As far as the cannabis world is concerned, I have front row seats. I live in Colorado, but for the last 2 years have operated (in my capacity at HelloMD) mostly in California. I get to live - and play - in the evolution of Colorado’s legalization experiment; yet work in and observe Californian’s massive transition from a medical cannabis-only market, to a full-fledged legal marketplace.
Colorado Cannabis: Regulation or Innovation?
Until recently, my view into the Colorado market was only one of a local consumer. And frankly my experience had been somewhat unremarkable. By this I imply that legalization in Colorado has not felt terribly abnormal, and by many accounts, been quite successful. The numbers support this ($1.2B in 2016 sales; $200M+ in taxes). Furthermore, thousands of jobs were added, entire towns have been rebooted, the state has registered huge upticks in tourism, and on the global stage, Colorado finally has a real home.
The consumer experience though, particularly in the first 2 years of implementation, felt unimpressive when compared to what I expected and to what I experienced in California. Retail was mostly uninspiring, the product choice and packaging struck me as stale in spots, and for an industry moving through such uncharted waters, innovation just felt lacking.
But recently, as HelloMD has turned its attention to national and global markets, I began scratching below the surface in Colorado. All is not what it seems here. To better understand this, I met with the leaders and founders of three highly reputed dispensary groups in Colorado - Groundswell, GoodChem and Lightshade. And while I started by intimating they look to California to benchmark future innovation (spoken like a true Californian of course), I quickly understood that in this case, the tables are squarely turned the other way. It’s California, and its slew of green-rush entrepreneurs, that must understand Colorado’s journey to be prepare for the future.
California vs. Colorado: Similar but Different
The sheer determination of these Colorado cannabis entrepreneurs is what struck me the most. To be clear, in each case, that determination is paying off. All have survived the highs and lows of the legalization tornado and are looking optimistically ahead. Yet, perhaps like 3-4 years from now in California, the battle that is running a cannabis company in Colorado never really seems to cease.
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It was also fascinating to hear how similarly the Colorado and California markets have acted at various stages of legalization. And, as I listened to stories of how these companies grew up, it also became clear why the consumer experience was less inspiring than I hoped for (and perhaps why it paled in comparison to California's). Ultimately, what I heard painted a picture of what could happen to California going forward.
Pre-Legalization Colorado: A Lot Like California Today.
Colorado was for some time a medical-only but very fast growing market
Growth capital was hard to come by Innovation at the product and retail level felt pervasice; entrepreneurs felt free to push the boundaries and respond to consumer demand
New talent and entrepreneurial spirit flowed rapidly into the market including from outside Colorado
Post-Legalization: What California Can Learn from Colorado
Packaging decisions became more those of government rather than operators (more than once, product companies have had to unload inventory and start all over to comply to new packaging laws)
No longer could entrepreneurs speed new products the market
Marketing channels continued to be restrictive, even as capital costs - because of regulation - grew
Different regulations for medical and recreational outlets made economies of scale difficult to realize
Hiring/training product consultants (bud tenders) continues to be a sore spot yet increasingly a differentiator as maturing consumers demand better service
Because of the surge in demand for recreational cannabis, the medical side was left with less identity, forcing entrepreneurs to re-imaging how to serve both sides of the market.
The social stigma around cannabis, while much improved, is far from gone
What's Next for California?
In a nutshell, regulatory constraints choked innovation in ways not always obvious to the consumer. Yet with 3 years of legalization under their belts, I was encouraged to hear from all that innovation is returning. And I can clearly see this in the stores today. Even the recreational versus medical dilemma seems to be stabilizing at the retail level. All reported a very loyal following for their medical businesses; medical outlets seem increasingly frequented by the very sick seeking alternative solutions, while those looking to address chronic conditions are happy visiting recreational outlets.
The last few years have been heady times in the California cannabis industry. A new generation of entrepreneurs has powered the flow of new brands, novel consumptions methods, micro-dosed offerings and have normalized retail experiences. What’s coming next though is unclear. So even if the landscape and market sizes are different, California best do what it can to learn from Colorado’s journey.