How Should Craft Cannabis Battle the Big Players?
Play to your strengths, not their's
Craft cannabis producers (CCP) have proven they can compete against large MSOs and LPs. However, the game is far from over.
The CCP’s innate strengths are not always sufficient to maintain competitiveness not to mention compete with the size and scale of much larger players - many of whom are improving daily and raising lots of money. The CCP’s size and limited resources eventually becomes a barrier to growth. And sector headwinds such as falling retail prices, input inflation and product commodization hurts all firms regardless of size.
Heres the thing: most CCPs aim for growth and sustained profitability, not merely survival.
How can they compete in a market dominated by larger foes? By treating their modest size, frugality and passion as virtues, and doubling down on their strengths, as follows:
1. Focus
Focus (and passion) enables the CCP to create world class products and capabilities in a deliberately chosen niche. Their success, however, can be illusory given latent business risks. CCPs ought not ape their larger competitors; they should enter new markets only after they have unique value and sufficient capital & resources.
2. Connection
No one understands the cannabis community (including sought-after heavy users and influencers) better than CCPs. This connection can be leveraged through attaining richer consumer insights, tighter retailer/budtender relationships and building more authentic brands. Yet, CCPs can’t take this connection for granted and must regularly demonstrate their authenticity and engagement.
3. Agility
The CCP’s lack of legacy assets, disparate operations and large company ROI hurdles allows them to efficiently innovate, quickly execute programs as well as capitalize on emerging trends. Agility, however, is a double edge sword: it can also make a firm too reactive or lose strategic focus.
4. Partnership
CCPs should do what they do best and share or outsource non-core activities, especially those that require large CapEx investments. Outsourced or shared services (like IT, procurement and HR) can help CCPs leverage scale, minimize cost and secure ‘best practices’ capabilities. But, flexibility often comes with less control over parts of your business as well as higher indirect costs.
5. Local
CCPs are natural partners with important community-based initiatives. For example, they can easily fit into regional appellation (e.g., BC Bud) efforts, sustainability programs and ‘Buy Local’ initiatives that serve all stakeholders. However, the CCP will need to have a collaborative mindset and lots of patience to fully leverage these initiatives.
Next week, I’ll discuss how large MSOs & LPs can successfully ward off the CCP challenge.
#craft #LP #MSO #strategy #community