As cannabis markets open across the United States, opportunity continues to grow for manufacturers of cannabis-infused food and beverage products.
But which factors should manufacturers and brand owners take into account before setting up shop in a new medical or adult-use market?
Stephanie Daley, VP of market expansion, Wana Brands, Boulder, CO, recently spoke to Cannabis Products about what the company looks for when it considers expanding, building connections with manufacturing partners, and its recent moves into Illinois and Missouri.
CP: What does Wana Brands look for when it is deciding to enter a new market?
SD: There are numerous factors that we evaluate when deciding whether or not to enter a new market. We tend to focus on states with larger populations, as well as those that either are already adult use or that have the likelihood of going adult use in the near future. We are definitely committed to providing products to medical patients, but we look to markets that will likely go adult-use as well so our products will be available to a larger percentage of the population.
Another factor we evaluate is whether or not we can find a good partner in that market. Our expansions have been done through licensing agreements in each of our markets, which means we find a partner that is already licensed there and we teach them how to produce our products. There are a couple of markets that we’ve been interested in for a while but have not found the right partner yet, so we are holding until the right one comes along. A good partnership is a key factor for our success in each market.
CP: What challenges come with getting established in a new market?
SD: There are many challenges that come with getting established in a new market. The first challenge is that our gummy recipe is very sensitive to elevation and humidity, so we need to alter the recipe slightly in each of our markets to ensure that the texture is consistent from market to market. There are not any ingredient changes to the recipe, it’s more about adjusting cooking times and temperatures, which is actually getting easier with more reference points we have for different elevations and humidity levels.
Another challenge we run into before we even get our products on shelves is establishing testing protocols with the labs in each market. When we first start testing in a new market, some labs have a difficult time extracting all of the cannabinoids out of our gummies for potency tests. When this happens, it means that the amount of cannabinoids that we put into the gummies does not accurately show up in the potency test results.
If this happens, we then work with the lab to help them dial in their testing procedures to be able to accurately test our products. We do not release our products until this is solved, as consistency is very important to us. This typically only happens in brand new markets where testing for edibles is a new process for all of the labs. In more established markets, this is less of an issue.
One of the biggest challenges this past year is that we’ve been unable to travel due to COVID. Typically, the training chefs on my team will travel to each market to conduct R&D on the recipe and train the kitchen staff on how to produce our products.
A few weeks before the COVID lockdown started last spring, we signed an agreement with our Canadian partner. We had planned to travel to their facility in Ontario to train the team, but there was no way to do that because the United States/Canadian border was closed. We paused for a couple of months hoping that the border would open back up, but eventually it was apparent that wasn’t going to happen anytime soon.
I knew that we had to figure out a way to get Canada launched without our chefs being able to travel there, so we developed a remote R&D and training plan. After launching in September, we have already become the No. 1 gummy in Canada. We have now taken that remote training plan to other markets and launched four other markets in addition to Canada last year without being able to travel.
CP: How does setting up a plant or connecting with manufacturing partners play into that?
SD: Our expansion strategy is currently based on licensing agreements with manufacturing partners, and they definitely play a key role in helping us get established in new markets. In Colorado, where we have our own manufacturing plant, we are well known by our customers for our excellent customer service and reliability. This is an important piece of our brand and something that we strive for in each market, but this can be more difficult in other markets since we are not fully in control of the manufacturing process.
Although we work very closely with our partners on sales forecasting and production planning to help ensure that we consistently have products available to our customers, there are some markets where there are factors outside either our control or our partners’ control.
For example, when a market transitions from a medical market to an adult-use market, there typically has not been ample time for the cultivation facilities to ramp up production to meet the demand of adult use. We are still feeling the effects of this in Illinois one year after adult-use sales began, but we expect that to even out later this year as the facility expansions of cultivators come to fruition and more cultivation licenses are awarded.
CP: What made Illinois an attractive place to launch Wana products?
SD: Illinois was an attractive market to us because of the large population of the state as well as the likelihood that it would go adult use, which of course it has. Securing this market also helps strengthen our domination of the Midwest, as our products are also available in Ohio, Michigan, Oklahoma, and most recently, Missouri.
CP: What makes Missouri a good market to enter?
SD: We feel that Missouri will be a good market because of its decent size population, similar to that of Colorado. Before adult use happened in Colorado we had a thriving medical market, and we expect the same for Missouri.
Secondly, Missouri’s current medical program should allow for a healthy market. Some states allow for only a very limited number of licenses, causing supply/demand issues because there are not enough cultivation facilities to meet the demand of the patients. Additionally, there may be too few dispensaries allowed, making it inconvenient for patients to get to a dispensary, and therefore causing many people to not seek a doctor's recommendation.
On the other hand, there are some markets that have too many licenses — Oklahoma is a good example. More than 2,000 dispensary licenses have been issued in Oklahoma, which is way too many for a state of that size. This makes for a bit of an unstable market, as there are many dispensaries that are struggling to survive with so much competition.
In my opinion, Missouri has set their program up for success. The regulations allow for 192 dispensaries throughout the state and mandates that there must be 24 in each of Missouri’s eight congressional districts. This will help ensure that those patients in Missouri who want access to medicinal cannabis will be able to have it.
Lastly, before the medicinal cannabis bill was passed in Missouri, we were approached by a Kansas City-based group, Clovr, that was interested in partnering with us. During early discussions, it was clear that they would be a strong partner, and we believed in them and their ability to obtain a license and get to market quickly. We did end up partnering with Clovr, and they have been a fantastic partner so far. They were first to market in Missouri with infused products, just as they had planned. Having such a strong potential partner so early on in evaluating the market helped solidify our desire to enter Missouri.
CP: Do you think cannabis legalization – whether medical and/or adult use – will continue to spread across the Midwest and East Coast?
SD: Absolutely. Montana and South Dakota recently voted to legalize adult use. South Dakota also voted to legalize medical, as did Mississippi. There is some talk that Kansas, Kentucky, South Carolina and Alabama could legalize medical cannabis in 2021. These were four states that I did not have on my radar, as I assumed they would be some of the last to adopt any sort of cannabis legislation.
I believe the East Coast is on the verge of some major legalization initiatives. New Jersey voters recently approved the legalization of adult-use cannabis, with the program expected to roll out in Q3 or Q4 of 2021. The expectation is that this will cause other neighboring states to follow suit so that they do not miss out on the tax revenue generated from cannabis sales.
Governor Cuomo from New York has been vocal about wanting to legalize adult-use cannabis in his state, and Governor Wolf from Pennsylvania has expressed his support for legalizing adult use, just like Governor Lamont from Connecticut, who recently introduced a bill to legalize adult use.
CP: Is Wana Brands eyeing any new markets or potential markets?
SD: Yes, Wana Brands is always eyeing new potential markets. We are currently onboarding a partner in Massachusetts, and we are very interested in New York, New Jersey and Pennsylvania, as those all promise to be large, important markets.
Additionally, we are interested in New Mexico, even though it’s a smaller market at the moment, because of the likelihood that adult use will be adopted there in the near future. Beyond that, we are exploring additional international markets as well.
CP: Is there anything else you’d like to add?
SD: Wana is currently available in Colorado, California, Oregon, Arizona, Michigan, Illinois, Oklahoma, Ohio, Missouri, Maryland, Florida and Canada. Wana is North America's largest cannabis-infused edibles producer by leading the industry in innovation.
From the beginning, Wana has focused on quality. During the cooking process, the gummies are infused with a high-quality tincture, not sprayed.
More than 30 different types of pectin were tested to determine the best possible consistency and scalability. Fruit pectin makes Wana Sour Gummies vegan. All Wana products are gluten-free and made with all-natural flavoring, coloring and sugar. Wana gummies contain no mineral oil or artificial sweeteners, which can cause stomach upset.