Young consumers want weed products, from CBD makeup to THC-infused beer. Here’s what brands should know about the cannabis craze and why they shouldn’t (puff, puff) pass on this opportunity…
Cannabis has caught the eyes of major brands as its potential cashflow reaches new highs. As we covered in our recent trend Cannabis Infusion, it’s not just indie upstarts like Milk Makeup and Recess looking to fog up their respective markets with marijuana-infused products: major alcohol brands Anheuser-Busch InBev, Constellation Brands, and Molson Coors are all striking up deals with marijuana companies, Coca-Cola made a major investment in beverage company Dirty Lemon, and Estée Lauder brought a calming face mask to Sephora. Even the Marlboro man is toking up, reports Bloomberg, with the cigarette company’s parent brand infusing $2.4 billion into the marijuanaconomy.
The Harvest Investor reports that the market is expected to reach $20.9 billion by 2021 and increasing legalization and decreasing regulation could open the floodgates. Canada has completely legalized recreational marijuana, while ten U.S. states and Washington, D.C. have now legalized marijuana for recreational use for adults over the age of 21, and 33 have legalized medical marijuana. And the recent passage of the 2018 Farm Bill just last month could change everything for brands. One hemp seed company’s CEO explains, “With this Farm Bill, people who were scared to get involved are now waving around millions of dollars…It really hasn’t changed anything about the infrastructure of the business, but people who [were] on the fence are now eager to get in.”
If young consumers have anything to say about it, the proliferation of both legal and illegal cannabinoids into the CPG market won’t be slowing down: our Cannabis Infusion trend report found that 57% of 18-36-year-olds are interested in trying a product with CBD in it, and 76% believe marijuana should be legalized for medicinal or recreational use with the greater majority saying both.
With the gold rush on the green stuff just kicking into full wild west mode, we looked to an expert to find out more. Jeannette Harkin is the SVP and Chief of Staff at MJardin, a company that handles the cannabis process from bud to shelf and recently acquired GrowForce. She gave us the rundown on the current state of cannabis, whether CBD really works (or marketers are just blowing smoke), and more:
Ypulse: Can you give us some background on the cannabis industry?
Jeannette Harkin: If you think about a supply chain from growing the cannabis to processing it, whether it’s flower or oils, and then into the retail store, many businesses own that whole supply chain right now because of the way that it’s regulated. You don’t really have many other businesses that operate that way. Apple is one example of a company that produces its own products and then has its own products on its own shelf. You really don’t have a consumer goods company (if you think about cannabis as a consumer good) that owns that whole space, so it’s still a pretty immature market. For example, you don’t have Budweiser stores or vodka stores; you go to the grocery store for beer because you don’t have that kind of integrated model.
That’s going to change over time for cannabis. We’re not going to be able to own the entire supply chain. What’s going to start happening is that you’re going to see companies start to move towards concentrating on one part of that supply chain. It will start to move away from this model where you don’t really have much choice, to having choices, so brands are really going to start coming into play. California is a good example to see where you have leaders starting to come out, brands being developed, and people starting to gravitate towards identifying with those brands and seeking those brands out. Most people have the properties that they like, like Coca-Cola or Pepsi, and you’re going to have the same preference for the type of joint that you like because you identify with the brand and you like the THC percentage that’s in that particular strain. In the market, we’re going to start moving away over time from regulation against this vertically-integrated model to more of a brand-centric model where it’s like a consumer good.
YP: Do you think marijuana is becoming more mainstream?
JH: Absolutely. One of the biggest demographics in Canada that we’re targeting is Millennial moms switching from white wine and chardonnays to cannabis. It’s relaxing and it can be a way you socialize that’s less stigmatized in Canada, where it’s definitely hitting popular culture in a different way. There’s a huge drought in Canada right now because we don’t have enough supply to meet the demand in the market, but once things start to move, they’re going to move pretty rapidly.
Thanks to the Farm Bill [in the U.S], companies will be able to extract CBD. Hemp is a very robust plant to grow and CBD has many medicinal and therapeutic applications. In addition to its own industrial applications, there’s an emerging market around CBD products. All CBD products that are sold in the U.S. right now are from cannabis seed oil, and they have minimal amounts of CBD in them. If you see a skin care line or a lotion that’s sold over the counter, it’s more of a marketing ploy at this point. In Europe, for example, they allow CBD isolate, which is a concentrated form of CBD. If you’re going to have a CBD skincare line in Europe, you’re actually going to be getting a therapeutic dose of CBD. It helps with inflammation as one of many therapeutic qualities, so if you have red skin or acne, it helps.
YP: So is CBD more of a “snake oil” product or hoax right now?
JH: The product currently used is coming from cannabis seed oil, which is a food grade oil like avocado oil or coconut oil. It contains very little CBD. If you actually go into a CBD isolate, so a pure form of CBD that’s extracted either from hemp or cannabis product plant, then you’re talking therapeutic, you’re not talking snake oil, you’re talking pain reduction and inflammation-reducing for the skin.
To be therapeutic or to be a medical product or device, you have to have research and you have to have claims that can be backed up by scientific data, and that’s what’s missing in the industry in a huge way because of the limitations on testing these types of products. You can’t just say that a CBD cream helps with rosacea. That’s a medical claim, and you can’t make that claim unless you have research. The industry has a long way to go from where it is now, which is using cannabis seed oil to moving towards a CBD isolate product, and then moving towards a real, therapeutic product that can help with certain issues.
YP: Do you think THC, CBD, and other cannabis compounds fit into the wellness industry, and play into Millennials’ penchant for health and fitness?
JH: I completely do. Right now, you have medical, and that’s one side of the business and very defined, and you have recreational retail. And that’s it. It’s either retail or medical. If you actually take those regulations and pull them apart a bit and create the space in the middle, there’s a big space for wellness. If you think of the product lines that could go in that space, there could be CBD drink for after you work out for muscle relaxation. Then there’s the pet care industry, where owners are giving CBD products to older dogs and dogs with anxiety. But if you were in a regulated market where only medical cannabis is allowed, then you can’t play ball. Would you really go into a dispensary to get your wellness products? No, you’d go to CVS. And when the market starts to open up, and these products are allowed more over-the-counter, that wellness space will become more mainstream.
YP: Do you think that medical uses aren’t explored because of the stigma attached to marijuana?
JH: If you really want to get into why, it’s not the stigma. It’s the ability to make a profit. You can’t put a patent on the plant, and so there’s a rush right now to take CBD and THC and synthesize it into a chemical compound that can be created and that they can put a patent on—because, again, they can’t patent a plant. If your Novartis or Pfizer or one of these huge companies, you’re not looking to make a product that anyone can make or grow.
YP: Why do you think acceptance of marijuana, especially CBD, has increased recently? And what’s driving the popularity, especially among young consumers?
JH: I think that it’s twofold. One: the awareness around the dangers of marijuana or the concept that it’s a gateway drug have proven to be false. And two: there is a definite place and a certain lifestyle for cannabis that doesn’t have negative ramifications. But I’m also going to say that this is a business, and there have been people working for the last 30 years trying to move cannabis into the legal markets. And once that push happens, there are billions of dollars to be made. All these companies can go public on the Toronto Stock Exchange, in the Canadian Stock Exchange, and there’s billions of dollars of wealth created in doing this. And you have to seeing this happen as well in the States. You can tax this huge amount in states like Colorado, where that tax revenue went into education. So there’s a big business angle to this through taxation and what I’ll call capital markets, which is the ability for companies to go public and be a publicly traded stock. That’s wealth creation. So when you start to enter that world, then you’re talking big money, big influence, and big lobbying.
YP: Do you have any advice for companies that are interested in the space, especially when it comes to concerns about potential stigma?
JH: You have to figure out where along that supply chain you want to play. It’s highly regulated, so there is a high barrier to entry to get into the space, so the companies that are interested should look for partnership plays, whether that’s across a wellness product or co-branding in-store.
I would suspect the stigma is a bit less with CBD as it becomes more mainstream. The issue with CBD is if the Farm Bill passes, think about the industry just flooding. There’s no barrier to entry to just taking a hemp plant and turning it into a CBD drink, a cream, a pill, a lotion–anyone can do it! But it’s brands that people are going to identify with and want to buy. Like why would I buy Lord James CBD lotion out of California? It’s because I identify with the brand. It’s like why you buy CVS brand versus the main brand. Companies have to be careful of what their differentiation is and if there are any other barriers for other companies trying to enter the market. For instance, there’s probably 50 companies trying to create a CBD drink right now, and Coca-Cola is going to do it and put it right next to their Coke and it’s going to blow everyone out of the water.
YP: Do you have any predictions as to what products using CBD are or could be the most popular?
JH: A CBD drink, like a sports drink, is my opinion. Also, CBD skin care from eczema to rosacea, acne, and those types of symptomatic skin issues. And then pain relief. So, if you have sore joints or muscles, certain types of cannabinoids can really help with pain relief. I think in those wellness spaces—drinks, pain relief, and inflammatory skin conditions—are really places where CBD can help to solve a symptom.
YP: Do you have any predictions for the future of marijuana, especially when it comes to companies getting involved?
JH: I think that cannabis and hemp will be commoditized to become like corn or wheat. It’ll be a commodity that’s grown in an area that’s best for that product to be grown, which is near the equator where the sun cycle and the temperature mean you have significantly less cost per gram. Once you’re growing in Colombia and Ecuador, in five to 10 years these grow-ops that are indoors or are green houses that are located in climates that really aren’t best for marijuana, will start to go away.
And the product itself will move away from flower. We won’t be smoking flower anymore, and it’ll be these extracted products. Oils, vape pens, edibles, and infused products is where the market is likely going. The bongs and bowls wlll slowly go away over time because combustibles and smoking still have harmful effects, so I think people will start to move away from them.
SVP and Chief of Staff, MJardin
Jeannette Harkin has over 15 years’ experience leading strategic initiatives at organizations worldwide. Her expertise includes process optimization, project management business launch and execution, IT strategy, and organizational design. Jeannette led the launch of GrowForce, a Canadian based cannabis platform, in the beginning of 2018. MJardin Group acquired GrowForce in December 2018 and Jeannette transition into the role of SVP and Chief of Staff. Prior to joining the cannabis industry, Jeannette was at Bridgewater Associates, the world’s largest hedge fund. At Bridgewater, she led the formation of the Dalio Family Office and Foundation. Prior to Bridgewater, Jeannette was in Management and Strategy Consulting for 9 years leading project delivery teams.
This interview has been edited and condensed.
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