Cannabis brands are having a tough time growing. After experiencing a 30% jump in annual sales from 2020 to 2021, the industry saw a pitiful 1% growth in 2022 according to the Brightfield Report. Given that several states opened up for business in 2022, the stagnation within the industry is even more troubling.
From the outside looking in, things seem to be coming up roses. Big brands like CANN make cannabis look approachable for all consumers, and both the Democrats and Republicans have their own plans to make federal legalization a reality.
But even CANN, with all of their money and Goop approved chops, is struggling to turn a profit. Thanks in large part to high taxes, a competitive illicit market, and the inability to advertise, cannabis brands large and small are finding growth trickier than ever.
For some brands though, there are possibilities to pop up in new markets without huge investment money or even startup costs. Another beverage brand, CQ (formerly known as Cannabis Quencher), has been able to stake a claim on the East Coast and in the Midwest by embracing a royalty based licensing model. This model allows for a brand in say, California, to enter the Nevada market by using a local manufacturer to create the original California products. In categories like beverages (as opposed to flower or pre-rolls) the final Nevada product is all but identical to the original California one. The Nevada manufacturer will then give the California brand a portion of sales via royalties.
The boon of this model goes beyond the pocket cash of royalties. The same California brand can not only claim a foothold in a new market, but also a higher market share overall – a big win for any brand who may want to keep the option of investment open to them. With little to no startup costs and without having to navigate the complicated legal system of a new state …