By MjInvest Editor in Chief on Monday, 25 July 2022
Category: Cannabis Business Executive

Is White Label the End of Legacy Cannabis or the Future? – Part 1

“You have to understand one thing,” Jesus Burrola, CEO from California’s POSIBL said at the end of a recent conversation, “White labeling in cannabis is still a dirty phrase – but it’s how every other product, from avocados to wine, comes to market but we still have somewhat of aways to go before the biggest consumer groups accept white label flower.”

The term white labeling refers to a relationship between a producer of products and a brand whereby the producer grows or creates the inventory, allowing the brand to focus on the sale and marketing of the product.

In the case of pre-rolls and packaged flower, white labeling affords cannabis brands the opportunity to enter and compete in any market quickly, leveraging the knowledge of experienced and often well-funded growers, and without the cost to set up operations, an advantage which leads most legacy growers and canna-connoisseur’s to scoff at white label flower companies.

“If you didn’t grow cannabis while it was illegal, if you’ve never run from helicopters, you’re part of the problem in California, not the solution,” one well-known activist, who refused to be quoted, spat out during a conversation at the most recent Emerald Cup awards.

The activist, who quickly packed his bags to escape the discussion, looked back as they left and perfectly summed up the legacy perspective, “(corporate cannabis) is killing my people, how can you expect us to feel any different?  How can you expect us to want to change?”

While not everyone is ready to accept change or its alternative, some legacy operators, like the team behind Black Market Group, are setting aside emotions and seeing white label for what it really is – a major opportunity.

“(white label) is the only path that keeps legacy operators in business while ensuring consumers have access to safe cannabis of the best quality,” Annick Monk-Goldsmith of Black Market Group offered in defense of white label, “We must work hard to protect those that made this industry possible, that took the risks, and the best way to do that as a consumer is to be conscious about paying respect with your dollars.”

Annick and her co-founder Arthur Gschwind, both of whom have experience in legacy markets in several states, recently launched a packaged flower brand with hip-hop legend Rakim.

Rather than renaming a Gelato phenotype like most 80-dollar-an-8thrapper-weed brands have done to date, BMG elected to source high quality, light dep and mixed light flower from Northern California legacy farmers instead.

“We want to bring the best to the consumer,” Annick said, offering the following on the topic of sustainability, “And, at the same time, we want to do the best by the growers too, which means paying at or above market rate to ensure the sales cycle is sustainable, not only for the growers and our brand but for the consumer as well.”

“Right now, sustainability is about keeping the cash flowing to legacy farms,” BMG co-founder Art Gschwind added, “Until California growers can truly realize the value of having the best flowering in the world via exporting to other states and countries, working with white label clients is the best way for many farms to survive.”

While it’s still anyone’s guess as to when interstate commerce or federal legalization will come to pass, there’s significant evidence that white label partnerships can keep legacy cultivators in California from the harsh realities of a market in disequilibrium.

That said, producing consistent, good quality, mixed-light flower and ensuring the relationship is profitable and sustainable for both parties involved isn’t so straightforward, something Burrola elaborated on.

“Getting it right takes a brand-client who knows what they want to sell – it’s not just an 8thin a bag or hash in a jar – you have to consider retailer price point, quality, taste, bag appeal, margins, consumer targets and slew of other data points which help define and refine what ultimately comes to market under the brand.” Burrola explained.

POSIBL is a California mixed-light cultivation business which focuses on white label partnerships and was launched by David Bon, the founder of Viva Organica, a white label organic fruit and vegetable greenhouse farm based in Mexico which produces for many of the top 10 retailers like Costco, Whole Foods, and others..

Right now, POSIBL’s flower powers 82 different sku’s for 16 brands including Old Pal. And the recently launched latino-inspired brand Humo, POSIBL’s new house label.

“We decided it was time earlier this year,” Jesus said about launching Humo.

“We looked at the market and didn’t see enough latino representation in cannabis – Latino brands have a hold on the beer and alcohol markets here in California, so to not be able to find any authentic Mexican brands on the shelves was kind of crazy.”

While there’s always risk involved in having a house brand and white labeling for others in the same category, the approach provides POSIBL with a hedge against market changes, both as a result of client diversification and contracting power.

As Jesus points out, every other industry utilizes white labeling, driven by the simple reality that what it takes to be successful in a global supply chain is a partnership with a product producer who can deliver inventory to your specifications every time and that understands that their success is dependent on your success.

When it comes to understanding specifications and delivering on promises as a white label cultivator, transparency is king, both within grow rooms and with clients, two different challenges being addressed by technology providers like Elevated Signals.

“There’s a lot of diversity in the market right now, a lot of different trends depending on the size of the cultivation operation and while the quality is very regulated from the lens of compliance and testing, we don’t always see the same quality control around partnerships,” Amar Singh, CEO of Elevated Signals, said when asked about transparency in a recent conversation.

With a focus on day-to-day environmental and inventory data collection and transparency for cultivators and manufacturers, Elevated Signals was born in Canada before coming to the United States in 2020 via an investment from Canopy Boulder.

“Finding the right product mix, the most profitable product mix, has been difficult to do for most cultivators because they lack the right data,” Singh points out, “A lot of businesses were and still are looking at harvests en masse rather than looking at cost and output data on a more micro level within each harvest.”

“And that same macro approach when applied to managing client relationships,” Singh continued, “Is often the reason the results of white label cultivation relationships can be unpredictable and unsustainable for both parties.”

While it seems unavoidable that large contract farms will one day dominate the domestic and global markets, white labeling flower in the context of today’s market seems to offer new businesses a chance to drive industry progression while affording legacy cultivators with the cash flow they need to survive over supplied, over taxed markets.

In the next exploration into white label agreements, we will look at the relationship between manufacturers and their clients.  

Disclosure: the author is a party to a for-profit relationship with Elevated Signals but does not own any stock in Elevated Signals and has not been compensated for their inclusion herein. 

 

The post Is White Label the End of Legacy Cannabis or the Future? – Part 1 appeared first on Cannabis Business Executive - Cannabis and Marijuana industry news.

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(Originally posted by RJ Falcioni)

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