The Problem at the Heart of the U.S. Cannabis Market—and How to Solve It

If there is a single defining challenge at the heart of the U.S. cannabis industry, it’s route-to-market strategy. No one has quite figured out how to get their products from the grower or manufacturer to consumers in a consistent, cost-effective way. And until they do, building resonant, loyalty-inspiring brands will be next-to-impossible.

This is a huge problem for emerging cannabis brands hoping to compete in the U.S. market. But it’s also an opportunity. The companies that crack the code on route-to-market will reap some serious rewards—especially once federal legalization becomes a reality.


Any brand that’s paying attention knows this, of course. What few realize is there is no shortcut to solving this problem. The reason cannabis lacks a reliable distribution infrastructure is because few have taken the time to build one. And unless brands commit to laying this foundation—and investing in the knowledge, experience, and relationships the task demands—a workable route to market will remain out-of-reach for much of the industry.

If the past couple of years have proven anything, it’s that many of the biggest players in cannabis are willing to try almost anything to get a leg up on route-to-market. The latest example of this came last week with the merger of Tilray and Canadian cannabis firm, Aphria. The news broke one month after Aphria agreed to purchase Sweetwater Brewing Company for a whopping $300 million.

Tilray and Aphria’s idea is that by building brand awareness among American consumers, and taking advantage of Sweetwater’s distribution infrastructure, the firm will be able to hit the ground running when federal cannabis legalization finally arrives.

How, exactly, this pivot from beer to cannabis is supposed to work is anyone’s guess. But that’s my point. Companies like Aphria are so desperate for any semblance of a route-to-market strategy that craft breweries are starting to look attractive (very attractive, if that purchase-price is any indication). Aphria isn’t the first company to gamble on this kind of strategy. Just last month, Pabst Blue Ribbon launched THC-infused seltzer in California.

Harnessing established brands and distribution infrastructure might make sense in just about any other kind of consumer packaged goods (CPG). So it’s understandable why some companies are betting on this approach.

But cannabis isn’t like other CPG categories. If you’re trying to build a wine brand, for instance, the route to market is fairly straightforward. There is a well-established network of manufacturers, distributors, marketers, merchandisers, and retailers already in place. There are banks and lenders willing to finance brand-building. And there is a well-understood set of laws and regulations that have been on the books for decades.

None of this is true for cannabis. Even the most basic infrastructure for growing, manufacturing, and distributing cannabis doesn’t really exist yet. The product is still illegal under federal law, which means brands have to deal with a confusing, constantly-changing patchwork of state regulations. And there is no model for creating brand loyalty, since most brands haven’t been around for very long.

For all of these reasons, developing close relationships with consumers, retailers, and distributors is absolutely essential for cannabis brands in a way that it isn’t for other CPG categories. In cannabis, you can’t just make a phone call and get your product on the shelf. In part, this is because the retail market is still small. There are roughly 34,000 liquor stores in the United States, and another 36,000 bars and nightclubs. There are only around 8,000 marijuana dispensaries.

The cannabis industry also suffers from a serious trust problem. I can’t tell you how many stories I’ve heard about retailers being burned by brands or distributors stabbing brands in the back. As a result, there are very few people in the industry capable of forging the kinds of relationships with distributors and retailers that a brand needs to succeed.

Big-ticket acquisitions don’t help with any of these challenges. In fact, the only way to build a brand that can compete in this unpredictable environment is to get your hands dirty laying the groundwork for things like distribution, lending, growing, and manufacturing. And if firms are willing to spend millions on a route-to-market play, they should spend it on people with the expertise, experience, and relationships to do exactly that.

The basic structure of the cannabis industry is still taking shape. And negotiating this uncertain terrain requires a specific kind of knowledge. Generic CPG experience won’t get you very far. What’s needed is a background in CPG combined with a deep understanding of the cannabis space. There aren’t that many people out there with this kind of expertise. But the brands who seek out these individuals will be the ones who finally crack the code on route-to-market.

Jason Vegotsky

Jason Vegotsky is chief executive officer at Petalfast, a first-of-its-kind full spectrum sales and marketing agency for the cannabis industry. Petalfast helps brands achieve rapid growth via its go-to-market accelerator, currently available in California only, and through its full spectrum of agency services available to brands nationally. Vegotsky is an entrepreneur with an extensive background in the cannabis, food, and beverage industries. Prior to Petalfast, Vegotsky was chief revenue officer for KushCo Holdings where he was responsible for expanding the company’s physical presence nationwide in every major cannabis market. Before KushCo, he founded Summit Innovations Inc., and was the driver of the company’s business development.

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