How marijuana entrepreneurs can outsmart black-market competitors

(This is an abridged version of a story that appears in the March issue of Marijuana Business Magazine.)

Whether you’re operating in a medical or recreational marijuana market, illicit cannabis sales are an ever-present threat to the legal industry.

Marijuana entrepreneurs can’t control how the black market operates, but there are ways to encourage customers to buy from a licensed, regulated business instead.

Put simply, it requires going above and beyond what black-market operators can offer by way of service and products.

From rewards programs and corporate giving campaigns to education, there area many ways cannabis business owners can win – and keep – customers.

Loyalty programs

Many cannabis retailers have turned to rewards programs to build brand loyalty and incentivize customers to choose the regulated market over the black market.

Dockside Cannabis in Washington state uses a points-based loyalty program from Baker Technologies, a Denver-based marketing automation software company that serves MJ retailers.

The Seattle-based retailer’s customers are prompted to sign up on an iPad when they visit a Dockside location, and they immediately receive 50 points they can redeem the same day for $10 off an item of $30 or more.

After their first visit, customers receive 20 points every time they check in on the iPad in the dispensary and can redeem 100 points for 10% off a purchase or 250 points for 25% off a purchase.

Hawaii’s Aloha Green Apothecary also has various loyalty programs and perks for its return MMJ patients.

But the dispensary goes a step farther by offering a 10% discount on product to all patients who sign up to receive email newsletters and text message updates.

The updates ensure the dispensary can communicate regularly with its patients – and that has a positive impact on sales.

“Our sales numbers see a direct correlation with our communication,” said Helen Cho, director of integrated strategy for Aloha Green.

She said the dispensary has seen up to a 25% increase in sales on days when a communication is sent to patients via text message.

Giving back

California-based Bloom Farms tries to appeal to the “conscientious consumer” through corporate giving, founder and CEO Michael Ray said.

The company donates one meal to a local food bank for every one of its products sold.

Bloom Farms, which sells its products throughout California, recently donated its millionth meal, Ray said.

“We see Bloom Farms as equally a customer service company as a social good company and as a cannabis company,” he said.

“That’s something the black market can’t do.”

Originality pays

Some cannabis entrepreneurs believe they can beat illicit sellers to the punch by offering products the black market doesn’t or simply can’t offer – such as CBD-rich strains or extractions.

“When it comes to our brands and products, we have made it our mission to allow customers to customize their treatment,” said Dennis Hunter, co-founder and co-CEO of CannaCraft, a vertically integrated medical cannabis producer and distributor in Northern California.

CannaCraft produces:

  • AbsoluteXtracts, a brand that offers 19 strain-specific vape cartridges that allow consumers to find a strain with the taste and effects that meet their needs.
  • Care By Design, a CBD-rich line that’s available in five ratios of CBD to THC and in eight applications – vape cartridges, softgel capsules, concentrated oils, sublingual sprays and droppers, chocolates, dissolvable strips and pain creams. Such options allow MMJ patients to decide the level of treatment and mode of consumption that works best for them, Hunter said.

Bloom Farms, meanwhile, sells limited seasonal batches of Single Origin Reserve strains of cannabis that come from farms in different regions of California, as well as a CBD-rich, low-THC ACDC strain that’s grown in Calaveras County.

“Much like wine, certain varieties or strains of cannabis thrive naturally in some areas and climates, and growers in those regions master their art,” Ray said.

“We choose the best strains grown in specific regions.”

Cannabis know-how

It’s critical for customers to know that product purchased on the regulated market is tested for quality and safety.

So education is key to encouraging consumers to shun the black market.

Aloha Green and Steep Hill Labs, a Hawaii cannabis testing facility, co-sponsor events that educate consumers about testing for harmful materials – such as yeast, mold, heavy metals or pesticides – in the state’s regulated cannabis.

Consultants at Aloha Green’s dispensary also educate patients about the state’s rigorous testing processes, safety standards and the benefits of cannabis.

“That’s a level of transparency you don’t get from the black market,” Cho said.

Education also is a priority for CannaCraft’s extensive product lineup, said Hunter, the co-CEO.

“We have spent a great deal of time laying out the differences in strain effects, the medicinal benefits of individual terpenes and the benefits of the various applications,” he added.

Education around infused products and extractions is also critical, said Kevin Gallagher, the executive director of Colorado’s Cannabis Business Alliance, which creates print materials on safe consumption as well as edible and concentrate dosing for dispensaries to share with consumers.

Infused products and extractions amount to about half the regulated market’s sales in Colorado, he added.

Whether extracts are manufactured with butane or CO2, they’re safer when they’re produced for the regulated market by trained professionals, Gallagher said. And it’s important for that information to be shared with consumers.

Black-market producers don’t pay for testing, compliance or adequate technology to create safe extractions.

But in Colorado, Gallagher noted, solvent-based infused products are tested for potency and residual solvents, and water-based concentrates are tested for potency and microbials.

Those tests ensure that consistent, safe products make it to market, Gallagher said.

“With the regulated market, you get the assurance of a safe product,” he said.

“It goes through more testing than your grapes at the local grocery store.”

10 comments on “How marijuana entrepreneurs can outsmart black-market competitors
  1. fabulasfreddy on

    i don’t know where you guy’s live but the black market here in Washington state is nonresistance the only way to have a black market is to be able to ship it to a state that dose not have a mmj or recreational market.

    Reply
  2. D_Rock S. on

    This article is inaccurate in many ways. I’m a professional grower in Arizona. I send my customers across this state looking for the best possible product they can find and to obtain it for me, whether it’s black market or dispensary bought. My goal as a grower is to produce a finished product second to no other in this state. My customers are loyal to me because of the quality of my product. Not to sound arrogant, but my product is the best in Arizona. I bank my life on it and I welcome anyone who thinks they have a better product to contact me because I want to see it. I want to see how it matches up under a full spectral analysis and I want my clients to experience it and decide for themselves.

    I welcome the best growers in the industry to network together and share their products with everyone who wants them. The satisfaction I get is when the head of Bedrocan tours my facility and gives me kudos, or when Snoop Dog compliments my product as the best they’ve tried from Arizona. To hell with the money!

    I AM A BLACK MARKET GROWER because our dispensary was taken from its rightful owners by thieves who should’ve been ground into fertilizer already.

    I have all of my product tested at a lab for potency, cannabinoid, 40 terpenes as well as pathogens and pesticides. I also decided to invest in the extraction equipment to make all the most popular concentrates. Whether I’m a licensed dispensary or a black market grower makes no difference at all to my sales because QUALITY is the number one factor for all eighty of my direct clients. They have been spoiled. They demand the best product and will not settle for crap, which is what my proclaimed growers produce for commercial dispensaries. This is proof positive that a B.S. in Botany doesn’t mean you are capable of producing the best product, or even average product.

    Yet I can walk into any dispensary in Arizona and no one would know me from any other Joe. Many have heard about me and my product, but that’s it. They call me Double D. Don’t ask me why, I don’t know why they picked that name. Others call me The Prodigy.

    I believe the entire idea of licensed dispensaries is a crock of shit anyway. Dispensary owners are no different from any other big business owner–greedy!!! They want to protect their little corner of the world and secure their business’ right to continue selling their sub-par product to an ignorant public who is easily beguiled. Because anyone selling the best product around isn’t worried about competition in the least bit–we actually welcome it!!! Because it will make me better. For as good as I am at growing I’m nowhere near as good as I could be.

    I’m as competitive as you’ll ever meet. Growing up my father etched into my mind that no matter what you decide to do in life, BE THE BEST!!! Whether you’re a landscaper, an engineer, architect, lawyer, bank robber or a murderer–Be the BEST at what you do! And the best don’t get caught. Get caught one time, quit and find another career. So first search your soul and ask yourself how far you would go to succeed. For me: As far as it takes…….there are no rules…..

    The old saying goes……”All’s fair in love and war!”
    OR
    “Only those who dare to fail greatly can ever achieve greatly.” -Robert F. Kennedy
    OR
    “In the middle of difficulty lies opportunity.” -Albert Einstein
    AND
    “The greatest pleasure in life is doing what people say you cannot do!” – Walter Bagehot

    Reply
    • Sage on

      Bless you, Brother. You are a true hero on behalf of this wonderful herb and all those who embrace it in their lives. Thank you!

      Reply
    • Roland on

      “People of the same trade seldom meet together…but the conversation ends in a conspiracy against the public.” Adam Smith, Wealth of Nations

      That’s what many of these businesses are doing. Dried vegetable matter like fine tobacco is less than $10/pound, and cannabis is easier to grow. Imagine what that would do to a politician’s promised stream of cannabis tax revenue.

      Reply
  3. Ken Squire on

    All great ideas. I have met some retailers who are reluctant to deploy loyalty programs simply because some clients still prefer anonymity. Other feedback from retailers indicates the preference of clients to know the supply has a defined quality and highest standard of safety. The ‘black market’ will always try to outwit, and I know they have come forward with more competitive prices and instant credit. The invisible hand and ingenuity will continue.

    Reply
  4. Bill Fannon on

    I agree, my product stands up to any testing…I pay to have it done..and I show the results to my associate’s..and as a result 70 % of the time they don’t care to see it…because they know me..but I’m not widely known…in 60 I’ve been doing this since I was 18..all that has been created is greed and narscisim…intil things are integrated into a more open market…like micro brews an wineries….when you do something really well the market comes to you..my farming practices are wholesome..and health for us and the land..

    Reply
  5. Brandon Strong on

    How marijuana entrepreneurs (#corporatemarijuanatakeover) can outsmart black-market competitors (the activist growers who legalized marijuana for everyone else)

    There. I fixed up your headline. 😉

    Reply
  6. CJ on

    I believe the best way to bring in and keep customers and take a bite out of the black market it to keep the prices low and the quality of bud high. Unfortunately we have retailers marking up 300%-400% from the wholesale price, keeping retail prices high and producing a black market that is thriving right here in our state, consumers are getting tired of high prices and heading back to their “guy”.

    Reply
  7. Kai on

    Sorry but a black market vendor will have more of a farm to fork feel similar to a farmers maket vs.a grocery store i refuse to buy anything at a club they are not in the business of keeping customers just making money besides all of this started in someones backyard yrs ago not in a corporate run weed factory …..

    Reply
  8. Bill Shane on

    My primary care physician has just applied for a dispensary license here in CT. Thank you for all the great ideas I can share with her; not just this article, but numerous others. You’re the best!

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *