Farm-to-Pre-Roll-to-Illinois: Ascend Wellness & Lowell Farms
“Lowell Smokes is an iconic American cannabis brand that deserves a home in all markets where consumers are free to enjoy cannabis,” — George Allen, Chairman, Lowell Farms Inc.
Similar to the announcement with GTI and Cann, we see Ascend Wellness (AWH) a cannabis multi-state operator (MSO) bringing a California brand into broader distribution throughout the US, this time Lowell Smokes Pre-Rolls from Lowell Farms. This isn’t the first brand partnership for AWH as they already carry notable brands like Cookies, 1906 and Airopro.
Lowell’s made a big splash shortly after California legalization with strong brand building in their home market driven in large part by celebrity endorsements, Coachella music festival trends and even a West Hollywood Cannabis Cafe. But will their brand equity built on a California narrative carry effectively into Illinois and Massachusetts?
California the trendsetter
While not all trends start in California, it does have a reputation for being a strong driver of cultural trends that end up expanding nationally. From skating to surfing, casual fashion to car culture California has always been a market that has a strong influence on the rest of the US.
Leveraging this coveted role in American culture now carries through into cannabis companies. A recent example is with JAY-Z’s The Parent Company, whose stated strategy has foundations on building out notable, trendsetting brands in California with plans to later bring them to the broader US market. A recent marketing campaign from Monogram, a Parent Company brand, replicated a classic 1960s California photo series from Slim Aarons that highlights attractive people doing attractive things in attractive places is using that California cool to drive brand awareness.
Lowell’s California Story
The Lowell brand was built on the the mythos of a fictional farmer from 1909 named William Bull Lowell who ends up in jail for refusing to stop growing and consuming cannabis at his farm in the Central Coast of California. With this story at its foundation, Lowell expands on its ‘heritage’ roots to provide sustainably grown cannabis packaged with natural materials with an old-timey apothecary branding vibe.
From there, Lowell’s has leveraged the Hollywood playbook, getting celebrity endorsements from Usher, Chelsea Handler, Bella Thorne, Diplo and Miley Cyrus. Capturing the zeitgeist of California legalization in 2018, Lowell continued making waves with a West Hollywood cannabis cafe with on-site consumption and an Instagram-friendly weed crown for Coachella, ending up a top selling Pre-Roll brand in the new emerging market.
Since its early marketing blitz culminating in features written for the New Yorker and Robb Report, Lowell has expanded from its humble Pre-Roll beginnings to a number of categories, from Flower to Edibles to Vapor Pen. More recently, its founders were accused of producing cannabis products illegally in a farm also in the Central Coast of California — perhaps taking a cue from old William Bull Lowell himself. In a raid on the facility, regulators seized over 2,000 pounds of Flower, close to 18,000 Pre-Rolls and almost 200 pounds of kief and shake. While not admitting to wrong doing, the founders settled for $500,000. Since then, the brand mark has been acquired by Indus Holdings, who took on the Lowell name and hopes to scale beyond the golden state, with the AWH relationship pointing to the strategy.
The Pre-Roll Landscape
In California, the Pre-Roll category is the fourth best selling category of cannabis, coming in at $137M for Q1 2021 (pre-tax). Most subcategories within Pre-Roll have shown limited growth with the exception of the Connoisseur / Infused segment, which has grown 200% year over year.
While at one point Lowell may have been the best-selling Pre-Roll brand in California, that is no longer the case with the brand ranking #5 within the first quarter of 2021. It’s top selling product is a Hybrid Pre-Roll 7-pack has shown strong year-over-year growth Q1 2021 vs Q1 2020 generating over $502k in sales revenue (pre-tax). For all the brands premium positioning with its marketing and packaging, the price point lands close to average at just about 12% more expensive than average equivalized pricing (price per gram) for Pre-Rolls in California, which indicates a great value for a premium product.
The Ascend Strategic Licensing Agreement
With Ascend Wellness bringing Lowell Farms products to the Illinois and Massachusetts markets, it will broaden access for a born and bred California brand and give Ascend a great new Pre-Roll line of products to carry at their locations. In the release, AWH Founder and Chief Executive Officer Abner Kurtin mentions that “We’re excited to add Lowell Farms, a well-established, beloved brand to our Ozone offering.” Ozone is a premium line of products, produced and distributed by AWH.
How AWH adds Lowell to their Ozone line will be interesting to watch, as Ozone products are positioned similarly, albeit at a higher price point. While llinois and California have very different pricing structures, looking at the Ozone Lemon Cake 5-pack Pre-Rolls which retail at $45.00 for 1.25g shows equivalized pricing (per gram pricing) of $36 vs. Lowell’s comparable best-selling Hybrid 7-pack Pre-Rolls which retail for $41.12 for 3.5g shows equivalized pricing of only $11.75. Given this price discrepancy, it will be interesting to see if buying Lowell’s in Illinois ends up 3x more expensive than their retail price in their home market of California.
Value Creation Playbook
With strategic arrangements like this I believe Lowell’s is leveraging a few elements of the value creation playbook, notably:
- Perfected mass-market brand building and product innovation.
- Built relationships with grocers and other mass retailers that provide advantaged access to consumers.
- Entered developing markets early and actively cultivated their categories as consumers became wealthier.
They have done a fantastic job of building a great brand that has lacked mass-market distribution beyond California, this partnership brings them closer to their national aspirations. While this arrangement doesn’t go beyond their Pre-Roll line of products, in California Lowell’s has innovated with other formats including Edibles and Vapor Pen.
Entering in a licensing agreement with a mass retailer, Ascend Wellness, will give Lowell more access to new consumers in new markets. In California, the consumer profile for a Lowell product purchaser over-indexes to older generations, doing particularly well with Baby Boomers and Generation X vs a younger audience. With extension into new markets, we’ll see if this California brand can bring in the younger demographic.
Finally, Illinois is very much a developing market and growing quickly. Much like their early success in California, building a consumer base early on in these new markets can translate into lasting sales success over time.
What to Watch For
Similar to the Cann and GTI relationship, I think this is win-win for AWH and Lowell Farms. Market fragmentation within cannabis is challenging, and entering into strategic licensing agreements give brands a great way to build exposure and retailers an opportunity to bring tried-and-true brands to a new consumer.
Here are some items I’ll be watching for:
- Can the California trendsetting success translate into Illinois and Massachusetts sales?
- What does overlap with premium Ozone branded products look like?
- Will the consumer profile of an Illinois and Massachusetts Lowell consumer match that of California?
- Will we see the other Lowell formats, like Edibles or Vapor Pens be introduced down the line?
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