In an oversaturated market the best cannabis & CBD brands will win out

Over the past few years, the legal cannabis and CBD markets have seen some big fluxes, as the “Green Rush” quickly attracted both investors and producers. With a significant number of investments being made on the basis of capacity (growing space) and licenses to grow cannabis, the result has been sky-high valuations and a high degree of speculation. However, market activity in late 2019 and early 2020 indicates that there will be trouble ahead for many of these investments as it is clear the highly valued ‘capacity’ will not be the factor that wins out in the long term.

The North American market has become saturated with high-quality cannabis and hemp from an ever-growing number of producers, with Statista suggesting there are upwards of 2000 growers in the US alone - but let’s be honest. Cannabis isn’t exactly difficult to grow and is, after all, called ‘weed’ for a reason. This oversupply has led to substantial fluctuations in the value of these crops and the companies that produce them. Additionally, the black market, free of licenses and regulation, and with strong consumer purchase habits, remains very relevant and is an inhibiting factor in companies achieving their somewhat optimistic valuations. 

Banking on growing capacity and floor space was always a fallacy and doomed to fail. While there is an established and recorded demand for cannabis products, it is still a new market taking on well established black and grey market supply chains, Along with taxation, the licenses and regulations have made these new suppliers more expensive than the black market supply they aimed to replace and upon which their valuations were built. 

This, in turn, has led to a race to the bottom; who can grow a gram for the cheapest, compete with black market sources, and undercut their rivals. Not surprisingly, and as with the capacity strategy, this race is also fast becoming a route to failure. With margins squeezed and investors demanding returns, previous plans are thrown out the window and, as a result, quality will suffer. Granted, current oversupply will need to come off the balance sheets and allow for fresh crops, meaning the situation is short-term, but it will lead to some suppliers going under as they fail to compete or recoup their investments (which, as an aside and if all else fails, could spark a renaissance in hemp paper from the abundance of hemp fibre; something that we at it’snotrocketscience are fully behind given the environmental credentials of hemp stock, even over recycled wood pulp paper). 

So who will win out in the long run? Those companies with the deepest pockets and widest folios? For sure, but it will also be those who invest well in their brands and awareness, financial might alone will not save these companies. 

Why? Because ‘brand’ transcends ‘product’. Brands occupy a place in the wider audience’s subconscious. They stand for more than just the cannabis they represent and possess an ethos that customers can buy into and grow to love. It’s a given that the majority of producers are all growing from the same genetics with similar processes so, the differentiator will be the brand, the packaging and the communications. After all, anyone can make cola, but there’s only one “Real thing”. 

Having created several beautifully crafted cannabis and CBD brands in the last seven years it’snotrocketscience has a rich history of brand building in this sector and is eager to do even more. 

We specialise in brands that stand out, avoid cliches and have at their core a set of values that distinguish them from the others. Whether that distinction is to be found in their positioning, packaging or creative assets and activation, we believe in this market. While novel (no pun on novel foods intended) it is a market that is no different to any other, as the same diligence and beautiful execution are needed to win in cannabis as they are to sell handbags or groceries. Even in a new market sector such as this, the tried and tested approaches to brand building will win out.  

Those who invest heavily, not just in their product, but also in their brand will be the winners in the end. They will be able to withstand the current peaks and troughs of the market and it’s wildly fluctuating valuations. They will buy up capacity and supply at knockdown rates, as those companies who failed to invest in branding go to the wall. Those who invest in building their brand will ultimately build value and market share, becoming the leaders in the space.  

Let’s build your brand together.

Stephan Roux is Executive Creative Director of itsnotrocketscience and Co-founder & COO of Genus.media