Photo for: Which Cannabis Products Should You White Label?

Insights

Which Cannabis Products Should You White Label?

Here are the steps to guide you through the decision-making process of which cannabis products to white label

16/10/2018

Choosing which cannabis products to white label is an important strategic decision for any retailer or dispensary. In most cases, only a relatively small selection of all SKUs in your inventory will be white label products, and so you will need to be very careful about selecting which products should be part of your portfolio. The steps below will guide you in the decision-making process of which white label products to add.

Decide on the right portfolio mix for white label products

As a general rule of thumb, no more than 20% of your products should be the white label, at least at the beginning. By way of comparison, private label brands in supermarkets now account for 15-20% of all sales. That is a good benchmark for guiding your strategy. Choose too many products at once, and you might be struggling with too many suppliers at one time. Choose too few products, though, and you might not be able to get the desired financial results, in terms of expanding sales and improving margins.

Review market data to see what’s trending

One of the best reasons to white label a cannabis product is to take advantage of a new market opportunity. Maybe a new consumer trend is on the cusp of taking off, and you have a unique chance to leverage this trend for your dispensary. Or maybe there is a “hole” or “gap” in the market that none of your competitors is addressing.

The way to spot these new market opportunities is by reviewing current market data. You first want to review store sales, and then take a wider look at market data. There are now a handful of firms – such as BDS Analytics, Headset and New Frontier – that provide current market data so that you can see which categories are “hot.”

Choose at least one product that is part of an emerging trend

Consumer interest in cannabis products can sharply spike for unknown reasons, and it can often be profitable to get ahead of the market before anyone else. For example, tinctures are still very popular, and this might be a great chance to build a tinctures brand. Since terpenes are hot right now, you can also think about a terpene-oriented line.

Offering products that are “on trend” and that have a lot of marketing momentum around them can help to build buzz for your store or dispensary. You will gain a reputation for having the “hot” products that everyone wants, and that will provide an overall lift to all of the other products in your inventory as well. By using a white label partner, you can bring a new product to market much faster than if you were forced to do all the R&D yourself and set up a new manufacturing facility.

Beware of the impact of white label products on other relationships

While white label products are great for your business – they can expand sales as well as improve margins – they are understandably viewed as a potential threat by national brands. Say, for example, that you already carry a line of cannabis-infused drinks in your store. If this supplier notices that you are now carrying new, cheaper, store-branded products that are eroding sales, that fact could have a negative impact on your relationship.

For that reason, it’s better to choose white label products that are not designed to go head-to-head with other brands already on your shelves. Think about customer demographics that are not already being served, about customer needs that are not being met, or about the unmet consumer demand for products at higher or lower price points. That way, you won’t have to worry about potential harm to relationships with white label suppliers.

Carefully choose your introductory launch product

The first white label product that you launch is also the most important because it is the first time that you are letting customers actively select your own store brand over competing brands. The base case scenario is the introduction of a store-branded product that competes with a lot of similar brands at other stores, but at a new price point.

If, for example, rivals already carry a range of cannabis chocolate bars in inventory, all priced at around the same point, you can introduce a little price variability by pricing directly below or above that price point. If you choose to price below the median price point of the other products, you are signalling that your store brand is a “value” product. And, conversely, if you choose to price above the median price point of other products, you are signalling that your store brand is a “premium” product.

Look for follow-up launch ideas

Once you already have one store brand in the marketplace, the next step is to look for additional gaps in the marketplace that you can address. For example, if you already offer a line of cannabis-infused sparkling beverages, you might want to turn your attention to cannabis-infused tea or coffee. And, after that, you might want to consider a launch into light snack items – such as cannabis cookies – that can also be enjoyed with these drinks.

In the best-case scenario, these products will produce important sales synergies. It’s the same reason why supermarkets will sell wine next to its cheese aisle, or why liquor stores will sell chips and dips next to their beer selections. Complementary products help to sell each other.

Of course, you’ll want to white label products that are not already part of your current SKU lineup. In other words, if you already offer a line of 10 store-branded tinctures, there’s very little incremental value in offering a new, 11th tincture with your own brand on it. However, there might be enormous value in offering other health and wellness products that complement these tinctures.

When choosing which cannabis products to white label, it all starts with having accurate, up-to-date data so that you are making decisions based on real market conditions, and not just on your own assumptions and “gut feeling.” The better your data, the faster you can get ahead of trends in the marketplace, and the faster that you can offer the right products at the right time to the right customers.