The global cannabis market is growing rapidly, a key factor in the sustained expansion will be the addition of new products targeting new consumers or the ‘canna curious’.
In 2020, the global cannabis market was estimated to be valued at US$20.5 billion, that number is expected to balloon to US$90.4 billion by 2026, registering a 28% compound annual growth rate.
North America makes up the largest market share in the cannabis space, thanks to the legalization of cannabis for both medical and recreational purposes across the continent, with Canada legalizing recreational use in 2019 and Mexico following suit in June of this year.
While recreational use remains illegal at the federal level in the US, more states have legalized use for this segment each year. Leading the way is California, which legalized recreational cannabis use in 2016.
READ: The Parent Company introduces 'Well by Caliva' lotions and tinctures; expanding product portfolio
Last year the West Coast state had cannabis sales north of US$4 billion, representing a 57% year-over-year increase. Sales in Oregon also surpassed US$1 billion for the first time in 2020.
Inhalables and now edibles make up the lion's share of the market, although there has been significant growth in other market segments. So far for 2021, the market for topicals has grown 10% year-over-year, and sublinguals have climbed 12% over the same period.
Continued growth in this segment will rely on new products and the building of customer trust, two factors that The Parent Company (OTCQX:GRAMF, NEO:GRAMU) (listed as TPCO Holding Corp) is also focused on.
The Parent Company is California's leading vertically integrated cannabis company, combining best-in-class operations with leading voices in popular culture and social impact.
The company’s unique business strategy brings together global icon and entrepreneur Shawn 'JAY-Z' Carter, entertainment powerhouse ROC NATION, California's leading direct-to-consumer platform Caliva, and leading cannabis and hemp manufacturer, LEFT COAST VENTURES, to form a business savvy cannabis conglomerate for the post-prohibition era.
“Really vertical orientation, right now, is necessary because we are in the very nascent stages of the cannabis industry,” said Steve Allan, CEO of The Parent Company in an interview with Proactive.
Allan explained that while cannabis has been legal in California since 1996 (for medical use) set standards and protocols have only recently been established. This discrepancy has led to a rebirth of the cannabis sector in California.
“It's very difficult at this point in time, as a CPG (consumer packaged goods) company, to rely on the supply chain, '' he noted. “So, for us, if we're going to earn the consumers trust, we're going to help them understand that we produce clean, consistent products for them in all form factors.”
To build customer trust and secure its place in the market the company oversees the entire process from seed to sale.
“We need to be able to control the biomass right from when the plants are grown up through when they're extracted if it's for oils, and then, we go through the manufacturing and the distribution side of things,” said Allan. “What's really been a key component is that supply chain security.”
New products to entice new customers
Keeping in line with its business strategy the cannabis company routinely introduces new products geared towards attracting new customers across the sector, as well as offerings catering to its existing customer base and cannabis connoisseurs.
DEEP DIVE: The Parent Company is coming to conquer California’s cannabis market — with some big-name help
Most recently, the company launched a new line of wellness products, Well by Caliva.
The new line offers lotions and tinctures in three categories; Well Balanced, Well Rested and Well Relieved - allowing consumers to pick the products that best cater to their needs.
The addition of Well marks The Parent Company's first CBD and THC-based line of self-branded wellness geared products under the Caliva label.
In the statement announcing their launch, the company noted that the new products “were designed with the evolving needs of consumers in mind, with recent data demonstrating that the top reasons for cannabis use overwhelmingly include relaxation, improving sleep quality and pain management.”
Allan expanded on this in our conversation, saying: “Really what we are recognizing is that more of the cannabis curious consumer is really looking for alternatives besides inhalables for them to be able to understand the benefits from a wellness perspective. That's really where we look at this as an extension of our ability to address a larger consumer market out there, really looking at those that are focused on the pain and sleep side of things, and this provides the opportunity to do so with a wellness lens.”
Demystifying the health benefits of cannabis and offering in-demand products will help fuel the continued growth of the sector.
“It is important that we wipe some of the stigma off,” said The Parent Company CEO. “The reality is, there are a lot of uses. When you think about the endocannabinoid system, what cannabinoids can actually do.”
The company's new Well line allows customers to experience the wellness benefits, “either from a topical perspective, helping to relieve some of the aches and pains and inflammation that can take place,” he said, “Or from a tincture perspective, a great alternative to inhalation or inhalables, specifically, because you can put it underneath your tongue, so from a sublingual perspective, it'll enter into your bloodstream directly.”
As Allan explained the sublingual administration allows you to get the same effect that you would get from inhaling cannabis, but without the potential impact on the lungs.
The company chose to launch the offerings in August as part of the National Wellness Month in the US, with the goal of meeting consumers and their desired effects head-on.
Earlier this summer The Parent Company expanded its value product offerings with the introduction of Fun Uncle Cruisers with Live Resin full gram vape cartridges.
Fun Uncle is a retro-stylized line of premium value cannabis, paying homage to marijuana's early heyday, with low prices reminiscent of the past.
Live resin is considered a premium cannabis ingredient valued for its retention of cannabinoid, terpene, and flavor profiles that delivers a full spectrum of effects.
Education fundamental to growth
Part of being an early leader means addressing the need to offer education to those who want to learn more about cannabis before making a purchase.
According to Allan, The Parent Company’s online wellness consultants field as many as 21,000 inquiries monthly, ranging from customers looking for a specific product they may have heard of, to those wanting to address a specific ailment or issue.
“Because it's still federally illegal, it's still hard to get impartial evidence, impartial opinions, really, you're kind of stuck talking to your friends or talking to people you know, or doing some Google searches,” said Allan. “What we've learned out of this is that the vast majority of consumers who are exploring really need to ask questions, they really need somebody who understands what's going on, a 'trusted expert' to help them navigate through.”
There are also corporate lessons to be learned for a company that has expanded internally and outwardly this year.
In January The Parent Company (TPCO) went public in Canada. In March, The Parent Company launched Fun Uncle Cruisers, a line of full gram vape cartridges; a three-part advertising campaign from Shawn 'JAY-Z' Carter and his cannabis brand, MONOGRAM; and its first-ever integrated loyalty program, Caliva CLUB.
Not even coronavirus (COVID-19) could slow the company’s growth, as orders continued to come in despite the lockdown. This was facilitated in part by The Parent Company’s delivery app on the Apple store.
“What we've seen is once people go to online, yeah, they'll still go back to the store every once in a while, but the majority of their transactions will continue to be online,” explained Allan. “So, we went from just over a third -about 35%- of our transactions being online, to about 68% of our transactions being online, during the first six months of COVID. It's really stayed at about that level, then in the mid to high 60s, peaking sometimes above 70% of transactions are originated online.”
The CEO went on to explain that the company’s omni-channel, vertically integrated approach allowed them to adapt quickly to challenges brought on by the pandemic. It also allowed The Parent Company the opportunity to test the robustness of the network it built from the ground up.
The company’s online ordering portal was put to the test when California shut down statewide on May 12, 2021.
“We went from receiving on average, about 300 to 400 orders a day to receiving over 2000 orders in four hours. And the system didn't break,” said Allan. “Now to be clear, we didn't have enough delivery drivers, so it did take people a little longer to get their delivery.”
The next phase of cannabis
As the cannabis sector continues to bud, The Parent Company also has its own growth plans.
Steve Allan will be handing over the CEO reins on September 8, 2021, ushering in a new chapter at the California cannabis company.
Taking over from Allan is seasoned executive Troy Datcher, who joins from The Clorox Company, where he most recently served as senior vice president and chief customer officer responsible for the company's worldwide sales organization. During his time there, Datcher deployed global sales plans for over $6.7 billion in annual revenue across The Clorox Company (NYSE:CLX)'s vast portfolio of brands.
The branding guru’s appointment will also be historic as it represents the first time a Black CEO will lead a major public US cannabis organization. Current CEO, Steve Allan, will continue with the company through the leadership transition and stay on to lead Corporate Development efforts going forward.
“It really has been a fast growth, rapid change environment and the teams have just adapted extraordinarily well and couldn't be more excited about what the future holds for us, especially bringing Troy in,” said Allan. “Cannabis is going through its next phase, people talk about Cannabis 1.0, cannabis 2.0, now we call it cannabis CPG.”
He added: “[Cannabis CPG] is really where brands are going to be developed within the market. And bringing in a leader like Troy, who has built brands and sustained brands, for the entirety of his career. It really feels like it's the right time to bring in that leader for the next wave of our growth.”
Datcher’s appointment also falls in line with The Parent Company’s social justice views, ones that aim to empower groups that have been left out of the widespread growth in the global cannabis sector.
“We definitely see the opportunity in front of us but understand the responsibility to lead by example. Whether that's the trust built around the product, the trust built around the access to it, or whether it's around our social equity efforts and what we're doing to help support black and brown entrepreneurs that are getting started in the cannabis space,” said Allan.
In late May, The Parent Company launched its corporate venture capital social equity initiative with the appointment of the advisory committee members.
“With an initial funding of $10 million, plus 2% of all future net income, The Parent Company’s social equity fund seeks to discover the industry’s future entrepreneurs of color, offering them the capital and mentorship necessary to build generational wealth as part of a more equitable and diverse cannabis industry,” the company's May statement read.
A week later, the committee selected Los Angeles-based cannabis brand and retail concept Josephine & Billie’s, as its first social equity corporate venture fund investment. Founded and led by Black women, Josephine & Billie’s was developed to create a welcoming and educational retail experience for Women of Color.
Not long after, The Peakz Company, an Oakland-based cannabis brand founded by Jessie Grundy, became TPCO’s second social equity corporate venture fund investment.
“We really believe that there's an opportunity as a leading company to set an example that others can follow. That will just make for a healthier, more diverse, equitable supply chain as cannabis really enters what is a 30, 40, 50-year growth cycle here globally,” said Allan.
“We know if we do it right at the beginning, then it's going to provide the opportunity for inclusion and diversity and opportunities for that generational wealth that extend out to a broader platform of individuals and that's really a core component for us as well.”
Contact the writer at georgia@proactiveinvestors.com
Follow her on Twitter @MissInformd