Kicking the Tires

, Kicking the Tires

Edibles companies look to staffers, customers, retail employees to test-drive new products

by Bart Schaneman

Forget about paying a consumer panel or hiring a market research firm to help your company test a new product.

Marijuana edibles makers increasingly are turning to customers and cannabis retail employees – plus their own staffers – to provide valuable feedback, helping the companies perfect their products before they land on store shelves.

Why this particular approach? Cannabis companies can’t use the same channels for product testing that other mainstream industries can deploy, such as sending out trial samples directly to consumers via the mail.

So they’ve improvised their own product testing procedures, which have become an essential part of the process for successful product launches.

“Without this, you’re really flying blind,” said Peggy Moore, CEO of Love’s Oven, a Denver cannabis bakery that creates medical and recreational marijuana products that include cookies and brownies. “You run the risk of putting a product on the shelves that’s not product-ready. This gives us a chance to have a controlled model for that final piece of the testing of the product, which is, ‘How is it going to play in the marketplace?’”

To avoid squandering precious dollars, edibles companies must follow key product testing strategies to ensure they get crucial feedback before cranking up production. It’s critical, for example, to consider who is performing the testing and the size of the sample audience. It’s also important to avoid producing too much product before the testing results have been analyzed.

“To really decide if a product is good to go in this marketplace, the best way is to do beta testing,” said Julie Dooley, president of Julie’s Natural Edibles, a Denver maker of medical and recreational products including granola, seed mix and granola bars.

Testing Do’s and Don’ts

Marijuana companies typically test products three ways:

  • By offering discounted samples to medical marijuana dispensaries and adult-use retailers for distribution to their employees for feedback.
  • By putting discounted product on retail shelves and giving customers access to a survey to get their reactions.
  • By giving product to their own employees (although in a state like Colorado companies must first send samples to retailers, then buy them back for their employees to remain compliant with the law).

Love’s Oven each month distributes about 600 samples of a particular product. Moore hopes customers will sample some of the product – ideally, a minimum of 100 – and also fill out a survey. That’s on top of feedback the company receives from its own staffers as well as retail employees who are given the sample.

“Realistically (customers) might respond to a survey about a quarter of the time,” Moore said. “No matter how much you discount the product, if people feel like doing a survey they will. If they don’t, they won’t.”

Moore’s company typically discounts test products destined for store shelves anywhere from 20%-50% off the wholesale price.

It’s also important to steer clear of certain steps that could not only cost you money but also undermine your test results. Dooley consults for other companies, and she has watched them commit numerous mistakes.

For example: Businesses ignore test data. A company once made a huge amount of an edible product, spending thousands of dollars. The company thought the product was good to go, because the THC content was right and the mixture uniform. However, the product tasted horrible and people refused to eat it. The company ended up throwing out 5,000 samples.

Another company brought in 10 people to test the product who weren’t objective. They were interested in being at the testing for another reason – they wanted a free vape pen. So they weren’t candid in their feedback, Dooley said. The 10 said they liked the product.

“You have to make this relatively blind, so people can be honest,” she said.

But the biggest mistake is not having a large enough sample size. Ten people aren’t enough for reliable data. Dooley recommends a minimum of 100 responses for a new product.

“This is the worst thing people end up doing,” Dooley added.

In the 10-person test Dooley referred to, the company ended up making 5,000 more units, received terrible feedback from retailers selling the vape pen and ended up throwing out the entire batch.

Limit Test Production

One way to limit the potential impact on your bottom line is to produce a small amount of packaging and labeling until the product has been tested. Dooley recommends new companies cut that back to 500 and assume all 500 units will be tested.

Dooley is more aggressive and buys 5,000 packages and 5,000 labels. She can afford to be more confident because her company is an established brand. About 500 units of that first batch of 5,000 will make its way to sampling.

Once Dooley’s top three dispensaries sign off on the product, she’ll order 20,000 units from her company’s kitchen.

Sending product to retailers, meanwhile, is not as simple as dropping off free samples. Because it’s illegal for a product manufacturer to give away cannabis-infused products in Colorado, Dooley sells her samples to a retailer for a nominal fee, a discount of up to 99% off. If enough – say one of three retailers – don’t like the product, she’ll pull back, re-evaluate and alter the product until she can build a consensus. It’s crucial the retailer is on board with the product if it’s going to sell, she said.

Recently, for example, Dooley received feedback from budtenders, store owners and managers that the milligram count for a new granola bar was too low. She was selling it at 50 milligrams but then increased it to 60. Feedback from other stores said it still wasn’t potent enough to meet the demands of customers and keep pace with competitors. So Dooley upped the dosage to 100 milligrams per bar.

Find Trusted Retailers

Having a small, trusted group of marijuana retailers who can run internal tests can help save your company – and provide valuable market intelligence. For example, Dooley said Denver-based Native Roots has its own team that monitors the changing regulatory requirements and can give feedback on whether a product is compliant before she puts it on the market.

While Dooley’s executive team tests all her products before sending them to retailers for feedback, she still relies on that next level of product testing to get everything correct.

“You think that you have it right,” she said. “You crossed every T, dotted every I, and you think it’s tasty and you think it’s perfect. Now you give it to Dispensary X, and they find nothing but fault with it. You have to be prepared for that.”

For example, Dooley has a new product, a honey drop, that isn’t yet ready for prime time. For feedback, she’ll choose a few of the retailers she knows and trusts. She’ll sell the product to them with her wholesale manufacturing license for as little as a penny apiece. The rec shop and dispensary owners will then distribute the product to their employees.

She will wait two weeks before her sales team calls to ask what the dispensary employees thought. Budtenders typically fill out a paper survey attached to the product that her sales team will come and collect.

Moore of Love’s Oven has a similar approach. Once a product has passed the internal analysis, she asks her sales staff to identify a retailer to help with testing. She provides the product to the store at a discount – anywhere from 20%-50%, as noted above – along with a survey for customers to fill out. The survey asks for impressions about the taste and experience and whether the customer would buy the product again. She also provides samples for the budtenders.

The budtenders will fill out a survey about their impressions of the product and also evaluate customer reactions.

From the budtenders, who interview customers firsthand, Moore’s looking
to see:

  • What caused a person to want to buy a product in the first place?
  • Is there a lot of excitement?
  • Is it lukewarm?
  • Are you having to push the product?

“Three-quarters of the battle is you want the budtenders to be on board with the products,” Moore said.

Budget for Testing

Don’t expect to sell your testing products at a profit.

“If you cover your costs you’re lucky,” Dooley said.

A good approach is to build the testing costs into your research and development budgets. Plan on a certain number of units, packaging and raw ingredients you’ll need, then evaluate your all-in cost, including overhead, and factor in discounted prices for the sample products accordingly.

For an existing product that has undergone minor changes, Dooley typically tests one sheet pan of a product, such as brownies, which will yield around 40 units. She takes that to a dispensary and lets them sell it.

If it’s an entirely new product, Dooley will make 10 pans and distribute them to as many dispensaries as she can. She’ll offer them on the shelf of a retail store for as little as a $1 apiece, or some stores will sell them as a buy two, get one free deal. And she eats the cost of the below-cost price the retailers pay for the product. Then she waits to hear back about how it went over with customers.

Moore said her company breaks even on the products it tests. But forgoing any profit, for the moment, is worth it.

“By proactively doing things like this we build goodwill with our customer base and in-state customers,” Moore said. “It shows that we care enough not just to sell someone something that hasn’t been tested in the marketplace.”