If you want to open a bank account, seek out smaller financial institutions. If you’re looking to boost customer loyalty, engage in socially responsible business practices. And if you’re hoping to attract more women as customers, stop using packaging and advertisements that they find offensive.
These are some of the many tips cannabis experts and professionals shared at the 2014 Marijuana Business Conference and Expo, which was held last week in Las Vegas. Total event attendance hit over 3,000, while the event featured more than 140 exhibitors and 72 speakers.
Here’s a sampling of advice, tips and insight shared at the event (note – Marijuana Business Media’s next big conference will be held from May 19-21 in Chicago):
Banking reform for the cannabis industry is likely on the way, according to John Sullivan, the president and CEO of First Security Bank of Nevada, one of only a handful of financial institutions in the country that is openly working with marijuana companies.
“There are very smart bankers that have looked at this in different states, and I think before long, the lightbulb will come on,” Sullivan said. “Banks across this country are standing up.”
But until there’s more guidance from the federal government on banking practices and more of a guarantee that financial institutions won’t be prosecuted for dealing with the cannabis industry, many will still remain too cautious to allow marijuana companies to open accounts or get loans, Sullivan said.
So for now, cannabis companies should seek out small- to medium-sized financial institutions with total assets of between $150 million and $1 billion, as they’re more likely to work with the industry than larger banks.
Sullivan also offered several suggestions that could help companies obtain financial services: document everything, and be prepared to alter some of your business practices to satisfy concerns from banks that are possible lenders. That kind of transparency and flexibility can go a long way toward reassuring bankers that working with cannabis companies is safe, Sullivan said.
Will the federal government legalize marijuana in the next five years? That question was posed to a panel of four industry leaders and visionaries in the closing session of the conference.
Tripp Keber of Dixie Brands predicted it would happen in 2017, while Rob Kampia of the Marijuana Policy Project and Meg Sanders of Mindful projected federal legalization in 2019.
Andrew DeAngelo of Harborside Health Center bucked the trend, saying he was highly skeptical that it would occur by 2019.
In terms of how various potential 2016 presidential candidates might help move the industry forward – or hold it back – DeAngelo described Hillary Clinton as an on-the-fence politician, noting that both Clintons have long been “squishy” on the issue of marijuana. Kampia said Rand Paul, a Republican Senator from Kentucky, could be the most marijuana-friendly potential nominee.
As we wrote about in our Day 1 piece last week, keynote Ben Cohen – co-founder of Ben & Jerry’s – said that one of the easiest ways to establish your brand name and build customer loyalty is through community outreach. That mentality helped boost his company’s bottom line into the stratosphere.
“The way it creates customer loyalty is off the hook,” Cohen said, to huge applause from attendees. “As we help others, we cannot avoid helping ourselves.”
Cohen urged cannabis companies to “use your business as a voice” for social change. For example, ask customers to join you in advocating for change to marijuana laws. That kind of approach, Cohen said, can aid not just individual companies but the industry as a whole. And depending on how it’s done, it could wind up bettering the entire country.
“Business is a combination of organized human energy plus money, which equals power,” Cohen said before telling marijuana entrepreneurs that they have the power to improve not just their profit margin but also their communities.
In a later session on marketing, Jazmin Hupp of Women Grow said get out of your own skin and step into the shoes of your customers. She recommends finding 25, 50, 100 of your best customers and sitting down with them. And forget about marketing to “everyone,” Hupp said. There is no such marketing plan.
“This is what you need to know about your best customers,” Hupp said. “What is their gender, age, income, what’s industry are they in, who are they shopping for, what is their price sensitivity, not just in your shop but overall?”
Pull data from your point-of-sale system, and if you don’t have a door counter, how do you know your peaks and valleys? Find out their good experiences, find out about their bad experiences. Dig, dig, dig for data, and then and only then should you start developing a marketing plan.
Women and Boomers
With more women and baby boomers consuming marijuana, companies that want to succeed in the cannabis industry need to ensure at least some of their marketing efforts, advertising and even packaging are pointed at those target demographics, said Becky DeKeuster of the dispensary Wellness Connection of Maine and Julianna Carella of edibles producer Auntie Dolores.
Women account for as much as 80% of overall spending decisions, 93% of over-the-counter pharmaceutical purchases and 92% of vacation spending, DeKeuster said.
Cannabis dispensaries that are trying to attract women and baby boomers need to be sure they take into account everything from the layout of their facilities to the design of their advertising, she said. Making customers climb too many steps will turn off people from 50 to 68 years old, while pasting scantily clad women on packaging may cause women to pass on a product, she said.
“Make thoughtful decisions in how you present yourself in every aspect” of a business, DeKeuster said. “You want to make things easy on your clientele.”
Baby boomers control 70% of disposable income, so they’re the ones with the time and money to spend on cannabis – discounting them when developing a marketing plan could push them to other dispensaries, she said.
“You want to have a brand speaking to the female or boomer demographic (who are) making decisions in a market that wasn’t open to them five or 10 years ago,” DeKeuster said.
Big tobacco, pharmaceutical and alcohol companies will likely try to move into the cannabis industry sooner rather than later, according to a group of panelists.
The tobacco industry, which has little public support and faces “a perfect storm” of legislation restricting sale and use, sees marijuana as a burgeoning industry with public support and, soon enough, federal deregulation, said Patrick Basham, director of the Democracy Institute, a non-partisan public policy research organization based in Washington DC and London.
Pharmaceutical companies will likely be coming to capitalize on the popularity of cannabis, he said.
Alcohol is “scared” of the growing marijuana industry because people may stop drinking beer and liquor if they can legally smoke cannabis, said Harry Schuhmacher, publisher of Beer Business Daily and Wine & Spirits Daily.
If you want to get a jump on this new competition, Basham has one key piece of advice: “Know your enemy.” Understanding the major players in these industries – including how and why they operate – can help the cannabis sector develop strategies to blunt the attack.
Pitch Slam Winner
The Marijuana Business Conference & Expo held its first Pitch Slam, in which executives from five companies seeking money presented in front of a panel of judges (pictured in photo up top) and attendees.
The judges – Cohen, Emily Paxhia of Poseidon Asset Management, Patrick Rea from MISO Capital, Tom Bollich of Surna and Brendan Kennedy of Privateer Holdings – provided feedback to help presenters improve their pitching skills and ranked the presentations on several key areas, including uniqueness of the business concept and style.
The Pitch Slam Champion award was given to GreenBroz Inc., which makes marijuana processing equipment.
Investing in Publicly Traded Companies
When looking to invest in public cannabis companies, there are definite signs to watch for that a company is either a risky or safe bet for one’s money, said Alan Brochstein, the chief financial advisor of 420 Investor, and Chris Parry, director of editorial at the investment newsletter Stockhouse.
“There are about 250 (public) companies in the space,” Brochstein said. “Two hundred of them are scams, then there are 30 that won’t make and about 20 that maybe have a chance.”
Watch out for big promises and silly comparables, the two said. Be wary of start-ups that point to the largest industry player and promise to be at that same level.
Brochstein and Parry also said missed milestones can be a warning sign. Look back at what a company has said it will accomplish and track its milestones.
Tony Dreibus, Jennifer Mann and John Schroyer contributed to this report