Are Traditional Cannabis Licensing Models Obsolete? How Reverse Licensing Can Help

How can cannabis brands expand to multiple states while maintaining consistent quality and authenticity?

Industry experts, including Crystal Millican, SVP of Marketing & Retail at Cookies; Christine Smith, founder and CEO of Grön; Josh Hirschey, president of Timeless Refinery and Kit Gallant, CEO of Fernway delved into the intricacies of managing state-specific regulations, implementing CPG strategies, and exploring innovative concepts like reverse licensing, at the last Benzinga Cannabis Capital Conference in Chicago.

Building Strong Cannabis Brands: Beyond Price and Regulations

The discussion delved into the uniqueness of the cannabis industry and the importance of effective cannabis branding. Moreso, when compared to traditional consumer packaged goods (CPG) sectors due to state-specific regulations and market conditions.

“There's a lot of talk about price compression and the race to the lowest price in the cannabis industry. However, when you look at the broader picture in most markets, you'll find that the top-selling brands are often not the cheapest ones in the state. This sends a clear message: consumers are responsive to brand messaging,” Hirschey noted.

"CPG is a well-established concept. People care about brands in virtually every aspect of their lives. So, why wouldn't they care about brands in the cannabis industry? They absolutely do,” Hirschey continued. “People want to align themselves with a brand they believe in and feel proud to be part of. It's not just about price; it's about building a brand that consumers are willing to pay a premium for.”

Reverse Licensing Model For Cannabis

Hirschey and Millican discussed different reverse licensing models as an alternative to maintaining quality across a multi-state expansion.

Reverse licensing models allow cannabis companies to operate under the license of a local partner and maintain control over the brand's consistency and authenticity in each market.

Hirschey explained how reverse licensing works for Timeless: "We noticed that many were accustomed to the conventional licensing model, where you hand over your packaging, and they handle the rest. However, we had a different vision. This approach provided us with control over our product quality and customer experience.”

“In Arizona, we took control of our operations and ran our business, even while operating under someone else's license. People have come to appreciate the idea. They see the value in it—receiving a licensing fee for our work, while the success and failure of the business rest squarely on our shoulders," Hirschey said. “We can manage the consumer experience, and swiftly respond to customer demands, ensuring that we're not at the mercy of others.”

Cookies' Reverse Licensing Model

Millican described Cookies' reverse licensing model, focusing on investing in local communities and building strong connections.

The executive mentioned the importance of selecting the right partners and emphasized the need for a collaborative relationship.

"We go in, set up our operations, and seek licensed partners with available space. We handle capital improvements, staffing, end-to-end operations, deliveries, and sales while staying within the state's legal framework,” Millican explained.

“This approach is known as the reverse licensing model. Rather than licensing our intellectual property to others, we essentially pay rent and offer a royalty to the license holder to operate under their license,” Millican added.

Photo by Volodymyr Hryshchenko on Unsplash.