Adult-use cannabis officially became legal in California in January, setting off a range of reactions from those in the state’s wine industry. While some vintners worry that cannabis sales will eat into wine’s market share, many see opportunities for investment and collaboration.
Four experts in the cannabis industry shared their insights at the 2018 North Coast Wine & Weed Symposium, held on August 2nd in Santa Rosa. Zack Crafton, the CEO of Big Moon Sky; Liz Gehl, the founder and chief recruiter for Gehl Search Partners; Marc Hauser, a law partner at Gaw Van Male; and Claudio Miranda, the founder of Guild Enterprises, participated in a panel discussion about potential business opportunities.
Getting in at Ground Level
According to Hauser, “a staggering amount” of money is coming into the cannabis industry from small funds and individual investors. However, big players such as Molson Coors and Constellation are already investing in cannabis companies in Canada, where recreational pot will become legal nationwide this fall. The same is likely to happen in the United States when federal prohibition eventually ends.
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“As soon as that happens,” Hauser says, “the floodgates are going to open. I think the question is, How can the wine industry position itself today to pair with the cannabis industry and take advantage of that? Why not figure out, before the big players come in and dominate the industry, how to play that niche at a more artisanal level?”
A major advantage wineries have in the cannabis world is their existing customer relationships. “A lot of these wineries are already sitting on a gold mine,” says Crafton, the former vice president of operations for NakedWines.com. Most maintain extensive lists of email subscribers, wine club members, and visitors, which could be used to promote cannabis brands. “There is a percentage of people buying wine from you,” Crafton says, “who are also buying cannabis elsewhere.”
Additionally, Miranda notes, wineries are light-years ahead of the cannabis industry when it comes to branding because for the last few decades, the only “branding” on weed packaging was the Ziploc name. This presents wineries with an opportunity to capitalize on the names they’ve already built in the marketplace.
“If you’re a luxury or premium purchaser of wine, you’re most likely going to purchase luxury or premium cannabis,” Gehl says. “Very few cannabis consumers right now are brand loyal. But if people are already loyal to your wine brand, they’re probably going to be loyal to your cannabis brand.”
Don’t Touch the Plant
While California regulations allow business owners to hold licenses under both the ABC Act (to manufacture or sell alcoholic beverages) and the Medicinal and Adult-Use Cannabis Regulation and Safety Act (to cultivate, manufacture, retail, distribute, or test cannabis), cannabis cultivation is not allowed at ABC-licensed locations, and infusing alcohol with cannabis is strictly prohibited. For these reasons, Miranda steers investors toward the manufacturing side of the business, where they can work with companies like his to create cannabis products—from vaporizer cartridges to edibles—without “touching the plant.”
Crafton also recommends a hands-off approach. “Look at the brand capital you’ve already developed,” he says. It allows you to “work with companies like us, and we will handle the product.” Wineries can put their brand on jars of flowers, pre-rolled joints, or anything else they set their minds to. “Then,” says Crafton, “we can essentially offer that product for sale.”
That’s not to suggest that if you create a cannabis brand, you’ll be wallowing in money. “There’s a very high cost of doing business in this industry,” Miranda says. “If you look at the regulations and the compliance requirements, they are incredibly taxing. Most of the operators I know are either just breaking even, losing money rapidly, or going out of business. That’s all part of the nascent market. Overall, it’s a good industry, but go in cautiously, with your eyes wide open.”
Tina Caputo is a writer based in Northern California who covers wine, beer, food, and travel. She was formerly the editor in chief of Vineyard & Winery Management magazine, and her work has appeared in Wine Enthusiast, Visit California, Sonoma magazine, the San Francisco Chronicle, and many other publications. She also produces the podcast Winemakers Drinking Beer.