(Editor’s note: This story is part of a recurring series of commentaries from professionals connected to the cannabis industry. Joe Caltabiano is CEO of Choice Consolidation Corp., a Chicago-based special purpose acquisition company, and co-founder of Cresco Labs, a multistate operator where he served as president until he resigned in 2020.)
As in every other business, cannabis brands are vying for consumer attention amid a sea of competition.
Cannabis businesses are also constantly seeking that elusive magic formula of products, customer service and community connection that will place them above their rivals.
To no one’s surprise, the cannabis brands most frequently getting it right have a relentless focus on their local market, local employees, local culture and, most importantly, local patients and consumers.
Very often, these brands are single-state operators with a passion for and commitment to their hometowns in a way other operators cannot match.
It is a well-established approach that has been utilized successfully for generations of retailers, yet larger companies often neglect or ignore this approach in a mistaken attempt to streamline operations.
The truth of running a business, however, is that you can never take your eye off the customer, no matter how inefficient a hyperlocal approach might feel at times.
The failures of utilizing a centralized, far-off leadership to make decisions for local businesses are many and well-documented.
Yet it seems that businesses are constantly having to relearn this important lesson.
If you do not understand and embrace the local market, its consumers and the local community, your business will always suffer and lose market share to more attentive competitors.
Centralized versus local leadership
When businesses, particularly retail establishments, are forced to accept companywide decisions that negatively impact customers, it becomes nearly impossible to explain.
Consumers do not understand why a product popular with all their friends is not available at their favorite dispensary, and those shoppers will be happy to patronize the retailer down the street who understands and caters to local preferences.
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When centralized, far-off leadership fails to account for local tastes, cultural attributes and community standards, no amount of corporate-created promotions can make up the difference.
The grocery industry has understood this for decades and has worked diligently to ensure that stores reflect the local community, allowing at least some important decisions to be made by regional managers.
For example, Smith’s grocery store, a Kroger subsidiary, sells an odd combination of ketchup and mayonnaise known as fry sauce in many of its Western U.S. locations.
The condiment is a mainstay in Utah culture and is popular with both young and old customers.
However, this same product would very likely rot on shelves in Kroger stores beyond most Western states.
Conversely, if a Salt Lake City customer could not find fry sauce in his or her local Smith’s location, they’d most likely question whether the store understood its customers.
So, exactly what does it look like when a single-state operator is firing on all cylinders and how can multistate operators (MSOs) mimic these behaviors to establish a local following?
First and foremost, it begins with understanding the local consumer and community, beginning with a deep understanding of the culture, events that matter to local customers and the overall community vibe.
Think local, act local, be local
Single-state operators are singularly minded.
Every decision – from the products featured in stores to promotions offered to customers to the community events supported – is made according to knowledge of the local market.
Even the locations of stores are a direct result of detailed knowledge about the local community.
There can be no substitute for possessing this knowledge, and consumers cannot be tricked into believing you know a market when you do not.
Smart single-state operators expend a great deal of effort researching their markets, hiring from within those markets and using those resources to identify the needs, preferences and aspirations of the local community.
A large part of the success of single-state operators can be attributed to their in-depth understanding of local customs, traditions and history.
Many local cannabis businesses take great pride in their knowledge of community culture and use it to ingratiate themselves with local organizations, artists, musicians and others that create the flavor of the local cannabis culture.
Because of this, they are embraced by local customers and sought out by local workers.
Local businesses also understand the local economy and are able to create promotions and events that resonate with the community.
In essence, they engrain themselves with community culture.
These efforts are made possible in large part by maintaining local leadership that can make decisions at the local level, rather than relying on distant decision-makers dictating maxims for markets they don’t understand.
When multistate operators enter new markets, they would be wise to emulate this practice if they are serious about capturing local market share.
It might be possible to create a local vibe for a brand without local leadership, but it is certainly not easy – nor is it sustainable.
Eventually a local brand faking its authenticity will be found out.
The cannabis industry is setting the tone for a reorganization and redevelopment of business strategies that have been utilized by brands for decades.
Because of the wide differences in regulations from market to market and the often very personal nature of cannabis purchasing decisions, this reorganization of business approaches has been necessary.
But it has also been a product of changing consumer preferences in general.
However, the nature of our business is helping redefine these practices for all industries. As a result, everyone benefits.
Consumers are increasingly attracted to brands that seem to cater directly to their needs and desires, and these companies benefit from the growing loyalty these customers have toward brands that get them.
There is no longer a one-size-fits-all mentality that works, and that reality is precisely why single-state operators are setting the new standard for brand success today.
Joe Caltabiano can be reached at email@example.com.
The previous installment of this series is available here.
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