Culture Council: An Unavoidable Tall Task: Building Trust in Legal Cannabis

Trust in legal cannabis means much more to this industry than in almost any other. Similar to food or medicine, cannabis is a consumable product and people need assurance that it is properly tested, labeled and safe. Cannabis is obviously still under federal prohibition, and until recently, state prohibition, leaving many people still skeptical of the plant.

This means that leaders in the industry need to collectively, and relentlessly, work towards showing them firsthand that cannabis can operate in a compliant way, that our processes ensure safe products end up on shelves, and that the industry will contribute in a beneficial way to society. For us working in cannabis, we understand the many benefits it brings to consumers, patients, communities and the economy, but for the general public, more education is needed. From an operator perspective, the federal prohibition has limited the overall availability and means to move capital effectively. This has caused a chain reaction, starting with invoices going unpaid and resulting in the erosion of trust amongst operators. We all want cannabis to thrive but to do this, we need to work on building trust in every transaction that happens in the space.  

While many of us are still reeling from the curtails of a difficult year and uncertainty still abounds, this is a pivotal moment for the industry to take a step toward creating trust amongst ourselves and our customers. If we can do this, we can remove a huge barrier that has stalled the real growth of cannabis, rampant inefficiency. With trust, we can move to close deals faster, share information to streamline the supply chain and free up dollars tied up in working capital. But, this is easier said than done. 

While cannabis has scored some public opinion wins recently, all it takes is one dangerous product to lose public trust in the regulated industry. In 2019, we saw a health scare in the legal market which stemmed from illegally produced vape products causing lung issues. As cannabis use grows, the risk of a dangerous, illegally made product hitting the shelves also grows. Another incident like this could be a significant setback for what has already been an incredibly long and arduous process toward building trust and, ultimately, legalization.

Perhaps more importantly, our illicit counterparts have earned the trust of consumers already, because they have found providers who offer high-quality cannabis at fair prices with convenient delivery to their door. With this in mind, the legal industry and its regulating counterparts need to take serious strides in creating broad-based trust in the legal market with consumers. To a consumer, this looks like unparalleled convenience (i.e., if I go to a store, I know what I want will be there), comparable pricing and a consistent and predictable experience. Simply stating, “Hey, Customer, I paid taxes and had my product tested, spend more here than with your local plug,” is not a winning marketing pitch. 

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So how do we accomplish this? Brands, manufacturers, distributors and retailers have to trust each other and each supply chain must work together as a team rather than an independent island. Brand success is tied to retail customers’ sell-through. These retailers should trust that brands are going to do whatever it takes to drive the traffic to sell through that inventory. For retailers, sharing sell-through information is not just a way to help distributors help you avoid stock-outs, but also a way to help them guide their brand’s production, eliminating costly waste, which ultimately increases COGS at the retail level. These are just a couple of obvious wins that come with trust.

Unfortunately, this wonderful industry of incredibly hard-working, passionate individuals has some battle wounds and scar tissue, putting roadblocks to building this trust. Even more unfortunate, many of my conversations with operators reveal much of the distrust is driven by good intentions. 

A conversation just this week with someone I greatly respect reveals the challenge we face. “Look I get it, sales of my products fund the payment of previous sales to other brands. We have to rob Peter to pay Paul to survive sometimes.” From my vantage point, it certainly appears that much of the distrust is a symptom of structural disadvantages such as access to capital, cost-effective solutions and unpredictability. I am not implying there are no bad actors,  however, one of the benefits of the capital markets tightening is that it is squeezing a lot of these “get rich quick” operators out. This allows us to build a resilient industry on a lasting foundation. It also means it’s more critical than ever that the processes we put in place re-establish trust.

I would love to say, just go trust each other and we’ll all be successful, but that’s not true. Blind trust is just naiveté. Instead, we need to better understand our counterparties’ motivations. Assume positive intent in your partners, and develop mechanisms that foster trust. Build your relationships on mutually beneficial goals that clearly can articulate the success or failure of your shared endeavors. I promise neither party should want the other party to fail. For this industry to work, all parties need to make a profit. We should be excited by our partners making a strong profit. It means they will be resilient and able to re-invest in growing the pie. A zero-sum mentality ultimately means no one wins.

This industry is full of pioneers. From the grass-roots activists to the multi-state operators (MSOs), most of us who have been here for a while aren’t focused on the money. We have some intrinsic motivation (albeit potentially masochistic) to put a stamp on an industry that can truly make an impact. It’s with this in mind that I implore the industry to be the solution it seeks. From growers to regulators to retailers to software providers and everything in between, do everything you can to earn the trust of vendors and customers.