In anticipation that more US states may soon legalize adult-use cannabis, companies are gearing up for a market where national cannabis brands will become increasingly valuable.
In November, four states — Arizona, Montana, New Jersey, and South Dakota — are set to vote on whether to legalize recreational cannabis.
Arizona and New Jersey are most likely to legalize, according to Cowen analyst Vivien Azer. She wrote in a September 10 note that the two states "represent by far the biggest revenue opportunity" among states with ballot referendums in November.
An adult-use program in New Jersey would have broad implications for a cannabis market in the Northeast, carving a path for legalization of the drug in neighboring states. Governors in Connecticut, New Jersey, Pennsylvania, and Rhode Island have said they want to lay out a collaborative regional approach to cannabis when the time comes. Recreational cannabis isn't currently legal in any of those states.
As the cannabis industry evolves, and the drug becomes legal in more states, companies are stressing the importance of building up national brands, similar to how consumer-packaged-goods (CPG) companies that make cereal and soda sell the same products nationally. Right now, cannabis brands in the US tend to vary significantly across states and regions.
Though 33 states in the US allow cannabis for medical use, the biggest cluster of recreational-cannabis states remains on the West Coast, meaning that up until now, there have been few opportunities to build a nationally recognizable recreational brand for any cannabis company, no matter their geographic footprint.
"I think as any industry evolves, consumer brands have more and more value," Kate Miller, the cofounder and CEO of the cannabis-wellness brand Miss Grass, said on Wednesday at the Luxury Meets Cannabis Conference.
Miss Grass is based in California but sells hemp products nationally online.
Kimberly Dillon, the founder of Frigg, a beauty and wellness cannabis line that launched in July, says the key for many companies is to make sure that they can build up a national brand that's relevant and attractive to customers on both the East Coast and the West Coast. Dillon was formerly the chief marketing officer at the cannabis brand Papa & Barkley.
Dillon told Business Insider's Jeremy Berke at the conference that because every state has its own set of complex regulations, companies would be smart to figure out a pathway to build up a national brand that could win.
"Whoever figures that out is it's definitely going to be a major player in the game," she said.
Narbe Alexandrian, the president of Canopy Rivers, the investment arm of Canopy Growth, says the companies he looks to invest in are the ones that understand their customers and the importance of marketing.
"The best entrepreneurs that we see take that CPG type of focus," Alexandrian said, adding that companies that do their due diligence in getting as much data and information on their target audience as possible are the ones who stand out among the crowd.
"It really comes down to execution, specifically with CPG, when there's no real hard assets and it's an idea," he said.
Cannabis isn't a product, he added, it's an ingredient within the product itself and should be marketed as such.
Large cannabis companies have also hired execs with CPG experience, as the sector moves from emerging to established.
This month, Aurora named Miguel Martin — an exec with experience across the hemp and tobacco sectors — as its new CEO. And Cronos Group named Kurt Schmidt, a longtime CPG exec with experience at Kraft Foods, as its CEO last week.
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