Branding in U.S. Cannabis with Ascend Wellness, Lowell Farms, and Edie Parker
Vivien Azer, Beverages, Tobacco and Cannabis analyst speaks with Abner Kurtin, Chairman, CEO & Founder of Ascend Wellness, George Allen, Chairman of Lowell Farms, and Brett Heyman, Founder and Creative Director of Edie Parker. They discuss the evolving cannabis landscape and how cannabis brands are navigating a fragmented industry that is still in relatively early stages of maturity. Press play to listen to the podcast.
Transcript
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Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
Vivien Azer:
I’m Vivien Azer, Cowen’s beverages, tobacco and cannabis analyst. Thank you for joining us for this podcast where I’m joined by Abner Kurtin, who’s the CEO of Ascend Wellness Holdings, Brett Heyman, who’s the founder of Edie Parker and George Allen the chairman of Lowell Farms. Delighted to be joined by these three cannabis executives who are in partnership as they expand collectively in cannabis markets, principally east of the Mississippi. Abner, let me start with you. Thank you for joining us.
Abner Kurtin:
Thank you.
Vivien Azer:
For the benefit of our audience. Perhaps you can start by offering a little bit of background and how you entered the cannabis market and a high level overview of a set.
Abner Kurtin:
Sure. I was a private investor, ran a hedge fund that looked at investment opportunities for most of my career. And in 2017, I looked at the legalization of cannabis and so a tremendous investment opportunity. I lived in Massachusetts and I figured if Massachusetts was going to go adult use, which is a liberal but conservative state, that this was going to go everywhere and decided to get involved, spend some time out in California saw the opportunity and starting an investment fund to invest in the space. And quickly we started to focus on the markets east of the Mississippi, limited license markets, earlier markets as an area that were really interesting from a building a business and a profitability point of view to create value. But unfortunately we found a lot of the early operators who obviously there were great early operators like GTI, Cresco, Curaleaf the ones you know, but there are a lot of people with licenses that were unable to execute on that strategy.
Abner Kurtin:
And so we decided to form what’s called an MSO, a multi-state operator to take advantage of that by licenses. And so Ascend was formed. We went out and won licenses in Mass and bought licenses in Illinois. We have the first adult use dispensary in a downtown northeast city with our flagship location in downtown Boston, right by Faneuil hall. We’re one of the leading operators in Illinois where we’re right by the Miracle Mile on Ohio Street down there. We believe that what’s coming in the west coast is coming to the east coast. There’s a real opportunity for these multi-state operators and Ascend to take advantage. We’re in Illinois, Michigan, and Ohio in the mid west and in the east we’re in Mass and New Jersey. And we have a pending acquisition of a New York license of a company called MedMen.
Abner Kurtin:
And we’re really excited about the future of legalization, particularly the New Jersey market, which comes online in the beginning of next year, that this is just going to be a continued trend in the United States as these markets flip from medical markets to adult use and Ascend is trying to be one of the leading MSOs to take advantage of that.
Vivien Azer:
That’s great. Thank you, Abner. George, why don’t I turn to you, if you could offer the audience a little bit of background on your initial involvement in cannabis and your current role at Lowell.
George Allen:
Great. It’s nice to meet you. Thanks for having me today. I’m George Allen, I serve as chairman of Lowell Farms. We’re California based operator, but we have our product being sold in other markets as well through a licensed partnership with Ascend. My background, I was in cannabis since about 2017 when I got involved with a company called Acreage Holdings. I was president of Acreage Holdings, we went through a transaction to sell that business to Canopy Growth. And at the time of the sale, I left the business because I was really focused on where I thought that the longterm value and the business was going. And I really wanted to build brand and brand equity. And I saw a huge opportunity in cannabis, but it was a wide open space. I hadn’t really seen anybody that had really captivated the consumer imagination.
George Allen:
And I was really fixated on the fact that cannabis has a consumption problem early on, in that most cannabis was consumed informed factors that were very much focused on private consumption. And California was the first place that was unapologetically recreational. And so I went to California to build a business around that concept, that California would teach us a lot about what the consumer’s looking for and the ability to build a brand around that. So we have a large amount of infrastructure in California, and one of the largest growth in the state combined with distribution infrastructure and branding infrastructure to distribute our products and brands across the marketplace. Lowell was our hero product and brand it’s packaged. Pre Lowell was very much akin to what a cigarette would look like in the cannabis landscape. And that product has really captured the imagination. It was one of the first brands and all cannabis to really identify with the consumer in terms of allowing them to be proud of their choice and to show off their choice of cannabis.
George Allen:
The historical meme of cannabis consumers for a long time has been something that’s really been stuck in our a lot of people who smoke privately. I know people who have been smoking for 30 years, but they still hide it from the rest of their family. And for me, if you’re going to build a brand in cannabis, it’s really about building a brand that makes people proud of their choice, and it makes them willing to share and showcase their choice. So that’s our business. As I said, we have infrastructure in California and today our products being sold not only in California, but as well in Massachusetts and in Illinois.
Vivien Azer:
Terrific. Thank you for that, George. And Brett, last but certainly not least if you could offer some background on Edie Parker and how you decided to enter the cannabis space.
Brett Heyman:
Thank you for having me. So I have a fashion background. I worked at Gucci for about 10 years, and I was the director of public relations there. And in 2010, launched a brand called Edie Parker, which is a fashion and mostly accessory luxury business. And we really are a lifestyle business. We make a lot of home accessories. And so in about 2018, my team, we’re about 10 women, we started talking about cannabis because it’s part of all of our lifestyles, and there was nothing on the market, either in accessories or at a dispensary level that we thought spoke to us, that didn’t feel considered, that didn’t feel fun, colorful, optimistic, the way that George mentioned that people brands and cannabis want to, you want to show off that choice and show up that brand. We didn’t think there was a brand that represented any of our interests. So we started working on a line of accessories and Flower and launched Flower by Edie Parker in 2019. We like to say, we’re the first brand to merge fashion and Flower. And that were a line of colorful collectibles for friends in high places.
Vivien Azer:
That’s great. I love that tagline. So Abner back to you, talk a little bit about kind of the thought process in establishing these brand relationships and what that means in terms of execution in your own dispensary’s as well as through your distribution network?
Abner Kurtin:
Yeah. Well, I think when these states first go legal, particularly in recreational use, there’s a real supply shortage, and it’s just about getting any viable product on the shelf. Customers are coming into empty stores and the first order of business is to get every customer the opportunity to buy an eighth, a pre-roll, a gummy and a vape every time they come into the store. And that is a real challenge for all of us in year one, I think of any out use market. But then it starts to change, then supply starts to come into the market. More people come in with different product offerings, and we move to a more traditional consumer product with good, better, best various branding, various form factors, various sub-markets, but make no mistake about it. This is not another consumer product, right? This is a state-by-state business limited capital, limited distribution, limited advertising. This happens at a much slower pace.
Abner Kurtin:
I tell people think about what probably happened in the late 1800s or pre world war two for other brands before there was TV and before there was all this fancy marketing. That’s kind of what’s going on in cannabis. And we basically had our own brand, the house brand called Ozone, one of the leading brands in Illinois, but it really plays in the quality for value segment. And we’ve been looking to develop some brands. We had some marketing people. We had these fancy consultants, which would charge a lot of money to build a brand. And I did a bunch of meetings, and I came to the conclusion that maybe a bunch of 40 year old white guys sitting in New York, we’re going to develop a great database brand, but it wasn’t likely, I mean, maybe, we’re still trying, and that like any other business, authentic brands like Lowell, like Edie Parker and the fashion, they know what they’re doing.
Abner Kurtin:
They know how to identify a consumer, reach out to the consumer and build an authentic brand, that I think cannabis is all about authenticity and being committed to both the product and your brand. And we really came to the conclusion that we should partner with these brands in the best category and allow our consumers to have access to it, not just in our stores, but in the whole market. And this for us is selfish. We want to be the number one or number two distributor in these states. And in order to do that, we have to have the best truck coming in delivery each week. And the best truck means the best brand selection. And that means I want to put Lowell and Edie on those trucks.
George Allen:
If I could just also just sing Abner praises a little bit, because on the other side of this trade, I will say that, he was really unique in his vision in the business being one of t!he first multi-state operators to realize that we’re going to go from a supply constrained environment to an environment where we had to win the customer. And I think a lot of operators are still stuck in the mindset that it’s going to be an oligopoly or a supply constraint environment where anything you sling at the customer they’re going to have to digest. Abner was one of the first I think, and still remains the strongest advocate of giving the consumers the choice and making sure that consumers get access to the best out there. And I think from my perspective, the analogy I use is in the CPG landscape, developing a brand is analogous to writing a hit song.
George Allen:
You can say, you want to do it. You can sit in a room for as long as you want and crank out ideas, but a brand happens because of a confluence of things that resonate with the consumer in a moment in time. And it’s almost impossible to sort of formulaically recreate it, Abner recognize that, and his brought in Brett and brought in myself and to help him in his portfolio in the state. And I think there’s many operators out there who don’t see what he sees. And I think he’s going to win because of …
Abner Kurtin:
Look, just to be fair. I mean, there are a number of attractive brands coming out of MSOs. I mean, I think what Cresco’s doing with Mindy’s Edibles, what Curaleaf is doing with Select, what GTI is doing with Dogwalkers. I mean, there are good brands out there. I think the point is that there’s a lot of white space and opportunity for non MSO brands to come in and take meaningful share.
Vivien Azer:
Absolutely, I think-
George Allen:
I will just say about those brands that you just mentioned. If you want to put them on a shelf in California, they ain’t going to hold water, none of them have. So I think they’ve done a nice job and they are doing a great job, but if you really want to put them into the gauntlet of success in a competitive environment, that is probably the most competitive in the world. They haven’t been able to hold their head above water and not to say that they’ve leaned into it as much as they otherwise would. But I think you do see … there is a virtue in picking the best and then importing it.
Abner Kurtin:
Okay. Well, Boris, Ben, Charlie I did not say that, that was George Allen. Thanks.
George Allen:
Now I know why you did that. [inaudible 00:13:04] They can’t hold head here.
Vivien Azer:
Well, let me turn to you for a minute. What Edie Parker is bringing to the cannabis space really is truly differentiated. I mean, all of you are doing something that’s differentiated to be sure, but from a price point perspective, coming from a background where you were selling $1,500 handbags, you’re setting a new price point with very attractive accessories in the cannabis marketplace. Talk a little bit about kind of some of the consumer appeal for that kind of high-end fashion oriented luxury accessory, and how you think about that sub category and that core consumer.
Brett Heyman:
We are a luxury brand, for sure. We have variation in pricing. We have entry price points, but we didn’t set out to make a $1,500 handbag. Our handbag is expensive because it’s hand poured acrylic because it’s made by skilled artisans in the US who get paid a living wage. We can’t talk about transparency and accountability and not have to pay for it. And I think cannabis is the same for us. Like we want to work with people like Abner who have the best, they do the best cultivation, they have the best retail, et cetera. So look, I think we’re trying to play in a space where our packaging is extremely appealing, but we’re not the most expensive. Like Abner said, we’re in that sort of good, better category. We’re not trying to be a really high end cannabis brand.
Brett Heyman:
We know it’s not the same as making a luxury handbag. We know that the people who want to spend the most in cannabis are obsessed with the plant, want to have the best cultivation, want to talk about the best strains. That’s not us and we know that. We’re an authentic brand that’s been around for 10 years, that’s for women by women. That means something, our brand means something to a lot of people. And we have a lot of avenues where you can find us, we were at the Met Gala on six celebrities with these really like socially relevant bags with social messages on them the other night. And so then we get this sort of free media coverage in the New York Times, in Vogue, in places that aren’t necessarily talking about cannabis, but that is a big part of who we are now.
Brett Heyman:
And so I think for our cannabis accessories, we have just like in our heritage accessories a range of products. We have, one of our biggest sellers are our rolling papers, they’re $10, but they’re extremely branded. They’re meant to be shown off. Then we have $700 bongs because they’re hand-blown glass with an artist named Paul Arnhold right out of Red Hook. So I think we run the gamut and we are working with traditional retailers, like Urban Outfitters who are launching smoke accessories. It’s a new category for them, they’ve done really well. They’ve blown out of them and reordered them a few times. So I think there’s really opportunity to speak to a lot of different people with the accessories and with our flower offerings.
Abner Kurtin:
And I would say this sector has not done a good job with the female consumer. I mean, its early, there’s a lot of opportunity, but there aren’t brands that speak to them. Quite frankly, there aren’t enough women in the industry in general, and this is a huge … there’s certainly more women than men in this country and they like cannabis. And if we don’t do a better job offering products that they like, we’re going to suffer.
Vivien Azer:
Yeah, absolutely. It would be a shame for the cannabis industry I think, to repeat some of the mistakes that we’ve seen in big alcohol, where not only do you not catered to a female consumer, in some cases you end up alienating a female consumer and that’s a hard consumer to win back when that happens. One of the connected threads that I think has emerged in our conversation thus far is pre-rolls, rolling paper, that form factor specifically. So Abner, let me start with you, and then I’ll turn to George and Brett. But as you think about category development in the broader THC marketplace, what is the role that you’re seeing for pre-rolls today and how do you expect that to evolve?
Abner Kurtin:
I mean, pre-rolls is a huge focus of Ascend. We are the number one or two pre-roll company with Cresco in Illinois. We launch in Massachusetts with a heavy pre-roll assortment. And the thesis is simple. I mean, when you look at tobacco, right, 98, 90% of the people smoke cigarettes, one or 2% roll their own cigarettes. And in cannabis 15 to 20% use pre-rolls, the rest use loose flower. And I think that’s a legacy issue. People have always bought loose Flower, they have a relationship with the Flower that includes rolling the joint. That will always be part of the business, but there’s plenty of room. My over 21 year old children don’t know how to roll a joint. They’ve got one friend that does and they want to buy, and they want me to bring home a bag of pre-rolls and-
George Allen:
Abner, you have failed as a father.
Abner Kurtin:
And so, we tend to see this as a huge category opportunity. And one that really, when you look at the cigarette space really looks to branding, that sort of segment that really branding matters.
Vivien Azer:
Certainly. And George, I was wondering if you’d maybe want to expand on that, just given the importance of pre-rolls as a portion of the portfolio for Lowell.
George Allen:
Well, we come at it from two different approaches. The first is really just in where the consumer’s going, and in terms of dollars spent, the largest dollar growth we’re seeing in the marketplace is in the natural form of cannabis. So we talk a lot about edibles, we talk a lot about vapes, but if you look at a Flower and pre-roll combined, that’s in the most advanced market in the world, California, you’re seeing those two categories outgrow the balance of the market in terms of dollar growth, pretty substantially. And I think the reason for that is that smoking cannabis in its raw form has been a little bit demystified and used to be associated with the sort of fringe element of society. And now it’s starting to become more mainstream. And frankly, I think New York, when they legalized smoking outside, anywhere where you can smoke a cigarette, you can smoke cannabis, is really starting to show that transition in the mind of the consumer.
George Allen:
And so the experience is vastly superior, smoking Flower in its raw or smoking cannabis in its raw form, versus these other sort of form factors that I think serve the purpose early on. And the purpose really was around discretion, right? You saw a huge need for discretion early on in cannabis consumption because there was such a negative stigma around smoking cannabis. And so I’m going to have a gummy, or I’m going to have vape pen because it allows me to microdose or allows me to dose without anybody else knowing. The problem I have with that, which is very hard to build a brand. And I said this before, it’s very hard to build a brand on any product, it’s fundamentally based around discretion, because the only avenues that you have to talk to that consumer are around price and utility.
George Allen:
And frankly, those are pretty lame avenues to market a brand around, right? If you really want to market a brand you look at categories where you see huge brand premiums and huge brand density, meaning brands, the larger brands control large share of the market, and those are automobile and fashion, and then jewelry and sneakers, and a whole bunch of categories that are really premised around the notion of not only do I make a choice based on my perception of quality and utility, but I make a choice based on what I think other people are going to think about by the choice that I’ve externally shown on display. And I think that’s something you really fail to get right, that external sharing, that external showcasing of my choice, you don’t see that in those other form factors.
George Allen:
So I think it’s a combination of the fact that pre-rolls are the natural form factor of cannabis and a better experience with where the consumer’s telling me they want to go as well as a market opportunity in pre-rolls where I see the real ability to build brand. Because when you walk into a party and you take a little pack out and you put it onto the table, you’re showcasing that you understand what quality means. You understand that you’re on the inside of some knowledge base in cannabis that other people want to be in. And that’s why we’ve seen ever since the product dropped in Illinois, we’ve seen the product really accelerate in shelf philosophy because the consumer sees it at a party and they understand it. And there’s a vitality to it. That vitality can’t exist in a marketplace or in a product modality that’s really based on private discreet consumption.
George Allen:
So I focused on pre-rolls because of all the things that Abner said, we see a huge opportunity for pre-rolls to take share from Flower, but I also think it’s a huge opportunity for us to build brands. And frankly, I’m not stopping until we see our brand on the tail fin of a NASCAR.
Vivien Azer:
One day, one day George.
George Allen:
Sooner than you think.
Abner Kurtin:
You’re not going to get to the Met Gala though, Brett’s got that.
George Allen:
Tax the rich.
Brett Heyman:
Tax the rich, crazy.
Vivien Azer:
But you raise a good point, George, it makes me think about Brett’s portfolio, in terms of really distinguishing yourself on shelf and creating that brand ethos. Your packaging and your offerings spread are so distinct and truly female friendly. Can you talk a little bit about the innovation process that you and your team of 10 women went through in terms of devising these awesome lighters that have a stash component or the vanity trays?
Brett Heyman:
Well, thank you. I mean, look, we’ve been innovating and creating product for 10 years. So I think it was based on … everything we do is based on what we want to have, right. I mean, what we want to have in our homes, what we want to buy, what we want to give to our girlfriends. And I think we were really jazzed about this idea of cannabis and the accessories as items that you display and share, because as George alluded to, historically cannabis is something that you may do in the shadows and you hide your NYU pipe in the back of your drawer. And our brand ethos is the opposite, right? Whereabouts surprising and delighting. We want to share it. We want to show it off. That’s why everything we do is branded in a really considered and cute way. When I say branded, we don’t slap our logo over everything, it’s color blocked. It’s has like a little Flower. I mean, it’s thoughtful.
Brett Heyman:
So I think that was where we were excited that it felt like we’re in a real white space, that nobody in our category, certainly in this intersection of fashion and Flower makes accessories like this. Obviously you can buy a tabletop lighter, but something that is just so unabashedly celebratory, and romantic for the person who has either always loved cannabis and felt maybe a sense of shame or who’s discovering cannabis. We love talking to that woman who with more and more legalization feels less intimidated as she goes into a dispensary. And certainly if she can buy her color block medtainer grinder on Urban Outfitter, she’s going to feel a lot better about it.
Vivien Azer:
Absolutely. And Abner, let me wrap up the interview with you, as you think about kind of the rollout plans for both of these brand partnerships, talk a little bit about what the next 12 months or so holds. George referenced they’ve launched in Illinois, Massachusetts within the last few days. So just talk about kind of the medium term expansion.
Abner Kurtin:
Yeah. First of all, which we haven’t said is in terms of pre-rolls, I think, the consumer investor might think, oh, you go buy a cigarette machine and you throw in the cannabis and the paper and out come all these pre-rolls. This is still not an automated business. There still is not good machinery and automation. So this is a very labor intensive business. That’s a huge barrier to entry and that slows down the rollout of all products. Edie and Lowell are discerning brands. They want a certain level of quality as they should. We have to do a good job and make sure we can execute on that. So it takes a little bit of time.
Abner Kurtin:
We have launched Lowell in Illinois, we’re in the process of launching in Mass and then bringing it up to scale and getting it to every door in Illinois. Edie follows very shortly behind that in terms of fourth quarter launches in both places. We like to get them out to our stores first, so we can test it out, see customer perceptions, see about placement digitally and in the store, and then roll it out to the rest of the state.
Abner Kurtin:
We’d like to do that in conjunction with brand ambassadors but tend to give the ways to try to really build that brand presence at the start. And that’s where we lean on great brands to help accentuate their brand identity into the market. But we’re in six states, we see the legalization of New Jersey happening next year. We’d like to get these brands in New Jersey. Michigan is a competitive market with pre-rolls. We think both brands would do well. And to be frank, we aren’t exclusive. We want them to be in every door. We know they’re going to work with people in other states, then that’s fine. We’re here to build the brand in our states and build the distribution for the benefit of all us.
Vivien Azer:
That’s terrific. Well, Abner and Brent and George, thank you all so much for your time and your insights. And to our audience, thank you for spending the time. We hope you enjoyed this podcast. I’m Vivien Azer, Cowen’s beverages, tobacco and cannabis analyst.
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