Could CPG Interest Mean Big Brand Partnerships for Cannabis?

As the cannabis industry continues to expand its profile and brand appeal, the question of whether a big-name consumer packaged goods (CPG) company may make an appearance in the space appears more admissible than ever.

Emerging cannabis companies across North America and globally are doing their best to build winning brands that consumers find comfort in and attach themselves to — and all things considered, the Coca-Cola of cannabis may already be somewhere out there.

But what if instead there’s a world where the mainstream brands consumers already know and love begin to offer go-to cannabis products?

A number of experts told the Investing News Network (INN) there is an endgame scenario in which the current major CPG brands find cannabis partners and begin the process of offering branded products, either separate from their premium brands or under the same umbrella. But that reality, if it exists, will need plenty of time and regulatory changes to materialize.

Sebastian Solano, CEO of Dreamfields Brands, a cannabis operator managing the California cannabis brand Jeeter, explained that large CPG brands may internally be excited about what cannabis could mean for them, but current regulations prevent them from doing anything.

“At some point that marriage is going to happen,” Solano told INN, using the example of the Coca-Cola Company (NYSE:KO) evaluating either acquiring a top-level cannabis drink maker or electing to make a drink as soon as it’s legally acceptable.

In the US, cannabis is a federally scheduled substance, and business activities around it are prohibited. This means cannabis companies in the US can’t trade on American exchanges.

The industry has grown thanks to decriminalization efforts from states within the country. In these state marketplaces, operators duke it out for sales supremacy through branded products.

The drug is federally sanctioned in Canada, with commerce across the nation, but strict branding rules have made it difficult for brands to experience organic growth and consumer recognition.

Solano is confident cannabis companies will eventually be seen as bankable partners that can promote everyday products like cars or even movies.

“I feel like it’s also (about) products and brands wanting to target the THC-consuming audience, which is freaking massive,” Solano told INN.

US expert hopeful for future of branded cannabis products

George Mancheril, co-founder and CEO of Bespoke Financial, a debt financing business with a particular focus on servicing US cannabis businesses, told INN it’s key for cannabis brands to emulate the consistency seen in premium established branded products.

He explained it’s still all too common for a consumer to walk into a cannabis shop, find a product they appreciate and simply not know when they might see it again at that same store. And even if it’s there, there’s also the question of the product’s consistency of quality.

“When I find something that I like, it’s a challenge (to ask), ‘Okay, will I come across this again anytime soon?’ Or does it require waiting till the next harvest or production run that comes in,” Mancheril said.

The financial expert, who watches the progress of the cannabis industry in the US directly, told INN that this issue will need to be addressed in order for cannabis to reach the kind of established marketplace it is currently pursuing.

“It’s a huge departure from how the consumer product industry works outside of cannabis,” he said.

When asked about whether big-name CPG brands may be interested in tapping into the cannabis industry at some point, Mancheril affirmed it is very reasonable to expect consolidation from the largest players as they pick and choose the top products.

“Once any market gets to a critical size, and once any brand gets to a critical mass within that market, obviously it becomes a target for a large-scale producer to move in,” Mancheril said.

He was quick to point out that the future, as it stands, is murky when it comes to this process for the cannabis industry. It may very well be that a current cannabis operator or brand will rise to the point that it becomes the one doing the acquiring, he said.

“Obviously, existing larger operators are just coming with much better resources, but a brand that understands cannabis that has gone through this road will probably have a much easier time assuming new brands and causing the least amount of disruption when they do work through a consolidation or an acquisition like that,” Mancheril said.

Investor takeaway

Brand appeal is an important component of the cannabis market today and will only grow more relevant as the sector continues to pursue a CPG model.

Whether or not consumers find themselves purchasing a cannabis product from an already recognizable brand in the future remains to be seen. But the potential ahead for those working on cannabis brands and products today seems endless at the moment.

Don’t forget to follow us @INN_Cannabis for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.