strategy and getting access to consumers beyond California is key. With GTI’s retail footprint, Cann is able to generate mindshare with consumers. Also, with the lack of a Beverage product on many GTI menus, Cann becomes the default associated Beverage brand for GTI customers. For GTI, the advantage comes from expanded baskets. In fact, in a market like California, over 40% of transactions that include a Beverage product, also include an Edible. Adding a beverage to your transaction is a perfect example of cross-sell and upsell patterns to drive revenues up. It provides a natural sales boost to GTI retailers by adding a single brand to their store’s assortments.
3. Entered developing markets early and actively cultivated their categories as consumers became wealthier.
Many of GTI’s retail markets are medical only, and introducing the brand early to medical consumers can begin to generate mindshare that may translate nicely into future adult-use consumption in areas like New Jersey and Pennsylvania, both markets that GTI operates in that have a legal framework on the way. As millennial consumers continue to age their purchase power grows, which will further expand into that popular demographic for Cann.
A good start but even more opportunity ahead
This partnership is a win/win for both parties involved. GTI gets access to a new category of products through a top-selling brand and Cann gets access to a larger market footprint, without direct investment in licensing, production and distribution.
Areas that the two should focus on to really maximize the opportunity include Pricing optimization and Demographic expansion.
How pricing can impact sales
Looking at best selling Beverages in California by unit sales, not dollar sales, we see that a majority of Beverages are sold as single servings. While Cann offers single serving products, they are on the very expensive end of the spectrum on a price per mg THC basis. Working on price optimization may drive higher overall transactions as Beverages are more of a throw-in product at the point-of-sale (think grabbing a Coke as you are in line at the grocery) and having a Cann product that is within reach of most consumers wallet can drive larger baskets and more brand sales for Cann.
You can see Headset’s Best Selling California Beverage list, based on trailing 90 days unit sales includes a lot of single-serving products.
Demographic expansion
Similar to the early days of alcholic seltzer brand White Claw, sales for Cann are skewed towards Females Millennials. To really capture the opportunity, Cann should explore ways to market the brand to a broader gender base, similar to the ‘No Laws When Drinking Claws’ marketing campaign moved White Claw into something that was socially acceptable for a younger male audience. One area of strong growth in cannabis is Gen Z, which already accounts for 12% of cannabis sales for those aged 21, 22 and 23 with more aging in every day. Cann is not as attractive to that audience (Gen Z males account for 8.2% of Beverage sales in California, but only account for 1.4% of Cann sales), and to maintain relevance Cann should consider bringing those consumers in whether through pricing, positioning or a new brand within the portfolio.
Beverages are gaining steam
The Beverage category is still small, but growing. It’s a great format for new consumers, and as more and more consumers are entering the cannabis category for the first time, having a mainstream brand like Cann available across a variety of markets will set them up for success, so long as they are mindful of the rising Gen Z consumer and price pressure from competitive products.
Takeaways:
- Beverage market is small but growing, accessible format, plenty of room for product innovation as shown by Cann’s rise
- Cann is leveraging GTI’s success to generate value for the Cann brand
- The Cann brand is premium, with a consumer profile that matches their notable investor base
- A good start, but there are still opportunities to be pursued with new demographics and pricing strategies
