How do you build a national cannabis brand when the rules of the game are different in every state? This is a challenge that every cannabis business with plans to become a multi-state operator (MSO) faces, and the fact that the rules change all the time makes the barriers of cross-border expansion in the cannabis industry even harder to overcome.
Fortunately, cannabis businesses don’t have to forge new ground when they’re ready to cross borders. A number of companies have already become successful multi-state operators, and new entrants into the multi-state cannabis industry can learn from their experiences.
Below are five strategies from cannabis business executives who’ve been there that you can use to make your cannabis company’s expansion across borders as successful as possible.
1. Keep a Local Focus
There are two primary ways that keeping a local focus can help make your cross-border expansion in the cannabis industry successful. First, it’s essential that you work with local attorneys since regulations vary from state to state. “It’s important to understand the impact of the differing state laws on brand development, cultivation, manufacturing, distribution, and sales, so retaining local counsel in each state is necessary,” says International Cannabrands CEO Steve Gormley.
Jeffrey Zucker, President of Green Lion Partners, further explains, “Make sure you have great attorneys who understand the nuances of cannabis laws in the states you’re looking to enter and the best way to structure your plans to ensure you’re in compliance with all laws.” Tapping into local legal expertise is truly crucial to a smooth expansion.
Second, it’s important to build relationships in the local communities where your cannabis business will operate. To that end, staff your business with local employees. “Hiring locally so each facility is locally managed and operated empowers the local workforce and creates a strong loyalty and ownership bond with each community that simply doesn’t exist if you ship in managers,” says Ron Goodson, President and COO of Verano Holdings.
2. Plan Your Supply Chain
In addition to building relationships with the local communities where your cannabis company will operate once it expands across borders, you also need to build relationships at the local level, which includes local suppliers where it makes strategic business sense to use them.
“Cannabis businesses need to find the right local partners and build relationships with local communities, regulators, and organizations,” says Grassroots Cannabis Co-Founder and COO Matt Darin. “You have to commit time to build good will locally.”
3. Do Your Research to Develop a Solid Business Plan and Capital Plan
Cannabis is not a one-size-fits-all industry, and your company needs to be flexible to adapt to the rules in different states. That means you need to invest time into researching and fully understanding the new markets where you plan to expand.
What products are allowed? What are the qualifying medical conditions? How do communities feel about medical or adult-use marijuana? How does the state and local law enforcement feel about it? “The answers to these questions allow you to develop a budget and business plan so you understand the investment required and whether it will be profitable to proceed,” says MariMed Inc. CEO Robert Fireman. “This industry requires a lot of planning.”
It’s also important to use your research to develop a solid capital plan. “This is a capital intensive industry,” says Darin. “Don’t underestimate the cost to build operations, teams, marketing, and everything else it takes to be successful.”
4. Identify the Decision Makers and Appropriate Messaging
Cannabis marketing and advertising rules can vary significantly from one state to another. If you hope to expand your cannabis business into a new state, you need to understand the dynamics of the marketplace that you’ll be entering and how to market your brand and products there.
Naturally, you need to adjust your marketing strategies to focus on specific media allowed within a state, but you also need to consider who the purchase decision makers are in each state.
David Goldstein, CEO of Potbotics, explains, “Are the key decision makers in the state physicians? Caretakers? Or is it up to the dispensary to provide medical insights to patient groups and wellness users? Localization for messaging varies heavily state by state, and you may find that a marketing campaign that worked great in one state fails in another because it doesn’t target the right gatekeepers.”
5. Prioritize Brand Consistency
Brand consistency is more than making sure all of your dispensaries, grow operations, or other consumer-facing locations and materials include your logo. Brand consistency includes your marketing, operations, packaging, and more, and it is critical to building a multi-state identity and reputation that people can trust and depend on regardless of the town or state where they interact with the brand or buy it.
“Creating consistency in product development across different markets so quality, packaging, labeling, dispensary design, staffing, and the brand are consistent is challenging,” says Darin, but it’s also extremely important.
Mark Grindeland, CEO and Co-Founder of Coda Signature, explains, “Customers expect the same experience with your product wherever they purchase it, so companies need very close coordination and authority on how the product is manufactured, marketed, and sold. Companies need to have consistent Standard Operating Procedures to maintain quality standards but also need the flexibility to adapt to local regulations.”
It’s a challenging balance but one that can be achieved as many multi-state cannabis companies have already proven. Will yours be next?
Key Takeaways for Cannabis Businesses Expanding Across Borders
Expanding your cannabis business into new states successfully requires research, planning, capital, local support, consistent branding and procedures, and flexible messaging. Scaling into new markets in the cannabis industry is exciting, but savvy cannabis business leaders will recognize the obstacles they’ll face and develop agile teams and plans to overcome those obstacles.
The lesson to learn is this. Be patient and purposeful as you scale your cannabis business, and your chances for success will increase significantly.