As the North American cannabis industry becomes more and more crowded, retailers are suddenly faced with flat or declining revenues. That’s bad news for owners, but it’s not necessarily the end of the world. Creative entrepreneurs are constantly looking for new ways to generate income, and those ideas are often hidden in plain sight in other retail industries.
Let’s look at three common retail practices that have yet to embed themselves in the DNA of the cannabis market.
One of the best ways to supplement sales is by charging fees for premium placement of certain products and brands on store shelves. Welcome to the world of slotting fees.
This may seem like an esoteric corner of the retail market, but it is a major driver of revenues for retailers in many different verticals. In fact, the American Journal of Agricultural Economics reported that grocery stores actually make more money from fees charged to manufacturers and distributors than they do from sales. It’s hard to find a retail vertical where this does not occur — as far back as 1996, the New York Times reported that major chain bookstores were engaging in similar practices. In fact, Goldman Sachs published a report in 2015 claiming that consumer goods companies pay more than $200 billion to retailers in placement fees every year.
The economics of slotting fees (also known as “fixed trade spending”) are simple: Customers buy more products that are prominently displayed than those that are placed in nondescript parts of a store. Snack food companies pay thousands of dollars to put up special end-cap displays festooned with bags of chips because they know that shoppers will grab the products as impulse purchases on their way to get milk and bread. They also pay a premium to get their products placed at eye level, which generates significantly more sales than being on the top or bottom shelf.
While this is a common practice in traditional retail, it has not yet become a factor in the legal cannabis retail industry in North America. Mark Cavdar, vice president of business development at Alberta-based Nova Cannabis Inc., says that the vagueness of the current legal scheme creates uncertainty for retailers around what is and isn’t allowed.
“The laws in Canada are restrictive when it comes to any sort of marketing for cannabis products by producers. The regulations are much tighter than those for alcohol, roughly on par with tobacco,” he says. “Because of the uncertainty around trade relationships, cannabis retailers end up in these ad hoc negotiations with sales reps pushing new and untested products and brands. Ordering decisions are then made not because customers are asking for certain products, but because something is featured in a catalogue. This hurts the legal industry as it saddles retailers with inventory that might not move and slows the emergence of legal market brands that deliver consistent product experiences to customers.”
Another practice that is common at many retail stores is the in-store promotion. If you’ve ever gone to Costco on a Saturday, you have most likely been accosted by people giving away small plastic cups filled with everything from Albanian granola to lumps of smoked cheese to alpaca pâté made by monks in Wisconsin. If you’re really lucky, you can finish up with a thimbleful of mystery wine. Why does all of this happen? Because it moves product.
“When people come up to a tasting stand and actually meet a representative, they have an immediate connection to the product even if they weren’t planning on buying it,” says food-industry veteran Michael Albert, who has sold everything from tea to gelato in Costco and other big-box stores. “It’s not so much about the product as it is about the personal contact. It’s a lot easier to walk past a product on the shelf than it is to tell a woman cutting up hot dogs on an electric grill that you aren’t interested.”
Obviously, it’s not possible to offer free samples of cannabis in most jurisdictions, but that doesn’t mean that retailers can’t create positive personal experiences for their shoppers. This is where branded swag — such as stickers, apparel and pens — can help retailers highlight certain products in their stores, even if they aren’t officially giving them preferential placement on their shelves.
One of the hallmarks of the fashion world is that top retailers from Louis Vuitton to Harrods offer personal shopping services. In general, these are appointment-only affairs reserved for high rollers, but it is surprisingly easy to get on the calendar. Why do stores offer these kinds of services? Simply put, they dramatically increase sales.
In many ways, it is the retail equivalent of the fox guarding the henhouse: Shoppers willingly walk the floor with an expert whose sole mission is to get them to buy more things.
As retail analyst Marshal Cohen of NPD Group says, “Imagine a person going into a store to buy a new skirt; personal shopping can turn that skirt into an outfit.”
In fact, Chinese clothing chain Lane Crawford reports that its sales are 400% higher than the average because more than half of its customers choose to work with a personal shopper who is employed by the company.
Personal shopping has been around for decades, if not centuries, but according to Bloomberg it finally went mainstream in the last two years. One of the major reasons for this is that online apps have made it easy for customers to schedule appointments without having to call stores to get on the calendar. In addition, the pandemic fundamentally changed how people interact with retailers, and savvy store owners recognize that now more than ever the personal connection is critical to driving sales. It’s no wonder that Nieman Marcus plans to triple the number of personal shoppers on its payroll by next year.
In addition to driving revenues-per-customer, personal shopping also allows retailers to gather valuable data on shoppers in their stores. It’s one thing for merchants to track general trends, but the personal shopping experience allows them to collect detailed information that they can use to develop future strategies for everything from staffing to merchandising to product selection.
“One of the best things about the pandemic restrictions being lifted here in Ontario is that we can finally offer concierge service, which was our vision from day one,” says Tatyana Parkanskaia, owner of Matchbox Cannabis. Parkanskaia operated a shoe store in Toronto’s West End for more than a decade and has now applied her experience to the Matchbox cannabis stores.
“Retail is all about the personal connection. It’s not just enough to have shoes for people to buy. You need to know what their preferences are, and what their needs are,” she says. “This is true no matter what you are selling. That’s why people can go to our website and book an appointment to meet one-on-one with one of our budtenders, even if they aren’t allowed to sample products in the stores. That’s how we are able to learn so much about our customers both as individuals and as a group.”
The cannabis retail industry faces an uncertain future in Canada and the United States. Because many cannabis products are still illegal at a federal level in the U.S., stores often find themselves operating in a gray zone when it comes to everything from banking to paying taxes. And in Canada, federal and provincial restrictions significantly limit how stores can market products to their customers.
But by drawing inspiration from other retail verticals, stores can adopt best practices that will help them drive revenues and stay ahead of the curve.
Richard Berman is the CEO of VerbFactory, a marketing agency with offices in California, New York and Toronto. He has written more than 2,000 articles for publications including the Toronto Star, the San Francisco Chronicle and Condé Nast Traveler.
Original Source: www.marijuanaventure.com
Labat and Leaf Botanicals Relationship Ends in Tears; N Cape Cannabis Producer Pulls Out of Deal with JSE Company
Unresolvable issues around value and quality
Northern Cape organic cannabis grower Leaf Botanicals has pulled out of its share deal with JSE-listed Labat Africa and wants out. That’s emerged after Labat, which owns 80% of Leaf Botanicals, posted an announcement on SENS to its shareholders on 17 March 2022 that there was a “quality issue” behind the breakdown.
Both sides seemed equally unhappy with their year-long marriage, with Upington-based Leaf Botanicals pulling the plug because of financial disappointment, and Labat saying the flower was not good enough for its international customers. Labat has gone looking for production elsewhere, picking up 80% of Eastern Cape grow op, Sweetwaters for R10 m – for which it paid cash. Leaf Botanicals’ intentions going forward have not been made public.
The company said the “Leaf Botanicals acquisition was terminated due to Leaf Botanicals no longer wishing to pursue the transaction following the discovery that the product was not up to standard and the inability to find a suitable way forward. Following further discussions, the termination has been accepted by Labat.”
Van der Colff activated suspensive clause after sale value plummeted by 75%
Labat purchased 75% of Leaf Botanicals in May 2021 from award-winning farmer, Johannes van der Colff.
Labat paid R11,25 million for its equity in the SAHPRA-licensed facility and paid the Gog van der Colff Trust by way of 11 250 000 Labat shares, taking a bet that the Labat share price would go up. Well it didn’t. It is currently trading around 25c a share, which means the R11,25 m van der Colff was paid for giving up majority control of his operation is now worth a mere R2,8 m, 75% down on the value of the striking price.
Van der Colff’s got out the deal by activating a suspensive condition in the purchase agreement which allowed him to pull out if Labat was trading below R1.00/share for the 30 days before the first anniversary of the deal, which is imminent. The issuing of his Labat shares is to be cancelled and those shares delisted.
Labat has endured a rocky ride so far, prospects are looking up
Labat has had a rocky ride as the mover with first advantage in the South African cannabis space. It paid for many of its acquisitions with Labat shares valued at R1.00/share. With the price languishing below 30c/share, those who accepted shares in return for giving up equity in their own businesses, have taken a haircut of 75% of the value of their shares. Nonetheless Labat appears to have stabilized, and has again been out shopping.
Gauteng Signs Township Act into Law; Calls for Entrepreneurs to Pitch Proposals to Industrialize Cannabis
New Act aimed at empowering community trade
The Gauteng government has invited entrepreneurs to come forward with commercial proposals for the provincial cannabis industrialization programme. It published the invitation in the Government Gazette on 29 April 2022, the same day that Premier David Makhura ratified the Township Economic Development Act (TEDA), aimed at empowering townships and informal settlements.
Agriculture MEC Parks Tau, who is in charge of the province’s cannabis strategy says TEDA’s benefits include:
cutting red tape by introducing model standard bylaws,
providing targeted tax incentives to unlock capital formation and job-creating investments, and
providing targeted funding and targeted procurement whereby 40% of government procurement from the Gauteng provincial government comes from companies in the TEZs.
Tau: Vaal River Smart City will be SA’s first real cannabis hub
Writing in the Sunday Times on 1 May 2022, Tau said TEDA was “ a welcome legislation to unleash the potential of the township cannabis and hemp sectors that will be fully licensed in the full hemp value chain and acting as gateways for the industry. This will make Gauteng a “green gold” mecca, as announced by Makhura, with the establishment in the Vaal River Smart City area of the country’s first cannabis hub focusing on cultivation of cannabis primarily for medical use and application”.
Tau said the implementation of TEDA would be done in conjunction with the private sector and community organizations. “TEDA is a whole-of-society call to action to build better townships and informal settlements reeling from the negative effects of the Covid-19 health and economic pandemic, the July 2021 civil unrest and the complex spillovers from the Russia-Ukraine war” he wrote.
“Moreover, this requires the introduction of a solidarity economy through, for instance, a service delivery co-production for municipalities where enterprises and organisations such as stokvels and mutual benefit societies provide their own communities with goods, services and knowledge that meets the local community’s needs”.
Gauteng wants to form partnerships with private sector
The Gauteng Department of Economic Development and the Department of Agriculture and Rural Development are championing cannabis reform as part of the province’s goal to create jobs and boost the economy by processing hemp and cannabis at an industrial scale.
Companies interested in partnering with the provincial government must take into consideration in their application that their proposals must include:
details of funding mechanisms,
cannabis-driven carbon reduction,
rehabilitation of compromised mining land,
and the inclusion of communities as partners.
In return Gauteng says it will provide support for private sector partners by:
offering leases on state owned or controlled land;
providing rentals at special economic zones, industrial parks
subsidies at private facilities;
funding input and administrative costs
facilitating collaborations with other state organs, aimed at removing barriers on projects.
Antony Moloto is the man riding point on the project. His contact details are below:
Email enquiries: Anthony.Moloto@gauteng.gov.za
Queries: Mr Anthony Moloto
Phone: 011 240 2684/ 083 408 5493
Upload a completed form here with CV’s, BBBEE certificate /affidavit, tax clearance certificate and proof of CIPC registration as well as a proposal. Application inclusive of attached documents must be no longer than 20 pages. Please complete the checklist at the end of the application form.
Now Musk’s Bought Twitter, Could This End The Cannabis Social Media Ban?
By Bruce Barcott, First Published in Leafly on 25 April 2022
Does this spell the end of cannabis prohibition on social media platforms?
Elon Musk has been an outspoken opponent of prohibition. Now he owns Twitter.
What began as a fun what-if last week ended as a startling fait accompli this afternoon: Twitter has accepted Elon Musk’s $44 billion bid to buy the company.
In the cannabis world, that deal could have profound ramifications.
The Tesla founder has been famously outspoken about his belief in cannabis legalization. In late 2018, Musk lit up a joint on the Joe Rogan Experience, inhaled, and launched a million memes.
In the summer of 2020, Musk added his voice to the chorus of those working to free America’s cannabis prisoners.
“Selling weed literally went from major felony to essential business (open during pandemic) in much of America & yet many are still in prison,” he wrote. “Doesn’t make sense, isn’t right.”
Musk isn’t so much an advocate as an ally. He’s not the guy who’s bankrolling state legalization campaigns; he’s the uber-bro with massive cultural influence who says, loudly: Prohibition is stupid!
And now he owns Twitter. At a purchase price of $54.20 per share. Ahem.
Will that change things?
What needs changing?
Anyone who works in cannabis can tell you: Social media platforms do not play well with weed. The continued federal prohibition of marijuana makes the major platforms—Facebook, Instagram, YouTube, Twitter, TikTok—extremely nervous. They often express that trepidation by blocking posts, enacting shadow bans, or deleting entire accounts.
It’s hard to find a cannabis company that hasn’t been blocked or banned from at least one social platform.
It’s hard to find a cannabis company that hasn’t been blocked or banned from at least one platform at one time or another.
Often the bans feel capricious. A post that seems utterly harmless can get flagged for violating a platform’s terms of service, while an edgier post can shine on with no trouble at all. ‘What did we do wrong? is an anguished cry that nearly every cannabis social media manager has shouted to the heavens.
These mysterious cannabis policies exist on a spectrum. On the far side of strictness sits TikTok, which allows no cannabis content whatsoever. Don’t even try. The Google-owned YouTube can be tricky, but it allows cannabis content within reason. Then there’s Instagram and Facebook, both owned by the parent company Meta. Because of the nature of the cannabis audience, Instagram is currently the most important and influential platform, and also the one that gives social media directors absolute fits when it comes to cannabis content.
Jungle Boys, one of the nation’s top cannabis brands, gave a wink to that situation earlier today:
Will Musk change Twitter’s cannabis rules?
The platform Musk just purchased has a reputation as being one of the most liberal in its treatment of cannabis. There’s upside and downside to that.
The upside is that Twitter is the best fit, culturally and temperamentally, with Musk himself. His public persona is much closer to that of the swashbuckling libertarian Jack Dorsey (Twitter’s founder) than to the aggressively flavorless Meta leader Mark Zuckerberg.
If anything, we should expect Twitter’s cannabis policies to relax even further under Elon Musk. Consider this tweet he put out upon the acceptance of his bid this afternoon:
Better gatekeeping, or an ugly free-for-all?
Musk’s championing of free speech could make Twitter the most 420-friendly platform—but it could also turn the entire Twitterverse into an ugly free-for-all of political propaganda, unchecked conspiracy theories, and hate speech.
One year from now Twitter could be the social platform most welcoming to cannabis companies and consumers. But will cannabis companies and consumers want to appear on Twitter one year from now?
It’s not just his company, it’s his voice
Beyond the changes he might enact at Twitter, Musk could change the environment for cannabis simply by virtue of his new role in the social media universe. After hearing about Musk’s bid over the weekend, I reached out to Arend Richard, the founder of WeedTube. Richard has been one of the leading advocates for social media freedom and fairness when it comes to cannabis. He founded WeedTube back in 2018 after finding himself blocked by YouTube for an innocuous cannabis post. Four years later the 420-friendly WeedTube is thriving, readying an ambitious new update to their app expected to launch later this summer.
“As a cannabis business owner and influencer, Twitter has been relatively easy to work with,” Richard told me. “But I want to get in touch with Elon, because we need him to help bring awareness to the situation with Meta” and their platforms.
Richard is currently gathering signatures on a petition demanding that Instagram reform its community guidelines “to treat all legally operating cannabis businesses equally.”
The heart of the grievance? Unequal enforcement, according to the petition:
“Instagram continues to suspend and delete the pages of licensed and legal cannabis companies for violation of their vague and outdated policy prohibiting “attempts by individuals, manufacturers and retailers to purchase, sell or trade” marijuana. This policy is not enforced equally, with large multi-state corporations being allowed to promote their products and locations, while smaller, independent operators lose access to their Instagram pages, which are essential marketing tools in 2022.”
Influence others by eating their lunch
Can Elon Musk demand a change in the policies of Instagram? Of course not. This is a situation where he could force a change, however, by simply opening his arms to cannabis companies and then gaining ground on Insta.
The Meta-owned giant has nearly ten times as many active monthly users as Twitter. Instagram is younger, hotter, and more hip. If a Musk-over of Twitter can change that perception and eat into that lead, Instagram could be forced to reconsider its stodgy and outdated cannabis policies. And that could lead to a change in the other Meta properties as well.
There are no guarantees, but it could work. Elon Musk alone couldn’t force GM and Ford to start making electric cars. The success of Tesla forced them to follow his lead or become obsolete. Let’s see what he can do with social media.
The post Now Musk’s Bought Twitter, Could This End The Cannabis Social Media Ban? appeared first on Cannabiz Africa.
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