The reasons: Cannabis is a perishable, crop-by-crop product, and producing the exact clone of a strain in successive generations is difficult.  The exception may be in edibles, but even here, there has to be enough supply to build a national brand, which is the most common way people think of a brand’s accessibility.

The second reason is that world-recognized brands today are held by publicly-traded companies. From the corporate treasurer’s perspective, a corporation’s intangibles, including its brand, are derived from the difference between a corporation’s book value and its stock market valuation.  When there was a wide price gap between the price companies were bought and sold for in the later-1980s, that price difference was often attributable to the corporation’s “intangibles,” which was often its brand value.  (For the more financially-oriented, a brand’s value is derived by taking the net present value of future expected earnings and then discounting them to net present value through a discount model, which assesses the risk of those earnings being achieved.)

Of course, non-profits, such as charities and foundations, also have brand value that makes it easier for them to raise funds, educate the public about their cause and conduct their business.  But the brand for charitable organizations is closely tied to their earned reputations and the good works they accomplish.

Third, the product is illegal in most states. This makes the effort to build a national brand problematic if the product is not accessible nationwide. It is also not inconceivable that reactionary state legislatures can limit or ban marijuana, even in states where it is illegal.

Is Branding Necessary?

While building a brand takes decades and hundreds of millions of dollars, the good news is that the cannabis industry may not need to be brand conscious in the first place.  Yes, local branding efforts will prove valuable at the urban and community levels, but depending on where a business is in the cannabis production chain, branding may not be that helpful.

At the grower’s level, a business’s reputation (which is only one element of a brand) will depend on delivering quality, pure, tested products.  At the dispensary level, the basics of good service, reliability and fair prices are the expected behaviors that can be buttressed by community involvement, good labor practices and adopting a co-op corporate structure. Suppliers will build their reputations based on positive bread-and-butter business practices, enhanced by clever forms of differentiation (coupons, partnering with complementary businesses, new products, etc.)  But for all these segments, branding will prove to be expensive and frustrating.

Marketing in the Social Media Age

Modern corporations, most of which are at least a generation old, that have become household names, built their brands in a different era.  Only over a decade ago, media was limited to print, TV, and radio, was more channeled. Traditional advertising (almost always through an agency) was the accepted path to reach customers and was determined by the client’s ad budget. Building brands in a pre-internet world was always an expensive challenge, but it was easier since there were fewer media variables to consider and consumers were more readily identifiable.  They also had more disposable income.

It’s certainly understandable why new business owners today focus on building brands. Brands, as a form of intangible were called “goodwill” on corporate balance sheets until ad agencies began to isolate and quantify the name values of Coca-Cola, Ferrari, Chanel, IBM, and Polo. Academics and financiers have found this fertile ground for study.

For instance, one study of companies in the Financial Times Stock Exchange (FTSE) Index found that 70% of the market capitalization of its top 100 companies was intangible, while 20 years ago that same value was 20%.  Today, brands are considered a global company’s most important single company asset, as exemplified by the combined values of Microsoft ($69 billion), Apple ($145 billion) and Coca-Cola ($56 billion), which in 2015 were valued at a combined $270 billion, according to Forbes.)

But all this does not translate into the inherently, non-traditional, mostly privately-held cannabis industry. People identify quality services and products brands both intentionally and sub-consciously. The subconscious makes lightning-fast links between positive and negative emotions and outside events that are both current and past. This occurs in every human interaction regardless of whether a business in intently focused on building a brand or just serving a random customer. 

Too many entrepreneurs misunderstand and misuse the idea of branding.  I’ve heard many people say they have a web site, so now they can build a brand.  Even worse, many people assume that because they have a web site, they also have a brand.  That’s not true. It can even be a delusional waste of limited resources for serious entrepreneurs.

Instead, the emerging cannabis industry can take the best elements of branding and adopt them for free in their local applications.  At their best, brands create the following:

• They make loyal customers that can maintain a company’s profitability and a stable work force.
• They help create new products.
• They protect customers by providing consistent quality.
• They help promote corporate participation in socially responsible programs.

Which Industry Segment Has the Best Branding Prospects?

Yet with all of these obstacles, there are some good opportunities for branding in the cannabis industry, specifically for growers and dispensaries.

Growers have a solid opportunity if they follow the existing model used in building brands in the wine industry.  Growers can model their efforts on wineries that also have a perishable commodity, subject to natural variations and exceptional years.  Growers will face these same issues even under greenhouse conditions.  The key is to build the grower’s brand by touting top strains, product cleanliness, horticultural expertise and adherence to strict, transparent test results by independent laboratories. Growers also have the best opportunities to build national (or as close to national) brands as the regulatory environment permits.  The caveat is that the branded vineyards have built their reputations over decades. Can the cannabis industry be that patient?

The second good branding opportunity exists with dispensaries; however these brands will be localized, sometimes at the city or neighborhood levels. Brand-building for dispensaries will be based on being a solid, community-oriented local business.

So can cannabis be the first billion dollar industry in modern corporate history to succeed without having a handful of “leading” national brands?

My bet is yes, if they follow the best outcomes that brands can create. Then, the individual companies that comprise the industry can reap the rewards brands offer without intentionally going through the huge expense and time that brand-building requires.

While the assembly line revolutionized auto manufacturing in 1913, this sole technological advance did not immediately change other elements critical to the car business, such as logistics, distribution, financing, vendor input and the vertical integration of manufacturing, sales, customer services and suppliers.

Flash forward 150 years, and the emerging cannabis industry is poised to benefit from faster, cheaper and more flexible computer, web and cloud, and servo technology than any industry ever launched. With these technologies now readily available and more affordable than ever, the cannabis industry has an added benefit:  It is able to attract investors via crowdfunding, as well as more traditional methods to use technology from the first day of any new cannabis company’s grand opening.

Now, the industry is poised to make a giant technological leap forward.

The reason: High technology is going to make sure the near future of cannabis will change significantly. Tech companies based on to Uber, Grubhub, Snapchat, Salesforce.com, Yelp and others already exist to provide the next generation of consumer marijuana business apps and services that will disrupt and streamline the business.  This includes changes in every element of the cannabis industry ranging from extraction, cultivation, vaporizers, and POS, CMS, auditing systems and even deliveries to customers.

The upcoming NewWest Summit to be held in San Francisco (November 20-21, Parc 55 Hotel) bills itself as the “first conference to focus exclusively on the game-changing, disruptive developments in technology, investment and media within the Cannabis space.”  According to conference organizer Jim McAlpine, cutting-edge new technologies already exist to propel the industry forward to make it more attractive to investors and customers alike.

Examples of the disruptive technologies that will be at the conference include Eaze, a cannabis delivery service that could take business away from dispensaries by serving as a one-stop shopping experience that includes delivery; a smart vaporizer that is going to be the Fit Bit of the marijuana space because it self-monitor the volume of oil and then sends a note to the user that the supply of oil is low and also to the dispensary to order a refill.  “These are just some of the tech shopping and delivery technology that will re-shape existing business platforms,” McAlpine said.

The event itself will also have panel discussions, including one on how the older, pre-technology  cannabis business model can co-exist with new businesses that could bypass dispensaries or the larger entry of major multi-national corporations (including those from the tobacco industry), who are preparing to enter the cannabis on an unprecedented scale. This topic, among others, will be discussed by panelists of active, accredited investors and successful entrepreneurs, including Steve DeAngelo of the Harborside Health Center, the world’s largest dispensary and Kevin McArty of the Eaze delivery service.  The event is expected to attract about 40-50 exhibitors and 500-1,000 people over two-days. 

Follow the Money

McAlpine noted that the legal cannabis industry is projected to have a $10 billion annual economic impact nationally and the sector is “rapidly professionalizing.”  Based on a report from a cannabis industry investment and research firm, The ArcView Group in Oakland, California, the U.S. market for legal cannabis grew 74% in 2014 to $2.7 billion, an increase from $1.5 billion in 2013. And despite rumblings by most 2016 Republican presidential candidates to make marijuana illegal at the federal level, the cannabis industry is projected to generate $11 billion in sales annually nationwide by 2019, according to the ArcView report.

To date, four states–Colorado, Washington, Alaska and Oregon–have legalized retail marijuana. Washington, D.C., voters also legalized recreational marijuana use, but sales currently remain banned. Twenty-three states have legalized medical cannabis.

And despite promises from the majority of 2016 Republican presidential candidates to enforce federal law that would effectively repeal existing state de-criminalization initiatives, public opinion shows more people favor the decriminalization of marijuana nationwide than ever before.

Yet the legal uncertainties have not dampened the enthusiasm for this growing market and its adoption of new technology. According to Chris Gromek, CEO, MJIC Media, one major engine behind the fast adaption of technology has been in the number of consultants. Gromek noticed that from attending two industry conferences four months apart, he saw more consultants offering fully-integrated, turn-key services that included everything from automated plant and growing operations to point-of-sales and compliance software. The full-service consulting firms in this space include Aperature Consulting and American Cannabis Co. Aperature offers services for people just entering the business to established operations who want to expand, according to their web site.

While these services can make a business owner’s job easier, they also will make the industry “super-competitive,” Gromek said. More competition also will be accompanied by falling product prices and this will squeeze profits dramatically, he added.

It will also spur the search for new customer services. For example, Gromek said MJIC Media has started to sign up clients for membership packages and is working with clients, such as Lexaria that is expanding its CBD product line due to a new technique it discovered that drastically improves gastrointestinal absorption of cannabidiol, as well as CLS Holdings, an extraction firm.

An Awakening Technological and Social Giant

But despite the legal and political uncertainties, the cannabis industry’s huge growth potential has become a magnet for investors and technologists ready to adapt, sell or develop new automated tools for every aspect of this plant-based business. This includes everything technological from automated greenhouses for cultivators, to pharmaceutical-grade testing laboratories for assuring plant safety and quality, to an electronic product exchange to automated sales and customer services applications and even homes delivery services to patients.

One of the most advanced, core building blocks of any plant-based commodity business is an exchange where price discovery between buyers and sellers can take place on in an open marker. There are currently three such venues, Amercanex, CCX and CHEX.  These exchanges match buyers and sellers with a clearinghouse and financial guarantee feature.  In the case of Amercanex, the services provided include transportation, storing and quality grading all transacted on an electronic platform, according to Amercanex CEO Steve Janjik.

According to the company’s web site, the Amercanex exchange connects products, pricing, and availability that are all posted from multiple market participants.  These include growers, wholesale distributors and retail vendors who are all electronically connected on the marketplace. The best sell and buy prices are shown from the prices received from all participants within the state and network.

The Amercanex system also has anti-money laundering safeguards built into the system and the exchange works like “a banking system” that links buyers and sellers with a payment feature.

Bring It Home

Since this is the age of instant gratification, it only makes sense that someone would come up with the idea of home delivery for cannabis products.  While this feature has already been fully exploited by pizza and Chinese food restaurants, it is an established aspect of modern life.  The cannabis business is no different.  “On the retail end, Southern California has seen a proliferation of delivery services and medical marijuana dispensaries. Hartfield says there are about 1,800 dispensaries in and around Los Angeles, which is almost half of the approximately 5,000 dispensaries nationwide, according to a report in The Forward.

Another report in TechCrunch acknowledges the penchant for immediate gratification and the willingness of people to pay for it. “With mobile usage comes the right-now economy. Anything you want today will come to you on-demand, when you want it — and so shall cannabis. Enterprises are popping up everywhere that promise to deliver your medicine within the hour, and some will even provide a medical consultation via your mobile device. Hungry after you’ve consumed cannabis? Partnerships and cross-marketing opportunities with the $70 billion food-delivery and takeout industry are huge.”