And How to Leverage It to Grow Revenue
and Drive Average Cart Prices
How White Labeling is Revolutionizing
Cannabis Retail
Well-run retail operations have a massive opportunity to grow revenue by launching their own white label brand. White labeling refers to the process of taking a mature company’s product and putting your branding on it.
White labeling doesn’t always make sense for all product categories, but product categories like budget pre-rolls or middle-of-the-road eighths provide the perfect opportunities to create customized products. As every retail store knows, budget pre-rolls are a must. From high-end boutiques trying to increase their average cart size another $10-$15 to low-margin stores that need a product to make a single sale, budget pre-rolls have a place on all menus. What about brand agnostic consumers that want a good eighth without paying an arm and a leg? White-labeled products allow you to get a product in the consumer’s hands at a price that you know is right. You know the dollar amount your customers are leaving on the table, so why not capitalize on it? From $5 to $15, give them something easy to grab at the register. Depending on your store’s unique needs, it’s possible to create a white-labeled product that can be tailored to fill the gaps in existing product offerings in your inventory—ones only you can fully identify.
Marie, manager at the Great Barrington Dispensary, said that after adding budget 1g pre-rolls to her menu, “We now get customers that know we have cheap 1g pre-rolls. They’ll stop by on their way home from work every day just to buy a 1g pre-roll since it’s such a good deal! Sometimes that’s all they buy, other times they’ll add some of our higher-quality products, either way, it’s good to see regular customers. Even if we sell the budget pre-rolls at cost, we still see the margin because of marketing value and inevitable add-on purchases.” Value products give your customers a reason to keep coming back and see what’s new on your menu. They’re not flashy, but they can be the work horse of your bottom line. This is a great example of how white labeling fill niche needs of individual stores.
While large vertical MSOs have access to sophisticated packaging equipment, small- to medium-sized retailers can feel left in the dust when it comes to realizing the benefits of packaging their own cannabis brand. Sonu Yadav from Entrepreneur states, “Partnering with a white-label provider is a cost-effective way to scale your business without high overhead costs.” Without dedicated packaging space, specialized equipment, and significant time devoted to developing processes and training employees, it’s nearly impossible for retailers to package a cost-effective cannabis product. That doesn’t even include managing quality control. Roald Larsen from Untaylored, a company that specializes in strategic growth, explains more about this (and other white labeling considerations) in his Business Model Innovation blog post.
Another benefit of white labeling is access to bulk pricing. White labelers are moving hundreds of
pounds of cannabis a month and therefore have access to the best pricing in the industry. Any reputable white labeler will pass these savings on to their customers, allowing them to produce the most competitive product, especially when the store is able to commit to large order sizes. And what’s going into the budget pre-rolls you currently sell? Shake? Straight trim? Who knows! If you want the highest quality pre-roll, ask your white labeler about full flower options. If you’re looking for a budget option, see what they have. With white labeling, it’s your decision. Off-the-shelf budget pre-rolls put what they want in their products, not what you need.
But what’s the biggest difference between white labeling and off-the-shelf budget pre-rolls? BRANDING. This is an opportunity for your customer to take a piece of your branding and actually pay YOU for it. Plus, why promote someone else’s brand when you have an opportunity to flash your own? Your marketing spend on free stickers, lighters, or other promotional items just turned from an expense into a profit center. Not to mention those marketing items typically are not tax-deductible expenses under 280e, while the cost of your white-labeled products is 100% cost of goods sold and typically sees full tax deductions even with the most conservative cannabis tax CPAs.
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Tight on vault space? White labelers like Coastal Cultivars provide finished product storage so you can access bulk pricing, but only store what you need.
Does this all sound too good? Let’s talk about some of the downsides. White labeling does take extra time on both the production and logistics sides. If you’re able to make reasonable commitments, these costs can generally be absorbed, but white labeling does have added costs. So it may not work to your advantage if you’re looking to replace a few hundred pre-rolls a month with your own custom labeled pre-rolls. Also consider the white labeler’s track record. You’re ready to make a large commitment, but can they actually deliver? Coastal Cultivars produces over 1,000,000 pre-rolls a year. We’re here for the long run, want to develop lasting partnerships and have the infrastructure to meet your needs. Some manufacturers will take on white labeling just to make a buck, then go back to their own brands. As a Tier 11 outdoor cultivation, we started white labeling to keep our farmers employed year-round. For us, white labeling keeps our team up and running full time.
Reach out to us today and see how Coastal Cultivars can help drive your revenue.