The MJ Unpacked cannabis convention held last week in Manhattan featured discussions of cannabis industry issues affecting New Jersey and other markets.

Their New York City show brought many established cannabis market players eager to work with those in the immature legal cannabis markets of New Jersey and New York. Green Rushers from other markets are interested since the barriers to entry are lower. 

The MJ Unpacked cannabis convention only permitted license holders and applicants to buy tickets. Thus, there were fewer ancillary services represented among attendees. Usually, this is not the case. Ancillary entrepreneurs and professionals had to buy a booth to vend or get creative to attend. 

There were many small companies there dreaming of being cannabis corporations that are Multi-State Operators (MSOs). It will be interesting to distinguish an MSO with a few locations and good values versus larger ones that do not. Vertical integration is attractive to applicants since it allows them to do more than one function and scale. For example, many would like to grow and manufacture adult-use cannabis products. Some applicants want to have a dispensary and delivery service. Others have ideas about dispensaries and consumption lounges.

MJ Unpacked was very much focused on entrepreneurialism. Thus, a “Money Stage” competition resembling Shark Tank for $5,000 and assistance was won by a company called Barbari.

Craft Cannabis Discussed at MJ Unpacked

A panel was held on how to protect the Craft Cannabis ecosystem was held with Nabis Co-CEO Vince Ning moderating a panel with San Francicco-based MD Numbers Inc. co-founder Marie Montmarquet, Northern California Native Humboldt Co-Founder Lindsey Renner, and Lowd CEO Jesce Horton of Portland, Oregon.

Ning explained that in the cannabis industry, cannabis corporations that are large Multi-State Operators (MSOs) have the capital to grow larger and push out smaller businesses by selling adult-use cannabis at a lower price and stronger, but at a lower quality, than their competitors.

Horton said that craft cannabis products would be better, higher-end products, more imbued with the legacy culture.

“People have different visions of what craft cannabis really is,” he said. “The Craft Brewery Alliance came up with a really great definition.”

He said craft cannabis entails premium, high-quality cannabis sold and made by owner-operators grown in small batches. Every crop experiences slightly different variables.

“Everything we love is going into those plants. We definitely irrigate automatically. We hand-trim everything, even down to the small nugs. You can see the difference,” Montmarquet said. “At a large scale, it’s not possible.”

“Delivery was not profitable, so we needed to scale,” she explained. 

“Craft cannabis is quality cannabis,” Renner said.

Business Models Discussed at Cannabis Convention

She described the “Whole Foods model” that could be applied to cannabis. Products are purchased by socially conscious consumers who appreciate organic products and Fair Trade made by workers earning a living wage. However, they are often more expensive as well.

“Every MSO’s… entire scheme of the game is trying to copy craft cannabis somehow,” Montmarquet said to great applause.

“How do you guarantee the quality?” Ning asked.

Horton said caring and data are key.

“That’s the reason it’s not as common,” he said. “These little incremental differences are what’s happening.”

Horton said differences in supply, chemicals, and trimming fashion all contribute to crafting cannabis.

“MSOs are all about scale and driving down the cost of production,” Ning said.  “Customers are very price sensitive. How do craft cannabis brands compete with these MSOs that are very well capitalized?”

“Cookies reached out,” Renner said. “If it’s the right MSO… that shares your same values… and really wants to support quality.”

“Commit to educating the consumer,” Horton said. 

“You can get amazing sun-grown cannabis that hugged terpene probably cheaper than auto flowers, at least in Humboldt,” Renner said. 

“The only way to have a long-term sustainable business is to connect to a West Coast breeder,” Montmarquet said. 

Business Issues

“You’re going to have to understand what makes you special. Innovation is key,” Renner said. “Genetics is ways going to lead the way. You’re never going to replicate the culture on the West Coast.”

“What other things did you consider in a struggle?” Ning asked.

“Clearly, the taxes in California are an issue,” Renner said. “The Cultivation tax is 161 per pound. Retailers pass on the excise tax to consumers. So consumers are turning to the illicit market.”

“By the time you see it on the shelves… it is so passed freshness,” Montmarquet said of corporate cannabis. “That same flower is existing on the street. It’s probably cheaper and fresher.”

“That affects everyone in the legal market,” Ning said. He noted the need to create a political advocacy coalition to change the rules.

Renner noted the need for a craft cannabis company to spend time making its brand unique.

“New York has done a lot to show they’ve learned,” Horton said, noting their focus on equity with lower barriers to entry, no license limit, and the open-arms welcoming of the underground market.

Their Social Equity incubator-like fund will likely help as well.

Pot Bullying: MSOs v. Smaller Companies Panel at MJ Unpacked

Moderator Charlie Cain oversaw a panel with the Massachusetts-based co-founder &CEO of the High-End dispensary Helen Gomez Adams, Founder and Managing Director of the Giving Tree Dispensary in Arizona Lilach Mazor Power, and Canna Provisions CEO Meg Sanders of Colorado.

Adams noted ability to tell an authentic story is important to creating a brand.

“Customers like stories which lend to credibility,” MS said.

“People love stories, but MSOs aren’t going anywhere. There’s room for both,” Sanders said.

“Buy local is a common refrain. Are you finding this to be true?” Cain asked.

“I think that consumers want to support people doing good things,” MS said. 

“It does not move the needle. Our industry is very young,” Power said.

She said customers make decisions based on price and THC level. 

“We haven’t truly created an educated consumer base,” Power added.

Cain asked what challenges they had faced.

“Access to capital,” Sanders said. “It’s still very challenging to tap on that shoulder. Even just in normal market conditions.” 

“Our consumers are super promiscuous,” she added. “You see the same thing at microbrews and streaming.”

“We do not have the buying power MSOs have,” Power said, lamenting they get better deals buying products in bulk. 

She said that creates a race to the bottom whereby smaller companies underprice themselves and do not reap the benefits from doing so.

Power Of Grassroots Cannabis Advocacy

At the cannabis convention, Adams noted the power of advocacy to influence the writing of the rules that govern regulated markets. Noting the issues with banking in the cannabis industry, she said she heard an MSO executive boast of deals with banks for an account and a commercial line of credit versus smaller businesses.

“Getting a seat at the table and lobbying. That’s capital,” Power said at the cannabis convention.

“Have you been a target of acquisition? Have you considered it?” Cain asked.

“All the time. Hell no, that’s not going to happen,” Power said.

“We’ve definitely been approached. It’s not a fair trade,” Sanders said.

She said that while her business is successful, she did not trust the logic of MSOs, which might have cash flow issues. Thus, taking their stock was worthless.

“It’s not attractive in any way, shape, or form. Cash is king,” Sanders said. “They don’t want you in the company. They don’t want you to earn out.”

Protecting Small Cannabis Companies

“We can’t plan our way to the right timing to get bought out without doing much but get a license,” Cain said, noting a strategy some companies adopt.

“Focusing on brands is what we can do,” Power said at the cannabis convention.

“Convenience is a huge factor. At some point, we won’t be a destination,” Adams said. “It’s a wellness product. There’s room right now.”

“It can be really hard to tell who’s independent,” a lady in the audience said.

“It’s the responsibility of the operator to communicate it,” Power said.

“You should really vote with your dollar every day,” Sanders said.

“It’s easy to be fooled by someone who says the right thing,” Adams said. “Don’t be afraid to do your due diligence. Ask the right questions.”

“As a small business, I get to hear how we’re not going to survive. Silence the noise, surround yourself with ones who believe in your vision,” Power said.

“Without it being super public, there’s MSO backing,” Adams said of many small companies at MJ Unpacked.  

“They close the door behind them. You can’t be the only one that makes it,” she added to great applause from the audience.

Cain explained in the early 90s, he worked in the coffee industry. Even with a lot of Starbucks, thousands of independent coffeehouses have opened since then as well.