Type CBD into a search engine and it will populate with new brand names every day, said Steve DeForest, the chief operating officer and chief compliance officer for Los Angeles-based Green Gorilla, a manufacturer and online retailer of hemp-derived CBD oils, topicals and pet products.
The U.S. market for hemp-derived CBD products is expected to approach $600 million this year, according to cannabis research firm Brightfield Group, and brands are eager to capitalize on the surging popularity of THC’s nonpsychoactive relative.
Despite a rosy outlook for the market, not every brand hawking hemp-derived CBD products is positioned to succeed.
Green Gorilla could be an exception, bolstered by manufacturing in a lab registered with the U.S. Food and Drug Administration (FDA), strategic product development and pricing as well as vertical integration. Green Gorilla’s products are available for sale online in the United States and Brazil, with plans to expand to Canada and the United Kingdom; they also are on shelves in more than 1,000 retail stores in the United States.
“We’re not a ginormous company yet,” said Steven Saxton, Green Gorilla’s CEO and founder. “But we hope to become one.”
While declining to go into specifics, the company said its revenue increased by 275% in the first half of this year compared to the same period in 2017. Green Gorilla also entered a new partnership with Arizona-based Pure Grow Soil, which will expand the company’s footprint to soil production and sales. In addition, Green Gorilla ultimately will use the soil to grow its own hemp. The partnership is intended to give Green Gorilla’s team more control over consistency, cost and efficacy of its line of CBD products.
DeForest and Saxton shared insight on the company’s strategy for staying ahead of the pack – and scaling to become a leading global brand.
Prepare for a Policy Shift
The hemp industry broadly expects the FDA to eventually regulate the manufacturing of CBD products.
In the Wild West of CBD production, such oversight could have massive implications for businesses manufacturing their products in facilities that are not up to par.
And that would put Green Gorilla ahead of the curve.
Action by the FDA would likely require CBD manufacturers to comply with current good manufacturing practices (GMPs), which are quality-control regulations for human pharmaceuticals to ensure products are safe and effective.
With products already manufactured in a facility registered with the FDA to manufacture and process pharmaceutical and over-the-counter drugs, Green Gorilla is well-positioned to survive a sudden shift in federal policy, according to company officials. Facilities registered with the FDA are subject to inspection to verify they comply with GMPs. And Green Gorilla said it already adheres to the FDA’s strict GMPs.
In addition, Green Gorilla’s facility:
- Is registered with the U.S. Department of Agriculture’s National Organic Program.
- Provides product traceability, batch reporting and quality assurance and control testing.
- Is certified by the International Organization for Standardization (ISO), which means it meets global manufacturing standards for quality, safety and efficiency. Not many labs obtain ISO certification because it’s an added operating cost, DeForest said.
The cost of manufacturing products at an FDA-registered facility is higher, but it is worth the cost, according to DeForest.
“Does it come with a little bit higher cost? Yeah, but I think that’s the only way that you can actually make sure that it’s done to the standards it needs to be,” he said. “Any percentage it adds to our cost is going to be made up in the long run.”
Align Products with Your Brand
Product development should be consistent with your brand and its current lineup and also meet a need in the market, DeForest said.
Don’t develop a product as a response to competitors – particularly if it doesn’t meet your standards for quality or align with your brand’s values.
“I’m not going to jump into anything (and say), ‘Hey, let’s slap a label on the front of it or buy it from someone else,’” DeForest said.
Green Gorilla has strategically and rapidly expanded its product line, consistently releasing higher-dosed oils and developing topicals and pet products.
Its release of pet products in 2017 – oils for house pets and horses and dog treats – is a response to consumer demand.
Despite demand for vape cartridges, DeForest isn’t convinced such a product jibes with Green Gorilla’s position as a health and wellness company.
“I struggle to see the connection between (those products) and our position,” DeForest said.
By contrast, softgel capsules, edibles and additional topicals are more in line with Green Gorilla’s brand – and equally in demand by consumers, according to Brightfield Group research. That’s why the company is actively exploring those new product opportunities.
“The way to do it right and the way to make sure it’s within our frame is to do it (strategically),” DeForest said. “And if we’re going to launch an item, it needs to be better than, it needs to be different than (rival products). It needs to have our particular Green Gorilla efficacy, quality and purity.”
Vary Price Points
Fighting price wars is a losing strategy, DeForest said. Rather, focus on segmenting your product offerings and price points as well as educating consumers about the efficacy of your products.
Green Gorilla’s signature line of Hemp & Olive CBD-infused oils ranges in price from $25.99 for 150 milligrams to $599.99 for 7,500 milligrams, and the prices for its line of products for house pets and horses range from $39.99 for 150 milligrams to $599.99 for 7,500 milligrams.
At the higher end, consumers may feel sticker shock, but steeper prices reflect larger doses and 30-day supplies, versus lower doses and 15-day supplies for lower-priced products. They also are designed to appeal to a wide range of consumers – from those integrating CBD into an everyday wellness routine to customers needing more sustained pain management.
Part of the company’s price-setting strategy is to create lower-priced products that work as an introduction to CBD in addition to higher-priced items that offer a pain-relief alternative to prescription drugs.
The lower-priced products – a 15-milligram, single-serving dose of CBD that sells for $5.99, a 150-milligram bottle of CBD oil for $25, or a 1.75-ounce balm for $49.99, for example – provide a nice “entry point” to Green Gorilla’s product line and is where most consumers start, DeForest said.
The company also uses its website to educate consumers about the health benefits of olive oil, which Green Gorilla uses as a carrier for CBD in its line of Hemp & Olive oils. In addition, the company shares laboratory results on its website that show the purity of the CBD used in its products.
As Green Gorilla’s revenue increases and fixed overhead costs stay steady, the company strategically examines the prices of its products and lowers them when it can.
As for price wars: “If that’s your strategy, you’re going to lose sooner or later,” DeForest said.
Vertically Integrate Operations
To better control the consistency, purity and manufacturing costs of its products and lead the market in developing hemp-derived CBD offerings, Green Gorilla signed a deal last year with Pure Grow Soil to create a new vertical: the Master Grower line of soil for biodynamic farming.
The Master Grower soil will be sold to cultivators. And, eventually, it will be used to grow hemp used in Green Gorilla’s product lines.
Another division of Green Gorilla, Gorilla FarmCo, will oversee seed genetics, planting, growth and harvesting of hemp plants on an 80-acre piece of land, scalable to more than a thousand acres. The first harvest is due in late 2018, and a proprietary CO2 extraction process will supply the CBD oil in Green Gorilla’s product lines. The remaining hemp biomass will be used to develop additional products the company plans to sell to other companies.
The move toward vertical integration is key to Green Gorilla’s long-term strategy of being a global market leader.
“As this business expands, CBD will become a commodity,” Saxton said. “But getting the consistent, organic product we want, we need to control it in some capacity. So, we either have to have significant partners or we have to be vertically integrated.”